<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 22, 1997
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
UNIVEC, INC.
(Name of Small Business Issuer in Its Charter)
<TABLE>
<S> <C> <C>
Delaware 3841 11-3163455
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or organization) Industrial Classification Identification No.)
Code Number)
</TABLE>
999 Franklin Avenue
Garden City, New York 11530
Telephone: (516) 294-1000
Telecopier: (516) 739-3343
(Address and telephone number of principal executive offices)
------
Joel Schoenfeld
Chairman of the Board and Chief Executive Officer
UNIVEC, Inc.
999 Franklin Avenue
Garden City, New York 11530
Telephone: (516) 294-1000
Telecopier: (516) 739-3343
(Name, address and telephone number of agent for service)
------
Copies to:
Jack Becker, Esq. Jay M. Kaplowitz, Esq.
Snow Becker Krauss P.C. Arthur S. Marcus, Esq.
605 Third Avenue Gersten, Savage, Kaplowitz, Fredericks
New York, New York 10158-0125 & Curtin, LLP
Telephone: (212) 687-3860 101 East 52nd Street
Telecopier: (212) 949-7052 New York, New York 10022-6018
Telephone: (212) 752-9700
Telecopier: (212) 980-5192
------
Approximate Date of Proposed Sale to the Public: As soon as practicable
after the effective date of this registration statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
If any of the securities on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act, please check
the following box. /X/
------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================
Title of Each
Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Price Aggregate Offer- Amount of
Registered Registered Per Security(1) ing Price(1) Registration Fee
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par
value ("Common Stock") 1,725,000(2) $3.50 $6,037,500 $1,829.55
- --------------------------------------------------------------------------------------------
Redeemable Common
Stock Purchase
Warrants ("Warrants") 2,587,500(3) $.10 $258,750 $78.41
- --------------------------------------------------------------------------------------------
Common Stock issuable
upon exercise of
Warrants ............ 2,587,500(4) $4.50 $11,643,750 $3,528.41
- --------------------------------------------------------------------------------------------
Underwriter's Warrants
to purchase shares of
Common Stock ........ 150,000 $.000025 $3.75 (5)
- --------------------------------------------------------------------------------------------
Underwriter's Warrants
to purchase Warrants 225,000 $.000025 $6.25 (5)
- --------------------------------------------------------------------------------------------
Common Stock issuable
upon exercise of
Underwriter's
Warrants ............ 150,000(4) $4.20 $630,000 $190.91
- --------------------------------------------------------------------------------------------
Warrants issuable upon
exercise of
Underwriter's
Warrants ............ 225,000 $.12 $27,000 $8.18
- --------------------------------------------------------------------------------------------
Common Stock issuable
upon exercise of
Warrants underlying
Underwriter's
Warrants ............ 225,000(4) $4.50 $1,012,500 $306.81
- --------------------------------------------------------------------------------------------
Redeemable Common
Stock Purchase
Warrants ............ 2,500,000(6) $.10 $250,000 $75.76
- --------------------------------------------------------------------------------------------
Common Stock ......... 2,500,000(4)(8) $4.50(7) $11,250,000 $3,409.09
33,436(4)(9) $3.50(7) $117,026 $35.46
- --------------------------------------------------------------------------------------------
Total Registration Fee .................................................. $9,462.58
===========================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933.
(2) Includes 225,000 shares of Common Stock which may be purchased by the
Underwriter to cover over- allotments, if any.
(3) Includes 337,500 Warrants which may be purchased by the Underwriter to
cover over-allotments, if any.
(4) Pursuant to Rule 416, there are also being registered such indeterminate
number of additional shares as may become issuable pursuant to the
anti-dilution provisions of the Warrants, the Underwriter's Warrants (and
the Warrants included therein), and the warrants and options owned by the
selling securityholders named herein.
(5) Pursuant to Rule 457(g) promulgated under the Securities Act of 1933, no
filing fee is required.
(6) Represents Redeemable Common Stock Warrants being registered for sale by
selling securityholders.
(7) Calculated pursuant to Rule 457(g).
(8) Represents 2,500,000 shares issuable upon exercise of Redeemable Common
Stock Purchase Warrants registered for sale by selling securityholders.
(9) Represents 33,436 shares issuable upon exercise of certain options
registered for sale by a selling securityholder.
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: (i) one to
be used in connection with an offering by the Company of shares of Common
Stock and Redeemable Common Stock Purchase Warrants (the "Prospectus") and
(ii) one to be used in connection with the sale of Redeemable Common Stock
Purchase Warrant and shares of Common Stock issuable upon exercise of those
Redeemable Common Stock Purchase Warrants and outstanding options by certain
selling securityholders (the "Selling Securityholder Prospectus"). The
Prospectus and the Selling Securityholder Prospectus will be identical in all
respects except for the alternate pages for the Selling Securityholder
Prospectus included herein which are labeled "Alternate Page for Selling
Securityholder Prospectus."
<PAGE>
The information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
PRELIMINARY PROSPECTUS, SUBJECT TO COMPLETION, DATED JANUARY 22, 1997
UNIVEC, INC.
1,500,000 SHARES OF COMMON STOCK AND
2,250,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
This Prospectus relates to an offering (the "Offering") by UNIVEC, Inc.
(the "Company") of 1,500,000 shares of common stock, par value $.001 per
share (the "Common Stock"), and 2,250,000 redeemable common stock purchase
warrants (the "Warrants") through Maidstone Financial, Inc. (the
"Underwriter"). The shares of Common Stock and the Warrants offered hereby
may be purchased separately and will be transferable separately after
issuance. The Common Stock is being offered at $3.50 per share and the
Warrants at $.10 per Warrant.
Each Warrant entitles the registered holder thereof to purchase one share
of Common Stock at an exercise price of $4.50 per share, subject to
adjustment in certain events, at any time during the period commencing
__________, 1999 [two years after the date upon which the Registration
Statement of which this Prospectus forms a part is declared effective by the
Securities Exchange Commission (the "Effective Date")] and expiring on
____________, 2002 [the fifth anniversary of the Effective Date]. The
Warrants are subject to redemption by the Company at $.05 per Warrant at any
time commencing _______________, 1999 [two years after the Effective Date]
(with the prior written consent of the Underwriter), on not less than 30 days
prior written notice to the holders of the Warrants, provided the closing bid
price of the Common Stock had been at least $8.00 for 20 consecutive trading
days ending on the third day prior to the date on which the Company gives
notice of redemption. The Warrants will be exercisable until the close of
business on the day immediately preceding the date fixed for redemption. The
Company has applied for quotation of the Common Stock and the Warrants on The
Nasdaq SmallCap Market under the trading symbols "UNVC" and "UNVCW",
respectively. See "Description of Securities -- Warrants."
Prior to the Offering, there has been no public market for the Common
Stock or Warrants, and there can be no assurance that any such market for the
Common Stock or Warrants will develop after the closing of the Offering, or
that, if developed, it will be sustained. The offering prices of the Common
Stock and Warrants and the terms of the Warrants were established by
negotiations between the Company and the Underwriter and do not necessarily
bear any direct relationship to the Company's assets, earnings, book value
per share or other generally accepted criteria of value.
The Company has registered for resale under a separate prospectus (the
"Selling Securityholder Prospectus") as part of the Registration Statement
warrants to purchase 2,500,000 shares of Common Stock (having terms identical
to the warrants offered hereby) and the shares of Common Stock issuable upon
exercise thereof, and 33,436 shares of Common Stock issuable upon exercise of
options. The warrants were issued in connection with a bridge financing
completed by the Company in December 1996. Prior to the Effective Date, each
of the selling securityholders named in the Selling Securityholder Prospectus
will enter into an agreement with the Underwriter not to sell or otherwise
dispose of any securities of the Company for a period of 24 months following
the Effective Date, without the prior written consent of the Underwriter. The
Company will not receive any proceeds from the sale of the warrants or shares
of Common Stock by the selling securityholders, but will receive the exercise
price of the warrants and options exercised. See "Selling Securityholder
Offering."
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK. ONLY INVESTORS WHO CAN BEAR THE RISK OF LOSS OF THEIR ENTIRE INVESTMENT
SHOULD INVEST. FOR A DESCRIPTION OF CERTAIN RISKS REGARDING AN INVESTMENT IN
THE COMPANY AND IMMEDIATE SUBSTANTIAL DILUTION, SEE "RISK FACTORS" COMMENCING
ON PAGE 9 AND "DILUTION" AT PAGE 22.
------
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
===============================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share .................... $3.50 $.35 $3.15
- ------------------------------------------------------------------------------
Per Warrant .................. $.10 $.01 $.09
- ------------------------------------------------------------------------------
Total(3) .................... $5,475,000 $547,500 $4,927,500
==============================================================================
</TABLE>
(footnotes appear on page 3)
------
MAIDSTONE FINANCIAL, INC.
------
The date of this Prospectus is , 1997.
<PAGE>
IN CONNECTION WITH THE OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AND THE WARRANTS OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
[INSERT PICTURES]
------
UNIVEC(R), and R/ Ultra(R) are registered trademarks of the Company. All
other trademarks appearing in this Prospectus are the property of their
respective holders.
2
<PAGE>
(1) Does not include additional compensation to the Underwriter consisting of
(i) a non-accountable expense allowance equal to 3% of the gross proceeds
of the Offering, of which $55,000 has been paid by the Company to date,
(ii) warrants (the "Underwriter's Warrants") entitling the Underwriter to
purchase an amount equal to 10% of the number of shares of Common Stock
and Warrants offered hereby (excluding the Over-Allotment Option, as
defined in footnote 3, below) for a purchase price of 120% of the initial
public offering price thereof, (iii) a financial advisory agreement with
the Underwriter for 24 months commencing on the date of the closing of
the Offering for a fee of $4,000 per month, or an aggregate of $96,000,
payable in its entirety at the closing of the Offering, and (iv) a
two-year right of first refusal with respect to the underwriting or
placement of certain sales of securities by the Company, its subsidiaries
or affiliates. In addition, the Company has agreed to pay the
Underwriter, under certain circumstances, a warrant solicitation fee of
8% of the exercise price of each Warrant exercised and to indemnify the
Underwriter against certain civil liabilities, including those arising
under the Securities Act. See "Underwriting."
(2) After deducting discounts and commissions payable to the Underwriter, but
before payment of the Underwriter's non-accountable expense allowance
($164,250, or $188,887 if the Over-Allotment Option is exercised in
full), the financial advisory fee ($96,000) and the other expenses of the
Offering (estimated at $383,000) payable by the Company. See
"Underwriting."
(3) The Company has granted the Underwriter an option, exercisable for a
period of 45 days after the closing of the Offering, to purchase up to an
additional 15% of the shares of Common Stock and/or Warrants offered
hereby, upon the same terms and conditions solely for the purpose of
covering over-allotments, if any (the "Over-Allotment Option"). If the
Over-Allotment Option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$6,296,250, $629,625 and $5,666,625, respectively. See "Underwriting."
The Common Stock and Warrants are being offered by the Underwriter on a
"firm commitment" basis, subject to prior sale, when, as and if delivered to
the Underwriter and subject to certain conditions. Subject to the provisions
of the underwriting agreement between the Underwriter and the Company, the
Underwriter reserves the right to withdraw, cancel or modify the Offering and
to reject any order in whole or in part. It is expected that delivery of
certificates will be made against payment therefor at the office of Maidstone
Financial, Inc., 101 East 52nd Street, New York, New York 10022, on or about
, 1997.
3
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2 under the Securities Act with respect to
the securities offered hereby (the "Registration Statement"). This Prospectus
does not contain all the information set forth in the Registration Statement
and the exhibits thereto as permitted by the Rules and Regulations of the
Commission. For further information with respect to the Company and such
securities, reference is made to the Registration Statement and to the
exhibits filed therewith. Statements contained in this Prospectus as to the
contents of any contracts or other documents referred to herein are not
necessarily complete and where such contract or other document is an exhibit
to the Registration Statement, each such statement is qualified in all
respects by the provisions of such exhibit to which reference is made for a
full statement of the provisions thereof. The Registration Statement,
including exhibits filed therewith, may be inspected, without charge, at the
principal office of the Commission located at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549. Copies of all or any part of the Registration
Statement (including the exhibits thereto) also may be obtained from the
Public Reference Section of the Commission at the its principal office in
Washington, D.C., at the Commission's prescribed rates. Electronic
registration statements made through the Electronic Data Gathering Analysis
and Retrieval system are publicly available through the Commission's web site
at http://www.sec.gov.
On the Effective Date, the Company will become subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, in accordance therewith, will file reports, proxy and
information statements and other information with the Securities and Exchange
Commission. Such reports, proxy and information statements and other
information can be inspected and copied at the Public Reference Section of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of such material may also be obtained from
the Public Reference Section of the Commission at prescribed rates. The
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically. The Company intends to furnish its stockholders
with annual reports containing audited financial statements and such other
reports as the Company deems appropriate or as may be required by law.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements appearing elsewhere in this
Prospectus. Unless otherwise indicated or the context otherwise requires, all
references herein to the Company or UNIVEC include UNIVEC, Inc., a New York
corporation ("UNIVEC-NY"), which was merged into the Company on October 10,
1996, and R/ Ultra, Inc., a wholly owned subsidiary of UNIVEC. Except as
otherwise stated, all information assumes no exercise of the Over-Allotment
Option.
THE COMPANY
UNIVEC, Inc. (the "Company" or "UNIVEC") develops and markets safety
hypodermic syringes designed to protect the healthcare worker and patient
against cross-infection. The Company also sells and intends to develop other
hypodermic devices. The Company has commenced marketing its 1cc locking clip
syringes, which are designed to make accidental or deliberate reuse
difficult, and plans to distribute them beginning in the first quarter of
1997. The accidental or deliberate reuse of syringes is a frequent cause of
the spread of the human immunodeficiency ("HIV") and hepatitis viruses, as
well as other blood-borne pathogens. The Company has received 510(k)
clearance from the U.S. Food and Drug Administration (the "FDA") to market
its locking clip syringes in the United States.
Public health officials, including C. Everett Koop (the former Surgeon
General of the United States), have encouraged the medical industry to
develop safer, more difficult to reuse, syringes, to prevent the spread of
blood-borne pathogens, such as HIV and hepatitis. In 1995, the House of
Delegates -- American Medical Association requested "manufacturers of
disposable hypodermic needles and syringes to adopt designs to prevent reuse
and to include in the packaging clear directions for their correct disposal."
In late 1995, UNICEF recommended "the use of auto-destruct syringes instead
of disposable, single use syringes in order to avoid the hazards of unsafe
injection practices." In 1996, Brazil adopted a law requiring disposable
syringes manufactured or marketed in that country to include a safety device
to prevent its reuse. During 1996, New York State enacted legislation
authorizing a limited number of pilot projects to test the practicality and
effectiveness of difficult to reuse syringes. Such pilot tests are to be
conducted, subject to funding, in state-operated facilities, such as prisons,
hospitals, youth detention facilities and development centers.
The Company believes that its 1cc difficult to reuse syringes are more
effective than competitive syringes and that they are competitively priced.
The Company also believes that it is the only company that markets a
difficult to reuse syringe with a 1cc barrel, which is ideal for dispensing
.05cc to .95cc dosages of medicine (e.g., allergy, immunization and insulin
medicines). It is more difficult to deliver .05cc to .95cc dosages accurately
with a syringe barrel that is greater than 1cc. The Company does not know of
any other company that offers an aspirating syringe that healthcare workers
can lock. Healthcare workers need aspirating syringes to mix medications in
the syringe barrel and inject medications intravenously. Furthermore, the
Company believes that aspirating syringes are preferred by diabetes patients
and needle-exchange programs.
The Company's syringes will be assembled primarily by Harmac Medical
Products, Inc. ("Harmac"), one of the largest independent, privately-owned
contract manufacturers of disposable medical products in the United States,
using assembly and packaging equipment supplied by the Company. Sherwood
Davis & Geck ("Sherwood"), a subsidiary of American Home Products, will
supply most of the components for the syringes assembled by Harmac. Some of
the Company's syringes and its proprietary aspirating plunger will be
manufactured by INSERPOR, a contract manufacturer in Portugal.
The Company's initial marketing efforts will be directed primarily to
UNICEF, the World Health Organization ("WHO"), and public hospitals and
health facilities in New York. The Company also intends to market its locking
clip syringes to (i) governments of developing countries, (ii) private
hospitals and health facilities in New York, New Jersey and Connecticut, and
(iii) retail distributors in the United States. The Company also plans to
license its patents and proprietary manufacturing processes relating to its
lock-
5
<PAGE>
ing clip and other syringe designs to established medical device
manufacturers. To stimulate demand for its safety syringes, the Company plans
to initiate promotional and educational campaigns directed at (i) public
health officers and other government officials responsible for public health
policies, (ii) doctors and administrators of healthcare facilities
responsible for treatment of HIV-AIDS patients, and (iii) liability insurance
companies. The Company plans to enter into arrangements with independent
sales agents and distributors in targeted markets and to hire a marketing
director following the completion of the Offering.
The Company is a Delaware corporation, incorporated on October 7, 1996,
and the successor by merger to UNIVEC, Inc., a New York corporation,
incorporated on August 18, 1992. The executive officers of the Company are
located at 999 Franklin Avenue, Garden City, New York 11530 (telephone number
(516) 294-1000).
THE OFFERING
Securities Offered............. 1,500,000 shares of common stock, $0.001 par
value per share (the "Common Stock"), and
2,250,000 redeemable common stock purchase
warrants (the "Warrants"). Each Warrant
entitles the holder thereof to purchase one
share of Common Stock at an exercise price
of $4.50 per share, subject to adjustment in
certain events. The shares of Common Stock
and the Warrants are separately tradeable
and transferable upon issuance. See
"Description of Securities" and
"Underwriting."
Offering Price................. $3.50 per share of Common Stock and $.10 per
Warrant.
Terms of Warrants:
Exercise price............... $4.50 per share, subject to adjustment in
certain events. See "Description of
Securities -- Warrants."
Exercise period............... Any time during the period commencing
------, 1999 [two years after the Effective
Date] and ending ------, 2002 [the fifth
anniversary of the Effective Date].
Redemption.................... Redeemable by the Company, with the prior
written consent of the Underwriter, at a
price of $.05 per Warrant upon not less than
30 days prior written notice to the holders
of the Warrants at any time commencing
------, 1999 [two years after the Effective
Date], provided the closing bid price of the
Common Stock has been at least $8.00 for 20
consecutive trading days ending on the third
day prior to the date upon which the Company
gives notice of redemption. See "Description
of Securities -- Warrants."
Common Stock Outstanding:
Prior to the Offering......... 1,082,287(1) shares of Common Stock
After the Offering............ 2,619,907(2) shares of Common Stock
Warrants Outstanding:
Prior to the Offering ........ 2,500,000 Warrants(3)
After the Offering ........... 4,750,000 Warrants
Use of Proceeds................ The net proceeds of the Offering,
aggregating approximately $4,284,250, will
be used (1) for the purchase of equipment,
(2) for
6
<PAGE>
marketing, promotion and public relations,
(3) for product development, (4) for
repayment of the Bridge Notes, and (5) for
working capital and general corporate
purposes. See "Use of Proceeds."
Risk Factors.................. The securities offered hereby involve a high
degree of risk and immediate substantial
dilution to new investors. Only investors
who can bear the risk of their entire
investment should invest. See "Risk Factors"
and "Dilution."
Proposed Nasdaq SmallCap
Market Symbols.............. Common Stock -- UNVC; Warrants -- UNVCW
- ------
(1) Does not include (i) 60,042 shares reserved for issuance upon exercise of
outstanding options, at an exercise price of $3.50, expiring at various
dates from February 22, 1999 through June 30, 1999, (ii) 2,500,000 shares
issuable upon exercise of warrants ("Bridge Warrants") issued in
connection with a bridge financing completed in December 1996 (the
"Bridge Financing"), which warrants will be automatically converted into
warrants having terms identical to the Warrants offered hereby on the
Effective Date, (iii) 35,715 shares reserved for issuance upon conversion
of the Company's 12 1/2% demand promissory note in the principal amount
of $125,000 following the consummation of the sale of the shares of
Common Stock and Warrants offered hereby (the "Closing"), (iv) 33,250
shares of Common Stock to be issued to a director of the Company at the
Closing in exchange for the cancellation of amounts due to him ($116,373
as of September 30, 1996), (v) 4,688,706 shares reserved for issuance
upon exercise of options which may be granted in the future pursuant to
the Company's stock option plan, and (vi) 282,000 shares reserved for
issuance upon conversion of the Company's Series A 8% Cumulative
Convertible Preferred Stock (the "Series A Preferred Stock"). See
"Certain Transactions," "Management -- Stock Option Plan" and
"Description of Securities -- Series A Preferred Stock."
(2) Does not include (i) 55,672 shares reserved for issuance upon exercise of
outstanding options, at an exercise price of $3.50, expiring at various
dates from February 22, 1999 through June 30, 1999, (ii) 4,750,000 shares
issuable upon exercise of the Warrants and the warrants to be issued to
holders of Bridge Warrants upon the automatic conversion of the Bridge
Warrants on the Effective Date, (iii) 35,715 shares reserved for issuance
upon conversion of the Company's 12 1/2% demand promissory note in the
principal amount of $125,000 following the Closing, (iv) 4,688,706 shares
reserved for issuance upon exercise of options which may be granted in
the future pursuant to the Company's stock option plan, and (vi) 282,000
shares reserved for issuance upon conversion of the Series A Preferred
Stock. Includes (i) 33,250 shares of Common Stock to be issued to a
director of the Company at the Closing in exchange for the cancellation
of amounts due to him ($116,373 as of September 30, 1996), and (ii) 4,370
shares to be issued to an officer of the Company at Closing upon exercise
of options. See "Certain Transactions," "Management -- Stock Option Plan"
and "Description of Securities -- Series A Preferred Stock."
(3) Represents the Bridge Warrants, which will convert automatically into
warrants having terms identical to the Warrants offered hereby on the
Effective Date.
7
<PAGE>
SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION
The summary consolidated financial information set forth below is derived
from and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
consolidated financial statements, including the notes thereto, appearing
elsewhere herein.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31, September 30,
---------------------------- -----------------------------
1994 1995 1995 1996
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Sales ........................... -- $1,106,930 -- $ 282,000
Gross profit .................... -- 90,400 -- 58,069
Net loss ........................ ($ 661,853) (946,014) ($ 895,807) (1,002,791)
Net loss per common share ....... ($ 0.65) ($ 0.89) ($ 0.85) ($ 0.95)
Weighted average number of common
and common equivalent shares
outstanding .................... 1,025,608 1,059,001 1,056,218 1,059,001
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
September 30, 1996
-------------------------------------
As Adjusted
Actual (1)
------------- --------------
<S> <C> <C>
Working capital (deficit) .. ($ 536,442) 3,609,123(2)
Total assets ............... 1,234,486 5,322,787(3)
Accumulated deficit ........ (3,815,158) (1,866,354)(4)
Stockholders' equity
(deficit) ............... (3,407,658) 2,206,526(5)
</TABLE>
- ------
(1) Gives effect to the issuance and sale of 1,500,000 shares of Common Stock
and 2,250,000 Warrants offered hereby and the application of the
estimated net proceeds thereof.
(2) Gives effect to (i) the payment of $15,949 by the Company for federal and
state withholding and payroll taxes incurred by an officer of the
Company, upon exercise of stock options; (ii) the cancellation of $25,000
of indebtedness payable to a consultant in December 1996 in exchange for
the issuance of 7,143 shares of Common Stock; and (iii) the receipt of
net proceeds of approximately $853,000 (before payment of expenses of
approximately $33,000) from the issuance and sale in the fourth quarter
of 1996 of $1,000,000, principal amount of the Company's 8% promissory
notes (the "Bridge Notes") and warrants to purchase 2,500,000 shares of
Common Stock (the "Bridge Warrants"), for a total purchase price of
$1,000,000 in the Bridge Financing.
(3) Gives effect to (i) a deduction for the payment of $15,949 by the Company
for federal and state withholding and payroll taxes incurred by an
officer of the Company, upon exercise of stock options; and (ii) the
receipt of net proceeds of $820,000 from the Bridge Financing, after
payment of all related expenses.
(4) Gives effect to (i) the reclassification of $1,948,805 of S corporation
undistributed losses to paid-in capital; and (ii) the write-off of debt
issuance costs of $180,000 associated with the Bridge Financing.
(5) Gives effect to (i) the issuance of 1,269 shares of Series A Preferred
Stock in December 1996 in exchange for the cancellation of approximately
$1,269,000 due to certain stockholders and affiliates of the Company;
(ii) the issuance of 33,250 shares of Common Stock at the Closing in
exchange for the cancellation of approximately $116,373 (as of September
30, 1996) due to a director of the Company; (iii) the issuance of an
aggregate of 20,513 shares of Common Stock, upon exercise of options by
an officer of the Company, at an exercise price of $3.50 per share, in
consideration for the cancellation of accrued compensation ($75,244) and
other amounts ($12,500) payable to him; (iv) the issuance of 7,143 shares
of Common Stock in December 1996 in exchange for the cancellation of
$25,000 of indebtedness payable to a consultant; and (v) the write-off of
debt issuance costs of $180,000 associated with the Bridge Financing.
8
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RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk, including but not limited to the risk factors described below. Each
prospective investor should carefully consider the following risk factors
before making an investment decision.
1. Continuing Losses; Accumulated Deficit; Working Capital Deficit. Since
inception, the Company has experienced losses, including a net loss of
approximately $946,000 (on sales of approximately $1,107,000) for the year
ended December 31, 1995, as compared to a net loss of approximately $662,000
(with no sales) for the year ended December 31, 1994. In addition, the
Company incurred a net loss of approximately $1,003,000 (on sales of
approximately $282,000) for the nine months ended September 30, 1996, as
compared to a net loss of approximately $896,000 (with no sales) for the nine
months ended September 30, 1995. The Company expects to continue to incur
operating losses until such time, if ever, as the Company's locking clip
syringes achieve sufficient market acceptance to generate significant sales.
There can be no assurance that the Company will ever operate profitably. As
of September 30, 1996, the Company had an accumulated deficit of
approximately $3,815,000 and a working capital deficit of approximately
$536,000. The Company's ability to operate profitably depends upon market
acceptance of its locking clip syringes, the development of an effective
sales and marketing organization, and the development of new products and
improvements to existing products. There can be no assurance that the
Company's locking clip syringes will achieve a level of market acceptance in
foreign or domestic markets to generate sufficient revenues to become
profitable. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's consolidated financial
statements, including the notes thereto, appearing elsewhere herein.
2. Qualified Report of Independent Accountants; "Going Concern." The
Company's independent accountants have qualified their report on the
Company's consolidated financial statements for the year ended December 31,
1995, which indicates there is substantial doubt about the Company's ability
to continue as a going concern due to the Company's need to generate cash
from operations and obtain additional financing. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Report of
Independent Accountants" on the Company's consolidated financial statements
appearing at page F-2 hereof.
3. Limited Operating History. Although the Company commenced operations
in August 1992, its operations have consisted primarily of the design of its
patented locking clip and plunger, the design of the manufacturing processes
and equipment for production of the locking clip, the hiring of key
personnel, formulation of a marketing plan for the sale of its syringes, and
the negotiation of production and supply agreements with contract
manufacturers and suppliers of components to be used in the production of its
syringes. Accordingly, the Company has a limited operating history upon which
an evaluation of its business and prospects can be based. An investment in
the securities of the Company is subject to all of the risks involved in a
newly established business venture. Potential investors should be aware of
the problems, delays, expenses and difficulties encountered by companies at
this early stage of operations, many of which may be beyond the Company's
control, including but not limited to commencement of production, marketing
and product introduction, competition, market acceptance of the Company's
difficult to reuse syringes, and unanticipated problems and additional costs
relating to the development and testing of products. None of the Company's
officers have any experience in the manufacture or distribution of medical
devices. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Management."
4. Ability to Manage Growth. The Company contemplates a rapid expansion of
its business. If the Company were to experience significant growth in the
future, such growth would likely result in new and increased responsibilities
for management personnel and place significant strain upon the Company's
management, operating and financial systems and resources. To accommodate
such growth and compete effectively, the Company must continue to implement
and improve its operational, financial, management and information systems,
procedures and controls, and to expand, train and manage its personnel. There
can be no assurance that the Company's personnel, systems, procedures and
controls will be adequate to support the Company's future operations. Any
failure to implement and improve the Company's operational, financial,
management and information systems, procedures or controls or to expand,
train or manage employees, could materially and adversely affect the
Company's business, financial condition and results of operations. See "Use
of Proceeds," "Risk Factors -- Dependence on Key Personnel," "Business --
Employees" and "Management -- Directors, Executive Officers and Key
Employees."
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5. Government Regulation. The manufacture and distribution of medical
devices are subject to extensive regulation by the FDA and, in some
instances, by foreign and state governments. Approval by the FDA and foreign
government authorities is unpredictable and uncertain, and no assurance can
be given that the necessary approvals or clearances for the Company's
products will be granted on a timely basis or at all. Delays in receipt of,
or a failure to receive, such approvals or clearances, or the loss of any
previously received approvals or clearances, could have a materially adverse
effect on the business, financial condition and results of operations of the
Company. Furthermore, approvals that have been or may be granted are subject
to continual review, and later discovery of previously unknown problems may
result in product labeling restrictions or withdrawal of the product from the
market. Moreover, changes in existing requirements or adoption of new
requirements or policies could adversely affect the ability of the Company to
comply with regulatory requirements. In addition, there can be no assurance
that the Company will not be required to incur significant costs to comply
with applicable laws and regulations in the future. Failure to comply with
applicable laws or regulatory requirements could have a materially adverse
effect on the Company's business, financial position and results of
operations. See "Business -- Government Regulation."
FDA and State Regulation. Pursuant to the Federal Food, Drug, and Cosmetic
Act, as amended, and the regulations promulgated thereunder (collectively,
the "FDC Act"), the FDA regulates the clinical testing, manufacture,
labeling, sale, distribution and promotion of medical devices. Before a new
device can be introduced into the market, a manufacturer must obtain FDA
permission to market through either the 510(k) pre-market notification
process or the costlier, lengthier and less certain pre-market approval
("PMA") application process. The FDA has granted the Company's 510(k)
application for its 1cc locking clip syringe, which has been classified as a
Class II device under the FDC Act, and accordingly, the Company may market
and sell its 1cc locking clip syringe in the United States, subject to
compliance with other applicable FDA regulatory requirements. As a Class II
device, performance standards may be developed for the 1cc locking clip
syringe which the product would then be required to meet. Failure to meet
those standards would require the Company to discontinue the marketing of the
product. Furthermore, manufacturers of medical devices are subject to
recordkeeping requirements and required to report adverse experiences
relating to the use of the device. Device manufacturers also are required to
register their establishments and list their devices with the FDA and with
certain state agencies and are subject to periodic inspections by the FDA and
certain state agencies. The FDC Act requires devices to be manufactured in
accordance with good manufacturing practices ("GMP") regulations, which
impose certain procedural and documentation requirements upon the Company
with respect to manufacturing and quality assurance activities. The FDA
conducts periodic audits and surveillance of the manufacturing, sterilizing
and packaging facilities of medical device manufacturers to determine
compliance with GMP requirements. The failure of a medical device
manufacturer to be able to show in the audit or post-market surveillance that
it has adequately complied with GMP requirements can result in penalties or
enforcement proceedings being imposed on the manufacturer. Harmac's
facilities will be subject to extensive audits in the future, pursuant to
standard FDA procedure. No assurance can be given that when Harmac is audited
that it will be found to be in compliance with GMP requirements, or that if
it is not found in compliance, what penalties, enforcement procedures or
compliance effort will be levied on or required of Harmac and/or the Company.
Recently adopted GMP requirements, including those pertaining to design
control, are likely to increase the cost of GMP compliance. Noncompliance
with applicable FDA requirements, including GMP regulations, can result in,
among other things, fines, injunctions, civil penalties, recall or seizure of
products, total or partial suspension of production, failure of the
government to grant pre-market clearance or pre-market approval for devices,
withdrawal of marketing approvals, and criminal prosecution. The FDA also has
the authority to request repair, replacement or refund of the cost of any
device manufactured or distributed by the Company.
Foreign Regulations. The introduction of the Company's products in foreign
markets will subject the Company to foreign regulatory clearances which may
impose additional substantive costs and burdens. The Company's products are
required to satisfy international manufacturing standards required by the
International Standards Organization ("ISO") for sale in certain foreign
countries. Although Harmac expects to achieve ISO 9001 certification in the
first quarter of February 1997, until Harmac obtains ISO 9001 certification,
the Company will have difficulty selling to some export accounts,
particularly in Europe. International sales of medical
10
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devices are subject to the regulatory requirements of each country. The
regulatory review process varies from country to country. Many countries also
impose product standards, packaging requirements, labeling requirements and
import restrictions on devices. In addition, each country has its own tariff
regulations, duties and tax requirements.
6. Product Acceptance; Demand for Locking Clip Syringes. The Company
expects to derive a significant portion of its revenues from sales of locking
clip syringes and/or licensing of its intellectual property. Despite
increased public awareness of the risks associated with conventional
disposable syringes, of the major syringe manufacturers only Becton-Dickinson
is manufacturing a difficult to reuse syringe for sale to UNICEF and WHO.
Accordingly, the Company's future success and financial performance will
depend almost entirely on its ability to successfully market its locking clip
syringes. There can be no assurance that the Company's marketing efforts will
be successful or that sales of the Company's difficult to reuse syringes will
generate sufficient revenues for the Company to become profitable. Export
sales, particularly in Europe, may be adversely affected until the Company's
contract manufacturers are able to manufacture the Company's syringes in
accordance with manufacturing standards required by the International
Standards Organization. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business."
7. Licensing. The Company intends to license its patents and proprietary
manufacturing processes relating to its locking clip and other syringe
designs to established medical device manufacturers worldwide. Although the
Company has granted Sherwood an option for a non-exclusive license to
manufacture and sell the Company's locking clip syringe in the United States,
there can be no assurance that Sherwood will exercise the option, that others
will enter into license arrangements with the Company, or that the Company
will be successful in its licensing efforts. See "Business."
8. Dependence on Certain Customers. Relief agencies, including UNICEF and
WHO, administered almost one billion injections to women and children through
immunization programs in developing countries in 1995. Although UNICEF has
expressed an interest in placing an initial order with the Company for 20
million locking clip syringes, the Company does not have a legally binding
commitment from UNICEF, and there can be no assurance as to the number of
locking clip syringes which UNICEF will purchase from the Company, if any.
The Company has only sold samples of its locking clip syringes hand assembled
by Sherwood to UNICEF. In order to qualify for a commercial order, the
Company must deliver samples that meet UNICEF's acceptance criteria. The
failure of UNICEF or other UN health organizations to purchase the Company's
locking clip syringes in the quantities contemplated by past expressions of
intent would have a materially adverse effect on the Company's business,
financial condition and results of operations. See "Business."
Furthermore, in 1996, New York State enacted legislation authorizing a
limited number of pilot projects to test the practicality and effectiveness
of difficult to reuse syringes. Such pilot tests are to be conducted, subject
to funding, in state-operated facilities, such as prisons, hospitals, youth
detention facilities, and development centers. New York State officials have
expressed an intent to buy the Company's syringes. However, the Company does
not have a legally binding commitment from purchasing agents for any of the
New York state- operated facilities, and there can be no assurance as to the
number of locking syringes which New York state- operated facilities will
purchase from the Company, if any.
9. Dependence on Certain Suppliers. The Company has entered into a letter
of understanding with INSERPOR, a Portuguese syringe manufacturer which has
previously manufactured syringes distributed by UNICEF, for the assembly of
syringes ordered by UNICEF (if any), as long as INSERPOR can supply the
required volume of syringes. Although the Company plans to negotiate a
definitive supply agreement with INSERPOR as soon as INSERPOR demonstrates
that it can deliver components and finished syringes that satisfy quality
criteria, there can be no assurance that the Company will enter into a
definitive supply agreement with INSERPOR. If INSERPOR is unable to supply a
sufficient quantity of components, the Company would seek to purchase
additional quantities of components from alternative suppliers, such as
Sherwood. However, there can be no assurance that the Company would be able
to obtain sufficient quantities of the syringe and related components
required to fill orders from UNICEF from alternative suppliers. In addition,
the Company is dependent upon INSERPOR to supply the Company's proprietary
plunger which satisfies tolerance limits for assembly of its aspirating
syringe. If INSERPOR is unable to supply sufficient quantities of the
Company's proprietary plunger which satisfies such tolerance limits, the
Company will be required to obtain alternative sources
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of supply. The Company has commenced discussions with Harmac to mold the
aspirating plunger; however, there can be no assurance that the Company will
be able to obtain an alternative source of supply on acceptable terms.
Furthermore, if the Company is able to obtain an alternative source of
supply, there can be no assurance that production of its aspirating syringes
will not be delayed. The Company's failure to obtain an alternate supplier
for its proprietary plunger or delays resulting from the selection of an
alternate supplier could have a materially adverse effect on the Company's
business. See "Business -- Suppliers."
The Company is dependent upon Sherwood for supplying syringe component
sets for the production of its locking clip syringes for other customers.
Pursuant to its supply agreement with the Company, Sherwood is only obligated
to deliver 4,166,667 component sets per month. There can be no assurance that
Sherwood will be able to supply component sets in excess of that amount if
the Company receives orders for syringes in excess thereof, or that the
Company will be able to obtain additional component sets from alternative
sources of supply on favorable terms, if at all. Failure to obtain an
adequate supply of syringes and related components could result in the
cancellation of orders and consequently, could have a materially adverse
effect on the Company's business. The Company also is dependent upon Sherwood
to supply the Company's proprietary plunger which satisfies tolerance limits
for assembly of its non-aspirating syringe. If Sherwood is unable to supply
sufficient quantities of the Company's proprietary plunger which satisfies
such tolerance limits, the Company will be required to obtain alternative
sources of supply. The Company has commenced discussions with Harmac to mold
the non-aspirating plunger; however, there can be no assurance that the
Company will be able to obtain an alternative source of supply on acceptable
terms. See "Business -- Suppliers."
10. Dependence on Certain Assemblers. The Company has entered into a
manufacturing agreement with Harmac for the assembly of the Company's locking
clip syringes. The equipment which the Company has supplied Harmac with for
the assembly of 1cc syringes only is capable of producing 80 million syringes
per year. There can be no assurance that Harmac will produce sufficient
quantities of syringes, or that if Harmac is unable to do so, that the
Company will be able to arrange for production of syringes from other sources
on a timely basis on terms acceptable to the Company. See "Business --
Production."
The Company has entered into a letter of understanding with INSERPOR for
the assembly of the Company's non-aspirating, locking syringes for UNICEF and
other UN-related immunization programs, as long as INSERPOR can supply the
required volume of syringes. Although the Company plans to negotiate a
definitive agreement with INSERPOR as soon as INSERPOR demonstrates that it
can deliver components and finished syringes that satisfy quality criteria,
there can be no assurance that the Company will enter into a definitive
agreement with INSERPOR. INSERPOR is capable of producing 30 million
syringes, which is contingent upon modifications to existing assembly
equipment and additional equipment to subassemble the clip to the plunger
(clip assembly line), the cost of which is estimated at $225,000. The Company
expects to purchase the clip assembly line with a portion of the net proceeds
of the Offering. Although INSERPOR has manufactured syringes for UNICEF,
there can be no assurance that INSERPOR will produce sufficient quantities of
syringes, or that if INSERPOR is unable to do so, that the Company will be
able to arrange for production of syringes from other sources on a timely
basis on terms acceptable to the Company. See "Business -- Production."
11. Delays in Establishing Production Capability. Although the Company
expects to commence production of its locking clip syringes at Harmac's
facilities in the first quarter of 1997, there can be no assurance that the
commencement of production will not be delayed as a result of delays in
acquiring, installing and testing the equipment and tooling required for
production. The failure to timely commence production would delay receipt of
revenues and would have a materially adverse effect on the Company's
business, financial condition and results of operations.
12. Ability to Develop 3cc Syringe. The Company intends to develop 3cc
locking clip syringes for hospitals and health clinics in 1997, and
anticipates that production of the non-aspirating model will commence by
1998. In general, hospitals and health clinics use more 3cc syringes than 1cc
syringes, and may not be willing to purchase the Company's 1cc locking clip
syringes until such time as the Company is able to offer 3cc syringes.
However, there can be no assurance that the 3cc designs selected for
commercialization will be accepted by hospitals and health clinics. Moreover,
the Company has not yet selected a product design for its aspirating model,
nor has it selected a design for the assembly equipment or an engineering
firm to construct the equipment. The Company's failure to timely select a
design for an aspirating model, a design for assembly
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<PAGE>
equipment, or an engineering firm to construct, such assembly equipment could
delay the production and commercial introduction of the Company's 3cc
syringe. Depending on the design selected, the Company may be required to
obtain 510(k) pre-market approval from the FDA prior to commencing commercial
sales of its 3cc aspirating syringes in the United States. See "Business."
13. Uncertainty Regarding Patents and Protection of Proprietary
Technology; Risk of Future Litigation. The Company's success will depend, in
part, on the strength of its patents, as well as its ability to preserve its
trade secrets and operate without infringing the proprietary rights of
others. The Company's policy is to seek protection of its proprietary
position by, among other methods, filing United States and foreign patent
applications related to its technology, inventions and improvements that are
important to the development of its business. The Company holds four United
States patents, including patents for its locking clip and aspirating
plunger, and has filed patent applications for its locking clip in Canada,
Brazil, Mexico, certain European countries, Japan, South Korea, China, Russia
and Australia. In addition, the Company has acquired licensed rights for
United States patents on three other locking devices, which utilize different
locking apparatuses or methods than those claimed by the UNIVEC clip patents.
The Company licensed these patents to exclude others from using these
inventions and/or to develop a 3cc locking syringe. The Company has filed for
patent protection in certain European Countries for one of these licenses,
which may be used in connection with its 3cc non-aspirating syringe.
There can be no assurance that pending or future applications for patents
and trademarks will mature into issued patents, or that the Company will
continue to develop its own patentable technologies. Furthermore, there can
be no assurance that any of the Company's patents or patents that may be
issued in the future will not be challenged, invalidated or circumvented in
the future or that the rights granted thereunder will provide a competitive
advantage. In addition, patent applications filed in foreign countries and
patents granted in such countries are subject to laws, rules and procedures
that differ from those in the United States. Patent protection in such
countries may be different from patent protection provided by the laws of the
United States.
Patent applications in the United States are maintained in secrecy until
patents issue, and patent applications in foreign countries are maintained in
secrecy for a period after filing. Publication of discoveries in the
scientific or patent literature tends to lag behind actual discoveries and
the filing of related patent applications. Accordingly, there can be no
assurance that current and potential competitors and other third parties have
not filed or in the future will not file applications for, or have not
received or in the future will not receive, patents or obtain additional
proprietary rights that will prevent, limit or interfere with the Company's
ability to make, use or sell its products either in the United States or
internationally.
The medical device industry in general has been characterized by
substantial competition and litigation regarding patent and other proprietary
rights. The Company intends to vigorously protect and defend its patents and
other proprietary rights relating to its proprietary technology. Litigation
alleging infringement claims against the Company (with or without merit), or
instituted by the Company to enforce patents and to protect trade secrets or
know-how owned by the Company or to determine the enforceability, scope and
validity of the proprietary rights of others, is costly and time consuming.
If any relevant claims of third-party patents are upheld as valid and
enforceable in any litigation or administrative proceedings, the Company
could be prevented from practicing the subject matter claimed in such
patents, or would be required to obtain licenses from the patent owners of
each patent, or to redesign its products or processes to avoid infringement.
There can be no assurance that such licenses would be available or, if
available, would be available on terms acceptable to the Company or that the
Company would be successful in any attempt to redesign its products or
processes to avoid infringement. Accordingly, an adverse determination in a
judicial or administrative proceeding or failure to obtain necessary licenses
could prevent the Company from manufacturing and selling its products, which
would have a materially adverse effect on the Company's business, financial
condition and results of operations.
The Company also relies upon trade secrets, technical know-how and
continuing technological innovation to develop and maintain its competitive
position. There can be no assurance that competitors will not independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to the Company's proprietary technology, or that the
Company can meaningfully protect its rights in unpatented proprietary
technology. See "Business -- Patents and Proprietary Rights" and "Risk
Factors -- Competition."
14. Competition. The Company's principal competition is from manufacturers
of traditional disposable syringes. Becton-Dickinson and Company
("Becton-Dickinson"), Sherwood and Terumo Medical Corporation of
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Japan ("Terumo") control approximately 74%, 19% and 5%, respectively, or a
total of approximately 98%, of the worldwide syringe market, and are
substantially larger, more established and have significantly greater
financial, sales and marketing, distribution, engineering, research and
development and other resources than the Company. To the Company's knowledge,
only Becton-Dickinson and Bader & Partner Medizintechnik GmbH ("Bader"), a
German machine tool manufacturer, distribute commercially a line of difficult
to reuse syringes, none of which allow for aspiration. The Bader DestroJect
syringe and the Becton-Dickinson SOLOSHOT syringe were developed originally
for WHO-UNICEF immunization programs. There can be no assurance that the
major syringe manufacturers or others will not commence production of
difficult to reuse syringes, or that the Company will be able to successfully
compete in this market. See "Business -- Difficult to Reuse Syringes" and
"Business -- Competition."
15. Dependence on Third Parties for Marketing; Limited Marketing
Experience. The Company intends to sell its products primarily through sales
agents and third-party distributors and may, on a limited basis, sell
products independently. The Company has entered into a limited number of
agreements with sales agents for the sale of its products. There can be no
assurance that the Company will be able to obtain satisfactory arrangements
with sales agents or distributors or that the Company will generate
substantial revenues from sales by sales agents and distributors.
16. Reliance on Foreign Sales. The Company believes that a significant
portion of its revenues will be derived from the sale of its locking clip
syringes in foreign markets, which will result in the Company being subject
to risks associated with foreign sales, including economic or political
instability, shipping delays, fluctuations in foreign currency exchange
rates, custom duties and export quotas and other trade restrictions, any of
which could have a materially adverse effect on the Company's business.
Although the Company intends to negotiate confirmed (irrevocable) letters of
credit and to transfer product title to the buyer when delivered to the
shipper (f.o.b. warehouse), there is no assurance that such terms will be
acceptable to customers.
17. Product Liability. The manufacture and sale of medical products
exposes the Company to the risk of significant damages from product liability
claims. The Company maintains product liability insurance against product
liability claims in the amount of $5 million per occurrence and $5 million in
the aggregate. The Company also has applied for recall insurance, although
there can be no assurance that such coverage can be obtained at acceptable
cost. There can be no assurance that the coverage limits of the Company's
insurance policies will be adequate, that the Company will continue to be
able to procure and maintain such insurance coverage, that such insurance can
be maintained at acceptable costs, or that customers will be able to satisfy
indemnification claims. In addition, any successful claim against the Company
in an amount exceeding its insurance coverage could have a materially adverse
effect on its business, financial condition or results of operations.
18. Control of the Company; Ownership of Shares by Directors and
Officers. Upon completion of the Offering, officers and directors of the
Company will beneficially own in the aggregate approximately 43% of the
outstanding shares of the Company's Common Stock. Although these stockholders
may or may not agree on any particular matter that is the subject of a vote
of the stockholders, these stockholders may be effectively able to control
the outcome of any issues which may be subject to a vote of stockholders,
including the election of directors, proposals to increase the authorized
capital stock, or the approval of mergers, acquisitions, or the sale of all
or substantially all of the Company's assets. See "Security Ownership of
Certain Beneficial Owners and Management."
19. Dependence on Management. The Company is dependent for the conduct of
its business on the experience, abilities and continued services of Joel
Schoenfeld, Chairman of the Board and Chief Executive Officer of the Company,
Dr. Alan H. Gold, President and a Director of the Company, David Shonfeld,
Director of Research and Development and a Director of the Company, and David
Chabut, Chief Financial Officer of the Company. The Company is dependent upon
Joel Schoenfeld for strategy, marketing and general management, Dr. Alan H.
Gold for functional definition of its products, David Shonfeld for product
design to meet functional requirements and David Chabut for financial
management. Dr. Alan H. Gold is professionally employed by, and is the
President of, the Long Island Plastic Surgical Group, and he only works
part-time with the Company. The Company does not have an employment agreement
with Joel Schoenfeld or Dr. Alan H. Gold, or key-man insurance on the life of
any of its executive officers. The Company has applied for key-man insurance
on the lives of Joel Schoenfeld and David Chabut, each in the amount of
$1,000,000, and will enter into an employment
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agreement with Joel Schoenfeld prior to the Effective Date. However there can
be no assurance that such insurance can be obtained at acceptable cost.
Furthermore, there is no plan of succession if one or more of the Company's
officers dies or becomes disabled. The loss of the services of Joel
Schoenfeld, Dr. Alan H. Gold, David Shonfeld or David Chabut could have a
materially adverse effect on the Company. See "Management."
20. Need for Additional Financing. Although the Company anticipates that
the net proceeds of the Offering, together with cash flow from operations,
will be sufficient to finance its operations for the 12 months following the
Effective Date, there can be no assurance that the Company will not require
additional financing at an earlier date. This will depend upon the Company's
ability to generate sufficient sales of its products and the timing of
required expenditures. If the Company is required to obtain financing in the
future, there can be no assurance that such financing will be available on
terms acceptable to the Company, if at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
21. Underwriter's Potential Influence on the Company. The Company has
agreed that for three years from the Effective Date, the Underwriter may
designate one person for election to the Company's Board of Directors and
that the Company will reasonably cooperate with the Underwriter in respect of
such designation. The election of such designee, if any, may enable the
Underwriter to exert influence on the Company. The Underwriter has not
designated any individual for election to the Company's Board of Directors.
See "Underwriting."
22. Limitation on Director Liability. The Company's certificate of
incorporation provides that a director of the Company shall not be personally
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, with certain exceptions under Delaware law.
This may discourage stockholders from bringing suit against a director for
breach of fiduciary duty and may reduce the likelihood of derivative
litigation brought by stockholders on behalf of the Company against a
director. In addition, the Company's certificate of incorporation provides
for mandatory indemnification of directors and officers. See "Management --
Indemnification of Officers and Directors and Limitation on Directors'
Liability."
23. Absence of Dividends on Common Stock. Since inception, the Company has
not paid any cash dividends on its Common Stock and it does not anticipate
paying such dividends in the foreseeable future. The payment of dividends by
the Company is within the discretion of its Board of Directors and depends
upon the Company's earnings, capital requirements, financial condition and
other factors deemed relevant by the Board. The Company intends to retain
earnings, if any, to finance its operations. See "Dividends."
24. Dilution. Purchasers of Common Stock in the Offering will suffer
immediate dilution of $2.69 per share (or approximately 76.9%) in the net
tangible book value of their investment from the initial public offering
price of $3.50 per share of Common Stock. See "Dilution."
25. Authorization and Discretionary Issuance of Preferred Stock. The
Company's Certificate of Incorporation authorizes the issuance of 5,000,000
shares of "blank check" preferred stock with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder
approval, to issue preferred stock with dividend, liquidation, conversion,
voting or other rights which could decrease the amount of earnings and assets
available for distribution to holders of Common Stock and adversely affect
the relative voting power or other rights of the holders of the Company's
Common Stock. In the event of issuance, the preferred stock could be used,
under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company. Except for 2,500 shares of
Series A Preferred Stock authorized for issuance in exchange for the
cancellation of amounts due to Joel Schoenfeld, Flora Schoenfeld and two
corporation's affiliated with Mr. Schoenfeld (collectively, the "Schoenfeld
Parties"), and Dr. Alan Gold, and payment of dividends thereon in additional
shares of Series A Preferred Stock, the Company has no present intention to
issue any shares of its preferred stock. However, there can be no assurance
that the Company will not issue shares of preferred stock in the future. The
Company has agreed with the Underwriter that, except for issuances disclosed
in or contemplated by this Prospectus, it will not issue any securities,
including but no limited to any shares of preferred stock, for a period of 24
months following the Effective Date, without the prior written consent of the
Underwriter. See "Certain Transactions" and "Description of Securities --
Preferred Stock."
26. No Assurance of Public Market; Determination of Public Offering Price;
Possible Volatility of Market Price for the Common Stock and Warrants. Prior
to the Offering, there has been no public trading mar-
15
<PAGE>
ket for the Common Stock or the Warrants. Consequently, the initial public
offering price of the Common Stock and Warrants and the exercise price and
other terms of the Warrants were determined through negotiations between the
Company and the Underwriter and bear no relationship whatsoever to the
Company's assets, book value per share, results of operations or other
generally accepted criteria of value. The offering prices of the Common Stock
and Warrants, as well as the exercise price of the Warrants, should not be
construed as indicative of their value. There can be no assurance that an
active trading market for the Common Stock and Warrants will develop after
the Offering or that, if developed, it will be sustained. As a result,
investors will be exposed to a risk of a decline in the market prices of the
Common Stock and Warrants after the Offering. The market prices of the Common
Stock and Warrants following the Offering may be highly volatile as has been
the case with the securities of many emerging companies. The Company's
operating results and various factors affecting the medical device industry
may impact the market price of the Company's securities to a significant
degree. In addition, in recent years the stock market has experienced a high
level of price and volume volatility, and market prices for the securities of
many companies have experienced wide price fluctuations not necessarily
related to the operating performance of such companies. There can be no
assurance that the market price of the Common Stock and the Warrants will not
experience significant fluctuations or decline below the initial public
offering price.
27. Underwriter's Influence on the Market; Possible Limitations on Market
Making Activities. A significant number of shares of Common Stock and
Warrants may be sold to customers of the Underwriter. Such customers
subsequently may engage in transactions for the sale or purchase of such
securities through or with the Underwriter. The Underwriter has indicated
that it intends to act as a market-maker and otherwise effect transactions in
the Common Stock and Warrants. To the extent the Underwriter acts as a
market-maker in the Common Stock and Warrants, it may exert a dominating
influence in the markets for those securities. The prices and liquidity of
the shares of Common Stock and Warrants may be significantly affected to the
extent, if any, that the Underwriter participates in such markets.
Furthermore, the Underwriter may discontinue such activities at any time or
from time to time. The Underwriter also has the right to act as the Company's
exclusive agent in connection with any future solicitation of holders of
Warrants to exercise their Warrants. Unless granted an exemption by the
Securities and Exchange Commission from Rule 10-6 under the Exchange Act, the
Underwriter and any other soliciting broker-dealers will be prohibited from
engaging in any market making activities or solicited brokerage activities
with regard to the Common Stock and Warrants for a period of up to nine
business days prior to the solicitation of the exercise of any Warrants until
the later of the termination of such solicitation activity or the termination
of any right the Underwriter may have to receive a fee for the solicitation
of the Warrants. As a result, the Underwriter and such soliciting
broker-dealers may be unable to continue to make a market for the Common
Stock and the Warrants during certain periods while the Warrants are
exercisable. Such a limitation, while in effect, could impair the liquidity
and market price of the Common Stock and the Warrants. See "Underwriting."
28. Possible Delisting. Application has been made for the inclusion of the
shares of Common Stock and Warrants on The Nasdaq SmallCap Market. There can
be no assurance that the Common Stock and Warrants will qualify for quotation
on The Nasdaq SmallCap Market. Furthermore, assuming that the Common Stock
and Warrants are approved for quotation on The Nasdaq SmallCap Market, there
can be no assurance that the Company will be able to satisfy specified
financial tests and market related criteria required for continued quotation
thereon following the Offering. If the Company is unable to satisfy The
Nasdaq SmallCap maintenance criteria in the future, the Common Stock and
Warrants may be delisted from trading on The Nasdaq SmallCap Market, and if
delisted, trading, if any, would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or the "Electronic
Bulletin Board" of the National Association of Securities Dealers, Inc.
