U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
(MARK ONE)
|X| Annual Report Pursuant to Section 13 or 15(d) of Securities
Exchange Act of 1934
(Fee Required)
For the fiscal year ended December 31, 1998
|_| Transition Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
(No Fee Required)
For the transition period from _______ to _______.
Commission File No. 0-21739
GENETIC VECTORS, INC.
(Name of Small Business Issuer in Its Charter)
Florida 65-0324710
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(State or Other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification No.)
5201 N.W. 77th Avenue, Suite 100, Miami, Florida 33166
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(Address of Principal Executive Offices) (Zip Code)
(305) 716-0000
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Securities Act:
Title of Each Class Name of Exchange on which registered
- ------------------- ------------------------------------
None None
Securities registered under Section 12(g) of the Securities Act:
Common Stock, Par Value $.001
-----------------------------
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months, and (2) has
been subject to such filing requirements for the past 90 days. Yes | | No |X|
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in the definitive proxy or
information statement incorporated by reference in Part III of this Form 10-KSB
or amendment to Form 10-KSB. |X|
The issuer generated revenues of $47,172 during its most recent fiscal
year.
The aggregate market value of the Company's voting stock held by
non-affiliates as of April 26, 1999 was approximately $13,511,597 based on the
average closing bid and asked prices of such stock on that date as quoted on the
OTC Bulletin Board. There were 2,349,843 shares of Common Stock outstanding as
of April 26, 1999.
Documents Incorporated by Reference: See Item 13
This Form 10-KSB consists of 63 pages. The Exhibit Index begins on page
61.
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PART I
Item 1. DESCRIPTION OF BUSINESS.
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INTRODUCTION
Genetic Vectors, Inc. (the "Company" or "Genetic Vectors") had cash and
cash equivalents of $109,924 as of December 31, 1998 compared to $2.1 million as
of December 31, 1997. The Company projects that such funds will be completely
exhausted on or before the end of April 1999. In the absence of additional
capital, the Company will be required to significantly curtail or cease its
business activities. The Company's ability to continue its business activities
is completely dependent on such additional capital and its failure to obtain
such capital will have a material adverse effect on the Company's ability to
continue its business activities. The Company's description of its business and
other information contained in this Form 10-KSB and the Company's ability to
continue its business as described herein is completely dependent on the
Company's ability to obtain significant additional capital.
On March 31, 1999, Genetic Vectors, Inc. (the "Company") filed a
Notification of Late Filing on Form 12b-25 with respect to its Annual Report on
Form 10-KSB for the year ended December 31, 1998. At the time of this filing,
the Company intended to file its Annual Report on Form 10-KSB on or before April
15, 1999. Subsequent to this filing, the Company learned from its independent
public accountants that they could after additional review only render a
disclaimer of opinion in connection with the Company's audited financial
statements. The Company's auditors have advised the company that it would
re-evaluate its position if the Company obtains a commitment for additional
financing. The auditors have not yet completed their audit of the Company's
financial statements and therefore the disclaimer of opinion cannot be obtained
without additional effort and expense. The Company believes that the disclaimer
of opinion is solely attributable to the Company's cash shortage and is not
attributable to any discrepancies in its financial statements or any
disagreements with its auditors. To preserve cash, the Company has decided to
include unaudited financial statements in lieu of audited financial statements
containing the disclaimer of opinion. In the opinion of the Company, the
unaudited financial statements included in Exhibit "A" include all adjustments
(consisting of normal recurring accruals) which are necessary for a fair
presentation of the results for the periods presented therein. For additional
information concerning the Company's current financial situation, see "Certain
Business Risk Factors - Future Capital Needs and Uncertainty of Additional
Financing"; "Certain Business Risk Factors - Ability to Continue to Operate as a
Going Concern"; and "Management's Plan of Operation and Discussion and Analysis
- - Additional Fund Raising Activities."
GENERAL INFORMATION
The Company is a biotechnology company which intends to specialize in
the development of diagnostic and quality control tools for the
biopharmaceutical, food and beverage industries. The Company was founded in 1991
by Dr. Mead McCabe (the Chairman of the Board of Directors of the Company) who
invented a new nucleic acid labeling and detection technology (the
"Technology"). The Technology consists of patents and patent applications
originally filed in the name of or for the benefit of the University of Miami,
and unpatented confidential and non-confidential know-how, which is either
proprietary or in the public domain. Part of the Technology relates to a new
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nucleic acid and method described in University of Miami Invention Disclosure
UM90-16, which invention was made under a grant from the United States
Government. Additional nucleic acids and methods were described in the patents
and patent applications filed in the name of or for the benefit of the
University of Miami, some of which were made using University facilities. The
antibody was described in University of Miami Invention Disclosure UM87-90 and
its preparation is the subject of a published paper and an abandoned patent
application which is not available to the public.
The Technology is the basis for the Company's initial product line, the
EpiDNA(TM), which includes the Company's first product, the Picogram Assay (the
"Picogram Assay"). A second proposed product line, EasyID(TM), combines the
EpiDNA technology with gene probes in kits for the detection of yeasts. These
kits are intended for quality control in the food and beverage industry and for
identification of proprietary yeasts in the brewing and wine-making industry.
After removing the Picogram Assay from the marketplace during the third
quarter of 1997, the Company has completed the refinement of the EpiDNA Picogram
Assay Kit (the "Picogram Assay Kit"). During the twelve-month period ended
December 31, 1998, the Company has not generated significant revenues and
remains largely a development stage company. In July 1998, the Company
reintroduced the Picogram Assay Kit to the marketplace and is closely monitoring
its market acceptance. The Company's cash shortage limited the Company's
marketing efforts to support the reintroduction of the Picogram Assay. There can
be no assurances that the Picogram Assay Kit will be accepted by the
marketplace.
EPIDNA TECHNOLOGY
DETECTION OF NUCLEIC ACIDS. The EpiDNA technology is a broadly
applicable method for labeling and detecting nucleic acids, particularly DNA.
The importance of the ability to attach labels to nucleic acids arises from the
use of nucleic acids as probes to identify, locate and isolate DNA fragments
containing a single gene in a mixture of DNA fragments containing thousands of
different genes. DNA labeling technology is analogous to the photographic
development process. The label makes the results of esoteric DNA hybridization
reactions visible to the naked eye in the same sense that developing solutions
render the latent image in a photograph visible. The visual results of this
process are pictures of DNA hybrids or DNA fingerprints. Nucleic acid probes are
usually labeled with radioactivity so that the probe and the gene to which it is
bound can be located. The use of non-radioactive labels on probes is becoming an
increasingly attractive alternative because of the dangers associated with
radioactivity and the expense of disposing of radioactive waste. The EpiDNA
technology can be used to make these types of non-radioactive labeled nucleic
acid probes.
The EpiDNA labeling technology involves a versatile chemical procedure
for attaching labels to nucleic acids. Genetic Vectors believes this process is
unique in its ability to attach a variety of labels to nucleic acids, regardless
of the size of the nucleic acid. The process is normally completed within a few
hours, and can be accomplished in a single test tube with no loss of nucleic
acid. The Company believes that scaling the reaction up to production levels
(milligram and gram amounts of nucleic acids) is possible. The core EpiDNA
technology is suited for the attachment of any detectable molecule (such as
biotin, fluorescent or phosphorescent compounds, enzymes or chelators) to
nucleic acids.
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The EpiDNA technology is not restricted to the labeling of probes, but
can also provide a method to accurately measure nucleic acids at very low
concentrations. This characteristic of the Technology provides the basis for the
Picogram Assay which is targeted to process development and monitoring, and to
quality control and research laboratories.
THE EPIDNA PICOGRAM ASSAY. Processes for manufacturing
biopharmaceuticals, such as monoclonal antibodies and recombinant proteins,
result in potentially harmful contamination with DNA, the material that carries
the genetic code and could carry cancer-causing oncogenes. FDA guidelines
recommend that manufacturers monitor the content of DNA to assure that the level
of DNA does not exceed 100 picograms per injected dose. Under FDA guidelines,
each biopharmaceutical manufacturer must devise its own in-house quality control
protocol to determine the purity of each product. Companies are free to adapt
current technology, including commercially available assays, to this purpose.
The Picogram Assay combines chemical and immunochemical procedures to
measure trace amounts of DNA. The assay is relatively easy to perform, measures
DNA in a range of one to one hundred picograms, can detect small fragments of
DNA, and is complete in about three hours. As reported in the Company's 10-KSB
filed in April 1998, prior to its preliminary launch of the Program Assay in the
third quarter of 1997, the Company had eliminated a step in the Picogram Assay
which was intended to make the assay more user friendly. Subsequent to this
preliminary launch, it was suspected that the elimination of this step caused
the assay to lose some reproducibility in the ultra-sensitive lower limit of
measurability. Accordingly, management of the Company felt that it was prudent
to temporarily remove the product from the market until the product's original
reproducibility could be restored. Accordingly, the Picogram Assay was removed
from the marketplace in December, 1997. However, through the redevelopment
process the Company discovered that removal of this step did not cause the loss
of sensitivity. Instead, the Company discovered that plastic tubes holding
certain reagents caused the problem by adherence of a portion of the reagents to
the inside of the tube. Subsequently, the Company changed the tubes and
reintroduced the Picogram Assay to the market in the third quarter of 1998.
The use of the Picogram Assay does not require the purchase of major
equipment, since the assay utilizes a standard microtiter plate reader, which is
routine in biopharmaceutical quality control laboratories. The assay is designed
for routine application by technicians and is intended for validation of final
product purity.
EASYID MICROBIAL IDENTIFICATION TECHNOLOGY
Genetic Vectors is developing the EasyID technology for the rapid
identification of yeasts and other microbes of commercial and research interest.
The Company's development efforts have been affected by the Company's working
capital shortage. EasyID technology is based on a series of small DNA chains
known as DNA probes. DNA probes are used in gene detection techniques to clearly
identify specific genes. DNA probes also have a common day-to-day application in
the identification of microbes, usually in health- or research-related
applications. Basic EasyID kits will provide DNA probes that should allow clear
identification of yeast species or strains by detecting a gene possessed solely
by that species or strain. The Company intends to join its EpiDNA technology
with its EasyID technology to produce labeled probes. Genetic Vectors believes
that its EasyID kits should give users a rapid means for yeast identification
because results should normally be obtained in about two hours. The Company
believes that these assays can be refined to run in about fifteen minutes
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similar to other DNA probe tests. This is a major improvement over conventional
culture-based identification techniques, which often take days to complete and
are sometimes inaccurate.
A commercial antibody-based test for yeast is available, but costs
about $15 per test. Genetic Vectors believes that its EasyID DNA probe will
allow accurate identification of yeast species and strains, at a lower cost than
existing products and much more rapidly than conventional techniques.
One market for these probes is in quality control in the manufacture of
wines. Wineries depend on proprietary yeast strains for the production of a high
quality product. The Company believes that wine producers are not currently able
to specifically identify wine yeast strains with conventional microbiological
techniques. The Company believes that its probes will provide the producers of
wine with a dependable and rapid means to identify their proprietary strains and
to detect contaminating yeast during the fermentation process and during
storage.
Many food and beverage manufacturers have problems with spoilage caused
by yeast contamination of their products. Conventional culture-based detection
methods are not well-suited to quality control in this area because of the time
required for results. Genetic Vectors believes that the EasyID technology will
allow the development of a series of tests that will detect yeast strains
commonly found as contaminants of foods and beverages. The Company believes
these assays can be used as a sensitive and rapid quality control mechanism.
RESEARCH AND DEVELOPMENT
The Company spent approximately $918,401 and $805,711 on
Company-sponsored research and development activities during its 1998 and 1997
fiscal years, respectively. The Company did not conduct any material
customer-sponsored research and development activities during either of those
fiscal years.
MARKETING AND SALES
The Company temporarily removed the Picogram Assay from the marketplace
in December, 1997, and reintroduced it in the third quarter of 1998. The
Company's marketing activities in connection with the reintroduction of the
Picogram Assay were limited by the Company's working capital shortage.
Accordingly, the Company remains largely a development stage company with the
Company's expenditures far exceeding its revenues.
Genetic Vectors intends to use EpiDNA and EasyID technology to fashion
diagnostic tools for use in quality control and quality assurance programs in
the food and beverage industry but there can be no assurance that this can be
accomplished successfully or at all.
The Company has received conflicting information regarding the
potential market for its Picogram Assay. Such information indicates that the
potential annual market for the Picogram Assay ranges from $4,000,000 to
$20,000,000. If the actual market for this product is near the lower end of this
range, the Company will have substantial difficulty in generating significant
sales.
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REGULATION
The Company's operations will be subject to federal, state and local
regulations to which business operations are normally subject, including
occupational safety and health acts, workmen compensation statutes, unemployment
insurance, and income tax and social security related regulations. The
biotechnology industry is also subject to federal, state and local regulations
with regard to the construction, maintenance, containment and release of
genetically engineered organisms and the manufacturing of diagnostic devices for
human use. The Company currently has no plans to construct or release
genetically altered organisms or to produce diagnostic devices for human use,
and accordingly the Company does not anticipate that these regulations will
affect it or its operations.
The Company's operations will be subject to applicable environmental
laws and regulations. The Company's operations will entail the storage and
disposal of small amounts of biological and chemical hazardous wastes. The costs
that the Company has incurred to date in connection with compliance with
environmental laws and regulations have not been material, and the Company
anticipates that such costs will not be material in the foreseeable future.
There can be no assurance, however, that this will be the case. The Company does
not anticipate that any significant capital expenditures related to compliance
with environmental laws will be required in the foreseeable future.
Diagnostic and therapeutic devices and tests that are intended for use
in humans generally require direct FDA approval. Devices and tests not intended
for use in humans, however, are generally not required to obtain FDA approval.
The FDA can also set industry-wide required tests and approvals. All of the
Company's current and proposed products are designed either for industrial
quality control or for research purposes and are, therefore, not subject to FDA
approval. For example, the Company's EasyID products are not subject to FDA
approval because they focus on the determination of particular species of yeasts
and fungi in connection with brewing industry applications.
MANUFACTURING
The Company's research and development and executive offices are
located at 5201 N.W. 77th Avenue, Suite 100, Miami, Florida. In addition, the
Company relies on outside vendors to manufacture all of the components of its
EpiDNA Picogram Assay.
Certain key components of the Company's Picogram Assay product are
currently provided by a limited number of sources, and many components are
provided by outside vendors. One component is provided by a single source. The
Company is utilizing contract manufacturers to manufacture required reagents.
Two key components of the EpiDNA Picogram Assay Kit, the "GeNuncTM" reaction
modules and the "MaxisorpTM" immunomodules are manufactured by NUNC (a Danish
entity), but can also be obtained from United States distributors such as Fisher
Scientific, V.W.R. or Baxter Scientific. The "AmpakTM" detection system, which
is also a key component of the Picogram Assay, is available only from a single
source of supply. Additionally, the Company contracts with Fujirebio
Diagnostics, Inc. for manufacturing of certain reagents, assembly and packaging.
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STRATEGY FOR GROWTH
In the event the Company is able to raise additional capital, Genetic
Vectors intends to expand its business opportunities through increased marketing
efforts (as outlined in "Marketing and Sales") and by expanding its product
lines (as described in other sections). The Company intends to attempt to form
strategic alliances with corporate partners that can provide distribution for
the Company's products or research and development support for its long term
research and development activities. The Company's labeling, detection and assay
kits may provide an attractive means for a strategic partner to enhance its
existing product lines. The Company may also seek to license or sublicense those
applications of the Technology that are either outside its product focus or for
which funding is inadequate.
Additionally, the Company believes that there are favorable business
acquisition opportunities that would enable it to expand its business more
rapidly. To date, the Company has been unsuccessful in consummating any
acquisitions and has expended approximately $152,000 in pursuing acquisition
opportunities. Management believes that the successful consummation of several
of these acquisition opportunities would enable it to achieve economies of
scale, improve gross margins and increase revenues and/or market share. However,
the Company's ability to pursue or consummate any acquisition is completely
dependent on its ability to obtain significant additional capital. Generally,
shareholder approval will not be required in connection with such activities.
COMPETITION
The biotechnology industry is subject to intense competition. The
Company's competitors in the United States and internationally are numerous and
include, among others, diagnostics, health care, pharmaceutical and
biotechnology companies. Additionally, other companies, including large
biotechnology companies, may enter the Company's business in the future.
Potential competitors may be able to develop technologies that are as effective
as, or more effective or easier to interpret than those offered by the Company,
which would render the Company's products noncompetitive or obsolete. Moreover,
many of the Company's existing and potential competitors have substantially
greater financial, marketing, sales, distribution and technological resources
than the Company. Such existing and potential competitors may also enjoy
substantial advantages over the Company in terms of research and development
expertise, experience in conducting clinical trials, experience in regulatory
matters, manufacturing efficiency, name recognition, sales and marketing
expertise and distribution channels. There can be no assurance that the Company
will be able to compete successfully against current or future competitors or
that competition will not have a material adverse effect on the Company's
business, financial condition and results of operations.
Genetic Vectors' chosen area of business lies in the labeling and
detection of nucleic acids using the Technology. The Company has chosen
specifically to market products that are not currently subject to regulation and
that can be marketed without the requirement for obtaining or licensing any
additional technology. The market which the Company intends to serve includes
tests for quality control of biopharmaceutical drug production and in food and
fermented beverages. In addition, the Company intends to market its products to
the life science research community. These widely diverse markets result in a
wide variety of competitive situations.
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DNA CONTAMINATION ASSAYS IN BIOPHARMACEUTICALS. Several companies are
currently involved in making or selling trace DNA detection reagents or
equipment, or performing assays. In this market there are two types of
competitors: (1) instrument and reagent sellers and (2) specialty reference
labs. Genetic Vectors believes that the largest competitive element in the
current market is specialty reference laboratories. These reference laboratories
offer DNA assaying at their own facilities based on their own individually
developed assays. While clearly competitors, the Company believes that these
facilities also represent potential customers for its products.
CUSTOMERS
The Company's customers to date have been biopharmaceutical
manufacturers. To date, the Company has not generated significant sales and,
therefore, is not dependent on any customers.
EMPLOYEES
Genetic Vectors currently has seven employees, two of which are
executive officers and all of which are full-time employees. See "Management's
Plan of Operation and Discussion and Analysis - Changes in the Number of
Employees." None of the Company's employees are covered by a collective
bargaining agreement and the Company believes its employee relations are
satisfactory.
INTELLECTUAL PROPERTY RIGHTS
The Company has acquired rights to make, use and sell certain products
under the patents and patent applications referred to herein pursuant to a
License Agreement dated September 7, 1990 between ProVec, Inc., ("ProVec"), a
company owned by Dr. Mead McCabe, and the University of Miami and its School of
Medicine, the owner of the patents and patent applications. The University of
Miami acquired the rights by virtue of an employee agreement and the University
Patent Policy. Parts of the invention were made using funds of the United States
Government. On January 20, 1992, ProVec assigned its rights under the License
Agreement to EpiDNA, Inc., a wholly owned subsidiary of the Company. EpiDNA
merged into the Company on September 6, 1996.
The license granted under the License Agreement is worldwide and
exclusive (except for the rights of the Federal Government) providing the
Company with the right to manufacture, use and sell products utilizing the
patents and patent applications referred to herein. The Company has the
obligation, at its own expense, to prosecute and maintain patents in the name of
or on behalf of the University of Miami. Further, the Company is obligated to
maintain product liability insurance, with the University of Miami being named
as an additional insured. The License Agreement provides for payment of a
maintenance fee of $500 and a running royalty of 4% of net sales of products
using the Technology. The maintenance fee is creditable against royalties
subsequently due in a given year. The term of the License Agreement is the life
of the U.S. patent and/or its foreign counterpart patents. The License Agreement
can be terminated by the University of Miami, at its discretion, for material
breaches by the Company. Primary among such breaches are failure to file
quarterly reports of sales, nonpayment of royalties, failure to develop and sell
products based on the Technology, cessation of sales for a period of three
months and bankruptcy or adjudication of insolvency. A two-month cure period is
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provided for correction of breaches. If the License Agreement is terminated by
the University of Miami, the ownership of the patents and patent applications
and all rights to develop, manufacture and sell products under the patents and
patent applications will revert to the University of Miami and the Company will
be unable to produce, market or sell products whose manufacture, use or sale is
covered by the claims of the patents and patent applications referred to herein.
Thus, the Company would suffer a material adverse effect on its business,
financial condition and viability if the University of Miami terminated the
License Agreement.
Since the patents and patent applications referred to herein were made,
in part, using federal funds provided by a federal agency, the National
Institute of Health ("NIH") has a nonexclusive, nontransferable, irrevocable,
paid-up worldwide license to practice the invention (35 U.S.C. 202 (c)(4)).
Under this nonexclusive license, the NIH can use the Technology in
federally-funded projects or it can, if provided in a treaty or agreement,
sublicense the Technology to a foreign government or international organization.
This nonexclusive license to the NIH did not terminate with the licensing of the
Technology to the Company. The NIH also has certain rights (35 U.S.C. 203)
allowing it to grant licenses to third parties if it is determined that
practical application of the invention is not occurring, even exclusive
licenses, as well as march-in rights to meet unmet health or safety needs, to
meet requirements for public use specified in federal regulations or for failure
to manufacture in the United States or to obtain a waiver of such provisions.
The grant of an exclusive license or the exercise of the march-in rights would
cause the Company to suffer a material adverse effect on its business, financial
condition and viability. As described herein, the Company has already developed
products based on the Technology and intends to continue the commercialization
of the Technology.
The Company has applied for and been granted, on behalf of the
University of Miami, patent protection for part of the Technology in the United
States and other countries. Letters Patent Number 246228 has been issued for the
Technology in New Zealand. Also, the University of Miami, at Company expense,
has filed for and was granted patents under the International Patent Cooperation
Treaty, followed by national stage filings in Australia, New Zealand and the
European Patent Office. There are currently two United States patents for the
Technology.
CERTAIN BUSINESS RISK FACTORS
The Company is subject to various risks which may have a material
adverse effect on its business, financial condition and results of operations.
Certain risks are discussed below.
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING. The Company
had cash and cash equivalents of only $156,054 as of December 31, 1998. Since
November 1998, the Company borrowed a total of $438,500 from private investors
in four separate transactions. The Company projects that such funds will be
completely exhausted on or before the end of April 1999. In the absence of
additional capital, the Company will be required to significantly curtail or
cease its business activities. The Company has no commitment for any additional
capital and no assurance can be given that the Company will be successful in
obtaining any additional capital. The Company's ability to continue its business
activities is completely dependent on such additional capital and its failure to
obtain such capital will have a material adverse effect on the Company's
business, financial condition and results of operation and will jeopardize the
Company's ability to continue its business activities.
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ABILITY TO REPAY SECURED INDEBTEDNESS. In order to fund its operations
since November 1998, the Company was forced to borrow money from private
investors in five separate transactions. See "Plan of Operation - Additional
Fund Raising Activities." Three of these transactions are secured by
substantially all of the Company's assets. The Company's ability to repay all
such loans is completely dependent on the Company's ability to raise additional
capital from external sources. The Company's failure to raise such capital by
the repayment date of these loans may result in the foreclosure on the Company's
assets. This would have a material adverse effect on the Company's business,
financial condition and results of operations and would jeopardize the Company's
ability to continue its business activities.
LIMITED OPERATING HISTORY AND EXPECTATION OF FUTURE LOSSES. The Company
was organized in 1991 and since inception has been in the development stage. To
date, the Company has generated very limited revenues from the sale of its
product. Further, the Company has devoted most of its efforts to various
organizational activities, including research and development and the
development of a business strategy. From its inception through December 31,
1998, the Company has incurred cumulative losses of approximately $6.1 million.
The Company expects to incur substantial losses for the foreseeable future due,
in part, to research and development, distributing and marketing its product.
There can be no assurance that the Company will not encounter substantial delays
and unexpected expenses related to research, development, production and
marketing or other unforeseen difficulties, which may cause additional losses.
UNCERTAIN MARKET ACCEPTANCE AND DEPENDENCE ON A LIMITED NUMBER OF
PRODUCTS. The Company currently has one product, the Picogram Assay, and another
product line under development, the EasyID product line. As such, the Company is
highly dependent on a limited number of products and the Company's long-term
success may depend on the market acceptance of these products. Market acceptance
of the Company's products will depend, in part, on the Company's ability to
demonstrate the superiority of its products with respect to existing techniques,
including the products' accuracy, ease of use, reliability and
cost-effectiveness and on the effectiveness of the Company's marketing efforts.
These efforts have been adversely affected by the Company's working capital
shortage. No assurance can be given that the Company will gain market acceptance
for its products. Failure to gain market acceptance for either of these product
lines will have a material adverse effect on the Company's business, financial
condition and results of operations.
TECHNOLOGICAL UNCERTAINTY AND EARLY STAGE OF PRODUCT DEVELOPMENT. The
science and technology of the Program Assay and EasyID are rapidly evolving.
Although the Company has conducted limited marketing of its initial product,
other proposed products are in the early development stage. These products will
require significant further research, development and testing and are subject to
the risks of failure inherent in the development of products based on innovative
technologies. These risks include the possibility that any or all of the
proposed products are found to be ineffective, unsafe, or otherwise fail to
receive necessary regulatory clearances, if any, that the proposed products,
though effective, are uneconomical to market, that third parties hold
proprietary rights that preclude the Company from marketing them, or that third
parties market a superior or equivalent product. Accordingly, the Company is
unable to predict whether its research and development activities will result in
any commercially viable products.
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LIMITED MANUFACTURING AND MARKETING CAPABILITY. The Company's
experience in manufacturing has been limited to the production of small amounts
of kits of its initial product for use in research and development and early
commercialization of its initial product. No assurance can be given that the
Company will ultimately be able to obtain or produce sufficient quantities of
such product at commercially reasonable costs.
The Company has limited experience in marketing its product and no
assurance exists that the Company can market its product in an effective manner.
The Company intends to market its product in the United States, Europe and Asia
through a network of independent distributors supported by a direct sales force,
but no sales force is yet in place, and no distribution agreements have been
entered into. The Company's ability to market its product in Europe and Asia and
other areas will depend on the Company's ability to fund such efforts as well as
the Company's ability to develop strategic alliances with marketing partners.
There can be no assurance that the Company will enter into such alliances with
other companies on favorable terms or at all.
RISK OF PRODUCT LIABILITY CLAIMS. The nature of the Company's business
exposes it to risk from product liability claims. The Company maintains product
liability insurance for its products with limits of $1 million per occurrence
and $2 million in the aggregate per year. Such insurance coverage is, however,
becoming increasingly expensive and there can be no assurance that the Company's
insurance will be adequate to cover future product liability claims, or that the
Company will be successful in maintaining adequate product liability insurance
at acceptable rates. In addition, due to the Company's working capital shortage,
there can be no assurance that the Company will be able to fund the premiums for
its existing insurance. Any losses that the Company may suffer from future
liability claims, and any adverse publicity from product liability litigation,
may have a material adverse effect on the Company's business, financial
condition and results of operations.
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS. The Company's
success will depend in part on its ability to obtain and maintain patent
protection for its products, preserve its trade secrets, and operate without
infringing the proprietary rights of other parties. Because of the substantial
length of time and expense associated with bringing new products through
development to the marketplace, the biotechnology industry places considerable
importance on obtaining and maintaining patent and trade secret protection for
new technologies, products and processes. Legal standards relating to the scope
of claims and the validity of patents in the biotechnology field are uncertain
and evolving. There can be no assurance that patent applications to which the
Company holds rights will result in the issuance of patents, that any patents
issued or licensed to the Company will not be challenged and held to be invalid,
or that any such patents will provide commercially significant protection to the
Company's technology, products and processes. In addition, there can be no
assurance that others will not independently develop substantially equivalent
proprietary information not covered by patents to which the Company has rights
or obtain access to the Company's know-how or that others will not be issued
patents which may prevent the sale of one or more of the Company's products, or
require licensing and the payment of significant fees or royalties by the
Company to third parties in order to enable the Company to conduct its business.
Defense and prosecution of patent claims can be expensive and time consuming,
regardless of whether the outcome is favorable to the Company, and can result in
the diversion of substantial financial, management, and other resources from the
Company's other activities. An adverse outcome could subject the Company to
11
<PAGE>
significant liability to third parties, require the Company to obtain licenses
from third parties, or require the Company to cease any related research and
development activities or product sales. In addition, the laws of certain
countries may not protect the Company's intellectual property. No assurance can
be given that any licenses required under any such third-party patents or
proprietary rights would be made available on commercially reasonable terms, if
at all. In addition, due to the Company's working capital shortage, there can be
no assurance that the Company will be able to continue its existing patent
applications.
The Company's success is also dependent upon the skills, knowledge, and
experience of its scientific and technical personnel. To help protect its
rights, the Company plans to require all of its employees, consultants, advisors
and collaborators to enter into confidentiality agreements that prohibit the
disclosure of confidential information to anyone outside the Company and require
disclosure and in most cases assignment to the Company of their ideas,
developments, discoveries and inventions. There can be no assurance, however,
that these agreements will provide adequate protection for the Company's trade
secrets, know-how or other proprietary information in the event of any
unauthorized use or disclosure.
DEPENDENCE ON KEY PERSONNEL; INEXPERIENCE OF MANAGEMENT. The Company's
ability to successfully manage its growth will substantially depend on its
ability to attract and retain additional qualified management personnel. Because
of the Company's cash shortage, its ability to attract or retain qualified
personnel has been hindered. This cash shortage has caused the Company to pay
only one-half of its employees' salaries during portions of December 1998,
January 1999, February 1999, April 1999, and for all of March 1999. On April 23,
1998, the Company paid the unpaid salary for some if its employees for the
period from December 1998 through April 16, 1999. On December 9, 1998, the
Company issued the employees options to purchase an aggregate of 4,393 shares of
Common Stock at an exercise price of $5.00 per share or approximately $2.25 less
than the closing price on that date. The Company recently repurchased 1,171
options from its employees for an aggregate purchase price of $2,635. The
Company is currently accruing one-half of its employees salaries which it will
pay when and if additional capital is received. The Company also intends to
issue additional stock options to its non-executive employees for March 1999 at
a price to be determined. Currently, none of the Company's administrative staff
has any experience in running a large company or a company whose securities are
publicly held, apart from the Company. There can be no assurance that the
demands placed on Company personnel by the cash shortage or the growth of the
Company's business and the need for close monitoring of the Company's operations
and financial performance through appropriate and reliable administrative and
accounting procedures and controls will be met, or that the Company will
otherwise manage its growth successfully; the failure to do so could have a
material adverse affect on the Company's business, results of operations and
financial condition. There is significant competition for qualified personnel,
and there can be no assurance that the Company will be successful in recruiting,
retaining or training the management personnel it requires. The Company has
designated Mead M. McCabe, Jr. as its interim principal financial officer. The
Company currently has no officer with experience in managing the financial and
accounting functions of a publicly-held company.
ITEM 2. DESCRIPTION OF PROPERTY.
- ------------------------------------------
The Company currently leases approximately 14,000 square feet of office
space located at 5201 N.W. 77th Avenue, Suite 100, Miami, Florida 33166. This
lease, which was entered into on June 12, 1997, has a ten-year term. This
property is in good condition.
12
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
- ------------------------------------
The Company is not aware of any legal proceedings involving the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ----------------------------------------------------------------------
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
- ---------------------------------------------------------------------------
MARKET INFORMATION
The Company's shares of common stock, par value $0.001 per share (the
"Common Stock"), is traded in the over-the-counter market and is quoted on the
Over-the-Counter Bulletin Board (the "OTC Bulletin Board") under the symbol
"GVEC." The following table shows the high and low bid prices for the Common
Stock for each quarter within the last two fiscal years(1). The Company's
closing price as of April 25, 1999 was $6.00.
BID PRICE PER SHARE(2)
----------------------
HIGH LOW
---- ---
First Quarter 1997 $13.875 $3.00
Second Quarter 1997 $10.375 $6.00
Third Quarter 1997 $9.25 $5.375
Fourth Quarter 1997 $9.875 $6.00
BID PRICE PER SHARE(2)
----------------------
HIGH LOW
---- ---
First Quarter 1998 $8.75 $7.00
Second Quarter 1998 $9.875 $8.75
Third Quarter 1998 $9.9375 $7.50
Fourth Quarter 1998 $8.50 $3.50
- -------------------------------
(1) This information was obtained from the OTC Bulletin Board.
(2) The Company believes that these quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and may not represent
actual transactions.
HOLDERS OF COMMON STOCK
As of April 25, 1998, there were approximately 38 holders of record of
the Common Stock. The Company believes it has in excess of 528 non-objecting
beneficial owners of its Common Stock.
13
<PAGE>
DIVIDENDS
The Company has not paid any dividends on its Common Stock at any time.
Section 607.06401 of Florida Statutes prohibits the payment of dividends by any
corporation which after taking into account such dividend would not be able to
pay its debts as they become due or which would result in such corporation's
total assets being less than its total liabilities. This provision may prohibit
the Company from paying dividends unless the Company obtains significant new
capital. Other than the foregoing, the Company is not aware of any restrictions
on its ability to pay dividends on its Common Stock, but the Company's
management does not anticipate paying any dividends for the foreseeable future.
SALES OF UNREGISTERED SECURITIES
In June and August of 1998, the Company issued an aggregate of 709
shares in exchange for consulting services valued by the Company at $6,000,
based on the closing price on the date of grant. This Offering was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Act").
On September 8, 1998, the Company granted warrants to purchase 50,000
shares of Common Stock of the Company at an exercise price of $6.00 per share to
a consultant (the "Consultant") to assist the Company to obtain additional
financing. These warrants are immediately exercisable. The closing price of the
Company's Common Stock on September 8, 1998 was $9.125. This offering was exempt
from registration pursuant to Section 4(2) of the Act.