("NASD"), and, consequently, an investor could find it more difficult to
dispose of, or to obtain accurate quotations as to the price of, the
Company's securities.
The Nasdaq Stock Market has recently proposed amendments to its rules
increasing eligibility and maintenance criteria for The Nasdaq SmallCap
Market. Existing eligibility criteria for inclusion on The Nasdaq SmallCap
require, among other things, that an issuer have total assets of $4 million
and total equity of $2 million, and that the security to be listed has a
minimum bid price of $3.00 per share. The proposed amendment would require,
among other things, that an issuer have net tangible assets (i.e., total
assets less total liabilities and intangible assets) of $4 million (or
alternatively, net income in two of the most recent three fiscal years of at
16
<PAGE>
least $750,000, or a market capitalization of $50 million) and that the
security to be listed has a minimum bid price of $4.00 per share. Existing
maintenance criteria require, among other things, that an issuer have total
assets of $2 million and total equity of $1 million and that the listed
security has a minimum bid price of $1.00. The amendment would require, among
other things, that an issuer have net tangible assets of $2 million (or
alternatively net income of $500,000 in two of the most recent three fiscal
years, or a market capitalization of $35 million) and that the listed
security has a minimum bid price of $1.00. Adoption of the proposed
amendments, which are not expected to become effective until after the
completion of the Offering, would further increase the risk of having the
Company's Common Stock and Warrants delisted.
29. Risk of Low-Priced Securities. The regulations of the Securities and
Exchange Commission promulgated under the Exchange Act require additional
disclosure relating to the market for penny stocks in connection with trades
in any stock defined as a penny stock. Commission regulations generally
define a penny stock to be an equity security that has a market price of less
than $5.00 per share, subject to certain exceptions. Unless an exception is
available, those regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith and impose various sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors (generally institutions). In
addition, the broker-dealer must provide the customer with current bid and
offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, and monthly account statements
showing the market value of each penny stock held in the customer's account.
Moreover, broker-dealers who recommend such securities to persons other than
established customers and accredited investors must make a special written
suitability determination for the purchaser and receive the purchaser's
written agreement to a transaction prior to sale. If the Company's securities
become subject to the regulations applicable to penny stocks, the market
liquidity for the Company's securities could be severely affected. In such an
event, the regulations on penny stocks could limit the ability of broker-
dealers to sell the Company's securities and thus the ability of purchasers
of the Company's securities to sell their securities in the secondary market.
30. Shares Eligible for Future Sale. No assurance can be given as to the
effect, if any, that future sales of Common Stock, or the availability of
shares of Common Stock for future sales, will have on the market price of the
Common Stock from time to time. Sales of substantial amounts of Common Stock
(including shares issued upon the exercise of warrants or stock options), or
the possibility of such sales, could adversely affect the market price of the
Common Stock and Warrants and also impair the Company's ability to raise
capital through an offering of its equity securities in the future. Upon
completion of the Offering, the Company will have 2,619,907 shares of Common
Stock outstanding, of which only the 1,500,000 shares of Common Stock offered
hereby will be transferable without restriction under the Securities Act. The
remaining 1,119,907 shares, issued in private transactions, will be
"restricted securities" (as defined in Rule 144 promulgated under the
Securities Act) which may be publicly sold only if registered under the
Securities Act or if sold in accordance with an applicable exemption from
registration, such as Rule 144. In general, under Rule 144 as currently in
effect, subject to the satisfaction of certain other conditions, a person,
including an affiliate of the Company, who has beneficially owned restricted
securities for at least two years, is entitled to sell (together with any
person with whom such individual is required to aggregate sales), within any
three-month period, a number of shares that does not exceed the greater of 1%
of the total number of outstanding shares of the same class or, if the Common
Stock is quoted on The Nasdaq Stock Market or a national securities exchange,
the average weekly trading volume during the four calendar weeks preceding
the sale. A person who has not been an affiliate of the Company for at least
three months and who has beneficially owned restricted securities for at
least three years is entitled to sell such restricted shares under Rule 144
without regard to any of the limitations described above. Officers, directors
and other securityholders of the Company owning and/or having rights to
acquire in the aggregate 3,653,343 shares of Common Stock constituting
restricted securities, have entered into agreements with the Underwriter not
to sell or otherwise dispose of any securities of the Company, including
Common Stock, for a period of 24 months following the Effective Date (the
"Lock-Up Agreements"), without the prior written consent of the Underwriter,
which may be granted or withheld in the sole and absolute discretion of the
Underwriter; provided, however, that if during such 24 month period, the
Company's shares of Common Stock are subject to a tender offer and holders of
the Company's Common Stock (other than the current stockholders) agree to
tender a majority of the outstanding shares of Common Stock to the offeror,
then the Underwriter shall release all stockholders subject to the Lock-Up
Agreement from the restrictions imposed thereby solely for the purposes of
17
<PAGE>
tendering their shares of Common Stock to the offeror pursuant to the terms
of the tender offer. The Company has registered for resale pursuant to the
Selling Securityholder Prospectus (i) warrants to purchase 2,500,000 shares
of Common Stock (having terms identical to the Warrants offered hereby) and
the shares of Common Stock issuable upon exercise thereof and (ii) 33,436
shares of Common Stock issuable upon exercise of options, subject to the
Lock-Up Agreements. Following expiration of the term of the Lock-Up
Agreements, or the earlier release of the restrictions contained therein,
1,119,907 shares will become eligible for resale pursuant to Rule 144,
subject to the volume limitations and compliance with the other provisions of
Rule 144, assuming the sale of the shares pursuant to the Selling
Securityholder Prospectus. Furthermore, the holders of the Underwriters'
Warrants (including the securities issuable upon exercise thereof) have
demand and piggyback registration rights with respect to the shares of Common
Stock and Warrants issuable upon exercise of the Underwriters' Warrants. See
"Description of Securities -- Registration Rights," "Description of
Securities -- Shares Eligible for Future Sale," "Certain Transactions,"
"Underwriting" and "Selling Securityholder Offering."
31. Effect of Issuance of Common Stock Upon Exercise of Warrants and
Options; Possible Issuance of Additional Options. Immediately after the
Offering, assuming the Over-Allotment Option is not exercised, the Company
will have an aggregate of approximately 12,193,000 shares of Common Stock
authorized but unissued and not reserved for specific purposes and an
additional 10,187,093 shares of Common Stock unissued but reserved for
issuance (i) upon exercise of options (including options which may be granted
in the future pursuant to the Company's stock option plan), (ii) upon
exercise of warrants (including the Warrants), (iii) upon exercise of the
Underwriter's Warrants (and the Warrants included therein), (iv) upon
conversion of a 12 1/2% demand promissory note in the principal amount of
$125,000, and (v) upon conversion of the Company's Series A Preferred Stock.
All of such shares may be issued without any action or approval by the
Company's stockholders. Although there are no present plans, agreements,
commitments or undertakings with respect to the issuance of additional shares
or securities convertible into any such shares by the Company, any shares of
Common Stock issued would further dilute the percentage ownership of the
Company held by the public stockholders. The Company has agreed with the
Underwriter that, except for the issuances disclosed in or contemplated by
this Prospectus, it will not issue any securities, including but not limited
to any shares of Common Stock, for a period of 24 months following the
Effective Date, without the prior written consent of the Underwriter. See
"Underwriting."
The exercise of warrants or options and the sale of the underlying shares
of Common Stock (or even the potential of such exercise or sale) may have a
depressive effect on the market price of the Common Stock and the Warrants.
Moreover, the terms upon which the Company will be able to obtain additional
equity capital may be adversely affected since the holders of outstanding
warrants and options can be expected to exercise them, to the extent they are
able, at a time when the Company would, in all likelihood, be able to obtain
any needed capital on terms more favorable to the Company than those provided
in the warrants and options. See "Management -- Stock Option Plan,"
"Description of Securities" and "Underwriting."
32. Adverse Effect of Redemption of Warrants. Under certain conditions,
the Warrants may be redeemed by the Company with the prior written consent of
the Underwriter, at a redemption price of $.05 per Warrant upon not less than
30 days prior written notice to the holders of such Warrants, provided the
closing bid price of the Common Stock has been at least $8.00 for 20
consecutive trading days ending on the third day prior to the date the notice
of redemption is given. The Warrants will be exercisable until the close of
business on the day immediately preceding the date fixed for redemption. The
redemption of the Warrants could force the holders (i) to exercise the
Warrants and pay the exercise price at a time when it may be disadvantageous
for the holders to do so, (ii) to sell the Warrants at the then current
market price when they might otherwise wish to hold the Warrants or (iii) to
accept the redemption price, which is likely to be substantially less than
the market value of the Warrants at the time of redemption. See "Description
of Securities -- Warrants."
33. Need for Future Registration of Warrants; State Blue Sky Registration;
Exercise of Warrants. The Warrants will trade separately upon the completion
of the Offering. Although the Warrants will not knowingly be sold to
purchasers in jurisdictions in which the Warrants are not registered or
otherwise qualified for sale, purchasers may buy Warrants in the after-market
or may move to jurisdictions in which the Warrants and the shares of Common
Stock underlying the Warrants are not so registered or qualified. In this
event, the Company would be unable to issue shares of Common Stock to those
persons desiring to exercise their Warrants unless
18
<PAGE>
and until the Warrants and the underlying shares of Common Stock are
qualified for sale in jurisdictions in which such purchasers reside, or an
exemption from such qualification exists in such jurisdictions. There can be
no assurance that the Company will be able to effect any required
qualification.
The Warrants will not be exercisable unless the Company maintains a
current Registration Statement on file with the Commission through
post-effective amendments to the Registration Statement containing the
Prospectus. Although the Company has agreed to file appropriate
post-effective amendments to the Registration Statement containing the
Prospectus and to maintain a current Prospectus with respect to the Warrants,
there can be no assurance that the Company will file post-effective
amendments necessary to maintain a current Prospectus or that the Warrants
will continue to be so registered. See "Description of Securities --
Warrants."
19
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common
Stock and Warrants offered hereby, after deducting underwriting discounts and
other expenses of the Offering, are estimated to be $4,284,250 ($4,998,738 if
the Over-Allotment Option is exercised in full). The Company expects to use
the net proceeds of the Offering as follows:
<TABLE>
<CAPTION>
Approximate
Amount Percent
------------- ---------
<S> <C> <C>
Equipment(1) ..................................... $1,442,000 33.7%
Marketing, promotion and public relations(2) ..... 585,000 13.7%
Product development(3) ........................... 270,000 6.3%
Repayment of Bridge Notes ........................ 1,000,000 23.3%
Working capital and general corporate purposes(4) 987,250 23.0%
------------- ---------
Total .......................................... $4,284,250 100.0%
============= =========
</TABLE>
- ------
(1) Includes production equipment (mold and inserts, assembly machine, clip
attachment line, packaging machine and automatic loader), as well as
furniture, fixtures and equipment for a warehouse facility.
(2) Includes the cost of hiring and retaining a marketing director and expenses
relating to market research, promotion (including advertising) and public
relations.
(3) Includes the cost of retaining a research and development officer and the
cost of developing prototype parts.
(4) Includes working capital to support inventory and accounts receivable.
Additional proceeds from the exercise of the Over-Allotment Option and the
Warrants will be added to the Company's working capital and be available for
general corporate purposes. Pending application, the Company will invest the
net proceeds of the Offering in United States government securities, short
term certificates of deposit, money market securities, investment grade
commercial paper or other short-term interest-bearing investment-grade
securities.
The Company has not determined the specific allocation of the net proceeds
within each of the various uses described above. Specific allocations of such
net proceeds will ultimately depend on the development of the Company's
products and the related technology and commercial acceptance of its
products. The Company anticipates, based on currently proposed plans and
assumptions relating to its operations, that the net proceeds of the Offering
will be sufficient to satisfy the Company's anticipated cash requirements for
at least 12 months following the Effective Date.
20
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
September 30, 1996, and (ii) such capitalization, as adjusted after giving
effect to the issuance and sale of the 1,500,000 shares of Common Stock and
2,250,000 Warrants in the Offering and the application of the net proceeds
thereof. The information set forth below should be read in conjunction with
the consolidated financial statements and notes thereto appearing elsewhere
herein and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
September 30, 1996
-------------------------------
Actual As Adjusted
------------- --------------
<S> <C> <C>
Unearned income in connection with Supply and License Agreements .. $ 1,683,788 $ 1,683,788
Notes due stockholders and affiliates (1) ......................... 1,385,638 --
Notes due officers (2) ............................................ 732,135 644,391
Stockholders' equity:
Preferred Stock, par value $0.001; 4,997,500 shares authorized;
none issued and outstanding at September 30, 1996, and as adjusted -- --
Series A 8% Cumulative Convertible Preferred Stock, par value
$0.001; 2,500 shares authorized; none issued and outstanding at
September 30, 1996; and 1,269 shares, as adjusted (3) ............ -- 1
Common Stock, par value $0.001; 25,000,000 shares authorized;
1,059,001 shares issued and outstanding at September 30, 1996 (4);
and 2,619,907 shares issued and outstanding, as adjusted (5) ..... 1,059 2,620
Additional paid-capital ........................................... 433,941 4,250,258 (6)
Accumulated deficit ............................................... (3,815,158) (2,046,353)(7)
Deferred offering costs ........................................... (27,500) --
------------- --------------
Stockholders' equity (deficit) .................................... (3,407,658) 2,206,526
------------- --------------
Total capitalization ............................................ $ 393,903 $ 4,534,705
============= ==============
</TABLE>
- ------
(1) Includes $1,155,565 payable to Joel Schoenfeld, Flora Schoenfeld and two
companies affiliated with Mr. Schoenfeld (the "Schoenfeld Parties"),
$113,700 payable to Dr. Alan H. Gold and $116,373 payable to John Frank, a
director of the Company. On December 31, 1996, the Company issued 1,155
shares and 114 shares of Series A Preferred Stock to the Schoenfeld Parties
and Dr. Gold, respectively, in exchange for the cancellation of the amounts
payable to them. At the Closing, the Company will issue 33,250 shares of
Common Stock to Mr. Frank in exchange for the cancellation of the amount
payable to him. See "Certain Transactions" and "Description of Securities
-- Series A Preferred Stock."
(2) Includes amounts accrued for compensation payable to Joel Schoenfeld
($644,391) and David Chabut ($75,244), and amounts payable to Mr. Chabut
for certain advances ($12,500). The Company has agreed that it will not pay
such compensation due Mr. Schoenfeld prior to the second anniversary of the
Closing, without the prior written consent of the Underwriter. Mr. Chabut
exercised options to purchase 16,143 shares of Common Stock in December
1996 and paid the exercise price thereof by cancellation of a portion of
amounts payable to him, and he has advised the Company that he intends to
exercise options to purchase an additional 4,370 shares of Common Stock at
the Closing and pay the exercise price thereof with the balance of the
amount payable to him. See "Management -- Summary Compensation Table" and
"Certain Transactions."
(3) Represents shares issued to the Schoenfeld Parties and Dr. Alan H. Gold in
exchange for the cancellation of amounts payable to them. See footnote (2)
above, "Certain Transactions" and "Description of Securities -- Series A
Preferred Stock."
(4) Does not include (i) 76,185 shares reserved for issuance upon exercise of
outstanding options, at an exercise price of $3.50, expiring at various
dates from February 22, 1999 through June 30, 1999; (ii) 35,715 shares
reserved for issuance upon conversion of the Company's 12 1/2% demand
promissory note in the principal amount of $125,000 following the Closing;
(iii) 33,250 shares to be issued at the Closing to a director of the
Company in exchange for the cancellation of amounts payable to him
($116,373 as of September 30, 1996); and (iv) 7,143 shares reserved for
issuance to a consultant of the Company in exchange for the cancellation of
$25,000 of indebtedness. See "Certain Transactions."
21
<PAGE>
(5) Includes (i) 33,250 shares issuable to a director of the Company at the
Closing in exchange for the cancellation of amounts payable to him
($116,373 as of September 30, 1996); (ii) 7,143 shares issued to a
consultant in December 1996 in exchange for the cancellation of $25,000 of
indebtedness; and (iii) 16,143 shares issued to an officer of the Company
in December 1996, and 4,370 shares to be issued to said officer at Closing,
upon exercise of stock options. Does not include (i) 55,672 shares reserved
for issuance upon exercise of outstanding options, at an exercise price of
$3.50, which expire at various dates from February 22, 1996 through June
30, 1999; (ii) 35,715 shares reserved for issuance upon conversion of the
Company's 12 1/2% demand promissory note in the principal amount of
$125,000 following the Closing; and (iii) 4,750,000 shares to be reserved
for issuance upon exercise of the Warrants and the warrants to be issued
upon automatic conversion of the Bridge Warrants on the Effective Date. See
"Certain Transactions" and "Description of Securities."
(6) Gives effect to the reclassification of $1,948,805 of S corporation
undistributed losses to paid-in capital.
(7) Give effect to the write-off of debt issuance costs of $180,000 associated
with the Bridge Financing.
DILUTION
At September 30, 1996, the net tangible book value (deficit) of the
Company was ($2,312,893), or approximately ($2.14) per share of Common Stock,
as adjusted for (i) the cancellation of approximately $1,269,000 due to
certain stockholders and affiliates of the Company in exchange for 1,269
shares of Series A Preferred Stock in December 1996, (ii) the exercise of
options to purchase 16,143 shares by an officer of the Company in December
1996, (iii) the cancellation of $25,000 of indebtedness payable to a
consultant in exchange for 7,143 shares of Common Stock in December 1996, and
(iv) the issuance and sale during the fourth quarter of 1996 of $1,000,000
principal amount of Bridge Notes and Bridge Warrants to purchase 2,500,000
shares of Common Stock, for a total purchase price of $1,000,000, in the
Bridge Financing. The net tangible book value of the Company is the tangible
assets (total assets less intangible assets, deferred financing and offering
costs) less total liabilities. Dilution per share represents the difference
between the amount paid per share of Common Stock by investors in the
Offering, attributing no value to the Warrants.
After giving effect to (i) the issuance and sale of 1,500,000 shares of
Common Stock and 2,250,000 Warrants in the Offering, (ii) the cancellation of
amounts payable to a director of the Company ($116,373 as of September 30,
1996) at Closing in exchange for the issuance of 33,250 shares of Common
Stock, (iii) the cancellation of amounts payable to an officer of the Company
($15,295) at Closing in exchange for the issuance of 4,370 shares of Common
Stock, but without taking into account any other changes in net tangible book
value subsequent to September 30, 1996, other than those described in the
immediately preceding paragraph, the pro forma net tangible book value of the
Company as of September 30, 1996 would have been $2,130,526, or $0.81 per
share. This represents an increase in net tangible book value per share of
$2.95 to the Company's existing stockholders and an immediate dilution of
$2.69 per share (or 76.9% of the offering price) to new stockholders
purchasing shares of Common Stock in the Offering. The following table
illustrates this dilution on a per share basis:
<TABLE>
<CAPTION>
<S> <C> <C>
Public offering price per share ................ $3.50
Net tangible book value before Offering ........ ($2.14)
Increase attributable to new investors ......... $2.95
---------
Pro forma net tangible book value after Offering 0.81
-------
Dilution to new investors ...................... $2.69
=======
</TABLE>
22
<PAGE>
The information in the following table summarizes through September 30,
1996, as adjusted for (A) the issuance of 33,250 shares of Common Stock to a
director of the Company at the Closing in exchange for the cancellation of
amounts due to him ($116,373 as of September 30, 1996), (B) 7,143 shares
issued to a consultant in December 1996 in exchange for the cancellation of
$25,000 of indebtedness, and (C) the issuance of 16,143 shares and 4,370
shares of Common Stock to an officer of the Company in December 1996 and at
Closing, respectively, upon exercise of options, (i) the number and
percentages of shares of Common Stock purchased from the Company, (ii) the
amount and percentage of cash consideration paid and (iii) the average price
per share paid to the Company, by existing stockholders and by new investors
pursuant to the Offering:
<TABLE>
<CAPTION>
Average
Price
Shares Purchased Total Consideration Paid Per Share
----------------------- ------------------------ -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders 1,119,907 42.7% $ 648,168 11.0% $0.58
New investors ....... 1,500,000 57.3% 5,250,000 89.0% $3.50
----------- -------- ------------ -------- -----------
2,619,907 100.0% $5,898,168 100.0%
</TABLE>
The information in the foregoing table does not give effect to 55,672
shares reserved for issuance upon exercise of outstanding options, at an
exercise price of $3.50 per share, which expire at various dates from
February 22, 1996 through June 30, 1999, (ii) 35,715 shares reserved for
issuance upon conversion of the Company's 12 1/2% demand promissory note in
the principal amount of $125,000 following the Closing, (iv) 4,750,000 shares
to be reserved for issuance upon exercise of the Warrants and the warrants to
be issued upon automatic conversion of the Bridge Warrants on the Effective
Date, (v) 562,500 shares reserved for issuance upon exercise of the
Over-Allotment Option and the Warrants included therein, and (vi) 375,000
shares reserved for issuance pursuant to the Underwriter's Warrants and the
Warrants included therein. See "Capitalization" and "Underwriting."
DIVIDEND POLICY
The payment of dividends by the Company is within the discretion of its
Board of Directors and depends in part upon the Company's earnings, capital
requirements and financial condition. Since its inception, the Company has
not paid any cash dividends on its Common Stock and does not anticipate
paying such dividends in the foreseeable future. The Company intends to
retain earnings, if any, to finance its operations.
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial information
regarding the results of operations and financial position of the Company for
the periods and at the dates indicated. The selected consolidated financial
information as of December 31, 1995 and for the fiscal years ended December
31, 1994 and 1995 have been derived from the audited consolidated financial
statements of the Company for those fiscal years. The selected consolidated
financial information as of September 30, 1996 and for the nine months ended
September 30, 1995 and 1996 are derived from the unaudited interim
consolidated financial statements of the Company and include, in the opinion
of management, all adjustments (consisting only of normal recurring
adjustments) necessary for the fair presentation of its results of operations
for such periods. The results of operations for the nine months ended
September 30, 1996, are not necessarily indicative of the results to be
expected for the full year. This information should be read in conjunction
with the Company's consolidated financial statements (including the notes
thereto) and the Company's unaudited interim consolidated financial
statements appearing elsewhere herein, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31 September 30
---------------------------- ------------------------------
1994 1995 1995 1996
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Sales ..................................... $ -- $1,106,930 $ -- $ 282,000
Cost of sales ............................. -- 1,016,530 -- 223,931
------------ ------------ ------------ --------------
Gross profit ............................. -- 90,400 -- 58,069
------------ ------------ ------------ --------------
Expenses:
Marketing ................................ 80,162 115,431 111,346 97,699
Product development ...................... 202,881 299,498 258,736 55,428
General and administrative ............... 331,396 433,012 374,193 687,856
Interest ................................. 47,414 153,473 126,532 149,877
Royalties ................................ -- 35,000 25,000 70,000
------------ ------------ ------------ --------------
Total expenses ......................... 661,853 1,036,414 895,807 1,060,860
------------ ------------ ------------ --------------
Net loss .................................. ($ 661,853) ($ 946,014) ($ 895,807) ($1,002,791)
Net loss per common share ................. ($ 0.65) ($ 0.89) ($ 0.85) ($ 0.95)
Weighed average number of common and common
equivalent shares outstanding ............ 1,025,608 1,059,001 1,056,218 1,059,001
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
December 31, 1995 September 30, 1996
----------------- ------------------
<S> <C> <C>
Working capital (deficit) ..... ($1,462,499) ($ 536,442)
Total assets .................. 606,917 1,234,486
Accumulated deficit ........... (2,812,367) (3,815,158)
Stockholders' equity (deficit) (2,377,367) (3,407,658)
</TABLE>
24
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis should be read in conjunction with
the consolidated financial statements, including the notes thereto, appearing
elsewhere in this Prospectus.
Since inception, the Company's operations have consisted primarily of the
design, development, testing and evaluation of its locking clip syringes,
production processes, and production equipment, which include molds, inserts
and assembly machines. As of September 30, 1996, UNIVEC had no sales of its
locking clip syringes, except for sales of samples to UNICEF, which were
hand-assembled by Sherwood. In the fourth quarter of 1995 and in the first
quarter of 1996, the Company sold lancets manufactured by Sherwood to one
distributor, which resold the lancets to retailers in Canada and the United
States. In the second quarter of 1996, the Company entered into an agreement
to buy syringe components from Sherwood (the "Sherwood Supply Agreement"). In
connection with the Sherwood Supply Agreement, Sherwood sold all of its
right, title and interest in and to the production mold for the plunger,
including the mold inserts and insert base (together, the "Plunger Mold") to
the Company in consideration for an option to enter into a non-exclusive
license to manufacturer and sell the Company's locking clip syringes in the
United States. The Company also entered into a lease agreement with Sherwood
pursuant to which it leased back the Plunger Mold to Sherwood (the "Equipment
Lease") for a period of six years for use in the manufacture and production of
the plungers as part of the assembly of single-use syringes using the Company's
proprietary design specifications. Sherwood is required to make aggregate rental
payments of $1,946,016 in 36 equal consecutive monthly installments of $54,056,
over the first three years of the term of the Equipment Lease. In consideration
for said lease payments, the Company agreed to pay Sherwood 14.925% of the
cumulative invoiced amount of components in excess of $3,350,000 up to a maximum
invoiced amount of $6,700,000 (or a maximum of $500,000). In addition, certain
stockholders of the Company agreed to pay Sherwood up to $1 million (less
14.925% of each dollar paid by the Company under the Sherwood Supply Agreement)
in the event the Company fails to pay a cumulative invoiced amount of $6.7
million over the first three years of the Sherwood Supply Agreement. In July
1996, the Company sold the Plunger Mold, subject to the Equipment Lease,
together with the Company's right to the payments under the Equipment Lease, to
a financial institution for net cash consideration of $1,600,000 ($1,837,904
less expenses of approximately $238,000). In connection with such sale, the
financial institution agreed to sell the Plunger Mold back to the Company for a
nominal amount upon expiration of the term of the Equipment Lease. The Company
has deferred recognition of approximately $1,684,000, which equals the net
proceeds from the lease payments received from Sherwood and the 34 payments sold
to a financial institution. Unearned income in connection with these agreements
will be recognized upon the sale of the Company's locking clip syringes which
include components supplied by Sherwood under the Sherwood Supply Agreement.
See "Business -- Suppliers."
In the United States, the Company's products are subject to regulation by
the FDA. In December 1994, the Company was granted 510(k) pre-marketing
approval by the FDA for its locking clip syringe. In addition, the FDA
requires the Company to be in compliance with GMP requirements and to
demonstrate that its devices are safe and effective. At any time, the FDA can
audit the Company's compliance with GMP requirements and can require the
Company to demonstrate that its products are safe and effective. See "Risk
Factors -- Government Regulation."
The Company has incurred net losses for each period since its inception.
The Company expects operating losses to continue until such time, if ever, as
the Company's locking clip syringes achieve sufficient market acceptance to
generate significant sales. See "Risk Factors -- Continuing Losses;
Accumulated Deficit; Working Capital Deficit," " Risk Factors -- Limited
Operating History" and "Risk Factors -- Product Acceptance; Demand for
Locking Clip Syringes."
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1996 As Compared to Nine Months Ended
September 30, 1995
Sales. Sales for the nine months ended September 30, 1996 (the "1996
interim period") were approximately $282,000. Although the Company had no
sales of its locking clip syringes during the 1996 interim period, it sold
lancets manufactured by Sherwood to one distributor, which resold the lancets
to retailers in Canada and the United States. The Company had no sales of any
product during the nine months ended September 30, 1995 (the "1995 interim
period").
25
<PAGE>
Cost of Sales. Cost of sales for the 1996 interim period was approximately
$224,000, and includes the purchase of lancets from Sherwood and freight
charges. Since the Company had no sales in the 1995 interim period, cost of
sales for that period was zero.
Marketing. Marketing expenses for the 1996 interim period (approximately
$98,000) decreased by approximately $13,000, or 12%, as compared to the 1995
interim period (approximately $111,000), due to reduced spending on
advertising and promotion.
Product Development. Product development expense for the 1996 interim
period (approximately $55,000) decreased by approximately $204,000, or 79%,
as compared to the 1995 interim period (approximately $259,000), due to a
reduction in both legal fees incurred for patent filings and expenses
relating to product and equipment development for its locking clip syringe.
General and Administrative. General and administrative expenses for the
1996 interim period (approximately $688,000) increased by approximately
$314,000, or 84%, as compared to the 1995 interim period (approximately
$374,000), due to the hiring in September 1995 of a full-time financial
officer and legal fees incurred in connection with the Sherwood Supply
Agreement, financing transactions and general corporate matters.
Interest. Interest expense for the 1996 interim period (approximately
$150,000) increased by approximately $23,000, or 18%, as compared to the 1995
interim period (approximately $127,000), due to increases in notes payable
weighted for the period of time the indebtedness was outstanding.
Royalties. Royalty expense for the 1996 interim period ($70,000) increased
by $45,000, or 180%, as compared to the 1995 interim ($25,000) as a result of
certain payments made to secure licensed rights for patents covering two
locking devices for hypodermic syringes utilizing locking apparatuses or
methods different than those covered by the Company's locking clip patents.
During the 1995 interim period, the Company made payments to secure licensed
rights relating to another patent. The Company licensed these patents to
exclude others from using these inventions and/or to develop a 3cc locking
syringe.
Net Loss. The net loss for the 1996 interim period (approximately
$1,003,000) increased by approximately $107,000, or 12%, as compared to the
net loss for the 1995 interim period (approximately $896,000), due primarily
to higher royalty and general and administrative expenses. This increase was
offset partially by gross profits from resales. Because the Company elected
to be treated as an S corporation for 1995, the net loss for that year was
passed through to its stockholders. The accumulated deficit of approximately
$1,866,000 at the end of Fiscal 1994, when the Company was treated as a C
corporation, is available to offset future net income after the Company's tax
status returns to a C corporation in 1997 as a result of the Offering.
Fiscal Year Ended December 31, 1995 As Compared to Fiscal Year Ended December
31, 1994
Sales. Sales for the fiscal year ended December 31, 1995 ("Fiscal 1995"),
were approximately $1,107,000 and resulted primarily from resales of lancets
manufactured by Sherwood to one distributor and sales of syringes
manufactured by INSERPOR, which did not utilize the Company's locking clip.
During Fiscal 1995, the Company had no sales of its locking clip syringes.
During the fiscal year ended December 31, 1994 ("Fiscal 1994"), the Company
had no sales of any product.
Cost of Sales. Cost of sales for Fiscal 1995 was approximately $1,017,000,
and includes the purchase of lancets and syringes, as well as freight
charges. Since the Company had no sales in Fiscal 1994, cost of sales for
that year was zero.
Marketing. Marketing expenses for Fiscal 1995 (approximately $115,000)
increased by approximately $35,000, or 44%, as compared to Fiscal 1994
(approximately $80,000). The increase is due primarily to increased
advertising and other marketing expenses.
Product Development. Product development expense for Fiscal 1995
(approximately $299,000) increased by approximately $96,000, or 48%, as
compared to Fiscal 1994 (approximately $203,000). The increase is due
primarily to legal fees for patent filings and product and equipment
development for the Company's locking clip syringe.
26
<PAGE>
General and Administrative. General and administrative expenses for Fiscal
1995 (approximately $433,000) increased by approximately $102,000, or 31%, as
compared to Fiscal 1994 (approximately $331,000). The increase is due
primarily to increased staffing and related payroll expenses.
Interest. Interest expense for Fiscal 1995 (approximately $153,000)
increased by approximately $106,000, or 225%, as compared to Fiscal 1994
(approximately $47,000). The increase is due primarily to increased
indebtedness ($765,000) incurred in connection with the purchase of assembly
equipment and operations. In July 1996, the Company repaid indebtedness of
approximately $632,000, plus accrued interest of approximately $32,000 with
the proceeds from the sale of the Equipment Lease to a financial institution.
Royalties. Royalty expense for Fiscal 1995 was $35,000 as a result of
certain payments made to secure licensed rights to a patent covering a
locking device for hypodermic syringes, which utilizes a locking apparatus or
method different than that covered by the Company's locking clip patents. The
Company licensed this patent to exclude others from using this invention
and/or to develop a 3cc locking syringe. The Company had no royalty expense
for Fiscal 1994.
Net Loss. The net loss for Fiscal 1995 (approximately $946,000) increased
by approximately $284,000, or 43%, as compared to the net loss for the Fiscal
1994 (approximately $662,000) due to increased expenses for all expense
categories. This increase was offset partially by gross profits from resales
of lancets and syringes, which do not utilize the Company's locking clip.
Because the Company elected to be treated as an S corporation for Fiscal
1995, the net loss for that year was passed through to its stockholders. The
accumulated deficit of approximately $1,866,000 at the end of Fiscal 1994,
when the Company was treated as a C corporation for tax purposes is available
to offset future net income after the Company's tax status returns to a C
corporation in 1997 as a result of the Offering.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company's expenses have exceeded gross profits from
resales of hypodermic devices. Operations have been funded primarily from (a)
advances from affiliates and stockholders, the issuance of notes, and the
sale of equity securities (approximately $2,421,000) and (b) the receipt of
two payments under the Sherwood Lease Agreement and the assignment of the
remaining 34 payments (approximately $1,684,000). In the fourth quarter of
1996, the Company received net proceeds of $853,000 from the issuance and
sale of $1,000,000 principal amount of Bridge Notes and Bridge Warrants to
purchase 2,250,000 shares of Common Stock, for a total purchase price of
$1,000,000. See "Business -- Supplies," "Certain Transactions" and
"Description of Securities -- Bridge Financing."
The Company used cash from operating activities in Fiscal 1995 and the
1996 interim period. Net losses in each of these periods greatly affected net
cash from operations. In Fiscal 1995, the Company used cash from operations
of approximately ($530,000): (a) the increases to cash from operating
activities were mostly from accounts payable and accrued expenses of
approximately $426,000 (including $171,000 payable to two officers) and
issuance of Common Stock for services of $35,000, and (b) the decreases to
cash from operating activities were primarily from a net loss of
approximately ($946,000) and accounts receivable of approximately ($63,000).
In the 1996 interim period, the Company used cash from operations of
approximately ($658,000): (a) the increases to cash from operating activities
were mostly from accounts payable and accrued expenses of approximately
$507,000 (including $97,000 payable to two officers), and (b) the decreases
to cash from operating activities were primarily from a net loss of
approximately ($1,003,000), accounts receivable of approximately ($91,000),
and inventory of syringe components available for production of approximately
($86,000).
The Company's investing activities have consisted primarily of
expenditures for production equipment, which totaled approximately $374,000
and $449,000 in Fiscal 1995 and the 1996 interim period, respectively. The
expenditures for Fiscal 1995 and the 1996 interim period were for assembly
equipment and tools and dies to produce the Company's proprietary clip. As of
September 30, 1996, the Company is committed to pay the balances of these
purchase orders (approximately $135,000) in order to take delivery of this
production equipment for its first syringe line located at Harmac in Buffalo,
New York. The Company intends to use a portion of the net proceeds from the
Bridge Financing to pay for this commitment. The Company intends to use a
portion of the net proceeds of the Offering to purchase a clip-attachment
line for INSERPOR in Portugal, a second production line for Harmac in
Buffalo, New York, and furniture, fixtures and equipment for a warehouse
facility (approximately $1,442,000).
27
<PAGE>
Cash provided by financing activities from inception through September 30,
1996 is comprised of (a) advances from affiliates and stockholders with
accrued interest of approximately $1,386,000, (b) the sale of equity
securities of approximately $370,000, (c) the issuance of notes of
approximately $915,000, (d) notes due officers of approximately $732,000
(including $720,000 for unpaid compensation), and (e) the proceeds of two
lease payments under the Equipment Lease as well as the assignment of the
remaining 34 lease payments of approximately $1,684,000. The Company used
part of the proceeds from the sale of Equipment Lease payments to repay notes
(including accrued interest) of approximately $632,000 and bank debt of
approximately $250,000.
The Company expects to incur additional operating losses and cash
requirements at least through 1997. These losses will continue until such
time as the Company builds up sufficient sales to offset expenses, which
include continuing product and machine development for new syringe products.
The timing and amounts of these expenditures will depend on many factors,
some of which are beyond the Company's control, such as the progress of the
Company's product development projects and market acceptance of the Company's
products. The Company expects that the net proceeds of the Offering, together
with cash flow from operations, will be sufficient to finance its operations
for the 12 months following the Effective Date.
The Company's consolidated financial statements for the year ended
December 31, 1995, indicate that there is substantial doubt about the
Company's ability to continue as a going concern due to the Company's need to
attain profitable operations and to obtain adequate long-term financing. See
Note 2 of Notes to the Company's consolidated financial statements appearing
elsewhere herein.
28
<PAGE>
BUSINESS
UNIVEC develops and markets safety hypodermic syringes designed to protect
the healthcare worker and patient against cross-infection. The Company also
sells and intends to develop other hypodermic devices. The Company has
commenced marketing its 1cc locking clip syringes, which are designed to make
accidental or deliberate reuse difficult, and plans to distribute them
beginning in the first quarter of 1997. The accidental or deliberate reuse of
syringes is a frequent cause of the spread of the human immunodeficiency and
hepatitis viruses, as well as other blood-borne pathogens. The Company has
received 510(k) clearance from the U.S. Food and Drug Administration to
market its locking clip syringes in the United States.
In addition to marketing its safety syringes, the Company resells medical
devices of other companies (e.g., traditional disposable syringes and
lancets, which are hypodermic devices used in conjunction with blood
testing). To date, the Company's revenues have been derived almost
exclusively from resales of traditional disposable devices and lancets. The
Company seeks to resell other medical devices that promote safety and
complement its hypodermic syringes.
PROBLEMS ASSOCIATED WITH TRADITIONAL DISPOSABLE SYRINGES
Accidental or deliberate reuse of disposable syringes poses a serious risk
of transmitting HIV-AIDS, hepatitis and other blood-borne pathogens for
patients and injection drug users. Disposable syringes are used traditionally
in developed countries and by many relief agencies such as UNICEF and WHO.
Intravenous drug users, who share syringes or use syringes discarded by
hospitals, medical clinics and laboratories, doctors or diabetic patients,
are extremely susceptible to HIV, hepatitis and other blood-borne pathogens.
An article in the May 1996 American Journal of Public Health for Disease
Control written by an epidemiologist for the Center for Disease Control and
Prevention estimates that nearly half of all new HIV infections are occurring
in intravenous drug users ("IDUs"). The article indicates that in New York
City the number of IDUs at risk (69,000) exceeds the number of men who have
sex with other men at risk ("MSM"), and that the number of IDUs at risk in
Chicago (10,500) and Detroit (3,460) is 87% and 71%, respectively, of the
number of MSMs at risk in those cities.
Relief agencies, including UNICEF and WHO, administered almost a billion
injections to women and children through immunization programs in developing
countries in 1995. WHO reported that surveys carried out in four of its six
regions indicated that up to a third of immunization injections were
unsterile. But immunization injections account for less than 10% of
injections administered within the health sector. The United Nations
estimates that more than half of all non-immunization injections in
developing countries are unsafe. According to an article in the New York
Times on July 7, 1996, an estimated 21.8 million adults and children
worldwide are infected with HIV, 90% of whom live in developing countries.
As a result of the findings in the United States and developing countries,
public health officials, including C. Everett Koop (the former Surgeon
General of the United States), have encouraged the medical industry to
develop safer syringes to prevent the spread of blood-borne pathogens, such
as HIV and hepatitis. In 1995, the House of Delegates -- American Medical
Association requested "manufacturers of disposable hypodermic needles and
syringes to adopt designs to prevent reuse and to include in the packaging
clear directions for their correct disposal." In late 1995, UNICEF
recommended "the use of auto-destruct syringes instead of disposable, single
use syringes in order to avoid the hazards of unsafe injection practices." In
1996, Brazil adopted a law requiring disposable syringes manufactured or
marketed in that country to include a safety device to prevent its reuse.
During 1996, New York State enacted legislation authorizing a limited number
of pilot projects to test the practicality and effectiveness of difficult to
reuse syringes. Such pilot tests are to be conducted, subject to funding, in
state-operated facilities, such as prisons, hospitals, youth detention
facilities and development centers.
As a result of the increase in the incidence of HIV-AIDS cases, there has
also been considerable discussion concerning over-the-counter sales of
non-prescription syringes and needle exchange programs, in which intravenous
drug users exchange used syringes for sterile syringes. However, political
and social concerns that over-the-counter sales of non-prescription syringes
and needle exchange programs encourage and condone illegal drug
29
<PAGE>
use have limited the access of intravenous drug users to sterile syringes,
including those with the added safety feature of a locking device to
discourage reuse. Nevertheless, 41 states, including Connecticut, Florida,
Ohio, Michigan, Texas and Virginia, have legalized over-the-counter sales of
non-prescription syringes.
Since the introduction of the disposable syringe in the late 1940's, two
types of features have been developed to deter the spread of blood-borne
pathogens as a result of accidental or deliberate reuse of syringes --
needle-stick prevention devices and difficult to reuse syringes.
NEEDLE STICK PREVENTION
Needle-stick prevention devices are designed to prevent accidental
puncture injuries to health care workers and patients before, during, and
after the use of hypodermic syringes and needles. Statistics indicate that
less than 1% of all reported HIV infections in the United States are
attributed to needle-stick injuries. Needle-stick prevention devices are not
substitutes, in most cases, for features that render a syringe difficult to
reuse; however, they can be combined with devices that make a syringe
difficult to reuse. Needle-stick prevention methods include:
Retracting Needles, which through mechanical devices incorporated in the
syringe, pull back the needle into the barrel after use. These devices are
effective needle-stick prevention devices; however, operators must manually
trigger the retraction of needles. Retracting needle devices that
automatically trigger with a single use of the syringe can render the syringe
design difficult to reuse. However, such devices are prone to malfunction and
are costly to manufacture due to the complexity of the mechanics required to
retract the needle.
Self-Destruct Needles, which permit the needle to be collapsed or deformed
into a shape which cannot result in a needle-stick injury. Although
self-destruct needle devices are mechanically simpler than retracting needle
devices, less prone to malfunction and less costly to manufacture, such
devices are effective only if the operator triggers the self-destruct
feature.
Extendible Barrel Sleeves, which enclose the barrel of the syringe in a
second cylinder which the operator extends before and after use to cover the
tip of the needle. The extendible barrel sleeves often lock in their extended
position after use. In virtually all designs, the operator of the syringe
must manually extend the barrel sleeve after use. The sleeve does not prevent
multiple use of the syringe before the operator encloses the barrel. However,
extendible barrel sleeves are more cost-effective than the other alternatives
and can be combined with a device that makes the syringe difficult to reuse.
Becton Dickinson and Sherwood distribute traditional (1cc and 3cc) syringes
with extendible barrel sleeves called safety syringes at a wholesale price of
$0.18 to $0.21.
DIFFICULT TO REUSE SYRINGES
To the Company's knowledge, only Bader and Becton-Dickinson distribute
commercially, a line of difficult to reuse syringes, none of which allow for
aspiration. Both companies developed their syringes for WHO and UNICEF
immunization programs.
Relative to the Bader and Becton-Dickinson syringes, the Company believes
that its 1cc locking clip syringes are more effective and that they are
competitively priced. Unlike its competitors, the Company markets a locking
clip syringe with a 1cc barrel, which is ideal for dispensing .05cc to .95cc
dosages of medicine (e.g., allergy, immunization and insulin medicines). It
is more difficult to deliver .05cc to .95cc dosages accurately with a syringe
barrel that is greater than 1cc. Also unlike its competitors, the Company
offers an aspirating syringe that healthcare workers can lock. Healthcare
workers need aspirating syringes to mix medications in the syringe barrel and
inject medications intravenously. Furthermore, the Company believes that
aspirating syringes are preferred by diabetes patients and needle-exchange
programs.
BADER
The Bader DestroJect syringe is a non-aspirating syringe developed for use
with WHO's and UNICEF's Expanded Programme on Immunization ("EPI")
manufactured since 1992 by Bader, a German machine tool manufacturer. The
DestroJect syringe, available in a 1.5 cc size, delivers a .5cc dose, which
is the dosage for many immunizations. To deliver a dosage other than .5cc,
the Company believes that Bader would have to
30
<PAGE>
modify components of the DestroJect syringe. Bader can supply DestroJect
syringes in a special dispensing carton which doubles as the disposal box for
used syringes. The disposal box is designed to incinerate the used syringes
reducing them to ash and an inert block of plastic and metal residue.
BECTON-DICKINSON
The Becton-Dickinson SOLOSHOT syringe is a non-aspirating syringe
specifically designed for the EPI. Becton-Dickinson can package the SOLOSHOT
syringes in an incineration box similar to that used by Bader. The SOLOSHOT
syringe, available in a 3cc size, delivers a .5cc dose, which is the dosage
for many immunizations. To deliver a dosage other than .5cc, the Company
believes that Becton-Dickinson would have to modify components of the
SOLOSHOT syringe.
UNIVEC
The Company has developed a 1cc locking clip syringe for aspirating and
non-aspirating applications, which is ideally suited for dispensing accurate
dosages of allergy, immunization and insulin medicines. The Company's 1cc
locking clip syringe can deliver dosages of up to .95cc. The non-aspirating
model is set at a specific nominal capacity during assembly (e.g., 0.5cc for
many immunizations) and does not allow the user to inject more than one
dosage of that amount. Conversely, the health-care worker must lock the
aspirating syringe to disable it, and until he does so, the operator can
depress and retract the plunger freely.
When the non-aspirating syringes is assembled, the syringe clip is placed
on the ratcheted plunger in the position needed to limit dosage as desired,
and it engages the barrel. When the operator depresses the plunger, the clip
travels down the barrel by an equal distance. Withdrawal of the plunger by
any amount embeds the prongs into the barrel and the user cannot retract the
plunger. The ability of the clip is dependent on a combination of materials,
as well as on machining and forming the clip within tolerances of less than
.005 of an inch.
The Company's 1cc, non-aspirating, syringe was developed for the needs of
immunization programs of EPI. Using existing components, the Company can
limit its non-aspirating syringe to any dosage between .05cc and .95cc;
however, the Company will have to modify its existing assembly machine to
produce syringes with a nominal dosage less than .95cc. Recently, the EPI has
prioritized its program for immunizing children under one for tuberculosis
("TB"). In 1997 for TB immunization, the EPI expects to vaccinate 100 million
children and to buy 100 million 1cc tuberculin syringes. The dosage for a TB
vaccination is .05cc. After the Company modifies its assembly machine, it
will be able to produce a syringe limited to a nominal dosage amount of
.05cc. Without modifications to components, the difficult to reuse syringes
of Bader and Becton-Dickinson can only deliver a dosage of .5cc. For the EPI,
the Company plans to distribute its locking clip syringes in incinerating
cartons similar to those distributed by Bader and Becton-Dickinson.
The Company's 1cc aspirating syringe, intended for the health-care worker
who frequently needs to inject medication intravenously and/or mix
medications, works similarly to the non-aspirating model, except that the
clip prongs do not engage the barrel until the health-care worker withdraws
the plunger completely. Once the health care worker does so, the clip catches
a single ratchet and travels down the barrel as the plunger is depressed and
the operator cannot withdraw the plunger.
The Company intends to develop a 3cc syringe with a luer (needleless) tip
for use in hospitals and health clinics in 1997. In general, hospitals and
health clinics use more 3cc syringes than 1cc syringes. Hospitals and clinics
will have the choice of an aspirating or non-aspirating plunger and a choice
of a syringe barrel with or without an extendible needle sheath. It is
anticipated that production of the Company's 3cc non-aspirating syringe will
commence by 1998. See "Risk Factors -- Ability to Develop 3cc Syringe."
SALES, MARKETING AND DISTRIBUTION
The Company's initial marketing efforts will be directed primarily to
UNICEF, the World Health Organization ("WHO"), and public hospitals and
health facilities in New York. The Company also intends to market its locking
clip syringes to (i) governments of developing countries, (ii) private
hospitals and health facilities in New York, New Jersey and Connecticut, and
(iii) retail distributors in the United States. The Company also plans to
license its patents and proprietary manufacturing processes relating to its
locking clip and other syringe
31
<PAGE>
designs to established medical device manufacturers. To stimulate demand for
its safety syringes, the Company plans to initiate promotional and
educational campaigns directed at (i) public health officers and other
government officials responsible for public health policies, (ii) doctors and
administrators of healthcare facilities responsible for treatment of HIV-AIDS
patients, and (iii) liability insurance companies. The Company plans to enter
into arrangements with independent sales agents and distributors in targeted
markets and to hire a marketing director after the Closing.
PRODUCTION
The Company's syringes will be assembled primarily by Harmac, one of the
largest independent, privately-owned contract manufacturers of medical
products in the United States, at its production facility in Buffalo, New
York. The Company has entered into a manufacturing agreement with Harmac for
the assembly of syringes, using assembly and packaging equipment supplied by
the Company. The manufacturing agreement may be terminated by Harmac or the
Company upon 90 days' prior written notice at the end of any calendar year.
See "Risk Factors -- Dependence on Certain Assemblers." Sherwood will supply
most of the components for the syringes assembled by Harmac. See "Business --
Suppliers." The Company anticipates that production will commence during the
first quarter of 1997.
The Company also has made arrangements with INSERPOR, a Portuguese syringe
manufacturer which has previously manufactured syringes for UNICEF, for the
assembly by INSERPOR of non-aspirating syringes for orders, if any, received
from UNICEF, using syringe components supplied by INSERPOR. In addition,
INSERPOR will manufacture the Company's proprietary plunger for its
aspirating syringe.
Initially, the Company will produce only 1cc locking clip syringes in
aspirating and non-aspirating models. The Company's syringes consist of a
standard needle, barrel, rubber stopper, a ratcheted plunger designed by the
Company, and a pronged stainless steel locking clip designed by the Company.
The Company has obtained a patent on its stainless steel locking clip, and
has been granted a patent for the design of a plunger which, when combined
with the locking clip, results in a narrow barrelled difficult to reuse,
locking syringe. The locking clip and plunger can be assembled, with minor
modifications, into barrels manufactured by Becton Dickinson, Sherwood,
Terumo and other syringe manufacturers. The plunger is made from plastic
materials which are readily available from numerous sources and is currently
manufactured by Sherwood and INSERPOR. The locking clip is made of stainless
steel and cut and formed for the Company by Harmac. The Company owns or
otherwise controls all production tooling used by suppliers of these
components.
Capacity can be expanded by purchasing new production systems. The Company
plans to use a portion of the net proceeds of the Offering for the
acquisition of an additional production line.
SUPPLIERS
The Company has entered into a supply agreement with Sherwood (the
"Sherwood Supply Agreement"), pursuant to which Sherwood has agreed to supply
the Company with at least 50 million syringe component sets per year (or
4,166,667 per month), each set consisting of a syringe barrel, with or
without a permanently pre-attached needle and sheath or separate hooded
needle, and a plunger tip and up to 8,333,333 single-use syringe plungers per
month, against receipt of purchase orders from the Company at specified
prices, subject to revision for cost increases (not to exceed 5% during any
twelve month period). In addition, in order for Sherwood to commit to the
minimum supply requirements under the Sherwood Supply Agreement, the Company
has agreed to pay Sherwood 14.925% of the cumulative invoiced amount of
components in excess of $3,350,000 up to a maximum invoiced amount of
$6,700,000 (or a maximum of $500,000) and Joel Schoenfeld, Dr. Alan H. Gold,
David Shonfeld and John Frank agreed, jointly and severally, to pay Sherwood
up to $1,000,000 (less $0.14925 for each dollar paid to Sherwood under the
Sherwood Supply Agreement) in the event the Company fails to pay a cumulative
invoiced amount of $6,700,000 over the first three years of the Sherwood
Supply Agreement. The Sherwood Supply Agreement is for a term of five years,
but may be extended under certain circumstances if prior thereto Sherwood
enters into a license agreement, to manufacture and sell the Company's
locking clip syringe. In connection with the Sherwood Supply Agreement,
Sherwood sold all of its right, title and interest in and to the production
mold for the plunger, including the mold inserts and insert base (together,
the "Plunger Mold") to the Company in consideration for an option to enter
into a non-exclusive license to manufacturer and sell the
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<PAGE>
Company's locking clip syringes in the United States (the "License
Agreement"). The Company also entered into a lease agreement with Sherwood
pursuant to which it leased back the Plunger Mold to Sherwood (the "Equipment
Lease") for a period of six years for use in the manufacture and production of
the plungers as part of the assembly of single-use syringes using the Company's
proprietary design specifications. Sherwood is required to make aggregate rental
payments of $1,946,016 in 36 equal consecutive monthly installments of $54,056,
over the first three years of the term of the Equipment Lease. In July 1996, the
Company sold the Plunger Mold, subject to the Equipment Lease, together with the
Company's right to the payments under the Equipment Lease, to a financial
institution for net cash consideration of $1,600,000 ($1,837,904 less expenses
of approximately $238,000). In connection with such sale, the financial
institution agreed to sell the Plunger Mold back to the Company for a nominal
amount upon expiration of the term of the Equipment Lease.
Sherwood has the right to exercise its option to enter into the License
Agreement at any time prior to November 30, 1999. Upon exercise of the
option, Sherwood is required to pay the Company a royalty advance of
$100,000, against which royalty payments may be offset. Under the License
Agreement, Sherwood is required to pay the Company a royalty equal to 5% of
net sales. The License Agreement may be terminated by Sherwood upon 30 days
prior written notice. If on or before February 1, 1998, the Company receives
a bona fide written offer from an unrelated third party to exclusively
license the Company's patent rights for its locking clip syringe, Sherwood,
within 30 days notice of such offer, has the right to exercise its option to
enter into the License Agreement or to enter into an exclusive license on the
same terms and conditions set forth in the third party offer. In the event of
a third party offer, the Company has the right to buy-out the option rights
granted Sherwood for $100,000.
The Company also has entered into a letter of understanding with INSERPOR,
a Portuguese manufacturer of syringes, to assemble locking clip
non-aspirating syringes. The Company plans to use a portion of the net
proceeds of the Offering to acquire a dye and press to cut and form the clip
and equipment to subassemble the clip to the plunger.
COMPETITION
The Company's principal competition is from traditional disposable
syringes. Becton-Dickinson, Sherwood and Terumo control approximately 74%,
19% and 5%, respectively, or a total of approximately 98%, of the worldwide
syringe market, and are substantially larger, more established and have
significantly greater financial, sales and marketing, distribution,
engineering, research and development and other resources than the Company.
To the Company's knowledge, only Becton-Dickinson and Bader, a German machine
tool manufacturer, distribute commercially a line of difficult to reuse
syringes, none of which allow for aspiration. The Bader DestroJect syringe
and the Becton-Dickinson SOLOSHOT syringe were developed specifically for
WHO-UNICEF-EPI immunization programs. The Bader DestroJect syringe and the
Becton-Dickinson SOLOSHOT syringe were designed to dispense a dosage of .5cc
only, whereas the UNIVEC 1cc locking clip syringe was designed to dispense
dosages from .05cc to .95cc. The Company believes that UNIVEC syringes are
more effective than competitive difficult to reuse syringes and that they are
competitively priced. There can be no assurance that the major syringe
manufacturers or others will not commence production of 1cc difficult to
reuse syringes, or locking syringes which aspirate, or that the Company will
be able to successfully compete in this market.
PATENTS AND PROPRIETARY RIGHTS
The Company's policy is to seek patent protection for all developments,
inventions and improvements that are patentable and which have potential
value to the business of the Company and to protect as trade secrets other
confidential and proprietary information.
In 1995, the Company was granted a United States patent for a locking clip
device not biased against the plunger. The patent is broad enough to include
several applications of the design covering the first series of products to
be marketed by the Company. In 1996, the Company was granted a United States
patent for a plunger design which, in conjunction with its patented locking
clip, results in a narrow barrel difficult to reuse syringe that allows for
aspiration during use. In addition, the Company has licensed the rights to
three other locking device patents. The Company licensed these patents to
exclude others from using these inventions and/or to develop a 3cc locking
syringe. The Company is obligated to make certain minimum annual royalty
payments in
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<PAGE>
respect of the licensed rights to these three locking device patents and, to
the extent the Company's products utilize the claims and designs of the
licensed patents, to pay royalties to the owner of the licensed patents
ranging from 2% to 7% of net sales (or in the case of products produced under
sublicenses granted to third parties, 10% to 40% of royalties received from
those parties). See Notes 5 and 11 to the Company's consolidated financial
statements appearing elsewhere herein.
The Company also has filed patent applications for its locking clip and
aspirating plunger in certain foreign countries participating in the Patent
Cooperation Treaty (Canada, Brazil, Mexico, certain European countries,
Japan, South Korea, China, Russia and Australia). However, patent
applications filed in foreign countries and patents granted in such countries
are subject to laws, rules and procedures that differ from those in the
United States, and accordingly, patent protection in such countries may be
different from patent protection provided by United States laws.
Strategically, the Company seeks manufacturing processes and agreements that
will enable it to have reliable quality and the lowest production costs. By
protecting its manufacturing processes, which enable the quality and cost
competitiveness of its products, the Company believes that it can defend
market share regardless of foreign patent protections, which are often
unenforceable or non-existent in many world markets (e.g., China and India).
See "Risk Factors -- Uncertainty Regards Patents and Proprietary Technology;
Risk of Future Litigation."
The Company has patents and licenses suitable for a 3cc syringe. All of
these inventions have U.S. patent protection, but most of these inventions
lack foreign patent protection. However, the Company has filed for patent
protection in certain European countries for one of its licenses, which is
the basis for its 3cc non-aspirating syringe. For the aspirating model, the
choice of design will depend upon certain factors, including patent
protection, manufacturing costs, ability to control quality and product
features. It is anticipated that production of the Company's 3cc
non-aspirating syringe will commence by 1998. See "Risk Factors --
Uncertainty Regarding Patents and Proprietary Technology; Risk of Future
Litigation."
The future success of the Company may depend upon the strength of its
patents. The Company believes that the scope of its patents and licenses is
sufficient to prevent competitors from introducing devices of similar design
to its current products and that its patents are valid and enforceable.
However, there can be no assurance that the Company's patents will not be
challenged, invalidated or circumvented in the future or that the rights
granted thereunder will provide a competitive advantage.
The Company is not aware of any patent infringement claims against the
Company or of any infringement of the Company's patents. Litigation to
enforce patents issued to the Company, to protect proprietary information
owned or licensed by the Company, or to defend the Company against claimed
infringement of the rights of others, could be costly and could divert the
resources of the Company from other planned activities. There can be no
assurance that the Company would be successful in any such litigation.
The Company protects its proprietary information and trade secrets,
including all aspects of its syringe assembly system, through confidentiality
agreements with its employees and suppliers.
The Company has registered trademarks UNIVEC(R), and R/ Ultra(R), and the
symbol representing no second use, (i.e., the number 2 crossed out inside of
a circle), with the United States Patent and Trademark Office. See "Risk
Factors -- Uncertainty Regarding Patents and Protection of Proprietary
Technology."
GOVERNMENT REGULATION
The manufacture and distribution of medical devices are subject to
extensive regulation by the FDA and, in some instances, by foreign and state
governments. Pursuant to the Federal Food, Drug, and Cosmetic Act, as
amended, and the regulations promulgated thereunder (collectively, the "FDC
Act"), the FDA regulates the clinical testing, manufacture, labeling, sale,
distribution and promotion of medical devices. Before a new device can be
introduced into the market, a manufacturer must obtain FDA permission to
market through either the 510(k) pre-market notification process or the
costlier, lengthier and less certain pre-market approval ("PMA") application
process. The FDA has granted the Company's 510(k) application for its 1cc
locking clip syringe, which has been classified as a Class II device under
the FDC Act, and accordingly, the Company may market and sell its 1cc locking
clip syringe in the United States, subject to compliance with other
applicable FDA regulatory requirements. As a Class II device, performance
standards may be developed for the 1cc locking clip syringe
34
<PAGE>
which the product would then be required to meet. Failure to meet those
standards would require the Company to discontinue the marketing of the
product. Furthermore, manufacturers of medical devices are subject to
recordkeeping requirements and required to report adverse experiences
relating to the use of the device. Device manufacturers are also required to
register their establishments and list their devices with the FDA and with
certain state agencies and are subject to periodic inspections by the FDA and
certain state agencies.
Medical devices are subject to strict federal regulations regarding the
quality of manufacturing ("Good Manufacturing Practices" or "GMP"). GMP
regulations impose certain procedural and documentation requirements upon the
Company with respect to manufacturing and quality assurance activities. The
FDA conducts periodic audits and surveillance of the manufacturing,
sterilizing and packaging facilities of medical device manufacturers to
determine compliance with GMP requirements. The failure of a medical device
manufacturer to be able to show in the audit or post-market surveillance that
it has adequately complied with GMP requirements can result in penalties or
enforcement proceedings being imposed on the manufacturer. These procedures
may include a product recall of a product or a "cease distribution" order
which would require the manufacturer to direct its distributors and sales
agents to stop selling products, as well as other enforcement sanctions.
Harmac's manufacturing facilities have been certified as satisfying GMP
requirements. Harmac's facilities will be subject to extensive audits in the
future, pursuant to standard FDA procedure. No assurance can be given that
when Harmac is audited that it will be found to be in compliance with GMP
requirements, or that if it is not found in compliance, what penalties,
enforcement procedures or compliance effort will be levied on or required of
Harmac and/or the Company. Recently adopted GMP requirements, including those
pertaining to design control, are likely to increase the cost of GMP
compliance. Noncompliance with applicable requirements, including GMP
requirements, can result in, among other things, fines, injunctions, civil
penalties, recall or seizure of products, total or partial suspension of
production, failure of the government to grant pre-market clearance or pre-
market approval for devices, withdrawal of marketing approvals, and criminal
prosecution. The FDA also has the authority to request repair, replacement or
refund of the cost of any device manufactured or distributed by the Company.
The introduction of the Company's products in foreign markets will also
subject the Company to foreign regulatory clearances which may impose
additional substantive costs and burdens. The Company's products are required
to satisfy international manufacturing standards for sale in certain foreign
countries. Harmac expects to achieve ISO 9001 certification in the first
quarter of 1997. However, until Harmac obtains ISO 9001 certification, the
Company will have difficulty selling to some export accounts, particularly in
Europe. INSERPOR expects to obtain ISO 9002 in 1997. International sales of
medical devices are subject to the regulatory requirements of each country.
The regulatory review process varies from country to country. Many countries
also impose product standards, packaging requirements, labeling requirements
and import restrictions on devices. In addition, each country has its own
tariff regulations, duties and tax requirements.
The approval by the FDA and foreign government authorities is
unpredictable and uncertain, and no assurance can be given that the necessary
approvals or clearances for the Company's products will be granted on a
timely basis or at all. Delays in receipt of, or a failure to receive, such
approvals or clearances, or the loss of any previously received approvals or
clearances, could have a materially adverse effect on the business, financial
condition and results of operations of the Company. Furthermore, approvals
that have been or may be granted are subject to continual review, and later
discovery of previously unknown problems may result in product labeling
restrictions or withdrawal of the product from the market. Moreover, changes
in existing requirements or adoption of new requirements or policies could
adversely affect the ability of the Company to comply with regulatory
requirements. There can be no assurance that the Company will not be required
to incur significant costs to comply with applicable laws and regulations in
the future. Failure to comply with applicable laws or regulatory requirements
could have a materially adverse effect on the Company's business, financial
position and results of operations.
FACILITIES
The Company occupies its executive offices in Garden City, New York
(comprised of approximately 1,200 square feet of space) pursuant to a
month-to-month tenancy. Rental expense for the space is approximately $2,300
per month. Dr. Alan H. Gold, the President, a Director and principal
stockholder of the Company, is the
35
<PAGE>
president and a stockholder of the owner of the premises, the Long Island
Plastic Surgical Group. Although the Company is satisfied with the
arrangements for its office space, which is adequate for its current
operations, it believes that alternative space is available on reasonable
terms.
The Company is seeking approximately 25,000 square feet of warehouse
space, and intends to use a portion of the net proceeds of the Offering for
furniture, fixtures and equipment for a warehouse facility.
EMPLOYEES
The Company currently employs five persons, including one in sales and
marketing, one in research and development, one in regulatory affairs and
quality assurance and two in financial administration. The Company also has
engaged the services of several independent contractors. None of the
Company's employees is covered by a collective bargaining agreement.
The Company intends to hire a full-time marketing director upon completion
of the Offering and to staff its warehouse facility with four people.
LITIGATION
The Company is not involved in any legal proceedings.
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<PAGE>
MANAGEMENT
Directors, Executive Officers and Key Employees
The directors, executive officers and key employees of the Company are as
follows:
Name Age Position
- ---- --- --------
Joel Schoenfeld 51 Chairman of the Board; Chief Executive
Officer; and a Director
Alan H. Gold 50 President and a Director
David Shonfeld 41 Director of Research and Development
and a Director
David Chabut 38 Chief Financial Officer
Flora Schoenfeld 51 Treasurer and Secretary
John Frank 57 Director
Richard Lerner 52 Director
Joel Schoenfeld, the founder of the Company, has been Chairman of the
Board and Chief Executive Officer of the Company since its inception in
August 1992. Mr. Schoenfeld was the founder and President of J&B Schoenfeld,
a global trading company whose main focus was on the import, export and
processing of pelts and hides, specializing in trade with the USSR and
Europe.
In 1988, Mr. Schoenfeld formed the American-Russian International Trading
Company ("AMRU"), which advised on trade agreements between the USSR and
United States. AMRU's broad base of interest and expertise enabled it to take
on such diverse projects as a joint venture with the Soviet government and
military known as AMRU-STAR, the representation of the Soviet Space Agency to
Washington, D.C., the introduction of western advertising to the USSR in
conjunction with another American company, Transportation Displays, Inc.
("TDI"), and the construction of a studio producing children's films for
international distribution.
As a result of the political changes in the former USSR, Mr. Schoenfeld
sought to further his business strategies. In 1990, he founded Joel
Schoenfeld & Associates in Garden City, New York. With affiliate offices in
Moscow, San Jose, London, and Boston, the company's purpose was to originate,
structure, capitalize, negotiate and advise on the implementation of import
and export trade transactions, projects and programs.
Mr. Schoenfeld has been a commercial attache and a consultant to a number
of foreign and multinational governments. Currently, Mr. Schoenfeld is an
advisor to United Nations Development Programs ("UNDP"). Previously, he
served as:
o Senior Advisor to the Costa Rican Ambassador to the United Nations
o Senior Advisor and Coordinator, Chief of Staff to the Chairman of the
Committee of States Parties to the International Covenant on Civil and
Political Rights to the United Nations
o Senior Economic and Trade Advisor to the United Nations Commission on
Transnational Corporations
Mr. Schoenfeld is the husband of Flora Schoenfeld.
Alan H. Gold, M.D., has been President of the Company since July 1996 and
a Director of the Company since inception in August 1992. Dr. Gold has been a
plastic surgeon since 1972, and is president of the Long Island Plastic
Surgical Group. He is a vice president and board member of Day-Op Center of
Long Island, a privately-owned surgery center in New York. Dr. Gold is a
medical advisor to the UNDP.
David Shonfeld has been Director of Research and Development of the
Company since its inception in August 1992. From December 1988 to February
1992, he was Vice President of Research and Development of Shyder, Inc. (a
designer of air purification systems). In 1986 and 1987, he was a participant
in a "think-tank" for Israel Aircraft Industries, developing a new security
system for Israel's borders. From 1983 to 1986, he super-
37
<PAGE>
vised a project involving "high-speed fiber optic communications" for IBM
France. From 1980 to 1983, he continued his university studies at Israel's
Technion Institute, majoring in physics and specializing in electronics and
electro-optics. From 1977 to 1980, he worked as a manager of automation,
robotics and production systems for Aloni Tiles, an international
manufacturing concern.
David Chabut has been the Chief Financial Officer of the Company since
October 1995. From January 1994 to September 1995 and from April 1992 to
January 1993, Mr. Chabut was a self-employed financial consultant. From
February 1993 to December 1993, he was chief operating officer for MediMax,
Inc. (which invested in accounts receivable financing of health care
providers), where he directed marketing, treasury and administration. From
August 1982 to March 1992, Mr. Chabut was a senior consultant for Coopers &
Lybrand in Chicago and New York where he advised several companies about
improving or starting operations. Additionally, Mr. Chabut has selling
experience for Queen City Supply Company, a distributor of motion control and
power transmission products in Cincinnati, Ohio that is owned by his family.
Mr. Chabut is a CPA and earned an MBA from the University of Michigan.
Flora Schoenfeld has been Treasurer and Secretary of the Company since its
inception in August 1992. Since March 1992, she also has been Treasurer and
Secretary of Joel Schoenfeld & Associates. From 1980 to 1992, she was
Treasurer and Secretary of J & B Schoenfeld, Inc. Flora Schoenfeld is the
wife of Joel Schoenfeld.
John Frank has been a consultant to the Company in the areas of corporate
development and strategic planning since its inception in August 1992. Mr.
Frank has been Chief Information Officer of The Hartford Steam Boiler
Inspection and Insurance Co. since August 1996. From October 1994 to August
1996, he was Special Projects Manager for Electronic Data Systems
Corporation. From August 1993 to September 1994, he was the chief auditor of
Travelers Insurance Companies. From September 1991 to July 1993, he was a
principal of Lipera Frank Inc., of which he was a co-founder. From January
1982 to September 1991, Mr. Frank was a partner of Coopers & Lybrand, where
he managed strategic planning and financial management engagements for
Fortune 500 clients. Mr. Frank is a CPA and earned an MBA from Harvard
University.
Richard Lerner has been a Director of the Company since inception in
August 1992. He is President of Lerner, Gordon & Hirsch, P.C., a Long Island
law firm.
All directors hold office until the annual meeting of stockholders of the
Company following their election or until their successors are duly elected
and qualified. Officers are appointed by the Board of Directors and serve at
its discretion.
Directors do not receive any cash compensation from the Company for
service as members of the Board of Directors; however, the Company reserves
the right to adopt a policy providing for compensation of independent
directors.
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<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation awarded to, earned by or
paid to the Company's Chief Executive Officer and each other executive
officer of the Company whose salary and bonus for the years ended December
31, 1995 and 1996 exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------- -----------------------------
Other Annual
Name and Principal Position Year Salary Compensation Securities Underlying Options
-------------------------------- ------ ------------- -------------- -----------------------------
<S> <C> <C> <C> <C>
Joel Schoenfeld, Chairman of the
Board and Chief Executive
Officer ....................... 1996 $192,000(1) -- --
David Chabut, Chief Financial
Officer ....................... 1996 $120,000(2) -- 20,513(3)
</TABLE>
- ------
(1) The Company accrues compensation expense for Joel Schoenfeld at a rate of
$192,000 per annum, plus benefits, which include a car (approximately
$8,500) and life/disability/health insurance (approximately $7,500).
(2) The Company accrues compensation expense for David Chabut at a rate of
$120,000 per annum, including health insurance benefits.
(3) Represents options granted to Mr. Chabut at $3.50 per share, exercisable
until March 31, 1999. Mr. Chabut has exercised options to purchase 16,143
shares and has advised the Company that he intends to exercise options to
purchase an additional 4,370 shares at Closing. See "Management -- Stock
Options" and "Certain Transactions."
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with David Chabut
pursuant to which he serves as Chief Financial Officer of the Company at a
salary of $120,000 per annum (including health insurance benefits). The
agreement expires on September 30, 1997.
David Shonfeld is employed as Director of Research and Development of the
Company pursuant to an employment agreement which expires on July 30, 1997.
The agreement may be terminated by the Company or Mr. Shonfeld upon not less
than 30 days prior written notice at any time after December 31, 1996. Under
the agreement, Mr. Shonfeld is compensated at the rate of $50 per hour for
research and development performed on a project basis.
The employment agreements with Messrs. Chabut and Shonfeld contain
non-competition covenants that prohibit each of them, directly or indirectly,
from engaging in a competitive business (as defined) for a period of twelve
months following the termination of employment.
The Company will enter into an employment agreement with Joel Schoenfeld,
its Chairman of the Board and Chief Executive Officer, on or before the
Effective Date.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options to Joel Schoenfeld and David Chabut (the "Named Executive Officers")
during the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
Number of Shares Percent of Total Options
Underlying Options Granted to Employees in Exercise Price
Name Granted Fiscal Year Per Share Expiration Date
--------------- ------------------ ------------------------ -------------- ---------------
<S> <C> <C> <C> <C>
Joel Schoenfeld 0 -- -- --
David Chabut .. 20,513 100% $ 3.50 March 31, 1999
</TABLE>
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<PAGE>
The following table summarizes for each of the Named Executive Officers
the total number of unexercised options, if any, held at December 31, 1996,
and the aggregate dollar value of in-the-money, unexercised options, held at
December 31, 1996. The value of the unexercised, in-the-money options at
December 31, 1996, is the difference between their exercise or base price and
the value of the underlying Common Stock on December 31, 1996, at an assumed
price of $3.50 per share.
AGGREGATED OPTION EXERCISES -- JANUARY 1, 1996 --
DECEMBER 31, 1996 AND DECEMBER 31, 1996 OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Shares Acquired Upon Number of Securities In-The-Money
Exercise of Options during Underlying Unexercised Options at
Fiscal 1996 Options at December 31, 1996 December 31, 1996
-------------------------- -------------------------------- --------------------------------
Name Number Value Realized Exercisable Unexercisable Exercisable Unexercisable
--------------- -------- -------------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Joel Schoenfeld -- -- -- -- -- --
David Chabut .. 16,143 -- 4,370 -- -- --
</TABLE>
STOCK OPTION PLAN
On December 14, 1996, the Board of Directors adopted, subject to
stockholder approval, the 1996 Stock Option Plan (the "Plan"). The Plan is to
be administered by the Board of Directors or a committee thereof. Pursuant to
the Plan, options to purchase 4,709,219 shares of Common Stock may be granted
to directors, employees (including officers) and consultants to the Company
(collectively, "Plan participants"). As of December 31, 1996, options to
purchase 20,513 shares have been granted under the Plan.
The Plan authorizes the issuance of incentive stock options ("ISOs"), as
defined in Section 422A of the Internal Revenue Code of 1986, as amended,
non-qualified stock options ("NQSOs", and together with ISOs, "Options").
Consultants and directors who are not also employees of the Company are
eligible for grants of only NQSOs. The exercise price of each ISO may not be
less than 100% of the fair market value of the Common Stock at the time of
grant, except that in the case of a grant to an employee who owns 10% or more
of the outstanding stock of the Company or a subsidiary or parent of the
Company (a "10% Stockholder"), the exercise price may not be less than 110%
of the fair market value on the date of grant. The aggregate fair market
value of the shares covered by ISOs granted under the Plan that become
exercisable by a Plan participant for the first time in any calendar year is
subject to a $100,000 limitation. The exercise price of each NQSO is
determined by the Board, or committee thereof, in its discretion; provided
that a NQSO granted a 10% Stockholder be no less than 110% of the fair market
value on the date of grant.
The Company has agreed with the Underwriter that the exercise price of
options to purchase 4,500,000 shares of Common Stock will not be less than
$3.50 per share and that such options will be exercisable for a period of ten
years, commencing upon the earlier of (x) nine years after the Effective Date
and (y) two years after the Effective Date, provided that in the case of
clause (y), the Company shall have obtained (i) at least $30,000,000 in gross
revenues and after tax net income of at least $2,000,000 in the second full
fiscal year following the Effective Date, or (ii) at least $45,000,000 in
gross revenues and $3,000,000 in after-tax net income in the third full
fiscal year following the Effective Date, or (iii) at least $60,000,000 in
gross revenues and $4,000,000 in after-tax net income in the fourth full
fiscal year following the Effective Date ("Time Accelerated Restricted Stock
Options").
Subject to the provisions of the Plan, the Board, or committee thereof,
has the authority to determine the individuals to whom the stock options are
to be granted, the number of shares to be covered by each option, the type of
option, the exercise period, the restrictions, if any, on the exercise of the
option, the terms for the payment of the exercise price and other terms and
conditions. Payments by holders of options upon exercise of any option may be
made (as determined by the Board or a committee thereof) in cash or such
other form of payment as may be permitted under the Plan.
INDEMNIFICATION OF OFFICERS AND DIRECTORS AND LIMITATION ON DIRECTORS'
LIABILITY
The Company's Certificate of Incorporation provides for indemnification of
directors and officers in conformity with Section 145 of the Delaware General
Corporation Law, as amended (the "DGCL"), which autho-
40
<PAGE>
rizes the Company to indemnify any director or officer under certain
prescribed circumstances and subject to certain limitations against certain
costs and expenses, including attorneys' fees actually and reasonably
incurred in connection with any action, suit or proceeding, whether civil,
criminal, administrative or investigative, to which such person is a party by
reason of being a director or officer of the Company if it is determined that
such person acted in accordance with the applicable standard of conduct set
forth in such statutory provisions.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
The Company's Certificate of Incorporation also contains a provision
eliminating the personal liability of a director to the Company or its
stockholders for damages for breach of fiduciary duty as a director to the
fullest extent permitted by the DGCL, as the same exists or may thereafter be
amended.
CERTAIN TRANSACTIONS
From its inception in August 1992, the Company's operations have been
funded through advances from Joel Schoenfeld, Flora Schoenfeld and two
companies affiliated with Mr. Schoenfeld (collectively, the "Schoenfeld
Parties"), and certain other stockholders of the Company. As of September 30,
1996, the amount due to these stockholders and affiliates with respect to the
repayment of these advances (including accrued interest) was as follows: the
Schoenfeld Parties -- $1,155,565; Dr. Alan H. Gold -- $113,700; and John
Frank -- $116,373. The Company issued its demand promissory notes evidencing
its obligation to repay the foregoing advances, together with accrued
interest on the outstanding principal amount thereof at 8% per annum. In
December 1996, the Schoenfeld Parties and Dr. Alan H. Gold exchanged for
cancellation their notes for 1,155 shares and 114 shares, respectively, of
the Company's Series A Preferred Stock. See "Description of Securities --
Series A Preferred Stock." At the Closing, the Company will issue 33,250
shares of Common Stock to Mr. Frank, a director of the Company, in exchange
for the cancellation of the amount payable to him. In addition, as of
September 30, 1996, the Company had accrued compensation payable to the
Schoenfeld Parties in the amount of $644,391, including management fees of
$382,191 for periods prior to June 30, 1994. Since June 30, 1994, the Company
has recorded a salary expense for Mr. Schoenfeld in lieu of management fees
due to affiliates of Mr. Schoenfeld. See "Management -- Summary Compensation
Table." The Company has agreed with the Underwriter that such compensation
will not be paid prior to March 31, 1999, without the prior written consent
of the Underwriter.
In connection with the Sherwood Supply Agreement, Joel Schoenfeld, Dr.
Alan H. Gold, David Shonfeld and John Frank agreed, jointly and severally, to
pay Sherwood up to $1,000,000 (less $0.14925 for each dollar paid to Sherwood
under the Sherwood Supply Agreement) in the event the Company fails to pay a
cumulative invoiced amount of $6,700,000 over the first three years of the
Sherwood Supply Agreement. See "Business -- Suppliers."
On October 10, 1996, UNIVEC-NY, the then owner of all of the outstanding
capital stock of the Company, was merged with and into the Company, solely
for the purpose of effecting a change in its state of incorporation from New
York to Delaware. In the merger, shareholders of UNIVEC-NY received
10,256.3954 shares of Common Stock for each share of UNIVEC-NY common stock
owned, with the total number of shares issuable to each shareholder rounded
up to the nearest whole share.
The Company occupies its executive offices, consisting of approximately
1,200 square feet of space, pursuant to a month-to-month tenancy. Rental
expense for the space is approximately $2,300 per month. Dr. Alan H. Gold,
the President, a Director and principal stockholder of the Company, is the
president and a stockholder of the owner of the premises, the Long Island
Plastic Surgical Group.
In December 1996, David Chabut, the Chief Financial Officer of the
Company, exercised options to purchase 16,143 shares of Common Stock, having
an exercise price of $3.50 per share, the exercise price of which was paid
for by the cancellation of amounts payable to him for accrued, but unpaid
compensation and certain advances. Mr. Chabut has advised the Company that he
intends to exercise options to purchase an additional 4,370 shares of Common
Stock (at $3.50 per share) at the Closing, and to pay the exercise price of
these options by cancellation of amounts payable to him for accrued but
unpaid compensation and certain advances. The Company has agreed to pay
$15,949 for federal and state withholding and payroll taxes incurred by Mr.
Chabut in connection with the exercise of such options. See "Management --
Stock Options."
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of the Common Stock immediately prior to and after the
Offering by (i) each stockholder known by the Company to be a beneficial
owner of more than five percent of the outstanding Common Stock, (ii) each
director of the Company and each executive officer of the Company listed in
the Summary Compensation Table under the caption "Management -- Summary
Compensation Table" and (iii) all directors and officers as a group.
<TABLE>
<CAPTION>
Percentage of Common
Stock Benefically
Owned
Amount and ---------------------------------
Nature of Beneficial Before After
Name Ownership(1) Offering(2) Offering(3)
----------------------------------------- -------------------- ---------------- ---------------
<S> <C> <C> <C>
Joel and Flora Schoenfeld((4)) .......... 333,333(5)(6) 30.80% 12.72%
Alan H. Gold, M.D.((4)) ................. 333,333(5) 30.80% 12.72%
David Shonfeld((4)) ..................... 256,410(6) 23.69% 9.79%
John Frank((7)) ......................... 140,128(8) 12.32%(9) 5.30%(10)
Richard Lerner .......................... 41,026 3.79% 1.57%
David Chabut((4)) ....................... 20,513(11) 1.89%(12) *
All directors and executive officers as a
group (7 persons) ...................... 1,124,743(13)(14) 98.47%(15) 42.57%(16)
</TABLE>
- ------
* Less then 1%
(1) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated, subject to community
property laws, where applicable. For purposes of computing the
percentage of outstanding shares held by each person or group of persons
named above as of the Effective Date, any security which such person or
group of persons has the right to acquire within 60 days after such date
is deemed to be outstanding for the purpose of computing the percentage
ownership for such person or persons, but is not deemed to be
outstanding for the purpose of computing the percentage ownership of any
other person.
(2) Except as otherwise stated, calculated on the basis of 1,082,287 shares
of Common Stock issued and outstanding.
(3) Except as otherwise stated, calculated on the basis of 2,619,907 shares
of Common Stock issued and outstanding. Gives effect to (i) the issuance
and sale of 1,500,000 shares of Common Stock in the Offering, (ii) the
issuance to a director of the Company at Closing of 33,250 shares of
Common Stock in exchange for the cancellation of amounts payable to him
($116,373 as of September 30, 1996), and (iii) the issuance to an
officer of the Company at Closing of 4,370 shares upon exercise of an
option. See "Certain Transactions."
(4) Address is c/o the Company, 999 Franklin Avenue, Garden City, New York
11530.
(5) All of the shares owned by Dr. Gold have been pledged to secure certain
indebtedness to Joel Schoenfeld. Dr. Gold retains voting and dispositive
power with respect to the pledged shares until the occurrence of a
default in the payment of the indebtedness secured by the pledged
shares. Accordingly, the pledged shares have been included in the number
of shares beneficially owned by Dr. Gold and excluded from the number of
shares beneficially owned by Mr. Schoenfeld.
<PAGE>
(6) All of the shares owned by Mr. Shonfeld have been pledged to secure
certain indebtedness to Joel Schoenfeld. Mr. Shonfeld retains voting and
dispositive power with respect to the pledged shares until the
occurrence of a default in the payment of the indebtedness secured by
the pledged shares. Accordingly, the pledged shares have been included
in the number of shares beneficially owned by Mr. Shonfeld and excluded
form the number of shares beneficially owned by Mr. Schoenfeld.
(7) Address is c/o The Hartford Steam Boiler Insurance & Inspection Co.,
P.O. Box 5204, One State Street, Hartford, Connecticut 06102-5024.
(8) Includes 33,250 shares issuable at Closing in exchange for cancellation
of amounts payable to him ($116,373, including accrued interest, as of
September 30, 1996), and 22,236 shares issuable upon exercise of
options, at an exercise price of $3.50 per share, which expire on
February 22, 1999.
(9) Calculated on the basis of 1,137,773 shares of Common Stock issued and
outstanding.
(10) Calculated on the basis of 2,642,143 shares of Common Stock issued and
outstanding.
(11) Includes 4,370 shares issuable upon exercise of options, at an exercise
price of $3.50 per share, which expire on March 31, 1999. Mr. Chabut has
advised the Company that he intends to exercise options to purchase
these shares at Closing. See "Certain Transactions."
(12) Calculated on the basis of 1,086,657 shares of Common Stock issued and
outstanding.
(13) For purposes of this calculation, shares of Common Stock beneficially
owned by more than one person have only been included once.
(14) Includes 22,236 shares and 4,370 shares issuable upon exercise of
options held by Messrs. Frank and Chabut, respectively, and 33,250
shares to be issued to Mr. Frank at Closing in exchange for cancellation
of amounts payable to him ($116,373 as of September 30, 1996). See
footnotes (8) and (11) above.
(15) Calculated on the basis of 1,142,143 shares of Common Stock issued and
outstanding.
(16) Calculated on the basis of 2,642,143 shares of Common Stock issued and
outstanding.
42
<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, $0.001 par value per share, 2,500 shares of Series A 8%
Cumulative Convertible Preferred Stock, $0.001 par value per share (the
"Series A Preferred Stock"), and 4,997,500 shares of "blank check" preferred
stock, $0.001 par value per share. On the Effective Date, 1,082,287 shares of
Common Stock and 1,269 shares of Series A Preferred Stock will be issued and
outstanding.
The following are brief descriptions of the securities offered hereby and
other securities of the Company. The rights of the holders of shares of the
Company's capital stock are established by the Company's Certificate of
Incorporation, a Certificate of Designation authorizing the Series A
Preferred Stock, the Company's By-laws and Delaware law. The following
statements do not purport to be complete or give full effect to statutory or
common law, and are subject in all respects to the applicable provisions of
the Certificate of Incorporation, the Certificate of Designation, By-laws and
state law.
COMMON STOCK
Holders of the Common Stock are entitled to one vote per share, and
subject to the rights of holders of the Series A Preferred Stock or any other
series of preferred stock, to receive dividends when, as and if declared by
the Board of Directors and to share ratably in the assets of the Company
legally available for distribution to holders of Common Stock in the event of
the liquidation, dissolution or winding up of the Company. Holders of the
Common Stock do not have subscription, redemption, conversion or preemptive
rights.
Each share of Common Stock is entitled to one vote on any matter submitted
to the holders, including the election of directors. Holders of Common Stock
do not have cumulative voting rights; therefore, holders of a majority of the
outstanding shares of Common Stock entitled to vote for the election of
Directors may elect all of the Directors to be elected, if they so choose,
and in such event, the holders of the remaining shares will not be able to
elect any of the Company's Directors. Except as otherwise required by the
DGCL, all stockholder action (other than the election of Directors, who are
elected by plurality vote), is subject to approval by a majority of the
shares of Common Stock present at a stockholders' meeting at which a quorum
(a majority of the issued and outstanding shares of Common Stock) is present
in person or by proxy, or by written consent pursuant to Delaware law.
All shares of Common Stock outstanding are fully paid and non-assessable,
and the shares of Common Stock offered hereby and the shares of Common Stock
issuable upon exercise of the Warrants, when issued upon payment of the
purchase price set forth on the cover page of the Prospectus or payment of
the exercise price specified in the Warrants, as the case may be, will be
fully paid and non-assessable.
The Board of Directors is authorized to issue additional shares of Common
Stock within the limits authorized by the Company's Certificate of
Incorporation without further stockholder action. The Company has agreed with
the Underwriter that it will not issue any securities, including but not
limited to shares of Common Stock, for a period of 24 months following the
Effective Date, except as disclosed in or contemplated by this Prospectus,
without the prior written consent of the Underwriter.
WARRANTS
The Warrants offered hereby will be issued in registered form under a
Warrant Agreement (the "Warrant Agreement") between the Company and
Continental Stock Transfer & Trust Company, as Warrant Agent (the "Warrant
Agent").
Each Warrant will be separately transferable and will entitle the
registered holder thereof to purchase one share of Common Stock at $4.50 per
share (subject to adjustment as described below) for a period of five years
commencing ------, 1999 [two years after the Effective Date] and ending
- ------, 2002 [five years after the Effective Date] (the "Exercise Period").
The exercise price and the number of shares of Common Stock issuable upon the
exercise of each Warrant are subject to adjustment in the event of a stock
split, stock dividend, recapitalization, merger, consolidation or certain
other events. A holder of Warrants may exercise such Warrants by surrendering
the certificate evidencing such Warrants to the Warrant Agent, together with
the form
43
<PAGE>
of election to purchase on the reverse side of such certificate attached
thereto properly completed and executed and the payment of the exercise price
and any transfer tax. If less than all of the Warrants evidenced by a Warrant
certificate are exercised, a new certificate will be issued for the remaining
number of Warrants.
The Company has authorized and reserved for issuance a number of shares of
Common Stock sufficient to provide for the exercise of the Warrants. When
issued, upon payment of the exercise price specified in the Warrants, each
share of Common Stock will be fully paid and nonassessable. Holders of
Warrants will not have any voting or other rights as stockholders of the
Company unless and until Warrants are exercised and shares issued pursuant
thereto.
The Warrants may be redeemed by the Company, at a price of $.05 per
Warrant, upon not less than 30 days prior written notice at any time during
the Exercise Period, with the prior written consent of the Underwriter,
provided the average of the closing bid quotations of the Common Stock,
during the period of twenty (20) consecutive trading days ending on the third
day prior to the date upon which notice of redemption is given, as reported
on The Nasdaq SmallCap Market (or if the Common Stock is not quoted thereon,
the closing sale price of the Common Stock on the Nasdaq National Market or
other principal securities exchange upon which the Common Stock is then
quoted or listed, or such other reporting system that provides closing sale
prices for the Common Stock), has been at least $8.00 per share. The Warrants
will be exercisable until the close of business on the day immediately
preceding the date fixed for the redemption of the Warrants in the notice of
redemption.
The Company will pay the Underwriter a fee of 8% of the exercise price of
each Warrant exercised, provided (i) the market price of the Common Stock on
the date the Warrant was exercised was equal to or greater than the Warrant
exercise price on that date, (ii) the exercise price of the Warrant was
solicited by a member of the NASD, (iii) the Warrant was not held in a
discretionary account, (iv) the disclosure of compensation arrangements was
made in documents provided to the holders of the Warrants, (v) the
solicitation of the exercise of the Warrant was not a violation of Rule 10b-6
under the Exchange Act and (vi) the Underwriter is designated in writing as
the soliciting NASD member. Unless granted an exemption from Rule 10b-6 under
the Exchange Act by the Commission, the Underwriter and any other soliciting
broker/dealers will be prohibited from engaging in any market making
activities or solicited brokerage activities with regard to the Company's
securities during the periods prescribed by exemption (xi) to Rule 10b-6
before the solicitation of the exercise of any Warrant until the later of the
termination of such solicitation activity or the termination of any right the
Underwriter and any other soliciting broker/dealer may have to receive a fee
for the solicitation of the exercise of the Warrants.
For a holder of a Warrant to exercise the Warrant, there must be a current
registration statement on file with the Securities and Exchange Commission
and various state securities commissions. The Company will be required to
file post-effective amendments to the registration statement when events
require such amendments and to take appropriate action under state securities
laws. While it is the Company's intention to file post-effective amendments
when necessary and to take appropriate action under state securities laws,
there can be no assurance that the Company will file all post-effective
amendments required to maintain the effectiveness of the registration
statement or that the Company will take all appropriate action under state
securities laws. If the registration statement is not kept current for any
reason, the Warrants will not be exercisable, and holders thereof may be
deprived of value.
OPTIONS AND WARRANTS
Options. On the Effective Date, there will be outstanding options to
purchase an aggregate of 60,042 shares of Common Stock at an exercise price
of $3.50, which expire at various dates from February 22, 1999 through June
30, 1999. David Chabut, Chief Financial Officer of the Company, has advised
the Company that he intends to exercise options to purchase 4,370 shares of
Common Stock at the Closing. See "Certain Transactions." In addition,
4,688,706 shares of Common Stock have been reserved for issuance upon
exercise of options which may be granted in the future pursuant to the
Company's 1996 Stock Option Plan, including 4,500,000 Time Accelerated
Restricted Stock Options. See "Management -- Stock Option Plan."
Warrants. On the Effective Date, there will be outstanding warrants to
purchase an aggregate of 2,500,000 shares of Common Stock having terms
identical to the Warrants offered hereby. See "Description of Securities --
Bridge Financing."
44
<PAGE>
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of "blank check"
preferred stock with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the
Board of Directors is empowered, without further stockholder approval, to
issue preferred stock with dividend, liquidation, conversion, voting or other
rights that could decrease the amount of earnings and assets available for
distribution to holders of Common Stock or adversely affect the voting power
or other rights of the holders of the Company's Common Stock. In the event of
issuance, the preferred stock could be utilized, under certain circumstances,
as a method of discouraging, delaying or preventing a change in control of
the Company. No shares of preferred stock will be outstanding on the
Effective Date, other than the 1,269 shares of Series A Preferred Stock owned
by the Schoenfeld Parties and Dr. Alan H. Gold. Except for shares of Series A
Preferred Stock which may be issued in payment of dividends on the Series A
Preferred Stock, the Company has no present intention to issue any shares of
preferred stock. The Company has agreed with the Underwriter that, except for
issuances disclosed in or contemplated by this Prospectus, it will not issue
any securities, including but no limited to any shares of preferred stock,
for a period of 24 months following the Effective Date, without the prior
written consent of the Underwriter. See "Certain Transactions" and
"Description of Securities -- Series A Preferred Stock."
SERIES A PREFERRED STOCK
The Board of Directors has authorized the issuance of up to 2,500 shares
of Series A Preferred Stock, of which 1,269 shares, owned by the Schoenfeld
Parties and Dr. Alan H. Gold are outstanding. The terms of the Series A
Preferred Stock, set forth in a Certificate of Designation filed with the
Office of the Secretary of the State for the State of Delaware, are as
follows:
Dividend Rights. Holders of Series A Preferred Stock are entitled to
receive, prior to the payment of cash dividends on the Common Stock,
cumulative dividends at the rate of $80 per share per annum, and no more,
when, as and if declared by the Company's Board of Directors, out of funds
legally available therefor. Dividends on the Series A Preferred Stock are
payable, in the sole and absolute discretion of the Board of Directors, in
cash, additional shares of Series A Preferred Stock (based upon the
liquidation value thereof), or a combination thereof. Dividends may not be
paid or declared on, and no other distributions may be made with respect to,
and no expenditure shall be made for the purchase, redemption or retirement
of, any of the Company's capital stock junior to or in parity with the Series
A Preferred Stock, unless all cumulative dividends payable on the Series A
Preferred Stock for all prior annual dividend periods have been paid. The
Company has agreed with the Underwriter that it will not declare or pay any
cash dividends on the Series A Preferred Stock without the prior written
consent of the Underwriter.
Redemption. The Series A Preferred Stock may be redeemed at the option of
the Company, as a whole at any time or in part from time to time, at $1,000
per share. Written notice of redemption must be given to the registered
holders of the Series A Preferred Stock not less than twenty (20) nor more
than thirty (30) days prior to the date fixed for the redemption of the
Series A Preferred Stock. The Company has agreed that it will not redeem any
shares of Series A Preferred Stock prior to the fifth anniversary of the
Effective Date, without the prior written consent of the Underwriter.
Liquidation Rights. Subject to the prior rights of the Company's creditors
and the holders of senior securities, the holders of the Series A Preferred
Stock are entitled to receive, upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, $1,000 per share, plus accrued and
unpaid dividends. If, in any such case, the assets of the Company are
insufficient to make such payment in full, then the available assets will be
distributed among the holders of the Series A Preferred Stock and any other
series of preferred stock which is in parity with the Series A Preferred
Stock, ratably in proportion to the full amount to which each holder would be
entitled.
Conversion Rights. Each share of Series A Preferred Stock is convertible
into 222.22 shares of Common Stock (the "conversion rate"), subject to
adjustment in certain events, at the option of the holder thereof commencing
upon the earlier of September 30, 1999 and 24 months after the Effective
Date. The conversion rate is subject to adjustment in the event of a stock
split, stock dividend, recapitalization, merger, consolidation or cer-
45
<PAGE>
tain other events. The right of conversion with respect to the shares of the
Series A Preferred Stock called for redemption will terminate at the close of
business on the business day preceding the date fixed for redemption. Upon
conversion, no payment or allowance will be made in respect of any accrued
but unpaid dividends on the Series A Preferred Stock.
Voting Rights. Holders of Series A Preferred Stock have no voting rights,
except as may be required by law.
STATUTORY PROVISIONS AFFECTING STOCKHOLDERS
Following the consummation of the Offering, the Company will be subject to
Section 203 of the Delaware General Corporation Law, the State of Delaware's
"business combination" statute. In general, such statute prohibits a publicly
held Delaware corporation from engaging in various "business combination"
transactions with any "interested stockholder" for a period of three years
after the date of the transaction in which the person became an "interested
stockholder," unless (i) the transaction in which the interested stockholder
obtained such status or the business combination is approved by the Board of
Directors prior to the date the interested stockholder obtained such status;
(ii) upon consummation of the transaction which resulted in the stockholder
becoming an "interested stockholder," the "interested stockholder" owned at
least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned by (a) persons who are directors and
officers and (b) employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) on or
subsequent to such date the "business combination" is approved by the Board
of Directors and authorized at an annual or special meeting of stockholders
by the affirmative vote of at least 66 2/3% of the outstanding voting stock
which is not owned by the "interested stockholder." A "business combination"
includes mergers, asset sales and other transactions resulting in financial
benefit to a stockholder. An "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years, did
own) 15% or more of a corporation's voting stock. The statute could prohibit
or delay mergers or other takeover or change in control attempts with respect
to the Company and, accordingly, may discourage attempts to acquire the
Company.
BRIDGE FINANCING
In November and December 1996, the Company sold an aggregate of 40 Units,
each Unit consisting of the Company's 8% promissory note in the principal
amount of $25,000 (the "Bridge Notes") and Bridge Warrants to purchase 62,500
shares of Common Stock for a purchase price of $25,000 per Unit (or an
aggregate of $1,000,000). The Bridge Notes are payable upon the earlier of
November 27, 1997 and the consummation of an initial public offering or
private placement of the Company's debt and/or equity securities resulting in
gross proceeds to the Company of at least $5,000,000. Each Bridge Warrant
entitles the registered holder thereof to purchase one share of Common Stock
at an exercise price of $4.50 per share, subject to adjustment in certain
events, at any time during the period commencing November 27, 1997 and ending
on November 26, 2001. On the Effective Date, the Bridge Warrants will convert
automatically into warrants having terms identical to the Warrants being
offered in the Offering. The net proceeds of the Bridge Financing
(approximately $820,000) were used in part to purchase machinery ($235,000)
and for sales and marketing ($235,000). The Company used the remaining net
proceeds as working capital, including the payment of some of the expenses of
the Offering.
REGISTRATION RIGHTS
Investors who acquired Bridge Warrants in connection with the Bridge
Financing have the right to request registration of the Bridge Warrants (or
securities issued in exchange therefor) and the shares of Common Stock issued
or issuable upon exercise thereof in any registration statement filed by the
Company with the Commission under the Securities Act (with certain
exceptions) for the issuance and sale of its securities. The Company has
registered for resale pursuant to the Selling Securityholder Prospectus
warrants to purchase 2,250,000 shares of Common Stock (having terms identical
to the Warrants offered hereby) which are to be issued on the Effective Date
upon automatic conversion of the Bridge Warrants, and the shares of Common
Stock issuable upon exercise of those warrants. The Company also has
registered for resale pursuant to the Selling Securityholder
46
<PAGE>
Prospectus 33,436 shares of Common Stock issuable upon exercise of an option
granted to an individual who through an affiliated entity, provided the
Company with debt financing in 1995. The Company granted that individual
piggyback and demand registration rights with respect to those shares.
Investors in the Bridge Financing and the optionee have agreed with the
Underwriter not to sell or otherwise dispose of securities of the Company,
including shares of Common Stock (except under certain circumstances in
connection with a third party tender offer for the Common Stock), for a
period of 24 months following the Effective Date, without the prior written
consent of the Underwriter, which may be granted or withheld in the sale and
absolute discretion of the Underwriter. See "Selling Securityholder
Offering."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 2,619,907 shares of
Common Stock outstanding, of which 1,500,000 will be transferable under the
Securities Act. The remaining 1,119,907 shares, issued in private
transactions, will be "restricted securities" (as that term is defined in
Rule 144 promulgated under the Securities Act) which may be publicly sold
only if registered under the Securities Act or if sold in accordance with an
applicable exemption from registration, such as Rule 144. In general, under
Rule 144 as currently in effect, subject to the satisfaction of certain other
conditions, a person, including an affiliate of the Company, who has
beneficially owned restricted securities for at least two years, is entitled
to sell (together with any person with whom such individual is required to
aggregate sales), within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class, or, if the Common Stock is quoted on The Nasdaq Stock Market or a
national securities exchange, the average weekly trading volume during the
four calendar weeks preceding the sale. A person who has not been an
affiliate of the Company for at least three months, and who has beneficially
owned restricted securities for at least three years is entitled to sell such
restricted shares under Rule 144 without regard to any of the limitations
described above. Officers, directors and other securityholders of the Company
owning and/or having rights to acquire in the aggregate 3,653,343 shares of
Common Stock constituting restricted securities, have entered into agreements
with the Underwriter not to sell or otherwise dispose of any securities of
the Company, including shares of Common Stock, for a period of 24 months
following the Effective Date (the "Lock-Up Agreements"), without the prior
written consent of the Underwriter, which may be granted or withheld at the
sole and absolute discretion of the Underwriter; provided, however, that if
during such 24 month period, the Company's shares of Common Stock are subject
to a tender offer and holders of the Company's Common Stock (other than the
existing stockholders) agree to tender a majority of the outstanding shares
of Common Stock to the offeror, then the Underwriter shall release all
stockholders subject to the Lock-Up Agreement from the restrictions imposed
thereby solely for the purpose of tendering their shares of Common Stock to
the offeror pursuant to the terms of the tender offer. The Company has
registered for resale pursuant to the Selling Securityholder Prospectus (i)
warrants to purchase 2,500,000 shares of Common Stock (having terms identical
to the Warrants offered hereby) and the shares of Common Stock issuable upon
exercise thereof, and (ii) 33,436 shares of Common Stock issuable upon
exercise of options, subject to the Lock-Up Agreements. Following expiration
of the term of the Lock-Up Agreements, or the earlier release of the
restrictions contained therein, 1,119,907 shares will become eligible for
resale pursuant to Rule 144, subject to the volume limitations and compliance
with the other provisions of Rule 144, assuming the sale of all shares
pursuant to the Selling Securityholder Prospectus. Furthermore, the holders
of the Underwriters' Warrants (including the securities issuable upon
exercise thereof) have demand and piggyback registration rights with respect
to the shares of Common Stock and Warrants issuable upon exercise of the
Underwriters' Warrants. See "Description of Securities -- Registration
Rights," "Certain Transactions," "Underwriting" and "Selling Securityholder
Offering."
As a result of the Offering, an additional 2,250,000 shares of Common
Stock (2,587,500 if the Over-Allotment Option is fully exercised) will be
subject to issuance upon the exercise of the Warrants offered hereby.
As of December 31, 1996, there were eight record holders of the Common
Stock.
47
<PAGE>
DIVIDEND POLICY
Since its inception, the Company has not paid any dividends on its Common
Stock and it does not anticipate paying such dividends in the foreseeable
future. The Company intends to retain earnings, if any, to finance its
operations.
REPORTS TO STOCKHOLDERS
The Company intends to furnish its stockholders with annual reports
containing financial statements audited and reported upon by its independent
certified public accountants after the end of each fiscal year, and will make
available such other periodic reports as the Company may deem to be
appropriate or as may be required by law. The Company's fiscal year end is
December 31. Prior to the Effective Date, the Company will file a
Registration Statement on Form 8-A with the Commission to register under, and
be subject to the reporting requirements of, the Exchange Act.
TRANSFER AGENT AND WARRANT AGENT
The Company has engaged Continental Stock Transfer & Trust Company to act
as Transfer Agent for the Company's Common Stock and Warrant Agent for the
Warrants.
48
<PAGE>
UNDERWRITING
The Company has agreed to sell, and the Underwriter has agreed to purchase
from the Company, 1,500,000 shares of Common Stock and 2,250,000 Warrants.
The underwriting agreement between the Company and the Underwriter (the
"Underwriting Agreement") provides that the obligations of the Underwriter
are subject to certain conditions precedent. The Underwriter is committed to
purchase all of such shares of Common Stock and Warrants, if any are
purchased.
The Underwriter has advised that it proposes initially to offer the
1,500,000 shares of Common Stock and 2,250,000 Warrants to the public at the
respective initial public offering prices set forth on the cover page of this
Prospectus and that it may allow to selected dealers who are members of the
NASD concessions not in excess of $ per share of Common Stock and $ per
Warrant, of which not more than $ per share of Common Stock and $ per
Warrant may be re-allowed to certain other dealers.
The Underwriting Agreement also provides that the Underwriter will receive
a non-accountable expense allowance of 3% of the gross proceeds of the
Offering, of which $55,000 has been paid by the Company to date. The Company
also has agreed to pay all expenses in connection with qualifying the shares
of Common Stock and the Warrants offered hereby for sale under the laws of
such states as the Underwriter may designate, including expenses of counsel
retained for such purpose by the Underwriter.
Pursuant to the Over-allotment Option, which is exercisable for a period
of 45 days after the closing of the Offering, the Underwriter may purchase up
to 15% of the total number of shares of Common Stock and Warrants offered
hereby, solely to cover over-allotments.
The Company has agreed to sell to the Underwriter, for nominal
consideration, the Underwriter's Warrants to purchase an amount equal to 10%
of the number of shares of Common Stock and Warrants sold to the public. The
Underwriter's Warrants shall be exercisable for a period of five years
commencing one year from the Effective Date at an exercise price equal to
120% of the offering price of the shares of Common Stock and Warrants sold to
the public in the Offering. The Underwriter's Warrants are not transferable
for a period of one year after the Effective Date, except to officers of the
Underwriter, members of the selling group and their officers and partners.
The Company has agreed that, upon written request of the then holder(s) of
a majority of the Warrants and the shares of Common Stock issued and/or
issuable upon exercise of the Underwriters' Warrants (the "Underwriters'
Warrant Shares") which were originally issued to the Underwriter or to its
designees, made at any time within the period commencing one year and ending
five years after the Effective Date, the Company will file, at its sole
expense, no more than once, a registration statement under the Securities Act
registering the Underwriters' Warrant Shares. The Company has agreed to use
its best efforts to cause the registration statement to become effective. The
holders of the Underwriter's Warrants may demand registration without
exercising the Underwriter's Warrants and, in fact, are never required to
exercise same.
The Company has also agreed that if, at any time within the period
commencing one year and ending five years after the Effective Date, it should
file a registration statement with the Commission pursuant to the Securities
Act, regardless of whether some of the holders of the Underwriter's Warrants
and the Underwriter's Warrant Shares shall have therefore availed themselves
of any of the registration rights above, the Company, at its own expense,
will offer to said holders (with certain exceptions) the opportunity to
register or qualify the Underwriter's Warrant Shares. The objection of a
subsequent underwriter to the above "piggyback" registration rights would
preclude such inclusion.
In addition to the demand and "piggyback" registration rights, the Company
will cooperate with the then holders of the Underwriter's Warrants and
Underwriter's Warrant Shares in the preparation and execution of any
registration statement required in order to sell or transfer the
Underwriter's Warrant Shares and will supply all information required
therefore, but such additional expenses of such registration statement will
be pro-rated between the Company and the holders of the Underwriter's
Warrants and Underwriter's Warrant Shares according to the aggregate sales
price of the securities being issued.
49
<PAGE>
For the life of the Underwriter's Warrants, the holders thereof are given,
at nominal cost, the opportunity to profit from a rise in the market price of
the Common Stock with a resulting dilution in the interest of other
stockholders. Further, such holders may be expected to exercise the
Underwriter's Warrants at a time when the Company would in all likelihood be
able to obtain equity capital on terms more favorable than those provided in
the Underwriter's Warrants.
The Company has agreed, for a period of 24 months after the Effective
Date, not to issue any shares of Common Stock, preferred stock or any
warrants, options or other rights to purchase Common Stock or preferred stock
without the prior written consent of the Underwriter, except as contemplated
by or as disclosed in the Prospectus. Officers, directors and other
securityholders of the Company owning and/or having rights to acquire in the
aggregate 3,653,343 shares of Common Stock constituting restricted
securities, have entered into agreements with the Underwriter not to sell or
otherwise dispose of any securities of the Company, including shares of
Common Stock (except under certain circumstances in connection with a third
party tender offer for the Common Stock), for a period of 24 months following
the Effective Date, without the prior written consent of the Underwriter,
which may be granted or withheld in the sole and absolute discretion of the
Underwriter. See "Description of Securities -- Shares Eligible for Future
Sale."
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against liabilities in connection with the
Offering, including liabilities under the Securities Act.
The Company has agreed that upon closing of the Offering it will, for a
period of not less than three years, engage a designee of the Underwriter as
advisor to the Board. In addition and in lieu of the Underwriter's right to
designate an advisor, the Company has agreed, if requested by the Underwriter
during such three year period, to nominate and use its best efforts to cause
the election of a designee of the Underwriter as a director of the Company.
The Underwriter has not yet designated any such person.
The Underwriter intends to act as a market maker for the Common Stock and
Warrants after the closing of the Offering.
The Company will pay the Underwriter a fee of 8% of the exercise price of
each Warrant exercised, provided (i) the market price of the Common Stock on
the date the Warrant was exercised was equal to or greater than the Warrant
exercise price on that date, (ii) the exercise price of the Warrant was
solicited by a member of the NASD, (iii) the Warrant was not held in a
discretionary account, (iv) the disclosure of compensation arrangements was
made in documents provided to the holders of the Warrants, (v) the
solicitation of the exercise of the Warrant was not a violation of Rule 10b-6
under the Exchange Act and (vi) the Underwriter is designated in writing as
the soliciting NASD member. Unless granted an exemption from Rule 10b-6 under
the Exchange Act by the Commission, the Underwriter and any other soliciting
broker/dealers will be prohibited from engaging in any market making
activities or solicited brokerage activities with regard to the Company's
securities during the periods prescribed by exemption (xi) to Rule 10b-6
before the solicitation of the exercise of any Warrant until the later of the
termination of such solicitation activity or the termination of any right the
Underwriter and any other soliciting broker/dealer may have to receive a fee
for the solicitation of the exercise of the Warrants.