On November 2, 1998, the Company borrowed $150,000 from two private
investors ("Loan No. 1"). The terms of Loan No. 1 provided for an annual
interest rate of 12% which will increase 1% for each month that any portion of
Loan No. 1 remains unpaid after April 1, 1999, up to the maximum rate permitted
by law. Accrued interest is payable monthly beginning on April 1, 1999. The
outstanding principal must be repaid by November 2, 1999. The Company also
issued to the private investors warrants to purchase 15,000 shares of Common
Stock at an exercise price of $6.00 per share. These warrants may be exercised
at any time before November 2, 2003. The closing price of the Common Stock on
November 2, 1998 was $7.00. The Company is obligated to grant the private
investors warrants to purchase an additional 1,250 shares of Common Stock at an
exercise price of $6.00 per share on April 1, 1999 and each month thereafter
through October 1, 1999 until the loans are repaid in full. On November 1, 1999
and each month thereafter that the loans are outstanding, the Company is
obligated to grant the private investors warrants to purchase an additional
2,500 shares of Common Stock at an exercise price of $6.00. The proceeds of
these loans have been used by the Company to fund its working capital needs.
This offering was exempt from registration pursuant to Section 4(2) of the Act
and Rule 506 promulgated thereunder.
In addition and on November 2, 1998, the Company issued to the
Consultant warrants to purchase 15,000 shares of Common Stock at an exercise
price of $6.00 per share. These warrants are immediately exercisable.
This offering was exempt from registration pursuant to Section 4(2) of the Act.
On January 19, 1999, the Company borrowed $163,500 from a private
investor ("Loan No. 2"). The terms of Loan No. 2 provided for an annual interest
rate of 12% which will increase 1% for each month that any portion of the loan
14
<PAGE>
remains unpaid after January 19, 2000, up to the maximum rate permitted by law.
Accrued interest is payable monthly beginning on April 19, 1999. The outstanding
principal balance must be repaid by January 19, 2000. The loan is secured by
substantially all of the Company's assets. In addition, the Company issued the
private investor warrants to purchase 50,000 shares of Common Stock at an
exercise price of $0.01 per share. These warrants are immediately exercisable.
The closing price of the Common Stock on January 19, 1999 was $5.125. The
Company is obligated to grant the private investor warrants to purchase 150,000
shares at an exercise price of $5.50 per share upon the repayment of the loan or
the closing on the sale of Company securities in an aggregate amount of
$1,500,000. Such additional warrants become exercisable on the fifth anniversary
of the grant. The proceeds of this loan have already been expended by the
Company to fund its working capital needs. This offering was exempt form
registration pursuant to Section 4(2) of the Act and Rule 506 promulgated
thereunder.
On March 9, 1999, the Company borrowed an additional $125,000 ("Loan
No. 3") from the same private investor which had made Loan No. 2. The terms of
Loan No. 3 provided for an annual interest rate of 12% which will increase 1%
for each month that any portion of the loan remains unpaid after January 19,
2000, up to the maximum rate permitted by law. Accrued interest is payable
monthly beginning on April 19, 1999. The outstanding principal balance must be
repaid by January 19, 2000. The loan is secured by substantially all of the
Company's assets. In addition, the Company issued the private investor warrants
to purchase 50,000 shares of Common Stock at an exercise price of $0.01 per
share. These warrants are immediately exercisable. The closing price of the
Common Stock on March 9, 1999 was $7.875. Substantially all of the proceeds of
this loan have been expended by the Company to fund its working capital needs.
This offering was exempt from registration pursuant to Section 4(2) of the Act
and Rule 506 promulgated thereunder.
In connection with Loan No. 2 and Loan No. 3, the Company granted
warrants to purchase 16,350 shares of Common Stock on January 19, 1999 and
12,500 shares of Common Stock on March 9, 1999 at an exercise price of $5.50 per
share to the Consultant for helping the Company to locate the financing. These
warrants are immediately exercisable. The closing price of the Common Stock was
$5.125 and $7.875 on January 19, 1999 and March 9, 1999, respectively. This
offering was exempt from registration pursuant to Section 4(2) of the Act.
On April 19, 1999, the Company borrowed an additional $100,000 ("Loan
No. 4") from a private investor. This loan has an annual interest rate of 12%.
Accrued interest is payable quarterly, commencing on June 1, 1999. The loan is
secured by substantially all of the Company's assets. In addition, the Company
issued the private investor warrants to purchase 25,000 shares of Common Stock
at an exercise price of $3.50 per share. These warrants are immediately
exercisable. The closing price of the Common Stock on April 19, 1999 was $6.00.
The Company intends to use these proceeds on unpaid salaries for its employees
and for other working capital purposes. The Company believes that these proceeds
will last for less than one month. This offering was exempt from registration
pursuant to Section 4(2) of the Act and Rule 506 promulgated thereunder.
USE OF PROCEEDS
1. Effective date of registration statement: December 20, 1996;
Commission File Number 333-5530-A.
2. The Offering commenced on December 20, 1996.
3. The Offering did not terminate before any securities were sold.
(i) The Offering did not terminate before the sale of all
securities registered.
(ii) The managing underwriter was Shamrock Partners, Ltd.
(iii) Securities registered:
15
<PAGE>
(a) Common Stock ($0.001 par value).
(b) Underwriter warrants to purchase an aggregate of 50,000
shares of Common Stock. Those warrants will become
exercisable on December 21, 1997 and expire on December
19, 2001.
(iv) Securities sold (all sold for account of the issuer):
AGGREGATE
OFFERING
PRICE OF AGGREGATE
AMOUNT AMOUNT AMOUNT OFFERING PRICE
TITLE REGISTERED REGISTERED SOLD OF AMOUNT SOLD
- --------------------------------------------------------------------------------
1. Common Stock 575,000 $5,750,000 $575,000 $5,750,000
2. Common Stock pursuant to
Underwriter Warrants 50,000 $750,000 - 0 - - 0 -
3. Underwriter Warrants 50,000 500 50,000 500
(v) Underwriting Discounts and Commissions: $517,500
Finder's Fees: - 0 -
Expenses Paid for Underwriters: 217,139
Other Expenses: 445,610
Total Expenses: $1,180,249
(vi) Net Proceeds of Offering Before Refunds: $4,569,751
Refund of Offering Costs: 19,257
Net Proceeds of Offering: 4,589,008
(vii) Uses of Net Proceeds:
<TABLE>
<CAPTION>
Direct or indirect payments to
directors, officers, general partners
of the issuer or their associates; to
persons owning ten percent or more of
any class of equity securities of the
issuer; and to affiliates Direct or indirect
of the issuer payment to others
------------------------------------- ------------------
<S> <C> <C>
Construction of plant, building $0
and facilities:
16
<PAGE>
Direct or indirect payments to
directors, officers, general partners
of the issuer or their associates; to
persons owning ten percent or more of
any class of equity securities of the
issuer; and to affiliates Direct or indirect
of the issuer payment to others
------------------------------------- ------------------
Purchase and installation of
machinery and equipment: 503,421
Purchase of real estate: -0-
Acquisition of other business(es): -0-
Repayment of indebtedness: -0-
Working capital: 30,000 976,894
TEMPORARY INVESTMENTS (SPECIFY)
- -------------------------------
Certificates of Deposit: 131,130
OTHER PURPOSES (SPECIFY)
Research and Development and Patent Protection 1,644,763
Expenditures:
Expansion of Research/Manufacturing Facilities: 109,000 365,173
Sales and Marketing Capabilities: 170,715
Management Salaries: 561,730
Investor Relations: 96,182
TOTAL: 700,730 3,888,278
</TABLE>
ITEM 6. MANAGEMENT'S PLAN OF OPERATION AND DISCUSSION AND ANALYSIS.
- -----------------------------------------------------------------------------
INTRODUCTORY STATEMENTS
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS. This Annual Report
contains forward-looking statements, including statements regarding, among other
things, (a) the Company's growth strategies, (b) anticipated trends in the
Company's industry and (c) the Company's future financing plans. In addition,
when used in this Annual Report, the words "believes," "anticipates," "intends,"
"in anticipation of," and similar words are intended to identify certain
forward-looking statements. These forward-looking statements are based largely
17
<PAGE>
on the Company's expectations and are subject to a number of risks and
uncertainties, many of which are beyond the Company's control. Actual results
could differ materially from these forward-looking statements as a result of
changes in trends in the economy and the Company's industry, reductions in the
availability of financing and other factors. In light of these risks and
uncertainties, there can be no assurance that the forward-looking statements
contained in this Annual Report will in fact occur. The Company does not
undertake any obligation to publicly release the results of any revisions to
these forward-looking statements that may be made to reflect any future events
or circumstances.
The Company temporarily removed the Picogram Assay from the marketplace
in December, 1997 and subsequently re-launched it in the third quarter of 1998
but has not generated significant sales revenue. The Company remains largely a
development stage company, with the Company's expenditures far exceeding its
revenues. Because the Company has not generated significant revenues, the
Company intends to continue to report its plan of operation.
PLAN OF OPERATION
ADDITIONAL FUND RAISING ACTIVITIES. The Company had originally
projected that the funds raised in its initial public offering (the "IPO"),
which was closed on December 26, 1996, would last for approximately eighteen
months after the date of the Offering. As previously reported in its Form 10-QSB
for the three-month period ended September 30, 1998, the Company needed to raise
additional capital to continue operations beyond November 1998. In order to fund
its operations since November 1998, the Company had to borrow money from several
private investors in four separate transactions. These loan transactions were
intended to provide short-term financing to the Company. The aggregate amount of
these loans (excluding payments of commissions and other expenses) was $438,500.
The Company anticipates that these loan proceeds will be completely expended by
the end of April 1999. Thereafter, the Company's ability to continue its
business activities will be completely dependent on its ability to obtain new
capital. The Company has no commitment for any additional capital and no
assurances can be given that the Company will be successful in raising any new
capital. A summary of these loan transactions is contained in "Market for Common
Equity and Related Stockholder Matters - Sales of Unregistered Securities." In
the absence of additional capital, the Company will be required to significantly
curtail or cease its business activities.
The plan of operation described in this Annual Report assumes that the
Company will be successful in raising significant additional capital, but no
assurances can be given that the Company will be successful in raising any
additional capital. The failure to raise additional capital will, among other
things, cause significant deviations from the plan of operation described in
this Annual Report, and will have a material adverse effect on the Company's
business, financial condition and results of operations. It will also jeopardize
the Company's ability to continue its business activities.
SUMMARY OF ANTICIPATED PRODUCT RESEARCH AND DEVELOPMENT. The Company
intends to continue its product research and development and continue to
implement what the Company believes to be a feasible plan for product
development. The Company has modified its feasibility plan since the filing of
its Quarterly Report on Form 10-QSB for the three-month period ended September
30, 1998. The Company expects to employ its resources in the research and
18
<PAGE>
development of potential applications of its nucleic acid labeling technology.
The major components of the plan of operation as revised from the last reporting
period are as follows:
1999 o Continued development of applications of Genetic Vectors' nucleic
acid labeling technology.
o Development of EasyID DNA probe products for quality assurance in
the food and beverage industry.
2000 o Development of EasyID probe products for quality assurance in the
food and beverage industry.
o Continued development of applications of Genetic Vectors' nucleic
acid labeling technology.
SIGNIFICANT PLANT OR EQUIPMENT PURCHASES. The Company anticipates
purchasing or leasing equipment valued at approximately $250,000 in 1999 to be
used in connection with the foregoing development plan.
CHANGES IN THE NUMBER OF EMPLOYEES. The Company currently has seven
employees. As shown in the following chart, the Company anticipates hiring
additional personnel during 1999 and 2000 in connection with its research and
development and product development plan. The Company believes that these
personnel will be adequate to accomplish the tasks set forth in its plan.
PROPOSED ADDITIONAL PERSONNEL 1999 2000
- ----------------------------- --------- ---------
Executive Personnel 2 0
Administrative Personnel 2 0
Director - Sales and Marketing 1 0
Salespersons 5 4
Technical Info/Inside Sales 3 0
Scientific Supervisors 1 0
Technicians 2 0
--------- ---------
TOTAL PROPOSED NEW EMPLOYEES 16 4
========= =========
TOTAL EMPLOYEES AT END OF YEAR 23 27
========= =========
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company generated revenues of $11,275 during 1998, which were
attributable to the launch of the Picogram Assay. In addition, the Company
recognized $35,897 in grant revenue during 1998. During 1997, the Company was
awarded a grant for $99,897 from the National Institute of Health and the
19
<PAGE>
National Institute of Allergy and Infectious Diseases for rapid identification
of fungal species. In this connection, the Company recognized grant revenue
aggregating $35,897 and $64,000 in 1998 and 1997, respectively. The award
terminated on February 27, 1998.
The sales generated by the Company during 1998 were preliminary in
nature, and represented the purchase of product samples primarily for evaluation
purposes. The Company reintroduced the Picogram Assay in the third quarter of
1998; however, the Company remains largely a development stage company with
expenditures far exceeding revenues.
Research and development expenses for 1998 increased by $179,226. The
increase was largely attributable to accelerated product improvement efforts on
EpiDNA Picogram Assay kits and development efforts on the core labeling
technology. In addition, the Company created a new research and development cost
center which the Company believes resulted in better tracking of certain
research and development expenses. Some of these expenses had not previously
been classified as research and development expenses, including certain
salaries. This reclassification resulted in greater research and development
expenses in 1998 compared to 1997.
Operating expenses for 1998 were approximately the same as in 1997,
increasing only $584.
Interest income for 1998 decreased by $136,970 because the Company had
less cash invested during 1998 than in 1997. Interest income was attributable to
interest earned on certificates of deposit and money market accounts which
represented the investment of the net proceeds of the Company's IPO and proceeds
from the issuance of debentures.
LIQUIDITY AND CAPITAL RESOURCES. The Company had net cash of $2,102,467
at the beginning of 1998, consisting primarily of the net proceeds received by
the Company in the IPO. The net cash used by the Company in operating activities
aggregated $2,125,437. This was largely attributable to research and development
and general and administrative expenses. The Company's net cash used in
investing activities aggregated $64,606 during 1998, consisting mainly of
purchases of laboratory and office equipment.
As of December 31, 1998, the Company had total stockholders' equity of
$563,575 and had short-term debt of $150,000. The Company had $109,924 in cash
and cash equivalents as of December 31, 1998. This represents, in large part,
the proceeds from Loan No. 1. The Company anticipates that such proceeds,
together with the net proceeds from Loan No. 2 and Loan No. 3, will be
completely expended by the end of April 1999. Thereafter, the Company will be
required to significantly curtail or cease its business activities until
additional capital can be obtained, if at all. See "Plan of Operation."
Additional financing is necessary for the Company to continue its business
activities. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Going Concern Opinion."
As discussed throughout this Annual Report, the Company has experienced
extreme cash shortages since the end of November 1998 through the date of this
Annual Report. See "Plan of Operation - Additional Fund Raising Activities." As
a result of these cash shortages, the Company was required to pay one-half of
its employees' salaries in cash and one-half in stock options for a portion of
December 1998 and January 1999. On December 9, 1998, the Company issued the
employees options to purchase an aggregate of 4,393 shares of Common Stock at an
exercise price of $5.00 per share or approximately $2.25 less than the closing
price on that date. In addition, the Company was required to pay only one-half
of its employees' salaries in cash for all of March 1999 in order to preserve
cash. The Company is currently accruing one-half of its employees' salaries
which it will pay when and if additional capital is received. In addition, the
20
<PAGE>
Company will issue additional stock options to its non-executive employees at a
price to be determined.
YEAR 2000 COMPUTER ISSUES. Computer programs have typically abbreviated
dates by eliminating the first two digits of the year under the assumption that
these two digits would be 19. As the year 2000 approaches, these systems may not
be able to recognize current dates which may cause computer system failure or
miscalculations by computer programs. The Company does not believe it will not
be materially affected by the Year 2000 problem. The Company's conclusion is
based on a survey of the computer equipment currently in use by the Company. All
such equipment was acquired by the Company within the last two years and was
Year-2000-compliant when acquired. The Company has not expended a material
amount of costs in this assessment. Moreover, the Company remains largely a
research and development company and therefore its exposure to the Year 2000
problems of its customers and suppliers is minimal. However, the Company is
exposed to the risk that one or more of its suppliers could experience Year 2000
problems that may impact their ability to supply materials to the Company. To
date, the Company is not aware of any Year 2000 problems of its suppliers that
would have a material adverse impact on the Company's operations. Nonetheless,
the inability of suppliers to convert their computer systems to avoid any Year
2000 problems could jeopardize the supply of materials to the Company and
therefore have a material adverse effect on the Company's operations. The effect
of non-compliance by suppliers is not determinable at this time. The Company's
Year 2000 risks are considered minimal and no contingency plans are believed to
be necessary. As a result, the Company believes the potential consequences of
Year-2000 problems will not have a material effect on the Company.
IMPACT OF INFLATION. Although inflation has slowed in recent years, it
is still a factor in the United States economy and the Company continues to seek
ways to mitigate its impact. To the extent permitted by competition, the Company
intends to pass increased costs on to its customers by increasing sales prices
over time. In addition, the Company places all of its major supplier purchases
out to bid.
NEW FASB PRONOUNCEMENTS. In June 1998, the Financial Accounting
Standards Board issued SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS 133 requires companies to recognize all derivatives
contracts as either assets or liabilities in the balance sheet and to measure
them at fair value. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to match the
timing of gain or loss recognition on the hedging derivative with the
recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in operations in the period
of change. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999.
Historically, the Company has not entered into derivatives contracts
either to hedge existing risks or for speculative purposes. Accordingly, the
Company does not expect adoption of the new standard on January 1, 2000 to
affect its financial statements.
21
<PAGE>
ITEM 7. FINANCIAL STATEMENTS.
- ---------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE
COMPANY)
Financial Statements
Year Ended December 31, 1998 and 1997
(Unaudited)
22
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE
COMPANY)
CONTENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
Page
----
Balance sheet (unaudited) 24
Statements of Operations (unaudited) 25
Statements of Stockholders' Equity (Deficit) (unaudited) 26-7
Statements of Cash Flows (unaudited) 28
Notes to Financial Statements (unaudited) 29-47
23
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
DECEMBER 31, 1998
- ---------------------------------------------------------------------------------------------
ASSETS (Notes 4 and 11)
CURRENT
Cash and cash equivalents $ 109,924
Accounts receivable 3,620
Inventory 13,500
Prepaid expenses 22,852
Deferred loan costs (net of $18,525 of accumulated amortization) (Note 4) 92,625
- ---------------------------------------------------------------------------------------------
Total current assets 242,521
Equipment and improvements, net (Note 3) 403,355
Patents and license agreement, net of $25,245 of accumulated
amortization (Note 9(a)) 221,719
Restricted cash equivalents (Note 5) 46,130
- ---------------------------------------------------------------------------------------------
$ 913,725
- ---------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 200,150
Notes payable (Note 4) 150,000
- ---------------------------------------------------------------------------------------------
Total liabilities 350,150
- ---------------------------------------------------------------------------------------------
Commitments and contingencies (Notes 2 and 8)
- ---------------------------------------------------------------------------------------------
Stockholders' Equity (Note 8)
Common stock, $.001 par value, 10,000,000 shares authorized,
2,349,843 shares issued and outstanding 2,350
Additional paid-in capital 6,674,670
Deficit accumulated during the development stage (6,113,445)
- ---------------------------------------------------------------------------------------------
Total stockholders' equity 563,575
- ---------------------------------------------------------------------------------------------
$ 913,725
- ---------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CUMULATIVE FROM
JANUARY 1, 1992
(INCEPTION) FOR THE FOR THE
THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1998 1997
- --------------------------------------------------------------------------------------------------
REVENUE:
Sales $ 50,535 $ 11,275 $ 39,260
Grant revenue 149,147 35,897 64,000
- --------------------------------------------------------------------------------------------------
Total revenue 199,682 47,172 103,260
- --------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Selling, general and administrative 3,855,641 1,574,082 1,573,534
Research and development 2,538,098 984,937 805,711
Depreciation and amortization 187,867 125,427 55,505
- --------------------------------------------------------------------------------------------------
Total expenses 6,581,606 2,684,446 2,434,750
- --------------------------------------------------------------------------------------------------
INTEREST 268,479 61,807 198,776
- --------------------------------------------------------------------------------------------------
Net loss $ (6,113,445) $ (2,575,467) $ (2,132,714)
- --------------------------------------------------------------------------------------------------
Weighted average common shares
outstanding (Note 8) 2,344,696 2,339,634
- --------------------------------------------------------------------------------------------------
Net loss per common share - basic and
diluted $ (1.10) $ (.91)
- --------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
DEFICIT
ADDITIONAL ACCUMULATED
PAID-IN DURING THE
SHARES AMOUNT CAPITAL DEVELOPMENT STAGE TOTAL
- -------------------------------------------------------------------------------------------------------------------------------
Initial capitalization for cash at $0.0000625
per share (Note 8(a)) 1,600,000 $ 1,600 $ (1,500) $ - $ 100
Capital contribution (Note 8(b)) - - 500,000 - 500,000
Net loss - - - (260,484) (260,484)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 1,600,000 1,600 498,500 (260,484) 239,616
Net loss - - - (205,753) (205,753)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 1,600,000 1,600 498,500 (466,237) 33,863
Net loss - - - (318,927) (318,927)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 1,600,000 1,600 498,500 (785,164) (285,064)
Net loss - - - (226,666) (226,666)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 1,600,000 1,600 498,500 (1,011,830) (511,730)
Issuance of common stock for cash, at
$5.00 per share, net of offering costs
of 70,000 (Note 8(c)) 110,000 110 479,990 - 480,100
Conversion of $413,518 due to parent in
exchange for 41,352 shares of common
stock (Note 8(f)) 41,352 42 413,476 - 413,518
Conversion of $132,822 of accrued payroll
and consulting to the president and
chairman of the Board for 13,282 shares
of common stock (Note 8(f)) 13,282 13 132,809 - 132,822
Issuance of common stock at $10.00 per
share, net of offering costs of
$1,180,249 (Note 8(g)) 575,000 575 4,569,176 - 4,569,751
Stock options granted for services - - 56,250 - 56,250
(Note 8(c))
Net loss - - - (393,434) (393,434)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 2,339,634 $ 2,340 $ 6,150,201 $ (1,405,264) $ 4,747,277
Offering cost refund (Note 8(g)) - - 25,500 - 25,500
Offering costs (Note 8(g)) - - (6,243) - (6,243)
Net loss - - - (2,132,714) (2,132,714)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 2,339,634 $ 2,340 $ 6,169,458 $ (3,537,978) $ 2,633,820
- -------------------------------------------------------------------------------------------------------------------------------
26
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DEFICIT
ADDITIONAL ACCUMULATED
PAID-IN DURING THE
SHARES AMOUNT CAPITAL DEVELOPMENT STAGE TOTAL
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 2,339,634 $ 2,340 $ 6,169,458 $ (3,537,978) $ 2,633,820
Issuance of common stock for services
(Note 8(j)) 709 1 5,999 - 6,000
Issuance for common stock for cash, at $5.00
per share (Note 8(k)) 9,500 9 47,491 - 47,500
Warrants granted for consulting services
(Note 9(f)) - - 332,500 - 332,500
Warrants granted for loan financing costs
(Note 4) - - 111,150 - 111,150
Options granted for services rendered
(Note 8(m)) - - 8,072 - 8,072
Net loss - - - (2,575,467) (2,575,467)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 2,349,843 $ 2,350 $ 6,674,670 $ (6,113,445 ) $ 563,575
- -------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
27
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cumulative from
January 1, 1992 For the For the
(inception) through year ended year ended
December 31, December 31, December 31,
1998 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
Operating Activities:
Net loss $ (6,113,445) $ (2,575,467) $ (2,132,714)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 187,867 125,427 55,505
Amortization of loan costs 18,525 18,525 -
Write-off of acquired technology 71,250 - 15,000
Consulting services provided for common stock 6,000 6,000 -
Stock options and warrants granted for services 340,572 340,572 -
(Increase) in accounts receivable (3,620) (3,620) -
(Increase) in inventory (13,500) (13,500) -
(Increase) in prepaid expenses (22,852) (22,852) -
(Increase) in restricted cash equivalents (46,130) (46,130) -
Increase (decrease) in accounts payable
and accrued liabilities 332,973 (45,608) 19,015
- ----------------------------------------------------------------------------------------------------------------------------
Total adjustments 871,085 450,030 89,520
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (5,242,360) (2,125,437) (2,043,194)
- ----------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of equipment and improvements (565,977) (63,240) (478,557)
Patent costs and license agreement (261,964) (1,366) (105,247)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (827,941) (64,606) (583,804)
- ----------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Increase due to parent 413,518 - -
Proceeds from note payable 185,000 150,000 -
Payment on notes payable (35,000) - (35,000)
Net proceeds from issuance of common stock 5,097,450 47,500 -
Capital contribution 500,000 - -
Offering refund 25,500 - 25,500
Offering costs (6,243) - (6,243)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 6,180,225 197,500 (15,743)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 109,924 (1,992,543) (2,642,741)
Cash and cash equivalents at beginning of period - 2,102,467 4,745,208
- ----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 109,924 $ 109,924 $ 2,102,467
- ----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES:
Conversion of due to parent in exchange for stock $ 413,518 $ - $ -
Conversion of accrued wages for stock $ 132,822 $ - $ -
Cash paid for interest $ - $ - $ -
Cash paid for taxes $ - $ - $ -
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
1. SUMMARY OF Organization and Business
SIGNIFICANT
ACCOUNTING Genetic Vectors, Inc. (the "Company"), formerly
POLICIES a subsidiary of Nyer Medical Group, Inc. ("Nyer"),
was incorporated on December 28, 1991. The Company
was organized to supply genetic engineering tools
and analytical kits to the biotechnology and
molecular biology markets. The Company's products
are intended to allow biopharmaceutical companies
to test for biopharmaceutical product purity in
compliance with regulatory standards. The Company
is in the development stage and its operations to
date have largely consisted of the research and
development of its products. The Company had no
financial activities from December 28, 1991 to
December 31, 1991. Accordingly, January 1, 1992
has been used as the inception date of these
financial statements.
These financial statements include the
specifically identifiable expenses of the Company
incurred by Nyer on behalf of the Company.
Nyer, which previously owned 74.9% of the
Company's common stock, distributed to its
shareholders 512,000 shares, representing 32% of
the outstanding shares of the Company's common
stock as of May 31, 1996.
Preparation of Financial Statements
-----------------------------------
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates
and assumptions that affect the reported amounts
of assets and liabilities and disclosure of
contingent assets and liabilities at the date of
the financial statements and the reported amounts
of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
29
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid
investments with an initial maturity of three
months or less when purchased to be cash
equivalents.
Research and Development Costs
------------------------------
Expenditures relating to the Company's product
research, development and testing are expensed as
incurred.
Deferred Loan Costs
-------------------
Deferred loan costs are carried at cost less
accumulated amortization. Amortization is computed
using the straight-line method over the life of
the notes payable of one year.
Equipment and Improvements and Depreciation
-------------------------------------------
Equipment and improvements are recorded at cost.
Depreciation is provided over the estimated useful
life of the assets which range from three to ten
years.
Patents and License Agreement
-----------------------------
Patents and the license agreement are carried at
cost less accumulated amortization. Amortization
is computed using the straight line method over
the estimated useful life of the patents which
range from 15.5 to 17 years.
The Company continually evaluates the carrying
value of its patents and license agreement.
Impairments are recognized when the expected
30
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
future operating cash flows to be derived from
such intangible assets are less than their
carrying values.
Revenue
-------
The Company recognizes revenue from sales upon
delivery of the product to a customer.
During 1997 the Company was awarded a grant for
$99,897 from the National Institute of Health and
the National Institute of Allergy and Infectious
Diseases for rapid identification of fungal
species. The award terminated on February 27,
1998. In this connection, the Company recognized
grant revenue aggregating $35,897 and $64,000 for
1998 and 1997, respectively.
Income Taxes
------------
Income taxes are accounted for using the liability
approach under the provisions of Statement of
Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
The Company filed a consolidated income tax return
with its parent through March 25, 1996.
Thereafter, it filed on a separate company basis.
Net Loss Per Common Share
-------------------------
Net loss per common share is calculated according
to Statement of Financial Accounting Standards No.
128, "Earnings Per Share" which requires companies
to present basic and diluted earnings per share.
Net loss per common share - Basic is based on the
weighted average number of common shares
outstanding during the year. Net loss per common
share - Diluted is based on the weighted average
number of common shares and dilutive potential
31
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
common shares outstanding during the year.
The Company's potential issuable shares of common
stock pursuant to outstanding stock purchase
options and warrants are excluded from the
Company's diluted computation as their effect
would be antidilutive to the Company's net loss.
Fair Value of Financial Instruments
-----------------------------------
The Company's financial instruments consist
principally of cash and cash equivalents,
receivables, accounts payable and notes payable.
The carrying amounts of such financial instruments
as reflected in the balance sheet approximate
their estimated fair value as of December 31,
1998. The estimated fair value is not necessarily
indicative of the amounts the Company could
realize in a current market exchange or of future
earnings or cash flows.
Comprehensive Income
--------------------
During 1998, the Company adopted SFAS No. 130
"Reporting Comprehensive Income." SFAS No. 130
establishes standards for reporting and display of
comprehensive income, its components and
accumulated balances. Comprehensive income is
defined to include all changes in equity except
those resulting from investments by owners and
distributions to owners. Among other disclosures,
SFAS No. 130 requires that all items that are
required to be recognized under current accounting
standards as components of comprehensive income be
reported in a financial statement that is
displayed with the same prominence as other
financial statements.
The adoption of SFAS No. 130 did not have any
effect on the Company's financial statements for
the year ended December 31, 1998.
32
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
SEGMENT REPORTING
During 1998, the Company adopted SFAS No. 131
"Disclosures about Segments of an Enterprise and
Related Information." SFAS No. 131 supersedes SFAS
No. 14, "Financial Reporting for Segments of a
Business Enterprise," and establishes standards
for the way public companies report information
about operating segments in annual financial
statements and requires reporting of selected
information about operating segments in interim
financial statements issued to the public. It also
establishes standards for disclosures regarding
products and services, geographic areas and major
customers. SFAS No. 131 defines operating segments
as components of a company about which separate
financial information is available that is
evaluated regularly by the chief operating
decision maker in deciding how to allocate
resources and in assessing performance.
The Company currently operates solely in one
segment, the biopharmaceutical industry, and
therefore the adoption of SFAS No. 131 did not
have any effect on the Company's financial
statements for the year ended December 31, 1998.
Recent Accounting Pronouncements
--------------------------------
In June 1998, the Financial Accounting Standards
Board issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133
requires companies to recognize all derivatives
contracts as either assets or liabilities in the
balance sheet and to measure them at fair value.
If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective
of which is to match the timing of gain or loss
recognition on the hedging derivative with the
recognition of (i) the changes in the fair value
of the hedged asset or liability that are
attributable to the hedged risk or (ii) the
earnings effect of the hedged forecasted
transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized
33
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
in operations in the period of change. SFAS 133 is
effective for all fiscal quarters of fiscal years
beginning after June 15, 1999.
Historically, the Company has not entered into
derivatives contracts either to hedge existing
risks or for speculative purposes. Accordingly,
the Company does not expect adoption of the new
standard on January 1, 2000 to affect its
financial statements.
2. LIQUIDITY The accompanying financial statements have been
prepared assuming the Company will continue as a
going concern. This basis of accounting
contemplates the recovery of the Company's assets
and the satisfaction of its liabilities in the
normal course of operations. Since inception, the
Company has been involved in the research and
design of its product, the development of an
organizational infrastructure, and the performance
of preliminary marketing and promotional
activities. The Company's ultimate ability to
attain profitable operations is dependent upon
obtaining additional financing adequate to
complete its development activities, and to
achieve a level of sales adequate to support its
cost structure. Through December 31, 1998, the
Company incurred losses totaling $6,113,445, used
cash from operating activities in the amount of
$5,242,360 and has been unable to develop a
customer base for its product which raises
substantial doubt about the Company's ability to
continue as a going concern.
Subsequent to December 31, 1998, the Company
obtained $288,500 in financing (Note 11). This
amount has been substantially used in the
operations of the Company. If the Company is not
successful in obtaining additional funds, it
intends to cease operations. There can be no
assurance that the Company will be successful in
consummating its plans, or that such plans, if
consummated, will enable the Company to attain
profitable operations or continue as a going
concern.
34
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
3. EQUIPMENT AND The Company's equipment is summarized as follows:
IMPROVEMENTS
DECEMBER 31, 1998
--------------------------------------------------
Laboratory equipment $ 385,765
Computers 49,862
Phone equipment 58,245
Leasehold improvements 36,077
Office furniture 22,520
Manufacturing equipment 5,947
Software 7,561
--------------------------------------------------
565,977
Less accumulated depreciation (162,622)
--------------------------------------------------
$ 403,355
--------------------------------------------------
4. NOTES PAYABLE In November 1998, the Company obtained financing
from two private investors of $100,000 and
$50,000, respectively. These unsecured notes
payable, which expire at the earlier of November
1999 or the closing of a public or private
placement of equity securities with gross proceeds
to the Company of $3,000,000, bear simple interest
at 12% annually, payable quarterly beginning April
1, 1999, with 1% increases per month for each
month that any portion of the note remains
outstanding after April 1, 1999. In the event that
the Company does not make the principal payments
as stated, the holder is entitled to receive 1,250
warrants to purchase shares of common stock of the
Company at $6.00 per share, for each month that
the amounts due remains unpaid through October
1999 and 2,500 warrants per month thereafter. The
Company was in compliance with the terms and
covenants of the notes at December 31, 1998.