The Underwriter acted as placement agent for the Bridge Financing, for
which it received selling commissions of $100,000 and a non-accountable
expense allowance of $30,000.
The Company has granted the Underwriter a right of first refusal for a
period of two years from the Effective Date with respect to the underwriting
or placement of certain securities the Company, its affiliates or any of its
present or future subsidiaries.
The Company has agreed to retain the Underwriter as a management and
financial advisor for a period of 24 months commencing on the Effective Date
at a fee equal to $4,000 per month. The entire fee ($96,000) is payable at
the closing of the Offering. In its capacity as an advisor to the Company,
the Underwriter will be obligated to provide general financial advisory
services to the Company on an as-needed basis with respect to possible future
financing or acquisitions by the Company and related matters. The Underwriter
is not obligated to provide any minimum number of hours of advisory services
to the Company.
50
<PAGE>
In addition, the Company has agreed to engage a financial public relations
firm reasonably satisfactory to the Underwriter no later than the Effective
Date. Such firm, or an acceptable substitute firm, shall be continuously
engaged from the Effective Date to a date 24 months from the closing of the
Offering.
The initial public offering prices of the shares of Common Stock and
Warrants offered hereby and the initial exercise price and other terms of the
Warrants have been determined by negotiation between the Company and the
Underwriter and do not necessarily bear any direct relationship to the
Company's assets, earnings, book value per share or other generally accepted
criteria of value. Factors considered in determining the offering prices of
the shares of Common Stock and Warrants and the exercise price of the
Warrants included the business in which the Company is engaged, the Company's
financial condition, an assessment of the Company's management, the general
condition of the securities markets and the demand for similar securities of
comparable companies.
SELLING STOCKHOLDER OFFERING
The Company has registered for resale under a separate prospectus (the
"Selling Securityholder Prospectus") as part of the Registration Statement
warrants to purchase 2,500,000 shares of Common Stock (having terms identical
to the warrants offered hereby) and the shares of Common Stock issuable upon
exercise thereof, and 33,436 shares of Common Stock issuable upon exercise of
an option granted to an individual who, through an affiliated entity,
provided debt financing to the Company in 1995. Those warrants were issued in
connection with a bridge financing completed by the Company in December 1996.
Prior to the Effective Date, each of the selling securityholders named in the
Selling Securityholder Prospectus (the "Selling Securityholders") will enter
into an agreement with the Underwriter not to sell or otherwise dispose of
any securities of the Company (except under certain circumstances in
connection with a third party tender offer for the Common Stock) for a period
of 24 months following the Effective Date, without the prior written consent
of the Underwriter, which may be granted or withheld in the sole and absolute
discretion of the Underwriter. The Underwriter has agreed that it will not
consent to the sale of any of the securities offered by the Selling
Securityholders pursuant to the Selling Stockholder Prospectus prior to the
date upon which the Over-Allotment Option expires, or such earlier date upon
which the Over-Allotment Option is fully exercised. See "Description of
Securities -- Bridge Financing," "Description of Securities -- Registration
Rights" and "Description of Securities -- Shares Eligible for Future Sale."
The Company will not receive any proceeds from the sale of the warrants or
shares of Common Stock by the Selling Securityholders, but will receive the
exercise price of the warrants and options exercised. Sales of the securities
offered by the Selling Securityholders, or even the potential for such sales,
would likely have an adverse effect on the market price of the Company's
securities.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Snow Becker Krauss P.C., 605 Third Avenue, New York, New York
10158-0125. Certain legal matters in connection with the Offering will be
passed upon for the Underwriter by Gersten, Savage, Kaplowitz, Fredericks &
Curtin, LLP, 101 East 52nd Street, New York, New York 10022-6018.
EXPERTS
The consolidated balance sheet as of December 31, 1995 and the
consolidated statements of operations, stockholders' deficiency and cash
flows for each of the two years in the period ended December 31, 1995,
included in the Prospectus, have been included herein in reliance on the
report of Coopers & Lybrand LLP, independent accountants, given on the
authority of said firm as experts in accounting and auditing.
51
<PAGE>
UNIVEC, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
--------
<S> <C>
Report of Independent Accountants ................................................................ F-2
Consolidated Balance Sheets as of December 31, 1995 (audited) and
September 30, 1996 (unaudited) .................................................................. F-3
Consolidated Statements of Operations for the years ended December 31, 1995 and 1994 (audited),
and for the nine months ended September 30, 1996 (unaudited) .................................... F-4
Consolidated Statements of Stockholders' Deficiency for the years ended December 31, 1995 and 1994
(audited) and for the nine months ended September 30, 1996 (unaudited) .......................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1995 and 1994 (audited),
and for the nine months ended September 30, 1996 (unaudited) .................................... F-6
Notes to Consolidated Financial Statements ....................................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors, Stockholders of Univec, Inc.:
We have audited the accompanying balance sheet of Univec, Inc. (the
"Company") as of December 31, 1995, and the related statements of operations,
stockholders' deficiency and cash flows for each of the two years in the
period then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Univec, Inc. as of
December 31, 1995 and the results of its operations and its cash flows for
each of the two years in the period then ended, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from
operations and has a net capital deficiency that raises substantial doubt
about the Company's ability to continue as a going concern. Management's
plans with regard to these matters are also discussed in Note 2. The
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable
to continue as a going concern.
Melville, New York
September 18, 1996, except for
Note 13 as to which the
date is December 14, 1996.
F-2
<PAGE>
UNIVEC, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
-------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash ............................................................ $ 79,978 $ 63,746
Accounts receivable ............................................. 63,326 154,031
Inventory ....................................................... 86,364
-------------- ---------------
Total current assets ....................................... 143,304 304,141
Fixed assets, net ............................................... 375,613 822,081
Patent rights, net .............................................. 88,000 76,000
Other assets .................................................... 32,264
-------------- ---------------
Total assets ............................................... $ 606,917 $ 1,234,486
============== ===============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
Accounts payable ................................................ $ 84,141 $ 373,244
Accrued expenses ................................................ 826,662 312,339
Notes payable ................................................... 665,000 125,000
Patent acquisition liability, current portion ................... 30,000 30,000
-------------- ---------------
Total current liabilities .................................. 1,605,803 840,583
Unearned income in connection with supply and licensing
agreements .................................................... 1,683,788
Notes payable to officer ........................................ 732,135
Notes payable to stockholders ................................... 262,974 277,296
Due to affiliates ............................................... 1,095,507 1,108,342
Patent acquisition liability .................................... 20,000
-------------- ---------------
Total liabilities .......................................... 2,984,284 4,642,144
Commitments and contingencies (Notes 2 and 11)
Stockholders' deficiency:
Preferred stock $.001 par value; 4,997,500 shares authorized;
none issued and outstanding ................................
Series A 8% Cumulative Convertible Preferred Stock, $.001 par
value, 2,500 shares authorized; none issued and outstanding
Common stock $.001 par value; 25,000,000 shares authorized;
issued and outstanding 1,059,001 shares (Note 1) ........... 1,059 1,059
Additional paid-in capital .................................... 433,941 433,941
Accumulated deficit ........................................... (2,812,367) (3,815,158)
Less deferred offering costs .................................. (27,500)
-------------- ---------------
Total stockholders' deficiency ............................. (2,377,367) (3,407,658)
-------------- ---------------
Total liabilities and stockholders' deficiency ............. $ 606,917 $ 1,234,486
============== ===============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
UNIVEC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine months ended
December 31, September 30,
1994 1995 1995 1996
------------- ------------- ------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
Sales .................................. $1,106,930 $ 282,000
Cost of sales .......................... 1,016,530 223,931
------------- --------------
Gross profit ................. 90,400 58,069
Expenses:
Marketing ......................... $ 80,162 115,431 $ 111,346 97,699
Product development ............... 202,881 299,498 258,736 55,428
General and administrative ........ 331,396 433,012 374,193 687,856
Interest .......................... 47,414 153,473 126,532 149,877
Royalties ......................... 35,000 25,000 70,000
------------- ------------- ------------- --------------
Total expenses ............... 661,853 1,036,414 895,807 1,060,860
------------- ------------- ------------- --------------
Net loss ..................... $ (661,853) $ (946,014) $ (895,807) $(1,002,791)
============= ============= ============= ==============
Net loss per share ..................... $ (.65) $ (.89) $ (.85) $ (.95)
============= ============= ============= ==============
Weighted average common stock
outstanding
(Note 1) ............................. 1,025,608 1,059,001 1,056,218 1,059,001
============= ============= ============= ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
UNIVEC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
Common Stock
-----------------------
Shares Amount
--------- -------
<S> <C> <C>
Balance, December 31, 1993 ..................... 1,025,608 $1,025
Collection of stock subscription ...............
Net loss for the year ended December 31, 1994 ..
--------- -------
Balance, December 31, 1994 ..................... 1,025,608 1,025
Issuance of stock .............................. 33,393 34
Stockholder payment of company liability .......
Net loss for the year ended December 31, 1995 ..
--------- -------
Balance, December 31, 1995 ..................... 1,059,001 1,059
Payment of offering costs (unaudited) ..........
Net loss for the nine months ended September 30,
1996 (unaudited) ..............................
--------- -------
Balance, September 30, 1996 (unaudited) ........ 1,059,001 $1,059
========= =======
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
Additional Deferred Stock Total
Paid-in Accumulated Offering Subscriptions Stockholders'
Capital Deficit Costs Receivable Equity
---------- ------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 ..................... $ 98,975 $(1,204,500) -- $ (35,000) $(1,139,500)
Collection of stock subscription ............... 35,000 35,000
Net loss for the year ended December 31, 1994 .. (661,853) (661,853)
---------- ------------- ---------- ------------- -------------
Balance, December 31, 1994 ..................... 98,975 (1,866,353) (1,766,353)
Issuance of stock .............................. 299,966 300,000
Stockholder payment of company liability ....... 35,000 35,000
Net loss for the year ended December 31, 1995 .. (946,014) (946,014)
---------- ------------- ---------- ------------- -------------
Balance, December 31, 1995 ..................... 433,941 (2,812,367) (2,377,367)
Payment of offering costs (unaudited) .......... (27,500) (27,500)
Net loss for the nine months ended September 30,
1996 (unaudited) .............................. (1,002,791) (1,002,791)
---------- ------------- ---------- ------------- -------------
Balance, September 30, 1996 (unaudited) ........ $433,941 $(3,815,158) $ (27,500) $ -- $(3,407,658)
========== ============= ========== ============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
UNIVEC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
December 31, September 30,
------------------------------ --------------------------------
1994 1995 1995 1996
------------- ------------- ------------- ---------------
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss ....................................... $ (661,853) $ (946,014) $ (895,807) $ (1,002,791)
Adjustments to reconcile net loss to net cash
used in operating activities:
Payment of Company liability by stockholder
Issuance of stock for services ............ 35,000
Depreciation and amortization ............. 8,590 18,616 19,447 14,814
Changes in assets and liabilities:
Accounts receivable .................... (63,326) (90,705)
Inventory .............................. (86,364)
Accounts payable and accrued expenses .. 477,485 425,735 313,168 506,915
------------- ------------- ------------- ---------------
Net cash used in operating activities (175,778) (529,989) (563,192) (658,131)
------------- ------------- ------------- ---------------
Cash flows from investing activities:
Purchase of fixed assets ....................... (3,950) (373,990) (365,608) (449,282)
Payment on note for acquisition of patent ...... (27,000) (35,000) (25,000) (20,000)
------------- ------------- ------------- ---------------
Net cash used in investing activities (30,950) (408,990) (390,608) (469,282)
------------- ------------- ------------- ---------------
Cash flows from financing activities:
Proceeds from the issuance of common stock ..... 35,000 300,000 300,000
Payment of notes ............................... (790,000)
Proceeds from issuance of notes ................ 665,000 530,000 250,000
Advances from affiliates/stockholders, net ..... 178,200 46,430 120,838 27,157
Deferred debt costs ............................ (32,264)
Deferred offering costs ........................ (27,500)
Unearned income on supply and licensing
agreements .................................. 1,683,788
------------- ------------- ------------- ---------------
Net cash provided by financing
activities ........................ 213,200 1,011,430 950,838 1,111,181
------------- ------------- ------------- ---------------
Net increase (decrease) in cash ...... 6,472 72,451 (2,962) (16,232)
Cash at beginning of period ...................... 1,055 7,527 7,527 79,978
------------- ------------- ------------- ---------------
Cash at end of period ............................ $ 7,527 $ 79,978 $ 4,565 $ 63,746
============= ============= ============= ===============
Supplemental disclosures .........................
Cash paid during the year for:
Interest .................................... $ 631 52,899
Income taxes ................................ 350 350
Supplemental disclosures of noncash investing and
financing activities:
Patent rights acquired through issuance of
debt for $112,000 in 1994. ................
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
UNIVEC, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
1. OPERATIONS AND REORGANIZATION:
Univec, Inc. (the "Company" or "Univec") was incorporated on August 18,
1992 in the State of New York. The Company was formed to develop, produce
market medical products and resell medical devices of other companies on a
global basis.
On October 7, 1996, Univec formed a wholly-owned subsidiary organized
under the laws of Delaware. The new corporation has been authorized with
25,000,000 shares of common stock, $.001 par value and 5,000,000 shares of
preferred stock, $.001 par value. The Company merged with its wholly-owned
subsidiary, with the wholly-owned subsidiary being the surviving corporation.
Accordingly, the Company issued 10,256 for each outstanding common share of
the parent company. The accompanying financial statements of the Company
retroactively reflect the foregoing reincorporation merger to present the
current capitalization.
2. GOING CONCERN:
The financial statements have been prepared on a going concern basis,
which contemplates realization of assets and liquidation of liabilities in
the ordinary course of business. The Company has a working capital deficit of
$1,462,499 and a stockholders' deficiency of $2,377,367 as of December 31,
1995. The ability to continue as a going concern is dependent, among other
things, upon the Company's obtaining adequate long-term financing and the
attainment of profitable commercial operations. Management has signed a
letter of intent to raise additional working capital through an initial
public offering ("IPO").
Although management expects that the above factors will allow the Company
to continue as a going concern, there is no assurance that the financing will
be consummated or revenues from product sales will generate profitable
operations. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The Company's financial statements were prepared as a development stage
enterprise from August 18, 1992 (inception) through fiscal 1994. Prior to
1996, the Company primarily directed its activities toward establishing the
business including product development, financing, negotiating supply
manufacturing contracts and raising capital.
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Rx Ultra, Inc., which was incorporated on
February 2, 1996. All material intercompany balances and transactions have
been eliminated.
INVENTORY
Inventory is valued at the lower of cost, determined by the first-in,
first-out method, or market.
FIXED ASSETS
Fixed assets are stated at original cost less accumulated depreciation.
Fixed assets are depreciated on a straight-line basis over their estimated
useful life of five years. Maintenance and repairs are charged to expense as
incurred; renewals and improvements which extend the life of assets are
capitalized. Gains or losses on the disposal of fixed assets are charged to
operations.
F-7
<PAGE>
Univec, Inc. and Subsidiary
Notes to Consolidated Financial Statements - (Continued)
PATENT RIGHTS AND ROYALTIES
Patent rights acquired are capitalized and amortized on a straight line
basis over an estimated useful life of seven years. Royalties based on future
revenues will be charged to operations when and if they are incurred (see
Note 5).
PRODUCT DEVELOPMENT
Research and development costs are expensed as incurred.
UNAUDITED INFORMATION
The unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made are
adequate to make the information presented not misleading. These unaudited
financial statements have been prepared on the same basis as audited
financial statements and reflect, in the opinion of Company management, all
adjustments (which include only normal recurring adjustments) necessary to
fairly present the results of operations, changes in cash flows and financial
position as of and for the periods presented. These unaudited financial
statements should be read in conjunction with the audited financial
statements and related notes. The results for the interim periods presented
are not necessarily indicative of results to be expected for a full year.
INCOME TAXES
The Company records its income taxes under the provisions of the Statement
of Financial Accounting Standards No. 109 "Accounting for Income Taxes,"
(SFAS No. 109). This method requires recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under SFAS No. 109,
deferred tax liabilities and assets are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are
expected to reverse. See Note 10.
The Company had elected treatment as an S corporation for Federal and
state income taxation as of January 1, 1995. S corporation taxable income,
whether distributed or not, is passed through and taxed at the stockholder
level. Accordingly, for the above referenced period, no provision for Federal
income taxes is included in the accompanying statements of operations.
LOSS PER SHARE
Loss per share has been computed by dividing net losses by the weighted
average number of common and common equivalent shares during each period.
Retroactive restatement has been made to all share and per share amounts for
the reorganization discussed in Note 1.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities 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.
DEFERRED OFFERING COSTS
At September 30, 1996, the Company has deferred costs aggregating $27,500
(unaudited), in connection with an expected public offering of its equity
securities. If the offering is unsuccessful, such costs will be charged to
operations.
F-8
<PAGE>
Univec, Inc. and Subsidiary
Notes to Consolidated Financial Statements - (Continued)
DEBT ISSUANCE COSTS
At September 30, 1996, the Company has incurred debt issuance costs
aggregating $32,264 (unaudited) in connection with a private placement of
debt completed during December 1996 (see Note 13). These costs are being
deferred, and are included in other assets until the placement is completed.
These costs will be amortized to interest expense using the effective
interest method over the life of the related debt.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist of cash deposits. Cash balances are held
principally at one financial institution.
The Company's contract manufacturers are concentrated among a few
suppliers and assemblers. The loss of any one supplier or assembler could
have a significant impact on the Company's financial position or results of
operations.
Sales for 1995 and for the nine months ended September 30, 1996 resulted
primarily from the resale of medical devices manufactured by others.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Notes payable are reflected in the accompanying balance sheet at amounts
considered by management to reasonably approximate fair value. The fair value
of the Company's notes payable approximates recorded amounts as similar
borrowings have been offered to the Company at comparable rates and
maturities.
NEWLY ISSUED ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("SFAS No. 123"). The Statement, which becomes effective in
fiscal 1996, allows companies to measure compensation cost in connection with
employee stock compensation plans using a fair value based method or to
continue to use an intrinsic value based method, which generally does not
result in compensation cost. The Company has not yet decided which method it
will utilize relating to its stock-based employee plans.
4. FIXED ASSETS:
Fixed assets consist of the following:
December 31, September 30,
1995 1996
-------------- ---------------
(Unaudited)
Construction in progress - machinery $211,138 $655,677
Factory equipment .................. 152,188 152,188
Office equipment ................... 15,591 20,334
-------------- ---------------
378,917 828,199
Less accumulated depreciation ...... (3,304) (6,118)
-------------- ---------------
$375,613 822,081
============== ===============
5. PATENT RIGHTS:
On June 30, 1994, the Company entered into an exclusive license agreement
with the estate of an inventor related to two patents for a non-reusable
syringe. Such agreement includes fixed payments aggregating $112,000 through
June, 1997. Thereafter, the Company is required to pay quarterly royalty
payments of 5% of net sales
F-9
<PAGE>
Univec, Inc. and Subsidiary
Notes to Consolidated Financial Statements - (Continued)
of product manufactured by Univec under the license agreement or 10% of the
difference between net sales and purchase price of product manufactured under
the license agreement by third parties for Univec shall be made. Univec may
grant non-exclusive sublicenses under the agreement, in which case 10% of any
royalties collected by Univec would be payable to the inventor's estate. If
the manufactured product does not use the non-reusable syringe of the type
discussed in the patent, no royalties are due, other than the minimum annual
licensing fees.
Patent rights consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
-------------- ---------------
(Unaudited)
<S> <C> <C>
Patent rights ............... $112,000 $112,000
Less accumulated amortization (24,000) (36,000)
-------------- ---------------
$ 88,000 $ 76,000
============== ===============
</TABLE>
Amortization expense for fiscal 1995 and for the nine months ended
September 30, 1996 was $16,000 and $12,000 (unaudited), respectively.
The Company paid $82,000 (unaudited) through September 30, 1996 in
connection with this agreement, and the remaining fixed payments are
scheduled to be paid as follows:
1996 ............................................................. $10,000
1997 ............................................................. 20,000
----------
$30,000
==========
6. ACCRUED EXPENSES:
Accrued expenses consist of the following:
December 31, September 30,
1995 1996
-------------- ---------------
(Unaudited)
Payroll payable to officers (Note 7) $602,132
Interest ........................... 41,859 $ 9,904
Professional fees .................. 142,143 190,358
Royalties .......................... 25,000
Other .............................. 15,528 112,077
-------------- ---------------
$826,662 $312,339
============== ===============
7. NOTES PAYABLE:
On February 9, 1995, the Company entered into a term note agreement with
an available line of $600,000. This facility is collateralized by the assets
of the Company and bears interest at a rate of 16%. As of December 31, 1995,
$540,000 was outstanding under this agreement. During July 1996, the Company
repaid the outstanding balance. Interest expense for fiscal 1995 and for the
nine months ended September 30, 1996 approximated $49,000 and $43,000
(unaudited), respectively, in connection with this agreement.
In December 1995, the Company issued a demand note payable of $125,000.
The note is collateralized by the assets of the Company and bears an interest
rate of 12 1/2%. The note agreement contains an option to convert the note
into common shares of the Company at the IPO price (35,715 shares at a
proposed share price of $3.50).
F-10
<PAGE>
Univec, Inc. and Subsidiary
Notes to Consolidated Financial Statements - (Continued)
8. NOTES PAYABLE TO OFFICERS AND STOCKHOLDERS:
In September 1996, the Company entered into an agreement to convert the
outstanding balance owed two officers into non-interest bearing notes due the
earlier of two years following an IPO or September 30, 1999. As of September
30, 1996 the balance of approximately $732,000 (unaudited) has been
classified as long term (see Note 6).
Notes payable to stockholders at December 31, 1995 and September 30, 1996
of $262,974 and $277,296 (unaudited), respectively,(including accrued
interest) are due on demand and bear interest at a rate of 8% per annum.
Interest expense for fiscal 1995 and for the nine months ended September 30,
1996 approximated $17,900 and $14,300 (unaudited), respectively. In December
1996, these notes were converted to Series A Preferred Stock and, as such,
have been classified as non-current liabilities as of December 31, 1995 and
September 30, 1996. (See Note 13.)
Of the $277,296 outstanding at September 30, 1996 $116,373 will
automatically be converted into shares of common stock upon the consummation of
an IPO (33,250 shares at a proposed share price of $3.50).
9. DUE TO AFFILIATES:
Upon founding of the Company in August 1992, pending Univec's obtaining its
own financing, the Company's costs were funded by JS Associates, Inc. (the
"Affiliate"), a related entity whose sole stockholder is also an officer of the
Company. These costs, representing research, market analysis and development and
various administrative costs (including office salaries and rental of office
space), were accrued by Univec as paid by the Affiliate. Such costs have been
included in the statement of operations based on the type of costs incurred to
be reimbursed to the Affiliate. The related liability has been recorded on the
balance sheet as due to affiliate. These advances are due on demand and bear
interest at a rate of 8% per annum. Interest expense for fiscal 1995 and for the
nine months ended in connection with these advances approximated $78,000 and
$58,400 (unaudited), respectively. In December 1996, these notes were converted
to Series A Preferred Stock and, as such, have been classifed as non-current
liabilities as of December 31, 1995 and September 30, 1996. (See Note 13.)
10. INCOME TAXES:
The Company has cumulative losses of $2,812,367 and $3,815,158 (unaudited)
as of December 31, 1995 and September 30, 1996, respectively. Losses
aggregating approximately $1,900,000 which were incurred prior to the Company
changing its tax status to an S corporation would be available should the
Company return to C corporation status. The Company's net operating loss for
tax purposes differs from the loss for financial reporting purposes as a
result of certain costs being capitalized and expensed over a five-year
period for tax purposes. The Company has recorded a full valuation allowance
against the potential future benefit of such deferred tax assets.
Upon closing of the proposed public offering, the Company's income tax
status as an S corporation will terminate. The Company will convert to a C
corporation and will be subject to both Federal and state income taxes.
Accordingly, the Company will record a deferred tax asset of approximately
$817,000 resulting from net operating loss carryforwards and a corresponding
valuation allowance of approximately $817,000. Any income tax adjustment
required as a result of the conversion will be reflected in the period C
corporation status becomes effective.
In addition, the undistributed losses of the S corporation through the
date of consummation of the offering will be reclassified to additional
paid-in capital.
11. COMMITMENTS:
On January 1, 1995, the Company entered into an exclusive license
agreement with two inventors related to a patent for an insertable element
which prevents reuse of a plastic syringe. To maintain this license agree-
F-11
<PAGE>
Univec, Inc. and Subsidiary
Notes to Consolidated Financial Statements - (Continued)
ment in force, the Company is required to pay an annual minimum licensing of
$10,000. In order for the agreement to remain exclusive, exclusivity payments
of $25,000 in 1996 and $50,000 annually thereafter, are required to be made.
In fiscal 1995, $35,000 was charged to operations in connection with this
agreement. Under the license agreement, royalty payments of 2% of net sales
of product manufactured and 25% of sublicense royalties received shall be
made for products which use a modification of the specific insertable element
as shown and described in the licensed patent rights. Royalty payments of 6%
of net sales of product manufactured and 40% of sublicense royalties received
shall be made for products that use the specific insertable element. If the
manufactured product does not use the non-reusable syringe of the type
discussed in the patent, no royalties are due, other than the minimum annual
licensing fees.
On February 28, 1996, the Company entered into an exclusive license
agreement with an inventor related to a patent for a non-reusable hypodermic
syringe. The Company is required to pay a royalty advance of $10,000, which
will be applied towards future royalties. In addition, royalty payments of 2%
of net sales of product manufactured and 10% of sublicense royalties received
shall be made for product that use a modification of the specific embodiment
as shown and described in the licensed patent rights. Royalty payments of 6%
of net sales of product manufactured and 25% of sublicense royalties received
shall be made for products that use the specific embodiment. If the
manufactured product does not use the non-reusable syringe of the type
discussed in the patent, no royalties are due, other than the minimum annual
licensing fees.
On March 25, 1996, the Company entered into an exclusive license agreement
with an inventor related to a patent for both a self destruct syringe and cap
assembly. The Company was required to pay $10,000 upon the execution of the
agreement and an additional two payments of $20,000 on the six-month and
one-year anniversaries to maintain the agreement. In addition, royalty
payments of 2% of net sales of product manufactured and 10% of sublicense
royalties received shall be made for product that use a modification of the
specific embodiment as shown and described in the licensed patent rights.
Royalty payments of 7% of net sales of product manufactured and 25% of
sublicense royalties shall be made for products that use the specific
embodiment. If the manufactured product does not use the non-reusable syringe of
the type discussed in the patent, no royalties are due, other than the minimum
annual licensing fees.
On May 30, 1996, the Company entered into a five-year supply and licensing
agreement with a manufacturer. The supply agreement requires the manufacturer
to supply Univec with approximately 50,000,000 syringe components per year.
In connection with this supply agreement, the manufacturer sold a production
mold and inserts to Univec for nominal consideration, and subsequently leased
back the equipment. Under this lease, the lessee is required to make payments
over three years approximating $1,946,000 to Univec. In July 1996, Univec
assigned its rights to the last 34 lease payments to an unrelated corporation
for approximately $1.6 million. Certain stockholders of the Company have agreed
to pay the manufacturer up to $1,000,000 (less $0.14925 for each dollar paid
by the Company under the agreement) if Univec does not purchase $6,700,000 of
products from the manufacturer over the first three years of the agreement.
Simultaneous with the supply agreement, the Company granted the
manufacturer the option to license the Company's product providing the
manufacturer the right to manufacture and sell the Company product to certain
segments of the market for a royalty of 5% of sales of the licensed product.
Unearned income in connection with these agreements will be recognized in income
upon the sale of the Company's product supplied by the manufacturer.
The Company leases office space under a three year operating lease from a
stockholder and officer of the Company. Minimum future rental under this
lease is $27,600 for fiscal 1996. Rent expense for fiscal 1995 and for the
nine months ended September 30, 1996 was $27,600 and $20,700 (unaudited),
respectively.
12. EQUITY:
The following share and per share amount have been restated to reflect the
reorganization as described in Note 1:
F-12
<PAGE>
Univec, Inc. and Subsidiary
Notes to Consolidated Financial Statements - (Continued)
In February 1995, the Company's board of directors and stockholders
approved the sale of 33,393 shares of the common stock to a stockholder of
the Company for an aggregate purchase price of $300,000. The individual also
received the option to purchase 22,236 additional shares of common stock at
the initial public offering price. The agreement expires on February 22,
1999.
In June 1995, the Company's board of directors and stockholders approved a
Share Option Agreement between the Company and an individual. The individual
has the option to purchase 33,436 shares of the common stock at the initial
public offering price. As of December 31, 1995, no options were exercised.
The agreement expires on June 30, 1998.
In December 1995, a stockholder of the Company gave 10,256 shares of his
common stock to a creditor of the Company to satisfy a liability for services
rendered. The Company has recorded a $35,000 contribution to paid-in capital.
13. SUBSEQUENT EVENTS:
During December 1996, the Company raised $1,000,000 through a private
placement of 40 units with each unit consisting of an 8% bridge note in the
principal amount of $25,000 and warrants to purchase 62,500 shares of common
stock. Each warrant entitles the holder to purchase one share of common stock at
an exercise price of $4.50 per share at any time during the period commencing
November 27, 1997 and ending on November 26, 2001. The net proceeds of
approximately $820,000 were used for sales and marketing, capital expenditures,
working capital, and general corporate expenses. These unsecured notes are
payable upon the earlier of November 27, 1997, or the consummation of an initial
public offering or private placement of debt or equity securities resulting in
gross proceeds of at least $5,000,000.
In connection with the reorganization in October 1996 (see Note 1), the
Company authorized the issuance of 1,269 shares of Series A 8% Cumulative
Convertible Preferred Stock to certain officers in exchange for the
cancellation of notes due to affiliate and payable to stockholders of
$1,269,000.
Series A preferred shares are entitled to receive, prior to the payment of
cash dividends of the common stock, cumulative dividends at a rate of $80 per
share per annum and may be redeemed at the option of the Company, at $1,000
per share (aggregate liquidation preference of $1,269,000). In addition,
preferred stockholders are entitled to a liquidation preference of $1,000 per
share, plus accrued and unpaid dividends. Each share of Series A Preferred
Stock is convertible at the earlier of two years following an IPO or
September 30, 1999 into 222.22 shares of common stock ($4.50 per share).
Holders of these shares have no voting rights.
During December 1996, the Board of Directors adopted, subject to stockholder
approval, the 1996 Stock Option Plan (the "Plan"). The Plan is to be
administered by the Board of Directors or a committee thereof. Pursuant to
the Plan, options to purchase 4,709,219 shares of common stock may be granted
to directors, employees (including officers) and consultants to the Company
(collectively, "Plan participants"). The Plan authorizes the issuance of
incentive stock options ("ISOs"), as defined in Section 422A of the Internal
Revenue Code of 1986, as amended, non-qualified stock options ("NQSOs", and
together with ISOs, "Options"). Consultants and directors who are not also
employees of the Company are eligible for grants of only NQSOs. The exercise
price of each ISO may not be less than 100% of the fair market value of the
common stock at the time of grant, except that in the case of a grant to an
employee who owns 10% or more of the outstanding stock of the Company or a
subsidiary or parent of the Company (a "10% Stockholder"), the exercise price
may not be less than 110% of the fair market value on the date of grant. The
aggregate fair market value of the shares covered by ISOs granted under the
Plan that become exercisable by a Plan participant for the first time in any
calendar year is subject to a $100,000 limitation. The exercise price of each
NQSO is determined by the Board, or committee thereof, in its discretion;
provided that NQSO granted a 10% Stockholder be no less than 110% of the fair
market value on the date of grant. As of December 31, 1996, 20,513 ISO's have
been granted to an officer of the Company.
F-13
<PAGE>
Univec, Inc. and Subsidiary
Notes to Consolidated Financial Statements - (Continued)
The Company has set aside Options to purchase 4,500,000 shares of common
stock based on the criteria listed below. These Options will become
exercisable commencing upon the earlier of (x) nine years after the effective
date of the option, or (y) two years after the effective date of the option,
provided that in the case of clause (y), the Company shall have obtained (i)
at least $30,000,000 in gross revenues and after tax net income of at least
$2,000,000 in the second full fiscal year following the effective date, or
(ii) at least $45,000,000 in gross revenues and $3,000,000 in after-tax net
income in the third full fiscal year following the effective date, or (iii)
at least $60,000,000 in gross revenues and $4,000,000 in after-tax net income
in the fourth full fiscal year following the effective date.
F-14
<PAGE>
================================================================================
No dealer, salesman or any other person has been authorized to give any
information or to make any representations in connection with the Offering
other than those contained in the Prospectus and, if given or made, such
other information and representations must not be relied upon as having been
authorized by the Company or the Underwriter. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create
any implication that there had been no change in affairs of the Company since
the date hereof. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any securities offered hereby by anyone in
jurisdictions in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so
or to anyone to whom it is unlawful to make such offer or solicitation.
------
TABLE OF CONTENTS
Page
--------
Additional Information ......................... 4
Prospectus Summary ............................. 5
Risk Factors ................................... 9
Use of Proceeds ................................ 20
Capitalization ................................. 21
Dilution ....................................... 22
Dividend Policy ................................ 23
Selected Consolidated Financial Information .... 24
Management's Discussion and Analysis of
Financial Condition and Results of
Operations .................................... 25
Business ....................................... 29
Management ..................................... 38
Certain Transactions ........................... 42
Security Ownership of Certain Beneficial
Owners and Management ......................... 43
Description of Securities ...................... 44
Underwriting ................................... 50
Selling Securityholder Offering ................ 52
Legal Matters .................................. 52
Experts ........................................ 52
Index to Consolidated Financial Statements ..... F-1
------
Until , 1997 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.
================================================================================
<PAGE>
================================================================================
1,500,000 SHARES OF COMMON STOCK
AND 2,250,000 REDEEMABLE
COMMON STOCK PURCHASE WARRANTS
UNIVEC, INC.
------
PROSPECTUS
------
MAIDSTONE FINANCIAL, INC.
, 1997
16
================================================================================
<PAGE>
The information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
PRELIMINARY PROSPECTUS, SUBJECT TO COMPLETION, DATED JANUARY 22, 1997
UNIVEC, INC.
2,533,436 SHARES OF COMMON STOCK AND
2,500,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
This Prospectus relates to 2,533,436 shares of common stock, par value
$.001 per share (the "Common Stock") of UNIVEC, Inc. (the "Company"), and
2,500,000 redeemable common stock purchase warrants (the "Warrants") that may
be sold by the selling securityholders named herein (the "Selling
Securityholders"). See "Selling Securityholders". The 2,500,000 Warrants
offered hereby were issued in connection with a bridge financing completed by
the Company in December 1996. Of the 2,533,436 shares of Common Stock offered
hereby, 2,500,000 shares are issuable upon exercise of the Warrants and
33,436 shares are issuable upon exercise of options.
Each Warrant entitles the registered holder thereof to purchase one share
of Common Stock at an exercise price of $4.50 per share, subject to
adjustment in certain events, at any time during the period commencing
__________, 1999 [two years after the date upon which the Registration
Statement of which this Prospectus forms a part is declared effective by the
Securities Exchange Commission (the "Effective Date")] and expiring on
____________, 2002 [the fifth anniversary of the Effective Date]. The
Warrants are subject to redemption by the Company at $.05 per Warrant at any
time commencing _______________, 1999 [two years after the Effective Date],
with the prior written consent of Maidstone Financial, Inc. ("Maidstone" or
the "Underwriter"), on not less than 30 days prior written notice to the
holders of the Warrants, provided the closing bid price of the Common Stock
has been at least $8.00 for 20 consecutive trading days ending on the third
day prior to the date on which the Company gives notice of redemption. The
Warrants will be exercisable until the close of business on the day
immediately preceding the date fixed for redemption. The Company has applied
for quotation of the Common Stock and the Warrants on The Nasdaq SmallCap
Market under the trading symbols "UNVC" and "UNVCW", respectively. See
"Description of Securities -- Warrants."
The Selling Securityholders may sell Warrants and shares of Common Stock
from time to time directly to purchasers, or through broker-dealers who may
receive compensation in the form of commissions or discounts from the Selling
Securityholders or purchasers. Sales of Warrants and shares of Common Stock
may be effected by broker-dealers in ordinary brokerage transactions or block
transactions on The Nasdaq SmallCap Market, through sales to one or more
dealers who may resell as principals, in privately negotiated transactions or
otherwise, at the market price prevailing at the time of sale, a price
related to such prevailing market price or at a negotiated price. Usual and
customary or specifically negotiated brokerage fees may be paid by the
Selling Securityholders in connection therewith. To the Company's knowledge,
none of the Selling Securityholders has entered into any underwriting
arrangements for the sale of such securities. The Company has offered, by
separate Prospectus dated the date hereof, 1,500,000 shares of Common Stock
and 2,225,000 Common Stock Purchase Warrants (having terms identical to the
Warrants offered hereby) through Maidstone (the "Offering" or the "IPO").
Each of the Selling Securityholders has agreed not to offer or sell the
Warrants or shares of Common Stock offered hereby (except under certain
circumstances in connection with a third party tender offer for the Common
Stock) until 24 months after the Effective Date, without the prior written
consent of the Underwriter, which may be granted or withheld in the sole and
absolute discretion of the Underwriter. The Underwriter has agreed that it
will not consent to the sale of any of the securities offered hereby prior to
the expiration of the 45-day period commencing on the date of the closing of
the IPO during which the Underwriter may exercise an option to purchase from
the Company up to an additional 15% of the shares of Common Stock and/or
Common Stock Purchase Warrants offered in the IPO to cover over-allotments,
if any (the "Over-Allotment Option"), or such earlier date upon which the
Over-Allotment Option is fully exercised.
The Company will not receive any proceeds from the sale of the Warrants or
shares of Common Stock by the Selling Securityholders, but will receive the
exercise price of Warrants and options exercised. See "Use of Proceeds."
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK. ONLY INVESTORS WHO CAN BEAR THE RISK OF LOSS OF THEIR ENTIRE INVESTMENT
SHOULD INVEST. FOR A DESCRIPTION OF CERTAIN RISKS REGARDING AN INVESTMENT IN
THE COMPANY, SEE "RISK FACTORS" COMMENCING ON PAGE 9.
------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------
The date of this Prospectus is , 1997.
<PAGE>
The Selling Securityholders may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933 (the "Securities Act") and any profits
realized by them may be deemed to be underwriting commissions. Any
broker-dealers that participate in the distribution of the Warrants or shares
of Common Stock also may be deemed to be "underwriters", as defined in the
Securities Act, and any commissions or discounts paid to them, or any profits
realized by them upon the resale of any securities purchased by them as
principals, may be deemed to be underwriting commissions or discounts under
the Securities Act. The sale of the Warrants and shares of Common Stock by
the Selling Securityholders is subject to the prospectus delivery and other
requirements of the Securities Act.
The Warrants and shares of Common Stock offered hereby have been
registered pursuant to registration rights granted to the Selling
Securityholders. All costs, expenses and fees in connection with the
registration of the Warrants and shares of Common Stock offered by the
Selling Securityholders will be borne by the Company. The Selling
Securityholders are responsible for the payment of brokerage commissions and
discounts incurred in connection with the sale of their Warrants and shares
of Common Stock. The Company has agreed to indemnify the Selling
Securityholders against certain liabilities, including liabilities under the
Securities Act.
<PAGE>
ing clip and other syringe designs to established medical device
manufacturers. To stimulate demand for its safety syringes, the Company plans
to initiate promotional and educational campaigns directed at (i) public
health officers and other government officials responsible for public health
policies, (ii) doctors and administrators of healthcare facilities
responsible for treatment of HIV-AIDS patients, and (iii) liability insurance
companies. The Company plans to enter into arrangements with independent
sales agents and distributors in targeted markets and to hire a marketing
director following the completion of this Offering.
The Company is a Delaware corporation, incorporated on October 7, 1996, and
the successor by merger to UNIVEC, Inc., a New York corporation, incorporated
on August 18, 1992. The executive officers of the Company are located at 999
Franklin Avenue, Garden City, New York 11530 (telephone number (516)
294-1000).
THE OFFERING
Securities Offered............. 2,533,436 shares of common stock, $0.001 par
value per share (the "Common Stock"), and
2,500,000 redeemable common stock purchase
warrants (the "Warrants"). Each Warrant
entitles the holder thereof to purchase one
share of Common Stock at an exercise price
of $4.50 per share, subject to adjustment in
certain events. See "Description of
Securities" and "Plan of Distribution."
Terms of Warrants:
Exercise price............... $4.50 per share, subject to adjustment in
certain events. See "Description of
Securities -- Warrants."
Exercise period............... Any time during the period commencing
------, 1999 [two years after the Effective
Date] and ending ------, 2002 [the fifth
anniversary of the Effective Date].
Redemption.................... Redeemable by the Company, with the prior
written consent of the Underwriter, at a
price of $.05 per Warrant upon not less than
30 days prior written notice to the holders
of the Warrants at any time commencing
------, 1999 [two years after the Effective
Date], provided the closing bid price of the
Common Stock has been at least $8.00 for 20
consecutive trading days ending on the third
day prior to the date upon which the Company
gives notice of redemption. See "Description
of Securities -- Warrants."
Common Stock Outstanding....... 2,619,907
Warrants Outstanding........... 4,750,000
Risk Factors................... The securities offered hereby involve a high
degree of risk . Only investors who can bear
the risk of their entire investment should
invest. See "Risk Factors."
Proposed Nasdaq SmallCap
Market Symbols............... Common Stock -- UNVC; Warrants -- UNVCW
- ------
(1) Does not include (i) 55,672 shares reserved for issuance upon exercise of
outstanding options, at an exercise price of $3.50, expiring at various
dates from February 22, 1999 through June 30, 1999, (ii) 4,750,000 shares
issuable upon exercise of the Warrants and 2,250,000 warrants to be
issued in the IPO having the same terms as the Warrants, (iii) 35,715
shares reserved for issuance upon conversion of the Company's 12 1/2%
demand promissory note in the principal amount of $125,000 following the
closing
6
<PAGE>
of the IPO (the "Closing"), (iv) 4,688,706 shares reserved for issuance
upon exercise of options which may be granted in the future pursuant to
the Company's stock option plan, and (vi) 282,000 shares reserved for
issuance upon conversion of the Company's Series A Cumulative Convertible
Preferred Stock (the "Series A Preferred Stock"). Includes (i) 33,250
shares of Common Stock to be issued to a director of the Company at the
Closing in exchange for the cancellation of amounts due to him ($116,373
as of September 30, 1996), and (ii) 4,370 shares to be issued to an
officer of the Company at Closing upon exercise of options. See "Certain
Transactions," "Management -- Stock Option Plan" and "Description of
Securities -- Series A Preferred Stock."
7
<PAGE>
SELLING SECURITYHOLDERS
The table below sets forth, with respect to each Selling Securityholder,
based upon information available to the Company as of the date hereof, the
number of shares of Common Stock beneficially owned, the number of Warrants
and/or shares of Common Stock to be sold, and the number of outstanding
shares of Common Stock beneficially owned after the sale of the Warrants
and/or shares of Common Stock offered hereby. None of the Selling
Securityholders has been an officer, director or affiliate of the Company
during the preceding three years. Except as stated below, each of the Selling
Stockholders acquired the Warrants offered hereby in connection with a bridge
financing of Units completed by the Company in December 1996. Each Unit
consisted of the Company's 8% Bridge Notes in the principal amount of $25,000
and Bridge Warrants to purchase 62,500 shares of Common Stock. On the
Effective Date, the Bridge Warrants will convert automatically into the
Warrants. The Bridge Notes will be paid out of the net proceeds of the IPO.
Although there can be no assurance that the Selling Securityholders will
sell any or all of the Warrants and/or shares of Common Stock offered hereby,
the following table assumes that each of the Selling Securityholders will
sell all Warrants and/or shares of Common Stock offered by this Selling
Securityholder Prospectus.
<TABLE>
<CAPTION>
Warrants and/or
Warrants and/or Shares of
Amount and Shares of Common Common
Nature Beneficial Stock to Be Stock Owned
Name Ownership (1) Sold(2) After Offering
--------------------------------------- ----------------- ----------------- ---------------
<S> <C> <C> <C>
Norben Import Corp./Profit Sharing Plan 0 750,000 0
Leonard N. Tarr ....................... 33,436(3) 656,250 Wts.(4) 0
689,686 Shs.(5)
Charles J. Divon, Jr. ................. 0 500,000(6) 0
Wilfred Bonilla ....................... 0 250,000(6) 0
Martin Rosenman ....................... 0 125,000 0
David A. Clanton ...................... 0 62,500
Robert A. Dubofsky .................... 0 62,500 0
Richard D. Siegel ..................... 0 31,250 0
WBM Associates ........................ 0 31,250 0
Richard Gershman ....................... 0 31,250(6) 0
</TABLE>
- ------
(1) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated, subject to community property
laws, where applicable. For purposes of computing the percentage of
outstanding shares held by each Selling Securityholder, any security
which such person has the right to acquire within 60 days after the
Effective Date is deemed to be outstanding for the purpose of computing
the percentage ownership for such person, but is not deemed to be
outstanding for the purpose of computing the percentage ownership of any
other person. Accordingly, shares issuable upon exercise of the Warrants
have not been included since the Warrants are not exercisable until two
years after the Effective Date.
(2) Except as otherwise indicated, represents the number of Warrants and
shares of Common Stock issuable upon exercise thereof owned by the
Selling Stockholder.
(3) Represents shares issuable upon exercise of presently exercisable options
granted to Mr. Tarr, who through an affiliated entity obtained debt
financing for the Company in 1995.
(4) Includes Warrants to purchase 531,250 shares of Common Stock registered in
the name of the Leonard N. Tarr P.C. Trust No. 1, of which Mr. Tarr is the
trustee and beneficiary.
(5) Includes 656,250 shares issuable upon exercise of Warrants and 33,436
shares issuable upon exercise of options. See footnotes (3) and (4)
above.
(6) These Warrants were acquired in January 1996 from an investor in the Bridge
Financing.
<PAGE>
PLAN OF DISTRIBUTION
Selling Securityholders may sell the Warrants and shares of Common Stock
offered hereby from time to time directly to purchasers, or through
broker-dealers who may receive compensation in the form of commissions or
discounts from the Selling Securityholders or purchasers. Sales of Warrants
and shares of Common Stock may be effected by broker-dealers in ordinary
brokerage transactions or block transactions on The Nasdaq SmallCap Market,
through sales to one or more dealers who may resell as principals, in
privately negotiated transactions or otherwise, at the market price
prevailing at the time of sale, a price related to such prevailing market
price or at a negotiated price. Usual and customary or specifically
negotiated brokerage fees may be paid by the Selling Securityholders in
connection therewith. To the Company's knowledge, none of the Selling
Securityholders have entered into any underwriting arrangements for the sale
of such securities. Each of the Selling Securityholders has agreed not offer
or sell the Warrants or shares of Common Stock offered hereby (except under
certain circumstances in connection with a third party tender offer for the
Common Stock) until 24 months after the Effective Date, without the prior
written consent of the Underwriter, which may be granted or withheld in the
sole and absolute discretion of the Underwriter. The Underwriter has agreed
that it will not consent to the sale of any of the securities offered hereby
prior to the expiration of the 45-day period commencing on the date of the
closing of the IPO during which the Underwriter may exercise the
Over-Allotment Option, or such earlier date upon which the Over-Allotment
Option is fully exercised.
The Selling Securityholders may be deemed to be "underwriters" within the
meaning of the Securities Act and any profits realized by them may be deemed
to be underwriting commissions. Any broker-dealers that participate in the
distribution of the Warrants or shares of Common Stock also may be deemed to
be "underwriters", as defined in the Securities Act, and any commissions or
discounts paid to them, or any profits realized by them upon the resale of
any securities purchased by them as principals, may be deemed to be
underwriting commissions or discounts under the Securities Act. The sale of
the Warrants and shares of Common Stock by the Selling Securityholders is
subject to the prospectus delivery and other requirements of the Securities
Act.
The Warrants and shares of Common Stock offered hereby have been
registered pursuant to registration rights granted to the Selling
Securityholders. All costs, expenses and fees in connection with the
registration of the Warrants and shares of Common Stock offered by the
Selling Securityholders will be borne by the Company. The Selling
Securityholders are responsible for the payment of brokerage commissions and
discounts incurred in connection with the sale of their Warrants and shares
of Common Stock. The Company has agreed to indemnify the Selling
Securityholders against certain liabilities, including liabilities under the
Securities Act.
Under the Exchange Act and the regulations thereunder, any person engaged
in a distribution of the Warrants and Common Stock offered by this Selling
Securityholder Prospectus may not simultaneously engage in market-making
activities with respect to the Warrants or Common Stock during the applicable
"cooling off" period prescribed by exemption (xi) to Rule 10b-6 prior to the
commencement of such distribution. In addition, and without limiting the
foregoing, the Selling Securityholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder
including, without limitation, Rules 10b-6 and 10b-7, which provisions may
limit the timing of purchases and sales of Warrants and Common Stock by the
Selling Securityholders.
To the extent required, the Company will use its best efforts to file,
during any period in which offers or sales of Warrants and/or shares of
Common Stock are being made by or on behalf of the Selling Securityholders,
one or more amendments or supplements to this Selling Securityholder
Prospectus which describe any material information with respect to the plan
of distribution not previously disclosed herein, including the name or names
of any underwriters, broker-dealers or agents, if any, the purchase price
paid by any underwriter for Warrants and/or shares of Common Stock purchased
from a Selling Securityholder, and any discounts, commissions or concessions
allowed or reallowed or paid to broker-dealers.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 7 of the Registrant's Certificate of Incorporation, in accordance
with Section 145 of the DGCL, provides that directors and officers may be
indemnified against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation -- a "derivative
action") if they acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe their conduct was unlawful. A similar standard of care is applicable
in the case of derivative actions, except that indemnification only extends
to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such an action. Moreover, the DGCL requires court
approval before there can be any indemnification where the person seeking
indemnification has been found liable to the corporation.
Article 7 of the Registrant's Certificate of Incorporation further
provides that directors and officers are entitled to be paid by the
Registrant the expenses incurred in defending the proceedings specified above
in advance of their final disposition, provided that such payment will only
be made upon delivery to the Registrant by the indemnified party of an
undertaking to repay all amounts so advanced if it is ultimately determined
that the person receiving such payments is not entitled to be indemnified.
Article 7 of the Registrant's Certificate of Incorporation provides that a
person indemnified under Article 7 of the Certificate of Incorporation may
contest any determination that a director, officer, employee or agent has not
met the applicable standard of conduct set forth in the Certificate of
Incorporation by petitioning a court of competent jurisdiction.
Article 7 of the Registrant's Certificate of Incorporation provides that
the right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in the
Article will not be exclusive of any other right which any person may have or
acquire under the Certificate of Incorporation, or any statute or agreement,
or otherwise.
Finally, Article 7 of the Registrant's Certificate of Incorporation
provides that the Registrant may maintain insurance, at its expense, to
reimburse itself and directors and officers of the Registrant and of its
direct and indirect subsidiaries against any expense, liability or loss,
whether or not the Registrant would have the power to indemnify such persons
against such expense, liability or loss under the provisions of Article 7 of
the Certificate of Incorporation. The Registrant has applied for such
insurance, and expects to have such insurance in effect on the date this
Registration Statement is declared effective by the Commission.
Article 8 of the Registrant's Certificate of Incorporation eliminates the
personal liability of the Registrant's directors to the Registrant or its
stockholders for monetary damages for breach of their fiduciary duties as a
director to the fullest extent provided by Delaware law. Section 102(b)(7) of
the DGCL provides for the elimination off such personal liability, except for
liability (i) for any breach of the director's duty of loyalty to the
Registrant or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the DGCL or (iv) for any transaction from which the
director derived any improper personal benefit.
Reference is made to Section 1.1 of the Underwriting Agreement between the
Registrant and Maidstone Financial, Inc. (the "Underwriter"), filed as
Exhibit 1.1 to this Registration Statement, which provides for
indemnification by the Underwriter of the Registrant and the directors and
officers of the Registrant under certain limited circumstances.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses (other than underwriting
discounts and commissions) which will be paid by the Registrant in connection
with the issuance and distribution of the securities being registered hereby.
With the exception of the SEC registration fee and the NASD filing fee, all
amounts indicated are estimates.
<TABLE>
<CAPTION>
<S> <C>
SEC Registration fee ........................................ $ 9,462.58
NASD filing fee ........................................... 3,122.65
NASDAQ filing fee ......................................... 10,000.00
Underwriter's non-accountable expense allowance ........... 164,250.00
Underwriter's advisory fee ................................ 96,000.00
Directors' and Officers' liability insurance .............. 80,000.00
Printing expenses (other than stock certificates) ......... 60,000.00
Printing and engraving of stock and warrant certificates .. 4,000.00
Legal fees and expenses (other than blue sky) ............. 100,000.00
Accounting fees and expenses .............................. 75,000.00
Blue sky fees and expenses (including legal and filing
fees) .................................................... 35,000.00
Transfer Agent and Warrant Agent fees and expenses ........ 5,000.00
Miscellaneous ............................................. 1,414.77
------------
Total .................................................... $643,250.00
============
</TABLE>
ITEM 26. RECENT SALE OF UNREGISTERED SECURITIES
During the past three years, the Registrant has sold securities to a
limited number of persons, as described below. Except as indicated, there
were no underwriters involved in the transactions and there were no
underwriting discounts or commissions paid in connection therewith. The
purchasers of securities in each such transaction represented their intention
to acquire the securities for investment only and not with a view to or for
sale in connection with any distribution thereof and appropriate legends were
affixed to the certificates for the securities issued in such transactions.
All purchasers of securities in each such transaction had adequate access to
information about the Registrant, and in the case of transactions exempt from
registration under Section 4(2) of the Securities Act, were sophisticated
investors.
1. Between February 28, 1995 and June 30, 1995, the Registrant issued and
sold to John Frank, a director of the Registrant, an aggregate of 33,360
shares of Common Stock for a purchase price of $300,000 ($8.93 per share). In
connection therewith, the Registrant granted Mr. Frank an option to purchase
an additional 22,236 shares of Common Stock at an exercise price of $77,826
($3.50 per share). The issuance of these securities was exempt from
registration under Sections 4(2) and 4(6) of the Securities Act.
2. On June 7, 1995, the Registrant granted Leonard N. Tarr options to
purchase 33,436 shares of Common Stock at an exercise price of $116,529
($3.50 per share) in consideration for services rendered. The issuance of
these securities was exempt from registration under Sections 4(2) and 4(6) of
the Securities Act.
3. On January 3, 1996, the Registrant issued and sold to Gary Sazer, a
consultant to the Registrant, 10,257 shares of Common Stock in consideration
for services rendered valued at $35,000 ($3.41 per share). The issuance of
these securities was exempt from registration under Sections 4(2) and 4(6) of
the Securities Act.
4. On December 14, 1996, the Registrant granted options to purchase 20,513
shares of Common Stock, at an exercise price of $3.50 per share, to David
Chabut, the chief financial officer of the Registrant. The issuance of these
securities was exempt from registration under Sections 4(2) and 4(6) of the
Securities Act and Rule 505 of Regulation D promulgated under Section 4(2) of
the Securities Act ("Regulation D").
5. On December 14, 1996, the Registrant issued to Howard Klein, a
consultant to the Company, 7,143 shares of Common Stock in exchange for the
cancellation of $25,000 of indebtedness payable to him for consulting
services. The issuance of these securities was except from registration under
Section 4(2) of the Securities Act.
II-2
<PAGE>
6. On December 31, 1996, the Registrant issued and sold to David Chabut,
the chief financial officer of the Registrant, 16,143 shares of Common Stock
for a purchase price of $56,500 ($3.50 per share). The issuance of these
securities was exempt from registration under Sections 4(2) and 4(6) of the
Securities Act and Rule 505 of Regulation D.
7. On December 31, 1996, the Registrant issued an aggregate of 1,269
shares of Series A Preferred to three officers of the Registrant, including
Joel Schoenfeld, Chairman of the Board and Chief Executive Officer of the
Registrant, and two companies affiliated with Mr. Schoenfeld, in exchange for
the cancellation of $1,269,000 payable to them. One share of Series A
Preferred Stock was issued in exchange for each $1,000 payable to such
person. Shares of Series A Preferred were issued to Joel Schoenfeld (395
shares); Flora Schoenfeld, the Treasurer and Secretary of the Registrant (47
shares); Dr. Alan H. Gold, President of the Registrant (114 shares); and to
two corporations affiliated with Mr. Schoenfeld -- JS Associates (341 shares)
and J&B Schoenfeld (372 shares). The issuance of these securities was exempt
from registration under Sections 3(a)(9) and 4(6) of the Securities Act, as
well as Rule 505 of Regulation D.
8. From November 27, 1996 until December 30, 1996, Registrant issued and
sold an aggregate of 40 units (the "Units"), each Unit consisting of the
Company's 8% Bridge Note in the principal amount of $25,000 and Warrants to
purchase 62,500 shares of Common Stock (the "Bridge Warrants"), for a
purchase price of $25,000 per Unit, or an aggregate of $1,000,000 (the
"Bridge Financing"). The 8% Bridge Notes mature upon the earlier of November
27, 1997 and the consummation of an initial public offering or private
placement of the Registrant's debt and/or equity securities resulting in
gross proceeds to the Registrant of at least $5,000,000. The 8% Bridge Notes
will be repaid with a portion of the net proceeds of this offering. In
connection the Bridge Financing, the Registrant paid Maidstone Financial,
Inc., as placement agent, selling commissions of $100,000, and a
non-accountable expense allowance of $30,000. Each of the investors in the
Bridge Financing represented to the Registrant that it was an "accredited
investor" (as defined in Rule 501(a) of Regulation D). The names of those
persons who purchased Units in the Bridge Financing (together with the total
number of Units purchased and the total purchase price paid by each
purchaser) are as follows: Norben Import Corp./Profit Sharing Plan (12 Units
- -- $300,000); Leonard N. Tarr and the Leonard N. Tarr, P.C. Trust No. 1 (a
total of 11 Units -- $275,000); Alan Adler (4 Units -- $100,000); Bruce Adler
(4 Units -- $100,000); Phyllis Kramer (4 Units -- $100,000); Martin Rosenman
(2 Units -- $50,000); David A. Clanton (1 Unit -- $25,000); Robert L.
Dubofsky (1 Unit -- $25,000); Richard D. Siegel ( 1/2 Unit -- $12,500); and
WBM Associates ( 1/2 Unit -- $12,500). The issuance of such securities was
exempt from registration under the Securities Act pursuant to Sections 4(2)
and 4(6) thereof and Rule 505 of Regulation D.
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
1.1 Form of Underwriting Agreement.
1.2 Form of Advisory and Investment Banking Agreement between the Registrant and Maidstone Financial, Inc.
3.1 Certificate of Incorporation of the Registrant.
3.2 By-laws of the Registrant.
4.1 Agreement and Plan of Merger dated as of October 7, 1996 between the Registrant
and UNIVEC, Inc., a New York corporation.
4.2 Form of Underwriter's Warrants.
4.3 Form of Warrant Agreement.
4.4* Specimen Common Stock Certificate.
4.5 Specimen Warrant Certificate (included as Exhibit A to Exhibit 4.3 herein).
4.6 Form of Bridge Note.
4.7 Form of Bridge Warrant.
4.8 Registration Rights Agreement among the Registrant and the holders of the Bridge
Warrants.
4.9* Form of Lock-up Agreement.
5.1* Opinion of Snow Becker Krauss P.C., counsel to the Company.
10.1** O.E.M. Supply Agreement dated May 30, 1996, between the Registrant and Sherwood
Medical Company ("Sherwood").
10.2 Guaranty of Certain Stockholders of the Registrant in favor of Sherwood.
10.3 Equipment Lease dated May 30, 1996 between the Registrant and Sherwood.
II-3
<PAGE>
10.4 Purchase Agreement dated as of June 27, 1996 between the Registrant and Paramount
Financial Corporation.
10.5** Manufacturing Agreement effective December 4, 1996, between the Registrant and
Harmac Medical Products, Inc.
10.6 Employment Agreement dated as of October 15, 1996, between the Registrant and
David Chabut.
10.7 Employment Agreement dated as of October 1, 1996, between the Registrant and
David Shonfeld.
10.8 Share Option Agreement dated June 5, 1995, between the Registrant and Leonard N.
Tarr.
10.9 1996 Stock Option Plan of the Registrant.
21.1 List of Subsidiaries.
23.1* Consent of Snow Becker Krauss P.C. (to be included in Exhibit 5.1 to this Registration
Statement).
23.2 Consent of Coopers & Lybrand LLP, independent certified public accountants, is included in
Part II of this Registration Statement.
24.1 Power of Attorney (included on the signature page of this Registration Statement).
27.1* Financial Data Schedule.
</TABLE>
- ------
* To be filed by amendment.
** Confidential treatment has been requested for certain portions of this
document.
ITEM 28. UNDERTAKINGS
(a) Rule 415 Offering
The undersigned small business issuer hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act.
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information set forth in the registrant statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment as a new registration statement relating
to the securities offered, and the offering of such securities at
that time to be the initial bona fide offering thereof.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(d) Equity Offerings by Non-Reporting Small Business Issuers
The undersigned small business issuer hereby undertakes that it will
provide the underwriters at the closing specified in the Underwriting
Agreement certificates in such denominations and registered in such names
as required by the Underwriters to permit prompt delivery to each
purchaser.
II-4
<PAGE>
(e) Request for Acceleration of Effective Date
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion
of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of the expenses incurred or
paid by a director, officer, or controlling person of the small business
issuer in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection
with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(f) Rule 430A Offering
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the small business
issuer under Rule 424(b)(1) or (4) or 497(h) under the Securities
Act as part of this registration statement as of the time the
Commission declared it effective.
(2) For determining any liability under the Securities Act, treat each
post-effect amendment that contains a form of prospectus as a new
registration statement for the securities offered in the
registration statement, and that offering of the securities at that
time as the initial bona fide offering of those securities.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirement for filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Garden City, in the State of New York, on January
22, 1997
UNIVEC, INC.
By: /s/ Joel Schoenfeld By: /s/ David Chabut
---------------------------- -----------------------------
Joel Schoenfeld David Chabut
Chairman of the Board and Chief Financial Officer
Chief Executive Officer (Principal Financial and
(Principal Executive Officer) Accounting Officer)
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Joel Schoenfeld and David Chabut,
acting singly, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacitates, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and any
Registration Statement filed pursuant to Rule 462(b) promulgated by the
Commission under the Securities Act of 1933, and to file the same and all
exhibits thereto, and all documents in connection therewith, with the
Commission, granting said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in about the premises, as full to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed on January 22, 1997 by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
<S> <C>
/s/ Joel Schoenfeld Chairman of the Board, Chief
- ----------------------- Executive Officer and a Director
Joel Schoenfeld (Principal Executive Officer)
/s/ Alan H. Gold Director
- -----------------------
Alan H. Gold
/s/ David Chabut Chief Financial Officer
- ----------------------- (Principal Financial and Accounting Officer)
David Chabut
/s/ David Shonfeld Director
- -----------------------
David Shonfeld
/s/ John Frank Director
- -----------------------
John Frank
/s/ Richard Lerner Director
- -----------------------
Richard Lerner
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
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<S> <C> <C>
1.1 Form of Underwriting Agreement.
1.2 Form of Advisory and Investment Banking Agreement between the Registrant and Maidstone
Financial, Inc.
3.1 Certificate of Incorporation of the Registrant.
3.2 By-laws of the Registrant.
4.1 Agreement and Plan of Merger dated as of October 7, 1996 between the Registrant
and UNIVEC, Inc., a New York corporation.
4.2 Form of Underwriter's Warrants.
4.3 Form of Warrant Agreement.
4.4* Specimen Common Stock Certificate.
4.5 Specimen Warrant Certificate (included as Exhibit A to Exhibit 4.3 herein).
4.6 Form of Bridge Note.
4.7 Form of Bridge Warrant.
4.8 Registration Rights Agreement among the Registrant and the holders of the Bridge
Warrants.
4.9* Form of Lock-up Agreement.
5.1* Opinion of Snow Becker Krauss P.C., counsel to the Company.
10.1** O.E.M. Supply Agreement dated May 30, 1996, between the Registrant and Sherwood
Medical Company ("Sherwood").
10.2 Guaranty of Certain Stockholders of the Registrant in favor of Sherwood.
10.3 Equipment Lease dated May 30, 1996 between the Registrant and Sherwood.
10.4 Purchase Agreement dated as of June 27, 1996 between the Registrant and Paramount
Financial Corporation.
10.5** Manufacturing Agreement effective December 4, 1996, between the Registrant and
Harmac Medical Products, Inc.
10.6 Employment Agreement dated as of October 15, 1996, between the Registrant and
David Chabut.
10.7 Employment Agreement dated as of October 1, 1996, between the Registrant and
David Shonfeld.
10.8 Share Option Agreement dated June 5, 1995, between the Registrant and Leonard N.
Tarr.
10.9 1996 Stock Option Plan of the Registrant.
21.1 List of Subsidiaries.
23.1* Consent of Snow Becker Krauss P.C. (to be included in Exhibit 5.1 to this Registration
Statement).
23.2 Consent of Coopers & Lybrand LLP, independent certified public accountants, is included in
Part II of this Registration Statement.
24.1 Power of Attorney (included on the signature page of this Registration Statement).
27.1* Financial Data Schedule.
</TABLE>
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* To be filed by amendment.
** Confidential treatment has been requested for certain portions of this
document.
<PAGE>
UNIVEC, INC.
UNDERWRITING AGREEMENT
New York, New York
Dated: , 1997
MAIDSTONE FINANCIAL, INC.
101 East 52nd Street
New York, New York 10022
Gentlemen:
The undersigned, UNIVEC, INC., a New York corporation (the
"Company"), proposes to issue and sell to Maidstone Financial, Inc.
("Maidstone," the "Underwriter" or "the Representative") as representative of
the several underwriters (the "Underwriters") named on Schedule A hereto,
pursuant to this Underwriting Agreement ("Agreement"), an aggregate of 1,500,000
shares of Common Stock, par value $.001 per share, of the Company (the "Common
Stock"), and 1,500,000 Redeemable Common Stock Purchase Warrants (the
"Warrants"). The Warrants will each be exercisable to purchase one share of
Common Stock, at any time commencing two years from the date on which the
Registration Statement (as defined in Section 1(a) hereof), shall have become or
been declared effective (the "Effective Date"), and ending on the seventh
anniversary of the Effective Date. The Warrant exercise price, subject to
adjustment as described in the agreement providing for the Warrants (the
"Warrant Agreement"), shall be $4.50 per share, subject to adjustment as
described in the Warrant Agreement.
Commencing two years after the Effective Date, the Warrants
are subject to redemption by the Company at $.05 per Warrant, provided that (a)
prior notice of not less than 30 days is given to the holders of the Warrants
(the "Warrantholders"), and (b) the closing high bid price per share of Common
Stock, if traded on The NASDAQ Stock Market, or the last sale price per share of
Common Stock, if traded on a national exchange, for the 20 consecutive trading
days ending on the third day prior to the date on which notice of redemption is
given, is at least $8.00.
<PAGE>
In addition, the Company proposes to grant to the Underwriters
the Over-Allotment Option (as defined in Section 2(c) hereof) to purchase all or
any part of an aggregate of 225,000 shares of Common Stock and/or 225,000
Warrants, and to issue to you the Underwriters' Warrants (as defined in Section
1 hereof) to purchase certain further additional Shares and/or Warrants.
The aggregate of 2,250,000 shares of Common Stock to be sold
by the Company, together with the aggregate of 225,000 additional shares of
Common Stock that are the subject of the Over-allotment Option, are herein
collectively called the "Shares." The Shares and the Warrants (the Warrants, the
additional Warrants subject to the Over-Allotment Option and the Warrants
issuable upon exercise of the Underwriters' Warrants), the shares of Common
Stock issuable upon exercise of the Warrants and the shares of Common Stock
issuable upon exercise of the Underwriters' Warrants, are herein collectively
called the "Securities. " The term "Underwriters' Counsel" shall mean the firm
of Gersten, Savage, Kaplowitz & Curtin, LLP, counsel to the Underwriter, and the
term "Company Counsel" shall mean the firm of Snow Becker Krauss P.C., counsel
to the Company. Unless the context otherwise requires, all references herein to
a "Section" shall mean the appropriate Section of this Agreement.
You have advised the Company that you, severally and not
jointly, desire to purchase the Shares and Warrants as herein provided. The
Company confirms the agreements made by it with respect to the purchase of the
Shares and Warrants by you, as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Underwriter that:
(a) Registration Statement; Prospectus. A
registration statement (File No. 333-1700) on Form SB-2 relating to the public
offering of the Securities (the "Offering"), including a preliminary form of
prospectus, copies of which have heretofore been delivered to you, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933 (the "Act"), and the rules and regulations of the Securities and
Exchange Commission (the "Commission") promulgated thereunder (the "Rules and
Regulations"), and has been filed with the Commission under the Act. As used
herein, the term "Preliminary Prospectus" shall mean each prospectus filed
pursuant to Rule 430 or Rule 424(a) of the Rules and Regulations. The
Preliminary Prospectus bore the legend required by Item 501 of Regulation S-B
under the Act and the Rules and Regulations. Such registration statement
(including all financial statements, schedules and exhibits) as amended at the
time it becomes effective and the final prospectus included therein are herein
respectively called the "Registration Statement" and the "Prospectus," except
that (i) if the prospectus filed by the Company pursuant to Rule 424(b) or Rule
430A of the Rules and Regulations shall differ from such final prospectus as
then amended, then the term "Prospectus" shall instead mean the prospectus first
filed pursuant to said Rule 424(b) or Rule 430A, and (ii) if such registration
statement is amended or such prospectus is amended or supplemented after the
effective date of such registration statement and prior to the Option Closing
Date (as defined in Section 2(c) hereof), then (unless the context necessarily
requires otherwise) the term "Registration Statement" shall include such
registration statement as so amended, and the term "Prospectus" shall include
such prospectus as so amended or supplemented, as the case may be.
2
<PAGE>
(b) Contents of Registration Statement. On the
Effective Date, and at all times subsequent thereto for so long as the delivery
of a prospectus is required in connection with the offering or sale of any of
the Securities, (i) the Registration Statement and the Prospectus shall in all
material respects conform to the requirements of the Act and the Rules and
Regulations, and (ii) neither the Registration Statement nor the Prospectus
shall include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary or make statements
therein in light of the circumstances in which they were made, not misleading;
provided, however, that the Company makes no representations, warranties or
agreements as to information contained in or omitted from the Registration
Statement or Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of the Underwriter
specifically for use in the preparation thereof. It is understood that the
statements set forth in the Prospectus with respect to stabilization, the
material set forth under the caption "UNDERWRITING," the information on the
cover page of the Prospectus regarding the underwriting arrangements and the
identity of the Underwriters' Counsel under the caption "LEGAL MATTERS," which
information the Underwriter hereby represents and warrants to the Company is
true and correct in all material respects and does not omit to state any
material fact required to be stated therein or necessary to make statements
therein, in light of the circumstances in which they were made, not misleading,
constitute the only information furnished in writing by or on behalf of the
Underwriter for inclusion in the Registration Statement and Prospectus, as the
case may be.
Except for the registration rights granted under the
Underwriters' Warrants, to the Selling Security Holders named in the
Registration Statement, or as disclosed in the Prospectus, no holders of any
securities of the Company or of any options, warrants or convertible or
exchangeable securities of the Company exercisable for or convertible or
exchangeable for securities of the Company, have the right to include any
securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company.
(c) Organization, Standing, Etc. The Company is duly
incorporated and validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, with full power and corporate
authority to own its properties and conduct its business as described in the
Prospectus, and is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each other jurisdiction in which the
nature of its business or the character or location of its properties requires
such qualification, except where failure so to qualify will not have an adverse
effect on the business or financial condition of the Company ("Material Adverse
Effect").
3
<PAGE>
(d) Capitalization. The authorized, issued and
outstanding capital stock of the Company as of the date of the Prospectus is as
set forth in the Prospectus under the caption "CAPITALIZATION". The shares of
Common Stock issued and outstanding on the Effective Date have been duly
authorized, validly issued and are fully paid and non-assessable. No options,
warrants or other rights to purchase, agreements or other obligations to issue,
or agreements or other rights to convert any obligation into, any shares of
capital stock of the Company have been granted or entered into by the Company,
except as expressly described in the Prospectus. The Securities conform to all
statements relating thereto contained in the Registration Statement or the
Prospectus.
(e) Securities. The Securities conform, or will
conform when issued, in all material respects to all statements with respect
thereto contained in the Registration Statement and the Prospectus. The
Securities have been duly authorized and, when issued and delivered against
payment therefor pursuant to this Agreement, the Warrant Agreement or the
Underwriters' Warrants, as the case may be, will be duly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights of any
security holder of the Company. Neither the filing of the Registration Statement
nor the offering or sale of any of the Securities as contemplated by this
Agreement gives rise to any rights, other than those which have been waived or
satisfied, for or relating to the registration of any securities of the Company,
except as described in the Registration Statement.
(f) Authority, Etc. This Agreement, the Warrant
Agreement, the Underwriters' Warrants, and the Financial Consulting Agreement
(as hereinafter defined), have been duly and validly authorized, executed and
delivered by the Company and, assuming due execution of this Agreement and such
other agreements by the other party or par-ties hereto and thereto, constitute
valid and binding obligations of the Company enforceable against the Company in
accordance with their respective terms, except as such enforcement is limited by
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting the enforcement of creditors' rights generally, and except insofar as
the enforceability of the indemnification and contribution terms may be limited
by applicable as or public policy. The Company has full right, power and lawful
authority to authorize, issue and sell the Securities and the Underwriters'
Warrants on the terms and conditions set forth herein. All consents, approvals,
authorizations and orders of any court or governmental authority which are
required in connection with the authorization, execution and delivery of such
agreements, the authorization, issue and sale of the Securities and the
Underwriters' Warrants, and the consummation of the transactions contemplated
hereby have been obtained.
(g) No Conflict. Except as described in the
Prospectus, the Company is not in violation, breach or default of or under, and
consummation of the transactions hereby contemplated and fulfillment of the
terms of this Agreement will not conflict with or result in a breach of, any of
the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance pursuant to the terms
of, any contract, indenture, mortgage, deed of trust, loan agreement or other
material agreement or instrument to which the Company is a party or by which the
Company may be bound or to which any of the property or assets of the Company is
subject, except such as would not have a Material Adverse Effect, nor will such
action result in any violation of the provisions of the Certificate of
Incorporation or the By-laws of the Company, except such as would not have a
Material Adverse Effect, or any statute or any order, rule or regulation
applicable to the Company, or of any court or of any regulatory authority or
other governmental body having jurisdiction over the Company, except such as
would not have a Material Adverse Effect.
4
<PAGE>
(h) Assets. Subject to the qualifications stated in
the Prospectus: (i) the Company has good and marketable title to all properties
and assets described in the Prospectus as owned by it, including without
limitation intellectual property, free and clear of all liens, charges,
encumbrances or restrictions, except such as do not materially affect the value
of such properties or assets and do not interfere with the use made or proposed
to be made of such assets or properties by the Company or are not materially
significant or important in relation to the business of the Company; (ii) all of
the material leases and subleases under which the Company is the lessor or
sublessor of properties or assets or under which the Company hold properties or
assets as lessee or sublessee, as described in the Prospectus, are in full force
and effect and, except as described in the Prospectus, the Company is not in
default in any material respect with respect to any of the terms or provisions
of any of such leases or subleases, and no claim has been asserted by any party
adverse to the rights of the Company as lessor, sublessor, lessee or sublessee
under any such lease or sublease, or affecting or questioning the right of the
Company to continued possession of the leased or subleased premises or assets
under any such lease or sublease, except as described or referred to in the
Prospectus; and (iii) the Company owns or leases all such assets and properties,
described in the Prospectus, as are necessary to its operations as now conducted
and, except as otherwise stated in the Prospectus, as proposed to be conducted
as set forth in the Prospectus.
The outstanding debt, the property and the business of the
Company conforms in all material respects to the descriptions thereof contained
in the Registration Statement and Prospectus.
(i) Independent Accountants. Coopers & Lybrand, who
have given their report on certain financial statements filed or to be filed
with the Commission as a part of the Registration Statement, and which are
included in the Prospectus, are with respect to the Company, independent public
accountants as required by the Act and the Rules and Regulations.
(j) Financial Statements. The consolidated financial
statements, together with related notes, set forth in the Registration Statement
and the Prospectus present fairly the consolidated financial position, results
of operations, changes in shareholders' equity and cash flows of the Company on
the basis stated in the Registration Statement, at the respective dates and for
the respective periods to which they apply. Such financial statements and
related notes have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the entire period
involved, except to the extent disclosed therein. The Summary Financial Data and
Selected Financial Data included in the Registration Statement and the
Prospectus present fairly the information shown therein and have been prepared
on a basis consistent with that of the financial statements included in the
Registration Statement and the Prospectus.
5
<PAGE>
(k) No Material Change. Except as otherwise set
forth in the Prospectus, subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, the
Company has not: (i) incurred any liability or obligation, direct or contingent,
or entered into any transaction, which is material to its business; (ii)
effected or experienced any change in its capital stock or incurred any
long-term debt; (iii) issued any options, warrants or other rights to acquire
its capital stock; (iv) declared, paid or made any dividend or distribution of
any kind on its capital stock; or (v) effected or experienced any material
adverse change, or development involving a prospective material adverse change,
in its financial position, net worth, results of operations, business or
business prospects, assets or properties or key personnel.
(l) Litigation. Except as set forth in the
Prospectus, there is not now pending nor, to the knowledge of the Company,
threatened, any action, suit or proceeding (including any related to
environmental matters or discrimination on the basis of age, sex, religion or
race), whether or not in the ordinary course of business, to which the Company
is a party or its business or property is subject, before or by any court or
governmental authority, which, if determined adversely to the Company, would
have a material adverse effect on the financial position, net worth, or results
of operations, business or business prospects, assets or property of the
Company; and no labor disputes involving the employees of the Company exist
which would affect materially adversely the business, property, financial
position or results of operations of the Company.
(m) Employee and independent Contractor Matters. The
Company has generally enjoyed satisfactory employer/employee relationships with
its employees and is in compliance in all material respects with all Federal,
state and local laws and regulations, including but not limited to, applicable
tax laws and regulations, respecting the employment of employees and employment
practices, terms and conditions of employment and wages and hours relating
thereto. To the knowledge of the Company, there are no pending or threatened
investigations involving the Company by the U.S. Department of Labor or
corresponding foreign agency, or any other governmental agency responsible for
the enforcement of such Federal, state or local laws and regulations. To the
knowledge of the Company, there are no unfair labor practice charges or
complaints against the Company pending before the National Labor Relations Board
or corresponding foreign agency or any strikes, picketing, boycotts, disputes,
slowdowns or stoppages pending or threatened against or involving the Company,
or any predecessor entity, and none has occurred. No representation question
exists respecting the employees of the Company. No collective bargaining
agreements or modifications thereof are currently in effect or being negotiated
by the Company and their respective employees. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company.
The Company does not: (i) maintain nor has it
maintained, sponsored or contributed to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan" or a
"multi-employer plan" as such terms are defined in Sections 3(2), 3(l) and
3(37), respectively of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), except for the Stock Option Plan described in the Prospectus;
(ii) presently maintain or contribute nor at any time in the past, has
maintained or contributed to a defined benefit plan, as defined in Section 3(35)
of ERISA; or (iii) has ever completely or partially withdrawn from a
"multi-employer plan."
6
<PAGE>
The Company has generally enjoyed satisfactory relationships
with its independent contractors and is in compliance in all material respects
with all federal, state and local laws and regulations, including but not
limited to applicable tax laws and regulations, respecting the engagement of its
independent contractors.
(n) No Unlawful Prospectuses. The Company has not
distributed any prospectus or other offering material in connection with the
Offering contemplated herein, other than any Preliminary Prospectus, the
Prospectus or other material permitted by the Act and the Rules and Regulations.
(o) Taxes. Except as disclosed in the Prospectus,
the Company has filed all necessary federal, state, local and foreign income and
franchise tax returns and has paid all taxes shown as due thereon on or before
the date such taxes are due to be paid; and there is no tax deficiency which has
been or, to the knowledge of the Company, might be asserted against the Company.
(p) Licenses, Etc. The Company has in effect all
necessary licenses, permits and other governmental authorizations currently
required for the conduct of its business or the ownership of its property, as
described in the Prospectus, and is in all material respects in-compliance
therewith. To the knowledge of the Company, none of the activities or business
of the Company is in violation of, or would cause the Company to violate, any
law, rule, regulation or order of the United States, any country, state, county
or locality, the violation of which would have a material adverse effect upon
the financial position, net worth, results of operations, business or business
prospects, assets or property of the Company taken as a whole.
(q) No Prohibited Payments. The Company has not,
nor, to the knowledge of the Company, any of its employees or officers or
directors, agents or any other person acting on behalf of the Company has,
directly or indirectly, contributed or agreed to contribute any money, gift or
similar benefit (other than legal price concessions to customers in the ordinary
course of business) to any customer, supplier, employee or agent of a customer,
supplier, or official or governmental agency or instrumentality of any
government (domestic or foreign) or any political party or candidate for office
(domestic or foreign) or other person who was, is, or may be in a position to
help or hinder the business of the Company (or assist it in connection with any
actual or proposed transaction) which (i) could reasonably be expected to
subject the Company to any material damage or penalty in any civil, criminal or
governmental litigation or proceeding, or (ii) if not made in the future, could
reasonably be expected to materially adversely affect the assets, business,
operations or prospects of the Company. The Company's internal accounting
controls and procedures are sufficient to cause the Company to comply in all
material respects with the Foreign Corrupt Practices Act of 1977, as amended.
7
<PAGE>
(r) Transfer Taxes. On the Closing Dates (as defined
in Section 2(d) hereof), all transfer and other taxes (including franchise,
capital stock and other taxes, other than income taxes, imposed by any
jurisdiction), if any, which are required to be paid in connection with the sale
and transfer of the Securities to the Underwriters hereunder shall have been
fully paid or provided for by the Company, and all laws imposing such taxes
shall have been fully complied with.
(s) Exhibits. All contracts and other documents of
the Company described in the Registration statement or the Prospectus or to be
filed as exhibits to the Registration Statement, have been described in the
Registration Statement or the Prospectus or filed with the Commission, as
required under the Rules and Regulations.
(t) Subsidiaries. Except as described in the
Prospectus, the Company has no subsidiaries.
(u) Registration Rights. No security holder of the
Company whose securities are not included in the Registration Statement has any
rights with respect to the registration of any Securities, and all registration
rights with respect to the Offering have been waived.
(v) No Stabilization or Manipulation. Neither the
Company nor, to the Company's knowledge, any of its officers or directors or any
of its employees or shareholders, have taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to constitute, under the Exchange Act or
otherwise, the stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Securities.
(w) No Finders. Except as described in the
Prospectus, to the knowledge of the Company, there are no claims, payments,
issuances, arrangements or understandings for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, commitments, payments or
issuances of securities with respect to the Company that may affect the
Underwriter's compensation, as determined by the National Association of
Securities Dealers, Inc. ("NASD").
(x) Lock-up Agreements. The Company has obtained
from each director, officer and existing shareholder of the Company (the
"Existing Shareholders"), a LockUp Agreement (as defined in Section 3(r) hereof)
in the form previously delivered.
(y) Licensing and Accreditation. The Company has at
all times since the commencement of its business been in compliance with all
federal, state and local laws, rules and regulations applicable to the nature of
its business and operation. The Company has all necessary licenses to operate
its business.
8
<PAGE>
(aa) No Adverse Effect of Transaction Contemplated
Hereby. Neither the completion of the Offering nor any of the transactions
contemplated herein or in the Prospectus, including but not limited to the
issuance of any of the Securities, will result in a "change of control" or the
loss of, or have any adverse effect on, the maintenance in good standing of the
Company's licenses.
2. PURCHASE, DELIVERY AND SALE OF SECURITIES
(a) Purchase Price Securities. The Securities shall
be sold to and purchased by the Underwriters at the purchase price of $3.15 per
Share and $.09 per Warrant (that being the public offering price of $3.50 per
Share and $.10 per Warrant less an underwriting discount of 10 percent) (the
"Purchase Price").
(b) Firm Securities.
(i) Subject to the terms and conditions of
this Agreement, and on the basis of the representations, warranties and
agreements herein contained the Company agrees to issue and sell to the
Underwriters, and the Underwriters, agree to buy from the Company at the
Purchase Price, all of the Shares and Warrants (the "Firm Securities").
(ii) Delivery of the Firm Securities against
payment therefor shall take place at the offices of Maidstone Financial, Inc.,
101 East 52nd Street, New York, New York 10022 (or at such other place as may be
designated by agreement between you and the Company) at 10:00 a.m., New York
Time, on , 1997, or at such later time and date, not later than eight business
days after the Effective Date, as you may designate (such time and date of
payment and delivery for the Firm Securities being herein called the "First
Closing Date").
(c) Option Securities.
(i) In addition, subject to the terms and
conditions of this Agreement, and on the basis of the representations,
warranties and agreements herein contained, the Company hereby grants to the
Underwriters an option (the "Over-Allotment Option"), to purchase from the
Company all or any part of an aggregate of an additional 225,000 Shares and/or
337,500 Warrants at the Purchase Price (the "Option Securities").
(ii) The Over-Allotment Option may be
exercised by the Underwriters, in whole or in part, within thirty business days
after the Effective Date, upon written notice by Maidstone to the Company
advising it of the number of Option Securities as to which the Over-Allotment
Option is being exercised, the names and denominations in which the certificates
for the Shares and the Warrants comprising such Option Securities are to be
registered, and the time and date when such certificates are to be delivered.
Such time and date shall be determined by you but shall not be less than two nor
more than ten business days after exercise of the Over-Allotment Option, nor in
any event prior to the First Closing Date (such time and date being herein
called the "Option Closing Date"). Delivery of the Option Securities against
payment therefor shall take place at Maidstone's offices.
9
<PAGE>
(iii) The Over-Allotment may be exercised
only to cover overallotments in the sale by the Underwriters of Firm Securities.
(d) Delivery of Certificates; Payment.
(i) The Company shall make the certificates
for the Shares and the Warrants to be purchased hereunder available to you for
checking at least one full business day prior to the First Closing Date or the
Option Closing Date (each, a "Closing Date"), as the case may be. The
certificates shall be in such names and denominations as you may request at
least two business days prior to the relevant Closing Date. The availability of
the certificates at the time and place specified in this Section 2(d)(i) is a
further condition to the obligations of the Underwriter hereunder.
(ii) On the First Closing Date, the Company
shall deliver to you for the account of the Underwriters definitive engraved
certificates in negotiable form representing all of the Shares and the Warrants
to be sold by the Company, against payment of the Purchase Price therefor by you
for the account of the Underwriters, by certified or bank cashier's checks
payable in New York Clearing House funds to the order of the Company.
(iii) In addition, if and to the extent that
the Underwriters exercise the Over-Allotment Option, then on the Option Closing
Date the Company shall deliver to you for the account of the Underwriters or its
designees definitive engraved certificates in negotiable form representing the
Shares and the Warrants to be sold by the Company, against payment of the
Purchase Price therefor by the Underwriters for the account of the Underwriters
or its designees, by certified or bank cashier's checks payable in next day
funds to the order of the Company.
(iv) It is understood that the Underwriters
propose to offer the Shares and Warrants to be purchased hereunder to the
public, upon the terms and conditions set forth in the Registration Statement,
after the Registration Statement becomes effective.
3. COVENANTS OF THE COMPANY. The Company covenants
and agrees with the Underwriters that:
(a) Registration.
(i) The Company shall use its best efforts
to cause the Registration Statement to become effective and, upon notification
from the Commission that the Registration Statement has become effective, shall
so advise you and shall not at any time, whether before or after the Effective
Date, file any amendment to the Registration Statement or any amendment or
supplement to the Prospectus of which you shall not previously have been advised
and furnished with a copy, or to which you or Underwriters' Counsel shall have
objected in writing, or which is not in compliance with the Act and the Rules
and Regulations.
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(ii) Promptly after you or the Company shall
have been advised thereof, you shall advise the Company or the Company shall
advise you, as the case may be, and confirm such advice in writing, of (A) the
receipt of any comments of the Commission, (B) the effectiveness of any
post-effective amendment to the Registration Statement, (C) the filing of any
supplement to the Prospectus or any amended Prospectus, (D) any request made by
the Commission for amendment of the Registration Statement or amendment or
supplementing of the Prospectus, or for additional information with respect
thereto, or (E) the issuance by the Commission or any state or regulatory body
of any stop order or other order denying or suspending the effectiveness of the
Registration Statement, or preventing or suspending the use of any Preliminary
Prospectus, or suspending the qualification of the Securities for offering in
any jurisdiction, or otherwise preventing or impairing the Offering, or the
institution or threat of any proceeding for any of such purposes. The Company
and you shall not acquiesce in such order or proceeding, and shall instead
actively defend such order or proceeding, unless the Company and you agree in
writing to such acquiescence.
(iii) The Company has caused to be delivered
to you copies of each Preliminary Prospectus, and the Company has consented and
hereby consents to the use of such copies for the purposes permitted by the Act.
The Company authorizes the Underwriters and selected dealers to use the
Prospectus in connection with the sale of the Securities for such period as in
the opinion of Underwriters' Counsel the use thereof is required to comply with
the applicable provisions of the Act and the Rules and Regulations. In case of
the happening, at any time within such period as a prospectus is required under
the Act to be delivered in connection with sales by an underwriter or dealer, of
any event of which the Company has knowledge and which materially affects the
Company or the Securities, or which in the opinion of Company Counsel or of
Underwriters' Counsel should be set forth in an amendment to the Registration
Statement or an amendment or supplement to the Prospectus in order to make the
statement made therein not then misleading, in light of the circumstances
existing at the time the Prospectus is required to be delivered to a purchaser
of the Securities, or in case it shall be necessary to amend or supplement the
Prospectus to comply with the Act or the Rules and Regulations, the Company
shall notify you promptly and forthwith prepare and furnish to the Underwriters
copies of such amended Prospectus or of such supplement to be attached to the
Prospectus, in such quantities as you may reasonably request, in order that the
Prospectus, as so amended or supplemented, shall not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements in the Prospectus, in the light of the
circumstances under which they are made, not misleading. The preparation and
furnishing of each such amendment to the Registration Statement, amended
Prospectus or supplement to be attached to the Prospectus shall be without
expense to the Underwriters, except that in the case that the Underwriters are
required, in connection with the sale of the Securities, to deliver a prospectus
nine months or more after the Effective Date, the Company shall upon your
request and at the expense of the Underwriter, amend the Registration Statement
and amend or supplement the Prospectus, or file a new registration statement, if
necessary, and furnish the Underwriters with reasonable quantities of
prospectuses complying with section 10(a)(3) of the Act.
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(iv) The Company will deliver to you at or
before the First Closing Date two signed copies of the Registration Statement
including all financial statements and exhibits filed therewith, and of all
amendments thereto. The Company will deliver to or upon your order, from time to
time until the Effective Date as many copies of any Preliminary Prospectus filed
with the Commission prior to the Effective Date as the Underwriters may
reasonably request. The Company will deliver to you on the Effective Date and
thereafter for so long as a Prospectus is required to be delivered under the
Act, from time to time, as many copies of the Prospectus, in final form, or as
thereafter amended or supplemented, as the Underwriters may from time to time
reasonably request.
(v) The Company shall comply with the Act,
the Rules and Regulations, and the Securities Exchange Act of 1934 (the
"Exchange Act"), and the rules and regulations promulgated thereunder in
connection with the offering and issuance of the Securities in all material
respects.
(b) Blue Sky. The Company shall, at its own expense,
use its best efforts to qualify or register the Securities for sale (or obtain
an exemption from registration) under the securities or "blue sky" laws of such
jurisdictions as you may designate, and shall make such applications and furnish
such information to Underwriters' Counsel as may be required for that purpose,
and shall comply with such laws; provided, however, that the Company shall not
be required to qualify as a foreign corporation or a dealer in securities or to
execute a general consent to service of process In any jurisdiction in any
action other than one arising out of the offering or sale of the Securities. The
Company shall bear all of the expense of such qualifications and registrations,
including without limitation the legal fees and disbursements of Underwriters'
Counsel, of $35,000 ($10,000 of which has already been paid), plus disbursements
relating to, but not limited, long-distance telephone calls, photocopying,
messengers, excess postage, overnight mail and courier services. After each
Closing Date, the Company shall, at its own expense, from time to time prepare
and file such statements and reports as may be required to continue each such
qualification (or maintain such exemption from registration) in effect for so
long a period as required by law, regulation or administrative policy in
connection with the offering of the Securities.
(c) Exchange Act Registration. The Company shall at
its own expense, prepare and file with the Commission a registration statement
(on Form 8-A or Form 10) under section 12 of the Exchange Act, and shall use its
best efforts to cause such registration statement to be declared effective by
the Commission on an accelerated basis on the Effective Date and maintained in
effect for at least five years from the Effective Date.
(d) Prospectus Copies. The Company shall deliver to
you on or before the First Closing Date a copy of the Registration Statement
including all financial statements, schedules and exhibits filed therewith, and
of all amendments thereto. The Company shall deliver to or on the order of the
Underwriter, from time to time until the Effective Date, as many copies of any
Preliminary Prospectus filed with the Commission prior to the Effective Date as
the Underwriters may reasonably request. The Company shall deliver to the
Underwriters on the Effective Date, and thereafter for so long as a prospectus
is required to be delivered under the Act, from time to time, as many copies of
the Prospectus, in final form, or as thereafter amended or supplemented, as the
Underwriters may from time to time reasonably request.
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(e) Amendments and Supplements. The Company shall,
promptly upon your request, prepare and file with the Commission any amendments
to the Registration Statement, and any amendments or supplements to the
Preliminary Prospectus or the Prospectus, and take any other action which in the
reasonable opinion of Underwriters' Counsel and Company Counsel may be
reasonably necessary or advisable in connection with the distribution of the
Securities, and shall use its best efforts to cause the same to become effective
as promptly as possible.
(f) Certain Market Practices. The Company has not
taken, and shall not take, directly or indirectly, any action designed, or which
might reasonably be expected, to cause or result in, or which has constituted,
the stabilization or manipulation of the price of the Securities to facilitate
the sale or resale thereof.
(g) Certain Representations. Neither the Company nor
any representative of the Company has made nor shall make any written or oral
representation in connection with the Offering and sale of the Securities or the
Underwriters' Warrants which is not contained in the Prospectus, which is
otherwise inconsistent with or in contravention of anything contained in the
Prospectus, or which shall constitute a violation of the Act, the Rules and
Regulations, the Exchange Act or the rules and regulations promulgated under the
Exchange Act.
(h) Continuing Registration of Warrants and
Underlying Common Stock. For so long as any Warrant is outstanding, the Company
shall, at its own expense: (i) use its best efforts to cause post-effective
amendments to the Registration Statement, or new registration statements
relating to the Warrants and the Common Stock underlying the Warrants to become
effective in compliance with the Act and without any lapse of time between the
effectiveness of the Registration Statement and of any such post-effective
amendment or new registration statement; provided, however, that the Company
shall have no obligation to maintain the effectiveness of such Registration
Statement or file a new Registration Statement, or to keep available a
prospectus at any time at which such registration or prospectus is not then
required; (ii) cause a copy of each Prospectus, as then amended, to be delivered
to each holder of record of a Warrant; (iii) furnish to the Underwriters and
dealers as many copies of each such Prospectus as the Underwriters or dealers
may reasonably request; and (iv) maintain the "blue sky" qualification or
registration of the Warrants and the Common Stock underlying the Warrants, or
have a currently available exemption therefrom, in each jurisdiction in which
the Securities were so qualified or registered for purposes of the Offering.
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(i) Use of Proceeds. The Company shall apply the net
proceeds from the sale of the Securities substantially for the purposes set
forth in the Prospectus under the caption "USE OF PROCEEDS," and shall file such
reports with the Commission with respect to the sale of the Securities and the
application of the proceeds therefrom as may be required pursuant to Rule 463 of
the Rules and Regulations.
(j) Twelve Months' Earnings Statement. The Company
shall make generally available to its security holders and deliver to you as
soon as it is practicable so to do, but in no event later than ninety days after
the end of twelve months after the close of its current fiscal quarter, an
earnings statement (which need not be audited) covering a period of at least
twelve consecutive months beginning after the Effective Date, which shall
satisfy the requirements of section 11(a) of the Act.
(k) NASDAQ Exchange Listings, Etc. The Company shall
immediately make all filings required to seek approval for the quotation of the
Securities on the NASDAQ SmallCap Market ("NASDAQ") and shall use its best
efforts to effect and maintain such approval for at least five years from the
Effective Date. Within 10 days after the Effective Date, the Company shall to
list itself, on an expedited basis, in Moody's OTC Industrial Manual, Standard
and Poor's Corporation Descriptions or other recognized securities manuals
acceptable to the Underwriters and to cause such listing to be maintained for
five years from the Effective Date.
(l) Board of Directors. For a period of three (3)
years after Closing Date I, nominate and use its best efforts to engage a
designee of the Representative, as a nonvoting advisor to the Company's Board of
Directors (the "Advisor") or in lieu thereof, at the Representative's option, to
designate an individual for election as a director, in which case the Company
shall use its best efforts to have such individual elected as a director. The
designee may be a director, officer, partner, employee or affiliate of the
Underwriters and the Representative shall designate such person in writing to
the Board. In the event the Underwriters shall not have designated such
individual at the time of any meeting of the Board or such person is unavailable
to serve, the Company shall notify the Representative of each meeting of the
Board. An individual, if any, designated by the Representative shall receive all
notices and other correspondence and communications sent by the Company to
members of the Board. Such Advisor or director, as the case may be, shall be
entitled to receive reimbursement for all reasonable costs incurred in attending
such meetings including, but not limited to, food, lodging, and transportation.
In addition, such Advisor or Director shall be entitled to the same compensation
as the Company gives to other non-employee directors for acting in such
capacity. The Company further agrees that, during said three (3) year period, it
shall give the Advisor or Director, as the case may be, the same notice of any
meeting of the Company's Board of Directors as it affords its other directors.
The Company agrees to indemnify and hold the
Underwriters and such Advisor harmless against any and all claims, actions,
damages, costs and expenses, and judgments arising solely out of the attendance
and participation of the Advisor at any such meeting described herein. In the
event the Company maintains a liability insurance policy affording coverage for
the acts of its officers and directors, it agrees, if possible to include the
Advisor as an insured under such policy.
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(m) Periodic Reports. For so long as the Company is
a reporting company under section 12(g) or section 15(d) of the Exchange Act,
the Company shall, at its own expense, hold an annual meeting of shareholders
for the election of directors within 180 days after the end of each of the
Company's fiscal years and, within 150 days after the end of each of the
Company's fiscal years, and furnish to its shareholders an annual report
(including financial statements audited by certified public accountants) in
reasonable detail. In addition, during the period ending five years from the
date hereof, the Company shall, at its own expense, furnish to you: (i) within
90 days of the end of each fiscal year, a balance sheet of the Company as at the
end of such fiscal year, together with statements of income, shareholders'
equity and cash flows of the Company as at the end of such fiscal year, all in
reasonable detail and accompanied by a copy of the certificate or report thereon
of certified public accountants; (ii) as soon as they are available, a copy of
all reports (financial or otherwise) distributed to security holders, and (iii)
as soon as they are available, a copy of all non-confidential reports and
financial statements furnished to or filed with the Commission. The financial
statements referred to herein shall be on a consolidated basis to the extent the
accounts of the Company are consolidated in reports furnished to its
shareholders generally.
(n) Form S-8 Registrations. Subject to the
provisions of subsection (o) below, for a period of two years following the
First Closing Date, the Company shall not, without Maidstone's prior written
consent, register or otherwise facilitate the registration of any of its
securities issuable upon the exercise of options, warrants (other than options
issued pursuant to the 1996 Stock Option Plan, the Warrants and the
Underwriter's Warrants) or other rights. whether by means of a Registration
Statement on Form S-8 or otherwise, unless the holders of shares of Common stock
being registered in such S-8 agree not to sell such shares for a period of two
years from the Effective Date without the consent of the Representative.
(o) Future Sales. For a period of two years
following the First Closing Date, the Company shall not, without Maidstone's
prior written consent, issue any shares of Common Stock, Preferred Stock or
securities convertible into Common Stock. Notwithstanding the foregoing, the
Company may at any time issue shares of Common Stock pursuant to the exercise of
the Warrants, the Warrants underlying the Underwriter's Warrants, and options,
warrants or conversion rights issued and outstanding on the Effective Date and
described in the Prospectus.
(p) Regulation S Sales. For a period of two years
following the First Closing Date, the Company shall not issue or sell any
securities pursuant to Regulation S of the Rules and Regulations under the Act,
without Maidstone's prior written consent.
(q) Agreements with Shareholders, Directors and
Officers. The Company shall cause each of the Company's existing shareholders,
directors and officers to enter into written agreements with Maidstone (the
"Lock-up Agreements") prior to the Effective Date, that, for a period of
twenty-four months from the Effective Date, they will not, without the consent
of Maidstone, (i) publicly sell any securities of the Company owned directly or
indirectly by them or owned beneficially by them (as defined in the Exchange
Act), or (ii) otherwise sell, or transfer such securities unless the transferee
agrees in writing to be bound by an identical lock-up.
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(r) Warrant Solicitation. Upon the exercise of any
Warrants on or after the first anniversary of the Effective Date, the Company
shall pay to Maidstone a commission of five (5%) percent of the aggregate
exercise price of such Warrants, a portion of which may be reallowed by
Maidstone to the dealer who solicited the exercise (which may also be you), if:
(i) the market price of the Common Stock is greater than the exercise price of
the Warrant on the date of exercise; (ii) the exercise of the Warrant was
solicited by Maidstone; (iii) the Warrant is not held in a discretionary
account; (iv) the disclosure of the compensation arrangements has been made in
documents provided to customers, both as part of the Offering and at the time of
exercise; and (v) the solicitation of the Warrant was not in violation of Rule
10b-6 promulgated under the Exchange Act. No commission shall be paid to you on
any Warrant exercise prior to the first anniversary of the Effective Date, or on
any Warrant exercised at any time without solicitation by Maidstone or a
soliciting dealer.
(s) Available Shares. The Company shall reserve and
at all times keep available that maximum number of its authorized but unissued
shares of Common Stock which are issuable upon exercise of the Warrants, the
Underwriters' Warrants, and the Warrants issuable upon exercise of the
Underwriters' Warrants, in each case taking into account the antidilution
provisions thereof.
(t) Financial Consulting Agreement. On the First
Closing Date and simultaneously with the delivery of the Firm Securities, the
Company shall execute and deliver to Maidstone an agreement with Maidstone, or
its representative, in the form previously delivered to the Company by
Maidstone, regarding the services of Maidstone or its representative a financial
consultant to the Company (the "Financial Consulting Agreement"), for a
twenty-four month period commencing as of the date hereof at a fee equal to
$4,000 per month which shall be paid in its entirety on the First Closing Date.
(u) Management. On each Closing Date, the Chief
Executive Officer of the Company shall be Joel Schoenfeld and the President of
the Company shall be Alan H. Gold. Prior to the Effective Date, the Company
shall have obtained "key-employee" life insurance coverage in the amount of
$1,000,000 on each of them. As of the Effective Date, the Company shall have
entered into employment agreements with Messrs. Schoenfeld and Gold as set forth
in the Registration Statement.
(v) Stock Transfer Sheets. The Company shall
instruct its Transfer Agent (as defined in Section 4(h) hereto) to deliver to
you copies of all advice sheets showing the daily transfer of the outstanding
shares of Common Stock and Warrants sold by the Company in the public offering
and shall, at its own expense, furnish you weekly following the First Closing
Date during the period ending three years following the First Closing Date with
Depository Trust Company stock transfer sheets.
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(w) Public Relations. As of the Closing Date, the
Company shall have retained a public relations firm reasonably acceptable to
you, and shall continue to retain such firm, or an alternate firm reasonably
acceptable to Maidstone, for a period of twelve (12) months.
(x) Additional Representations. The Company shall
engage the Underwriters' Counsel to provide the Underwriter, at the First
Closing Date and quarterly thereafter, until such time as the Common Stock is
listed on the New York Stock Exchange or the American Stock Exchange or quoted
on NASDAQ National Market System, with an opinion, setting forth those states in
which the Common Stock may be traded in non-issuer transactions under the blue
sky laws of the fifty states. The Company shall pay the Underwriters' Counsel a
one-time fee of $12,500 at the First Closing Date for such opinions.
(aa) Bound Volumes. Within a reasonable time
after the First Closing Date, the Company shall deliver to you, at the Company's
expense, five bound volumes, containing the Registration Statement and all
exhibits filed therewith and all amendments thereto, and all other agreements,
correspondence, filings, certificates and other documents filed and/or delivered
in connection with the Offering.
4. CONDITIONS TO UNDERWRITERS' OBLIGATIONS. The obligations of
the Underwriters to purchase and pay for the Securities which the Underwriters
have agreed to purchase hereunder are subject to the material accuracy (as of
the date hereof and as of each Closing Date) of the representations and
warranties of the Company contained herein, the performance by the Company of
all of its respective obligations hereunder and the following further
conditions:
(a) Effective Registration Statement; No Stop Order.
The Registration Statement shall have become effective and you shall have
received notice thereof not later than 6:00 p.m., New York time, on the date of
this Agreement, or at such later time or on such later date as provided herein
or to which you may agree in writing. In addition, on each Closing Date (i) no
stop order denying or suspending the effectiveness of the Registration Statement
shall be in effect, and no proceedings for that or any similar purpose shall
have been instituted or shall be pending or, to your knowledge or to the
knowledge of the Company, shall be contemplated by the Commission, and (ii) all
requests on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of Underwriters' Counsel.
(b) Opinion of Company Counsel. On the First Closing
Date, you shall have received the opinion, dated as of the First Closing Date,
of Company Counsel, in form and substance satisfactory to the Underwriters'
Counsel, to the effect that:
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(i) the Company has been duly incorporated
and validly exists as a corporation in good standing under the laws of
its jurisdiction of incorporation, with full corporate power and
authority to own its properties and conduct its business as described
in the Prospectus, and to such counsel's knowledge, is duly qualified
or licensed to do business as a foreign corporations and is in good
standing in each other jurisdiction in which the nature of its business
or the character or location of its properties requires such
qualification, except where failure to so qualify will not have a
material adverse affect on the business, properties or financial
condition of the Company taken as a whole;
(ii) (A) the authorized capitalization of
the Company as of the date of the Prospectus was as is set forth in the
Prospectus under the caption "CAPITALIZATION." (B) all of the shares of
Common Stock now outstanding have been duly authorized and validly
issued, are fully paid and non-assessable, conform in all material
respects to the description thereof contained in the Prospectus, have
not been issued in violation of the preemptive rights of any
shareholder and, except as described in the Prospectus, are not subject
to any restrictions upon the voting or transfer thereof; (C) all of the
Shares and all of the Warrants comprising the Securities have been duly
authorized and, when issued and delivered to the Underwriters against
payment therefor as provided herein, shall be validly issued, fully
paid and non-assessable, shall not have been issued in violation of the
preemptive rights of any shareholder, and no personal liability shall
attach to the ownership thereof; (D) the shareholders of the Company do
not have any preemptive rights or other rights to subscribe for or
purchase, and except for the transfer restrictions imposed by Rule 144
of the Rules and Regulations promulgated under the Act or contained in
the Lock-up Agreements executed with the Underwriters, there are no
restrictions upon the voting or transfer of, any of the Securities; (E)
the Shares and the Warrants comprising the Securities, the Warrant
Agreement and the Underwriters' Warrants conform in all material
respects to the respective descriptions thereof contained in the
Prospectus; (F) all issuances of the Company's securities have been
made in compliance with, or under an exemption from, the Act and
applicable state securities laws; (G) a sufficient number of shares of
Common Stock has been reserved, for all times when any of the Warrants
(including the Warrants issuable upon exercise of the Underwriters'
Warrants) are outstanding, for issuance upon exercise of all of the
Warrants; and (H) to the knowledge of such counsel, neither the filing
of the Registration Statement nor the offering or sale of the
Securities as contemplated by this Agreement gives rise to any
registration rights or other rights, other than those which have been
effectively waived or satisfied or described in the Prospectus, for or
relating to the registration of any securities of the Company,
(iii) the certificates evidencing the Shares
and the Warrants comprising the Securities are each in valid and proper
legal form; and the Warrants are exercisable for shares of Common Stock
in accordance with the terms of the Warrants;
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(iv) this Agreement, the Warrant Agreement,
the Underwriters' Warrants, and the Financial Consulting Agreement have
been duly and validly authorized, executed and delivered by the Company
and (assuming due execution and delivery thereof by the Underwriter
and/or Continental Stock Transfer & Trust Company, as the case may be)
all of such agreements are, or when duly executed shall be, the valid
and legally binding obligations of the Company, enforceable in
accordance with their respective terms (except as enforceability may be
limited by bankruptcy, insolvency or other laws affecting the rights of
creditors generally or by general equitable principles); provided,
however, that no opinion need to be expressed as to the enforceability
of the indemnity provisions contained in Section 6 or the contribution
provisions contained in Section 7;
(v) Other than as described in the
Prospectus (A) there is no pending, threatened or contemplated legal or
governmental proceeding affecting the Company which would have a
Material Adverse Effect or earnings of the Company, or which questions
the validity of the Offering, the Securities, this Agreement, the
Warrant Agreement, the Underwriters' Warrants, or the Financial
Consulting Agreement or of any action taken or to be taken by the
Company pursuant thereto; and (B) there is no legal or governmental
regulatory proceeding required to be described or refer-red to in the
Registration Statement which is not so described or referred to;
(vi) (A) the Company is not in violation of
or default under this Agreement, the Warrant Agreement, the
Underwriters' Warrants, or the Financial Consulting Agreement; and (B)
to the knowledge of such counsel, the execution and delivery hereof and
thereof and consummation of the transactions herein or therein
contemplated shall not result in a material violation of, or constitute
a default under, the Certificate of Incorporation or By-law-s of the
Company, or any material obligation, agreement, covenant of condition
contained in any bond, debenture, note or other evidence of
indebtedness, or in any material contract, indenture, mortgage, loan
agreement, lease, joint venture or other agreement or instrument to
which the Company is a party or by which the assets of the Company is
bound, or any material order, rule, regulation, writ, injunction or
decree of any government, governmental instrumentality or court
applicable to the Company;
(vii) (a) the Company has obtained, or is in
the process of obtaining, all licenses, permits and other governmental
authorizations necessary to the conduct of its business as described in
the Prospectus, (b) such obtained licenses, permits and other
governmental authorizations are in full force and effect, and (c) the
Company is in all material respects complying therewith;
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(viii) the Registration Statement has become
effective under the Act, and to the knowledge of such counsel, no stop
order denying or suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for that or any similar
purpose have been instituted or are pending before or threatened by the
Commission;
(ix) the Registration Statement and the
Prospectus (except for the financial statements, notes thereto and
other financial information and statistical data contained therein, as
to which counsel need not express an opinion) comply as to form in all
material respects with the Act and the Rules and Regulations;
(x) all descriptions contained in the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, of' contracts and other documents are accurate and
fairly present the information required to be described, and such
counsel is familiar with all contracts and other documents referred to
in the Registration Statement and the Prospectus, and any such
amendment or supplement, or filed as exhibits to the Registration
Statement and, to the knowledge of such counsel, no contract, document,
license or permit of a character required to be summarized or described
therein or to be filed as an exhibit thereto is not so summarized,
described or filed.