In connection with these notes payables, 10,000,
5,000 and 15,000 warrants to purchase shares of
common stock of the Company at $6.00 per share
35
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
were issued to the two lenders and consultant in
connection with obtaining the financing,
respectively. The fair value of such warrants
amounting to $111,150 was estimated using the
Black Scholes option pricing model, and are shown
in the balance sheet as deferred loan costs, net
of accumulated amortization of $18,525. In
addition, the consultant was paid a $12,000
success fee for obtaining the financing.
5. RESTRICTED CASH Restricted cash equivalents represents a
EQUIVALENTS certificate of deposit of $46,130 held as
security on a letter of credit tied to the
Company's facility lease.
6. DEPENDENCE ON Certain key components of the Company's products
LIMITED NUMBER are currently provided by a limited number
OF SUPPLIERS of sources, and one component is provided by a
single source.
7. INCOME TAXES At December 31, 1998, the Company had federal net
operating losses (NOL) of approximately
$5,843,000. The NOL expires during the years
2007-2013. In the event of a change in ownership
of the Company, the utilization of the NOL
carryforward will be subject to limitation under
certain provisions of the Internal Revenue Code.
Realization of any portion of the approximate
$2,200,000 deferred tax asset at December 31,
1998, resulting from the utilization of the NOL,
is not likely; accordingly, a valuation allowance
has been established for the full amount of such
asset.
Net operating loss carryforward $ 2,200,000
Less: Valuation allowance (2,200,000)
--------------------------------------------------
Net deferred tax asset $ -
--------------------------------------------------
There are no significant temporary differences.
36
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
8. STOCKHOLDERS' a) During 1992, the Company issued 100 shares of
EQUITY (DEFICIT) common stock for $100 as the initial
capitalization of the Company. In June 1996, the
Company issued a stock dividend in the form of a
15,999 for 1 stock split. The components of
stockholders' equity (deficit), all shares and per
share amounts have been retroactively adjusted to
reflect the stock split. The Company also
recapitalized its common stock to 10,000,000
shares, $.001 par value.
b) During 1992, the Company received $500,000 in
additional capital contributions.
c) In June 1996, in connection with a private
placement, the Company issued 110,000 shares of
common stock, at $5.00 per share for cash of
$480,100 net of offering costs of $70,000.
In addition, during June 1996, the Company granted
non-plan stock options to purchase 75,000 shares
of common stock at an exercise price of $5.00 per
share (estimated fair value based upon the price
of common stock sold in the private placement) to
a consultant who became a director in August 1996.
Options to purchase 25,000 of such shares were
exercisable immediately. Options to purchase
25,000 of such shares became exercisable July 24,
1996 upon the execution of the employment
agreement with the Company's Chief Executive
Officer. The remaining 25,000 of such shares
became exercisable upon the closing of the
Company's initial public offering. The fair value
of such options amounting to $56,250 was charged
to operations during the period ended December 31,
1996. During 1997, approximately $30,000 was paid
to this director for consulting services.
d) In July 1996, the Company granted ten year stock
options to purchase 75,000 shares of common stock
37
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
at 120% of the initial public offering price to
the President. Options to purchase
25,000, 25,000 and 25,000 of such shares vest
immediately, six months after the completion of
the initial public offering, and one year after
the completion of the initial public offering,
respectively.
e) In August 1996, the Company granted ten year
options, which vested one year after the grant
date, to purchase 5,000 shares each of common
stock at 120% of the initial public offering price
to two directors of the Company.
f) In August 1996, the Company converted the then
outstanding $413,518 due to parent (Nyer) in
exchange for 41,352 shares of common stock and the
then outstanding $132,822 of accrued payroll and
consulting fees to the President and Chairman of
the Board in exchange for 13,282 shares of common
stock. The conversion price was $10.00 per share.
g) In December 1996, the Company completed its
initial public offering. The offering consisted of
575,000 shares of common stock which raised net
proceeds of approximately $4,570,000 (gross
proceeds of approximately $5,750,000 less
underwriting discounts, commissions and other
expenses of the offering totaling approximately
$1,180,249). During 1997, the Company incurred
additional offering costs of $6,243 and received a
refund of $25,500 for overpayment of expenses
relating to this transaction.
h) In February 1997, the Company granted ten year
options, which vest one year after the grant date,
to purchase 5,000 shares each of common stock at
120% of the initial public offering price to two
directors of the Company.
i) In March 1998, the Company granted two year
options to six of its employees under the 1996
Incentive Plan (Note 10), which vest one year
after the grant date, to purchase 13,848 shares of
38
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
common stock at $8.00 per share.
j) In June and August of 1998, the Company issued
383 and 326 shares, respectively, of common stock
at market with a total value of $6,000 to a
consultant in connection with services rendered.
k) In June, July and August of 1998, a board member
exercised options of 5,000, 2,000 and 2,500,
respectively, at $5.00 per share.
l) In July 1998, the Company granted two year options
to five of its employees under the 1996 Incentive
Plan (Note 10), which vest one year after the
grant date, to purchase 3,367 shares of common
stock at $10.375 per share.
m) In December of 1998, the Company granted five year
options, which vest two months after the grant
date, to purchase 4,393 shares of common stock at
$5.00 per share to seven employees of the Company
in lieu of 50% pay for two pay periods. The fair
value of such options relating to 1998 amounting
to $8,072 was charged to operations during the
period ended December 31, 1998. The Company has
repurchased 1,171 options for a purchase price of
$2,635. The Company intends to repurchase the
remaining options by the end of April.
n) The following reconciles the components of the
earnings per share (EPS) computation:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31, 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
PER- PER-
LOSS SHARES SHARE LOSS SHARE SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
Loss per common share - basic: $ (2,575,467) 2,344,696 $ (1.10) $ (2,132,714) 2,339,634 $ (.91)
Effect of Dilutive Securities
Options - - - - - -
Warrants - - - - - -
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Loss per common share - assuming
dilution: $ (2,575,467) 2,344,696 $ (1.10) $ (2,132,714) 2,339,634 $ (.91)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Options to purchase 282,108 shares of common stock
at prices ranging from $5.00 to $12.00 per share,
were not included in the computation of loss per
share assuming dilution for 1998 and for 1997 as
they would have an antidilutive effect. 282,108
options which expire through 2008, are still
outstanding at December 31, 1998. Warrants to
purchase 130,000 shares of common stock at prices
ranging from $6.00 to $15.00 per share were not
included in the computation of loss per common
share assuming dilution for 1998 and for 1997 as
they would have an antidilutive effect. 130,000
warrants which expire through 2003 are outstanding
at December 31, 1998.
9. COMMITMENTS a) The Company has acquired rights to a new nucleic
AND acid labeling and detection technology (the
CONTINGENCIES "Technology") pursuant to a license agreement
between ProVec, Inc. and the University of Miami
and its School of Medicine which was assigned to
the Company on January 20, 1992. ProVec, Inc., was
owned by the Company's Chairman of the Board.
These rights were acquired under certain patents
and patent applications pursuant to the license
agreement and include the manufacture of products
utilizing the Technology and the marketing and
sale of such products. The license agreement
provides for a royalty equal to 4% of net sales
and can expire or be terminated prior to the
Company's development of products using the
Technology.
In addition, certain of the Company's patents and
patent applications were made, in part, using
federal funds provided by a federal agency,
National Institute of Health (NIH), which has a
nonexclusive, nontransferable, irrevocable
license. Under this nonexclusive license, NIH can
use the Technology in federally-funded projects or
it can, if provided in a treaty or agreement,
sublicense the Technology. This nonexclusive
license did not terminate with the licensing of
40
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
the Technology to the Company. NIH also has
certain rights allowing it to grant licenses to
third parties, even exclusive licenses, if it is
determined that practical application of the
invention is not occurring, as well as march-in
rights to meet unmet health or safety needs. The
grant of an exclusive license, or the exercise of
march-in rights, would cause the Company to suffer
a material adverse effect on its business,
financial condition and viability.
b) In 1994, the Company entered into an agreement
with an investment firm whereby the investment
firm assisted the Company in obtaining $135,000 in
funding through its parent. In consideration for
these services, the Company will pay to the
investment firm 5% of sales until five years from
the date of the agreement have passed or the
cumulative payments total $50,000, whichever
occurs first. During 1997, the agreement was
assigned to a firm affiliated with the Company's
underwriter. No payments were made through
December 31, 1998.
c) In August 1996, the Company entered into a
three year employment agreement with the Chairman
of the Board for a base salary of $125,000.
Pursuant to the agreement, the Company granted ten
year options vesting over a three year period,
exercisable during the period of employment, to
purchase 100,000 shares of common stock at an
exercise price equal to 120% of the initial public
offering price per share of common stock.
d) The Company entered into a new lease during
June 1997 for office and laboratory space. The
facility is leased for a ten year term with annual
rental payments of approximately $192,000 and
annual increases of 3%. In December of 1998, the
Company renegotiated the lease reducing annual
rental payments to approximately $164,000 and
annual increases of 3%. Rent expense for 1998 and
1997 aggregated approximately $192,300 and
41
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
$90,900, respectively.
e) Minimum guaranteed lease payments under this lease
are as follows:
42
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, AMOUNT
--------------------------------------------------
1999 $ 164,000
2000 169,000
2001 174,000
2002 179,000
2003 184,000
Thereafter 690,000
--------------------------------------------------
$ 1,560,000
--------------------------------------------------
After five years the Company has the option to
cancel its lease agreement for a cancellation fee
equal to three months of the then monthly rent.
In 1997, a director received approximately
$109,000 for consulting services in connection
with the identification of the facility,
negotiation of the lease and design, engineering
and construction management services.
f) In September 1998, in connection with the signing
of the consulting agreement to obtain
approximately $3,000,000 in financing for the
Company, a consultant to the Company was issued
50,000 warrants to purchase shares of the
Company's common stock at $6.00 per share. The
Company estimated the fair value of the warrants
at the grant date by using the Black-Scholes
option pricing model with the following
weighted-average assumptions: no dividend yield
percent; expected volatility of 0.488 risk free
interest rate of 5.03%, and an estimated life of
10 years. The fair value of services related to
1998 of $332,500 was charged to operations during
the period ended December 31, 1998.
10. STOCK BASED At December 31, 1998, the Company has a fixed
COMPENSATION stock option plan and non-plan options which
are described below. The Company applies APB
43
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
Opinion 25, Accounting for Stock Issued to
Employees, and related Interpretations in
accounting for the plan. Under APB Opinion 25,
because the exercise price of the Company's
employee stock options equals or exceeds the
market price of the underlying stock on the date
of grant, no compensation cost is recognized.
In August 1996, the Company adopted an Incentive
Plan (the "Plan") under which 300,000 shares of
common stock are reserved for issuance upon
exercise of stock based awards including,
non-qualified stock options, incentive stock
options, stock appreciation rights or for issuance
of restricted shares of common stock or other
stock-based awards. The Plan is also authorized to
issue short-term cash incentive awards. The Plan
is currently administered by a plan administrator
which consists of the Board of Directors, but may
consist of such committees, officers and/or
employees of the Company as the Board may so
designate. The purchase price of each share of
common stock purchased upon exercise of any option
granted is as follows: i) Incentive stock options
shall be equal to or greater than the fair market
value of the common stock on the date of grant as
required under Section 422 of the Internal Revenue
Code, ii) Options granted to 10% holders and
designated by the Plan Administrator as Incentive
Stock Options shall be equal to or greater than
110% of the fair market value of the common stock
on the date of grant as required under Section 422
of the Internal Revenue Code, (iii) Non-employee
director options shall be equal to or greater than
the fair market value of the common stock on the
date of the grant.
FASB Statement 123, Accounting for Stock-Based
Compensation, requires the Company to provide pro
forma information regarding net income (loss) and
net income (loss) per share as if compensation
cost for the Company's stock option plan had been
determined in accordance with the fair value based
method prescribed in FASB Statement 123. The
Company estimates the fair value of each stock
option at the grant date by using the
44
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
Black-Scholes option-pricing model with the
following weighted-average assumptions used for
grants in 1998 and 1997: no dividend yield
percent; expected volatility of .500 - .568 and
0.465; risk-free interest rates of 4.4 - 5.4% and
6.5%, and expected lives ranging from 1.5 to 10
years for the Plan and non-plan options.
Under the accounting provisions of FASB Statement
123, the Company's net loss and net loss per share
would have increased to the pro forma amounts
indicated below:
1998 1997
--------------------------------------------------
Net loss
As reported $ (2,575,467) $ (2,132,714)
Pro forma (2,842,480) (2,400,514)
Net loss per common share
As reported $ (1.10) $ (.91)
Pro forma (1.21) (1.03)
A summary of the status of the Company's fixed
stock option plan and non-plan options as of
December 31, 1998 and 1997 and changes during the
years ended is presented below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
DECEMBER 31, DECEMBER
1998 31, 1997
---- --------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
---------------------------------------------------------------------------------------
Outstanding at beginning of year 345,000 $ 10.48 335,000 $ 10.43
Granted 21,608 7.76 10,000 12.00
Exercised (9,500) 5.00 - -
Forfeited (75,000) 12.00 - -
---------------------------------------------------------------------------------------
Outstanding at end of year 282,108 10.05 345,000 10.48
---------------------------------------------------------
Options exercisable at year-end 202,160 9.73 218,333 9.60
Weighted-average fair value of
options granted during the year 21,608 $ 2.78 10,000 $ 6.00
---------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The following table summarizes information about fixed stock options and non-plan
options outstanding at December 31, 1998:
<S> <C> <C> <C> <C> <C>
Options Outstanding Options Exercisable
---------------------------------------------------------- ----------------------------
Weighted-
Number Average Weighted- Number Weighted-
Range of Outstanding Remaining Average Exercisable Average
Exercise at Contractual Exercise at Exercise
Prices 12/31/98 Life Price 12/31/98 Price
---------------------------------------------------------- ----------------------------
$5.00 - $12.00 282,108 7.21 $10.05 202,166 $9.73
</TABLE>
11. SUBSEQUENT In January 1999, the Company obtained additional
EVENTS financing from a private investor in the amount of
$163,500. This note payable, which is due on the
earlier of one year or the closing of a private
placement of equity securities with net proceeds
to the Company of $1,500,000, bears interest at
12%, payable quarterly in arrears beginning on
April 19, 1999, with 1% increases per month for
each month that any portion of the note remains
outstanding after January 19, 2000, and is
collateralized by substantially all of the assets
of the Company. In connection with this note
payable, 50,000 non-expiring warrants to purchase
common shares at $0.01 per share and 16,350
non-expiring warrants to purchase common shares at
$5.50 per share were issued to the lender and
consultant in obtaining the financing,
respectively. In addition, a $13,000 success fee
was paid to the consultant in connection with
obtaining the financing.
In March 1999, the private investor noted above
provided the Company with additional financing in
the amount of $125,000. This note payable, which
expires at the earlier of one year or the closing
of a private placement of equity securities with
net proceeds to the Company of $1,500,000, bears
interest at 12%, payable quarterly in arrears
beginning April 1999, with 1% increases per month
for each month that any portion of the note
remains outstanding after January 19, 2000. The
46
<PAGE>
- --------------------------------------------------------------------------------
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
note is collateralized with a first security
interest to substantially all of the assets of the
Company. In connection with this notes payable,
50,000 non-expiring warrants to purchase common
shares at $0.01 per share and 12,500 non-expiring
warrants to purchase common shares at $5.50 per
share were issued to the lender and consultant in
obtaining the financing, respectively. In
addition, a $10,000 success fee was paid to the
consultant in connection with obtaining the
financing.
In April 1999, the Company borrowed $100,000 from
a private investor. The note is due upon the
earlier of one year or the closing of a private
placement of securities with gross proceeds from
the Company of $2 million. The note accrues
interest at 12% per year. Accrued interest is paid
quarterly, commencing on June 1, 1999. The note is
secured by substantially all the Company's assets.
The private investor received warrants to purchase
25,000 shares of Common Stock from the Company.
47
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
- --------------------------------------------------------------------------------
None.
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
- --------------------------------------------------------------------------------
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Company's present directors and executive officers are as follows:
Name Age Position
- ---- --- --------
Mead M. McCabe, Sr., Ph.D. 61 Chairman of the Board of Directors
Mead M. McCabe, Jr. 33 President and Secretary; Director
Mark E. Burroughs 42 Director
Jack W. Fell, Ph.D. 66 Director
Michael C. Foley 55 Director
MEAD M. MCCABE, SR., PH.D. is the founder of the Company and the
inventor of the EpiDNA technology. Dr. McCabe is the Chairman of the Board of
Directors of the Company. He holds a B.S. in Zoology from Pennsylvania State
University and a Ph.D. in Biology from the University of Miami. Since 1972, he
has been on the faculty of the University of Miami School of Medicine, and
currently is on the faculty of the Department of Microbiology and Immunology.
From November 1995 to July 1996 he served as a consultant in chromatographic
process development for Viragen, Inc. Dr. McCabe's research interests center on
the molecular mechanisms of microbial diseases and he has taught undergraduate
courses in molecular pathogenesis. Dr. McCabe served four years on the Oral
Biology and Medicine Study Section at the National Institute of Health and has
consulted for the NIH on numerous other occasions since 1976. He has been
awarded NIH research grants, including a recent S.B.I.R. Phase I grant. Dr.
McCabe has been a director of the Company since its inception. Dr. McCabe is the
father of Mead M. McCabe, Jr. and the brother-in-law of Mr. Foley.
MEAD M. MCCABE, JR. is the President and Secretary of the Company and
is responsible for the Company's corporate development, sales and marketing. Mr.
McCabe serves as the Company's interim Chief Financial Officer and as such is
responsible for the Company's financial and accounting matters. Mr. McCabe has a
B.S. in International Business from Auburn University and an M.B.A. in both
Finance and International Business from the University of Miami. Mr. McCabe
joined Genetic Vectors in September 1993. Prior to that, Mr. McCabe was a
financial consultant with Merrill Lynch for two years. Mr. McCabe is the son of
Dr. McCabe and the nephew of Mr. Foley. Mr. McCabe became a director of the
Company on October 16, 1993.
MARK E. BURROUGHS has served as a director of the Company since March
1995. He is currently a principal of Burroughs Properties, L.L.C., a full
service real estate development, brokerage and asset management concern. He has
48
<PAGE>
been the Managing Partner/Broker-In-Charge of Diversified Holdings
International, Inc., an investment and venture capital firm with primary
holdings in real estate, management consulting, computer software and wine
making since 1984. From 1988 to 1991, Mr. Burroughs also represented Stiles
Corporation/Tribune Company Joint Venture as Owner's Representative/Senior
Development Manager, managing the development of the New River Center in Fort
Lauderdale, Florida. He also served from 1980 to 1983 as Vice President and
Project Manager of Cheezem Development Corp., a publicly held real estate
development and asset management company.
JACK W. FELL, PH.D. is currently a professor of Microbiology at the
University of Miami's Rosenstiel School of Marine and Atmospheric Science and
has served in that capacity since 1977. Dr. Fell has a B.S. in Biology from
Northwestern University, an M.S. in Marine Biology from the University of
Miami's Institute of Marine Science, a Ph.D. in Microbiology from the University
of Miami's School of Medicine and Institute of Marine Science and a
post-doctorate in Microbiology from the University of California, Davis. Dr.
Fell became a director of the Company on February 7, 1997.
MICHAEL C. FOLEY is currently a Senior Vice President and Director of
Janney Montgomery Scott, Inc., an investment banking firm, where he has been
employed since 1994. Prior to these positions he served as President and Chief
Executive Officer of Foley, Mufson Howe & Company, an investment banking firm,
from 1992 to 1994. Mr. Foley has worked in the security industry for over
twenty-five years. He is past Chairman of the Securities Industry Association's
Mid-Atlantic Division and past President of the Bond Club of Philadelphia. Mr.
Foley is a graduate of Villanova University and received a Masters Degree in
Business Administration from the University of Pittsburgh. Mr. Foley became a
director of the Company on January 12, 1998. Mr. Foley is the brother-in-law of
Dr. McCabe and the uncle of Mr. McCabe.
RESIGNATIONS OF DIRECTORS. Allyn L. Golub and James A. Joyce resigned
from the Company's Board of Directors on December 4, 1998, and March 5, 1999,
respectively. The Company has not filled the two vacancies on the Board of
Directors caused by the registrations of Dr. Golub and Mr. Joyce.
ELECTION OF DIRECTORS AND EXECUTIVE OFFICERS.
The Company's executive officers are elected annually by the Board of
Directors and serve at the discretion of the Board of Directors. The Company's
directors are elected by the shareholders of the Company and hold office until
the first annual meeting of shareholders following their election or appointment
and until their successors have been duly elected and qualified.
Pursuant to an agreement with the underwriter which managed its IPO,
the Company has agreed that this underwriter may designate one member of the
Board of Directors. The underwriter had designated James A. Joyce as its
designee to the Board of Directors until his resignation on March 5, 1999. The
underwriter has not designated a successor. The underwriter's designee's service
on the Board of Directors will be subject to the approval of the holders of a
majority of the outstanding shares of the Company's Common Stock.
49
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company is not aware of any failure to comply with the ownership
reporting requirements of Section 16(a) promulgated under the Securities
Exchange Act of 1934, as amended, during 1998 by any of its executive officers,
directors or owners of more than ten percent of the outstanding shares of Common
Stock.
ITEM 10. EXECUTIVE COMPENSATION.
- -----------------------------------------
COMPENSATION OF DIRECTORS
Non-employee directors receive a fee of $500 for each Board of
Directors meeting attended, plus travel expenses.
The Company's 1996 Incentive Plan (the "Incentive Plan") provides that
directors who are not employees of the Company are automatically granted an
option to purchase 5,000 shares of the Company's Common Stock in connection with
their appointment to the Board of Directors. Such options will vest after one
year of service on the Board of Directors. The options granted to the Company's
non-employee directors (Mr. Burroughs and Dr. Fell) have an exercise price of
$12.00 per share (120% of the offering price in the Company's IPO). Options to
purchase 5,000 shares of Common Stock were granted to Mr. Michael Foley on
January 12, 1998 (the date he joined the Board of Directors) at an exercise
price of $7.75. Options granted in the future will be priced at no less than
100% of the Common Stock's fair market value on the date of the grant. Options
granted to non-employee directors will be non-statutory options and will become
exercisable after one year of service on the Board and will be exercisable for
ten years from the date of the grant, except that options exercisable at the
time of a director's death may be exercised for twelve months thereafter. Under
the terms of the Incentive Plan, neither the Board of Directors nor any
committee of the Board of Directors will have any discretion with respect to
options granted to directors.
EXECUTIVE COMPENSATION
The following table shows all the cash compensation paid by the Company
as well as certain other compensation paid or accrued, during the years ended
December 31, 1998, 1997, and 1996 to Mead M. McCabe, Sr., Ph.D., Chairman of the
Company. No restricted stock awards, long-term incentive plan payouts or other
types of compensation other than the compensation identified in the chart below
were paid to Dr. McCabe during years 1998, 1997, and 1996. No other executive
officer of the Company earned a total annual salary and bonus for any of these
years in excess of $100,000. The summary compensation table which follows
includes all payments to Dr. McCabe for years 1998, 1997, and 1996.
50
<PAGE>
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
AWARDS PAYOUTS
------ -------
SECURITIES
RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS ($) COMPENSATION
POSITION YEAR ($) ($) ($) ($) (#) ($)
- ---------------------- ------- ---------- -------- --------------- ------------ ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mead M. McCabe, Sr., 1998 $125,000 -0- -0- -0- -0- -0- -0-
Ph.D., Chairman of
the Board of
Directors
1997 $125,000 -0- -0- -0- 100,000(1) -0- -0-
1996 $125,000 -0- -0- -0- -0- -0- -0-
</TABLE>
- -----------------
(1) These options were granted on August 15, 1996, and have an exercise price of
$12.00 per share. These options vest in equal increments over a three year
period. All of these grants are for options to purchase Common Stock. No SAR's
were granted.
51
<PAGE>
AGGREGATED OPTIONS/SAR EXERCISES
IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTIONS/SAR VALUES(1)
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired on Value Options/SAR's at Fiscal Options/SAR's at
Name Exercise Realized ($) Year End Fiscal Year End
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mead M. McCabe, Sr. -0- -0- Exercisable: 66,667 -0-
Unexercisable: 33,333
</TABLE>
- -----------------
(1) These grants represent options to purchase Common Stock. No SAR's have been
granted.
(2) None of these options were in-the-money as of December 31, 1998.
Employment Agreements
Effective August 15, 1996, the Company entered into written employment
agreements (the "Employment Agreements") with Dr. McCabe and Mr. McCabe for an
initial three year period. Both individuals devote substantially all of their
time to the business of the Company. Dr. McCabe's base salary is $125,000 per
year and Mr. McCabe's base salary is $75,000 per year. Pursuant to a Stock
Option Addendum to Dr. McCabe and Mr. McCabe's Employment Agreements, Dr. McCabe
and Mr. McCabe were granted options to purchase 100,000 and 75,000 shares,
respectively, of the Common Stock at $12.00 per share (120% of the per share
public offering price in the Company's initial public offering). These options
vest over a three year period, expire ten years after the date of the grant and
are granted under and are subject to the terms and conditions of the Incentive
Plan and Stock Option Addendum. The provisions of the Stock Option Addendum
shall control in the event of the termination of either of these individuals'
employment with the Company. The Employment Agreements provide that during the
employee's period of employment and in the event of a termination for cause, for
two years after termination, the employee will not participate in any business
that is competitive with that of the Company in any location where the Company
is doing business as of the date of termination of the employee's employment.
This non-competition covenant will not apply in the event of Dr. McCabe's or Mr.
McCabe's resignation.
Incentive Plan
Overview of the Incentive Plan
Incentive compensation for non-employee directors, executives and other
key employees of the Company will be provided under the Genetic Vectors, Inc.
1996 Incentive Plan. The purpose of the Incentive Plan is to (a) increase the
proprietary and vested interest of non-employee directors of the Company in the
growth and performance of the Company, (b) assist in attracting and retaining
highly competent employees, (c) provide an incentive for motivating selected
officers and other key employees of the Company, (d) achieve long-term corporate
objectives and (e) enable cash incentive awards to qualify as performance-based
for purposes of the tax deduction limitations under Section 162(m) of the
Internal Revenue Code of 1986, as amended.
52
<PAGE>
The Incentive Plan is administered by the Board of Directors of the
Company or such committees, officers and/or employees of the Company as the
Board of Directors may so designate. Eligible participants include non-employee
directors and such officers and other key employees of the Company as the plan
administrator may designate from time to time. The Incentive Plan will continue
in effect until terminated by its terms or, if earlier, by the Board of
Directors.
The Incentive Plan authorizes the plan administrator to grant any or
all of the following types of awards: (1) stock options, including non-qualified
stock options and incentive stock options, (2) stock appreciation rights, (3)
restricted shares of Common Stock, (4) performance awards, (5) other stock-based
awards, and (6) short-term cash incentive awards.
Administration
The Incentive Plan is administered by a plan administrator, which is
currently the Compensation Committee of the Board of Directors. The plan
administrator has been granted exclusive and final authority under the Incentive
Plan with respect to all determinations, interpretations and other actions
affecting the Incentive Plan and its participants.
Shares Subject to the Incentive Plan
Three hundred thousand shares of the Company's Common Stock have been
initially authorized to be issued under the Incentive Plan. Such authorized
shares will be appropriately adjusted to reflect adjustments (if any) to the
Company's capital structure.
Indemnification of Officers and Directors
Pursuant to authority conferred by Florida law, the Company's By-laws
provide that the Company's directors, officers, and employees be indemnified to
the fullest extent permitted by Florida law. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted for directors and
officers and controlling persons pursuant to the foregoing provisions, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- --------------------------------------------------------------------------------
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth, as of April 25, 1999, information with
respect to the beneficial ownership of the Company's Common Stock by (i) persons
known by the Company to beneficially own more than five percent of the
outstanding shares of the Company's Common Stock, (ii) each director, (iii) each
executive officer and (iv) all directors and executive officers as a group.
53
<PAGE>
COMMON STOCK
BENEFICIALLY OWNED (1)
----------------------
NAME/ADDRESS NUMBER PERCENT
- ------------ ------ -------
Mead M. McCabe, Sr. And.............. 216,500(2) 9.2%(2)
Marigrace McCabe (jointly)
12901 SW 63rd Ct.
Miami, FL 33156
Mead M. McCabe, Sr. ................. 1,000(2) 0.04%(2)
12901 SW 63rd Ct.
Miami, FL 33156
Mead M. McCabe, Jr................... 151,960(2) 6.5%(2)
5201 N.W. 77th Avenue
Suite 100
Miami, Florida 33133
Nyer Medical Group 870,215(2),(3) 37.0%(2),(3)
1292 Hammond St.
Bangor, ME 04401
James A. Joyce....................... 65,500(2,(7) 2.8%(2),(7)
7825 Bay Avenue, Suite 200
La Jolla, California 92037
Jack W. Fell, Jr., Ph.D.............. 5,000(1),(6) 0.2%(1),(6)
University of Miami-RSMAS
4600 Rickenbacker Causeway
Key Biscayne, Florida 33149
Allyn L. Golub, Ph.D................. 5,000(1),(6),(7) 0.2%(1),(6),(7)
10320 USA Today Way
Miramar, Florida 33025
Mark E. Burroughs.................... 5,000(1),(6) 0.2%(1),(6)
4523-C Edwards Mills Road
Raleigh, North Carolina 27612
All directors and executive officers
as a group(4)(5)(6).................. 449,960 19.1%
- ---------------------------
(1) Applicable percentage of ownership is based on 2,349,843 shares of Common
Stock outstanding as of April 25, 1999 together with applicable options for
each shareholder. Beneficial ownership is determined in accordance with the
rules of the Commission and generally includes voting or investment power
with respect to securities. Shares of Common Stock subject to options that
are currently exercisable or exercisable within 60 days of April 25, 1999
are deemed to be beneficially owned by the person holding such options for
the purpose of computing the percentage of ownership of such person, but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person. The Common Stock is the only outstanding
class of equity securities of the Company.
54
<PAGE>
(2) Pursuant to a letter agreement dated March 25, 1996, Nyer Medical agreed to
vote the shares of Common Stock held by it to elect one member of the Board
of Directors designated by Nyer Medical and the remaining members of the
Board of Directors as designated by Dr. McCabe, Mrs. McCabe and Mr. McCabe.
If, pursuant to this agreement, the beneficial ownership of Nyer Medical's
Common Stock is attributed to Dr. McCabe and Mrs. McCabe (jointly), Dr.
McCabe (individually) and Mr. McCabe, they would own 1,086,715, 871,215,
and 1,022,175 shares of Common Stock, respectively. Their ownership
percentages would be 46.2%, 37.1% and 43.5%, respectively.
(3) Includes Common Stock owned by Nyle International Corp. (115,447 shares)
and Mr. Samuel Nyer (4,228 shares), which are deemed to be beneficially
owned by Nyer Medical. Mr. Samuel Nyer is the only natural person who may
be deemed to be the beneficial owner of the shares of the Common Stock held
by Nyer Medical.
(4) Six (6) persons, including Mr. Joyce and Dr. Golub.
(5) Represents 197,167 shares which may be acquired upon the exercise of
presently exercisable stock options.
(6) Represents shares which may be acquired upon the exercise of presently
exercisable stock options.
(7) Mr. Golub and Mr. Joyce resigned from the Company's Board of Directors on
December 4, 1998 and March 5, 1999, respectively.
Nyer Medical Group, Inc., a Florida corporation ("Nyer Medical"), is a
publicly held holding company with various interests in the medical products
business. In addition to its investment in the Company, its interests include
distribution of medical and rehabilitation supplies and equipment and
distribution of fire, police and rescue supplies and equipment, all primarily in
the New England area. Nyer Medical's Common Stock is listed and traded on the
NASDAQ SmallCap Market under the symbol "NYER."
Nyer Medical has entered into an agreement (the "Voting Agreement")
dated March 25, 1996 with Mead M. McCabe, Sr., Marigrace M. McCabe and Mead M.
McCabe, Jr., (collectively, the "McCabes"). The Voting Agreement provides among
other things that, for a period of five years, Nyer Medical will vote its shares
of Common Stock to elect (a) one member of the Company's Board of Directors
designated by Nyer Medical, and (b) all other Board of Directors nominees
designated by the McCabes. The Voting Agreement will not affect Nyer Medical's
rights to vote its shares of Common Stock in connection with other matters on
which the Company's shareholders vote.
Dr. McCabe is the founder of the Company and currently serves as its
Chairman. Marigrace McCabe is the wife of Dr. McCabe. Mead McCabe, Jr. is the
son of Dr. McCabe.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- -----------------------------------------------------------------
PAYMENT FOR REAL ESTATE CONSULTING SERVICES
The Company paid approximately $109,000 to Mark E. Burroughs, a member
of the Board of Directors, in 1997. This payment was made to Mr. Burroughs for
his services in connection with the identification of a facility, lease
negotiations and design, engineering and construction management services for
the Company's new facility.
CONSULTING AGREEMENT
On June 19, 1996 the Company entered into a consulting agreement with
Mr. James A. Joyce, who became a director of the Company on August 13, 1996. He
was granted options to purchase a total of 75,000 shares of the Company's Common
Stock at an exercise price of $5.00 per share, all of which are currently
exercisable. These options were not issued through the Incentive Plan. This
agreement terminated in December 1996. Mr. Joyce continued to provide consulting
55
<PAGE>
services through June 1997. Mr. Joyce's option exercise rights will continue
until the fourth anniversary of the execution of such consulting agreement.
ROLE OF MEAD M. MCCABE, SR.
Dr. McCabe has been involved in the Company's operations since its
inception but he did not serve as a traditional "promoter" of the Company. As a
scientist, his role since the Company's inception has been focused on the
technical aspects of the Technology rather than the traditional promoter's role
of attempting to build the Company and promote its success. Dr. McCabe was the
developer of the nucleic acid labeling and detection Technology which is the
basis for the Company's products. He was the sole owner of ProVec, Inc., a
company which was the original licensee of the Technology and which subsequently
assigned its license rights to the Company. Though the Company was formed in
1991, he did not receive any shares of its Common Stock until 1996. At that time
he received 20% of the Company's Common Stock in exchange for all of the shares
of the Class B Preferred Stock of Nyer Medical owned by him and his wife. In
1996, he received an additional 11,322 shares of Common Stock in exchange for
the conversion of certain indebtedness owed to him by the Company in connection
with accrued payroll and expenses.
OBLIGATIONS UNDER INVESTORS FINDERS AGREEMENT
In June 1994, the Company and Nyer Medical entered into an Investors
Finders Agreement with an investment firm pursuant to which the investment firm
assisted the Company in obtaining approximately $135,000 in funding through Nyer
Medical. The Agreement requires the Company to pay the investment firm 5% of its
gross sales revenues until five years from the date of the Agreement have passed
or the cumulative payments total $50,000, whichever comes first. This agreement
has been assigned to Shamrock Partners International Inc., a firm affiliated
with the underwriter who managed the Offering.
TRANSACTIONS WITH OFFICERS AND SHAREHOLDERS
The Company believes that all transactions entered into with its
officers and shareholders have been effected on terms and conditions no less
favorable to the Company than those available from unaffiliated third parties.
The Company anticipates that any future transactions with such affiliated
parties will be made on terms and conditions no less favorable to the Company
than those available from unaffiliated third parties.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.
- ---------------------------------------------------------
(A) EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
No. Description Location Page
------- ----------- ------- ----
<S> <C> <C> <C>
3.1 Articles of Incorporation of the Company, Incorporated by reference to Exhibit No.
as amended 3.1 to Registrant's Registration Statement
(the "Registration Statement") on Form
SB-2 (Registration Number 333-5530-A).
3.2 By-laws of the Company Incorporated by reference to Exhibit No.
3.2 to the Registration Statement.
56
<PAGE>
4.1 Form of Common Stock certificate Incorporated by reference to Exhibit No.
4.1 to the Registration Statement.
4.2 Form of Underwriters' Warrant Incorporated by reference to Exhibit No.
4.2 to the Registration Statement.
4.3 Form of 1996 Incentive Plan Incorporated by reference to Exhibit No.
4.3 to the Registration Statement.
10.1 License Agreement dated September 7, 1990 Incorporated by reference to Exhibit No.
between the University of Miami and its 10.1 to the Registration Statement.
School of Medicine and ProVec, Inc.
10.2 Assignment of License Agreement dated Incorporated by reference to Exhibit No.
January 20, 1992 between ProVec, Inc. and 10.2 to the Registration Statement.
EpiDNA, Inc.
10.3 Agreement between University of Miami and Incorporated by reference to Exhibit No.
its School of Medicine and the Company 10.3 to the Registration Statement.
dated August 21, 1996
10.4 Employment Agreement dated August 15, 1996 Incorporated by reference to Exhibit No.
between Mead M. McCabe, Sr. and the Company 10.4 to the Registration Statement.
10.5 Stock Option Addendum to Employment Incorporated by reference to
Agreement dated August 15, 1996 between Exhibit No. 10.5 to the Registration Statement.
Mead M. McCabe, Sr. And the Company
10.6 Employment Agreement dated August 15, 1996 Incorporated by reference to Exhibit No.
between Mead M. McCabe, Jr. and the Company 10.6 to the Registration Statement.
10.7 Stock Option Addendum to Employment Incorporated by reference to
Agreement dated August 15, 1996 between Exhibit No. 10.7 to the Registration Statement.
Mead M. McCabe, Jr. and the Company
10.8 Consulting Agreement dated June 19, 1996 Incorporated by reference to Exhibit No.
between James A. Joyce and the Company 10.10 to the Registration Statement.
10.9 Letter Agreement dated December 16, 1994 Incorporated by reference to Exhibit No.
among Nyer Medical Group, Inc., the 10.11 to the Registration Statement.
Company, Mead M. McCabe, Sr. And Mead M.
McCabe, Jr.
10.10 Investors Finders Agreement dated Incorporated by reference to
June 9, 1994 among Nyer Medical Group, Exhibit No. 10.12 to the Registration Statement.
Inc., and the Company and Gulf American
Trading Company
10.11 Industrial Real Estate Lease dated June 12, Incorporated by reference to
1997 among the Company and Jetex Group, Inc. Exhibit No. 10.13 to the Company's
Quarterly Report on Form 10-QSB for the
Quarter ended June 30, 1997
10.12 Letter from University of Miami dated April Incorporated by reference to
8, 1998 Exhibit No. 10.12 to the Company's Annual
Report on Form 10-KSB for the Year Ended
December 31, 1997
10.13 Promissory Note dated as of November 2, Provided herewith
1998 in the Original Principal Amount of
$50,000 given by the Company to Ms.
Patricia A. Gionone
57
<PAGE>
10.14 Common Stock Purchase Warrant No. W-2 dated Provided herewith
as of November 2, 1998 granted by the
Company to Ms. Patricia A. Gionone
10.15 Promissory Note dated as of November 2, Provided herewith
1998 in the Original Principal Amount of
$100,000 given by the Company to Jerome P.
Seiden Irrevocable Trust Dated April 22,
1998
10.16 Common Stock Purchase Warrant No. W-1 dated Provided herewith
as of November 2, 1998 granted by the
Company to Jerome P. Seiden Irrevocable
Trust Dated April 22, 1998
10.17 Common Stock Purchase Warrant No. W-5 dated Provided herewith
as of September 3, 1998 granted by the
Company to Sterling Technology Partners,
Ltd.
10.18 Common Stock Purchase Warrant No. W-4 dated Provided herewith
as of January 19, 1999 granted by the
Company to Sterling Technology Partners,
Ltd.
10.19 Common Stock Purchase Warrant No. W-7 dated Provided herewith
as of March 9, 1999 granted by the
Company to Sterling Technology Partners,
Ltd.
10.20 Common Stock Purchase Warrant No. W-3 dated Provided herewith
as of January 19, 1999 granted by the
Company to Capital Research, Ltd.
10.21 Promissory Note dated as of January 19, Provided herewith
1999 in the Original Principal Amount
of $163,500 given by the Company to
Capital Research, Ltd.
10.22 Pledge and Security Agreement dated as of Provided herewith
January 19, 1999 between the Company and
Capital Research, Ltd.
10.23 Registration Rights Agreement dated as of Provided herewith
January 19, 1999 between the Company and
Capital Research, Ltd.
10.24 Promissory Note dated as of March 9, 1999 Provided herewith
in the Original Principal Amount of
$125,000 given by the Company to
Capital Research, Ltd.
10.25 Common Stock Purchase Warrant No. W-6 dated Provided herewith
as of March 9, 1999 granted by the Company
to Capital Research, Ltd.
10.26 Registration Rights Agreement dated as of Provided herewith
March 9, 1999 between the Company and
Capital Research, Ltd.
11. Statement re: computation of earnings Not applicable
18. Letter on change in accounting principles Not applicable
21. Subsidiaries of the Registrant Provided herewith
58
<PAGE>
22. Published report regarding matters Not applicable
submitted to Vote
24. Power of Attorney Not applicable
27. Financial Data Schedule Provided herewith
</TABLE>
(b) REPORTS ON FORM 8-K.
On May 21, 1998, the Company filed a Form 8-K with respect to an
agreement in principle to acquire all of the outstanding capital stock of Gen
Trak, Inc., for 350,000 newly-issued shares of Common Stock of the Company. On
August 7, 1998, the Company announced that the acquisition of Gen Trak, Inc. had
been terminated.
59
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GENETIC VECTORS, INC.
By: /s/ Mead M. McCabe, Jr.
-----------------------
Mead M. McCabe, Jr.
President
Date: April 27, 1999
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
DATE SIGNATURE TITLE
---- --------- -----
April 27,1999 /s/ Mead M. McCabe, Sr., Ph.D. Chairman of the Board of
--------------------------- Directors (Principal
Mead M. McCabe, Sr., Ph.D. Executive Officer)
April 27, 1999 /s/ Mead M. McCabe, Jr. President; Director
--------------------------- (Principal Financial
Mead M. McCabe, Jr. Officer; Principal
Accounting Officer)
April 27, 1999 /s/ Mark E. Burroughs Director
---------------------------
Mark E. Burroughs
April 27, 1999 /s/ Jack W. Fell, Ph.D Director
---------------------------
Jack W. Fell, Ph.D.
April 27, 1999 /s/ Michael C. Foley Director
----------------------------
Michael C. Foley
60
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
No.
-------
Description Location Page
----------- -------- ----
<S> <C> <C> <C>
3.1 Articles of Incorporation of the Company, Incorporated by reference to Exhibit No.
as amended 3.1 to Registrant's Registration Statement
(the "Registration Statement") on Form
SB-2 (Registration Number 333-5530-A).
3.2 By-laws of the Company Incorporated by reference to Exhibit No.
3.2 to the Registration Statement.
4.1 Form of Common Stock certificate Incorporated by reference to Exhibit No.
4.1 to the Registration Statement.
4.2 Form of Underwriters' Warrant Incorporated by reference to Exhibit No.
4.2 to the Registration Statement.
4.3 Form of 1996 Incentive Plan Incorporated by reference to Exhibit No.
4.3 to the Registration Statement.
10.1 License Agreement dated September 7, 1990 Incorporated by reference to Exhibit No.
between the University of Miami and its 10.1 to the Registration Statement.
School of Medicine and ProVec, Inc.
10.2 Assignment of License Agreement dated Incorporated by reference to Exhibit No.
January 20, 1992 between ProVec, Inc. and 10.2 to the Registration Statement.
EpiDNA, Inc.
10.3 Agreement between University of Miami and Incorporated by reference to Exhibit No.
its School of Medicine and the Company 10.3 to the Registration Statement.
dated August 21, 1996
10.4 Employment Agreement dated August 15, 1996 Incorporated by reference to Exhibit No.
between Mead M. McCabe, Sr. and the Company 10.4 to the Registration Statement.
10.5 Stock Option Addendum to Employment Incorporated by reference to
Agreement dated August 15, 1996 between Exhibit No. 10.5 to the Registration Statement.
Mead M. McCabe, Sr. And the Company
10.6 Employment Agreement dated August 15, 1996 Incorporated by reference to Exhibit No.
between Mead M. McCabe, Jr. and the Company 10.6 to the Registration Statement.
10.7 Stock Option Addendum to Employment Incorporated by reference to
Agreement dated August 15, 1996 between Exhibit No. 10.7 to the Registration Statement.
Mead M. McCabe, Jr. and the Company
10.8 Consulting Agreement dated June 19, 1996 Incorporated by reference to Exhibit No.
between James A. Joyce and the Company 10.10 to the Registration Statement.
10.9 Letter Agreement dated December 16, 1994 Incorporated by reference to Exhibit No.
among Nyer Medical Group, Inc., the 10.11 to the Registration Statement.
Company, Mead M. McCabe, Sr. And Mead M.
McCabe, Jr.
61
<PAGE>
10.10 Investors Finders Agreement dated Incorporated by reference to Exhibit No.
June 9, 1994 among Nyer Medical Group, 10.12 to the Registration Statement.
Inc., and the Company and Gulf American
Trading Company
10.11 Industrial Real Estate Lease dated June 12, Incorporated by reference to Exhibit No.
1997 among the Company and Jetex Group, Inc. 10.13 to the Company's
Quarterly Report on Form 10-QSB for the
Quarter ended June 30, 1997
10.12 Letter from University of Miami dated April Incorporated by reference to
8, 1998 Exhibit No. 10.12 to the Company's Annual
Report on Form 10-KSB for the Year Ended
December 31, 1997 provided herewith
10.13 Promissory Note dated as of November 2, Provided herewith
1998 in the Original Principal Amount of
$50,000 given by the Company to Ms.
Patricia A. Gionone
10.14 Common Stock Purchase Warrant No. W-2 dated Provided herewith
as of November 2, 1998 granted by the
Company to Ms. Patricia A. Gionone
10.15 Promissory Note dated as of November 2, Provided herewith
1998 in the Original Principal Amount of
$100,000 given by the Company to
Jerome P. Seiden Irrevocable Trust Dated
April 22, 1998
10.16 Common Stock Purchase Warrant No. W-1 dated Provided herewith
as of November 2, 1998 granted by the
Company to Jerome P. Seiden Irrevocable
Trust Dated April 22, 1998
10.17 Common Stock Purchase Warrant No. W-5 dated Provided herewith
as of September 3, 1998 granted by the
Company to Sterling Technology
Partners, Ltd.
10.18 Common Stock Purchase Warrant No. W-4 dated Provided herewith
as of January 19, 1999 granted by the
Company to Sterling Technology
Partners, Ltd.
10.19 Common Stock Purchase Warrant No. W-7 dated Provided herewith
as of March 9, 1999 granted by the
Company to Sterling Technology
Partners, Ltd.
10.20 Common Stock Purchase Warrant No. W-3 dated Provided herewith
as of January 19, 1999 granted by the
Company to Capital Research, Ltd.
10.21 Promissory Note dated as of January 19, Provided herewith
1999 in the Original Principal Amount of
$163,500 given by the Company to
Capital Research, Ltd.
10.22 Pledge and Security Agreement dated as of Provided herewith
January 19, 1999 between the Company and
Capital Research, Ltd.
62
<PAGE>
10.23 Registration Rights Agreement dated as of Provided herewith
January 19, 1999 between the Company and
Capital Research, Ltd.
10.24 Promissory Note dated as of March 9, 1999 Provided herewith
in the Original Principal Amount of $125,000
given by the Company to Capital Research, Ltd.
10.25 Common Stock Purchase Warrant No. W-6 dated Provided herewith
as of March 9, 1999 granted by the Company
to Capital Research, Ltd.
10.26 Registration Rights Agreement dated as of Provided herewith
March 9, 1999 between the Company and
Capital Research, Ltd.
11. Statement re: computation of earnings Not applicable
18. Letter on change in accounting principles Not applicable
21. Subsidiaries of the Registrant Provided herewith
22. Published report regarding matters Not applicable
submitted to Vote
24. Power of Attorney Not applicable
27. Financial Data Schedule Provided herewith
</TABLE>
63
EXHIBIT 10.13
FORM OF PROMISSORY NOTE
$50,000.00
November 2, 1998
1. AMOUNT; MATURITY. FOR VALUE RECEIVED, the undersigned, GENETIC
VECTORS, INC., a Florida corporation (the "MAKER"), promises to pay to PATRICIA
A. GIANONE (the "HOLDER"), the principal sum of Fifty Thousand Dollars
($50,000.00), which principal sum shall mature on November , 1999 and shall bear
simple interest at the rate set forth herein.
2. INTEREST. Interest shall accrue as of the date of this Note at the
simple interest rate of twelve percent (12%) per annum which rate shall increase
one percent (1%) per annum on the first day of each month that any portion of
this Note remains unpaid after April 1, 1999 up to the maximum amount permitted
by law. Interest shall be payable monthly in arrears, commencing on April 1,
1999 and each successive interest payment shall be due on the first day of each
successive month thereafter.
3. MODE OF PAYMENT. All payments of principal and interest due under
this Note shall be made in legal tender in the United States of America and
delivered to the Holder at or, at the option of the Holder, in such other manner
and at such other place as the Holder shall have designated to the Make in
writing.
4. PREPAYMENT.
(a) This Note may be voluntarily prepaid, without penalty or premium,
in whole or in part, at any time and from time to time. Any prepayment must
include all accrued interest on the principal being prepaid, through the date of
prepayment.
<PAGE>
(b) Notwithstanding anything contained herein to the contrary, this
Note shall be mandatorily prepaid in the event that the Maker closes an offering
of its securities, whether through one or more private placements or secondary
public offerings, in which the Maker raises gross proceeds from such transaction
or transactions of at least $3,000,000.
5. ACCELERATION UPON EVENT OF DEFAULT. This Note may be accelerated at
the option of the Holder, upon the occurrence of any event of default as
described below:
(a) any default, whether in whole or in part, shall occur in the
payment to the Holder of principal, interest or other item comprising the Note
as and when due which shall continue for a period of thirty (30) days after the
receipt of written notice by the Maker thereof;
(b) the Maker shall (1) make a general assignment for the benefit of
its creditors, (2) apply for or consent to the appointment of a receiver,
trustee, assignee, custodian sequestrator, liquidator or similar official for
itself or any of its assets and properties, (3) commence a voluntary case for
relief as a debtor under the United States Bankruptcy Code, (4) file with or
otherwise submit to any governmental authority any petition, answer or other
document seeking (A) reorganization, (B) an arrangement with creditors or (C) to
take advantage of any other present or future applicable law respecting
bankruptcy, reorganization, insolvency, readjustment of debts, relief of
debtors, dissolution or liquidation, (5) file or otherwise submit any answer or
other document admitting or failing to contest the material allegations of a
petition or other document filed or otherwise submitted against it in any
proceeding under any such applicable law, or (6) be adjudicated a bankrupt or
insolvent by a court of competent jurisdiction; or
(c) any case, proceeding or other action shall be commenced against
the Maker for the purpose of effecting, or an order, judgment or decree shall be
2
<PAGE>
entered by any court of competent jurisdiction approving (in whole or in part)
anything specified in Section 4(d) hereof, or any receiver, trustee, assignee,
custodian, sequestrator, liquidator or other official shall be appointed with
respect to the Maker, or shall be appointed to take or shall otherwise acquire
possession or control of all or a substantial part of the assets and properties
of the Maker, and any of the foregoing shall continue unstayed and in effect for
any period of 60 days.
6. DELAY IN EXERCISE OF RIGHTS. No delay on the part of the Holder in
exercising any of its options, powers or rights nor any partial or single
exercise of its options, power or rights shall constitute a waiver thereof or of
any other option, power or right, and no waiver on the part of the Holder of any
of its options, powers or rights shall constitute a waiver of any other option,
power or right.
7. WAIVER OF PRESENTMENT; NO OFFSETS. The Maker hereby waives presentment
for payment, dishonor, protest, notice of protest and any demand whatsoever with
respect to this Note and the right to interpose any defense based upon any
statute of limitation or any claim of laches and any set-off or counterclaim of
any nature or description.
8. COLLECTION COSTS; MAXIMUM INTEREST LIMITATIONS.
(a) The Maker agrees to pay all reasonable costs, including all
reasonable attorneys' fees and disbursements incurred by the Holder in
collecting or enforcing payment of this Note in accordance with its terms.
(b) After this Note becomes due, at stated maturity or on
acceleration, any unpaid balance hereof shall thereafter bear interest until
paid at a rate of 16% simple interest per annum, but such interest rate shall
not exceed at any time the maximum interest rate allowable under applicable
state usury laws.
3
<PAGE>
9. GOVERNING LAW.
(a) This Note and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Florida,
without regard to its conflicts of law principles. All parties hereto (1) agree
that any legal suit, action or proceeding arising out of or relating to this
note shall be instituted only in a Federal or state court in Miami-Dade County,
Florida, (2) waive any objection which they may now or hereafter have to the
laying of the venue of any such suit, action or proceeding, and (3) irrevocably
submit to the jurisdiction of such Federal or state court in Miami-Dade County,
Florida in any such suit, action or proceeding, but such consent shall not
constitute a general appearance or be available to any other person who is not a
party to this Note. All parties hereto agree that the mailing of any process in
any suit, action or proceeding in accordance with the notice provisions of this
Note shall constitute personal service thereof.
(b) THE MAKER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING RELATED IN ANY WAY TO THIS NOTE.
10. NOTICES. All notices or other communications required or permitted to
be given pursuant to this Note shall be in writing and shall be considered as
duly given on (a) the date of delivery, if delivered in person or by nationally
recognized overnight delivery service or (b) five days after mailing if mailed
by registered or certified mail, return receipt requested to the party entitled
to receive the same, if to the Holder, at his or its address on the books and
records of the Maker, and if to the Maker, to Genetic Vectors, Inc., 5201 N.W.
77th Avenue, Suite 100, Miami, Florida 33166, Attention: Mead M. McCabe, Jr.,
with a copy to Kirkpatrick & Lockhart LLP, Miami Center - 20th Floor, 201 South
Biscayne Boulevard, Miami, Florida 33131, Attention: Clayton E. Parker, Esq. Any
party may change its address by giving notice to the other party stating its new
4
<PAGE>
address. Commencing on the tenth day after the giving of such notice, such newly
designated address shall be such party's address for the purpose of all notices
or other communications required or permitted to be given pursuant to this Note.
11. SEVERABILITY. If any provision of this Note shall be held invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Note, and this Note shall be carried out
as if any such invalid or unenforceable provision were not contained herein.
12. AMENDMENT. This Note shall not be amended without the prior written
consent of the Holder.
GENETIC VECTORS, INC.
By: ___________________________________
Its: ___________________________________
ATTEST:
By: _____________________________
Its: _____________________________
Corporate Seal:
5
EXHIBIT 10.14
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE
UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS, AND NO SALE OR TRANSFER
THEREOF MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT OR AN
OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
No. W-2
FORM OF
COMMON STOCK PURCHASE WARRANT
GENETIC VECTORS, INC., a Florida corporation (the "COMPANY"), hereby
certifies that, for value received, PATRICIA A. GIANONE (the "HOLDER"), or her
registered permitted assigns, is entitled, subject to the terms set forth below,
to purchase from the Company at any time or from time to time before 5:00 P.M.,
Eastern Time, on November 2,, 2003, Five Thousand (5,000) shares of fully paid
and non-assessable shares of the $0.001 par value per share common stock (the
"COMMON STOCK") of the Company, at a purchase price per share of $6.00 (such
purchase price per share as adjusted from time to time as provided herein is
referred to herein as the "PURCHASE PRICE"). The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "COMPANY" shall include Genetic Vectors, Inc., a Florida
corporation, and any corporation which shall succeed or assume the obligations
of the Company hereunder.
(b) The term "COMMON STOCK" includes the Company's Common Stock, $0.001
par value per share, as authorized on the date of the Agreement and any other
securities into which or for which any of such Common Stock may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or otherwise.
1. EXERCISE OF WARRANT.
1.1 FULL EXERCISE. This Warrant may be exercised in full by the
Holder by surrender of this Warrant, with the form of subscription attached
hereto as Exhibit "A" (the "SUBSCRIPTION FORM") duly executed by the Holder, to
the Company at its principal office, accompanied by payment, in cash or by
certified or official bank check or wire transfer payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price then in
effect.
<PAGE>
1.2 PARTIAL EXERCISE. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in Section 1.1
except that the amount payable by the holder on such partial exercise shall be
the amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the Subscription Form by (b) the Purchase Price then
in effect. On any such partial exercise the Company will issue and deliver to or
upon the order of the holder hereof a new Warrant or Warrants of like tenor, in
the name of the holder hereof or such holder (upon payment by such holder of any
applicable transfer taxes) may request, reflecting in the aggregate on the face
or faces thereof for the number of shares of Common Stock for which such Warrant
or Warrants may still be exercised.
2. DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. As soon as
practical after the exercise of this Warrant in full or in part, the Company, at
its expense (including the payment by it of any applicable issue taxes), will
cause to be issued in the name of and delivered to the Holder hereof, as such
Holder (upon payment by the Holder of any applicable transfer taxes and, if
requested by the Company, demonstration by the Holder of compliance with
applicable securities laws) may direct, a certificate or certificates for the
number of fully paid and non-assessable shares of Common Stock to which such
Holder shall be entitled on such exercise, plus, in lieu of any fractional share
to which such Holder would otherwise be entitled, cash equal to such fraction
multiplied by the then-current market value of one full share, together with any
other stock or other securities and property (including cash, where applicable)
to which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
3.1 REORGANIZATION. In case at any time or from time to time,
the Company shall (a) effect a reorganization, (b) consolidate with or merge
into any other person or party, or (c) transfer all or substantially all of its
properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, the
Holder of this Warrant, on the exercise hereof as provided in Section 1 at any
time after the consummation of such reorganization, consolidation or merger or
the effective date of such dissolution as the case may be, shall receive, in
lieu of the Common Stock issuable on such exercise prior to such consummation or
such effective date, the stock and other securities and property (including
cash) to which such Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such Holder had so
exercised this Warrant immediately prior thereto, all subject to further
adjustment thereafter as provided herein.
3.2 CONTINUATION OF TERMS. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided herein.
2
<PAGE>
4. ADDITIONAL WARRANTS. The Company shall grant to the Holder additional
warrants to purchase additional shares of Common Stock, in the amount set forth
in the following table, commencing on April 1, 1999 and on the first day of each
month thereafter, PROVIDED that the Company shall have no obligation to grant
additional warrants if on or before the date on which such grant is to be made
by the Company no amounts are outstanding on that certain Promissory Note in the
original principal amount of $100,000 given by the Company to the Holder:
NO. OF SHARES
DATE: OF COMMON STOCK:
---- ---------------
April 1, 1999 through October 1, 1999 1,250
November 1, 1999 and thereafter 2,500
All warrants to be granted pursuant to the immediately preceding sentence shall
be granted pursuant to a new Warrant in the same form as this Warrant.
5. RIGHT TO ATTEND BOARD MEETINGS. The Holder shall have the right to
have a single representative present (either in person or by telephone) at all
meetings of the Board of Directors of the Company for so long as any portion of
the Note remains unpaid. Such representative shall not be deemed to be a
director and shall have no voting rights.
6. NO DILUTION OR IMPAIRMENT.
(a) The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of the
Warrants, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holders of the Warrants
against dilution or other impairment.
(b) Any provision herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be made in respect of the issuance of
additional shares of Common Stock of the Company (or upon the conversion or
exchange of securities convertible or exchangeable into shares of Common Stock)
unless after the date hereof (a) the aggregate consideration to be received by
the Company for the issuance of such additional shares of Common Stock, whether
through one or more private placements or secondary public offerings (or upon
the conversion or exchange of securities convertible or exchangeable into shares
of Common Stock), is at least $500,000 and (b) the consideration per share for
an additional share of Common Stock (or the conversion or exchange price with
respect to securities convertible or exchangeable into shares of Common Stock)
to be issued by the Company is less than the difference between the Purchase
Price and $1.00. In such event, the Purchase Price shall be reduced to a price
(calculated to the nearest cent) determined by multiplying such Purchase Price
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of shares of
Common Stock which the aggregate consideration received by the Company for the
3
<PAGE>
total number of additional shares of Common Stock so issued would purchase at
such Purchase Price in effect immediately prior to such issuance, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of such additional shares of
Common Stock so issued.
7. NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company of a record of the holders of any
class or securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all the assets of the Company to or consolidation or merger of
the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or option to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities (other than this issue of Common Stock on the conversion of the Notes
and the exercise of the Warrants), then and in each such event the Company will
mail or cause to be mailed to each registered holder of a Warrant a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend distribution or right, and stating the amount and character of
such dividend, distribution or right; (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or wind-up is to take place, and the time, if
any is to be fixed, as of which the holders of record of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up; and
(iii) the amount and character of any stock or other securities, or rights or
options with respect thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the persons or class of persons to whom such
proposed issue or grant is to be offered or made. Such notice shall be mailed at
least 20 days prior to the date specified in such notice on which any such
action is to be taken.
8. CERTAIN DELIVERIES. The Company shall deliver to the Holder copies
of all documents filed by the Company with the Securities and Exchange
Commission. In addition and for so long as any portion of the Note remains
unpaid, the Company shall deliver to the Holder copies of its monthly financial
statements. Such financial statements shall be delivered on or before the
thirtieth day of each month for the immediately preceding month.
4
<PAGE>
9. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANTS. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrants, all shares of Common Stock from time to time
issuable on the exercise of the Warrants.
10. EXCHANGE OF WARRANTS. On surrender for exchange of any Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (upon payment by such
holder of any applicable transfer taxes and, if requested by the Company,
demonstration by such holder of compliance with applicable securities laws) may
direct, calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock called for on the face or faces of the Warrant or
Warrants so surrendered.
11. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, heft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
12. NEGOTIABILITY. This Warrant is issued upon the following terms, to
all of which each holder or owner hereof by the taking hereof consents and
agrees:
(a) subject to compliance with all applicable securities laws,
title to this Warrant may be transferred by endorsement (by the holder hereof
executing the form of assignment at the end hereof) and delivery in the same
manner as in the case of a negotiable instrument transferable by endorsement and
delivery;
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a BONA FIDE
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such BONA FIDE
purchaser, and each such BONA FIDE purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
(c) until this Warrant is transferred on the books of the Company,
the Company may treat the registered holder hereof as the absolute owner hereof
for all purposes, notwithstanding any notice to the contrary.
13. NOTICES. All notices or other communications required or permitted
to be given pursuant to this Agreement shall be in writing and shall be
considered as duly given on (a) the date of delivery, if delivered in person, by
nationally recognized overnight delivery service or by facsimile, or (b) five
days after mailing if mailed from within the continental United States by
registered or certified mail, return receipt requested to the party entitled to
receive the same, if to the Company, to Genetic Vectors, Inc., 5201 N.W. 77th
Avenue, Suite 100, Miami, Florida 33166 Attention: Mead M. McCabe, Jr., with a
copy to Clayton E. Parker, Esq., Kirkpatrick & Lockhart LLP, 201 S. Biscayne
Boulevard, 20th Floor, Miami, Florida 33131, and if to the Holder, at the
5
<PAGE>
address of such Holder shown on the books of the Company. Any party may change
his or its address by giving notice to the other party stating his or its new
address. Commencing on the 10th day after the giving of such notice, such newly
designed address shall be such party's address for the purpose of all notices or
other communications required or permitted to be given pursuant to this
Agreement.
14. GOVERNING LAW. This Agreement and the rights of the parties
hereunder shall be governed by and construed in accordance with the laws of the
State of Florida, without regard to its conflicts of law principles. All parties
hereto (i) agree that any legal suit, action or proceeding arising out of or
relating to this Agreement shall be instituted only in a federal or state court
in Miami-Dade County, Florida; (ii) waive any objection which they may now or
hereafter have to the laying of the venue of any such suit, action or
proceeding; and (iii) irrevocably submit to the jurisdiction of such federal or
state court in Miami-Dade County, Florida in any such suit, action or
proceeding, but such consent shall not constitute a general appearance or be
available to any other person who is not a party to this Agreement. All parties
hereto agree that the mailing of any processing any suit, action or proceeding
in accordance with the notice provisions of this Agreement shall constitute
personal service thereof.
15. ENTIRE AGREEMENT; WAIVER OF BREACH. This Agreement constitutes the
entire agreement among the parties and supersedes any prior agreement or
understanding among them with respect to the subject matter hereof, and it may
not be modified or amended in any manner other than as provided herein, and no
waiver of any breach or condition of this Agreement shall be deemed to have
occurred unless such waiver is in writing, signed by the party against whom
enforcement is sought, and no waiver shall be claimed to be a waiver of any
subsequent breach or condition of a like or different nature.
16. SEVERABILITY. If any provision of this Agreement, shall be held
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render invalid or
unenforceable any other severable provision of this Agreement, and this
Agreement shall be carried out as if any such invalid or unenforceable provision
were not contained herein.
17. AMENDMENT. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
18. EXPIRATION. All rights under or arising out of this Warrant shall
expire at 5:00 P.M., Eastern Time, on November 2, 2003.
19. ATTORNEYS' FEES AND COSTS. In the event of any litigation arising
under or relating to this Warrant, the prevailing party in such dispute shall be
entitled to recover its costs and expenses, including reasonable attorney fees,
from the other.
20. RESTRICTIONS ON TRANSFERABILITY; RESTRICTIVE LEGEND. The holder
acknowledges that the shares of Common Stock issuable upon exercise of this
Warrant are subject to restrictions under applicable Federal and state
securities laws. Each certificate representing shares of Common Stock issued
6
<PAGE>
shall, upon the exercise of this Warrant, bear the following legends in addition
to such other restrictive legends as may be required by law:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "ACT"), or any state
securities laws, and no sale or transfer thereof may be effected without an
effective registration statement or an opinion of counsel for the holder,
satisfactory to the Company, that such registration is not required under the
Act and any applicable state securities laws."
Dated: November 2, 1998
GENETIC VECTORS, INC.
By:_______________________________________________
Title:____________________________________________
AGREED TO AND ACCEPTED:
____________________________________________
PATRICIA A. GIANONE
Date:_______________________________________
7
<PAGE>
FORM OF SUBSCRIPTION
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _____ shares of
Common Stock of ____________________, herewith makes payment of $__________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to, whose address is:
______________________________________________________________
______________________________________________________________
______________________________________________________________
Dated: ___________________.
____________________________________
Signature
(Signature must conform to name of
holder as specified on the face of
the Warrant)
____________________________________
Print Name
____________________________________
Street Address
____________________________________
City, State and Zip Code
____________________________________
Person's Social Security Number or
Tax Identification Number
8
<PAGE>
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers
unto ___________________ the right represented by the within Warrant to purchase
shares of Common Stock of ___________________ to which the within Warrant
relates, and appoints ___________________ as its attorney to transfer such right
on the books of _________________ with full power of substitution in the
premises.