(xi) the statements in the Registration
Statement and the Prospectus under the captions "Risk Factors," "Use of
Proceeds," "Business," "Management, " and "Description of Securities, "
which purport to summarize the provisions of agreements, licenses,
statutes or rules and regulations, have been reviewed by such counsel
and are accurate summaries in all material respects;
(xii) except for registration under the Act
and registration or qualification of the Securities under applicable
state or foreign securities or blue sky laws and NASD approval, no
authorization, approval, consent or license of any governmental or
regulatory authority or agency is necessary in connection with: (A) the
authorization, issuance, sale, transfer or delivery of the Securities
by the Company in accordance with this Agreement; (B) the execution,
delivery and performance of this Agreement by the Company or the taking
of any action contemplated herein; (C) the issuance of the
Underwriters' Warrants in accordance with this Agreement or the
Securities issuable upon exercise thereof; or the taking of any action
contemplated herein.
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In rendering the opinions as set forth above, such counsel may rely upon
certificates of officers of the Company and of public officials as to matters of
fact. Such opinion shall also include a statement to the effect that in
connection with the preparation of the Registration Statement and the
Prospectus, such counsel has participated in conferences with officers and other
representatives of the Company, the Representative, Underwriters' counsel and
the independent certified public accountants of the Company, at which
conferences the contents of the Registration Statement and the Prospectus and
related matters were discussed, and although such counsel is not passing on, and
has not verified the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus (except for customary due
diligence) nothing has come to the attention of such counsel which leads them to
believe that at the time the Registration Statement became effective under the
Act, the Prospectus, on the date it was filed pursuant to Rule 424(b), and the
Registration Statement and the Prospectus as of the date hereof (other than the
financial statements and schedules and other financial and statistical
information as to which counsel need not express an opinion) contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. In addition, such opinion shall also cover such
matters incident to the transactions contemplated hereby as you or Underwriters'
Counsel shall reasonably request. In rendering such opinion, Company Counsel may
rely as to matters of fact upon certificates of officers of the Company, and of
public officials, and may rely as to all matters of law other than the law of
the United States or the State of New York and the General Corporation Law of
the State of Delaware, upon opinions of counsel reasonably satisfactory to you,
in which case the opinion shall state that they have no reason to believe that
you and they are not entitled so to rely.
(c) Intentionally omitted.
(d) Corporate Proceedings. All corporate proceedings
and other legal matters relating to this Agreement, the Registration Statement,
the Prospectus and other related matters shall be reasonably satisfactory to or
approved by Underwriters' Counsel.
(e) Comfort Letter. Prior to the Effective Date, and
again on and as of the First Closing Date, you shall have received a letter from
Coopers & Lybrand, certified public accountants for the Company, reasonably
satisfactory in form and substance to the Underwriters' Counsel.
(f) Bring Down. At each of the Closing Dates, (i)
the representations and warranties of the Company contained in this Agreement
shall be true and correct with the same effect as if made on and as of such
Closing Date, and the Company shall have performed all of its obligations
hereunder and satisfied all the conditions to be satisfied at or prior to such
Closing Date; (ii) the Registration Statement and the Prospectus shall contain
all statements which are required to be stated therein in accordance with the
Act and the Rules and Regulations, and shall in all material respects conform to
the requirements of the Act and the Rules and Regulations, and neither the
Registration Statement nor the Prospectus shall contain any untrue statement of
a material fact or omit to state any material fact required to be stated or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; (iii) there shall have been, since the
respective dates as of which information is given, no material adverse change in
the business, operations, condition (financial or otherwise), earnings, capital
stock, long-term or short-term debt or general affairs of the Company from that
set forth in the Registration Statement and the Prospectus, except changes which
the Registration Statement and Prospectus indicate might occur after the
Effective Date, and the Company shall not have incurred any material liabilities
nor entered into any material agreement other than as referred to in the
Registration Statement and Prospectus; and (iv) except as set forth in the
Prospectus, no action, suit or proceeding shall be pending or threatened against
the Company before or by any commission, board or administrative agency in the
United States or elsewhere, wherein an unfavorable decision, ruling or finding
would materially adversely affect the business, property, operations, condition
(financial or otherwise), earnings or general affairs of the Company. In
addition, you shall have received, at the First Closing Date, a certificate
signed by the principal executive officer and by the principal financial officer
of the Company, dated as of the First Closing Date, evidencing compliance with
the provisions of this Section 4(g).
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(g) Transfer and Warrant Agent. On or before the
Effective Date, the Company shall have appointed Continental Stock Transfer &
Trust Company (or other agent mutually acceptable to the Company and Maidstone),
as its transfer agent and warrant agent ("Transfer Agent") to transfer all of
the Shares and Warrants issued in the Offering, as well as to transfer other
shares of the Common Stock outstanding from time to time.
(h) NASD Approval Of Underwriters' Compensation. By
the Effective Date, the Underwriter shall have received clearance from the NASD
as to the amount of compensation allowable or payable to the Underwriters, as
described in the Registration Statement.
(i) Certain Further Matters. On each Closing Date.
Underwriters' Counsel shall have been furnished with all such other documents
and certificates as they may reasonably request for the purpose of enabling them
to render their legal opinion to the Underwriter and in order to evidence the
accuracy and completeness of any of the representations, warranties or
statements, the performance of any of the covenants, or the fulfillment of any
of the conditions, herein contained.
(j) All proceedings taken in connection with the
authorization, issuance or sale of the Securities, as herein contemplated shall
be reasonably satisfactory in form and substance to the Underwriters and to
Underwriters' Counsel;
(k) On each Closing Date there shall have been duly
tendered to you for your account the appropriate number of Securities;
(l) No order suspending the sale of the Securities
in any Jurisdiction designated by you pursuant to Section 3(b) hereof shall have
been issued on either Closing Date, and no proceedings for that purpose shall
have been instituted or, to the knowledge of the Underwriters or the Company,
shall be contemplated;
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(m) Prior to each Closing Date, there shall not have
been received or provided by the Company's independent public accountants or
attorneys, qualifications to the effect of either difficulties in furnishing
certifications as to material items including, without limitation, information
contained within the footnotes to the financial statements, or as affecting
matters incident to the issuance and sale of the Securities or as to corporate
proceedings or other matters;
(n) On or prior to the First Closing Date, the
Underwriters' Warrants, the Warrant Agreement and the Financial Consulting
Agreement shall have been executed and delivered by the Company, and the Lock-Up
Agreements shall have been executed and delivered by all of the Company's
officers, directors and existing shareholders, to the Underwriters.
(o) Additional Conditions Relating to Option
Closing. Upon exercise of the Over-Allotment Option, Maidstone's obligations to
purchase and pay for the Option Securities shall be subject to the following
conditions:
(i) The Registration Statement shall remain
effective at the Option Closing Date, no stop order denying or suspending the
effectiveness thereof shall have been issued, and no proceedings for that or any
similar purpose shall have been instituted or shall be pending or, to your
knowledge or the knowledge of the Company, shall be contemplated by the
Commission, and all reasonable requests on the part of the Commission for
additional information shall have been complied with to the satisfaction of
Underwriters' Counsel.
(ii) On the Option Closing Date there shall
have been delivered to you the signed opinion of Company Counsel, dated as of
the Option Closing Date, in form and substance satisfactory to Underwriters'
Counsel, which opinion shall be substantially the same in scope and substance as
the opinion furnished to you on the First Closing Date pursuant to Section 4(b),
except that such opinion, where appropriate, shall cover the Option Securities
rather than the Firm Securities. If the First Closing Date is the same as the
Option Closing Date, such opinions may be combined.
(iii) All proceedings taken at or prior to
the Option Closing Date in connection with the sale and issuance of the Option
Securities shall be reasonably satisfactory in form and substance to you, and
you and Underwriters' Counsel shall have been furnished with all- such
documents, certificates and opinions as you may reasonably request in connection
with this transaction in order to evidence the accuracy and completeness of any
of the representations, warranties or statements of the Company or its
compliance with any of the covenants or conditions contained herein.
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(iv) On the Option Closing Date there shall
have been delivered you a letter in form and substance satisfactory to Maidstone
from Coopers & Lybrand, dated the Option Closing Date addressed to you,
confirming the information in their letter referred to in Section 4(f) as of the
date thereof and stating that, without any additional investigation required,
nothing has come to their attention during the period from the ending date of
their review referred to in such letter to a date not more than five banking
days prior to the Option Closing Date which would require any change in such
letter if it were required to be dated the Option Closing Date.
Any certificate signed by any officer of the Company and
delivered to the Underwriters or to Underwriters' Counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the
statements made therein. If any of the conditions herein provided for in this
Section shall not have been completely fulfilled as of the date indicated, this
Agreement and all obligations of the Underwriter under this Agreement may be
cancelled at, or at any time prior to, each Closing Date by your notifying the
Company of such cancellation in writing or by telecopy at or prior to the
applicable Closing Date. Any such cancellation shall be without liability of any
Underwriters to the Company, except as otherwise provided herein.
5. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to sell and deliver the Securities are subject to the
following conditions:
(a) Effective Registration Statement. The
Registration Statement shall have become effective not later than 6:00 p.m. New
York Time, on the date of this Agreement, or at such later time or on such later
date as the Company and you may agree in writing.
(b) No Stop Order. On the applicable Closing Date,
no stop order denying or suspending the effectiveness of the Registration
Statement shall have been issued under the Act or any proceedings therefor
initiated or threatened b I the Commission.
(c) Payment for Securities. On the applicable
Closing Date, you shall have made payment, for the account of the Underwriter,
of the aggregate Purchase Price for the Securities then being purchased by
certified or bank cashier's checks payable in next day funds to the order of the
Company.
If the conditions to the obligations of the Company provided by this Section 5
have been fulfilled on the First Closing Date but are not fulfilled after the
First Closing Date and prior to the Option Closing Date, then only the
obligation of the Company to sell and deliver the Option Securities upon
exercise of the Over-Allotment Option shall be affected.
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6. INDEMNIFICATION.
(a) Indemnification by the Company. As used in this
Agreement, the term "Liabilities" shall mean any and all losses, claims, damages
and liabilities, and actions and proceedings in respect thereof (including
without limitation all reasonable costs of defense and investigation and all
attorneys' fees) including without limitation those asserted by any party to
this Agreement against any other party to this Agreement. The Company hereby
indemnities and holds harmless the Underwriters and each person, if any, who
controls the Underwriters within the meaning of the Act, from and against all
Liabilities, to which the Underwriters or such controlling person may become
subject, under the Act or otherwise, insofar as such Liabilities arise out of or
are based upon: (i) any untrue statement or alleged untrue statement of any
material fact, in light of the circumstances in which it was made, contained in
(A) the Registration Statement or any amendment thereto, or the Prospectus or
any Preliminary Prospectus, or any amendment or supplement thereto, or (B) any
"blue sky" application or other document executed by the Company specifically
for that purpose, or based upon written information furnished by the Company,
filed in any state or other jurisdiction in order to qualify any or all of the
Securities under the securities laws thereof (any such application, document or
information being herein called a "Blue Sky Application"); or (ii) the omission
or alleged omission to state in the Registration Statement or any amendment
thereto, or the Prospectus or any Preliminary Prospectus, or any amendment or
supplement thereto, or in any Blue Sky Application, a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which it was made, not misleading; provided, however, that the
Company shall not be liable in any such case to the extent, but only to the
extent, that any such Liabilities arise out of or are based upon an untrue
statement or alleged untrue statement or omission or alleged omission (x) made
in reliance upon and in conformity with written information furnished to the
Company through you by or on behalf of the Underwriters specifically for use in
the preparation of the Registration Statement or any such amendment thereto, or
the Prospectus or any such Preliminary Prospectus, or any such amendment or
supplement thereto, or any such Blue Sky Application or (y) corrected by the
final Prospectus and the failure of the Underwriter to deliver the final
Prospectus. The foregoing indemnity shall be in addition to any other liability
which the Company may otherwise have.
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(b) Indemnification by each Underwriter. The
Underwriters hereby indemnify and hold harmless the Company, each of its
directors, each nominee (if any) for director named in the Prospectus, each of
its officers who have signed the Registration Statement, and each person, if
any, who controls the Company within the meaning of the Act, from and against
all Liabilities to which the Company or any such director, nominee, officer or
controlling person may become subject under the Act or otherwise, insofar as
such Liabilities arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or any amendment thereto, or the Prospectus or any Preliminary
Prospectus, or any amendment or supplement thereto, or (ii) the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that any such Liabilities arise out of or are
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement or any amendment thereto, or
the Prospectus or any Preliminary Prospectus, or any amendment or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Company through you, by or on behalf of such Underwriters, specifically
for use in the preparation thereof. In no event shall any Underwriters be liable
under this Section 6(b) for any amount in excess of the compensation received by
such Underwriters, in the form of underwriting discounts or otherwise, pursuant
to this Agreement or any other agreement contemplated hereby. The foregoing
indemnity shall be in addition to any other liability which any Underwriters may
otherwise have.
(c) Procedure. Promptly after receipt by an
indemnified party under this Section 6 of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under this Section 6, notify in writing the
indemnifying party of the commencement thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to any indemnified party otherwise than under this Section 6 unless the rights
of the indemnifying party have been prejudiced by such omission or delay. In
case any such action is brought against any indemnified party and it notifies
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate in and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense thereof,
subject to the provisions hereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under this
Section 6 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation., The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided,
however, that the fees and expenses of such counsel shall be at the expense of
the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both such
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it which
are different from or in addition to those available to the indemnifying party
or that the indemnified and indemnifying party have conflicting interests which
would make it inappropriate for the same counsel to represent both of them (in
which case the indemnifying party shall have the right to assume the defense of
such action on behalf of the indemnified party, it being understood, however,
that the indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys). No
settlement of any action against an indemnified party shall be made without the
consent of the indemnified party, which shall not be unreasonably withheld in
light of all factors of importance to such indemnified party.
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7. CONTRIBUTION. In order to provide for just and equitable
contribution under the Act in any case in which (a) any indemnified party makes
claims for indemnification pursuant to Section 6 but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case, notwithstanding the
fact that the express provisions of Section 6 provide for indemnification in
such case, or (b) contribution under the Act may be required on the part of any
indemnified party, then such indemnified party and each indemnifying party (if
more than one) shall contribute to the aggregate Liabilities to which it may be
subject, in either such case (after contribution from others) in such
proportions that the Underwriters are responsible in the aggregate for the
portion of such Liabilities represented by the percentage that the underwriting
discount per Share and per Warrant appearing on the cover page of the Prospectus
bears to the public Offering price per Share and per Warrant appearing thereon,
and the Company shall be responsible for the remaining portion; provided,
however, that if such allocation is not permitted by applicable law, then the
relative fault of the Company, and the Underwriters in connection with the
statements or omissions which resulted in such Liabilities and other relevant
equitable considerations shall also be considered. The relative fault shall be
determined by reference to, among other things, whether in the case of an untrue
statement of material fact or the omission to state a material fact, such
statement or omission relates to information supplied by the Company, or the
Underwriters, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
Company and the Underwriters agree that it would not be just and equitable if
the respective obligations of the Company, and the Underwriters to contribute
pursuant to this Section 7 were to be determined by pro rata or per capita
allocation of the aggregate Liabilities or by any other method of allocation
that does not take account of the equitable considerations referred to in the
first sentence of this Section 7. Moreover, the contribution of any Underwriters
shall not be in excess of the cash compensation received by such Underwriters,
in the form of underwriting discounts or otherwise, pursuant to this agreement
or any other agreement contemplated hereby. No person guilty of a fraudulent
misrepresentation (within the meaning of section I 1 (f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. As used in this Section 7, the term "Company" shall include
any officer, director or person who controls the Company within the meaning of
section 15 of the Act. If the full amount of the contribution specified in this
Section 7 is not permitted by law, then each indemnified party and each person
who controls an indemnified party shall be entitled to contribution from each
indemnifying party to the full extent permitted by law. The foregoing
contribution agreement shall in no way affect the contribution liabilities of
any persons having liability under section I 1 of the Act other than the Company
and the Underwriters. No contribution shall be requested with regard to the
settlement of any matter from any party who did not consent to the settlement;
provided, however, that such consent shall not be unreasonably withheld in light
of all factors of importance to such party.
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8. COSTS AND EXPENSES.
(a) Certain Costs and Expenses. Whether or not this
Agreement becomes effective or the sale of the Securities to the Underwriters is
consummated, the Company shall pay all costs and expense incident to the
issuance, offering, sale and delivery of the Securities and the performance of
its obligations under this Agreement, including without limitation: (i) all fees
and expenses of the Company's legal counsel and accountants; (ii) all costs and
expenses incident to the preparation, printing, filing and distribution of the
Registration Statement (including the financial statements contained therein and
all exhibits and amendments thereto), each Preliminary Prospectus and the
Prospectus, each as amended or supplemented, this Agreement and the other
underwriting documents, as well as the other agreements and documents referred
to herein and the Blue Sky Memorandum; each in such quantities as you shall deem
necessary; (iii) all fees of NASD required in connection with the filing
required by NASD to be made by the Underwriter with respect to the Offering;
(iv) all expenses, including fees (but not in excess of the amount set forth in
Section 3(b)) and disbursements of Underwriters' Counsel in connection with the
qualification of the Securities under the "blue sky" laws which you shall
designate; (v) all costs and expenses of printing the respective certificates
representing the Shares and the Warrants; (vi) the expense of placing one or
more "tombstone" advertisements or promotional materials as directed by you
(provided, however, that the aggregate amount thereof shall not exceed $15,000)
and of offering memorabilia; (vii') all costs and expenses of the Company and
its employees associated with due diligence meetings and presentations
(including the payment for road show conference centers); (viii) any and all
taxes (including without limitation any transfer, franchise, capital stock or
other tax imposed by any jurisdiction) on sales of the Securities to the
Underwriters hereunder; and (xi) all costs and expenses incident to the
finishing of any amended Prospectus or any supplement to be attached to the
Prospectus as required by Sections 3(a) and 3(d), except as otherwise provided
by said Sections. In addition, the Company shall engage Underwriters' Counsel to
provide the Underwriters, at the Closing and quarterly thereafter, until such
time as the Common Stock is listed on the New York Stock Exchange or the
American Stock Exchange or quoted on NASDAQ/NMS, with a memorandum, setting
forth those states in which the Common Stock and the Warrants may be traded in
non-issuer transactions under the blue sky laws of the 50 states. The Company
shall pay such counsel a one-time fee of $12,500 at the Closing for such
opinions.
(b) Underwriters' Expense Allowance. In addition to
the expenses described in Section 8(a), the Company shall on the First Closing
Date pay to Maidstone the balance of a non-accountable expense allowance,
exclusive of the fees referred to in Section 3(b), an amount equal to three
percent (3%) of the gross proceeds received upon sale of the Firm Securities, of
which $55,000 has been paid to Maidstone prior to the date hereof. In the event
that the Over-Allotment Option is exercised, then the Company shall, on the
Option Closing Date, pay to Maidstone, based on the number of Option Securities
to be sold by the Company, an additional amount equal to three percent (3 %) of
the gross proceeds received upon sale of any of the Option Securities. In the
event that the transactions contemplated hereby fail to be consummated for any
reason, then Maidstone shall return to the Company that portion of $55,000
heretofore paid by the Company to the extent that it has not been utilized by
you in connection with the Offering for reasonable accountable out-of-pocket
expenses; provided, however, that if such failure is due to a breach by the
Company of any covenant, representation or warranty contained herein or because
any other condition to the Underwriters' obligations hereunder required to be
fulfilled by the Company is not fulfilled, then the Company shall be liable for
your reasonable accountable out-of-pocket expenses to the full extent thereof
(with credit given to the $55,000 paid).
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(c) No Finders. No person is entitled either
directly or indirectly to compensation from the Company, the Underwriters or any
other person for services as a finder in connection with the Offering, and the
Company hereby indemnifies and hold harmless the Underwriters, and the
Underwriters hereby indemnify and hold harmless the Company from and against all
Liabilities, joint or several, to which the indemnified party may become subject
insofar as such Liabilities arise out of or are based upon the claim of any
person (other than an employee of the party claiming indemnity) or entity that
he or it is entitled to a finder's fee in connection with the Offering by reason
of such person's or entity's influence or prior contact with the indemnifying
party.
9. EFFECTIVE DATE. The Agreement shall become effective at
9:30 A.M. on the first full business day following the day on which the
Registration Statement becomes effective or at the time of the initial public
offering by you of the Stock, whichever is earlier. The time of the initial
public offering shall mean the time of release by you of the first newspaper
advertisement which is subsequently published with respect to the Securities, or
the time when the Securities are first generally offered by you to dealers by
letter or telegram, whichever shall first occur. You or the Company may prevent
this Agreement from becoming effective without liability at any party to any
other party, except as provided in Section 8, by giving the notice indicated
below in Section 13 before the time this Agreement becomes effective.
10. TERMINATION.
(a) Grounds for Termination.
(i) This Agreement, except for Sections 6,
7, 8, 12, 13, 14 and 15, may be terminated at any time prior to the First
Closing Date, and the Over-Allotment Option, if exercised, may be cancelled at
any time prior to the Option Closing Date, by you if in your sole judgment it is
impracticable to offer for sale or to enforce contracts made by you for the
resale of the Securities agreed to be purchased hereunder, by reason of: (A) the
Company having sustained a material loss, whether or not insured, by reason of
fire, earthquake, flood, accident or other calamity, or from any labor dispute
or court or government action, order or decree; (B) trading in securities on the
New York Stock Exchange or the American Stock Exchange having been suspended or
limited; (C) material governmental restrictions having been imposed on trading
in securities generally which are not in force and effect on the date hereof;
(D) a banking moratorium having been declared by federal or New York State
authorities; (E) an outbreak or significant escalation of major international
hostilities or other national or international calamity having occurred; (F) the
passage by the Congress of the United States or by any state legislative body of
similar impact, of any act or measure, or the adoption of any orders, rules or
regulations by any governmental body or any authoritative accounting institute
or board, or any governmental executive, which is reasonably believed likely by
you to have a material adverse impact on the business, financial condition or
financial statements of the Company; (G) any material adverse change in the
financial or securities markets beyond normal fluctuations in the United States
having occurred since the date of this Agreement; or (H) any material adverse
change having occurred, since the respective dates for which information is
given in the Registration Statement and Prospectus, in the earnings, business,
prospects or condition (financial or otherwise) of the Company, whether or not
arising in the ordinary course of business.
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(ii) Maidstone shall have the right, in its
sole discretion, to terminate this Agreement, including without limitation, the
obligation to purchase the Firm Securities and the obligation to purchase the
Option Securities after the exercise of the OverAllotment Option, by notice
given to the Company prior to delivery and payment for all the Firm Securities
or the Option Securities, as the case may be, if any of the conditions
enumerated in Section 4 are not either fulfilled or waived by the Underwriters
on or before any Closing Date.
(iii) Anything herein to the contrary
notwithstanding, if this Agreement shall not be carried out within the time
specified herein, or any extensions thereof granted by the Underwriters, by
reason of any failure on the part of the Company to perform any undertaking or
satisfy any condition of this Agreement by it to be performed or satisfied then,
in addition to the obligations assumed by the Company pursuant to Section 8(a)
hereof, the Underwriter shall provide the Company with, and the Company shall
pay, a statement of the Underwriters' accountable expenses.
(b) Notification. If you elect to prevent this
Agreement from becoming effective or to terminate this Agreement as provided by
this Section 10 or by Section 9, the Company shall be promptly notified by you,
by telephone or telegram, confirmed by letter.
11. UNDERWRITERS' WARRANTS. On the First Closing Date, the
Company shall issue and sell to you, for nominal consideration, and upon the
terms and conditions set forth in the form of Underwriters' Warrants filed as an
exhibit to the Registration Statement, a Warrant entitling you to purchase
150,000 Shares and/or 225,000 Warrants at an exercise price equal to 120% of the
initial public offering price per Share or Warrant, as the case may be,
exercisable for a period of four years commencing one year from the Effective
Date (the "Underwriters' Warrants"). The Underwriters' Warrants grant to the
holders thereof certain "piggyback" registration rights for a period of four
years, and demand registration rights for a period of four years, commencing one
year from the Effective Date with respect to the registration under the
Securities Act of the Securities issuable upon exercise thereof. In the event of
conflict in the terms of this Agreement and the Underwriters' Warrants, the
terms and conditions of the Underwriters' Warrants shall control.
12. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. The respective indemnities, agreements, representations, warranties,
covenants and other statements of the Company and the Underwriter set forth in
Sections 3, 6, 7 and 8 of this Agreement shall remain in full force and effect
regardless of any investigation made by or on behalf of any other party, and
shall survive delivery of and payment for the Securities and the termination of
this Agreement. The Company hereby indemnities and holds harmless the
Underwriters from and against all Liabilities, joint or several, to which the
Underwriters may become subject insofar as such Liabilities arise out of or are
based upon the breach or failure of any of the provisions of Sections 3, 6, 7
and 8.
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13. NOTICES. All communications hereunder shall be in writing
and, except as otherwise expressly provided herein, if sent to you, shall be
mailed, delivered or telegraphed and confirmed to you at Maidstone Financial,
Inc., 101 East 52nd Street, New York, New York 10022, with a copy sent to Jay M.
Kaplowitz, Esq., Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP, 101 East
52nd Street, New York, New York 10022; or if sent to the Company, shall be
mailed, delivered, or telegraphed and confirmed to it at Univec, Inc., 999
Franklin Avenue, Garden City, New York 11530, Attention: Joel Schoenfeld, with a
copy sent to Jack Becker, Esq., Snow Becker Krauss P.C., 605 Third Avenue, New
York, New York 10158-0125.
14. PARTIES IN INTEREST. This Agreement is made solely for the
benefit of the Underwriters, the Company, and, to the extent expressed, any
person controlling the Company or the Underwriters, as the case may be, and the
directors of the Company, nominees for directors of the Company (if any) named
in the Prospectus, officers of the Company who have signed the Registration
Statement, and their respective executors, administrators, successors and
assigns; and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" shall not include any
purchaser, as such, from an underwriter of the Securities.
15. CONSTRUCTION. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without giving effect to conflict of laws. The parties agree to submit
themselves to the jurisdiction of the courts of the State of New York or of the
United States of America for the Southern District of New York, which shall be
the sole tribunals in which any parties may institute and maintain a legal
proceeding against the other party arising from any dispute in this Agreement.
In the event either party initiates a legal proceeding in a jurisdiction other
than in the courts of the State of New York or of the United States of America
for the Southern District of New York, the other party may assert as a complete
defense and as a basis for dismissal of such legal proceeding that the legal
proceeding was not initiated and maintained in the courts of the State of New
York or of the United States of America for the Southern District of New York,
in accordance with the provisions of this Section 15.
16. ENTIRE AGREEMENT. This Agreement, the Underwriter's
Warrants, and the Financial Consulting Agreement contain the entire agreement
between the parties hereto in connection with the subject matter hereof and
thereof.
17. COUNTERPARTS. This Agreement may be executed in two or
more counterpart copies, each of which shall be deemed and an original but all
of which together shall constitute one and the same instrument.
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18. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter or Underwriters shall default
in its or their obligations to purchase the Stock and Warrants hereunder, and if
the number of shares and Warrants with respect to which such default relates
does not exceed in the aggregate 10% of the number of shares of Stock and
Warrants which all Underwriters have agreed to purchase hereunder, then such
Stock and Warrants to which the default relates shall be purchased by the
nondefaulting Underwriters in proportion to their respective commitments
hereunder.
(b) In the event that such default relates to more
than 10% of the number of shares of Stock and Warrants, you may in your
discretion arrange for yourself or for another party or parties to purchase such
Stock and Warrants to which such default relates on the terms contained herein.
if within one (1) business day after such default relating to more than 1 0 % of
the number of shares of Stock and Warrants, the Representative or the
Underwriters satisfactory to you do not elect to purchase the Stock and Warrants
which the defaulting Underwriter agreed but failed to purchase, then the Company
shall be entitled to a further period of one (1) business day within which to
procure another party or parties satisfactory to you to purchase said Stock and
Warrants on such terms. In the event that neither you nor the Company arrange
for the purchase of the Stock and Warrants to which a default relates as
provided in this Section 18, this Agreement may be terminated by you or the
Company (except as provided in Section 6 and Section 8(a) hereof) or the several
Underwriters, but nothing herein shall relieve a defaulting Underwriter of its
liability, if any, to the other several Underwriters and to the Company for
damages occasioned by its default hereunder.
(c) In the event that the Stock and Warrants to
which the default relates is to be purchased by the non-defaulting Underwriters,
or is to be purchased by another party or parties as aforesaid, you or the
Company shall have the right to postpone the Closing Date for a reasonable
period but not in any event exceeding five (5) business days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus or in any other documents and arrangements, and the Company
agrees to file promptly any amendment to the Registration Statement or the
Prospectus which in the opinion of counsel for the Underwriters may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any party substituted under this Section 18 with like effect as if it had
originally been a party to this Agreement with respect to such Stock.
32
<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return this Agreement, whereupon it will become a
binding agreement between the Company and the Underwriters in accordance with
its terms.
Very truly yours,
UNIVEC, INC.
By:
----------------------------------
Name:
Title:
Accepted as of the date
first above written:
New York, New York
MAIDSTONE FINANCIAL, INC., as Representative
of the
By:
---------------------------------
Name:
Title:
33
<PAGE>
EXHIBIT A
Name Number of Shares and/or Warrants
34
<PAGE>
ADVISORY AND INVESTMENT BANKING AGREEMENT
This Agreement is made and entered into as of the __ day of
____, 1997 by and between Maidstone Financial, Inc., a New York
corporation ("Maidstone"), and Univec, Inc., a New York corporation
(the "Company").
In consideration of the mutual promises made herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Purpose: The Company hereby engages Maidstone for the
term specified in Paragraph 2 hereof to render consulting advice to
the Company as an investment banker relating to financial and similar
matters upon the terms and conditions set forth herein.
2. Term: Except as otherwise specified in paragraph 4
hereof, this Agreement shall be effective from ____________________, 1997 to
_________________, 1999.
3. Duties of Maidstone: During the term of this Agreement,
Maidstone shall seek out Transactions (as hereinafter defined) on
behalf of the Company and shall furnish advice to the Company in
connection with any such Transactions.
<PAGE>
4. Compensation: In consideration for the services rendered by
Maidstone to the Company pursuant to this Agreement (and in addition to the
expenses provided for in Paragraph 5 hereof), the Company shall compensate
Maidstone as follows:
(a) The Company shall pay Maidstone a fee of $4,000 per
month during the term of this Agreement. The sum of $96,000 shall be payable in
full on the date of this Agreement;
(b) In the event that any Transaction (as hereinafter
defined) occurs during the term of this Agreement or one year thereafter, the
Company shall pay fees to Maidstone as follows:
Consideration Fee
------------- ---
$ - 0 - to $ 500,000 Minimum fee of $25,000
$ 500,000 to $5,000,000 5% of Consideration
$5,000,000 or more $250,000 plus 1% of the
Consideration in excess of
$5,000,000
For the purposes of this Agreement, "Consideration" shall mean
the total market value on the day of the closing of stock, cash, assets and all
other property (real or personal) exchanged or received, directly or indirectly
by the Company or any of its security holders in connection with any
Transaction. Any co-broker retained by Maidstone shall be paid by Maidstone.
For the purposes of the Agreement, a "Transaction" shall mean
(a) any transaction originated by Maidstone, other than in the ordinary course
of trade or business of the Company, whereby, directly or indirectly, control of
or a material interest in the Company or any of its businesses or any of their
-2-
<PAGE>
respective assets, is transferred for Consideration, (b) any transaction
originated by Maidstone whereby the Company acquires any other company or the
assets of any other company or an interest in any other company (an
"Acquisition") or (c) any sale or Acquisition in connection with which the
Company engages an investment banker other than Maidstone and pays such
investment banker a fee in respect of such Transaction.
In the event Maidstone originates a line of credit with a
lender, the Company and Maidstone will mutually agree on a satisfactory fee and
the terms of payment of such fee; provided, however, that in the event the
Company is introduced to a corporate partner by Maidstone in connection with a
merger, acquisition or financing and a credit line develops directly as a result
of the introduction, the appropriate fee shall be the amount set forth in the
schedule above. In the event Maidstone introduces the Company to a joint venture
partner or customer and sales develop as a result of the introduction, the
Company agrees to pay a fee of five percent (5%) of total sales generated
directly from this introduction during the first two years following the date of
the first sale. Total sales shall mean cash receipts less any applicable
refunds, returns, allowances, credits and shipping charges and monies paid by
the Company by way of settlement or judgment arising out of claims made by or
threatened against the Company. Commission payments shall be paid on the 15th
day of each month following the receipt of customers' payment. In the event any
adjustments are made to the total sales after the commission has been paid, the
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<PAGE>
Company shall be entitled to an appropriate refund or credit against future
payments under this Agreement. All fees to be paid pursuant to this Agreement,
except as otherwise specified, are due and payable to Maidstone in cash at the
closing or closings of any transaction specified in Paragraph 4 hereof. In the
event that this Agreement shall not be renewed or if terminated for any reason,
notwithstanding any such non-renewal or termination, Maidstone shall be entitled
to a full fee as provided under Paragraphs 4 and 5 hereof, for any transaction
for which the discussions were initiated during the term of this Agreement and
which is consummated within a period of twelve months after non-renewal or
termination of this Agreement.
5. Expenses of Maidstone: In addition to the fees payable
hereunder, and regardless of whether any transaction set forth in Paragraph 4
hereof is proposed or consummated the Company shall reimburse Maidstone for all
fees and disbursements of Maidstone's counsel and Maidstone's travel and
out-of-pocket expenses incurred in connection with the services performed by
Maidstone pursuant to this Agreement, including without limitation, hotels, food
and associated expenses and long-distance telephone calls.
6. Liability of Maidstone:
(1) The Company acknowledges that all opinions and advice
(written or oral) given by Maidstone to the Company in connection with
Maidstone's engagement are intended solely for the benefit and use of the
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<PAGE>
Company in considering the transaction to which they relate, and the Company
agrees that no person or entity other than the Company shall be entitled to make
use of or rely upon the advice of Maidstone to be given hereunder, and no such
opinion or advice shall be used for any other purpose or reproduced,
disseminated, quoted or referred to at any time, in any manner or for any
purpose, nor may the Company make any public references to Maidstone, or use
Maidstone's name in any annual reports or any other reports or releases of the
Company without Maidstone's prior written consent.
(2) The Company acknowledges that Maidstone makes no
commitment whatsoever as to making a market in the Company's securities or to
recommending or advising its clients to purchase the Company's securities.
Research reports or corporate finance reports that may be prepared by Maidstone
will, when and if prepared, be done solely on the merits or judgment of analysis
of Maidstone or any senior corporate finance personnel of Maidstone.
7. Maidstone's Services to Others: The Company acknowledges
that Maidstone's or its affiliates are in the business of providing financial
services and consulting advice to others. Nothing herein contained shall be
construed to limit or restrict Maidstone in conducting such business with
respect to others, or in rendering such advice to others.
8. Company Information:
-5-
<PAGE>
(a) The Company recognizes and confirms that, in advising
the Company and in fulfilling its engagement hereunder, Maidstone will use and
rely on data, material and other information furnished to Maidstone by the
Company. The Company acknowledges and agrees that in performing its services
under this engagement, Maidstone may rely upon the data, material and other
information supplied by the Company without independently verifying the
accuracy, completeness or veracity of same.
(b) Except as contemplated by the terms hereof or as
required by applicable law, Maidstone shall keep confidential all material
non-public information provided to it by the Company, and shall not disclose
such information to any third party, other than such of its employees and
advisors as Maidstone determines to have a need to know.
9. Indemnification:
a. The Company shall indemnify and hold Maidstone harmless
against any and all liabilities, claims, lawsuits, including any and all awards
and/or judgments to which it may become subject under the Securities Act of
1933, as amended (the "1933 Act"), the Securities Exchange Act of 1934, as
amended (the "Act") or any other federal or state statute, at common law or
otherwise, insofar as said liabilities, claims and lawsuits (including awards
and/or judgments) arise out of or are in connection with the services rendered
-6-
<PAGE>
by Maidstone or any transactions in connection with this Agreement, except for
any liabilities, claims and lawsuits (including awards and/or judgments),
arising out of acts or omissions of Maidstone. In addition, the Company shall
also indemnify and hold Maidstone harmless against any and all costs and
expenses, including reasonable counsel fees, incurred or relating to the
foregoing.
Maidstone shall give the Company prompt notice of any such
liability, claim or lawsuit which Maidstone contends is the subject matter of
the Company's indemnification and the Company thereupon shall be granted the
right to take any and all necessary and proper action, at its sole cost and
expense, with respect to such liability, claim and lawsuit, including the right
to settle, compromise and dispose of such liability, claim or lawsuit, excepting
therefrom any and all proceedings or hearings before any regulatory bodies
and/or authorities.
Maidstone shall indemnify and hold the Company harmless
against any and all liabilities, claims and lawsuits, including any and all
awards and/or judgments to which it may become subject under the 1933 Act, the
Act or any other federal or state statute, at common law or otherwise, insofar
as said liabilities, claims and lawsuits (including awards and/or judgments)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact required to be stated or necessary to make the statement
therein, not misleading, which statement or omission was made in reliance upon
information furnished in writing to the Company by or on behalf of Maidstone for
-7-
<PAGE>
inclusion in any registration statement or prospectus or any amendment or
supplement thereto in connection with any transaction to which this Agreement
applies. In addition, Maidstone shall also indemnify and hold the Company
harmless against any and all costs and expenses, including reasonable counsel
fees, incurred or relating to the foregoing.
The Company shall give to Maidstone prompt notice of any
such liability, claim or lawsuit which the Company contends is the subject
matter of Maidstone's indemnification and Maidstone thereupon shall be granted
the right to a take any and all necessary and proper action, at its sole cost
and expense, with respect to such liability, claim and lawsuit, including the
right to settle, compromise or dispose of such liability, claim or lawsuit,
excepting therefrom any and all proceedings or hearings before any regulatory
bodies and/or authorities.
b. In order to provide for just and equitable contribution
under the Act in any case in which (i) any person entitled to indemnification
under this Section 9 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 10 provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
such person in circumstances for which indemnification is provided under this
-8-
<PAGE>
Section 10, then, and in each such case, the Company and Maidstone shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after any contribution from others) in such proportion taking
into consideration the relative benefits received by each party from the
offering covered by the prospectus with respect to any transactions in
connection with this Agreement (taking into account the portion of the proceeds
of the offering realized by each), the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was assessed,
the opportunity to correct and prevent any statement or omission and other
equitable considerations appropriate under the circumstances; provided, however,
that notwithstanding the above in no event shall Maidstone be required to
contribute any amount in excess of 10% of the public offering price of any
securities to which such Prospectus applies; and provided, that, in any such
case, no person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is to be made against another party (the "Contributing Party"), notify
the Contributing Party of the commencement thereof, but the omission so to
notify the Contributing Party will not relieve it from any liability which it
-9-
<PAGE>
may have to any other party other than for contribution hereunder. In case any
such action, suit or proceeding is brought against any party, and such party
notifies a Contributing Party or his or its representative of the commencement
thereof within the aforesaid fifteen (15) days, the Contributing Party will be
entitled to participate therein with the notifying party and any other
Contributing Party similarly notified. Any such Contributing Party shall not be
liable to any party seeking contribution on account of any settlement of any
claim, action or proceeding effected by such party seeking contribution without
the written consent of the Contributing Party. The indemnification provisions
contained in this Section 10 are in addition to any other rights or remedies
which either party hereto may have with respect to the other or hereunder.
10. Maidstone an Independent Contractor : Maidstone shall
perform its services hereunder as an independent contractor and not as an
employee of the Company or an affiliate thereof. It is expressly understood and
agreed to by the parties hereto that Maidstone shall have no authority to act
for, represent or bind the Company or any affiliate thereof in any manner,
except as may be agreed to expressly by the Company in writing from time to
time.
-10-
<PAGE>
11. Miscellaneous:
(1) This Agreement between the Company and Maidstone
constitutes the entire agreement and understanding of the parties hereto, and
supersedes any and all previous agreements and understandings, whether oral or
written, between the parties with respect to the matters set forth herein.
(2) Any notice or communication permitted or required
hereunder shall be in writing and shall be deemed sufficiently given if
hand-delivered or sent (i) postage prepaid by registered mail, return receipt
requested, or (ii) by facsimile, to the respective parties as set forth below,
or to such other address as either party may notify the other in writing:
If to the Company, to: Univec, Inc.
999 Franklin Avenue
Garden City, New York 11530
with a copy to: Jack Becker
Snow Becker Krauss P.C.
605 Third Avenue
New York, New York 10158-0125
If to Maidstone, to: Maidstone Group Inc.
101 East 52nd Street
New York, New York 10022
with a copy to: JAY M. KAPLOWITZ
Gersten, Savage, Kaplowitz,
Fredericks & Curtin, LLP
101 East 52nd Street
New York, New York 10022
(3) This Agreement shall be binding upon and inure to the
benefit of each of the parties hereto and their respective successors, legal
representatives and assigns.
(4) This Agreement may be executed in any number of
counterparts, each of which together shall constitute one and the same original
document.
-11-
<PAGE>
(5) No provision of this Agreement may be amended, modified
or waived, except in a writing signed by all of the parties hereto.
(6) This Agreement shall be construed in accordance
with and governed by the laws of the State of New York, without giving effect to
conflict of law principles. The parties hereby agree that any dispute which may
arise between them arising out of or in connection with this Agreement shall be
adjudicated before a court located in New York City, and they hereby submit to
the exclusive jurisdiction of the courts of the State of New York located in New
York, New York and of the federal courts in the Southern District of New York
with respect to any action or legal proceeding commenced by any party, and
irrevocably waive any objection they now or hereafter may have respecting the
venue of any such action or proceeding brought in such a court or respecting the
fact that such court is an inconvenient forum, relating to or arising out of
this Agreement, and consent to the service of process in any such action or
legal proceeding by means of registered or certified mail, return receipt
requested, in care of the address set forth in Paragraph 11(b) hereof.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
MAIDSTONE FINANCIAL, INC.
By:________________________________
UNIVEC, INC.
By:________________________________
-13-
<PAGE>
CERTIFICATE OF INCORPORATION
OF
UNIVEC, INC.
1. The name of the corporation is UNIVEC, Inc. (the "Corporation").
2. The address of the registered office of the Corporation in Delaware is
1013 Centre Road, City of Wilmington, County of New Castle, Delaware 19805. The
name of the corporation's registered agent at that address is Corporation
Service Company.
3. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "General Corporation Law").
4. The total number of shares of capital stock which the Corporation shall
have authority to issue is 30,000,000 shares, of which 5,000,000 shares shall be
designated as preferred stock, each having a par value of $0.001 per share (the
"Preferred Stock"), and 25,000,000 shares shall be designated as common stock,
each having a par value of $0.001 per share (the "Common Stock"). The Board of
Directors of the Corporation is hereby expressly vested with authority by
resolution or resolutions to authorize the issuance of shares of Preferred Stock
in one or more series, from time to time, with each such series to have such
designations, powers, preferences, and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof,
as shall be stated and expressed in the resolution or resolutions providing for
the issue of such series adopted by the Board of Directors of the Corporation,
subject to the limitations prescribed by law and in accordance with the
provisions hereof. The authority of the Board of Directors with respect to each
such series shall include, but not be limited to, the determination or fixing of
the following:
(i) The distinctive designation and number of shares comprising such
series, which number may (except where otherwise provided by the Board of
Directors in creating such series) be increased or decreased (but not below
the number of shares then outstanding) from time to time by like action of
the Board of Directors;
(ii) The dividend rate of such series, the conditions and time upon
which such dividends shall be payable, the relation that such dividends
shall bear to the dividends payable on any other class or classes of stock
or series thereof, or any other series of the same class, and whether such
dividends shall be cumulative or non-cumulative;
(iii) The conditions upon which the shares of such series shall be
subject to redemption by the Corporation and the times, prices and other
terms and provisions upon which the shares of the series may be redeemed;
<PAGE>
(iv) Whether or not the shares of the series shall be subject to the
operation of a retirement or sinking fund to be applied to the purchase or
redemption of such shares and, if such retirement or sinking fund be
established, the annual amount thereof and the terms and provisions
relative to the operation thereof;
(v) Whether or not the shares of the series shall be convertible into
or exchangeable for shares of any other class or classes, with or without
par value, or of any other series of the same class, and, if provision is
made for conversion or exchange, the times, prices, rates, adjustments, and
other terms and conditions of such conversion or exchange;
(vi) Whether or not the shares of the series shall have voting rights,
in addition to the voting rights provided by law, and, if so, the terms of
such voting rights;
(vii) The rights of the shares of the series upon the distribution of
the assets of the Corporation in the event of the liquidation, dissolution,
or winding up of the affairs of the Corporation, whether voluntary or
involuntary; and
(viii) Any other powers, preferences and relative participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, of the shares of such series, as the Board of
Directors may deem advisable and as shall not be inconsistent with the
provisions of the Certificate of Incorporation.
The holders of shares of the Preferred Stock of each series shall be
entitled to receive, when and as declared by the Board of Directors, out of
funds legally available for the payment of dividends, dividends (if any) at the
rates fixed by the Board of Directors for such series, and no more, before any
cash dividends shall be declared and paid, or set apart for payment, on the
Common Stock with respect to the same dividend period.
The holders of shares of the Preferred Stock of each series shall be
entitled upon liquidation or dissolution or upon the distribution of the assets
of the Corporation to such preferences as provided in the resolution or
resolutions creating such series of Preferred Stock, and no more, before any
distribution of the assets of the Corporation shall be made to the holders of
the Common Stock. Whenever the holders of shares of the Preferred Stock shall
have been paid the full amounts to which they shall be entitled, the holders of
the Common Stock shall be entitled to share ratably in all assets of the
Corporation remaining.
5. The name of the sole incorporator is Mark Orenstein, c/o Snow Becker
Krauss P.C. 605 Third Avenue, 25th Floor, New York, New York 10158-0125.
6. The election of the Board of Directors need not be by written ballot.
- 2 -
<PAGE>
7. The Corporation shall indemnify, and hold harmless, to the fullest
extent permitted by Section 145 of the General Corporate Law, as amended from
time to time ("Section 145"), any person who was or is made or is threatened to
be made a party or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (each, a "proceeding")
by reason of the fact that he, or a person for whom he is the legal
representative, is or was a director or officer of the Corporation (each, an
"Eligible Indemnitee"), against all liability and loss suffered and expenses
reasonably incurred by such person in connection with a proceeding initiated by
him only if the proceeding was authorized by the Board of Directors. In
addition, the Corporation may indemnify and hold harmless, to the fullest extent
permitted by Section 145, any other person who was or is made or is threatened
to be made a party or is otherwise involved in any proceeding by reason of the
fact that he, or an officer, director or a person for whom he is the legal
representative, is or was an employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity (each, a "Permitted Indemnitee"), including
service with respect to employee benefit plans, against all liability and loss
suffered and expenses reasonably incurred by such person in connection with such
proceeding. If the Corporation elects to indemnify a Permitted Indemnitee for
liability and loss suffered and expenses reasonably incurred by such person in
connection with a proceeding, its obligation to indemnify such person shall be
reduced by the amount of any indemnity payments received by the Permitted
Indemnitee from any other corporation, partnership, joint venture, trust,
enterprise or non-profit entity on behalf of whom he was acting at the request
of the Corporation and as a result of which he became a party to or was
otherwise became involved in the proceeding.
The Corporation shall pay the expenses incurred by any Eligible Indemnitee
in investigating or defending any proceeding in advance of its final disposition
(unless the proceeding is of a nature for which advancement of expenses is not
permitted by Section 145), but only upon receipt of an undertaking from the
Eligible Indemnitee to repay all amounts advanced if it is ultimately determined
that the Eligible Indemnitee is not entitled to be indemnified under Section
145, this Article or otherwise. In addition, the Corporation may pay the
expenses incurred by any Permitted Indemnitee in defending any proceeding in
advance of its final disposition (unless the proceeding is of a nature for which
advancement of expenses is not permitted by Section 145), but only upon receipt
of an undertaking from the Permitted Indemnitee to repay all amounts advanced if
it is ultimately determined that the Permitted Indemnitee is not entitled to be
indemnified under Section 145, this Article or otherwise.
If a claim for indemnification or payment of expenses under this Article is
not paid in full within sixty days after a written claim therefor has been
received by the Corporation, the claimant may file suit to recover the amount of
such claim and, if successful in whole or in part, shall be entitled to be paid
the expenses of prosecuting such claim. In any such action, the Corporation
shall have the burden of proving that the claimant was not entitled to the
requested indemnification or payment of expenses under Section 145, this Article
or otherwise.
- 3 -
<PAGE>
The rights conferred on any person by this Article shall not be exclusive
of any other rights which such person may have or hereafter acquire under any
statute, any provision of the By-laws of this Corporation, any agreement, any
vote of stockholders or disinterested directors or otherwise.
The Corporation shall have the power to purchase and maintain insurance on
behalf of any Eligible Indemnitee or Permitted Indemnitee against any liability
asserted against him and incurred by him for actions undertaken on behalf of the
Corporation in his capacity, or arising out of his status with the Corporation,
whether or not the Corporation would have had the power to indemnify him against
such liability under this Article or otherwise.
Any amendment or repeal of the foregoing provisions of this Article shall
not adversely affect any right or protection hereunder of any person in respect
of any act or omission occurring prior to the time of such repeal or
modification.
8. No director shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director for
any act or omission occurring subsequent to the date when this provision becomes
effective, except that he may be liable (i) for breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law, as the same exists
or hereafter may be amended, or (iv) for any transaction from which the director
derived an improper personal benefit. If the General Corporation Law hereafter
is amended to authorize the further elimination or limitation of the liability
of directors, then the liability of a director of the Corporation, in addition
to the limitation of personal liability provided herein, shall be limited to the
fullest extent permitted by the amended General Corporation law. Any repeal or
modification of this Article by the stockholders of the Corporation shall be
prospective only, and shall not adversely affect any limitation on the personal
liability of a director of the Corporation existing at the time of such repeal
or modification.
9. Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code on the application
of trustees in dissolution or any receiver or receivers appointed for this
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or the stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
this Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if
- 4 -
<PAGE>
sanctioned by the court to which the said application has been made, be binding
on all the creditors or class of creditors, and/or on all the stockholders or
class of stockholders, of this Corporation, as the case may be, and also on this
Corporation.
10. All the powers of this Corporation, insofar as the same may be lawfully
vested by this Certificate of Incorporation in the Board of Directors, are
hereby conferred upon the board of directors of this Corporation. In furtherance
and not in limitation of that power, the Board of Directors shall have the power
to make, adopt, alter, amend and repeal from time to time By-laws of this
Corporation, subject to the right of the stockholders entitled to vote with
respect thereto to adopt, alter, amend and repeal By-laws made by the Board of
Directors.
Dated: October 7, 1996 /s/ Mark Orenstein
---------------------------
Mark Orenstein
Sole Incorporator
- 5 -
<PAGE>
UNIVEC, INC.
Certificate of Designation
Series A 8% Cumulative Convertible Preferred Stock
Pursuant to Section 151
Of The
General Corporation Law of the State of Delaware
UNIVEC, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the "Corporation"),
DOES HEREBY CERTIFY that, by unanimous written consent in lieu of a meeting
dated as of October 7, 1996, the following resolution was duly adopted by the
Board of Directors of the Corporation pursuant to Section 151 of the General
Corporation Law of the State of Delaware:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by Article 4 of the Corporation's Certificate
of Incorporation, a series of Preferred Stock of the Corporation be, and it
hereby is, created out of the authorized but unissued shares of the capital
stock of the Corporation, such series to be designated Series A 8%
Cumulative Convertible Preferred Stock (the "Series A Preferred Stock"), to
consist of 2,500 shares, par value $0.001 per share, of which the
preferences and relative and other rights, and the qualifications,
limitations or restrictions thereof, shall be (in addition to those set
forth in the Corporation's Certificate of Incorporation) as follows:
1. Dividend Rights.
1.1 The holders of shares of Series A Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors, but only
out of funds legally available for payment of dividends, (i) cumulative
dividends at the rate of $80 per share per annum (the "Series A Preferred
Dividend"), which dividends shall accrue and be cumulative from the date of
issuance, payable at the option of the Company in cash, in additional shares of
Series A Preferred Stock, or a combination thereof. The number of additional
shares of Series A Preferred Stock to be issued in payment of cumulative
dividends shall be determined based upon the liquidation preference ($1,000) of
the Series A Preferred Stock, so that .08 of a share of Series A Preferred Stock
would be issued for each $80 of cumulative cash
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dividends.
1.2 Dividends shall cease to accrue on shares of Series A Preferred
Stock that are redeemed pursuant to Paragraph 4 hereof as of the date fixed for
such redemption.
1.3 So long as any shares of Series A Preferred Stock are outstanding,
no dividends shall be paid or declared and set apart for payment, nor shall any
other distribution be made, on the Common Stock, or on any other stock junior to
the Series A Preferred Stock as to dividends (other than dividends payable in
Common Stock or other stock junior to Series A Preferred Stock both as to
dividends and distribution upon liquidation), unless dividends on Series A
Preferred Stock for the current dividend period and all past dividend periods
shall have been paid or declared and set apart for payment.
1.4 So long as any shares of Series A Preferred Stock are outstanding,
no shares of any stock on a parity with or junior to Series A Preferred Stock
shall be purchased, redeemed or otherwise acquired by the Corporation or by any
subsidiary, nor shall any funds be set aside or made available for any purchase,
retirement or sinking fund for the purchase or redemption of any stock on a
parity with or junior to Series A Preferred Stock, unless dividends on the
Series A Preferred Stock for the current dividend period and all past dividend
periods shall have been paid or declared and set apart for payment.
1.5 Subject to the foregoing provisions, such dividends (payable in
cash, property or stock junior to Series A Preferred Stock) as may be determined
by the Board of Directors may be declared and paid from time to time on the
shares of any stock junior to Series A Preferred Stock, without any right of
participation therein by the holders of Series A Preferred Stock.
1.6 Accrued and unpaid dividends on Series A Preferred Stock shall not
bear interest.
1.7 In case dividends on the Series A Preferred Stock for any dividend
period in which they are payable are not paid in full, all shares of Series A
Preferred Stock and all shares of any other series of Preferred Stock ranking as
to dividends on a parity with Series A Preferred Stock shall participate ratably
in the payment of dividends for such period in proportion to the full amounts of
dividends for such period to which they are respectively entitled.
2. Liquidation Rights.
2.1 In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary (each of which is
hereinafter referred to as a
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"Liquidation"), the holders of shares of Series A Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders an amount per share equal to
$1,000, plus accrued but unpaid dividends, before any distribution shall be made
to the holders of Common Stock or any other stock junior to Series A Preferred
Stock as to the distribution of assets upon Liquidation. If upon Liquidation the
Corporation's assets are not sufficient to pay in full the amounts so payable to
the holders of shares of Series A Preferred Stock and the holders of any other
series of Preferred Stock ranking on a parity as to the distribution of assets
on Liquidation with shares of Series A Preferred Stock, all shares of Series A
Preferred Stock and of such other series of Preferred Stock shall participate
ratably in the distribution of assets in proportion to the full amounts to which
they are respectively entitled.
2.2 For the purpose of this Paragraph 2, a consolidation or merger of
the Corporation with any other corporation, or the sale, transfer of lease of
all or substantially all of its assets, shall not constitute or be deemed a
Liquidation.
3. Redemption.
3.1 Shares of Series A Preferred Stock may be redeemed, in whole at
any time or in part from time to time, at the option of the Corporation
expressed by resolution of the Board of Directors, at $1,000 per share, plus an
amount equal to all accrued dividends unpaid as of the date fixed for redemption
(hereinafter called the "Series A Preferred Redemption Price").
3.2 If less than all the outstanding shares of Series A Preferred
Stock are to be redeemed pursuant to the optional redemption provisions of this
Paragraph 3, the shares to be redeemed shall be selected pro rata among the
holders thereof.
3.3 Notice to the holders of shares of Series A Preferred Stock to be
redeemed shall be given by mailing to such holders a notice of such redemption,
first class, postage prepaid, not less than 20 nor more than 30 days before the
date fixed for redemption, at their last addresses as they shall appear upon the
books of the Corporation. Any notice which is mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
the stockholder receives such notice; and failure duly to give such notice by
mail, or any defect in such notice, to any stockholder whose shares of Series A
Preferred Stock have been designated for redemption shall not affect the
validity of the proceedings for the redemption of any other shares of Series A
Preferred Stock. The notice of redemption to each stockholder whose shares of
Series A Preferred Stock are to be redeemed shall specify the
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number of shares of Series A Preferred Stock held by such stockholder to be
redeemed, the date fixed for such redemption and the Series A Preferred
Redemption Price at which such shares are to be redeemed, and shall specify
where payment of the Series A Preferred Redemption Price is to be made upon
surrender of such shares.
3.4 On and after the date fixed in any such notice of redemption as
the date of redemption (unless default shall be made by the Corporation in
providing moneys for the payment of the Series A Preferred Redemption Price),
all rights as stockholders of the Corporation of the holders of shares of Series
A Preferred Stock to be redeemed, except the right to receive the Series A
Preferred Redemption Price as herein provided, shall cease and terminate. At any
time on or after the date fixed as aforesaid for such redemption, the respective
holders of record of shares of Series A Preferred Stock to be redeemed shall be
entitled to receive the Series A Preferred Redemption Price upon actual delivery
to the Corporation of certificates of the shares to be redeemed, such
certificates, if required by the Corporation, to be properly stamped for
transfer and duly endorsed in blank or accompanied by proper instruments of
assignment and transfer thereof duly executed in blank.
4. Status of Series A Preferred Stock Reacquired.
Shares of Series A Preferred Stock which have been issued and
reacquired in any manner shall (upon compliance with applicable provisions of
the laws of the State of Delaware), be deemed to be cancelled and have the
status of authorized and unissued shares of the class of Preferred Stock
issuable in series undesignated as to series and may be redesignated and
reissued.
5. No Voting Rights.
Holders of Series A Preferred Stock shall have no voting rights,
except as may be required by law.
6. Conversion Rights.
6.1 Upon the terms and in the manner hereinafter set forth in this
Paragraph 6, any holder of shares of the Series A Preferred Stock may, at the
option of such holder, at any time and from time to time after the earlier of
(i) September 30, 1999 and (ii) the second anniversary of the date upon which
the Securities and Exchange Commission declares effective under the Securities
Act of 1933, as amended, a registration statement for an underwritten public
offering of the Corporation's Common Stock, convert each share of Series A
Preferred Stock into 222.22 shares of Common Stock (the "Conversion Rate"), as
adjusted and readjusted from time to time in accordance with this Paragraph 6.
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<PAGE>
6.1.2 In order to convert shares of Series A Preferred Stock into
Common Stock, the holder thereof shall (i) surrender the certificate or
certificates for such shares of Series A Preferred Stock, duly endorsed to the
Corporation or in blank, to the Corporation at its principal office or at the
office of the agency maintained for such purposes, (ii) give written notice to
the Corporation at such office that such holder elects to convert such shares of
Series A Preferred Stock, and (iii) state in writing therein the name or names
in which such holder wishes the certificate or certificates for shares of Common
Stock to be issued. Each conversion shall be deemed to have been effected at the
close of business on the date on which the Corporation or such agency shall have
received such surrendered Series A Preferred Stock certificate(s), and the
person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become the record holder or holders of the shares represented thereby on
such date. As soon as practicable after such conversion, the Corporation shall
issue or deliver at such office to the holder for whose account such shares of
Series A Preferred Stock were so surrendered, or to such holder's nominee or
nominees, certificates (bearing such legend(s) as may be required under
applicable securities laws) for the number of full shares of Common Stock to
which such holder shall be entitled, plus, in lieu of any fractional share to
which such holder would otherwise be entitled, cash equal to such fraction
multiplied by the closing price per share of the Common Stock on the principal
exchange on which it is then listed, or if it is not so listed, the mean between
the closing bid and ask prices per share for such stock, as reported by NASDAQ,
The National Quotation Bureau, Incorporated, or other similar service, in each
instance as of the close of business on the date of such conversion.
6.1.3 No accrued but unpaid dividends shall be paid on shares of
Series A Preferred Stock converted, except that no holder shall be prejudiced,
by reason of conversion, in his rights to recover dividends declared and unpaid,
if the payment date of the dividends declared preceded the date of conversion.
6.2 The conversion rate shall be subject to adjustment from time to
time as follows: in case the Corporation shall at any time pay a stock dividend
in its Common Stock (other than on the Series A Preferred Stock), or in case the
Corporation shall at any time either subdivide or combine the outstanding shares
of Common Stock, the conversion rate shall immediately be proportionately
adjusted. In case of any capital reorganization or any reclassification of the
capital stock of the Corporation or in case of the consolidation or merger of
the Corporation with or into another corporation or the sale of all or
substantially all of the assets of the Corporation as or substantially as an
entirety to another corporation, each share of Series A Stock shall thereafter
be convertible into the number of shares of
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stock or other securities or property to which a holder of the number of shares
of Common Stock of the Corporation then deliverable upon conversion of such
share of Series A Preferred Stock would have been entitled upon such
reorganization, reclassification, consolidation, merger or conveyance; and, in
any such case, appropriate adjustment (as determined by the Board of Directors)
shall be made in the application of the provisions herein set forth with respect
to the rights and interests thereafter of the holders of the shares of Series A
Preferred Stock, to the end that the provisions set forth herein (including
provisions with respect to changes in and other adjustments of the conversion
rate) shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable upon
the conversion of the shares of Series A Preferred Stock.
6.3 No adjustment in the conversion rate shall be required unless such
adjustment (and any other adjustments which by reason of this Paragraph 6.3 are
not required to be made) would not, if made, entitle the holders of all then
outstanding shares of Series A Preferred Stock upon conversion thereof to
receive additional shares of Common Stock equal in the aggregate to one percent
(1%) or more of the total issued and outstanding shares of Common Stock. All
calculations under this Paragraph 6.3 shall be made to the nearest one
one-hundredth (1/100) of a share.
6.4 Whenever the conversion rate is adjusted as herein provided, an
officer of the Corporation shall compute the adjusted conversion rate in
accordance with the foregoing provisions and shall prepare a written instrument
setting forth such adjusted conversion rate and showing in detail the facts upon
which such adjustment is based, and a copy of such written instrument shall
forthwith be mailed to each holder of record of the Series A Preferred Stock,
and made available for inspection by the stockholders of the Corporation.
6.5 The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued Common Stock,
for the purpose of effecting the conversion of the shares of Series A Preferred
Stock, the full number of shares of Common Stock then deliverable upon the
conversion of all shares of Series A Preferred Stock then outstanding, and such
shares shall be listed, subject to notice of issuance, on any stock exchange(s)
on which outstanding shares of Common Stock may then be listed.
6.6 The Corporation will pay and all taxes that may be payable in
respect of the issuance or delivery of shares of Common Stock on conversion of
shares of Series A Preferred Stock pursuant hereto. The Corporation shall not,
however, be required to pay any tax which may be payable in respect of any
transfer
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<PAGE>
involved in the issue and delivery of shares of Common Stock in a name other
than that in which the shares of Series A Preferred Stock so converted were
registered, and no such issue or delivery shall be made unless and until the
person requesting such issue has paid to the Corporation the amount of any such
tax, or has established, to the satisfaction of the Corporation, that such tax
has been paid or is not payable.
7. Exclusion of Other Rights. Except as may otherwise be required by law,
the shares of Series A Preferred Stock shall not have any preferences or
relative, participating, optional or other special rights other than those
specifically set forth in this resolution (as such resolution may be amended
from time to time) and in the Certificate of Incorporation of the Corporation,
as amended.
8. Headings of Subdivisions. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
9. Severability of Provisions. If any right, preference or limitation of
the Series A Preferred set forth in this resolution (as such resolution may be
amended from time to time) is invalid, unlawful, or incapable of being enforced
by reason of any rule of law or public policy, all other rights, preferences and
limitations set forth in this resolution (as so amended) which can be given
effect without the invalid, unlawful or unenforceable right, preference or
limitation shall, nevertheless, remain in full force and effect, and no right,
preference or limitation herein set forth shall be deemed dependent upon any
other such right, preference or limitation unless so expressed herein.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed and this certificate to be signed by Joel Schoenfeld, its Chairman of
the Board and Chief Executive Officer and attested to by Flora Schoenfeld, its
Secretary, this 30th day of December, 1996.
/s/ Joel Schoenfeld
--------------------------------
Joel Schoenfeld
Chairman of the Board
and Chief Executive Officer
[CORPORATE SEAL]
ATTEST:
/s/ Flora Schoenfeld
-------------------------------
Flora Schoenfeld
Secretary
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BY-LAWS
OF
UNIVEC, INC.
1. MEETINGS OF STOCKHOLDERS
1.1 Annual Meeting. An annual meeting of stockholders shall be held for the
election of directors at such date, time and place, either within or without the
State of Delaware, as may be designated by resolution of the Board of Directors
(the "Board") from time to time. Any other proper business may be transacted at
the annual meeting.
1.2 Special Meetings. Special meetings of the stockholders may be called at
any time by resolution of the Board or by the Chairman of the Board, the Chief
Executive Officer or the President, and may be held either within or without the
State of Delaware, but such special meetings may not be called by any other
persons.
1.3 Notice of Meetings. Written notice of each meeting of stockholders
shall be given to each stockholder entitled to vote at the meeting, personally
or by mail, not less than 10 nor more than 60 days before the meeting and shall
state the time and place of the meeting, and unless it is the annual meeting,
shall state the purposes for which it is called. If mailed, notice shall be
considered given when mailed to a stockholder at his address on the
Corporation's records.
1.4 Adjournments. Any meeting of stockholders, annual or special, may
adjourn from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than 30
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
1.5 Quorum. Except as provided by law, the Certificate of Incorporation or
these By-laws, at each meeting of stockholders, the presence in person or by
proxy of the holders of a majority of the issued and outstanding shares of stock
entitled to vote shall constitute a quorum for the transaction of any business.
In the absence of a quorum, holders of a majority of the shares of stock
entitled to vote present in person or by proxy, or, if no stockholders are
present, any officer entitled to preside at or to act as secretary of the
<PAGE>
meeting, may adjourn the meeting from time to time in the manner provided in
Section 1.4 of these By-laws until a quorum is present.
1.6 Organization. Meetings of stockholders shall be presided over by the
Chairman of the Board, or in his absence, the Vice Chairman of the Board, or in
his absence, by the Chief Executive Officer, or in his absence, by the
President, or in the absence of the foregoing persons by a chairman designated
by the Board of Directors, or in the absence of such designation by a chairman
chosen at the meeting. The Secretary shall act as secretary of the meeting, but
in his absence the chairman of the meeting may appoint any person to act as
secretary of the meeting.
1.7 Voting; Proxies. Each stockholder of record entitled to vote at any
meeting of stockholders shall be entitled to one vote for every share registered
in his name, except as otherwise provided in the Certificate of Incorporation or
any certificate of designation authorizing the creation of any series or class
of stock of the Corporation filed with the Secretary of State pursuant to
Section 151 of the Delaware General Corporation Law. Corporate action to be
taken by stockholder vote, other than the election of directors, shall be
authorized by a majority of the votes cast at a meeting of stockholders, except
as otherwise provided by law, Section 1.10 of these By-laws, or in the
Certificate of Incorporation or any certificate of designation authorizing the
creation of any series or class of stock of the Corporation filed with the
Secretary of State pursuant to Section 151 of the Delaware General Corporation
Law. Directors shall be elected in the manner provided in Section 2.1 of these
By-laws. Unless required by statute or the Certificate of Incorporation, or
ordered by the chairman of the meeting, voting need not be by written ballot.
Each stockholder entitled to vote at any meeting of stockholders or express
consent to or dissent from corporate action in writing without a meeting may
authorize another person to act for him by proxy. Every proxy must be signed by
the stockholder or his attorney-in-fact. No proxy shall be valid after three
years from its date unless it provides otherwise. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with the Secretary of
the Corporation.
1.8 Fixing Date for Determination of Stockholders of Record. In order that
the Corporation may determine the
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stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board and which record date: (1) in the case of determination of
stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than 60 nor less
than 10 days before the date of such meeting; (2) in the case of determination
of stockholders entitled to express consent to corporate action in writing
without a meeting, shall not be more than 10 days from the date upon which the
resolution fixing the record date is adopted by the Board; and (3) in the case
of any other action, shall not be more than 60 days prior to such other action.
If no record date is fixed, (1) the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given, or
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held; (2) the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting
when no prior action of the Board is required by law shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation in accordance with applicable law, or, if
prior action by the Board is required by law, shall be at the close of business
on the day on which the Board adopts the resolution taking such prior action;
and (3) the record date for determining stockholders for any other purpose shall
be at the close of business on the day on which the Board adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board may fix a new record date for the
adjourned meeting.
1.9 List of Stockholders. Not less than 10 days prior to the date of any
meeting of stockholders, the Secretary of the corporation shall prepare a
complete list of stockholders entitled to vote at the meeting, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in his name. For a period of not less than 10 days prior to
the meeting, the list shall be available during ordinary business hours for
inspection by any stockholder for any purpose germane to the meeting. During
this period, the list shall be kept either (a) at a place within the city where
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the meeting is to be held, if that place shall have been specified in the notice
of meeting, or (b) if not so specified, at the place where the meeting is to be
held. The list also shall be available for inspection by stockholders at the
time and place of the meeting.
1.10 Action by Consent without a Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required or permitted to be taken at
any annual or special meeting of stockholders of the Corporation may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voting. Prompt notice of the taking of
any such action shall be given to those stockholders who did not consent in
writing.
1.11 Inspectors. The Board may, in advance of any meeting of stockholders,
appoint one or more inspectors to act at such meeting or any adjournment
thereof. If the inspectors shall not be so appointed or if any of them shall
fail to appear or act, the chairman of the meeting may, and at the request of
any stockholder entitled to vote thereat shall, appoint inspectors. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares outstanding and the voting power of each,
the number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of the meeting or any
stockholder entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. Inspectors may, but need not, be
stockholders.
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2. BOARD OF DIRECTORS
2.1 Number, Qualification, Election and Term of Directors. The business of
the Corporation shall be managed by the Board of Directors. The Board of
Directors shall consist of not more than seven nor less than three directors, as
fixed from time to time by resolution of the Board, except that the number of
directors constituting the Board may be less than three provided the number of
directors is not less than the number of stockholders. The number of directors
may be changed by a resolution of a majority of the directors then in office or
by the stockholders, but no decrease may shorten the term of any incumbent
director. Directors shall be elected at each annual meeting of stockholders by a
plurality of the votes cast and shall hold office until the election and
qualification of their respective successors, or if earlier, their death,
resignation or removal in accordance with the provisions of Section 2.9 of these
By-laws, or as otherwise provided by law or the Certificate of Incorporation.
2.2 Quorum and Manner of Acting. A majority of the directors then in office
shall constitute a quorum for the transaction of business at any meeting, except
as provided in Section 2.7 of these By-laws. In the absence of a quorum, a
majority of the directors present may adjourn any meeting from time to time
until a quorum is present. Action of the Board shall be authorized by the vote
of a majority of the directors present at the time of the vote if there is a
quorum, unless otherwise provided by law, these By-laws or the Certificate of
Incorporation.
2.3 Annual and Regular Meetings. Annual meetings of the Board for the
election of officers and consideration of other matters may be held either
within or without the State of Delaware and shall be held either (a) without
notice immediately after the annual meeting of stockholders and at the same
place, or (b) as soon as practicable after the annual meeting of stockholders,
on notice as provided in Section 2.5 of these By-laws. Regular meetings of the
Board may be held without notice at such times and places as the Board
determines. If the day fixed for the regular meeting is a legal holiday, the
meeting shall be held on the next business day.
2.4 Special Meetings. Special meetings of the Board may be held at any time
and place within or without the State of Delaware whenever called by the
Chairman of the Board, the Vice Chairman of the Board, the Chief Executive
Officer, the President or by a majority of the directors. Only business related
to the purposes set forth in the notice of meeting may be transacted at a
special meeting.
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2.5 Notice of Meetings. Notice of the time and place of each special
meeting of the Board, and of each annual meeting not held immediately after the
annual meeting of stockholders and at the same place, shall be given to each
director by mailing it to him at his residence or usual place of business at
least three days before the meeting, or by delivering, telephoning or faxing it
to him at least 24 hours before the meeting. Notice of a special meeting shall
also state the purpose or purposes for which the meeting is called. Notice of
any adjourned meeting need not be given, other than by announcement at the
meeting at which the adjournment is taken.
2.6 Organization. Meetings of the Board of Directors shall be presided over
by the Chairman of the Board, or in his absence, the Vice Chairman of the Board,
or in his absence, the Chief Executive Officer, or in his absence, the
President, or in their absence by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his absence the chairman
of the meeting may appoint any person to act as secretary of the meeting.
2.7 Board or Committee Action without a Meeting. Any action required or
permitted to be taken by the Board or by any committee of the Board may be taken
without a meeting if all of the members of the Board or the committee consent in
writing to the adoption of a resolution authorizing the action. The resolution
and the written consents by the members of the Board or the committee shall be
filed with the minutes of the proceedings of the Board or of the committee.
2.8 Participation in Board or Committee Meetings by Conference Telephone.
Any or all members of the Board or of any committee of the Board may participate
in a meeting of the Board or of the committee by means of a conference telephone
or similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such means shall
constitute presence in person at the meeting.
2.9 Resignation and Removal of Directors. Any director may resign at any
time by delivering his resignation in writing to the Chairman of the Board, the
Vice Chairman of the Board, the Chief Executive Officer, the President or the
Secretary of the Corporation, to take effect at the time specified in the
resignation, and the acceptance of a resignation, unless required by its terms,
shall not be necessary to make it effective. Except as otherwise provided by law
or in the Certificate of Incorporation, any or all of the directors may be
removed at any time, either with or without cause, by vote of a majority of the
shares then entitled to vote for the election of directors.
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2.10 Vacancies. Any vacancy in the Board, including one created by an
increase in the number of directors, may be filled by a majority vote of the
remaining directors, although such majority is less than a quorum, or by a
plurality of the votes cast at a meeting of the stockholders, and each director
so elected shall hold office until the expiration of the term of the director
whom he has replaced or until his successor is elected and qualified.
2.11 Compensation. Directors shall receive such compensation as the Board
determines, together with reimbursement of their reasonable expenses in
connection with the performance of their duties. A director also may be paid for
serving the Corporation, its affiliates or subsidiaries in other capacities.
3. COMMITTEES
3.1 Executive Committee. The Board, by resolution adopted by a majority of
the entire Board, may designate an Executive Committee of one or more directors
which shall have all the powers and authority of the Board, except as otherwise
provided in the resolution, Section 141(c) of the Delaware General Corporation
Law, or any other applicable law. The members of the Executive Committee shall
serve at the pleasure of the Board. All action of the Executive Committee shall
be reported to the Board at its next meeting.
3.2 Other Committees. The Board, by resolution adopted by a majority of the
entire Board, may designate other committees of the Board of one or more
directors, which shall serve at the Board's pleasure and have such powers and
duties as the Board determines, subject to the limitations set forth in Section
141(c) of the Delaware General Corporation Law.
3.3 Rules Applicable to Committees. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of any member of a committee, the member or members present at
a meeting of the committee and not disqualified, whether or not a quorum, may
unanimously appoint another director to act at the meeting in place of the
absent or disqualified member. All action of the committee shall be reported to
the Board at its next meeting. Each committee shall adopt rules of procedure and
shall meet as provided by those rules or by resolutions of the Board.
4. OFFICERS
4.1 Executive Officers. The executive officers of the Corporation shall
consist of the Chairman of the Board, the
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<PAGE>
Chief Executive Officer, the President, one or more Vice Presidents (one or more
of whom may be designated Executive Vice President or Senior Vice President),
the Chief Financial Officer, a Secretary and a Treasurer. Any two or more
offices may be held by the same person.
4.2 Election; Term of Office. The executive officers of the Corporation
shall be elected annually by the Board, and each such officer shall hold office
until the next annual meeting of the Board and until the election of his
successor, or his earlier death, resignation or removal in accordance with the
provisions of Section 4.4 of these By-laws.
4.3 Subordinate Officers. The Board may appoint subordinate officers
(including assistant secretaries and assistant treasurers), agents or employees,
each of whom shall hold office for such period and have such powers and duties
as the Board determines. The Board may delegate to any executive officer or to
any committee the power to appoint and define the powers and duties of any
subordinate officers, agents or employees. The Board may require any officer,
agent or employee to give security for the faithful performance of his duties.
4.4 Resignation and Removal of Officers. Any officer may resign at any time
by delivering his resignation in writing to the Chairman of the Board, the Vice
Chairman of the Board, the Chief Executive Officer, the President or the
Secretary of the Corporation, to take effect at the time specified in the
resignation, and the acceptance of such resignation, unless required by its
terms, shall not be necessary to make it effective. Any officer appointed by the
Board or appointed by an executive officer or by a committee may be removed by
the Board either with or without cause, and in the case of an officer appointed
by an executive officer or by a committee, by the officer or committee who
appointed him or by the Chairman of the Board, the Vice Chairman of the Board,
the Chief Executive Officer or the President.
4.5 Vacancies. A vacancy in any office may be filled for the unexpired term
in the manner prescribed in Sections 4.2 and 4.3 of these By-laws for election
or appointment to the office.
4.6 Chairman of the Board. The Chairman of the Board of the Corporation
shall preside at all meetings of the Board and of the stockholders and shall
have such other powers and duties as the Board assigns to him.
4.7 Chief Executive Officer. The Chief Executive Officer of the Corporation
shall supervise and direct the business and affairs of the Corporation, subject
to the control of the Board,
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<PAGE>
and shall have such other powers and duties as the Board assigns to him.
4.8 President. The President of the Corporation shall, subject to the
direction of the Chief Executive Officer and the control of the Board, direct
and manage the day-to-day business activities and general affairs of the
Corporation, and shall have such other powers and duties as the Board assigns to
him.
4.9 Vice-President. Each vice president shall have such powers and duties
as the Board or the Chairman of the Board, the Chief Executive Officer or the
President assigns to him.
4.10 Secretary. The Secretary shall be the secretary of, and keep the
minutes of, all meetings of the Board and of the stockholders, shall be
responsible for giving notice of all meetings of stockholders and of the Board,
and shall keep the seal and, when authorized by the Board, apply it to any
instrument requiring it. Subject to the control of the Board, he shall have such
powers and duties as the Board, the Chairman of the Board or the President
assigns to him. In the absence of the Secretary from any meeting, the minutes
shall be kept by the person appointed for that purpose by the presiding officer.
4.11 Chief Financial Officer. The Chief Financial Officer of the
Corporation shall be the principal financial and accounting officer of the
Corporation, and shall have primary responsibility for the Corporation's books
and accounts. Subject to the control of the Board, he shall have such other
powers and duties as the Board, the Chairman of the Board, the Chief Executive
Officer or the President assigns to him.
4.12 Treasurer. The Treasurer of the Corporation shall have custody of the
corporate funds and securities and, subject to the control of the Board, shall
have such other powers and duties as the Board, the Chairman of the Board, the
Chief Executive Officer, the President or the Chief Financial Officer assigns to
him.
4.13 Salaries. The Board may fix the officers' salaries, if any, or it may
authorize the Chairman of the Board or the President to fix the salary of any
other officer.
5. SHARES
5.1 Certificates. The Corporation's shares shall be represented by
certificates in the form approved by the Board. Each certificate shall be signed
by the Chairman of the Board, the Vice Chairman of the Board, the Chief
Executive Officer, the
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<PAGE>
President or a Vice President and by the Secretary or an Assistant Secretary, or
the Treasurer or an Assistant Secretary, and shall be sealed with the
Corporation's seal or a facsimile of the seal. Any or all of the signatures on
the certificate may be a facsimile.
5.2 Transfers. Shares shall be transferable only on the Corporation's
books, upon surrender of the certificate for the shares, properly endorsed.
5.3 Lost, Stolen or Destroyed Certificates. The Corporation may issue a new
certificate of stock in the place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed, and the Corporation may require
the owner of any lost, stolen or destroyed certificate, or his legal
representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of any new
certificate.
6. MISCELLANEOUS
6.1 Seal. The corporate seal shall bear the Corporation's name and the year
and state in which it was incorporated.
6.2 Fiscal Year. The Board, by resolution, may determine the Corporation's
fiscal year. Until changed by the Board, the Corporation's fiscal year shall be
the calendar year.
6.3 Waiver of Notice of Meetings of Stockholders, Directors and Committees.
Any written waiver of notice, signed by the person entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at the meeting shall constitute a waiver of notice of
such meeting, except when the person attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business transacted at, nor the purpose of, any regular or special meeting of
the stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice.
6.4 Interested Directors; Ouorum. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership or association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the
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<PAGE>
Board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if: (1) the
material facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the Board or the committee, and the
Board or the committee in good faith authorizes the contract or transaction by
the affirmative votes of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (2) the material facts as
to his relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (3) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approve or ratified by the Board, a committee
thereof, or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board or of a committee
which authorizes the contract or the transaction.
6.5 Voting of Shares in other Corporations. Shares in other corporations
which are held by the Corporation may be represented and voted by the Chairman
of the Board, the Chief Executive Officer, the President or a Vice President of
the Corporation or by proxy or proxies appointed by any one of them. The Board
may, however, appoint some other person to vote the shares.
6.6 Amendments. These By-laws may be amended or repealed, and new By-laws
may be adopted, by the Board, subject to compliance with Section 2.2 of these
By-Laws, but the stockholders may adopt additional By-laws and may amend and
repeal any By-laws whether adopted by them or otherwise.
-11-
<PAGE>
AGREEMENT
AND PLAN OF MERGER
BETWEEN
UNIVEC, INC.
(a New York Corporation)
AND
UNIVEC, INC.
(a Delaware Corporation)
Agreement and Plan of Merger (the "Agreement"), dated as of October 7,
1996, between UNIVEC, Inc., a New York corporation ("UNIVEC") and UNIVEC, Inc.,
a newly-formed Delaware corporation and a wholly-owned subsidiary of UNIVEC (the
"Surviving Corporation").
A. UNIVEC is a corporation duly organized and existing under the laws of
the State of New York and has an authorized capital of 200 common
shares, without par value ("New York Common Shares"). As of the date
hereof, 103.3526 New York Common Shares are issued and outstanding and
entitled to one vote per share.
B. The Surviving Corporation is a corporation duly organized and existing
under the laws of the State of Delaware and has an authorized capital
of 25,000,000 shares of common stock, $.001 par value ("Delaware
Common Stock"), and 5,000,000 shares of Preferred Stock, $.001 par
value ("Delaware Preferred Stock"). As of the date hereof, 100 shares
of Delaware Common Stock are issued and outstanding and entitled to
one vote per share, and no shares of Delaware Preferred Stock are
issued and outstanding.
C. The Board of Directors of UNIVEC has determined that, for the purpose
of effecting the reincorporation of UNIVEC in the State of Delaware,
it is advisable that UNIVEC merge with and into the Surviving
Corporation upon the terms and conditions herein provided and in
accordance with the laws of the States of New York and Delaware.
D. The respective Boards of Directors of UNIVEC and the Surviving
Corporation have approved this Agreement and have directed that this
Agreement be submitted to a vote of the shareholders of UNIVEC.
<PAGE>
NOW THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, UNIVEC and the Surviving Corporation hereby agree, subject to the
terms and conditions hereinafter set forth, as follows:
ARTICLE I
MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, UNIVEC
shall be merged with and into the Surviving Corporation in accordance with the
New York Business Corporation Law (the "NYBCL") and the General Corporation Law
of the State of Delaware (the "DGCL")(the "Merger").
The separate existence of UNIVEC shall cease, and the Surviving Corporation
shall be the surviving corporation and continue its corporate existence under
the laws of the State of Delaware. Thereafter, without further action, the
Surviving Corporation shall succeed, insofar as permitted by law, to all the
rights, assets, privileges, franchises, liabilities and obligations of UNIVEC.
1.2 Filing and Effectiveness. The Merger shall become effective upon the
completion of the following actions:
(a) This Agreement and the Merger shall have been approved by the
shareholders of UNIVEC in accordance with the provisions of the NYBCL;
(b) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived
by the party entitled to satisfaction thereof;
(c) An executed Certificate of Merger, in the form attached hereto as
Exhibit A, meeting the requirements of the DGCL or an executed
counterpart of this Agreement shall have been filed with the Secretary
of State of Delaware on behalf of the Surviving Corporation; and
(d) An executed Certificate of Merger, in the form attached hereto as
Exhibit B, meeting the requirements of the NYBCL shall have been filed
with the Secretary of State of New York on behalf of UNIVEC.
The date and time when the Merger shall become effective, as set forth
above, is hereinafter referred to as the "Effective Date."
<PAGE>
1.3 Certificate of Incorporation. The Certificate of Incorporation of the
Surviving Corporation, attached hereto as Exhibit C, in effect immediately prior
to the Effective Date shall continue in full force and effect as the Certificate
of Incorporation of the Surviving Corporation until duly amended in accordance
with the provisions thereof and applicable law, and the name of the Surviving
Corporation shall be UNIVEC, Inc.
1.4 By-laws. The By-laws of the Surviving Corporation in effect immediately
prior to the Effective Date shall continue in full force and effect as the
By-laws of the Surviving Corporation until duly amended in accordance with the
provisions thereof and applicable law.
1.5 Directors and Officers. The directors and officers of the Surviving
Company immediately prior to the Effective Date shall continue as the directors
and officers of the Surviving Corporation until their successors shall have been
elected or until otherwise provided by law, the Certificate of Incorporation of
the Surviving Corporation or the By-laws of the Surviving Corporation.
1.6 Effect of Merger. Upon the Effective Date, the separate existence of
UNIVEC shall cease and the Surviving Corporation, as the Surviving Corporation,
(i) shall continue to possess all of its assets, rights, powers and property as
constituted immediately prior to the Effective Date, shall be subject to all
actions previously taken by its and UNIVEC's Board of Directors and shall
succeed, without other transfer, to all of the assets, rights, powers and
property of UNIVEC in the manner and as more fully set forth in Section 259 of
the DGCL, and (i) shall continue to be subject to all of its debts, liabilities
and obligations as constituted immediately prior to the Effective Date and
succeed, without other transfer, to all of the debts, liabilities and
obligations of UNIVEC in the same manner as if the Surviving Corporation had
incurred them, all as more fully provided under the applicable provisions of the
DGCL and the NYBCL.
ARTICLE II
MANNER OF CONVERSION OF STOCK
2.1 Outstanding Stock of UNIVEC. Upon the Effective Date, by virtue of the
Merger and without any action on the part of the holder thereof, each New York
Common Share outstanding immediately prior thereto shall be changed and
converted into 10,256.3954 fully paid and nonassessable share of common stock of
the Surviving Corporation, $.001 par value, with any fractional shares issuable
to a registered owner of New York Common Shares in the aggregate to be rounded
up to the nearest whole share.
2.2 Stock Certificates. On and after the Effective Date, all of the
outstanding certificates which, prior to that time,
<PAGE>
represented New York Common Shares shall be deemed for all purposes to evidence
ownership of and to represent the shares of Delaware Common Stock into which the
New York Common Shares represented by such certificates have been converted as
provided for in this Agreement. The registered owner on the books and records of
UNIVEC or its transfer agent of any such outstanding stock certificate shall,
until such certificate shall have been surrendered for transfer or otherwise
accounted for the Surviving Corporation or its transfer agent, have and be
entitled to exercise any voting rights with respect to, and to receive any
dividend and other distributions upon, the shares of Delaware Common Stock
evidenced by such outstanding certificate as provided above.
2.3 Warrants, Options. Upon the Effective Date, each outstanding option,
warrant or other right to purchase New York Common Shares shall be converted
into and become an option, warrant or right to purchase a number of shares of
Delaware Common Stock equal to the product of 10,256.3954 and the number of New
York Common Shares purchasable upon exercise thereof at a price per share equal
to the quotient resulting from dividing the price as in effect at the Effective
Date by 10,256.3954 (with fractional shares issuable in the aggregate to each
holder thereof to be rounded up to the nearest whole number), and upon the same
terms and subject to the same conditions as set forth in the agreements entered
into by UNIVEC pertaining to such option, warrant or right. The Surviving
Corporation shall reserve a number of shares of Delaware Common Stock for
purposes of such options, warrants and rights sufficient to allow the exercise
thereof.
2.4 Outstanding Common Stock of the Surviving Corporation. Upon the
Effective Date, the 100 shares of Delaware Common Stock issued and outstanding
in the name of UNIVEC shall be cancelled and retired and resume the status of
authorized and unissued shares of Delaware Common Stock, and no shares of
Delaware Common Stock or other securities of the Surviving Corporation shall be
issued in respect thereof.
ARTICLE III
COVENANTS OF The Surviving Corporation
The Surviving Corporation covenants and agrees that, upon or before the
Effective Date:
(a) it will qualify to do business as a foreign corporation in the State of
New York;
(b) it may be served with process in the State of New York in any
proceeding for the enforcement of any obligation of UNIVEC or the Surviving
Corporation and irrevocably appoints the Secretary of State to accept service of
process in any such proceeding and directs the Secretary of State to mail a copy
of
<PAGE>
the process in such proceeding to UNIVEC, Inc., 999 Franklin Street, Garden
City, New York 11530; and
(c) it will file any and all documents with the State of New York necessary
for the assumption by the Surviving Corporation of UNIVEC's tax liabilities to
the State of New York.
ARTICLE IV
GENERAL
4.1 Termination and Abandonment. At any time prior to the Effective Date,
this Agreement may be terminated and the Merger abandoned by the respective
Board of Directors of UNIVEC or the Surviving Corporation if (a) the submission
to the shareholders specified in Article I hereof shall not have been satisfied
or waived by the respective Board of Directors of UNIVEC or the Surviving
Corporation, or (b) the respective Board of Directors if either UNIVEC or the
Surviving Corporation determines that in its sole discretion the Merger does not
appear to be in the best interests of either of the two corporations or their
respective shareholders or is otherwise not advisable.
4.2 Amendment. This Agreement may be amended, modified, supplemented or
abandoned at any time (before or after shareholder approval) prior to the
Effective Date with the mutual consent of the Boards of Directors of UNIVEC and
the Surviving Corporation; provided, however, that this Agreement may not be
amended, modified or supplemented after it has been approved by the shareholders
of UNIVEC in any manner which, in the judgment of the Board of Directors of
UNIVEC, would have a material adverse effect on the rights of such shareholders
or in any manner not permitted under applicable law.
4.3 Headings. The headings set forth herein are inserted for convenience or
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
4.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, and all of which, when
taken together, shall constitute one and the same instrument.
4.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, except to the extent that the
laws of the State of New York shall mandatorily apply to the Merger.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf and attested by its officers hereunto duly authorized,
all as of the date and year
<PAGE>
first above written.
UNIVEC, INC.
(New York)
By: /s/ Joel Schoenfeld
------------------------------
Joel Schoenfeld
Chairman of the Board and
Chief Executive Officer
Attest:
/s/ Flora Schoenfeld
---------------------
Flora Schoenfeld
Secretary
UNIVEC, INC.
(Delaware)
By: /s/ Joel Schoenfeld
------------------------------
Joel Schoenfeld
Chairman of the Board and
Chief Executive Officer
Attest:
/s/ Flora Schoenfeld
---------------------
Flora Schoenfeld
Secretary
<PAGE>
Exhibit A
CERTIFICATE OF MERGER
UNIVEC INC.
(a New York Corporation)
AND
UNIVEC, INC.
(a Delaware Corporation)
It is hereby certified that:
1. The constituent corporations participating in the merger herein are:
(a) UNIVEC Inc. ("UNIVEC"), which is incorporated under the laws of
the State of New York; and
(b) UNIVEC, INC. (the "Surviving Corporation"), a wholly-owned
subsidiary of UNIVEC, which is incorporated under the laws of the State of
Delaware.
2. An Agreement and Plan of Merger has been approved, adopted, certified,
executed, and acknowledged by each of the aforesaid constituent corporations in
accordance with the provisions of subsection (c) of Section 252 of the General
Corporation Law of the State of Delaware (the "GCL"), to wit, by UNIVEC in
accordance with the laws of the state of its incorporation and by the Surviving
Corporation in the same manner as is provided in Section 251 of the GCL.
3. The name of the Surviving Corporation in the merger herein certified is
UNIVEC, Inc., which will continue its existence as the Surviving Corporation
upon the effective date of said merger pursuant to the provisions of the GCL.
4. The Certificate of Incorporation of the Surviving Corporation, as now in
force and effect, shall continue to be the Certificate of Incorporation of the
Surviving Corporation until amended and changed pursuant to the provisions of
the GCL.
5. The executed Agreement and Plan of Merger between the aforesaid
constituent corporations is on file at the principal place of business of the
Surviving Corporation, the address of which is as follows:
UNIVEC, Inc.
999 Franklin Avenue
Garden City, New York 11530
<PAGE>
6. A copy of the Agreement and Plan of Merger will be furnished by the
Surviving Corporation, on request, and without cost, to any stockholder of each
of the constituent corporations.
7. The authorized capital stock of UNIVEC consists of 200 shares of Common
Stock, without par value.
Dated: October 7, 1996
UNIVEC, Inc. (a New York corporation)
("UNIVEC")
By: /s/ Joel Schoenfeld
------------------------------
Joel Schoenfeld
Chairman of the Board and
Chief Executive Officer
Dated: October 7, 1996
UNIVEC, Inc. (a Delaware corporation)
(the Surviving Corporation)
By: /s/ Joel Schoenfeld
------------------------------
Joel Schoenfeld
Chairman of the Board and
Chief Executive Officer
2
<PAGE>
Exhibit B
CERTIFICATE OF MERGER
of
UNIVEC INC.
(a New York Corporation)
into
UNIVEC, INC.
(a Delaware Corporation)
(Under Section 907 of the Business Corporation Law)
It is hereby certified, upon behalf of each of the constituent corporations
herein named, as follows:
FIRST: The Board of Directors of each of the constituent corporations has
duly adopted a plan of merger setting forth the terms and conditions of the
merger of said corporations.
SECOND: The name of the foreign constituent corporation, which is to be the
surviving corporation, and which is hereinafter referred to as the "Surviving
Corporation", is UNIVEC, Inc. The jurisdiction of its incorporation is Delaware;
and the date of its incorporation therein is October 4, 1996.
No Application for Authority in the State of New York of the Surviving
Corporation to transact business as a foreign corporation therein was filed by
the Department of State of the State of New York; and it is not to do business
in the State of New York until an Application for Authority shall have been
filed by the Department of State of the State of New York.
THIRD: The name of the domestic constituent corporation, which is being
merged into the Surviving Corporation, and which is hereinafter referred to as
the "Merged Corporation", is UNIVEC Inc., which is the sole stockholder of the
Surviving Corporation. The date upon which the Merged Corporation's certificate
of incorporation was filed by the Department of State was August 18, 1992.
FOURTH: As to each constituent corporation, the plan of merger sets forth
the designation and number of outstanding shares of each class and series, the
specification of the classes and series entitled to vote on the plan of merger,
and the specification of each class and series entitled to vote as a class on
the plan of merger, as follows:
<PAGE>
UNIVEC, INC.
(the Surviving Corporation)
Designation of Number of Designation Classes and
each outstanding outstanding of class and series entitled
class and series shares of series enti- to vote as a
of shares each class tled to vote class
- ---------------- ----------- ------------ -----
Common Stock 100 Common Stock Common Stock
UNIVEC INC.
(the Merged Corporation)
Designation of Number of Designation Classes and
each outstanding outstanding of class and series entitled
class and series shares of series enti- to vote as a
of shares each class tled to vote class
- ---------------- ----------- ------------ -----
Common Stock 103.3526 Common Stock Common Stock
FIFTH: The merger herein certified was authorized in respect of the Merged
Corporation by the vote of the holders of at least two-thirds of all outstanding
shares of the corporation entitled to vote on the plan of merger under the
certificate of incorporation. No class of stock of the Merged Corporation is
denied voting power in its certificate of incorporation.
SIXTH: The merger herein certified is permitted by the laws of the State of
Delaware, the jurisdiction of incorporation of the Surviving Corporation, and is
in compliance with said laws.
SEVENTH: The Surviving Corporation agrees that it may be served with
process in the State of New York in any action or special proceeding for the
enforcement of any liability or obligation of the Merged Corporation, for the
enforcement of any liability or obligation of the Surviving Corporation for
which the Surviving Corporation is previously amenable to suit in the State of
New York, and for the enforcement, as provided in the Business Corporation Law
of the State of New York ("BCL"), of the right of shareholders of the Merged
Corporation to receive payment for their shares against the Surviving
Corporation.
EIGHTH: The Surviving Corporation agrees that, subject to the provisions of
section 623 of the BCL, it will promptly pay to the shareholders of the Merged
Corporation the amount, if any, to which they shall be entitled under the
provisions of the BCL relating to the rights of shareholders to receive payment
for their shares.
<PAGE>
NINTH: The Surviving Corporation hereby designates the Secretary of State
of the State of New York as its agent upon whom process against it may be served
in the manner set forth in paragraph (b) of section 306 of the BCL in any action
or special proceeding. The post office address outside the State of New York to
which the Secretary of State shall mail a copy of any process against the
Surviving Corporation served upon him is:
999 Franklin Street
Garden City, New York 11530
IN WITNESS WHEREOF, we have subscribed this document on the date set forth
below and do hereby affirm, under the penalties of perjury, that the statements
contained herein have been examined by us and are true and correct.
Dated: October , 1996
UNIVEC, INC.
(the Surviving Corporation)
By: /s/ Joel Schoenfeld
---------------------------
Joel Schoenfeld
Chairman of the Board and
Chief Executive Officer
/s/ Flora Schoenfeld
---------------------------
Flora Schoenfeld
Secretary
UNIVEC, INC.
(the Merged Corporation)
By: /s/ Joel Schoenfeld
---------------------------
Joel Schoenfeld
Chairman of the Board and
Chief Executive Officer
/s/ Flora Schoenfeld
---------------------------
Flora Schoenfeld
Secretary
<PAGE>
UNIVEC, INC.
AND
MAIDSTONE FINANCIAL, INC.
UNDERWRITERS'
WARRANT AGREEMENT
<PAGE>
12
UNDERWRITERS' WARRANT AGREEMENT dated as of
__________________, 1997 by and between UNIVEC, INC. (the "Company") and
MAIDSTONE FINANCIAL, INC. ("Maidstone" or the "Representative"), as the
Representative of the underwriting group. The underwriting group is referred to
collectively herein as the "Underwriters.
WITNESSETH:
WHEREAS, the Company proposes to issue to the Underwriters
warrants (the "Underwriters' Warrants") to purchase up to 150,000 shares of the
Company's common stock, par value $.001 per share (the "Common Stock") and/or up
to 225,000 Class A Redeemable Common Stock Purchase Warrants (the "Redeemable
Warrants") each exercisable to purchase one share of Common Stock.
WHEREAS, the Underwriters have agreed, pursuant to the
underwriting agreement (,the "Underwriting Agreement") dated ________________,
1997, by and between the Underwriters and the Company, to act as the
underwriters in connection with the Company's proposed initial public offering
(the "Initial Public Offering") of 1,500,000 shares of Common Stock and
2,250,000 Redeemable Warrants (the "Offering Securities"), such Offering
Securities being; identical to the securities issuable upon exercise of the
Underwriters' Warrants (the "Securities"); and
WHEREAS, the Underwriters' Warrants to be issued pursuant to
'this Agreement will be issued on the First Closing Date (as such term is
defined in the Underwriting Agreement) by the Company to the Underwriters in
consideration for, and as part of, the Underwriters' compensation in connection
with the Underwriters acting as the underwriters pursuant to the Underwriting
Agreement;
1
<PAGE>
NOW, THEREFORE, in consideration of the promises, the payment
by the Underwriters to the Company of Ten Dollars ($10.00), the agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant. The Holder (as defined in Section 3 below) is hereby
granted the right to purchase, at any time from ________________, 1998 until
5:00 p.m., New York time, on ______________, 2002, an aggregate of up to 150,000
shares of Common Stock and/or 225,000 Redeemable Warrants, at an initial
purchase price (subject to adjustment as provided in Sect@ion 8 hereof) of $4.20
per share of Common Stock and $.12 per Redeemable Warrant (120% of the Initial
Public Offering price per Offering Security), subject to the terms and
conditions of this Agreement. The Securities issuable upon exercise of the
Underwriters' Warrants are sometimes referred to herein as the "Underwriters'
Securities. "
2. Warrant Certificates. The warrant certificate (the
"Underwriters' Warrant Certificate") to be delivered pursuant to this Agreement
shall be in the form set forth in Exhibit A attached hereto and made a part
hereof, with such appropriate insertions, omissions, substitutions, and other
variations as required or permitted by this Agreement.
3. Exercise of Underwriters' Warrants. The Underwriters'
Warrants are exercisable during the term set forth in Section 1 hereof payable
by certified or cashier's check or money order in lawful money of the United
States. Upon surrender of an Underwriter's Warrant Certificate with the annexed
Form of Election to Purchase duly executed, together with payment of the
Purchase Price (as defined in Section 6 hereof) for the Underwriter's Securities
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(and such other amounts, if any, arising pursuant to Section 4 hereof) at the
Company's principal office in New York located at 999 Franklin Avenue, Garden
City, New York 11530, the registered holder of an Underwriters' Warrant
Certificate ("Holder" or "Holders") shall be entitled to receive a certificate
or certificates for the Underwriters' Securities so purchased. The purchase
rights represented by each Underwriters' Warrant Certificate are exercisable at
the option of the Holder or Holders thereof, in whole or in part as to
Underwriters' Securities. The Underwriters' Warrants may be exercised to
purchase all or any part of the Underwriters' Securities represented thereby. In
the case of the purchase of less than all the Underwriters' Securities
purchasable on the exercise of the Underwriters' Warrants represented by an
Underwriters' Warrant Certificate, the Company shall cancel the Underwriters'
Warrant Certificate represented thereby upon the surrender thereof and shall
execute and deliver a new Underwriters' Warrant Certificate of like tenor for
the balance of the Underwriters' Securities purchasable thereunder.
4. Issuance of Certificates. Upon the exercise of the
Underwriters' Warrants and payment of the Purchase Price therefor, the issuance
of certificates representing the Underwriters' Securities or other securities,
properties or rights underlying such Underwriters' Warrants, shall be made
forthwith (and in any event within five (5) business days thereafter) without
further charge to the Holder thereof, and such certificates shall (subject to
the provisions of Sections 5 and 7 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof, provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder, and the Company shall not be required to
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issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid. The Underwriters' Warrant Certificates and the certificates
representing the Underwriters' Securities or other securities, property or
rights (if such property or rights are represented by certificates) shall be
executed on behalf of the Company by the manual or facsimile signature of the
then present Chairman or Vice Chairman of the Board of Directors or President or
Vice President of the Company, attested to by the manual or facsimile signature
of the then present Secretary or Assistant Secretary or Treasurer or Assistant
Treasurer of the Company. Underwriters' Warrant Certificates shall be dated the
date of issuance thereof by the Company upon initial issuance, transfer or
exchange.
5. Restriction On Transfer of Underwriters' Warrants. The
Holder of an Underwriters' Warrant Certificate (and its Permitted Transferee, as
defined below), by its acceptance thereof, covenants and agrees that the
Underwriters' Warrants are being acquired as an investment and not with a view
to the distribution thereof; that the Underwriters' Warrants may be sold,
transferred, assigned, hypothecated or otherwise disposed of, in whole or in
part, to any person (a "Permitted Transferee"), provided such transfer,
assignment, hypothecation or other disposition is made in accordance with the
provisions of the Securities Act of 1933, as amended (the "Act"); and provided,
further, that until _________________, 1998 (one year following the effective
date of the Initial Public Offering), only officers and partners of the
Underwriters, or any Initial Public Offering selling group member and their
respective officers and partners, shall be Permitted Transferees.
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6. Purchase Price.
(a) Initial and Adjusted Purchase Price. Except as
otherwise provided in Section 8 hereof, the initial purchase price of the
Underwriters' Securities shall be $4.20 per share of Common Stock and $.12 per
Redeemable Warrant. The adjusted purchase price shall be the price which shall
result from time to time from any and all adjustments of the initial purchase
price in accordance with the provisions of Section 8 hereof. (b) Purchase Price.
The term "Purchase Price" herein shall mean the initial purchase price or the
adjusted purchase price, depending upon the context.
7. Registration Rights.
(a) Registration Under the Securities Act of 1933. The
Underwriters' Warrants have not been registered under the Act. The Underwriters'
Warrant Certificates shall bear the following legend:
The securities represented by this certificate have not
been registered under the Securities Act of 1933, as
amended (the "Act"), and may not be offered for sale or
sold except pursuant to (1) an effective registration
statement under the Act, or (ii) an opinion of counsel, if
such opinion and counsel shall be reasonably satisfactory
to counsel to the issuer, that an exemption from
registration under the Act is available.
(b) Demand Registration. (1) At any time commencing on the
first anniversary of and expiring on the fifth anniversary of the effective date
of the Company's Registration Statement relating to the Initial Public Offering
(the "Effective Date"), the Holders of a Majority (as hereinafter defined) in
interest of the Underwriters' Warrants, or the Majority in interest of the
Underwriters' Securities (assuming the exercise of all of the Underwriters'
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Warrants) shall have the right, exercisable by written notice to the Company, to
have the Company prepare and file with the U.S. Securities and Exchange
Commission (the "Commission"), solely on one (1) occasion, a registration
statement on Form SB-2 (or other appropriate form), and such other documents,
including a prospectus, as may be necessary in the opinion of both counsel for
the Company and counsel for the Holders, in order to comply with the provisions
of the Act, so as to permit a public offering and sale, for a period of nine (9)
months, of the Underwriters' Securities by such Holders and any other Holders of
the Underwriters' Warrants and/or the Underwriters' Securities who notify the
Company within fifteen (15) business days after receipt of the notice described
in Section 7(b)(2). The Holders of the Underwriters' Warrants may demand
registration without exercising the Underwriters' Warrants, and are never
required to exercise same.
(2) The Company covenants and agrees to give written
notice of any registration request under this Section 7(b) by any Holders to all
other registered Holders of the Underwriters' Warrants and the Underwriters'
Securities within ten (10) business days from the date of the receipt of any
such registration request.
(3) For purposes of this Agreement, the term "Majority"
in reference to the Holders of the Underwriters' Warrants or Underwriters'
Securities, shall mean in excess of fifty percent (50%) of the then outstanding
Underwriters' Warrants or Underwriters' Securities that (i) are not held by the
Company, an affiliate, officer, employee or agent thereof or any of their
respective affiliates, members of their family, persons acting as nominees or in
conjunction therewith, or (ii) have not been resold to the public pursuant to a
registration statement filed with the Commission under the Act.
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(c) Piggyback Registration. (1) If, at any time within the
period commencing on the first anniversary and expiring on the fifth anniversary
of the Effective Date, the Company should file a registration statement with the
Commission under the Act (other than in connection with a merger or other
business combination transaction or pursuant to Form S-8) it wi 'II give written
notice at least thirty (30) calendar days prior to the filing of each such
registration statement to the Underwriters and to all other Holders of the
Underwriters' Warrants and/or the Underwriters' Securities of its intention to
do so. If either of the Underwriters or other Holders of the Underwriters'
Warrants and/or the Underwriters' Securities notify the Company within twenty
(20) calendar days after receipt of any such notice of its or their desire to
include any Underwriters' Securities in such proposed registration statement,
the Company shall afford the Underwriters and such Holders of the Underwriters'
Warrants and/or Underwriters' Securities the opportunity to have any such
Underwriters' Securities registered under such registration statement.
Notwithstanding the provisions of this Section 7(c)(1) and the provisions of
Section 7(d), the Company shall have the right at any time after it shall have
given written notice pursuant to this Section 7(c)(1) (irrespective of whether a
written request for inclusion of any such securities shall have been made) to
elect not to file any such proposed registration statement, or to withdraw the
same after the filing but prior to the effective date thereof.
(2) If the underwriter of an offering to which the
above piggyback rights apply objects to such rights, such objection shall
preclude such inclusion. However, in such event, the Company will, within nine
(9) months of completion of such subsequent underwriting, file at the expense of
the Company, a registration statement so as to permit a public offering and
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sale, for a period of nine (9) months, of such excluded Underwriters'
Securities, which shall be in addition to any registration statement required to
be filed pursuant to Section 7(b).
(d) Covenants of the Company With Respect to Registration.
In connection with any registrations under Sections 7(b) and 7(c) hereof, the
Company covenants and agrees as follows:
(1) The Company shall use its best efforts to file a
registration statement within forty-five (45) calendar days of receipt of any
demand therefor pursuant to Section 7(b); provided, however, that the Company
shall not be required to produce audited or unaudited financial statements for
any period prior to the date such financial statements are required to be filed
in a report on Form 10-KSB or Form 10-QSB, as the case may be. The Company shall
use its best efforts to have any registration statement declared effective at
the earliest possible time, and shall furnish each Holder desiring to sell
Underwriters' Securities such number of prospectuses as shall reasonably be
requested.
(2) The Company shall pay all costs (excluding fees and
expenses of Holders' counsel and any underwriting discounts or selling fees,
expenses or commissions), fees and expenses in connection with the first
registration statement filed pursuant to Sections 7(b) and 7(c) hereof
including, without limitation, the Company's legal and accounting fees, printing
expenses, blue sky fees and expenses.