Dated: _________________.
____________________________________
Signature
(Signature must conform to name of
holder as specified on the face of
the Warrant)
____________________________________
Print Name
____________________________________
Street Address
____________________________________
City, State and Zip Code
____________________________________
Person's Social Security Number or
Tax Identification Number
Signed in the presence of:
_______________________________________
9
EXHIBIT 10.15
FORM OF PROMISSORY NOTE
-----------------------
$100,000.00
November 2, 1998
1. AMOUNT; MATURITY. FOR VALUE RECEIVED, the undersigned, GENETIC
VECTORS, INC., a Florida corporation (the "Maker"), promises to pay to JEROME P.
SEIDEN IRREVOCABLE TRUST DATED APRIL 22, 1998 (the "Holder"), the principal sum
of One Hundred Thousand Dollars ($100,000.00), which principal sum shall mature
on November 2, 1999 and shall bear simple interest at the rate set forth herein.
2. INTEREST. Interest shall accrue as of the date of this Note at the
simple interest rate of twelve percent (12%) per annum which rate shall increase
one percent (1%) per annum on the first day of each month that any portion of
this Note remains unpaid after April 1, 1999 up to the maximum amount permitted
by law. Interest shall be payable monthly in arrears, commencing on April 1,
1999 and each successive interest payment shall be due on the first day of each
successive month thereafter.
3. MODE OF PAYMENT. All payments of principal and interest due under
this Note shall be made in legal tender in the United States of America and
delivered to the Holder at or, at the option of the Holder, in such other manner
and at such other place as the Holder shall have designated to the Make in
writing.
4. PREPAYMENT.
(a) This Note may be voluntarily prepaid, without penalty or premium,
in whole or in part, at any time and from time to time. Any prepayment must
include all accrued interest on the principal being prepaid, through the date of
prepayment.
<PAGE>
(b) Notwithstanding anything contained herein to the contrary, this
Note shall be mandatorily prepaid in the event that the Maker closes an offering
of its securities, whether through one or more private placements or secondary
public offerings, in which the Maker raises gross proceeds from such transaction
or transactions of at least $3,000,000.
5. ACCELERATION UPON EVENT OF DEFAULT. This Note may be accelerated at
the option of the Holder, upon the occurrence of any event of default as
described below:
(a) any default, whether in whole or in part, shall occur in the
payment to the Holder of principal, interest or other item comprising the Note
as and when due which shall continue for a period of thirty (30) days after the
receipt of written notice by the Maker thereof;
(b) the Maker shall (1) make a general assignment for the benefit of
its creditors, (2) apply for or consent to the appointment of a receiver,
trustee, assignee, custodian sequestrator, liquidator or similar official for
itself or any of its assets and properties, (3) commence a voluntary case for
relief as a debtor under the United States Bankruptcy Code, (4) file with or
otherwise submit to any governmental authority any petition, answer or other
document seeking (A) reorganization, (B) an arrangement with creditors or (C) to
take advantage of any other present or future applicable law respecting
bankruptcy, reorganization, insolvency, readjustment of debts, relief of
debtors, dissolution or liquidation, (5) file or otherwise submit any answer or
other document admitting or failing to contest the material allegations of a
petition or other document filed or otherwise submitted against it in any
proceeding under any such applicable law, or (6) be adjudicated a bankrupt or
insolvent by a court of competent jurisdiction; or
(c) any case, proceeding or other action shall be commenced against
the Maker for the purpose of effecting, or an order, judgment or decree shall be
entered by any court of competent jurisdiction approving (in whole or in part)
2
<PAGE>
anything specified in Section 4(d) hereof, or any receiver, trustee, assignee,
custodian, sequestrator, liquidator or other official shall be appointed with
respect to the Maker, or shall be appointed to take or shall otherwise acquire
possession or control of all or a substantial part of the assets and properties
of the Maker, and any of the foregoing shall continue unstayed and in effect for
any period of 60 days.
6. DELAY IN EXERCISE OF RIGHTS. No delay on the part of the Holder in
exercising any of its options, powers or rights nor any partial or single
exercise of its options, power or rights shall constitute a waiver thereof or of
any other option, power or right, and no waiver on the part of the Holder of any
of its options, powers or rights shall constitute a waiver of any other option,
power or right.
7. WAIVER OF PRESENTMENT; NO OFFSETS. The Maker hereby waives presentment
for payment, dishonor, protest, notice of protest and any demand whatsoever with
respect to this Note and the right to interpose any defense based upon any
statute of limitation or any claim of laches and any set-off or counterclaim of
any nature or description.
8. COLLECTION COSTS; MAXIMUM INTEREST LIMITATIONS.
(a) The Maker agrees to pay all reasonable costs, including all
reasonable attorneys' fees and disbursements incurred by the Holder in
collecting or enforcing payment of this Note in accordance with its terms.
(b) After this Note becomes due, at stated maturity or on
acceleration, any unpaid balance hereof shall thereafter bear interest until
paid at a rate of 16% simple interest per annum, but such interest rate shall
not exceed at any time the maximum interest rate allowable under applicable
state usury laws.
3
<PAGE>
9. GOVERNING LAW.
(a) This Note and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Florida,
without regard to its conflicts of law principles. All parties hereto (1) agree
that any legal suit, action or proceeding arising out of or relating to this
note shall be instituted only in a Federal or state court in Miami-Dade County,
Florida, (2) waive any objection which they may now or hereafter have to the
laying of the venue of any such suit, action or proceeding, and (3) irrevocably
submit to the jurisdiction of such Federal or state court in Miami-Dade County,
Florida in any such suit, action or proceeding, but such consent shall not
constitute a general appearance or be available to any other person who is not a
party to this Note. All parties hereto agree that the mailing of any process in
any suit, action or proceeding in accordance with the notice provisions of this
Note shall constitute personal service thereof.
(b) THE MAKER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING RELATED IN ANY WAY TO THIS NOTE.
10. NOTICES. All notices or other communications required or permitted to
be given pursuant to this Note shall be in writing and shall be considered as
duly given on (a) the date of delivery, if delivered in person or by nationally
recognized overnight delivery service or (b) five days after mailing if mailed
by registered or certified mail, return receipt requested to the party entitled
to receive the same, if to the Holder, at his or its address on the books and
records of the Maker, and if to the Maker, to Genetic Vectors, Inc., 5201 N.W.
77th Avenue, Suite 100, Miami, Florida 33166, Attention: Mead M. McCabe, Jr.,
with a copy to Kirkpatrick & Lockhart LLP, Miami Center - 20th Floor, 201 South
Biscayne Boulevard, Miami, Florida 33131, Attention: Clayton E. Parker, Esq. Any
party may change its address by giving notice to the other party stating its new
4
<PAGE>
address. Commencing on the tenth day after the giving of such notice, such newly
designated address shall be such party's address for the purpose of all notices
or other communications required or permitted to be given pursuant to this Note.
11. SEVERABILITY. If any provision of this Note shall be held invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Note, and this Note shall be carried out
as if any such invalid or unenforceable provision were not contained herein.
12. AMENDMENT. This Note shall not be amended without the prior written
consent of the Holder.
GENETIC VECTORS, INC.
By: ___________________________________
Its: ___________________________________
ATTEST:
By: _____________________________
Its: _____________________________
Corporate Seal:
5
EXHIBIT 10.16
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE UPON
ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS, AND NO SALE OR TRANSFER
THEREOF MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT OR AN
OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
No. W-1
FORM OF
COMMON STOCK PURCHASE WARRANT
-----------------------------
GENETIC VECTORS, INC., a Florida corporation (the "Company"), hereby
certifies that, for value received, the JEROME P. SEIDEN IRREVOCABLE TRUST DATED
APRIL 22, 1993 (the "Holder"), or its registered permitted assigns, is entitled,
subject to the terms set forth below, to purchase from the Company at any time
or from time to time before 5:00 P.M., Eastern Time, on November 2, 2003, Ten
Thousand (10,000) shares of fully paid and non-assessable shares of the $0.001
par value per share common stock (the "Common Stock") of the Company, at a
purchase price per share of $_____ (such purchase price per share as adjusted
from time to time as provided herein is referred to herein as the "Purchase
Price"). The number and character of such shares of Common Stock and the
Purchase Price are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "COMPANY" shall include Genetic Vectors, Inc., a Florida
corporation, and any corporation which shall succeed or assume the obligations
of the Company hereunder.
(b) The term "COMMON STOCK" includes the Company's Common Stock, $0.001
par value per share, as authorized on the date of the Agreement and any other
securities into which or for which any of such Common Stock may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or otherwise.
1. EXERCISE OF WARRANT.
-------------------
1.1. FULL EXERCISE. This Warrant may be exercised in full by the
Holder by surrender of this Warrant, with the form of subscription attached
hereto as Exhibit "A" (the "Subscription Form") duly executed by the Holder, to
the Company at its principal office, accompanied by payment, in cash or by
certified or official bank check or wire transfer payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price then in
effect.
<PAGE>
1.2. PARTIAL EXERCISE. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in Section 1.1
except that the amount payable by the holder on such partial exercise shall be
the amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the Subscription Form by (b) the Purchase Price then
in effect. On any such partial exercise the Company will issue and deliver to or
upon the order of the holder hereof a new Warrant or Warrants of like tenor, in
the name of the holder hereof or such holder (upon payment by such holder of any
applicable transfer taxes) may request, reflecting in the aggregate on the face
or faces thereof for the number of shares of Common Stock for which such Warrant
or Warrants may still be exercised.
2. DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. As soon as
practical after the exercise of this Warrant in full or in part, the Company, at
its expense (including the payment by it of any applicable issue taxes), will
cause to be issued in the name of and delivered to the Holder hereof, as such
Holder (upon payment by the Holder of any applicable transfer taxes and, if
requested by the Company, demonstration by the Holder of compliance with
applicable securities laws) may direct, a certificate or certificates for the
number of fully paid and non-assessable shares of Common Stock to which such
Holder shall be entitled on such exercise, plus, in lieu of any fractional share
to which such Holder would otherwise be entitled, cash equal to such fraction
multiplied by the then-current market value of one full share, together with any
other stock or other securities and property (including cash, where applicable)
to which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
3.1 REORGANIZATION. In case at any time or from time to time, the
Company shall (a) effect a reorganization, (b) consolidate with or merge into
any other person or party, or (c) transfer all or substantially all of its
properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, the
Holder of this Warrant, on the exercise hereof as provided in Section 1 at any
time after the consummation of such reorganization, consolidation or merger or
the effective date of such dissolution as the case may be, shall receive, in
lieu of the Common Stock issuable on such exercise prior to such consummation or
such effective date, the stock and other securities and property (including
cash) to which such Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such Holder had so
exercised this Warrant immediately prior thereto, all subject to further
adjustment thereafter as provided herein.
3.2. CONTINUATION OF TERMS. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided herein.
2
<PAGE>
4. ADDITIONAL WARRANTS. The Company shall grant to the Holder additional
warrants to purchase additional shares of Common Stock, in the amount set forth
in the following table, commencing on April 1, 1999 and on the first day of each
month thereafter, PROVIDED that the Company shall have no obligation to grant
additional warrants if on or before the date on which such grant is to be made
by the Company no amounts are outstanding on that certain Promissory Note in the
original principal amount of $100,000 given by the Company to the Holder:
NO. OF SHARES
DATE: OF COMMON STOCK:
---- ---------------
April 1, 1999 through October 1, 1999 1,250
November 1, 1999 and thereafter 2,500
All warrants to be granted pursuant to the immediately preceding sentence shall
be granted pursuant to a new Warrant in the same form as this Warrant.
5. RIGHT TO ATTEND BOARD MEETINGS. The Holder shall have the right to
have a single representative present (either in person or by telephone) at all
meetings of the Board of Directors of the Company for so long as any portion of
the Note remains unpaid. Such representative shall not be deemed to be a
director and shall have no voting rights.
6. NO DILUTION OR IMPAIRMENT.
(a) The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of the
Warrants, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holders of the Warrants
against dilution or other impairment.
(b) Any provision herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be made in respect of the issuance of
additional shares of Common Stock of the Company (or upon the conversion or
exchange of securities convertible or exchangeable into shares of Common Stock)
unless after the date hereof (a) the aggregate consideration to be received by
the Company for the issuance of such additional shares of Common Stock, whether
through one or more private placements or secondary public offerings (or upon
the conversion or exchange of securities convertible or exchangeable into shares
of Common Stock), is at least $500,000 and (b) the consideration per share for
an additional share of Common Stock (or the conversion or exchange price with
respect to securities convertible or exchangeable into shares of Common Stock)
to be issued by the Company is less than the difference between the Purchase
Price and $1.00. In such event, the Purchase Price shall be reduced to a price
(calculated to the nearest cent) determined by multiplying such Purchase Price
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of shares of
Common Stock which the aggregate consideration received by the Company for the
3
<PAGE>
total number of additional shares of Common Stock so issued would purchase at
such Purchase Price in effect immediately prior to such issuance, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of such additional shares of
Common Stock so issued.
7. NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company of a record of the holders of any class
or securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or consolidation or merger of the
Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of stock
of any class or any other securities, or any right or option to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities (other than this issue of Common Stock on the conversion of the Notes
and the exercise of the Warrants), then and in each such event the Company will
mail or cause to be mailed to each registered holder of a Warrant a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend distribution or right, and stating the amount and character of
such dividend, distribution or right; (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or wind-up is to take place, and the time, if
any is to be fixed, as of which the holders of record of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up; and
(iii) the amount and character of any stock or other securities, or rights or
options with respect thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the persons or class of persons to whom such
proposed issue or grant is to be offered or made. Such notice shall be mailed at
least 20 days prior to the date specified in such notice on which any such
action is to be taken.
8. CERTAIN DELIVERIES. The Company shall deliver to the Holder copies
of all documents filed by the Company with the Securities and Exchange
Commission. In addition and for so long as any portion of the Note remains
unpaid, the Company shall deliver to the Holder copies of its monthly financial
statements. Such financial statements shall be delivered on or before the
thirtieth day of each month for the immediately preceding month.
4
<PAGE>
9. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANTS. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrants, all shares of Common Stock from time to time
issuable on the exercise of the Warrants.
10. EXCHANGE OF WARRANTS. On surrender for exchange of any Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (upon payment by such
holder of any applicable transfer taxes and, if requested by the Company,
demonstration by such holder of compliance with applicable securities laws) may
direct, calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock called for on the face or faces of the Warrant or
Warrants so surrendered.
11. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, heft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
12. NEGOTIABILITY. This Warrant is issued upon the following terms, to all
of which each holder or owner hereof by the taking hereof consents and agrees:
(a) subject to compliance with all applicable securities laws, title
to this Warrant may be transferred by endorsement (by the holder hereof
executing the form of assignment at the end hereof) and delivery in the same
manner as in the case of a negotiable instrument transferable by endorsement and
delivery;
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a BONA FIDe
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such BONA FIDE
purchaser, and each such BONA FIDE purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
(c) until this Warrant is transferred on the books of the Company, the
Company may treat the registered holder hereof as the absolute owner hereof for
all purposes, notwithstanding any notice to the contrary.
13. NOTICES. All notices or other communications required or permitted to
be given pursuant to this Agreement shall be in writing and shall be considered
as duly given on (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or by facsimile, or (b) five days after
mailing if mailed from within the continental United States by registered or
certified mail, return receipt requested to the party entitled to receive the
same, if to the Company, to Genetic Vectors, Inc., 5201 N.W. 77th Avenue, Suite
100, Miami, Florida 33166 Attention: Mead M. McCabe, Jr., with a copy to Clayton
E. Parker, Esq., Kirkpatrick & Lockhart LLP, 201 S. Biscayne Boulevard, 20th
Floor, Miami, Florida 33131, and if to the Holder, at the address of such Holder
5
<PAGE>
shown on the books of the Company. Any party may change his or its address by
giving notice to the other party stating his or its new address. Commencing on
the 10th day after the giving of such notice, such newly designed address shall
be such party's address for the purpose of all notices or other communications
required or permitted to be given pursuant to this Agreement.
14. GOVERNING LAW. This Agreement and the rights of the parties hereunder
shall be governed by and construed in accordance with the laws of the State of
Florida, without regard to its conflicts of law principles. All parties hereto
(i) agree that any legal suit, action or proceeding arising out of or relating
to this Agreement shall be instituted only in a federal or state court in
Miami-Dade County, Florida; (ii) waive any objection which they may now or
hereafter have to the laying of the venue of any such suit, action or
proceeding; and (iii) irrevocably submit to the jurisdiction of such federal or
state court in Miami-Dade County, Florida in any such suit, action or
proceeding, but such consent shall not constitute a general appearance or be
available to any other person who is not a party to this Agreement. All parties
hereto agree that the mailing of any processing any suit, action or proceeding
in accordance with the notice provisions of this Agreement shall constitute
personal service thereof.
15. ENTIRE AGREEMENT; WAIVER OF BREACH. This Agreement constitutes the
entire agreement among the parties and supersedes any prior agreement or
understanding among them with respect to the subject matter hereof, and it may
not be modified or amended in any manner other than as provided herein, and no
waiver of any breach or condition of this Agreement shall be deemed to have
occurred unless such waiver is in writing, signed by the party against whom
enforcement is sought, and no waiver shall be claimed to be a waiver of any
subsequent breach or condition of a like or different nature.
16. SEVERABILITY. If any provision of this Agreement, shall be held
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render invalid or
unenforceable any other severable provision of this Agreement, and this
Agreement shall be carried out as if any such invalid or unenforceable provision
were not contained herein.
17. AMENDMENT. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
18. EXPIRATION. All rights under or arising out of this Warrant shall
expire at 5:00 P.M., Eastern Time, on November 2, 2003.
19. ATTORNEYS' FEES AND COSTS. In the event of any litigation arising
under or relating to this Warrant, the prevailing party in such dispute shall be
entitled to recover its costs and expenses, including reasonable attorney fees,
from the other.
20. RESTRICTIONS ON TRANSFERABILITY; RESTRICTIVE LEGEND. The holder
acknowledges that the shares of Common Stock issuable upon exercise of this
Warrant are subject to restrictions under applicable Federal and state
securities laws. Each certificate representing shares of Common Stock issued
6
<PAGE>
shall, upon the exercise of this Warrant, bear the following legends in addition
to such other restrictive legends as may be required by law:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "ACT"), or any state securities
laws, and no sale or transfer thereof may be effected without an effective
registration statement or an opinion of counsel for the holder, satisfactory to
the Company, that such registration is not required under the Act and any
applicable state securities laws."
Dated: November 2, 1998
GENETIC VECTORS, INC.
By:__________________________________________
Title:_______________________________________
AGREED TO AND ACCEPTED:
THE JEROME P. SEIDEN IRREVOCABLE TRUST
DATED APRIL 22, 1993
By:_________________________________
Its:________________________________
Date:_______________________________
7
<PAGE>
FORM OF SUBSCRIPTION
--------------------
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _____ shares of
Common Stock of ____________________, herewith makes payment of $__________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to, whose address is:
___________________________________________________
___________________________________________________
___________________________________________________
Dated: ___________________.
____________________________________________
Signature
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
Print Name
____________________________________________
Street Address
____________________________________________
City, State and Zip Code
____________________________________________
Person's Social Security Number or Tax
Identification Number
8
<PAGE>
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers
unto ___________________ the right represented by the within Warrant to purchase
shares of Common Stock of ___________________ to which the within Warrant
relates, and appoints ___________________ as its attorney to transfer such right
on the books of _________________ with full power of substitution in the
premises.
Dated:_________________.
____________________________________________
Signature
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
Print Name
____________________________________________
Street Address
____________________________________________
City, State and Zip Code
____________________________________________
Person's Social Security Number or Tax
Identification Number
Signed in the presence of:
__________________________________
9
EXHIBIT 10.17
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE UPON ITS
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS, AND NO SALE OR TRANSFER THEREOF MAY
BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
No. W-5
FORM OF
COMMON STOCK PURCHASE WARRANT
-----------------------------
GENETIC VECTORS, INC., a Florida corporation (the "Company"), hereby
certifies that, for value received, STERLING TECHNOLOGY PARTNERS, LTD. (the
"Holder"), or its registered permitted assigns, is entitled, subject to the
terms set forth below, to purchase from the Company at any time Fifty Thousand
(50,000) shares of fully paid and non-assessable shares of common stock, par
value $0.001 per share (the "Common Stock"), of the Company at a purchase price
per share of $6.00 (the "Purchase Price"). The number and character of such
shares of Common Stock are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "COMPANY" shall include Genetic Vectors, Inc., a Florida
corporation, and any corporation which shall succeed or assume the obligations
of the Company hereunder.
(b) The term "COMMON STOCK" includes the Company's Common Stock, par value
$0.001 per share, as authorized on the date hereof of the Agreement and any
other securities into which or for which any of such Common Stock may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
1. EXERCISE OF WARRANT.
1.1. FULL EXERCISe. This Warrant may be exercised in full by the
Holder by surrender of this Warrant, with the form of subscription attached
hereto as Exhibit "A" (the "Subscription Form") duly executed by the Holder, to
the Company at its principal office, accompanied by payment, in cash or by
certified or official bank check or wire transfer payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price.
1.2. PARTIAL EXERCISE. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in Section 1.1
except that the amount payable by the holder on such partial exercise shall be
the amount obtained by multiplying (a) the number of shares of Common Stock
<PAGE>
designated by the holder in the Subscription Form by (b) the Purchase Price. On
any such partial exercise the Company will issue and deliver to or upon the
order of the holder hereof a new Warrant or Warrants of like tenor, in the name
of the holder hereof or such holder (upon payment by such holder of any
applicable transfer taxes) may request, reflecting in the aggregate on the face
or faces thereof for the number of shares of Common Stock for which such Warrant
or Warrants may still be exercised.
2. DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. As soon as practical
after the exercise of this Warrant in full or in part, the Company, at its
expense (including the payment by it of any applicable issue taxes), will cause
to be issued in the name of and delivered to the Holder hereof, as such Holder
(upon payment by the Holder of any applicable transfer taxes and, if requested
by the Company, demonstration by the Holder of compliance with applicable
securities laws) may direct, a certificate or certificates for the number of
fully paid and non-assessable shares of Common Stock to which such Holder shall
be entitled on such exercise, plus, in lieu of any fractional share to which
such Holder would otherwise be entitled, cash equal to such fraction multiplied
by the then-current market value of one full share, together with any other
stock or other securities and property (including cash, where applicable) to
which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
3.1. REORGANIZATION. If the Company shall a) effect a
reorganization, (b) consolidate with or merge into any other person or party, or
(c) transfer all or substantially all of its properties or assets to any other
person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, the Holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution as the case may be, shall receive, in lieu of the Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such Holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such Holder had so exercised this Warrant
immediately prior thereto, all subject to further adjustment thereafter as
provided herein.
3.2. CONTINUATION OF TERMS. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided herein.
4. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
2
<PAGE>
the terms of the Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
dilution or other impairment.
5. NOTICES OF RECORD DATE, ETC. IN THE EVENT OF:
(a) any taking by the Company of a record of the holders of any class
or securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or consolidation or merger of the
Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of stock
of any class or any other securities, or any right or option to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities (other than this issue of Common Stock on exercise of the Warrant),
then and in each such event the Company will mail or cause to be mailed to the
Holder a notice specifying (i) the date on which any such record is to be taken
for the purpose of such dividend distribution or right, and stating the amount
and character of such dividend, distribution or right; (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or wind-up is to take place, and
the time, if any is to be fixed, as of which the holders of record of Common
Stock shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up; and (iii) the amount and character of any stock or other securities,
or rights or options with respect thereto, proposed to be issued or granted, the
date of such proposed issue or grant and the persons or class of persons to whom
such proposed issue or grant is to be offered or made. Such notice shall be
mailed at least twenty (20) days prior to the date specified in such notice on
which any such action is to be taken.
6. CERTAIN DELIVERIES. The Company shall deliver to the Holder copies of
all documents filed by the Company with the Securities and Exchange Commission.
In addition and for so long as any portion of the Note remains unpaid, the
Company shall deliver to the Holder copies of its monthly financial statements.
Such financial statements shall be delivered on or before the thirtieth day of
each month for the immediately preceding month.
7. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. The Company will
at all times reserve and keep available, solely for issuance and delivery on the
exercise of the Warrant, all shares of Common Stock from time to time issuable
on the exercise of the Warrant.
3
<PAGE>
8. EXCHANGE OF WARRANT. On surrender of the Warrant, properly endorsed,
to the Company, the Company at its expense will issue and deliver to or on the
order of the holder thereof a new Warrant or Warrants of like tenor, in the name
of such holder or as such holder (upon payment by such holder of any applicable
transfer taxes and, if requested by the Company, demonstration by such holder of
compliance with applicable securities laws) may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common Stock called for
on the face or faces of the Warrant or Warrants so surrendered.
9. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of the Warrant and,
in the case of any such loss, theft or destruction of the Warrant, on delivery
of an indemnity agreement or security reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, on surrender and
cancellation of such warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
10. NEGOTIABILITY. This Warrant is issued upon the following terms, to all
of which each holder or owner hereof by the taking hereof consents and agrees:
(a) subject to compliance with all applicable securities laws, title
to this Warrant may be transferred by endorsement (by the holder hereof
executing the Form of Assignment attached hereto as Exhibit "B") and delivery in
the same manner as in the case of a negotiable instrument transferable by
endorsement and delivery;
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a BONA FIDE
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such BONA FIDE
purchaser, and each such BONA FIDE purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
(c) until this Warrant is transferred on the books of the Company, the
Company may treat the registered holder hereof as the absolute owner hereof for
all purposes, notwithstanding any notice to the contrary.
11. NOTICES. All notices or other communications required or permitted to
be given pursuant to this Agreement shall be in writing and shall be considered
as duly given on (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or (b) five days after mailing if mailed
from within the continental United States by registered or certified mail,
return receipt requested to the party entitled to receive the same, if to the
Company, to Genetic Vectors, Inc., 5201 N.W. 77th Avenue, Suite 100, Miami,
Florida 33166 Attention: Mead M. McCabe, Jr., with a copy to Clayton E. Parker,
Esq., Kirkpatrick & Lockhart LLP, 201 S. Biscayne Boulevard, 20th Floor, Miami,
Florida 33131, and if to the Holder, at the address of such Holder shown on the
books of the Company. Any party may change his or its address by giving notice
to the other party stating his or its new address. Commencing on the 10th day
after the giving of such notice, such newly designed address shall be such
4
<PAGE>
party's address for the purpose of all notices or other communications required
or permitted to be given pursuant to this Agreement.
12. GOVERNING LAW. This Agreement and the rights of the parties hereunder
shall be governed by and construed in accordance with the laws of the State of
Florida, without regard to its conflicts of law principles. All parties hereto
(i) agree that any legal suit, action or proceeding arising out of or relating
to this Agreement shall be instituted only in a federal or state court in
Miami-Dade County, Florida; (ii) waive any objection which they may now or
hereafter have to the laying of the venue of any such suit, action or
proceeding; and (iii) irrevocably submit to the jurisdiction of such federal or
state court in Miami-Dade County, Florida in any such suit, action or
proceeding, but such consent shall not constitute a general appearance or be
available to any other person who is not a party to this Agreement. All parties
hereto agree that the mailing of any processing any suit, action or proceeding
in accordance with the notice provisions of this Agreement shall constitute
personal service thereof.
13. ENTIRE AGREEMENT; WAIVER OF BREACH. This Agreement constitutes the
entire agreement among the parties and supersedes any prior agreement or
understanding among them with respect to the subject matter hereof, and it may
not be modified or amended in any manner other than as provided herein, and no
waiver of any breach or condition of this Agreement shall be deemed to have
occurred unless such waiver is in writing, signed by the party against whom
enforcement is sought, and no waiver shall be claimed to be a waiver of any
subsequent breach or condition of a like or different nature.
14. SEVERABILITY. If any provision of this Agreement shall be held invalid
or unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein.
15. AMENDMENT. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
16. ATTORNEYS' FEES AND COSTS. In the event of any litigation arising
under or relating to this Warrant, the prevailing party in such dispute shall be
entitled to recover its costs and expenses, including reasonable attorney fees,
from the other.
17. RESTRICTIONS ON TRANSFERABILITY; RESTRICTIVE LEGENd. The holder
acknowledges that the shares of Common Stock issuable upon exercise of this
Warrant are subject to restrictions under applicable Federal and state
securities laws. Each certificate representing shares of Common Stock issued
shall, upon the exercise of this Warrant, bear the following legends in addition
to such other restrictive legends as may be required by law:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "ACT"), or any state securities
laws, and no sale or transfer thereof may be effected without an effective
registration statement or an opinion of counsel for the holder, satisfactory to
5
<PAGE>
the Company, that such registration is not required under the Act and any
applicable state securities laws."
Dated: September 3, 1998
GENETIC VECTORS, INC.
By:__________________________________________
Title:_______________________________________
AGREED TO AND ACCEPTED:
STERLING TECHNOLOGY PARTNERS, LTD.
By:_________________________________
Its:________________________________
Date:_______________________________
6
<PAGE>
EXHIBIT "A"
-----------
FORM OF EXERCISE
----------------
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _____ shares of
Common Stock of ____________________, herewith makes payment of $__________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to, whose address is:
_____________________________________________________
_____________________________________________________
_____________________________________________________
Dated:___________________.
____________________________________________
Signature
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
Print Name
____________________________________________
Street Address
____________________________________________
City, State and Zip Code
____________________________________________
Person's Social Security Number or Tax
Identification Number
A-1
<PAGE>
EXHIBIT "B"
-----------
FORM OF ASSIGNMENT
------------------
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers
unto ___________________ the right represented by the within Warrant to purchase
shares of Common Stock of ___________________ to which the within Warrant
relates, and appoints ___________________ as its attorney to transfer such right
on the books of _________________ with full power of substitution in the
premises.
Dated: _________________.
____________________________________________
Signature
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
Print Name
____________________________________________
Street Address
____________________________________________
City, State and Zip Code
____________________________________________
Person's Social Security Number or Tax
Identification Number
Signed in the presence of:
___________________________________
B-1
EXHIBIT 10.18
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE UPON ITS
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS, AND NO SALE OR TRANSFER THEREOF MAY
BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
No. W-4
FORM OF
COMMON STOCK PURCHASE WARRANT
-----------------------------
GENETIC VECTORS, INC., a Florida corporation (the "COMPANY"), hereby
certifies that, for value received, STERLING TECHNOLOGY PARTNERS, LTD. (the
"HOLDER"), or its registered permitted assigns, is entitled, subject to the
terms set forth below, to purchase from the Company at any time Sixteen Thousand
Three Hundred and Fifty (16,350) shares of fully paid and non-assessable shares
of common stock, par value $0.001 per share (the "COMMON STOCK"), of the Company
at a purchase price per share of $5.50 (the "PURCHASE PRICE"). The number and
character of such shares of Common Stock are subject to adjustment as provided
herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "COMPANY" shall include Genetic Vectors, Inc., a Florida
corporation, and any corporation which shall succeed or assume the obligations
of the Company hereunder.
(b) The term "COMMON STOCK" includes the Company's Common Stock, par value
$0.001 per share, as authorized on the date hereof of the Agreement and any
other securities into which or for which any of such Common Stock may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
1. EXERCISE OF WARRANT.
1.1. FULL EXERCISE. This Warrant may be exercised in full by the
Holder by surrender of this Warrant, with the form of subscription attached
hereto as Exhibit "A" (the "Subscription Form") duly executed by the Holder, to
the Company at its principal office, accompanied by payment, in cash or by
certified or official bank check or wire transfer payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price.
1.2. PARTIAL EXERCISE. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in Section 1.1
except that the amount payable by the holder on such partial exercise shall be
<PAGE>
the amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the Subscription Form by (b) the Purchase Price. On
any such partial exercise the Company will issue and deliver to or upon the
order of the holder hereof a new Warrant or Warrants of like tenor, in the name
of the holder hereof or such holder (upon payment by such holder of any
applicable transfer taxes) may request, reflecting in the aggregate on the face
or faces thereof for the number of shares of Common Stock for which such Warrant
or Warrants may still be exercised.
2. DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. As soon as practical
after the exercise of this Warrant in full or in part, the Company, at its
expense (including the payment by it of any applicable issue taxes), will cause
to be issued in the name of and delivered to the Holder hereof, as such Holder
(upon payment by the Holder of any applicable transfer taxes and, if requested
by the Company, demonstration by the Holder of compliance with applicable
securities laws) may direct, a certificate or certificates for the number of
fully paid and non-assessable shares of Common Stock to which such Holder shall
be entitled on such exercise, plus, in lieu of any fractional share to which
such Holder would otherwise be entitled, cash equal to such fraction multiplied
by the then-current market value of one full share, together with any other
stock or other securities and property (including cash, where applicable) to
which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
3.1. REORGANIZATION. If the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person or party, or
(c) transfer all or substantially all of its properties or assets to any other
person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, the Holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution as the case may be, shall receive, in lieu of the Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such Holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such Holder had so exercised this Warrant
immediately prior thereto, all subject to further adjustment thereafter as
provided herein.
3.2. CONTINUATION OF TERMS. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided herein.
4. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
2
<PAGE>
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
dilution or other impairment.
9. NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company of a record of the holders of any class
or securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or consolidation or merger of the
Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of stock
of any class or any other securities, or any right or option to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities (other than this issue of Common Stock on exercise of the Warrant),
then and in each such event the Company will mail or cause to be mailed to the
Holder a notice specifying (i) the date on which any such record is to be taken
for the purpose of such dividend distribution or right, and stating the amount
and character of such dividend, distribution or right; (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or wind-up is to take place, and
the time, if any is to be fixed, as of which the holders of record of Common
Stock shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up; and (iii) the amount and character of any stock or other securities,
or rights or options with respect thereto, proposed to be issued or granted, the
date of such proposed issue or grant and the persons or class of persons to whom
such proposed issue or grant is to be offered or made. Such notice shall be
mailed at least twenty (20) days prior to the date specified in such notice on
which any such action is to be taken.
6. CERTAIN DELIVERIES. The Company shall deliver to the Holder copies of
all documents filed by the Company with the Securities and Exchange Commission.
In addition and for so long as any portion of the Note remains unpaid, the
Company shall deliver to the Holder copies of its monthly financial statements.
Such financial statements shall be delivered on or before the thirtieth day of
each month for the immediately preceding month.
7. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. The Company will
at all times reserve and keep available, solely for issuance and delivery on the
exercise of the Warrant, all shares of Common Stock from time to time issuable
on the exercise of the Warrant.
3
<PAGE>
8. EXCHANGE OF WARRANT. On surrender of the Warrant, properly endorsed,
to the Company, the Company at its expense will issue and deliver to or on the
order of the holder thereof a new Warrant or Warrants of like tenor, in the name
of such holder or as such holder (upon payment by such holder of any applicable
transfer taxes and, if requested by the Company, demonstration by such holder of
compliance with applicable securities laws) may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common Stock called for
on the face or faces of the Warrant or Warrants so surrendered.
9. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of the Warrant and,
in the case of any such loss, theft or destruction of the Warrant, on delivery
of an indemnity agreement or security reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, on surrender and
cancellation of such warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
10. NEGOTIABILITY. This Warrant is issued upon the following terms, to all
of which each holder or owner hereof by the taking hereof consents and agrees:
(a) subject to compliance with all applicable securities laws, title
to this Warrant may be transferred by endorsement (by the holder hereof
executing the Form of Assignment attached hereto as Exhibit "B") and delivery in
the same manner as in the case of a negotiable instrument transferable by
endorsement and delivery;
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a BONA FIDE
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such BONA FIDE
purchaser, and each such BONA FIDE purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
(c) until this Warrant is transferred on the books of the Company, the
Company may treat the registered holder hereof as the absolute owner hereof for
all purposes, notwithstanding any notice to the contrary.
11. NOTICES. All notices or other communications required or permitted to
be given pursuant to this Agreement shall be in writing and shall be considered
as duly given on (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or (b) five days after mailing if mailed
from within the continental United States by registered or certified mail,
return receipt requested to the party entitled to receive the same, if to the
Company, to Genetic Vectors, Inc., 5201 N.W. 77th Avenue, Suite 100, Miami,
Florida 33166 Attention: Mead M. McCabe, Jr., with a copy to Clayton E. Parker,
Esq., Kirkpatrick & Lockhart LLP, 201 S. Biscayne Boulevard, 20th Floor, Miami,
Florida 33131, and if to the Holder, at the address of such Holder shown on the
books of the Company. Any party may change his or its address by giving notice
to the other party stating his or its new address. Commencing on the 10th day
after the giving of such notice, such newly designed address shall be such
4
<PAGE>
party's address for the purpose of all notices or other communications required
or permitted to be given pursuant to this Agreement.
12. GOVERNING LAW. This Agreement and the rights of the parties hereunder
shall be governed by and construed in accordance with the laws of the State of
Florida, without regard to its conflicts of law principles. All parties hereto
(i) agree that any legal suit, action or proceeding arising out of or relating
to this Agreement shall be instituted only in a federal or state court in
Miami-Dade County, Florida; (ii) waive any objection which they may now or
hereafter have to the laying of the venue of any such suit, action or
proceeding; and (iii) irrevocably submit to the jurisdiction of such federal or
state court in Miami-Dade County, Florida in any such suit, action or
proceeding, but such consent shall not constitute a general appearance or be
available to any other person who is not a party to this Agreement. All parties
hereto agree that the mailing of any processing any suit, action or proceeding
in accordance with the notice provisions of this Agreement shall constitute
personal service thereof.
13. ENTIRE AGREEMENT; WAIVER OF BREACH. This Agreement constitutes the
entire agreement among the parties and supersedes any prior agreement or
understanding among them with respect to the subject matter hereof, and it may
not be modified or amended in any manner other than as provided herein, and no
waiver of any breach or condition of this Agreement shall be deemed to have
occurred unless such waiver is in writing, signed by the party against whom
enforcement is sought, and no waiver shall be claimed to be a waiver of any
subsequent breach or condition of a like or different nature.
14. SEVERABILITY. If any provision of this Agreement shall be held invalid
or unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein.
15. AMENDMENT. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
16. ATTORNEYS' FEES AND COSTS. In the event of any litigation arising
under or relating to this Warrant, the prevailing party in such dispute shall be
entitled to recover its costs and expenses, including reasonable attorney fees,
from the other.
17. RESTRICTIONS ON TRANSFERABILITY; RESTRICTIVE LEGEND. The holder
acknowledges that the shares of Common Stock issuable upon exercise of this
Warrant are subject to restrictions under applicable Federal and state
securities laws. Each certificate representing shares of Common Stock issued
shall, upon the exercise of this Warrant, bear the following legends in addition
to such other restrictive legends as may be required by law:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "ACT"), or any state securities
laws, and no sale or transfer thereof may be effected without an effective
registration statement or an opinion of counsel for the holder, satisfactory to
5
<PAGE>
the Company, that such registration is not required under the Act and any
applicable state securities laws."
Dated: January 19, 1999
GENETIC VECTORS, INC.
By:_________________________________________
Title:______________________________________
AGREED TO AND ACCEPTED:
STERLING TECHNOLOGY PARTNERS, LTD.
By:_________________________________
Its:________________________________
Date:_______________________________
6
<PAGE>
EXHIBIT "A"
-----------
FORM OF EXERCISE
----------------
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _____ shares of
Common Stock of ____________________, herewith makes payment of $__________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to, whose address is:
__________________________________________________
__________________________________________________
__________________________________________________
Dated:___________________.
____________________________________________
Signature
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
Print Name
____________________________________________
Street Address
____________________________________________
City, State and Zip Code
____________________________________________
Person's Social Security Number or Tax
Identification Number
A-1
<PAGE>
EXHIBIT "B"
-----------
FORM OF ASSIGNMENT
------------------
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers
unto ___________________ the right represented by the within Warrant to purchase
shares of Common Stock of ___________________ to which the within Warrant
relates, and appoints ___________________ as its attorney to transfer such right
on the books of _________________ with full power of substitution in the
premises.
Dated:_________________.
____________________________________________
Signature
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
Print Name
____________________________________________
Street Address
____________________________________________
City, State and Zip Code
____________________________________________
Person's Social Security Number or Tax
Identification Number
Signed in the presence of:
__________________________________
B-1
EXHIBIT 10.19
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE UPON ITS
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS, AND NO SALE OR TRANSFER THEREOF MAY
BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
No. W-7
FORM OF
COMMON STOCK PURCHASE WARRANT
-----------------------------
GENETIC VECTORS, INC., a Florida corporation (the "COMPANY"), hereby
certifies that, for value received, STERLING TECHNOLOGY PARTNERS, LTD. (the
"HOLDER"), or its registered permitted assigns, is entitled, subject to the
terms set forth below, to purchase from the Company at any time Twelve Thousand
Five Hundred (12,500) shares of fully paid and non-assessable shares of common
stock, par value $0.001 per share (the "COMMON STOCK"), of the Company at a
purchase price per share of $5.50 (the "PURCHASE PRICE"). The number and
character of such shares of Common Stock are subject to adjustment as provided
herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "COMPANY" shall include Genetic Vectors, Inc., a Florida
corporation, and any corporation which shall succeed or assume the obligations
of the Company hereunder.
(b) The term "COMMON STOCK" includes the Company's Common Stock, par value
$0.001 per share, as authorized on the date hereof and any other securities into
which or for which any of such Common Stock may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
1. EXERCISE OF WARRANT.
1.1. FULL EXERCISE. This Warrant may be exercised in full by the
Holder by surrender of this Warrant, with the form of subscription attached
hereto as Exhibit "A" (the "Subscription Form") duly executed by the Holder, to
the Company at its principal office, accompanied by payment, in cash or by
certified or official bank check or wire transfer payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price.
1.2. PARTIAL EXERCISE. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in Section 1.1
except that the amount payable by the Holder on such partial exercise shall be
the amount obtained by multiplying (a) the number of shares of Common Stock
<PAGE>
designated by the Holder in the Subscription Form by (b) the Purchase Price. On
any such partial exercise the Company will issue and deliver to or upon the
order of the Holder hereof a new Warrant or Warrants of like tenor, in the name
of the Holder hereof or such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, reflecting in the aggregate on the face
or faces thereof for the number of shares of Common Stock for which such Warrant
or Warrants may still be exercised.
2. DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. As soon as practical
after the exercise of this Warrant in full or in part, the Company, at its
expense (including the payment by it of any applicable issue taxes), will cause
to be issued in the name of and delivered to the Holder hereof, as such Holder
(upon payment by the Holder of any applicable transfer taxes and, if requested
by the Company, demonstration by the Holder of compliance with applicable
securities laws) may direct, a certificate or certificates for the number of
fully paid and non-assessable shares of Common Stock to which such Holder shall
be entitled on such exercise, plus, in lieu of any fractional share to which
such Holder would otherwise be entitled, cash equal to such fraction multiplied
by the then-current market value of one full share, together with any other
stock or other securities and property (including cash, where applicable) to
which such Holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
3.1. REORGANIZATION. If the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person or party, or
(c) transfer all or substantially all of its properties or assets to any other
person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, the Holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution as the case may be, shall receive, in lieu of the Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such Holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such Holder had so exercised this Warrant
immediately prior thereto, all subject to further adjustment thereafter as
provided herein.
3.2. CONTINUATION OF TERMS. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided herein.
4. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
2
<PAGE>
the terms of the Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
dilution or other impairment.
5. NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company of a record of the holders of any class
or securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or consolidation or merger of the
Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of stock
of any class or any other securities, or any right or option to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities (other than this issue of Common Stock on exercise of the Warrant),
then and in each such event the Company will mail or cause to be mailed to the
Holder a notice specifying (i) the date on which any such record is to be taken
for the purpose of such dividend distribution or right, and stating the amount
and character of such dividend, distribution or right; (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or wind-up is to take place, and
the time, if any is to be fixed, as of which the holders of record of Common
Stock shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up; and (iii) the amount and character of any stock or other securities,
or rights or options with respect thereto, proposed to be issued or granted, the
date of such proposed issue or grant and the persons or class of persons to whom
such proposed issue or grant is to be offered or made. Such notice shall be
mailed at least twenty (20) days prior to the date specified in such notice on
which any such action is to be taken.
6. CERTAIN DELIVERIES. The Company shall deliver to the Holder copies of
all documents filed by the Company with the Securities and Exchange Commission.
In addition and for so long as any portion of the Note remains unpaid, the
Company shall deliver to the Holder copies of its monthly financial statements.
Such financial statements shall be delivered on or before the thirtieth day of
each month for the immediately preceding month.
7. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. The Company will
at all times reserve and keep available, solely for issuance and delivery on the
exercise of the Warrant, all shares of Common Stock from time to time issuable
on the exercise of the Warrant.
3
<PAGE>
8. EXCHANGE OF WARRANT. On surrender of the Warrant, properly endorsed,
to the Company, the Company at its expense will issue and deliver to or on the
order of the Holder thereof a new Warrant or Warrants of like tenor, in the name
of such Holder or as such Holder (upon payment by such Holder of any applicable
transfer taxes and, if requested by the Company, demonstration by such Holder of
compliance with applicable securities laws) may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common Stock called for
on the face or faces of the Warrant or Warrants so surrendered.
9. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of the Warrant and,
in the case of any such loss, theft or destruction of the Warrant, on delivery
of an indemnity agreement or security reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, on surrender and
cancellation of such warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
10. NEGOTIABILITY. This Warrant is issued upon the following terms, to all
of which each Holder or owner hereof by the taking hereof consents and agrees:
(a) subject to compliance with all applicable securities laws, title
to this Warrant may be transferred by endorsement (by the Holder hereof
executing the Form of Assignment attached hereto as Exhibit "B") and delivery in
the same manner as in the case of a negotiable instrument transferable by
endorsement and delivery;
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a BONA FIDe
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such BONA FIDE
purchaser, and each such BONA FIDE purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
(c) until this Warrant is transferred on the books of the Company, the
Company may treat the registered Holder hereof as the absolute owner hereof for
all purposes, notwithstanding any notice to the contrary.
11. NOTICES. All notices or other communications required or permitted to
be given pursuant to this Agreement shall be in writing and shall be considered
as duly given on (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or (b) five days after mailing if mailed
from within the continental United States by registered or certified mail,
return receipt requested to the party entitled to receive the same, if to the
Company, to Genetic Vectors, Inc., 5201 N.W. 77th Avenue, Suite 100, Miami,
Florida 33166 Attention: Mead M. McCabe, Jr., with a copy to Clayton E. Parker,
Esq., Kirkpatrick & Lockhart LLP, 201 S. Biscayne Boulevard, 20th Floor, Miami,
Florida 33131, and if to the Holder, at the address of such Holder shown on the
books of the Company. Any party may change his or its address by giving notice
to the other party stating his or its new address. Commencing on the 10th day
after the giving of such notice, such newly designed address shall be such
4
<PAGE>
party's address for the purpose of all notices or other communications required
or permitted to be given pursuant to this Agreement.
12. GOVERNING LAW. This Agreement and the rights of the parties hereunder
shall be governed by and construed in accordance with the laws of the State of
Florida, without regard to its conflicts of law principles. All parties hereto
(i) agree that any legal suit, action or proceeding arising out of or relating
to this Agreement shall be instituted only in a federal or state court in
Miami-Dade County, Florida; (ii) waive any objection which they may now or
hereafter have to the laying of the venue of any such suit, action or
proceeding; and (iii) irrevocably submit to the jurisdiction of such federal or
state court in Miami-Dade County, Florida in any such suit, action or
proceeding, but such consent shall not constitute a general appearance or be
available to any other person who is not a party to this Agreement. All parties
hereto agree that the mailing of any processing any suit, action or proceeding
in accordance with the notice provisions of this Agreement shall constitute
personal service thereof.
13. ENTIRE AGREEMENT; WAIVER OF BREACH. This Agreement constitutes the
entire agreement among the parties and supersedes any prior agreement or
understanding among them with respect to the subject matter hereof, and it may
not be modified or amended in any manner other than as provided herein, and no
waiver of any breach or condition of this Agreement shall be deemed to have
occurred unless such waiver is in writing, signed by the party against whom
enforcement is sought, and no waiver shall be claimed to be a waiver of any
subsequent breach or condition of a like or different nature.
14. SEVERABILITY. If any provision of this Agreement shall be held invalid
or unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein.
15. AMENDMENT. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
16. ATTORNEYS' FEES AND COSTS. In the event of any litigation arising
under or relating to this Warrant, the prevailing party in such dispute shall be
entitled to recover its costs and expenses, including reasonable attorney fees,
from the other.
17. RESTRICTIONS ON TRANSFERABILITY; RESTRICTIVE LEGEND. The Holder
acknowledges that the shares of Common Stock issuable upon exercise of this
Warrant are subject to restrictions under applicable Federal and state
securities laws. Each certificate representing shares of Common Stock issued
shall, upon the exercise of this Warrant, bear the following legends in addition
to such other restrictive legends as may be required by law:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "ACT"), or any state securities
laws, and no sale or transfer thereof may be effected without an effective
registration statement or an opinion of counsel for the Holder, satisfactory to
5
<PAGE>
the Company, that such registration is not required under the Act and any
applicable state securities laws."
Dated: March 9, 1999
GENETIC VECTORS, INC.
By:_________________________________________
Title:______________________________________
AGREED TO AND ACCEPTED:
STERLING TECHNOLOGY PARTNERS, LTD.
By:_________________________________
Its:________________________________
Date:_______________________________
6
<PAGE>
EXHIBIT "A"
-----------
FORM OF EXERCISE
----------------
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO:
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _____ shares of
Common Stock of ____________________, herewith makes payment of $__________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to, whose address is:
__________________________________________________
__________________________________________________
__________________________________________________
Dated:___________________.
____________________________________________
Signature
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
Print Name
____________________________________________
Street Address
____________________________________________
City, State and Zip Code
____________________________________________
Person's Social Security Number or Tax
Identification Number
A-1
<PAGE>
EXHIBIT "B"
-----------
FORM OF ASSIGNMENT
------------------
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers
unto ___________________ the right represented by the within Warrant to purchase
shares of Common Stock of ___________________ to which the within Warrant
relates, and appoints ___________________ as its attorney to transfer such right
on the books of _________________ with full power of substitution in the
premises.
Dated:_________________.
____________________________________________
Signature
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
Print Name
____________________________________________
Street Address
____________________________________________
City, State and Zip Code
____________________________________________
Person's Social Security Number or Tax
Identification Number
Signed in the presence of:
________________________________
B-1
EXHIBIT 10.20
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE UPON ITS
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS, AND NO SALE OR TRANSFER THEREOF MAY
BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
No. W-3
FORM OF
COMMON STOCK PURCHASE WARRANT
-----------------------------
GENETIC VECTORS, INC., a Florida corporation (the "COMPANY"), hereby
certifies that, for value received, CAPITAL RESEARCH LTD., a Delaware
corporation (the "HOLDER"), or its registered permitted assigns, is entitled,
subject to the terms set forth below, to purchase from the Company at any time
Fifty Thousand (50,000) shares of fully paid and non-assessable shares of common
stock, par value $0.001 per share (the "COMMON STOCK"), of the Company at a
purchase price per share of $0.01 (the "PURCHASE PRICE"). The number and
character of such shares of Common Stock are subject to adjustment as provided
herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "COMPANY" shall include Genetic Vectors, Inc., a Florida
corporation, and any corporation which shall succeed or assume the obligations
of the Company hereunder.
(b) The term "COMMON STOCK" includes the Company's Common Stock, par value
$0.001 per share, as authorized on the date hereof of the Agreement and any
other securities into which or for which any of such Common Stock may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
1. EXERCISE OF WARRANT.
1.1. FULL EXERCISE. This Warrant may be exercised in full by the
Holder by surrender of this Warrant, with the form of subscription attached
hereto as Exhibit "A" (the "SUBSCRIPTION FORM") duly executed by the Holder, to
the Company at its principal office, accompanied by payment, in cash or by
certified or official bank check or wire transfer payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price.
1.2. PARTIAL EXERCISE. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in Section 1.1
except that the amount payable by the holder on such partial exercise shall be
the amount obtained by multiplying (a) the number of shares of Common Stock
<PAGE>
designated by the holder in the Subscription Form by (b) the Purchase Price. On
any such partial exercise the Company will issue and deliver to or upon the
order of the holder hereof a new Warrant or Warrants of like tenor, in the name
of the holder hereof or such holder (upon payment by such holder of any
applicable transfer taxes) may request, reflecting in the aggregate on the face
or faces thereof for the number of shares of Common Stock for which such Warrant
or Warrants may still be exercised.
2. DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. As soon as practical
after the exercise of this Warrant in full or in part, the Company, at its
expense (including the payment by it of any applicable issue taxes), will cause
to be issued in the name of and delivered to the Holder hereof, as such Holder
(upon payment by the Holder of any applicable transfer taxes and, if requested
by the Company, demonstration by the Holder of compliance with applicable
securities laws) may direct, a certificate or certificates for the number of
fully paid and non-assessable shares of Common Stock to which such Holder shall
be entitled on such exercise, plus, in lieu of any fractional share to which
such Holder would otherwise be entitled, cash equal to such fraction multiplied
by the then-current market value of one full share, together with any other
stock or other securities and property (including cash, where applicable) to
which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
3.1. REORGANIZATION. If the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person or party,
or (c) transfer all or substantially all of its properties or assets to any
other person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, the Holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution as the case may be, shall receive, in lieu of the Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such Holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such Holder had so exercised this Warrant
immediately prior thereto, all subject to further adjustment thereafter as
provided herein.
3.2. CONTINUATION OF TERMS. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided herein.
3.3. ADDITIONAL WARRANTS. Upon the satisfaction of either (a) the
Company's full payment of all of the outstanding obligations under that certain
Promissory Note (the "NOTE") of even date herewith made by the Company and
payable to the Holder or (b) a closing of an offering of securities, whether
2
<PAGE>
through one or more private placements or secondary public offerings, in which
the Company raises gross proceeds from such transaction or transactions of at
least $1,500,000, the Company shall grant to the Holder additional warrants to
purchase from the Company at any time or from time to time before 5:00 p.m.,
Eastern Time, on the fifth anniversary of the grant of such additional warrants
to the Holder, One-Hundred Fifty-Thousand (150,000) shares of fully paid and
non-assessable Common Stock at a purchase price per share of $5.50 (the
"PURCHASE PRICE").
All warrants to be granted pursuant to the immediately preceding sentence shall
be granted pursuant to a new Warrant in the same form as this Warrant, except
that such Warrant shall contain the following provision:
Any provision herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be made in respect
of the issuance of additional shares of Common Stock of
the Company (or upon the conversion or exchange of
securities convertible or exchangeable into shares of
Common Stock) unless after the date hereof (a) the
aggregate consideration to be received by the Company for
the issuance of such additional shares of Common Stock,
whether through one or more private placements or
secondary public offerings (or upon the conversion or
exchange of securities convertible or exchangeable into
shares of Common Stock), is at least $500,000 and (b) the
consideration per share for an additional share of Common
Stock (or the conversion or exchange price with respect to
securities convertible or exchangeable into shares of
Common Stock) to be issued by the Company is less than
$4.00. In such event, the Purchase Price shall be reduced
to a price (calculated to the nearest cent) determined by
multiplying such Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the
number of shares of Common Stock which the aggregate
consideration received by the Company for the total number
of additional shares of Common Stock so issued would
purchase at such Purchase Price in effect immediately
prior to such issuance, and the denominator of which shall
be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of such
additional shares of Common Stock so issued.
5. RIGHT TO ATTEND BOARD MEETINGS. The Holder shall have the right to
have a single representative present (either in person or by telephone) at all
meetings of the Board of Directors of the Company for so long as any portion of
the Note remains unpaid. Such representative shall not be deemed to be a
director and shall have no voting rights.
6. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
3
<PAGE>
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
dilution or other impairment.
7. NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company of a record of the holders of any class
or securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or consolidation or merger of the
Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of stock
of any class or any other securities, or any right or option to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities (other than this issue of Common Stock on exercise of the Warrant),
then and in each such event the Company will mail or cause to be mailed to the
Holder a notice specifying (i) the date on which any such record is to be taken
for the purpose of such dividend distribution or right, and stating the amount
and character of such dividend, distribution or right; (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or wind-up is to take place, and
the time, if any is to be fixed, as of which the holders of record of Common
Stock shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up; and (iii) the amount and character of any stock or other securities,
or rights or options with respect thereto, proposed to be issued or granted, the
date of such proposed issue or grant and the persons or class of persons to whom
such proposed issue or grant is to be offered or made. Such notice shall be
mailed at least twenty (20) days prior to the date specified in such notice on
which any such action is to be taken.
8. CERTAIN DELIVERIES. The Company shall deliver to the Holder copies of
all documents filed by the Company with the Securities and Exchange Commission.
In addition and for so long as any portion of the Note remains unpaid, the
Company shall deliver to the Holder copies of its monthly financial statements.
Such financial statements shall be delivered on or before the thirtieth day of
each month for the immediately preceding month.
9. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. The Company will
at all times reserve and keep available, solely for issuance and delivery on the
exercise of the Warrant, all shares of Common Stock from time to time issuable
on the exercise of the Warrant.
4
<PAGE>
10. EXCHANGE OF WARRANT. On surrender of the Warrant, properly endorsed,
to the Company, the Company at its expense will issue and deliver to or on the
order of the holder thereof a new Warrant or Warrants of like tenor, in the name
of such holder or as such holder (upon payment by such holder of any applicable
transfer taxes and, if requested by the Company, demonstration by such holder of
compliance with applicable securities laws) may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common Stock called for
on the face or faces of the Warrant or Warrants so surrendered.
11. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of the Warrant and,
in the case of any such loss, theft or destruction of the Warrant, on delivery
of an indemnity agreement or security reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, on surrender and
cancellation of such warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
12. NEGOTIABILITY. This Warrant is issued upon the following terms, to all
of which each holder or owner hereof by the taking hereof consents and agrees:
(a) subject to compliance with all applicable securities laws, title
to this Warrant may be transferred by endorsement (by the holder hereof
executing the Form of Assignment attached hereto as Exhibit "B") and delivery in
the same manner as in the case of a negotiable instrument transferable by
endorsement and delivery;
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a BONA FIDE
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such BONA FIDE
purchaser, and each such BONA FIDE purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
(c) until this Warrant is transferred on the books of the Company, the
Company may treat the registered holder hereof as the absolute owner hereof for
all purposes, notwithstanding any notice to the contrary.
13. NOTICES. All notices or other communications required or permitted to
be given pursuant to this Agreement shall be in writing and shall be considered
as duly given on (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or (b) five days after mailing if mailed
from within the continental United States by registered or certified mail,
return receipt requested to the party entitled to receive the same, if to the
Company, to Genetic Vectors, Inc., 5201 N.W. 77th Avenue, Suite 100, Miami,
Florida 33166 Attention: Mead M. McCabe, Jr., with a copy to Clayton E. Parker,
Esq., Kirkpatrick & Lockhart LLP, 201 S. Biscayne Boulevard, 20th Floor, Miami,
Florida 33131, and if to the Holder, at the address of such Holder shown on the
books of the Company. Any party may change his or its address by giving notice
to the other party stating his or its new address. Commencing on the 10th day
after the giving of such notice, such newly designed address shall be such
5
<PAGE>
party's address for the purpose of all notices or other communications required
or permitted to be given pursuant to this Agreement.
14. GOVERNING LAW. This Agreement and the rights of the parties hereunder
shall be governed by and construed in accordance with the laws of the State of
Florida, without regard to its conflicts of law principles. All parties hereto
(i) agree that any legal suit, action or proceeding arising out of or relating
to this Agreement shall be instituted only in a federal or state court in
Miami-Dade County, Florida; (ii) waive any objection which they may now or
hereafter have to the laying of the venue of any such suit, action or
proceeding; and (iii) irrevocably submit to the jurisdiction of such federal or
state court in Miami-Dade County, Florida in any such suit, action or
proceeding, but such consent shall not constitute a general appearance or be
available to any other person who is not a party to this Agreement. All parties
hereto agree that the mailing of any processing any suit, action or proceeding
in accordance with the notice provisions of this Agreement shall constitute
personal service thereof.
15. ENTIRE AGREEMENT; WAIVER OF BREACH. This Agreement constitutes the
entire agreement among the parties and supersedes any prior agreement or
understanding among them with respect to the subject matter hereof, and it may
not be modified or amended in any manner other than as provided herein, and no
waiver of any breach or condition of this Agreement shall be deemed to have
occurred unless such waiver is in writing, signed by the party against whom
enforcement is sought, and no waiver shall be claimed to be a waiver of any
subsequent breach or condition of a like or different nature.
16. SEVERABILITY. If any provision of this Agreement shall be held invalid
or unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein.
17. AMENDMENT. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
18. ATTORNEYS' FEES AND COSTS. In the event of any litigation arising
under or relating to this Warrant, the prevailing party in such dispute shall be
entitled to recover its costs and expenses, including reasonable attorney fees,
from the other.
19. RESTRICTIONS ON TRANSFERABILITY; RESTRICTIVE LEGEND. The holder
acknowledges that the shares of Common Stock issuable upon exercise of this
Warrant are subject to restrictions under applicable Federal and state
securities laws. Each certificate representing shares of Common Stock issued
shall, upon the exercise of this Warrant, bear the following legends in addition
to such other restrictive legends as may be required by law:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "ACT"), or any state securities
laws, and no sale or transfer thereof may be effected without an effective
registration statement or an opinion of counsel for the holder, satisfactory to
6
<PAGE>
the Company, that such registration is not required under the Act and any
applicable state securities laws."
Dated: January 19, 1999
GENETIC VECTORS, INC.
By:_________________________________________
Title:______________________________________
AGREED TO AND ACCEPTED:
CAPITAL RESEARCH LTD.
By:_________________________________
Its:________________________________
Date:_______________________________
7
<PAGE>
EXHIBIT "A"
-----------
FORM OF EXERCISE
----------------
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _____ shares of
Common Stock of ____________________, herewith makes payment of $__________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to, whose address is:
__________________________________________________
__________________________________________________
__________________________________________________
Dated:___________________.
____________________________________________
Signature
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
Print Name
____________________________________________
Street Address
____________________________________________
City, State and Zip Code
____________________________________________
Person's Social Security Number or Tax
Identification Number
A-1
<PAGE>
EXHIBIT "B"
-----------
FORM OF ASSIGNMENT
------------------
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers
unto ___________________ the right represented by the within Warrant to purchase
shares of Common Stock of ___________________ to which the within Warrant
relates, and appoints ___________________ as its attorney to transfer such right
on the books of _________________ with full power of substitution in the
premises.
Dated:_________________.
____________________________________________
Signature
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
Print Name
____________________________________________
Street Address
____________________________________________
City, State and Zip Code
____________________________________________
Person's Social Security Number or Tax
Identification Number
Signed in the presence of:
__________________________________
B-1
EXHIBIT 10.21
FORM OF PROMISSORY NOTE
-----------------------
$163,500.00
January 19, 1999
1. AMOUNT; MATURITY. FOR VALUE RECEIVED, the undersigned, GENETIC VECTORS,
INC., a Florida corporation (the "MAKER"), promises to pay to CAPITAL RESEARCH
LTD., a Delaware corporation partnership (the "HOLDER"), the principal sum of
One Hundred Sixty-Three Thousand Five Hundred Dollars ($163,500.00), which
principal sum shall mature on January 19, 2000 and shall bear simple interest at
the rate set forth herein.
2. INTEREST. Interest shall accrue as of the date of this Note at the
simple interest rate of twelve percent (12%) per annum which rate shall increase
one percent (1%) on the nineteenth (19th) day of each month that any portion of
this Note remains unpaid commencing on January 19, 2000 up to the maximum amount
permitted by law. Interest shall be payable quarterly in arrears, commencing on
April 19, 1999 and each successive interest payment shall be due on the first
day of each successive quarter thereafter.
3. MODE OF PAYMENT. All payments of principal and interest due under this
Note shall be made in legal tender in the United States of America and delivered
to the Holder at or, at the option of the Holder, in such other manner and at
such other place as the Holder shall have designated to the Maker in writing.
4. SECURITY. The Maker's obligations hereunder are secured by a security
interest granted to the Holder pursuant to a Security Agreement of even date
herewith by and between the parties hereto.
<PAGE>
5. PREPAYMENT.
----------
(a) This Note may be voluntarily prepaid, without penalty or premium,
in whole or in part, at any time and from time to time. Any prepayment must
include all accrued interest on the principal being prepaid, through the date of
prepayment.
(b) Notwithstanding anything contained herein to the contrary, this
Note shall be mandatorily prepaid in the event that the Maker closes an offering
of its securities, whether through one or more private placements or secondary
public offerings, in which the Maker raises gross proceeds from such transaction
or transactions of at least $1,500,000.
6. ACCELERATION UPON EVENT OF DEFAULT. This Note may be accelerated at the
option of the Holder, upon the occurrence of any event of default as described
below:
(a) any default, whether in whole or in part, shall occur in the
payment to the Holder of principal, interest or other item comprising the Note
as and when due which shall continue for a period of ten (10) days after the
receipt of written notice thereof by the Maker;
(b) the Maker shall (1) make a general assignment for the benefit of
its creditors, (2) apply for or consent to the appointment of a receiver,
trustee, assignee, custodian sequestrator, liquidator or similar official for
itself or any of its assets and properties, (3) commence a voluntary case for
relief as a debtor under the United States Bankruptcy Code, (4) file with or
otherwise submit to any governmental authority any petition, answer or other
document seeking (A) reorganization, (B) an arrangement with creditors or (C) to
take advantage of any other present or future applicable law respecting
bankruptcy, reorganization, insolvency, readjustment of debts, relief of
debtors, dissolution or liquidation, (5) file or otherwise submit any answer or
other document admitting or failing to contest the material allegations of a
petition or other document filed or otherwise submitted against it in any
proceeding under any such applicable law, or (6) be adjudicated a bankrupt or
2
<PAGE>
insolvent by a court of competent jurisdiction; or
(c) any case, proceeding or other action shall be commenced against the
Maker for the purpose of effecting, or an order, judgment or decree shall be
entered by any court of competent jurisdiction approving (in whole or in part)
anything specified in Section 6(b) hereof, or any receiver, trustee, assignee,
custodian, sequestrator, liquidator or other official shall be appointed with
respect to the Maker, or shall be appointed to take or shall otherwise acquire
possession or control of all or a substantial part of the assets and properties
of the Maker, and any of the foregoing shall continue unstayed and in effect for
any period of 60 days.
7. DELAY IN EXERCISE OF RIGHTS. No delay on the part of the Holder in
exercising any of its options, powers or rights nor any partial or single
exercise of its options, power or rights shall constitute a waiver thereof or of
any other option, power or right, and no waiver on the part of the Holder of any
of its options, powers or rights shall constitute a waiver of any other option,
power or right.
8. WAIVER OF PRESENTMENT; NO OFFSETS. The Maker hereby waives presentment
for payment, dishonor, protest, notice of protest and any demand whatsoever with
respect to this Note and the right to interpose any defense based upon any
statute of limitation or any claim of laches and any set-off or counterclaim of
any nature or description.
9. COLLECTION COSTS; MAXIMUM INTEREST LIMITATIONS.
----------------------------------------------
(a) The Maker agrees to pay all reasonable costs, including all
reasonable attorneys' fees and disbursements incurred by the Holder in
collecting or enforcing payment of this Note in accordance with its terms.
3
<PAGE>
(b) After this Note becomes due, at stated maturity or on acceleration,
any unpaid balance hereof shall thereafter bear interest until paid at a rate of
sixteen percent (16%) simple interest per annum, but such interest rate shall
not exceed at any time the maximum interest rate allowable under applicable
state usury laws.
10. GOVERNING LAW.
-------------
(a) This Note and the rights of the parties hereunder shall be governed
by and construed in accordance with the laws of the State of Florida, without
regard to its conflicts of law principles. All parties hereto (1) agree that any
legal suit, action or proceeding arising out of or relating to this note shall
be instituted only in a Federal or state court in Miami-Dade County, Florida,
(2) waive any objection which they may now or hereafter have to the laying of
the venue of any such suit, action or proceeding, and (3) irrevocably submit to
the jurisdiction of such Federal or state court in Miami-Dade County, Florida in
any such suit, action or proceeding, but such consent shall not constitute a
general appearance or be available to any other person who is not a party to
this Note. All parties hereto agree that the mailing of any process in any suit,
action or proceeding in accordance with the notice provisions of this Note shall
constitute personal service thereof.
(b) THE MAKER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING RELATED IN ANY WAY TO THIS NOTE.
11. NOTICES. All notices or other communications required or permitted to
be given pursuant to this Note shall be in writing and shall be considered as
duly given on (a) the date of delivery, if delivered in person or by nationally
recognized overnight delivery service or (b) five days after mailing if mailed
by registered or certified mail, return receipt requested to the party entitled
to receive the same, if to the Holder, at his or its address on the books and
records of the Maker, and if to the Maker, to Genetic Vectors, Inc., 5201 N.W.
4
<PAGE>
77th Avenue, Suite 100, Miami, Florida 33166, Attention: Mead M. McCabe, Jr.,
with a copy to Kirkpatrick & Lockhart LLP, Miami Center - 20th Floor, 201 South
Biscayne Boulevard, Miami, Florida 33131, Attention: Clayton E. Parker, Esq. Any
party may change its address by giving notice to the other party stating its new
address. Commencing on the tenth day after the giving of such notice, such newly
designated address shall be such party's address for the purpose of all notices
or other communications required or permitted to be given pursuant to this Note.
12. SEVERABILITY. If any provision of this Note shall be held invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Note, and this Note shall be carried out
as if any such invalid or unenforceable provision were not contained herein.
13. AMENDMENT. This Note shall not be amended without the prior written
consent of the Holder and the Maker.
GENETIC VECTORS, INC.
By: ____________________________________
Its: ____________________________________
5
EXHIBIT 10.22
FORM OF PLEDGE AND SECURITY AGREEMENT
-------------------------------------
THIS PLEDGE AND SECURITY AGREEMENT, dated as of January 19, 1999, by and
between GENETIC VECTORS, INC., a Florida corporation ("PLEDGOR"), and CAPITAL
RESEARCH LTD., a Delaware corporation (the "PLEDGEE").
WHEREAS, Pledgee is the holder of a Promissory Note (the "NOTE") of even
date herewith made by Pledgor in the original principal amount of $163,500;
WHEREAS, Pledgee desires to obtain a security interest in certain property
owned by Pledgor; and
WHEREAS, as an inducement to Pledgee's purchase of the Note, Pledgor has
agreed to grant to Pledgee a security interest in and to the Pledged Collateral
(as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and for other good and valuable consideration, the adequacy
and receipt for which are hereby acknowledged, the parties hereto hereby agree
as follows:
ARTICLE 1.
DEFINITIONS AND INTERPRETATIONS
-------------------------------
Section 1.1. INTERPRETATIONS.
---------------
Nothing herein expressed or implied is intended or shall be construed to
confer upon any person other than Pledgee any right, remedy or claim under or by
reason hereof. All covenants, stipulations and agreements herein contained by or
on behalf of Pledgee shall be for the sole and exclusive benefit of Pledgee.
<PAGE>
Section 1.2. OBLIGATIONS SECURED.
-------------------
The obligations secured hereby are the obligations of Pledgor to Pledgee
under the Note sold by Pledgor to Pledgee, in the maximum principal amount
thereof outstanding from time to time, and any additional amounts payable by or
chargeable to Pledgor thereunder or hereunder (collectively, the "OBLIGATIONS").
ARTICLE 2.
PLEDGE AND ADMINISTRATION OF PLEDGED COLLATERAL
-----------------------------------------------
Section 2.1. PLEDGED COLLATERAL.
------------------
(a) Pledgor hereby pledges to Pledgee, and creates in Pledgee
for its benefit, a security interest, for such time as the Obligations shall
remain outstanding, in and to all of Pledgor's right, title and interest in and
to:
(i) the property (the "PLEDGED PROPERTY") listed on EXHIBIT
1 attached hereto (and signed by Pledgor), including, without limitation, any
securities described therein (which securities are collectively referred to as
the "PLEDGED SECURITIES"), now owned by Pledgor, and all machinery, equipment,
automobiles, accounts receivable, inventory and general intangibles, patents,
patent applications, licenses and all other intellectual property rights owned
by or acquired by Borrower on or after the date of this Agreement; and
(ii) all products and proceeds from the Pledged Property.
The property pledged in Section 2.1(a)(i) hereof, the Pledged Securities and the
products thereof and the proceeds of all such items are hereinafter collectively
referred to as the "Pledged Collateral." The security interest granted by
Pledgor to Pledgee in and to the Pledged Collateral shall be free and clear of
all security interests and restrictions on transfer of any kind except as
provided in this Agreement or as may be imposed by applicable law.
2
<PAGE>
(b) Simultaneously with the execution and delivery of this
Agreement, Pledgor shall make, execute, acknowledge, file, record and deliver to
Pledgee any documents reasonably requested by Pledgee to perfect its
first-in-priority security interest in the Pledged Collateral. Simultaneously
with the execution and delivery of this Agreement, Pledgor shall make, execute,
acknowledge, file, record and deliver to Pledgee such documents and instruments,
including, without limitation, financial statements, certificates, affidavits
and forms as may, in Pledgee's reasonable judgment, be necessary to effectuate,
complete or perfect, or to continue and preserve, the first-in-priority security
interest of Pledgee in the Pledged Collateral, and Pledgee shall hold such
documents and instruments as secured party, subject to the terms and conditions
contained herein.
Section 2.2. RIGHTS; INTERESTS; ETC.
-----------------------
(a) So long as no Event of Default (as hereinafter defined)
shall have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all rights
pertaining to the Pledged Collateral or any part thereof for any purpose not
inconsistent with the terms hereof; and
(ii) Pledgor shall be entitled to receive and retain any and
all payments paid or made in respect of the Pledged Collateral.
(b) Upon the occurrence and during the continuance of an
Event in Default:
(i) Subject to Section 2.2(b)(iii) hereof, all rights of
Pledgor to exercise the rights which it would otherwise be entitled to exercise
pursuant to Section 2.2(a)(i) hereof and to receive payments which it would
otherwise be authorized to receive and retain pursuant to Section 2.2(a)(ii)
hereof shall be suspended, and all such rights shall thereupon become vested in
3
<PAGE>
Pledgee who shall thereupon have the sole right to exercise such rights and to
receive and hold as Pledged Collateral such payments; provided, however, that if
Pledgee shall become entitled and shall elect to exercise its right to realize
on the Pledged Collateral pursuant to Article V hereof, then all cash sums
received by Pledgee, or held by Pledgor for the benefit of Pledgee and paid over
pursuant to Section 2.2(b)(ii) hereof, shall be applied against any outstanding
Obligations.
(ii) All interest, dividends, income and other payments and
distributions which are received by Pledgor contrary to the provisions of
Section 2.3(b)(i) hereof shall be received in trust for the benefit of Pledgee,
shall be segregated from other property of Pledgor and shall be forthwith paid
over to Pledgee;
(iii) notwithstanding anything contained hereto to the
contrary, Pledgor shall retain any voting rights it may have with respect to any
of the Pledged Securities until such time as Pledgee is entitled and elects to
exercise its rights to realize on the Pledged Securities pursuant to Article V
hereof.
(c) Each of the following events shall constitute a default
under this Agreement (each an "EVENT OF DEFAULT"):
(i) any default, whether in whole or in part, shall occur in
the payment to Pledgee of principal, interest or other item comprising the
Obligations as and when due, which default shall continue for a period of thirty
(30) days after the receipt of written notice thereof by Pledgor;
(ii) any default, whether in whole or in part, shall occur
in the due observance or performance of any other covenant, term or provision to
be performed under this Agreement by Pledgor, or the Note, and all exhibits
thereto which default is not described in any other subsection of this Section,
4
<PAGE>
and such default shall continue for a period of thirty (30) days after the
receipt of written notice thereof by Pledgor; provided, however, that if Pledgor
shall have commenced to cure such default within such thirty-day period and
shall proceed continuously in good faith and with due diligence to cure such
default, then such period instead shall be sixty (60) days;
(iii) Pledgor shall: (1) make a general assignment for the
benefit of its creditors; (2) apply for or consent to the appointment of a
receiver, trustee, assignee, custodian, sequestrator, liquidator or similar
official for itself or any of its assets and properties; (3) commence a
voluntary case for relief as a debtor under the United States Bankruptcy Code;
(4) file with or otherwise submit to any governmental authority any petition,
answer or other document seeking: (A) reorganization, (B) an arrangement with
creditors or (C) to take advantage of any other present or future applicable law
respecting bankruptcy, reorganization, insolvency, readjustment of debts, relief
of debtors, dissolution or liquidation; (5) file or otherwise submit any answer
or other document admitting or failing to contest the material allegations of a
petition or other document filed or otherwise submitted against it in any
proceeding under any such applicable law, or (6) be adjudicated a bankrupt or
insolvent by a court of competent jurisdiction; or
(iv) any case, proceeding or other action shall be commenced
against Pledgor for the purpose of effecting, or an order, judgment or decree
shall be entered by any court of competent jurisdiction approving (in whole or
in part) anything specified in Section 2.2(c)(iii) hereof, or any receiver,
trustee, assignee, custodian, sequestrator, liquidator or other official shall
be appointed with respect to Pledgor, or shall be appointed to take or shall
otherwise acquire possession or control of all or a substantial part of the
assets and properties of Pledgor, and any of the foregoing shall continue
5
<PAGE>
unstayed and in effect for any period of sixty (60) days.
ARTICLE 3.
ATTORNEY-IN-FACT; PERFORMANCE
-----------------------------
Section 3.1. PLEDGEE APPOINTED ATTORNEY-IN-FACT.
----------------------------------
Upon the occurrence of an Event of Default and only as long as such Event
of Default shall be continuing, Pledgor hereby appoints Pledgee as Pledgor's
attorney-in-fact, with full authority in the place and stead of Pledgor and in
the name of Pledgor or otherwise, from time to time in Pledgee's discretion to
take any action and to execute any instrument which Pledgee may reasonably deem
necessary to accomplish the purposes of this Agreement, including, without
limitation, to receive and collect all instruments made payable to Pledgor
representing any payments in respect of the Pledged Collateral or any part
thereof and to give full discharge for the same. Pledgee may demand, collect,
receipt for, settle, compromise, adjust, sue for, foreclose, or realize on the
Pledged Collateral as and when Pledgee may determine. To facilitate collection,
Pledgee may notify account debtors and obligors on any Pledged Collateral to
make payments directly to Pledgee.
Section 3.2. PLEDGEE MAY PERFORM.
-------------------
If Pledgor fails to perform any agreement contained herein, Pledgee, at
its option, may itself perform, or cause performance of, such agreement, and the
reasonable expenses of Pledgee incurred in connection therewith shall be payable
by Pledgor under Section 8.3.
6
<PAGE>
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 4.1. AUTHORIZATION; ENFORCEABILITY.
-----------------------------
Each of the parties hereto represents and warrants that it has taken all
action necessary to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby; and upon execution and
delivery, this Agreement shall constitute a valid and binding obligation of the
respective party, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights or by the principles
governing the availability of equitable remedies.
Section 4.2. OWNERSHIP OF PLEDGED COLLATERAL.
-------------------------------
Pledgor warrants and represents that Pledgor is the legal and beneficial
owner of the Pledged Collateral free and clear of any lien, security interest,
option or other charge or encumbrance except for the security interest created
by this Agreement or as may be imposed by applicable law.
Section 4.3. DUE ORGANIZATION.
----------------
Pledgor warrants and represents that it: (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida; (ii) has the corporate power and authority necessary to entitle it to
use its corporate name and to own, lease or otherwise hold its properties and
assets and to carry on its business as presently conducted or proposed to be
conducted; and (iii) is duly qualified and in good standing to do business as
presently conducted or proposed to be conducted.
7
<PAGE>
ARTICLE 5.
DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL
----------------------------------------
Section 5.1. DEFAULT AND REMEDIES.
--------------------
(a) If an Event of Default described in Section 2.2(c)(i) and
(ii) occurs and is continuing for the period set forth therein, then in each
such case the Holder may declare the principal amount to be due and payable
immediately, by a notice in writing to the Company, and upon any such
declaration, such principal amount shall become immediately due and payable. If
an Event of Default described in Sections 2.2(c)(iii) or (iv) occurs and is
continuing for the period set forth therein, then the principal amount of the
Note shall automatically become immediately due and payable without declaration
or other act on the part of any Holder.
(b) Upon the occurrence of an Event of Default, the Holder shall
be entitled to receive all distributions with respect to the Pledged Collateral,
to cause the Pledged Collateral to be transferred into the name of Pledgee or
its nominee, to dispose of the Pledged Collateral, and to realize upon any and
all rights in the Pledged Collateral then held by Pledgee.
Section 5.2. METHOD OF REALIZING UPON THE PLEDGED COLLATERAL: OTHER
-------------------------------------------------------
REMEDIES.
--------
Upon the occurrence of an Event of Default, in addition to any rights and
remedies available at law or in equity, the following provisions shall govern
Pledgee's right to realize upon the Pledged Collateral;
(a) Any item of the Pledged Collateral may be sold for cash or
other value in any number of lots at brokers board, public auction or private
sale and may be sold without demand, advertisement or notice (except that
Pledgee shall give Pledgor thirty (30) business days' prior written notice of
the time and place or of the time after which a private sale may be made (the
"SALE NOTICE")), which notice shall in any event be commercially reasonable. At
any sale or sales of the Pledged Collateral, Pledgor may bid for and purchase
8
<PAGE>
the whole or any part of the Pledged Collateral and, upon compliance with the
terms of such sale, may hold, exploit and dispose of the same without further
accountability to Pledgee. Pledgor will execute and deliver, or cause to be
executed and delivered, such instruments, documents, assignments, waivers,
certificates, and affidavits and supply or cause to be supplied such further
information and take such further action as Pledgee reasonably shall require in
connection with any such sale.
(b) Any cash being held by Pledgee as Pledged Collateral and all
cash proceeds received by Pledgee in respect of, sale of, collection from, or
other realization upon all or any part of the Pledged Collateral shall be
applied as follows:
(i) to the payment of all amounts due the Holder for the
expenses reimbursable to it or them hereunder or owed to it pursuant to Section
8.3 hereof;
(ii) to the payment of the amounts then due and unpaid for
principal of and interest on the Note.
(iii) the balance, if any, to the person or persons
entitled thereto, including, without limitation, Pledgor.
(c) In addition to all of the rights and remedies which Pledgor
and Pledgee may have pursuant to this Agreement, Pledgor and Pledgee shall have
all of the rights and remedies provided by law, including, without limitation,
those under the Uniform Commercial Code.
(d) (i) If Pledgor fails to pay such amounts due upon the
occurrence of an Event of Default which is continuing, then the Holder may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
9
<PAGE>
enforce the same against Pledgor and collect the monies adjudged or decreed to
be payable in the manner provided by law out of the property of Pledgor,
wherever situated.
(ii) Pledgor agrees that it shall be liable for any
reasonable expenses incurred by the Holder in connection with enforcement,
collection and preservation of the Note, including, without limitation, legal
fees and expenses, and such amounts shall be deemed included under Section 8.3
hereof.
Section 5.3. PROOFS OF CLAIM.
---------------
(a) In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relating to Pledgor or the property of Pledgor or of
such other obligor or their creditors, the Holder (irrespective of whether the
principal of the Note shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Holder shall have made
any demand on Pledgor for the payment of overdue principal, if any, or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise:
(i) to file and prove a claim for the whole amount of
principal of the Note and interest owing and unpaid in respect of the Note and
to file such other papers or documents as may be necessary or advisable in order
to have the claims of the Holder (including any claim for the legal fees and
expenses and other expenses paid or incurred by the Holder permitted hereunder
and of the Holder allowed in such judicial proceeding), and
(ii) to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Holder and, in the event that the Holder
10
<PAGE>
shall consent to the making of such payments directed to the Holder, to pay to
the Holder any amounts for expenses due it hereunder.
(b) Nothing herein contained shall be deemed to authorize the
Holder to authorize, consent to or accept or adopt on behalf of any Holder any
plan of reorganization, arrangement, adjustment or composition affecting the
rights of any Holder thereof or to authorize the Holder to vote in respect of
the claim of any Holder in any such proceeding.
Section 5.4. DUTIES REGARDING PLEDGED COLLATERAL.
-------------------------------------
Pledgee shall have no duty as to the collection or protection of the
Pledged Collateral or any income thereon or as to the preservation of any rights
pertaining thereto, beyond the safe custody and reasonable care of any of the
Pledged Collateral actually in Pledgee's possession.
ARTICLE 6.
AFFIRMATIVE COVENANTS
---------------------
Pledgor covenants and agrees that, from the date hereof and until the
Obligations have been fully paid and satisfied, unless Pledgee shall consent
otherwise in writing (as provided in Section 8.4 hereof):
Section 6.1. EXISTENCE, PROPERTIES, ETC.
---------------------------
(a) Pledgor shall do, or cause to be done, all things, or proceed
with due diligence with any actions or courses of action, that may be reasonably
necessary (i) to maintain its due organization, valid existence and good
standing under the laws of its state of incorporation, and (ii) to preserve and
keep in full force and effect all qualifications, licenses and registrations in
those jurisdictions in which the failure to do so could have a Material Adverse
Effect (as defined in this Section 6.1(a)); and (b) Pledgor shall not do, or
cause to be done, any act impairing its corporate power or authority (i) to
carry on its business as now conducted, and (ii) to execute or deliver this
11
<PAGE>
Agreement or any other document delivered in connection herewith (which other
loan instruments collectively shall be referred to the "LOAN INSTRUMENTS") to
which it is or will be a party, or perform any of its obligations hereunder or
thereunder. For purpose of this Agreement, the term "MATERIAL ADVERSE EFFECT"
shall mean any material and adverse affect, whether individually or in the
aggregate, upon (a) Pledgor's assets, business, operations, properties or
condition, financial or otherwise; (b) the ability of Pledgor to make payment as
and when due of all or any part of the Obligations; or (c) the Pledged
Collateral.
Section 6.2. ACCOUNTS AND REPORTS.
--------------------
Pledgor shall maintain a standard system of accounting in accordance with
generally accepted accounting principles consistently applied and provide, at
its sole expense, to Pledgee the following:
(a) as soon as available, a copy of any notice or other
communication alleging any nonpayment or other material breach or default, or
any foreclosure or other action respecting any material portion of its assets
and properties, received respecting any of the indebtedness of Pledgor in excess
of $15,000 (other than the Obligations), or any demand or other request for
payment under any guaranty, assumption, purchase agreement or similar agreement
or arrangement respecting the indebtedness or obligations of others in excess of
$15,000, including any received from any person acting on behalf of the Holder
or beneficiary thereof; and
(b) within five (5) business days after the making of each
submission or filing, a copy of any report, registration statement, proxy
statement, financial statement, notice or other document, whether periodic or
otherwise, submitted to the shareholders of Pledgor, or submitted to or filed by
Pledgor with any governmental authority involving or affecting (i) any
registration of Pledgor or its securities; (ii) Pledgor that could have a
Material Adverse Effect; (iii) the Obligations; (iv) any part of the Pledged
12
<PAGE>
Collateral or (v) any of the transactions contemplated in this Agreement or the
Loan Instruments, including, without limitation, those submitted or filed
pursuant to the Securities Act of 1933, as amended, and the Securities Exchange
Act of 1934, as amended.
Section 6.3. MAINTENANCE AND INSURANCE.
---------------------------
(a) Pledgor shall maintain or cause to be maintained, at its own
expense, all of its assets and properties in good working order and condition,
making all necessary repairs thereto and renewals and replacements thereof.
(b) Pledgor shall maintain or cause to be maintained, at its own
expense, insurance in form, substance and amounts (including deductibles), which
Pledgor deems reasonably necessary to Pledgor's business, (i) adequate to insure
all assets and properties of Pledgor, which assets and properties are of a
character usually insured by persons engaged in the same or similar business
against loss or damage resulting from fire, flood, hurricanes or other risks
included in an extended coverage policy; (ii) against public liability and other
tort claims that may be incurred by Pledgor; (iii) as may be required by the
Loan Instruments or applicable law and (iv) as may be reasonably requested by
Pledgee, all with adequate, financially sound and reputable insurers, and all
naming Pledgee as an additional insured and loss payee under a standard
mortgagee's endorsement as Pledgee's interest may appear.
Section 6.4. CONTRACTS AND OTHER COLLATERAL.
-------------------------------
Pledgor shall perform all of its obligations under or with respect to each
instrument, receivable, contract and other intangible included in the Pledged
Collateral to which Pledgor is now or hereafter will be party on a timely basis
and in the manner therein required, including, without limitation, this
Agreement; and Pledgor shall endorse all of its rights under all such
13
<PAGE>
instruments, agreements and other receivable on a timely basis to the full
extent permitted by applicable law.
Section 6.5. DEFENSE OF COLLATERAL, ETC.
-----------------------------
Pledgor shall defend and enforce its right, title and interest in and to
any part of: (a) the Pledged Collateral; and (b) if not included within the
Pledged Collateral, those assets and properties whose loss could have a Material
Adverse Effect, Pledgor shall defend Pledgee's right, title and interest in and
to each and every part of the Pledged Collateral, each against all manner of
claims and demands on a timely basis to the full extent permitted by applicable
law.
Section 6.6. PAYMENT OF DEBTS, TAXES, ETC.
-------------------------------
Pledgor shall pay, or cause to be paid, all of its indebtedness and other
liabilities and perform, or cause to be performed, all of its obligations in
accordance with the respective terms thereof, and pay and discharge, or cause to
be paid or discharged, all taxes, assessments and other governmental charges and
levies imposed upon it, upon any of its assets and properties on or before the
last day on which the same may be paid without penalty, as well as pay all other
lawful claims (whether for services, labor, materials, supplies or otherwise) as
and when due; provided, however, that it shall not constitute a breach of this
paragraph if Pledgor fails to perform any such obligation or to pay any such
indebtedness or other liability (except for the Obligations), tax, assessment,
or governmental or other charge, levy or claim (i) if the effect of such failure
to pay or perform will not (A) accelerate the maturity thereof, or of any other
debt or obligation of Pledgor, or (B) subject any part of the assets and
properties of Pledgor to sale or forfeiture.
14
<PAGE>
ARTICLE 7.
NEGATIVE COVENANTS
------------------
Pledgor covenants and agrees that, from the date hereof until the
Obligations have been fully paid and satisfied, unless Pledgee shall consent
otherwise in writing:
Section 7.1. INDEBTEDNESS.
------------
Pledgor shall not directly or indirectly permit, create, incur, assume,
permit to exist, increase, renew or extend on or after the date hereof any
indebtedness on its part, including commitments, contingencies and credit
availabilities, or apply for or offer or agree to do any of the foregoing,
except that Pledgor may incur or permit to exist: (a) indebtedness owed to
Pledgee; (b) indebtedness incurred in the ordinary course of business,
including, without limitation, to suppliers, distributors, carriers,
materialmen, laborers, counsel, accountants, advisors, sellers or lessors of
machinery and equipment and real estate acquired or leased in connection with
Pledgor's business in an amount not to exceed $250,000 at any time; and (c)
other indebtedness expressly subordinated to the obligations by such creditor.
Section 7.2. LIENS AND ENCUMBRANCES.
----------------------
Pledgor shall not directly or indirectly make, create, incur, assume or
permit to exist any assignment, pledge, mortgage, security interest or other
lien or encumbrance of any nature in, to or against any part of the Pledged
Collateral, or offer or agree to do so, or own or acquire or agree to acquire
any asset or property of any character subject to any of the foregoing
encumbrances (including any conditional sale contract or other title retention
agreement), or assign, pledge or in any way transfer or encumber its right to
receive any income or other distribution or proceeds from any part of the
Pledged Collateral, or enter into any sale-leaseback financing respecting any
part of the Pledged Collateral as lessee, or cause or assist the inception or
continuation of any of the foregoing; provided, however, that the foregoing
15
<PAGE>
restrictions shall not prohibit (to the extent otherwise not prohibited by this
Agreement):
(a) liens for taxes, assessments, governmental charges, levies or
claims described in Section 6.7, if payment thereof shall not then be required
to be made by this Section 7.2;
(b) liens of carriers, warehousemen, mechanics, laborers and
materialmen incurred in the ordinary course of business, so long as there shall
have been set aside on the books of Pledgor such reserve, if any, as shall be
required by generally accepted accounting principles;
(c) liens incurred in the ordinary course of business in
connection with workers' compensation, unemployment insurance, statutory
obligation or social security legislation, or for any purpose at the time
required by law as a condition precedent to the transaction of business or the
exercise of any of the privileges or licenses of Pledgor;
(d) liens incurred in respect of attachments discharged within
thirty (30) days from the making thereof or judgments or awards in force for
less than thirty (30) days or with respect to which Pledgor in good faith shall
be prosecuting an appeal or proceeding for review and with respect to which a
stay of execution upon appeal or proceeding for review shall have been secured
if required;
(e) the security interests and other liens and encumbrances
granted from time to time to Pledgee;
(f) with respect to indebtedness permitted under Section 7.1,
liens incurred in respect of any financing of Pledgor's inventory, accounts
receivable, machinery, equipment and automobiles with a bank or other financial
institution, provided that the loan instruments evidencing such financing
16
<PAGE>
expressly provide that any lien arising from such financing is subordinate to
the first security interest hereunder and, in the event of a default thereunder,
no collection of the principal, interest and other charges and expenses
thereunder will be made until the full payment of the Obligations, or otherwise
as may be acceptable to the Holder;
(g) liens incurred in respect of indebtedness on the Pledged
Collateral which are subordinated to the Obligations by such creditor(s)
executing the Subordination Agreement; and which are subordinated to the
Obligations, or otherwise as may be acceptable to Pledgee in its sole discretion
and as to which it consents in writing; and
(h) with respect to indebtedness permitted under Section 7.1 and
subject to the limitations set forth in Section 7.1, liens incurred in respect
of indebtedness on machinery, equipment and automobiles purchased or leased by
Pledgor after the date of the execution and delivery of this Agreement by
Pledgor.
ARTICLE 8.
MISCELLANEOUS
-------------
Section 8.1. NOTICES.
-------
All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered as duly
given on: (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or (b) three (3) days after mailing if
mailed from within the continental United States by registered or certified
mail, return receipt requested to the party entitled to receive the same, if to
Pledgor, Genetic Vectors, Inc., 5201 N.W. 77th Avenue, Suite 100, Miami, Florida
33166, Attention: Mead M. McCabe, Jr., with a copy to Clayton E. Parker, Esq.,
Kirkpatrick & Lockhart LLP, 201 S. Biscayne Boulevard, 20th Floor, Miami,
Florida 33131 and if to Pledgee, at the addresses shown on the books of Pledgor.
17
<PAGE>
Any party may change its address by giving notice to the other party stating its
new address. Commencing on the 10th day after the giving of such notice, such
newly designated address shall be such party's address for the purpose of all
notices or other communications required or permitted to be given pursuant to
this Agreement.
Section 8.2. SEVERABILITY.
------------
If any provision of this Agreement shall be held invalid or unenforceable,
such invalidity or unenforceability shall attach only to such provision and
shall not in any manner affect or render invalid or unenforceable any other
severable provision of this Agreement, and this Agreement shall be carried out
as if any such invalid or unenforceable provision were not contained herein.
Section 8.3. EXPENSES.
--------
In the event of an Event of Default, Pledgor will pay to Pledgee the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel, which Pledgee or the Holder may incur in connection
with: (i) the custody or preservation of, or the sale, collection from, or other
realization upon, any of the Pledged Collateral; (ii) the exercise or
enforcement of any of the rights of Pledgee hereunder or (iii) the failure by
Pledgor to perform or observe any of the provisions hereof.
Section 8.4. WAIVERS, AMENDMENTS, ETC.
--------------------------
Pledgee's delay or failure at any time or times hereafter to require
strict performance by Pledgor of any undertakings, agreements or covenants shall
not waiver, affect, or diminish any right of Pledgee under this Agreement to
demand strict compliance and performance herewith. Any waiver by Pledgee of any
Event of Default shall not waive or affect any other Event of Default, whether
such Event of Default is prior or subsequent thereto and whether of the same or
18
<PAGE>
a different type. None of the undertakings, agreements and covenants of Pledgor
contained in this Agreement, and no Event of Default, shall be deemed to have
been waived by Pledgee, nor may this Agreement be amended, changed or modified,
unless such waiver, amendment, change or modification is evidenced by an
instrument in writing specifying such waiver, amendment, change or modification
and signed by the Holder.
Section 8.5. CONTINUING SECURITY INTEREST.
----------------------------
This Agreement shall create a continuing security interest in the Pledged
Collateral and shall: (i) remain in full force and effect until payment in full
of the obligations or the conversion of all of the Note as provided therein; and
(ii) be binding upon Pledgor and its successors and (iii) inure to the benefit
of Pledgee and its successors and permitted assigns. Upon the payment or
satisfaction in full of the Obligations, or such conversion of the Note, Pledgor
shall be entitled to the return, at its expense, of such of the Pledged
Collateral as shall not have been sold, returned in accordance with Section 5.2
hereof or otherwise applied pursuant to the terms hereof.
Section 8.6. APPLICABLE LAW: JURISDICTION.
----------------------------
This Agreement and the rights of the parties hereunder shall be governed
by and construed in accordance with the laws of the State of Florida, without
regard to its conflicts of law principles. Pledgee and Pledgor hereto: (i) agree
that any legal suit, action or proceeding arising out of or relating to this
Agreement shall be instituted only in a federal or state court in Miami-Dade
County, Florida; (ii) waive any objection which they may now or hereafter have
to the laying of the venue of any such suit, action or proceeding; and (iii)
irrevocably submit to the jurisdiction of any federal or state court in
Miami-Dade County, Florida, in any such suit, action or proceeding, but such
consent shall not constitute a general appearance or be available to any other
person who is not a party to this Agreement. Pledgee and Pledgor hereto agree
that the mailing of any process in any suit, action or proceeding in accordance
19
<PAGE>
with the notice provisions of this Agreement shall constitute personal service
thereof.
Section 8.7. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement among the parties and
supersedes any prior agreement or understanding among them with respect to the
subject matter hereof.
Section 8.8. NUMBER AND GENDER.
-----------------
Wherever from the context it appears appropriate, each term stated in
either the singular or the plural shall include the singular and the plural, and
pronouns stated in either the masculine, the feminine or the neuter gender shall
include the masculine, feminine and neuter.
Section 8.9. COUNTERPARTS.
------------
This Agreement may be executed in counterparts, both of which shall be
deemed an original but both of which shall constitute one and the same
instrument. In addition, this Agreement may contain more than one counterpart of
the signature page and this Agreement may be executed by the affixing of such
signature pages executed by the parties to one copy of the Agreement; all of
such counterpart signature pages shall be read as though one, and they shall
have the same force and effect as though all of the signers had signed a single
signature page.
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
GENETIC VECTORS, INC.
By:_________________________________________
Title:______________________________________
CAPITAL RESEARCH LTD.
By:_________________________________________
Title:______________________________________
21
EXHIBIT 10.23
FORM OF REGISTRATION RIGHTS AGREEMENT
-------------------------------------
THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT"), dated as of January
19, 1999, by and between GENETIC VECTORS, INC., a Florida corporation (the
"COMPANY"), and Capital Research Ltd., a Delaware corporation ("CAPITAL
RESEARCH").
The parties hereto, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
hereby agree as follows:
1. DEFINITIONS. The following terms have the following meanings:
(a) "ACT" means the U.S. Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
(b) "COMMISSION" means the Securities and Exchange Commission.
(c) "COMMON STOCK" means the Common Stock, par value $0.001 per share,
of the Company.
(d) "REGISTRABLE SECURITIES" means any Warrant Shares (as defined
herein) held by Capital Research.
(e) "REGISTRATION," "REGISTER" and like words mean compliance with all
of the laws, rules and regulations (federal, state and local), and provisions of
agreements and corporate documents pertaining to the public offering of
securities, including registration of any public offering of securities on any
form under the Act.
(f) "WARRANT SHARES" means any shares of Common Stock of the Company
received by Capital Research in connection with the exercise of the Common Stock
Purchase Warrant No. W-3 (the "WARRANT") of even date herewith given by the
Company to Capital Research or any new warrant given to Capital Research
pursuant to the terms of such warrant.
2. DEMAND REGISTRATION.
(a) At any time following the exercise of the Warrant and prior to the
Registration of all of the Warrant Shares, and subject to the other provisions
of this Agreement, Capital Research shall have the right, exercisable by making
a written request (the "REGISTRATION REQUEST") to the Company, to demand that
the Company effect the Registration of any Registrable Securities in accordance
with the provisions of the Act. Upon receipt of the Registration Request, the
Company shall be obligated to register each of the Registrable Securities
beneficially owned by Capital Research in the manner set forth in Section 2(b)
hereof. Any provision herein to the contrary notwithstanding, the right to
demand Registration pursuant to this Section 2 shall be limited to one (1)
Registration demand. A right to demand Registration hereunder shall be deemed to
have been exercised and all of the Company's demand Registration obligations
hereunder shall be deemed to be fully satisfied when the registration statement
filed on account of such exercise has been declared effective by the Commission.
(b) Following receipt of the Registration Request pursuant to Section
2(a) hereof, the Company shall (i) file within ninety (90) days thereafter a
registration statement on the appropriate form under the Act for the shares of
<PAGE>
Common Stock that the Company has been requested to Register; (ii) if the
applicable Offering is pursuant to an underwriting agreement, enter into an
underwriting agreement in such form as said managing or sole underwriter shall
require (which must only contain terms and conditions customary for offerings of
equity securities of entities with market capitalizations that are approximately
equal to the Company's then current market capitalization and may contain
customary provisions requiring the Company and Capital Research to indemnify and
provide contribution to the underwriter or underwriters of such Offering); and
(iii) use its reasonable best efforts to have such registration statement
declared effective as promptly as practicable and to remain effective for at
least One Hundred and Twenty (120) days. Notwithstanding any other provision
hereof, Capital Research acknowledges and agrees that there can be no guarantee
or warranty from or by the Company that any such registration statement will
ever be declared effective by the Commission, and that the Company makes no such
guarantee or warranty in this Agreement or otherwise.
3. PIGGYBACK REGISTRATION. At any time following the exercise of the
Warrant and prior to the Registration of all of the Warrant Shares, and subject
to the other provisions of this Agreement, the Company shall advise Capital
Research by written notice at least thirty (30) days prior to the filing of any
registration statement under the Act by the Company (other than a registration
statement on Form S-4, Form S-8 or subsequent similar forms), and will upon the
provision of written notice from Capital Research as described below include in
any such registration statement such information as may be required to permit a
public offering of the Registrable Securities desired to be registered by
Capital Research; PROVIDED, HOWEVER, that if the sole underwriter or managing
underwriters advise the Company that the inclusion in the offering of securities
proposed to be sold by Capital Research would adversely affect the ability of
the Company to complete the public offering, then the Company shall have no
obligation to register any shares held by Capital Research in connection with
this registration statement. If Capital Research desires to have its Registrable
Securities included in such registration statement, it must so advise the
Company in writing within fifteen (15) days after the date of receipt of the
Company's notice of registration, setting forth the amount of Registrable
Securities for which registration is requested. Notwithstanding any other
provision hereof, Capital Research acknowledges and agree that there can be no
guaranty or warranty from or by the Company that such registration statement
will ever be declared effective by the Commission, and that the Company makes no
such guarantee or warranty in this Agreement or otherwise.
4. INFORMATION TO BE FURNISHED BY CAPITAL RESEARCH. Capital Research
shall furnish to the Company in writing all information within its possession
or knowledge required by the applicable rules and regulations of the Commission
and by any applicable state securities or blue sky laws concerning Capital
Research, the proposed method of sale or other disposition of the shares of
Common Stock being sold by Capital Research in such Offering, and the identity
of and compensation to be paid to any proposed underwriter or underwriters to be
employed in connection with such Offering.
5. COSTS AND EXPENSES. The Company shall pay all costs and expenses in
connection with the Registration under this Agreement; PROVIDED, HOWEVER, that
Capital Research shall bear the fees and expenses of its own counsel and
accountants and any selling expenses relating to Registrable Shares registered
on behalf of Capital Research in connection with such Offering, including
without limitation, any transfer taxes, underwriting discounts or commissions.
6. NOTICES. All notices and other communications provided for hereunder
must be in writing and shall be deemed to have been given on the same day when
personally delivered or sent by confirmed facsimile transmission or on the next
2
<PAGE>
business day when delivered by receipted courier service or on the third
business day when mailed with sufficient postage, certified mail, return receipt
requested, to the following addresses:
If to the Company: Genetic Vectors, Inc.
5201 N. W. 77th Avenue
Suite 100
Miami, Florida 33166
Attn: Mead M. McCabe, Jr.
With a copy to: Clayton E. Parker, Esq.
Kirkpatrick & Lockhart LLP
201 South Biscayne Boulevard
Miami Center - Suite 2000
Miami, Florida 33131
If to the Capital Capital Research Ltd.
Research: 27241 Pasco Peregrino
San Juan Capistrano, California 92675-5041
c/o Bruce Cowen, Partner
or to such other address as any party shall have furnished to the other parties
pursuant to this Section 6.
7. ENTIRE AGREEMENT; MODIFICATION OF AGREEMENT; CONSENTS. This Agreement
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof. Changes in or additions to this Agreement may be made
and/or compliance with any covenant or condition herein set forth may be omitted
only upon written consent of all the parties hereto.
8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective permitted successors,
transferees and assigns.
9. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Florida without regard to any of its
principles of conflicts of law. All parties hereto (a) agree that any suit,
action or proceeding arising out of or relating to the Agreement shall be
instituted only in a Federal or state court in Miami-Dade County, Florida, (b)
waive any objection which they may now or hereafter have to the laying of such
venue of any such suit, action or proceeding, and (c) irrevocably submit to the
jurisdiction of such Federal or state court in Miami-Dade County, Florida in any
such suit, action or proceeding.
10. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and both of which together shall constitute
one and the same agreement.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed as of the date first set forth above.
GENETIC VECTORS, INC.
By:______________________________________
Name:____________________________________
Its:_____________________________________
CAPITAL RESEARCH LTD.
By:______________________________________
Name:____________________________________
Its:_____________________________________
4
EXHIBIT 10.24
FORM OF PROMISSORY NOTE
-----------------------
$125,000 March 9, 1999
1. AMOUNT; MATURITY. FOR VALUE RECEIVED, the undersigned, GENETIC
VECTORS, INC., a Florida corporation (the "MAKER"), promises to pay to CAPITAL
RESEARCH LTD., a Delaware corporation (the "HOLDER"), the principal sum of One
Hundred Twenty Five Thousand Dollars ($125,000), which principal sum shall
mature on January 19, 2000 and shall bear simple interest at the rate set forth
herein.
2. INTEREST. Interest shall accrue as of the date of this Note at the
simple interest rate of twelve percent (12%) per annum which rate shall increase
one percent (1%) on the nineteenth (19th) day of each month that any portion of
this Note remains unpaid commencing on January 19, 2000 up to the maximum amount
permitted by law. Interest shall be payable quarterly in arrears, commencing on
April 19, 1999 and each successive interest payment shall be due on the first
day of each successive quarter thereafter.
3. MODE OF PAYMENT. All payments of principal and interest due under this
Note shall be made in legal tender in the United States of America and delivered
to the Holder at or, at the option of the Holder, in such other manner and at
such other place as the Holder shall have designated to the Maker in writing.
4. SECURITY. The Maker's obligations hereunder are secured by a security
interest granted to the Holder pursuant to a Pledge and Security Agreement dated
as of January 19, 1999, by and between the parties hereto.
<PAGE>
5. PREPAYMENT.
(a) This Note may be voluntarily prepaid, without penalty or premium,
in whole or in part, at any time and from time to time. Any prepayment must
include all accrued interest on the principal being prepaid, through the date of
prepayment.
(b) Notwithstanding anything contained herein to the contrary, this
Note shall be mandatorily prepaid in the event that the Maker closes an offering
of its securities, whether through one or more private placements or secondary
public offerings, in which the Maker raises gross proceeds from such transaction
or transactions of at least $1,500,000.
6. ACCELERATION UPON EVENT OF DEFAULT. This Note may be accelerated at
the option of the Holder, upon the occurrence of any event of default as
described below:
(a) any default, whether in whole or in part, shall occur in the
payment to the Holder of principal, interest or other item comprising the Note
as and when due which shall continue for a period of ten (10) days after the
receipt of written notice thereof by the Maker;
(b) the Maker shall (1) make a general assignment for the benefit of
its creditors, (2) apply for or consent to the appointment of a receiver,
trustee, assignee, custodian sequestrator, liquidator or similar official for
itself or any of its assets and properties, (3) commence a voluntary case for
relief as a debtor under the United States Bankruptcy Code, (4) file with or
otherwise submit to any governmental authority any petition, answer or other
document seeking (A) reorganization, (B) an arrangement with creditors or (C) to
take advantage of any other present or future applicable law respecting
bankruptcy, reorganization, insolvency, readjustment of debts, relief of
debtors, dissolution or liquidation, (5) file or otherwise submit any answer or
other document admitting or failing to contest the material allegations of a
petition or other document filed or otherwise submitted against it in any
proceeding under any such applicable law, or (6) be adjudicated a bankrupt or
insolvent by a court of competent jurisdiction; or
(c) any case, proceeding or other action shall be commenced against
the Maker for the purpose of effecting, or an order, judgment or decree shall be
entered by any court of competent jurisdiction approving (in whole or in part)
anything specified in Section 6(b) hereof, or any receiver, trustee, assignee,
custodian, sequestrator, liquidator or other official shall be appointed with
respect to the Maker, or shall be appointed to take or shall otherwise acquire
possession or control of all or a substantial part of the assets and properties
of the Maker, and any of the foregoing shall continue unstayed and in effect for
any period of 60 days.
7. DELAY IN EXERCISE OF RIGHTS. No delay on the part of the Holder in
exercising any of its options, powers or rights nor any partial or single
exercise of its options, power or rights shall constitute a waiver thereof or of
any other option, power or right, and no waiver on the part of the Holder of any
of its options, powers or rights shall constitute a waiver of any other option,
power or right.
8. WAIVER OF PRESENTMENT; NO OFFSETS. The Maker hereby waives presentment
for payment, dishonor, protest, notice of protest and any demand whatsoever with
respect to this Note and the right to interpose any defense based upon any
statute of limitation or any claim of laches and any set-off or counterclaim of
any nature or description.
9. COLLECTION COSTS; MAXIMUM INTEREST LIMITATIONS.
(a) The Maker agrees to pay all reasonable costs, including all
reasonable attorneys' fees and disbursements incurred by the Holder in
collecting or enforcing payment of this Note in accordance with its terms.
(b) After this Note becomes due, at stated maturity or on
acceleration, any unpaid balance hereof shall thereafter bear interest until
paid at a rate of sixteen percent (16%) simple interest per annum, but such
interest rate shall not exceed at any time the maximum interest rate allowable
under applicable state usury laws.
10. GOVERNING LAW.
(a) This Note and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Florida,
without regard to its conflicts of law principles. All parties hereto (1) agree
that any legal suit, action or proceeding arising out of or relating to this
note shall be instituted only in a Federal or state court in Miami-Dade County,
Florida, (2) waive any objection which they may now or hereafter have to the
laying of the venue of any such suit, action or proceeding, including, without
limitation, any objection based on the assertion that such venue is an
inconvenient forum and (3) irrevocably submit to the jurisdiction of such
Federal or state court in Miami-Dade County, Florida in any such suit, action or
proceeding, but such consent shall not constitute a general appearance or be
available to any other person who is not a party to this Note. All parties
hereto agree that the mailing of any process in any suit, action or proceeding
in accordance with the notice provisions of this Note shall constitute personal
service thereof.
(b) THE MAKER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING RELATED IN ANY WAY TO THIS NOTE.
11. NOTICES. All notices or other communications required or permitted to
be given pursuant to this Note shall be in writing and shall be considered as
duly given on (a) the date of delivery, if delivered in person or by nationally
recognized overnight delivery service or (b) five days after mailing if mailed
by registered or certified mail, return receipt requested to the party entitled
4
<PAGE>
to receive the same, if to the Holder, at his or its address on the books and
records of the Maker, and if to the Maker, to Genetic Vectors, Inc., 5201 N.W.
77th Avenue, Suite 100, Miami, Florida 33166, Attention: Mead M. McCabe, Jr.,
with a copy to Kirkpatrick & Lockhart LLP, Miami Center - 20th Floor, 201 South
Biscayne Boulevard, Miami, Florida 33131, Attention: Clayton E. Parker, Esq. Any
party may change its address by giving notice to the other party stating its new
address. Commencing on the tenth day after the giving of such notice, such newly
designated address shall be such party's address for the purpose of all notices
or other communications required or permitted to be given pursuant to this Note.
12. SEVERABILITY. If any provision of this Note shall be held invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Note, and this Note shall be carried out
as if any such invalid or unenforceable provision were not contained herein.
13. AMENDMENT. This Note shall not be amended without the prior written
consent of the Holder and the Maker.
GENETIC VECTORS, INC.
By: _______________________________________
Its: _______________________________________
5
EXHIBIT 10.25
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE UPON ITS
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS, AND NO SALE OR TRANSFER THEREOF MAY
BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
No. W-6
COMMON STOCK PURCHASE WARRANT
-----------------------------
GENETIC VECTORS, INC., a Florida corporation (the "Company"), hereby
certifies that, for value received, CAPITAL RESEARCH LTD., a Delaware
corporation (the "Holder"), or its registered permitted assigns, is entitled,
subject to the terms set forth below, to purchase from the Company at any time
Fifty Thousand (50,000) shares of fully paid and non-assessable shares of common
stock, par value $0.001 per share (the "Common Stock"), of the Company at a
purchase price per share of $0.01 (the "Purchase Price"). The number and
character of such shares of Common Stock are subject to adjustment as provided
herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "COMPANY" shall include Genetic Vectors, Inc., a Florida
corporation, and any corporation which shall succeed or assume the obligations
of the Company hereunder.
(b) The term "COMMON STOCK" includes the Company's Common Stock, par value
$0.001 per share, as authorized on the date hereof and any other securities into
which or for which any of such Common Stock may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
1. EXERCISE OF WARRANT.
1.1. FULL EXERCISE. This Warrant may be exercised in full by the
Holder by surrender of this Warrant, with the form of subscription attached
hereto as Exhibit "A" (the "Subscription Form") duly executed by the Holder, to
the Company at its principal office, accompanied by payment, in cash or by
certified or official bank check or wire transfer payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price.
1.2. PARTIAL EXERCISE. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in Section 1.1
except that the amount payable by the Holder on such partial exercise shall be
the amount obtained by multiplying (a) the number of shares of Common Stock
<PAGE>
designated by the Holder in the Subscription Form by (b) the Purchase Price. On
any such partial exercise the Company will issue and deliver to or upon the
order of the Holder hereof a new Warrant or Warrants of like tenor, in the name
of the Holder hereof or such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, reflecting in the aggregate on the face
or faces thereof for the number of shares of Common Stock for which such Warrant
or Warrants may still be exercised.
2. DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. As soon as practical
after the exercise of this Warrant in full or in part, the Company, at its
expense (including the payment by it of any applicable issue taxes), will cause
to be issued in the name of and delivered to the Holder hereof, as such Holder
(upon payment by the Holder of any applicable transfer taxes and, if requested
by the Company, demonstration by the Holder of compliance with applicable
securities laws) may direct, a certificate or certificates for the number of
fully paid and non-assessable shares of Common Stock to which such Holder shall
be entitled on such exercise, plus, in lieu of any fractional share to which
such Holder would otherwise be entitled, cash equal to such fraction multiplied
by the then-current market value of one full share, together with any other
stock or other securities and property (including cash, where applicable) to
which such Holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
3.1. REORGANIZATIOn. If the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person or party, or
(c) transfer all or substantially all of its properties or assets to any other
person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, the Holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution as the case may be, shall receive, in lieu of the Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such Holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such Holder had so exercised this Warrant
immediately prior thereto, all subject to further adjustment thereafter as
provided herein.
3.2. CONTINUATION OF TERMS. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided herein.
3.3. ADDITIONAL WARRANTs. Upon the satisfaction of either (a) the
Company's full payment of all of the outstanding obligations under that certain
Promissory Note (the "NOTE") of even date herewith made by the Company and
payable to the Holder or (b) a closing of an offering of securities, whether
2
<PAGE>
through one or more private placements or secondary public offerings, in which
the Company raises gross proceeds from such transaction or transactions of at
least $1,500,000, the Company shall grant to the Holder additional warrants to
purchase from the Company at any time or from time to time before 5:00 p.m.,
Eastern Time, on the fifth anniversary of the grant of such additional warrants
to the Holder, One Hundred Thousand (100,000) shares of fully paid and
non-assessable Common Stock at a purchase price per share of $5.50 (the
"PURCHASE PRICE").
All warrants to be granted pursuant to the immediately preceding sentence shall
be granted pursuant to a new Warrant in the same form as this Warrant, except
that such Warrant shall contain the following provision:
Any provision herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be made in respect
of the issuance of additional shares of Common Stock of
the Company (or upon the conversion or exchange of
securities convertible or exchangeable into shares of
Common Stock) unless after the date hereof (a) the
aggregate consideration to be received by the Company for
the issuance of such additional shares of Common Stock,
whether through one or more private placements or
secondary public offerings (or upon the conversion or
exchange of securities convertible or exchangeable into
shares of Common Stock), is at least $500,000 and (b) the
consideration per share for an additional share of Common
Stock (or the conversion or exchange price with respect to
securities convertible or exchangeable into shares of
Common Stock) to be issued by the Company is less than
$4.00. In such event, the Purchase Price shall be reduced
to a price (calculated to the nearest cent) determined by
multiplying such Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the
number of shares of Common Stock which the aggregate
consideration received by the Company for the total number
of additional shares of Common Stock so issued would
purchase at such Purchase Price in effect immediately
prior to such issuance, and the denominator of which shall
be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of such
additional shares of Common Stock so issued.
5. RIGHT TO ATTEND BOARD MEETINGS. The Holder shall have the right to
have a single representative present (either in person or by telephone) at all
meetings of the Board of Directors of the Company for so long as any portion of
the Note remains unpaid. Such representative shall not be deemed to be a
director and shall have no voting rights.
6. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
3
<PAGE>
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
dilution or other impairment.
7. NOTICES OF RECORD DATE, ETC. IN THE EVENT OF:
(a) any taking by the Company of a record of the holders of any class
or securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or consolidation or merger of the
Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of stock
of any class or any other securities, or any right or option to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities (other than this issue of Common Stock on exercise of the Warrant),
then and in each such event the Company will mail or cause to be mailed to the
Holder a notice specifying (i) the date on which any such record is to be taken
for the purpose of such dividend distribution or right, and stating the amount
and character of such dividend, distribution or right; (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or wind-up is to take place, and
the time, if any is to be fixed, as of which the Holders of record of Common
Stock shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up; and (iii) the amount and character of any stock or other securities,
or rights or options with respect thereto, proposed to be issued or granted, the
date of such proposed issue or grant and the persons or class of persons to whom
such proposed issue or grant is to be offered or made. Such notice shall be
mailed at least twenty (20) days prior to the date specified in such notice on
which any such action is to be taken.
8. CERTAIN DELIVERIES. The Company shall deliver to the Holder copies of
all documents filed by the Company with the Securities and Exchange Commission.
In addition and for so long as any portion of the Note remains unpaid, the
Company shall deliver to the Holder copies of its monthly financial statements.
Such financial statements shall be delivered on or before the thirtieth day of
each month for the immediately preceding month.
9. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. The Company will
at all times reserve and keep available, solely for issuance and delivery on the
exercise of the Warrant, all shares of Common Stock from time to time issuable
on the exercise of the Warrant.
4
<PAGE>
10. EXCHANGE OF WARRANT. On surrender of the Warrant, properly endorsed,
to the Company, the Company at its expense will issue and deliver to or on the
order of the Holder thereof a new Warrant or Warrants of like tenor, in the name
of such Holder or as such Holder (upon payment by such Holder of any applicable
transfer taxes and, if requested by the Company, demonstration by such Holder of
compliance with applicable securities laws) may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common Stock called for
on the face or faces of the Warrant or Warrants so surrendered.
11. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of the Warrant and,
in the case of any such loss, theft or destruction of the Warrant, on delivery
of an indemnity agreement or security reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, on surrender and
cancellation of such warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
12. NEGOTIABILITY. This Warrant is issued upon the following terms, to all
of which each Holder or owner hereof by the taking hereof consents and agrees:
(a) subject to compliance with all applicable securities laws, title
to this Warrant may be transferred by endorsement (by the Holder hereof
executing the Form of Assignment attached hereto as Exhibit "B") and delivery in
the same manner as in the case of a negotiable instrument transferable by
endorsement and delivery;
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a BONA FIDE
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such BONA FIDE
purchaser, and each such BONA FIDE purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
(c) until this Warrant is transferred on the books of the Company, the
Company may treat the registered Holder hereof as the absolute owner hereof for
all purposes, notwithstanding any notice to the contrary.
13. NOTICES. All notices or other communications required or permitted to
be given pursuant to this Agreement shall be in writing and shall be considered
as duly given on (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or (b) five days after mailing if mailed
from within the continental United States by registered or certified mail,
return receipt requested to the party entitled to receive the same, if to the
Company, to Genetic Vectors, Inc., 5201 N.W. 77th Avenue, Suite 100, Miami,
Florida 33166 Attention: Mead M. McCabe, Jr., with a copy to Clayton E. Parker,
Esq., Kirkpatrick & Lockhart LLP, 201 S. Biscayne Boulevard, 20th Floor, Miami,
Florida 33131, and if to the Holder, at the address of such Holder shown on the
books of the Company. Any party may change his or its address by giving notice
to the other party stating his or its new address. Commencing on the 10th day
after the giving of such notice, such newly designated address shall be such
5
<PAGE>
party's address for the purpose of all notices or other communications required
or permitted to be given pursuant to this Agreement.
14. GOVERNING LAW. This Agreement and the rights of the parties hereunder
shall be governed by and construed in accordance with the laws of the State of
Florida, without regard to its conflicts of law principles. All parties hereto
(i) agree that any legal suit, action or proceeding arising out of or relating
to this Agreement shall be instituted only in a federal or state court in
Miami-Dade County, Florida; (ii) waive any objection which they may now or
hereafter have to the laying of the venue of any such suit, action or
proceeding, including, without limitation, any objection based on the assertion
that such venue is an inconvenient forum; and (iii) irrevocably submit to the
jurisdiction of such federal or state court in Miami-Dade County, Florida in any
such suit, action or proceeding, but such consent shall not constitute a general
appearance or be available to any other person who is not a party to this
Agreement. All parties hereto agree that the mailing of any processing any suit,
action or proceeding in accordance with the notice provisions of this Agreement
shall constitute personal service thereof.
15. ENTIRE AGREEMENT; WAIVER OF BREACH. This Agreement constitutes the
entire agreement between the parties and supersedes any prior agreement or
understanding among them with respect to the subject matter hereof, and it may
not be modified or amended in any manner other than as provided herein, and no
waiver of any breach or condition of this Agreement shall be deemed to have
occurred unless such waiver is in writing, signed by the party against whom
enforcement is sought, and no waiver shall be claimed to be a waiver of any
subsequent breach or condition of a like or different nature.
16. SEVERABILITY. If any provision of this Agreement shall be held invalid
or unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein.
17. AMENDMENT. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
18. ATTORNEYS' FEES AND COSTS. In the event of any litigation arising
under or relating to this Warrant, the prevailing party in such dispute shall be
entitled to recover its costs and expenses, including reasonable attorney fees,
from the other.
19. RESTRICTIONS ON TRANSFERABILITY; RESTRICTIVE LEGEND. The Holder
acknowledges that the shares of Common Stock issuable upon exercise of this
Warrant are subject to restrictions under applicable Federal and state
securities laws. Each certificate representing shares of Common Stock issued
shall, upon the exercise of this Warrant, bear the following legends in addition
to such other restrictive legends as may be required by law:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "ACT"), or any state securities
laws, and no sale or transfer thereof may be effected without an effective
6
<PAGE>
registration statement or an opinion of counsel for the Holder, satisfactory to
the Company, that such registration is not required under the Act and any
applicable state securities laws."
Dated: March 9, 1999
GENETIC VECTORS, INC.
By:__________________________________________
Title:_______________________________________
AGREED TO AND ACCEPTED:
CAPITAL RESEARCH LTD.
By:_________________________________
Its:________________________________
Date:_______________________________
7
<PAGE>
EXHIBIT "A"
-----------
FORM OF EXERCISE
----------------
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO:
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder _____ shares of
Common Stock of ____________________, herewith makes payment of $__________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to, whose address is:
_________________________________________________
_________________________________________________
_________________________________________________
Dated:___________________.
____________________________________________
Signature
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
Print Name
____________________________________________
Street Address
____________________________________________
City, State and Zip Code
____________________________________________
Person's Social Security Number or Tax
Identification Number
A-1
<PAGE>
EXHIBIT "B"
-----------
FORM OF ASSIGNMENT
------------------
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers
unto ___________________ the right represented by the within Warrant to purchase
shares of Common Stock of ___________________ to which the within Warrant
relates, and appoints ___________________ as its attorney to transfer such right
on the books of _________________ with full power of substitution in the
premises.
Dated: _________________.
____________________________________________
Signature
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
Print Name
____________________________________________
Street Address
____________________________________________
City, State and Zip Code
____________________________________________
Person's Social Security Number or Tax
Identification Number
Signed in the presence of:
_____________________________________
B-1
EXHIBIT 10.26
FORM OF REGISTRATION RIGHTS AGREEMENT
-------------------------------------
THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT"), dated as of March 9,
1999, by and between GENETIC VECTORS, INC., a Florida corporation (the
"COMPANY"), and Capital Research Ltd., a Delaware corporation ("CAPITAL
RESEARCH").
The parties hereto, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
hereby agree as follows:
1. DEFINITIONS. The following terms have the following meanings:
(a) "ACT" means the U.S. Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
(b) "COMMISSION" means the Securities and Exchange Commission.
(c) "COMMON STOCK" means the Common Stock, par value $0.001 per share,
of the Company.
(d) "REGISTRABLE SECURITIES" means any Warrant Shares (as defined
herein) held by Capital Research.
(e) "REGISTRATION," "REGISTER" and like words mean compliance with all
of the laws, rules and regulations (federal, state and local), and provisions of
agreements and corporate documents pertaining to the public offering of
securities, including registration of any public offering of securities on any
form under the Act.
(f) "WARRANT SHARES" means any shares of Common Stock of the Company
received by Capital Research in connection with the exercise of the Common Stock
Purchase Warrant No. W-6 (the "WARRANT") of even date herewith given by the
Company to Capital Research or any new warrant given to Capital Research
pursuant to the terms of such warrant.
2. DEMAND REGISTRATION.
(a) At any time following the exercise of the Warrant and prior to the
Registration of all of the Warrant Shares, and subject to the other provisions
of this Agreement, Capital Research shall have the right, exercisable by making
a written request (the "REGISTRATION REQUEST") to the Company, to demand that
the Company effect the Registration of any Registrable Securities in accordance
with the provisions of the Act. Upon receipt of the Registration Request, the
Company shall be obligated to register each of the Registrable Securities
beneficially owned by Capital Research in the manner set forth in Section 2(b)
hereof. Any provision herein to the contrary notwithstanding, the right to
demand Registration pursuant to this Section 2 shall be limited to one (1)
Registration demand. A right to demand Registration hereunder shall be deemed to
have been exercised and all of the Company's demand Registration obligations
hereunder shall be deemed to be fully satisfied when the registration statement
filed on account of such exercise has been declared effective by the Commission.
(b) Following receipt of the Registration Request pursuant to Section
2(a) hereof, the Company shall (i) file within ninety (90) days thereafter a
registration statement on the appropriate form under the Act for the shares of
<PAGE>
Common Stock that the Company has been requested to Register; (ii) if the
applicable Offering is pursuant to an underwriting agreement, enter into an
underwriting agreement in such form as said managing or sole underwriter shall
require (which must only contain terms and conditions customary for offerings of
equity securities of entities with market capitalizations that are approximately
equal to the Company's then current market capitalization and may contain
customary provisions requiring the Company and Capital Research to indemnify and
provide contribution to the underwriter or underwriters of such Offering); and
(iii) use its reasonable best efforts to have such registration statement
declared effective as promptly as practicable and to remain effective for at
least One Hundred and Twenty (120) days. Notwithstanding any other provision
hereof, Capital Research acknowledges and agrees that there can be no guarantee
or warranty from or by the Company that any such registration statement will
ever be declared effective by the Commission, and that the Company makes no such
guarantee or warranty in this Agreement or otherwise.
3. PIGGYBACK REGISTRATION. At any time following the exercise of the
Warrant and prior to the Registration of all of the Warrant Shares, and subject
to the other provisions of this Agreement, the Company shall advise Capital
Research by written notice at least thirty (30) days prior to the filing of any
registration statement under the Act by the Company (other than a registration
statement on Form S-4, Form S-8 or subsequent similar forms), and will upon the
provision of written notice from Capital Research as described below include in
any such registration statement such information as may be required to permit a
public offering of the Registrable Securities desired to be registered by
Capital Research; PROVIDED, HOWEVER, that if the sole underwriter or managing
underwriters advise the Company that the inclusion in the offering of securities
proposed to be sold by Capital Research would adversely affect the ability of
the Company to complete the public offering, then the Company shall have no
obligation to register any shares held by Capital Research in connection with
this registration statement. If Capital Research desires to have its Registrable
Securities included in such registration statement, it must so advise the
Company in writing within fifteen (15) days after the date of receipt of the
Company's notice of registration, setting forth the amount of Registrable
Securities for which registration is requested. Notwithstanding any other
provision hereof, Capital Research acknowledges and agree that there can be no
guaranty or warranty from or by the Company that such registration statement
will ever be declared effective by the Commission, and that the Company makes no
such guarantee or warranty in this Agreement or otherwise.
4. INFORMATION TO BE FURNISHED BY CAPITAL RESEARCH. Capital Research
shall furnish to the Company in writing all information within its possession
or knowledge required by the applicable rules and regulations of the Commission
and by any applicable state securities or blue sky laws concerning Capital
Research, the proposed method of sale or other disposition of the shares of
Common Stock being sold by Capital Research in such Offering, and the identity
of and compensation to be paid to any proposed underwriter or underwriters to be
employed in connection with such Offering.
5. COSTS AND EXPENSES. The Company shall pay all costs and expenses in
connection with the Registration under this Agreement; provided, however, that
Capital Research shall bear the fees and expenses of its own counsel and
accountants and any selling expenses relating to Registrable Shares registered
on behalf of Capital Research in connection with such Offering, including
without limitation, any transfer taxes, underwriting discounts or commissions.
6. NOTICES. All notices and other communications provided for hereunder
must be in writing and shall be deemed to have been given on the same day when
personally delivered or sent by confirmed facsimile transmission or on the next
2
<PAGE>
business day when delivered by receipted courier service or on the third
business day when mailed with sufficient postage, certified mail, return receipt
requested, to the following addresses:
If to the Company: Genetic Vectors, Inc.
5201 N. W. 77th Avenue
Suite 100
Miami, Florida 33166
Attn: Mead M. McCabe, Jr.
With a copy to: Clayton E. Parker, Esq.
Kirkpatrick & Lockhart LLP
201 South Biscayne Boulevard
Miami Center - Suite 2000
Miami, Florida 33131
If to Capital Research: Capital Research Ltd.
27241 Pasco Peregrino
San Juan Capistrano, California 92675-5041
c/o Bruce Cowen, Partner
or to such other address as any party shall have furnished to the other parties
pursuant to this Section 6.
7. ENTIRE AGREEMENT; MODIFICATION OF AGREEMENT; CONSENTS. This Agreement
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof. Changes in or additions to this Agreement may be made
and/or compliance with any covenant or condition herein set forth may be omitted
only upon written consent of all the parties hereto.
8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective permitted successors,
transferees and assigns.
9. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Florida without regard to any of its
principles of conflicts of law. All parties hereto (a) agree that any suit,
action or proceeding arising out of or relating to the Agreement shall be
instituted only in a Federal or state court in Miami-Dade County, Florida, (b)
waive any objection which they may now or hereafter have to the laying of such
venue of any such suit, action or proceeding, and (c) irrevocably submit to the
jurisdiction of such Federal or state court in Miami-Dade County, Florida in any
such suit, action or proceeding.
10. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and both of which together shall constitute
one and the same agreement.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed as of the date first set forth above.
GENETIC VECTORS, INC.
By:______________________________________
Name:____________________________________
Its:_____________________________________
CAPITAL RESEARCH LTD.
By:______________________________________
Name:____________________________________
Its:_____________________________________
4
EXHIBIT 21
Subsidiaries of the Registrant
None.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001017157
<NAME> GENETIC VECTORS, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> $109,924
<SECURITIES> 0
<RECEIVABLES> 3,620
<ALLOWANCES> 0
<INVENTORY> 13,500
<CURRENT-ASSETS> 242,521
<PP&E> 565,977
<DEPRECIATION> (162,622)
<TOTAL-ASSETS> 913,725
<CURRENT-LIABILITIES> 350,150
<BONDS> 0
0
0
<COMMON> 2,350
<OTHER-SE> 561,225
<TOTAL-LIABILITY-AND-EQUITY> 913,725
<SALES> 11,275
<TOTAL-REVENUES> 47,172
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,684,446
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,575,467)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,575,467)
<EPS-PRIMARY> (1.10)
<EPS-DILUTED> (1.10)
</TABLE>