(3) The Company will use its best efforts to qualify or
register the Underwriters' Securities included in a registration statement for
offering and sale under the securities or blue sky laws of such states as
reasonably are requested by the Holders, provided that the Company shall not be
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<PAGE>
obligated to execute or file any general consent to service of process or to
qualify as a foreign corporation to do business under the laws of any such
jurisdiction.
(4) The Company shall indemnify the Holders of the
Underwriters' Securities to be sold pursuant to any registration statement and
each person, if any, who controls such Holders within the meaning of Section 15
of the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become subject
under the Act, the Exchange Act or otherwise, arising from such registration
statement, but only to the same extent and with the same effect as the
provisions pursuant to which the Company has agreed to indemnify the
Underwriters contained in Section 8 of the Underwriting Agreement.
(5) The Holders of the Underwriters' Securities to be
sold pursuant to a registration statement, and their successors and assigns,
shall indemnify the Company, its officers and directors and each person, if any,
who controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against all loss, claim, damage or expense or
liability to which they may become subject under the Act, the Exchange Act or
otherwise, arising from information furnished by or on behalf of such Holders,
or their successors or assigns, for specific inclusion in such registration
statement to the same extent and with the same effect as the provisions
contained in Section 8 of the Underwriting Agreement pursuant to which the
Underwriters have agreed to indemnify the Company.
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(6) Nothing contained in this Agreement shall be
construed as requiring the Holders to exercise their Underwriters' Warrants
prior to the initial filing of any registration statement or the effectiveness
thereof.
(7) The Company shall not be entitled to include any
securities other than the Under-writers' Securities in any registration
statement filed pursuant to Section 7(b) hereof without the prior written
consent, which consent shall not be unreasonably withheld, of the Holders of the
Underwriters' Warrants and Underwriters' Securities representing a Majority of
such securities (assuming exercise of all of the Underwriters' Warrants).
(8) The Company shall furnish to a designated
representative of the Holders participating in the offering and to each
underwriter, if any, a signed counterpart, addressed to the Company or the
underwriter of (i) an opinion of counsel to the Company, dated the effective
date of such registration statement (and if such registration includes an
underwritten public offering, an opinion dated the date of the closing under the
underwriting agreement), and (ii) if such registration includes an underwritten
public offering a copy of the "cold comfort" letter dated the effective date of
such registration statement signed by each independent public accountant who has
issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letters. with respect to events
subsequent to the date of such financial statements, as are duly covered in
opinions of issuer's counsel and in accountants' letters, with respect to
customary events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants' letters
delivered to underwriters in underwritten public offerings of securities.
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(9) The Company shall as soon as practicable after the
effective date of the registration statement, and in any event within 15 months
thereafter, make "generally available to its security holders" (within the
meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with Section 1 (a) of the Act and covering a period of at
least 12 consecutive months beginning after the effective date of the
registration statement.
(10) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence described below and
any managing underwriter copies of all correspondence between the Commission and
the Company, its counsel or auditors with respect to the registration statement
and permit each Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request.
(11) The Company shall enter into an underwriting
agreement with the managing underwriter selected for such underwriting by
Holders holding a Majority of the Underwriters' Securities requested to be
included in such underwriting, provided, however that (i) such managing
underwriter shall be reasonably acceptable to the Company, except that in
connection with an offering for which the Holders have piggyback rights, the
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<PAGE>
Company shall have the sole right to select the managing underwriter or
underwriters, and (ii) the Holders shall be responsible for any selling fees or
commissions in connection with such underwriting. Such underwriting agreement
shall be satisfactory in form and substance to the Company, a Majority of such
Holders (in respect of a registration under Section 7(b) only) and such managing
underwriter, and shall contain such representations, warranties and covenants by
the Company and such other terms as are customarily contained in agreements of
that type used by the managing underwriter. The Holders shall be parties to any
underwriting agreement relating to an underwritten sale of their Underwriters'
Securities and may, at their option, require that any or all the
representations, warranties and covenants of the Company to or for the benefit
of such underwriters shall also be made to and for the benefit of such Holders.
Such Holders shall not be required to make any representations or warranties to
or agreements with the Company or the underwriters except as they may relate to
such Holders and their intended methods of distribution.
e. Further Registrations. The Company will cooperate with the
Holders of the Underwriters' Warrants and Underwriters' Securities in preparing
and signing any registration statement, in addition to the registration
statements discussed above, required in order to sell or transfer the
Underwriters' Securities and will supply all information required therefor, but
all of such additional registration statement expenses including legal and
accounting fees will be prorated between the Company and the Holders of the
Underwriters' Warrants and Underwriters' Securities according to the aggregate
sales price of the securities being issued, and if the Company is not issuing
any securities pursuant to such registration statement, such expenses will be
borne entirely by the Holders of the Underwriters' Warrants and the
Underwriters' Securities. The provisions of Section 7(d) other than subsection
(2) shall apply to any such registration statement.
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8. Adjustments to Purchase Price and Number of Securities.
(a) Computation of Adjusted Purchase Price. Except as
hereinafter provided, in case the Company shall at any time after the date
hereof issue or sell any shares of Common Stock (other than the issuances
referred to in Section 8(g) hereof), including shares held in the Company's
treasury, for a consideration per share less than the lesser of the Purchase
Price in effect immediately prior to the issuance or sale of such shares or the
"Market Price" (as defined in Section 8(a)(6) hereof) per share of Common Stock
on the date immediately prior to the issuance or sale of such shares, or without
consideration, then forthwith upon any such issuance or sale, the Purchase Price
shall (until another such issuance or sale) be reduced to the price (calculated
to the nearest full cent) determined by dividing (1) the product of (a) the
Purchase Price in effect immediately before such issuance or sale and (b) the
sum of (i) the total number of shares of Common Stock outstanding immediately
prior to such issuance or sale, and (ii) the number of shares determined by
dividing (A) the aggregate consideration, if any, received by the Company upon
such sale or issuance, by (B) the lesser of (x) the Market Price, and (y) the
Purchase Price, in effect immediately prior to such issuance or sale; by (2) the
total number of shares of Common Stock outstanding immediately after such
issuance or sale provided, however, that in no event shall the Purchase Price be
adjusted pursuant to this computation to an amount in -excess of the Purchase
Price in effect immediately prior to such computation, except in the case of a
combination of outstanding shares of Common Stock, as provided by Section 8(c)
hereof.
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For the purposes of this Section 8, the term "Purchase
Price" shall mean the Purchase Price of the Underwriters' Securities set forth
in Section 6 hereof, as adjusted from time to time pursuant to the provisions of
this Section 8.
For the purposes of any computation to be made in
accordance with this Section 8(a), the following provisions shall be applicable:
(1) In case of the issuance or sale of shares of Common
Stock for a consideration part or all of which shall be cash, the amount of the
cash consideration therefor shall be deemed to be the amount of cash received by
the Company for such shares (or, if shares of Common Stock are offered by the
Company for subscription, the subscription price), before deducting therefrom
any compensation paid or discount allowed in the sale or purchase thereof by
underwriters or dealers or others performing similar services, or any expenses
incurred in connection therewith.
(2) In case of the issuance or sale (otherwise than as
a dividend or other distribution on any stock of the Company) of shares of
Common Stock for a consideration part or all of which shall be other than cash,
the amount of the consideration therefor other than cash shall be deemed to be
the value of such consideration as determined in good faith by the Board of
Directors of the Company.
(3) Shares of Common Stock issuable by way of dividend
or other distribution on any stock of the Company shall be deemed to have been
issued immediately after the opening of business on the day following the record
date for the determination of stockholders entitled to receive such dividend or
other distribution and shall be deemed to have been issued without
consideration.
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(4) The reclassification of securities of the Company
other than shares of Common Stock into securities including shares of Common
Stock shall be deemed to involve the issuance of such shares of Common Stock for
a consideration other than cash immediately prior to the close of business on
the date fixed for the determination of security holders entitled to receive
such shares, and the value of the consideration allocable to such shares of
Common Stock shall be determined as provided in Section 8(a)(2).
(5) The number of shares of Common Stock at any one
time deemed to be issued and outstanding, as determined for the purposes of
Sections 8(b)(1) and 8(b)(2) hereof, shall include the aggregate number of
shares of Common Stock issued or issuable (subject to readjustment upon the
actual issuance thereof) upon the exercise of options, rights, warrants and upon
the conversion or exchange of convertible or exchangeable securities.
(6) As used herein, the phrase "Market Price" at any
date shall be deemed to be the last reported sale price, or, in the case no such
reported sale takes place on such day, the average of the last reported sales
prices for the last three (3) trading days, in either case as officially
reported by the principal securities exchange on which the Common Stock is
listed or admitted to trading, or, if the Common Stock is not listed or admitted
to trading on any national securities exchange, the average closing bid price as
furnished by the NASD through the NASD Automated Quotation System ("NASDAQ") or
similar organization if NASDAQ is no longer reporting such information, or if
the Common Stock is not quoted on NASDAQ, as determined in good faith by
resolution of the Board of Directors of the Company, based on the best
information available to it.
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(b) Options, Rights, Warrants and Convertible and
Exchangeable Securities. Except in the case of the Company issuing rights to
subscribe for shares of Common Stock distributed to all the stockholders of the
Company and Holders of Underwriters' Warrants, if the Company shall at any time
after the date hereof issue options, rights or warrants to purchase shares of
Common Stock, or issue any securities convertible into or exchangeable for
shares of Common Stock (other than the issuances referred to in Section 8(g)
hereof), (i) for a consideration per share less than the lessor of (a) the
Purchase Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities or (b) the
Market Price, or (ii) without consideration, the Purchase Price in effect
immediately prior to the issuance of such options, rights or warrants, or such
convertible or exchangeable securities, as the case may be, shall be reduced to
a price determined by making a computation in accordance with the provisions of
Section 8(a) hereof, provided that:
(1) The aggregate maximum number of shares of Common
Stock issuable under such options, rights or warrants shall be deemed to be
issued and outstanding at the time such options, rights or warrants were issued,
and for a consideration equal to the minimum purchase price per share provided
for in such options, rights or warrants at the time of issuance, plus the
consideration (determined in the same manner as consideration received on the
issue or sale of shares in accordance with the terms of the Underwriters'
Warrants), if any, received by the Company for such options, rights or warrants;
provided, however, that upon the expiration or other termination of such
options, rights or warrants, if any thereof shall not have been exercised, the
number of shares of Common Stock deemed to be issued and outstanding pursuant to
this Section 8(b)(1) (and for the purposes of Section 8(a)(5) hereof) shall be
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reduced by such number of shares as to which options, warrants and/or rights
shall have expired or terminated unexercised, and such number of shares shall no
- -longer be deemed to be issued and outstanding, and the Purchase Price then in
effect shall forthwith be readjusted and thereafter be the price which it would
have been had adjustment been made on the basis of the issuance only of shares
actually issued or issuable upon the exercise of those options, rights or
warrants as to which the exercise rights shall not be expired or terminated
unexercised.
(2) The aggregate maximum number of shares of Common
Stock issuable upon conversion or exchange of any convertible or exchangeable
securities shall be deemed to be issued and outstanding at the time of issuance
of such securities, and for a consideration equal to the consideration
(determined in the same manner as consideration received on the issue or sale of
shares of Common Stock in accordance with the terms of the Underwriters'
Warrants) received by the Company for such securities, plus the minimum
consideration, if any, receivable by the Company upon the conversion or exchange
thereof; provided, however, that upon the termination of the right to convert or
exchange such convertible or exchangeable securities (whether by reason of
redemption or otherwise), the number of shares deemed to be issued and
outstanding pursuant to this Section 8(b)(2) (and for the purpose of Section
8(a)(5) hereof) shall be reduced by such number of shares as to which the
conversion or exchange rights shall have expired or terminated unexercised, and
such number of shares shall no longer be deemed to be issued and outstanding and
the Purchase Price then in effect shall forthwith be readjusted and thereafter
be the price which it would have been had adjustment been made on the basis of
the issuance only of the shares actually issued or issuable upon the conversion
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or exchange of those convertible or exchangeable securities as to which the
conversion or exchange rights shall not have expired or terminated unexercised.
(3) If any change shall occur in the price per share
provided for in-any of the options, rights or warrants referred to in Section
8(b)(1), or in the price per share at which the securities referred to in
Section 8(b)(2) are convertible or exchangeable, such options, rights or
warrants or conversion or exchange rights, as the case may be, shall be deemed
to have expired or terminated on the date when such price change became
effective in respect of shares not theretofore issued pursuant to the exercise
or conversion or exchange thereof, and the Company shall be deemed to have
issued upon such date new options, rights or warrants or convertible or
exchangeable securities at the new price in respect of the number of shares
issuable upon the exercise of such options, rights or warrants or the conversion
or exchange of such convertible or exchangeable securities.
(c) Subdivision and Combination. In case the Company shall
at any time issue any shares of Common Stock in connection with a stock dividend
in shares of Common Stock or subdivide or combine the outstanding shares of
Common Stock, the Purchase Price shall forthwith be proportionately decreased in
the case of a stock dividend or a subdivision or increased in the case of a
combination.
(d) Adjustment in Number of Securities. Upon each
adjustment of the Purchase Price pursuant to the provisions of this Section 8,
the number of Underwriters' Securities issuable upon the exercise of the
Underwriters' Warrant shall be adjusted to the nearest whole share by
multiplying a number equal to the Purchase Price in effect immediately prior to
such adjustment by the number of Underwriters' Securities issuable upon exercise
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of the Underwriters' Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Purchase Price.
(e) Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean the class of stock designated as
Common Stock in the Articles of Incorporation, of the Company as it may be
amended as of the date hereof.
(f) Reclassification, Merger or Consolidation. The Company
will not merge, reorganize or take any other action which would terminate the
Underwriters' Warrants without first making adequate provision for the
Underwriters' Warrants. In case of any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value to no par
value, or from nor par value to par value, or as a result of a subdivision or
combination), or in case of any consolidation of the Company with, or merger of
the Company with, or merger of the Company into, another corporation (other than
a consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification or change of the outstanding
Common Stock except a change as a result of a subdivision or combination of such
shares or a change in par value, as aforesaid), or in the case of a sale or
conveyance to another corporation or other entity of the property of the Company
as an entirety, the Holders of each Underwriters' Warrant then outstanding or to
be outstanding shall have the right thereafter (until the expiration of such
Underwriters' Warrant) to purchase, upon exercise of such Underwriters' Warrant,
the kind and number of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance as if the Holders were the owner of the shares of Common Stock
underlying the Underwriters' Warrants immediately prior to any such events at a
price equal to the product of (x) the number of shares issuable upon exercise of
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the Underwriters' Warrants and (y) the Purchase Price in effect immediately
prior to the record date for such reclassification, change, consolidation,
merger, sale or conveyance, as if such Holders had exercised the Underwriters'
Warrants. In the event of a consolidation, merger, sale or conveyance of
property, the corporation formed by such consolidation or merger, or acquiring
such property, shall execute and deliver to the Holders a supplemental
underwriter's warrant agreement to such effect. Such supplemental underwriter's
warrant agreement shall provide for adjustments which shall be identical to the
adjustments provided for in this Section 8. The provisions of this Section 8(f)
shall similarly apply to successive consolidations or mergers.
(g) No Adjustment of Purchase Price in Certain Cases.
Notwithstanding any provision to the contrary contained herein, no adjustment of
the Purchase Price shall be made:
(1) Upon the issuance or sale of (i) the Underwriters'
Warrants or the securities underlying the Underwriters' Warrants, (ii) the
securities sold pursuant to the Initial Public Offering or securities underlying
securities sold in the Initial Public Offering or securities to be sold in a
bona fide public offering pursuant to a firm commitment underwriting or
securities underlying securities sold in such firm commitment underwriting and
(iii) the shares issuable pursuant to the options, warrants, rights, stock
purchase agreements or convertible or exchangeable securities outstanding or in
effect on the date hereof as described in the prospectus relating to the Initial
Public Offering.
(2) If the amount of said adjustments shall aggregate
less than five ($.05) cents for one (1) share of Common Stock; provided,
however, that in such case any adjustment that would otherwise be required then
20
<PAGE>
to be made shall be carried for-ward and shall be made at the time of and
together with the next subsequent adjustment which, together with any adjustment
so carried forward, shall aggregate at least five ($.05) cents for one (1) share
of Common Stock.
9. Exchange and Replacement of Warrant Certificates. Each
Underwriters' Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holders at the principal executive office of
the Company, for a new Underwriters' Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of
Underwriters' Securities in such denominations as shall be designated by the
Holders thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any
Underwriters' Warrant Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to it, and reimbursement to the
Company of all reasonable expenses incidental thereto, and upon surrender and
cancellation of the Underwriters' Warrant Certificates, if mutilated, the
Company will make and deliver a new Underwriters' War-rant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock and/or Redeemable Warrants upon the exercise of the Underwriters'
Warrants, nor shall it be required to issue scrip or pay cash in lieu of
fractional interests; provided, however, that if a Holder exercises all
Underwriters' Warrants held of record by such Holder the fractional interests
shall be eliminated by rounding any fraction to the nearest whole number of
shares of Common Stock or other securities, properties or rights.
21
<PAGE>
11. Reservation and Listing of Securities. The Company shall
at all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Underwriters'
Warrants, such number of shares of Common Stock or other securities, properties
or rights as shall be issuable upon the exercise thereof and the exercise of the
Redeemable Warrants. The Company covenants and agrees that, upon exercise of the
Underwriters' Warrants and payment of the Purchase Price therefor, all the
shares of Common Stock and other securities issuable upon such exercise shall be
duly and validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any stockholder. As long as the Underwriters' Warrants
shall be outstanding, the Company shall use its best efforts to cause the Common
Stock to be listed (subject to official notice of issuance) on all securities
exchanges on which the Common Stock issued in the Initial Public Offering may
then be listed or quoted.
12. Notices to Underwriters' Warrant Holders. Nothing
contained in this Agreement shall be construed as conferring upon the Holders
the right to vote or to consent or to receive notice as a stockholder in respect
of any meetings of stockholders for the election of directors or any other
matter, or as having any rights whatsoever as a stockholder of the Company. If,
however, at any time prior to the expiration of the Underwriters' Warrants and
their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
22
<PAGE>
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed; then, in any one or more of said events, the Company shall give
written notice of such event at least fifteen (15) calendar days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such proposed dissolution, liquidation, winding up or sale. Such notice
shall specify such record date or the date of closing the transfer books, as the
case may be. Failure to give such notice or any defect therein shall not affect
the validity of any action taken in connection with the declaration or payment
of any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
13. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
23
<PAGE>
(a) If to the registered Holders of the Underwriters'
Warrants, to the address of such Holders as shown on the books of the Company;
or
(b) If to the Company to the address set forth in Section 3
hereof or to such other address as the Company may designate by notice to the
Holders.
14. Supplements and Amendments. The Company and the
Underwriters may from time to time supplement or amend this Agreement without
the approval of any Holders of Underwriters' Warrant Certificates (other than
the Underwriters) in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Underwriters may deem
necessary or desirable and which the Company and the Underwriters deem shall not
adversely affect the interests of the Holders of Underwriters' Warrant
Certificates.
15. Binding Effect; Successors. All the covenants and
provisions of this Agreement shall be binding upon and inure to the benefit of
the Company, the Underwriters, the Holders and their respective successors and
assigns hereunder.
16. Termination. This Agreement shall terminate at the close
of business on _____________, 2002. Notwithstanding the foregoing, the
indemnification provisions of Section 7 shall survive such termination until the
close of business on the expiration of any applicable statute of limitations.
17. Governing Law; Submission to Jurisdiction. This Agreement
and each Underwriters' Warrant Certificate issued hereunder shall be deemed to
be a contract made under the laws of the State of New York and for all purposes
shall be construed in accordance with the laws of said state without giving
24
<PAGE>
effect to the rules of said state governing the conflicts of laws. The Company,
the Underwriters and the Holders hereby each agree that any action, proceeding
or claim against it arising out of, or relating in any way to, this Agreement
shall be brought and enforced in the courts of the State of New York or of the
United States of America for the Southern District of New York, and irrevocably
submits to such jurisdiction, which jurisdiction shall be exclusive. The
Company, the Underwriters and the Holders hereby irrevocably waive any objection
to such exclusive Jurisdiction or inconvenient forum. Any such process or
summons to be served upon any of the Company, the Underwriters and the Holders
(at the option of the party bringing such action, proceeding or claim) may be
served by transmitting a copy thereof, by registered or certified mail, return
receipt requested, postage prepaid, addressed to it at the address set forth in
Section 13 hereof. Such mailing shall be deemed personal service and shall be
legal and binding upon the party so served in any action, proceeding or claim.
18. Entire Agreement, Modification. This Agreement (including
the Underwriting Agreement, to the extent portions thereof are referred to
herein) contains the entire understanding between the parties hereto with
respect to the subject matter hereof and thereof. Subject to Section 14, this
Agreement may not be modified or amended except by a writing duly signed by the
Company and the Holders of a Majority in Interest of the Underwriters'
Securities (for this purpose, treating all then outstanding Underwriters'
Warrants as if they had been exercised).
19. Severability. If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.
25
<PAGE>
20. Captions. The caption headings of the Sections of this
Agreement are for convenience of reference only and are not intended, nor should
they be construed as, a part of this Agreement and shall be given no substantive
effect.
21. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company
and the Underwriters and any other registered Holders of the Underwriters'
Warrant Certificates or Underwriters' Securities any legal or equitable right,
remedy or claim under this Agreement; and this Agreement shall be for the sole
and exclusive benefit of the Company and the Underwriters and any other Holders
of the Underwriter's Warrant Certificates or Underwriters' Securities.
22. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one and
the same instrument.
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
UNIVEC, INC.
By:
---------------------------------
Joel Schoenfeld, President
MAIDSTONE FINANCIAL, INC.
By:
---------------------------------
Name:
Title:
27
<PAGE>
EXHIBIT A
UNIVEC, INC.
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED FOR
SALE OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT, OR (ii) AN OPINION OF COUNSEL, IF SUCH OPINION AND COUNSEL SHALL BE
REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE COMMENCING _________________, 1998 THROUGH
5:00 P.M., NEW YORK TIME ON __________________, 2002
No. UW- __________ Warrants
This Warrant Certificate certifies that registered holder of
____________ Warrants to purchase initially, at any time from ________________,
1998, until 5:00 p.m., New York time on ___________, 2002 (the "Expiration
Date"), up to 150,000 shares of Univec, Inc.'s (the "Company") Common Stock,
$.01 par value (the "Common Stock"), and/or up to 225,000 Redeemable Warrants
each exercisable to purchase one share of Common Stock (the "Common Stock
Warrants"), at a purchase price of $4.20 per share of Common Stock and $.12 per
Redeemable Warrant (the "Purchase Price"), upon the surrender of this Warrant
Certificate and payment of the applicable Purchase Price at an office or agency
of the Company, but subject to the conditions set forth herein and in the
underwriters' warrant agreement, dated as of _____________, 1997 (the "Warrant
Agreement"), by and between the Company and Maidstone Financial, Inc.
("Maidstone" or the "Representative"), as the Representative of the several
underwriters (the "Underwriting Group") named in the Underwriting Agreement,
dated _______________, 1997 between the Company and Maidstone. The Underwriting
Group is collectively referred to herein as the "Underwriters." Payment of the
Purchase Price shall be made by certified or cashier's check or money order
payable to the order of the Company.
No Warrant may be exercised after 5:00 p.m., New York time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
28
<PAGE>
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement
between the Company and the Underwriters, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events the respective Purchase Prices and the type and/or number of the
Company's securities issuable upon the exercise of these Warrants, may, subject
to certain conditions, be adjusted. In such event, the Company will, at the
request of the holder, issue a new Warrant Certificate evidencing the adjustment
in the Purchase Price and the number and/or type of securities issuable upon the
exercise of the Warrants; provided, however, that the failure of the Company to
issue such new Warrant Certificates shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the Warrant
Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange as provided herein, without any charge except for any tax or other
governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
[THE REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
29
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
certificate this day of __________, 1997.
UNIVEC, INC.
By:
---------------------------
Joel Schoenfeld, CEO
ATTEST:
By:
-----------------------
30
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _________________________________________
hereby sells, assigns and transfers unto_____________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the within Warrant Certificate on the books of Univec,
Inc., with full power of substitution.
Dated:
-----------------------
Signature
----------------------------------
(Signature must conform in all respects to the
name of the holder as specified on the face
of the Warrant Certificate.)
--------------------------------------------
(Insert Social Security or Other
Identifying Number of Holders)
31
<PAGE>
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase shares of Common Stock and/or Redeemable
Warrants and herewith tenders in payment of such securities a certified or
cashier's check or money order payable to the order of Univec, Inc. in the
amount of $ ________, all in accordance with the terms hereof. The undersigned
requests that certificates for such securities be registered in the name of
_______________________________ whose address is _____________________________
and that such certificates be delivered to _____________________ whose address
is __________________________________. .
Dated:
---------------------
Signature
---------------------------
(Signature must conform in all respects to the
name of the holder as specified on the face
of the Warrant Certificate.)
----------------------------------------------
(Insert Social Security or Other
Identifying Number of Holders)
32
<PAGE>
EXHIBIT 4.3
WARRANT AGREEMENT
AMONG
UNIVEC, INC.
a Delaware corporation,
MAIDSTONE FINANCIAL, INC.
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
1. Appointment of Warrant Agent.....................................2
2. Form of Warrant..................................................2
3. Countersignature and Registration................................4
4. Transfers and Exchanges..........................................4
5. Exercise of Warrants; Payment of Warrant Solicitation Fee........5
6. Payment of Taxes.................................................9
7. Mutilated or Missing Warrants....................................9
8. Reservation of Common Stock.....................................10
9. Adjustments of Warrant Price and Number of Securities...........11
10. Fractional Interests............................................22
11. Notices to Warrantholders.......................................23
12. Disposition of Proceeds on Exercise of Warrants.................24
13. Redemption of Warrants..........................................25
14. Merger or Consolidation or Change of Name of Warrant Agent......26
15. Duties of Warrant Agent.........................................26
16. Change of Warrant Agent.........................................29
17. Identity of Transfer Agent......................................30
18. Notices.........................................................31
19. Supplements and Amendments......................................32
20. New York Contract...............................................32
21. Benefits of this Agreement......................................33
22. Successors......................................................33
i
<PAGE>
WARRANT AGREEMENT, dated as of __________ ___, 1997, among UNIVEC,
Inc., a Delaware corporation (the "Company"), Maidstone Financial, Inc. (the
"Underwriter") and Continental Stock Transfer & Trust Company, as warrant agent
(the "Warrant Agent").
The Company proposes to issue and sell through an initial public
offering (the "IPO") underwritten by the Underwriter, an aggregate of up to
1,500,000 shares of common stock, par value $.001 per share (the "Common
Stock"), and 2,250,000 redeemable Common Stock purchase warrants ("Warrants")
and, pursuant to the Underwriter's overallotment option (the "Over-allotment
Option"), up to an additional 225,000 shares of Common Stock and 337,500
Warrants.
In connection with the IPO the Company proposes to sell to the
Underwriter warrants (the "Underwriter's Warrants") to purchase up to 150,000
shares of Common Stock and up to 225,000 warrants (the "Underlying Warrants").
The Company has issued and sold warrants to purchase an aggregate of up
to 2,500,000 shares of Common Stock (the "Bridge Warrants") in a private
placement of its securities completed in December 1996. The Bridge Warrants
automatically will be converted into Warrants having terms identical to the
Warrants being offered in the IPO on the date the Company's registration
statement under the Securities Act of 1933 registering the securities to be
offered in the IPO is declared effective by the Securities and Exchange
Commission.
Each Warrant will entitle the holder to purchase one share of Common
Stock.
The Company desires the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing so to act, in connection with the issuance,
registration, transfer, exchange and exercise of the Warrants.
1
<PAGE>
THEREFORE, the parties hereto agree as follows:
Section 1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as Warrant Agent for the Company in accordance with the
instructions hereinafter set forth in this Agreement, and the Warrant Agent
hereby accepts such appointment.
Upon the execution of this Agreement, certificates representing
4,750,000 Warrants to purchase up to an aggregate of 4,750,000 shares of Common
Stock (subject to modification and adjustment as provided in Section 9 hereof)
shall be executed by the Company and delivered to the Warrant Agent.
Upon the exercise of the Over-allotment Option, certificates
representing up to 337,500 Warrants to purchase up to an aggregate of 337,500
shares of Common Stock (subject to modification and adjustment as provided in
Section 9 hereof) shall be executed by the Company and delivered to the Warrant
Agent.
Upon exercise of the Underwriters' Warrant as provided therein,
certificates representing up to 225,000 Warrants to purchase up to an aggregate
of 225,000 shares of Common Stock (subject to modification and adjustment as
provided in Section 9 hereof) shall be executed by the Company and delivered to
the Warrant Agent.
Section 2. Form of Warrant. The text of the Warrants and the form of
election to purchase Common Stock to be printed on the reverse thereof shall be
substantially as set forth in Exhibit A attached hereto (the provisions of which
are hereby incorporated herein). All of the certificates for the Warrants may
have such letters, numbers or other marks of identification or designation and
such legends, summaries or endorsements printed,
2
<PAGE>
lithographed or engraved thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any law or with any rule or regulation made pursuant thereto or with
any rule or regulation of any stock exchange on which the Warrants may be
listed, or to conform to usage. Each Warrant shall initially entitle the
registered holder thereof to purchase one share of Common Stock at a purchase
price of four dollars and fifty cents ($4.50) (as adjusted as hereinafter
provided, the "Warrant Price"), at any time during the period (the "Exercise
Period") commencing on __________ __ 1999 [the second anniversary of the date
of the Company's prospectus (the "Prospectus") pursuant to which the Warrants
are being sold in the IPO] and expiring at 5:00 p.m. New York time, on
__________ __, 2002 [the fifth anniversary of the date of the Prospectus]. The
Warrant Price and the number of shares of Common Stock issuable upon exercise of
the Warrants are subject to adjustment upon the occurrence of certain events,
all as hereinafter provided. The Warrants shall be executed on behalf of the
Company by the manual or facsimile signature of the present or any future Chief
Executive Officer, President or Vice President of the Company, and attested to
by the manual or facsimile signature of the present or any future Secretary or
Assistant Secretary of the Company.
Warrants shall be dated as of the date of issuance by the Warrant Agent
either upon initial issuance or upon transfer or exchange.
In the event the aforesaid expiration date of the Warrants falls on a
day that is not a business day, then the Warrants shall expire at 5:00 p.m. New
York time on the next succeeding business day. For purposes hereof, the term
"business day" shall mean any day
3
<PAGE>
other than a Saturday, Sunday or a day on which banking institutions in New York
City, New York, are authorized or obligated by law to be closed.
Section 3. Countersignature and Registration. The Warrant Agent shall
maintain books for the transfer and registration of the Warrants. Upon the
initial issuance of the Warrants, the Warrant Agent shall issue and register the
Warrants in the names of the respective holders thereof. The Warrants shall be
countersigned manually or by facsimile by the Warrant Agent (or by any successor
to the Warrant Agent then acting as warrant agent under this Agreement) and
shall not be valid for any purpose unless so countersigned. The Warrants may,
however, be so countersigned by the Warrant Agent (or by its successor as
Warrant Agent) and be delivered by the Warrant Agent, notwithstanding that the
persons whose manual or facsimile signatures appear thereon as proper officers
of the Company shall have ceased to be such officers at the time of such
countersignature or delivery.
Section 4. Transfers and Exchanges. The Warrant Agent shall transfer,
from time to time, any outstanding Warrants upon the books to be maintained by
the Warrant Agent for that purpose, upon surrender thereof for transfer properly
endorsed or accompanied by appropriate instructions for transfer. Upon any such
transfer, a new Warrant shall be issued to the transferee and the surrendered
Warrant shall be cancelled by the Warrant Agent. Warrants so cancelled shall be
delivered by the Warrant Agent to the Company from time to time upon request.
Warrants may be exchanged at the option of the holder thereof, when surrendered
at the office of the Warrant Agent, for another Warrant, or other Warrants of
different denominations of like tenor and representing in the aggregate the
right to purchase a like number of shares of Common Stock. No certificates for
4
<PAGE>
Warrants shall be issued except for (i) Warrants initially issued hereunder in
accordance with Section 1 hereof, (ii) Warrants issued upon any transfer or
exchange of Warrants, (iii) Warrants issued in replacement of lost, stolen,
destroyed or mutilated certificates for Warrants pursuant to Section 7 hereof,
and (iv) at the option of the Board of Directors of the Company, Warrants in
such form as may be approved by its Board of Directors, to reflect any
adjustment or change in the Warrant Price or the number of shares of Common
Stock purchasable upon exercise of the Warrants made pursuant to Section 9
hereof.
Section 5. Exercise of Warrants; Payment of Warrant Solicitation Fee.
Subject to the provisions of this Agreement, each registered holder of Warrants
shall have the right, at any time during the Exercise Period, to exercise such
Warrants and purchase the number of fully paid and non-assessable shares of
Common Stock specified in such Warrants upon presentation and surrender of such
Warrants to the Company at the corporate office of the Warrant Agent, with the
exercise form on the reverse thereof duly executed, and upon payment to the
Company of the Warrant Price, determined in accordance with the provisions of
Sections 2, 9 and 10 of this Agreement, for the number of shares of Common Stock
in respect of which such Warrants are then exercised. Payment of such Warrant
Price shall be made in cash or by certified or bank check payable to the
Company. Subject to Section 6 hereof, upon such surrender of Warrants and
payment of the Warrant Price, the Warrant Agent on behalf of the Company shall
cause to be issued and delivered with all reasonable dispatch to or upon the
written order of the registered holder of such Warrants and in such name or
names as such registered holder may designate, a certificate or certificates for
the number of full shares of Common Stock so purchased upon the
5
<PAGE>
exercise of such Warrants. Such certificate or certificates shall be deemed to
have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such shares of Common Stock
immediately prior to the close of business on the date of the surrender of such
Warrants and payment of the Warrant Price as aforesaid. The rights of purchase
represented by the Warrants shall be exercisable during the Exercise Period, at
the election of the registered holders thereof, either as an entirety or from
time to time for a portion of the shares specified therein and, in the event
that any Warrant is exercised in respect of less than all of the shares of
Common Stock specified therein at any time prior to the date of expiration of
the Warrants, a new Warrant or Warrants will be issued to the registered holder
for the remaining number of shares of Common Stock specified in the Warrant so
surrendered, and the Warrant Agent is hereby irrevocably authorized to
countersign and to deliver the required new Warrants pursuant to the provisions
of this Section and of Section 3 of this Agreement and the Company, whenever
requested by the Warrant Agent, will supply the Warrant Agent with Warrants duly
executed on behalf of the Company for such purpose. Upon the exercise of any one
or more Warrants, the Warrant Agent shall promptly notify the Company in writing
of such fact and of the number of securities delivered upon such exercise and,
subject to the provisions below, shall cause all payments of an amount, in cash
or by check made payable to the order of the Company, equal to the aggregate
Warrant Price for such Warrants, less any amounts payable to the Underwriter,
as provided below, to be deposited promptly in the Company's bank account. The
Company and Warrant Agent shall determine, in their
6
<PAGE>
sole and absolute discretion, whether a Warrant certificate has been properly
completed for exercise by the registered holder thereof.
Anything in the foregoing to the contrary notwithstanding, no Warrant
will be exercisable and the Company shall not be obligated to deliver any
securities pursuant to the exercise of any warrant unless at the time of
exercise the Company has filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933, as amended (the "Act"),
covering the securities issuable upon exercise of such Warrant and such
registration statement shall have been declared and shall remain effective and
shall be current, and such shares have been registered or qualified or be exempt
under the securities laws of the state or other jurisdiction of residence of the
holder of such Warrant and the exercise of such Warrant in any such state or
other jurisdiction shall not otherwise be unlawful. During the Exercise Period,
the Company shall use its best efforts to have a current registration statement
on file with the Securities and Exchange Commission covering the issuance of
Common Stock underlying the Warrants so as to permit the Company to deliver to
each person exercising a Warrant a prospectus meeting the requirements of
Section 10(a) (3) of the Act and otherwise complying therewith, and will deliver
such prospectus to each such person. During the Exercise Period, the Company
shall also use its best efforts to effect appropriate qualifications of the
Common Stock underlying the Warrants under the laws and regulations of the
states and other jurisdictions in which the Common Stock and Warrants are sold
by the Underwriter in the IPO in order to comply with applicable laws in
connection with the exercise of the Warrants.
7
<PAGE>
(a) If at the time of exercise of any Warrant (i) the market
price of the Common Stock is equal to or greater than the then exercise price of
the Warrant, (ii) the exercise of the Warrant is solicited by the Underwriter at
such time as it is a member of the National Association of Securities Dealers,
Inc. ("NASD") , (iii) the Warrant is not held in a discretionary account, (iv)
disclosure of the compensation arrangement is made in documents provided to the
holders of the Warrants, and (v) the solicitation of the exercise of the Warrant
is not in violation of Rule 10b-6 (as such rule or any successor rule may be in
effect as of such time of exercise) promulgated under the Securities Exchange
Act of 1934, as amended, then the Underwriter shall be entitled to receive from
the Company following exercise of each of the Warrants so exercised a fee of
eight percent (8%) of the aggregate exercise price of the Warrants so exercised
(the "Exercise Fee") The procedures for payment of the Exercise Fee are set
forth in Section 5(b) below.
(b) (i) Within five (5) days after the last day of each month
commencing with __________ ___, 1999, the Warrant Agent will notify the
Underwriter of each Warrant certificate which has been properly completed for
exercise by holders of Warrants during the last month. The Warrant Agent will
provide the Underwriter with such information, in connection with the exercise
of each Warrant, as the Underwriter shall reasonably request.
(ii) The Company hereby authorizes and instructs the
Warrant Agent to deliver to the Underwriter the Exercise Fee, if payable, in
respect of each exercise of Warrants, promptly after receipt by the Warrant
Agent from the Company of a check payable to the order of the Underwriter in the
amount of such Exercise Fee. In the event
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that an Exercise Fee is paid to the Underwriter with respect to a Warrant which
the Company or the Warrant Agent determines is not properly completed for
exercise or in respect of which the Underwriter is not entitled to an Exercise
Fee, the Underwriter will return such Exercise Fee to the Warrant Agent which
shall forthwith return such fee to the Company.
The Underwriter and the Company may at any time during business hours
examine the records of the Warrant Agent, including its ledger of original
Warrant certificates returned to the Warrant Agent upon exercise of Warrants.
Notwithstanding any provision to the contrary, the provisions of paragraph 5 (a)
and 5 (b) may not be modified, amended or deleted without the prior written
consent of the Underwriter.
Section 6. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Common Stock issuable upon the
exercise of Warrants; provided, however, that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance or delivery of any certificates for shares of Common Stock in a name
other than that of the registered holder of Warrants in respect of which such
shares are issued, and in such case neither the Company nor the Warrant Agent
shall be required to issue or deliver any certificate for shares of Common Stock
or any Warrant until the person requesting the same has paid to the Company the
amount of such tax or has established to the Company's satisfaction that such
tax has been paid or that no such tax is required to be paid.
Section 7. Mutilated or Missing Warrants. In case any of the Warrants
shall be mutilated, lost, stolen or destroyed, the Company may, in its
discretion, issue and the
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Warrant Agent shall countersign and deliver in exchange and substitution for and
upon cancellation of the mutilated Warrant, or in lieu of and in substitution
for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and
representing an equivalent right or interest, but only upon receipt of evidence
satisfactory to the Company and the Warrant Agent of such loss, theft or
destruction and, in case of a lost, stolen or destroyed Warrant, indemnity or
bond, if requested, also satisfactory to them. Applicants for such substitute
Warrants shall also comply with such other reasonable regulations and pay such
reasonable charges as the Company or the Warrant Agent may prescribe.
Section 8. Reservation of Common Stock. There have been reserved, and
the Company shall at all times keep reserved, out of its authorized shares of
Common Stock, a number of shares of Common Stock sufficient to provide for the
exercise of the rights of purchase represented by the Warrants, and the transfer
agent for the shares of Common Stock and every subsequent transfer agent for any
shares of Common Stock issuable upon the exercise of any of the aforesaid rights
of purchase are irrevocably authorized and directed at all times to reserve such
number of authorized shares of Common Stock as shall be required for such
purpose. The Company agrees that all shares of Common Stock issued upon exercise
of the Warrants shall be, at the time of delivery of the certificates for such
shares against payment of the Warrant Price therefor, validly issued, fully paid
and nonassessable and listed on any national securities exchange or included in
any interdealer automated quotation system upon or in which the other shares of
outstanding Common Stock are then listed or included. The Company will keep a
copy of this Agreement on file with the transfer agent for the shares of Common
Stock (which may be the Warrant Agent)
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and with every subsequent transfer agent for any shares of Common Stock issuable
upon the exercise of the rights of purchase represented by the Warrants. The
Warrant Agent is irrevocably authorized to requisition from time to time from
such transfer agent stock certificates required to honor outstanding Warrants.
The Company will supply such transfer agent with duly executed stock
certificates for that purpose. All Warrants surrendered in the exercise of the
rights thereby evidenced shall be cancelled by the Warrant Agent and shall
thereafter be delivered to the Company, and such cancelled Warrants shall
constitute sufficient evidence of the number of shares of Common Stock which
have been issued upon the exercise of such Warrants. Promptly after the date of
expiration of the Warrants, the Warrant Agent shall certify to the Company the
total aggregate amount of Warrants then outstanding, and thereafter no shares of
Common Stock shall be subject to reservation in respect of such Warrants which
shall have expired.
Section 9. Adjustments of Warrant Price and Number of Securities.
(a) Computation of Adjusted Price. Except as hereinafter
provided, in case the Company shall, at any time after the date of closing of
the sale of securities pursuant to the IPO (the "Closing Date"), issue or sell
any shares of Common Stock (other than the issuances or sales referred to in
Section 9 (f) hereof), including shares held in the Company's treasury and
shares of Common Stock issued upon the exercise of any options, rights or
warrants to subscribe for shares of Common Stock (other than the issuances or
sales of Common Stock pursuant to rights to subscribe for such Common Stock
distributed pursuant to Section 9(h) hereof) and shares of Common Stock issued
upon the direct or indirect conversion or exchange of securities for shares of
Common Stock, for a
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consideration per share less than the greater of (x) $3.50 per share and (y)
both the "Market Price" (as defined in Section 9(a)(vi) hereof) per share of
Common Stock on the trading day immediately preceding such issuance or sale and
the Warrant Price in effect immediately prior to such issuance or sale, or
without consideration, then forthwith upon such issuance or sale, the Warrant
Price shall (until another such issuance or sale) be reduced to the price
(calculated to the nearest full cent) determined by multiplying the Warrant
Price in effect immediately prior to such issuance or sale by a fraction, the
numerator of which shall be the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issuance or sale multiplied by the Warrant
Price immediately prior to such issuance or sale plus (2) the consideration
received by the Company upon such issuance or sale, and the denominator of which
shall be the product of (x) the total number of shares of Common Stock
outstanding immediately after such issuance or sale, multiplied by (y) the
Warrant Price immediately prior to such issuance or sale; provided, however,
that in no event shall the Warrant Price be adjusted pursuant to this
computation to an amount in excess of the Warrant Price in effect immediately
prior to such computation, except in the case of a combination of outstanding
shares of Common Stock, as provided by Section 9(c) hereof.
For the purposes of any computation to be made in accordance with this
Section 9(a), the following provisions shall be applicable:
(i) In case of the issuance or sale of shares of
Common Stock for a consideration part or all of which shall be cash, the amount
of the cash consideration therefor shall be deemed to be the amount of cash
received by the Company for such shares
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(or, if shares of Common Stock are offered by the Company for subscription, the
subscription price, or, if such securities shall be sold to underwriters or
dealers for public offering without a subscription offering, the public offering
price) before deducting therefrom any compensation paid or discount allowed in
the sale, underwriting or purchase thereof by underwriters or dealers or others
performing similar services, or any expenses incurred in connection therewith.
(ii) In case of the issuance or sale (otherwise than
as a dividend or other distribution on any stock of the Company) of shares of
Common Stock for a consideration part or all of which shall be other than cash,
the amount of the consideration therefor other than cash shall be deemed to be
the value of such consideration as determined in good faith by the Board of
Directors of the Company.
(iii) Shares of Common Stock issuable by way of
dividend or other distribution on any stock of the Company shall be deemed to
have been issued immediately after the opening of business on the day following
the record date for the determination of shareholders entitled to receive such
dividend or other distribution and shall be deemed to have been issued without
consideration.
(iv) The reclassification of securities of the
Company other than shares of Common Stock into securities including shares of
Common Stock shall be deemed to involve the issuance of such shares of Common
Stock for a consideration other than cash immediately prior to the close of
business on the date fixed for the determination of security holders entitled to
receive such shares, and the value of the consideration allocable
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to such shares of Common Stock shall be determined as provided in subsection
(ii) of this Section 9(a).
(v) The number of shares of Common Stock at any one
time outstanding shall include the aggregate number of shares issued or issuable
upon the exercise of options, warrants or rights and upon the conversion or
exchange of convertible or exchangeable securities.
(vi) As used herein, the phrase "Market Price" at any
date shall be deemed to be the average of the last reported sale price, or, in
case no such reported sale takes place on such day, the average of the last
reported sale prices for the last three trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading or as reported in the Nasdaq Stock
Market, or, if the Common Stock is not listed or admitted to trading on any
national securities exchange or quoted on the Nasdaq Stock Market, the closing
bid quotation as furnished by the National Association of Securities Dealers,
Inc. through Nasdaq or a similar organization if Nasdaq is no longer reporting
such information, or if the Common Stock is not quoted on Nasdaq, as determined
in good faith by resolution of the Board of Directors of the Company, based on
the best information available to it for the day immediately preceding such
issuance or sale, the day of such issuance or sale and the day immediately after
such issuance or sale. If the Common Stock is listed or admitted to trading on a
national securities exchange and also quoted on the Nasdaq Stock Market, the
Market Price shall be determined as hereinabove provided by reference to the
prices reported in the Nasdaq Stock Market; provided that if the Common Stock is
listed or
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<PAGE>
admitted to trading on the New York Stock Exchange, the Market Price shall be
determined as hereinabove provided by reference to the prices reported by such
exchange.
(b) Options, Rights, Warrants and Convertible and Exchangeable
Securities. Except in the case of the Company issuing rights to subscribe for
shares of Common Stock distributed pursuant to Section 9(h) hereof, if the
Company shall at any time after the Closing Date issue options, rights or
warrants to subscribe for shares of Common Stock, or issue any securities
convertible into or exchangeable for shares of Common Stock, in each case other
than the issuances or sales referred to in section 9 (f) hereof, (i) for a
consideration per share less than the greater of (x) $3.50 per share and (y) the
lesser of (a) the Warrant Price in effect immediately prior to the issuance of
such options, rights or warrants, or such convertible or exchangeable
securities, and (b) the Market Price on the trading day immediately preceding
such issuance, or (ii) without consideration, the Warrant Price in effect
immediately prior to the issuance of such options, rights or warrants, or such
convertible or exchangeable securities, as the case may be, shall be reduced to
a price determined by making a computation in accordance with the provisions of
Section 9(a) hereof; provided that:
(i) The aggregate maximum number of shares of Common
Stock, as the case may be, issuable under all the outstanding options, rights or
warrants shall be deemed to be issued and outstanding at the time all the
outstanding options, rights or warrants were issued, and for a consideration
equal to the minimum purchase price per share provided for in the options,
rights or warrants at the time of issuance, plus the consideration (determined
in the same manner as consideration received on the issue or sale
15
<PAGE>
of shares in accordance with the terms of Section 9(a)), if any, received by the
Company for the options, rights or warrants, and if no minimum purchase price is
provided in the options, rights or warrants, then the minimum purchase price
shall be equal to zero; provided, however, that upon the expiration or other
termination of the options, rights or warrants, if any thereof shall not have
been exercised, the number of shares of Common Stock deemed to be issued and
outstanding pursuant to this subsection (b) (and for the purposes of subsection
(v) of Section 9(a) hereof) shall be reduced by such number of shares as to
which options, warrants or rights shall have expired or terminated unexercised,
and such number of shares shall no longer be deemed to be issued and
outstanding, and the Warrant Price then in effect shall forthwith be readjusted
and thereafter be the price which it would have been had adjustment been made on
the basis of the issuance only of shares actually issued or issuable upon the
exercise of those options, rights or warrants as to which the exercise rights
shall not have expired or terminated unexercised.
(ii) The aggregate maximum number of shares of Common
Stock issuable upon conversion or exchange of any convertible or exchangeable
securities shall be deemed to be issued and outstanding at the time of issuance
of such securities, and for a consideration equal to the consideration
(determined in the same manner as consideration received on the issue or sale of
shares of Common Stock in accordance with the terms of Section 9 (a)) received
by the Company for such securities, plus the minimum consideration, if any,
receivable by the Company upon the conversion or exchange thereof; provided,
however, that upon the expiration or other termination of the right to convert
or exchange such convertible or exchangeable securities (whether by reason of
redemption or
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otherwise), the number of shares deemed to be issued and outstanding pursuant to
this subsection (ii) (and for the purpose of subsection (v) of Section 9(a)
hereof) shall be reduced by such number of shares as to which the conversion or
exchange rights shall have expired or terminated unexercised, and such number of
shares shall no longer be deemed to be issued and outstanding, and the Warrant
Price then in effect shall forthwith be readjusted and thereafter be the price
which it would have been had adjustment been made on the basis of the issuance
only of the shares actually issued or issuable upon the conversion or exchange
of those convertible or exchangeable securities as to which the conversion or
exchange rights shall not have expired or terminated unexercised. No adjustment
will be made pursuant to this subsection (ii) upon the issuance by the Company
of any convertible or exchangeable securities pursuant to the exercise of any
option, right or warrant exercisable therefor, to the extent that adjustments in
respect of such options, rights or warrants were previously made pursuant to the
provisions of subsection (i) of this subsection 9 (b) .
(iii) If any change shall occur in the price per
share provided for in any of the options, rights or warrants referred to in
subsection (i) of this Section 9 (b) , or in the price per share at which the
securities referred to in subsection (ii) of this Section 9(b) are convertible
or exchangeable, or if any such options, rights or warrants are exercised at a
price greater than the minimum purchase price provided for in such options,
rights or warrants, or any such securities are converted or exercised for more
than the minimum consideration receivable by the Company upon such conversion or
exchange, the options, rights or warrants or conversion or exchange rights, as
the case may be, shall be
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<PAGE>
deemed to have expired or terminated on the date when such price change became
effective in respect of shares not theretofore issued pursuant to the exercise
or conversion or exchange thereof, and the Company shall be deemed to have
issued upon such date new options, rights or warrants or convertible or
exchangeable securities at the new price in respect of the number of shares
issuable upon the exercise of such options, rights or warrants or the conversion
or exchange of such convertible or exchangeable securities; provided, however,
that no adjustment shall be made pursuant to this subsection (iii) with respect
to any change in the price per share provided for in any of the options, rights
or warrants referred to in subsection (b) (i) of this Section 9 (b), or in the
price per share at which the securities referred to in subsection (b) (ii) of
this Section 9(b) are convertible or exchangeable, which change results from the
application of the anti-dilution provisions thereof in connection with an event
for which, subject to subsection (iv) of this Section 9(f), an adjustment to the
Warrant Price and the number of securities issuable upon exercise of the
Warrants will be required to be made pursuant to this Section 9.
(c) Subdivision and Combination. In case the Company shall at
any time after the Closing Date subdivide or combine the outstanding shares of
Common Stock, the Warrant Price shall forthwith be proportionately decreased in
the case of subdivision or increased in the case of combination.
(d) Adjustment in Number of Shares. Upon each adjustment of
the Warrant Price pursuant to the provisions of this Section 9, the number of
shares of Common Stock issuable upon the exercise of the Warrants shall be
adjusted to the nearest full whole number by multiplying a number equal to the
Warrant Price in effect
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immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of the Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Warrant Price.
(e) Reclassification, Consolidation, Merger, etc. In case of
any reclassification or change of the outstanding shares of Common Stock (other
than a change in par value to no par value, or from no par value to par value,
or as a result of a subdivision or combination), or in the case of any
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger which does not result in any
reclassification or change of the outstanding shares of Common Stock, except a
change as a result of a subdivision or combination of such shares or a change in
par value, as aforesaid), or in the case of a sale or conveyance to another
corporation of the property of the Company as an entirety, the Holder shall
thereafter have the right to purchase the kind and number of shares of stock and
other securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance as if the Holder were the owner of the
shares of Common Stock underlying the Warrants immediately prior to any such
events at a price equal to the product of (x) the number of shares issuable upon
exercise of the Warrants and (y) the Warrant Price in effect immediately prior
to the record date for such reclassification, change, consolidation, merger,
sale or conveyance as if such Holder had exercised the Warrant.
(f) No Adjustment of Warrant Price in Certain Cases.
Notwithstanding anything herein to the contrary, no adjustment of the Warrant
Price shall be made:
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(i) Upon the issuance or sale of the Underwriters'
Warrant, the shares of Common Stock or Warrants issuable upon the exercise of
the Underwriters' Warrant or the shares of Common Stock issuable upon exercise
of the Warrants underlying the Underwriters' Warrant; or
(ii) Upon the issuance or sale of (A) the shares of
Common Stock or Warrants issued by the Company in the IPO (including pursuant to
the Over-allotment Option) or other shares of Common Stock or warrants issued by
the Company upon consummation of the IPO or, (B) the shares of Common Stock (or
other securities) issuable upon exercise of Warrants; or
(iii) Upon (i) the issuance of options pursuant to
the Company's stock option plan in effect on the date hereof or as hereafter
amended in accordance with the terms thereof or any other employee or executive
stock option plan approved by stockholders of the Company or the sale by the
Company of any shares of Common Stock pursuant to the exercise of any such
options, or (ii) the sale by the Company of any shares of Common Stock pursuant
to the exercise of any options or warrants issued and outstanding on the date of
closing of the sale of Common Stock and Warrants pursuant to the IPO; or
(iv) If the amount of said adjustment shall be less
than five cents ($.05) per share of Common Stock.
(g) Dividends and Other Distributions with Respect to
Outstanding Securities. In the event that the Company shall at any time after
the Closing Date and prior
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<PAGE>
to the exercise or expiration of all Warrants declare a dividend (other than a
dividend consisting solely of shares of Common Stock or a cash dividend or
distribution payable out of current or retained earnings) or otherwise
distribute to the holders of Common Stock any monies, assets, property, rights,
evidences of indebtedness, securities (other than such a cash dividend or
distribution or dividend consisting solely of shares of Common Stock), whether
issued by the Company or by another person or entity, or any other thing of
value, the Holders of the unexercised Warrants shall thereafter be entitled, in
addition to the shares of Common Stock or other securities receivable upon the
exercise thereof, to receive, upon the exercise of such Warrants, the same
monies, property, assets, rights, evidences of indebtedness, securities or any
other thing of value that they would have been entitled to receive at the time
of such dividend or distribution as if the Holders were the owners of the shares
of Common Stock underlying such Warrants. At the time of any such dividend or
distribution, the Company shall make appropriate reserves to ensure the timely
performance of the provisions of this Section 9(g).
(h) Subscription Rights for Shares of Common Stock or Other
Securities. In case the Company or an affiliate of the Company shall at anytime
after the date hereof and prior to the exercise of all the Warrants issue any
rights to subscribe for shares of Common Stock or any other securities of the
Company or of such affiliate to all the holders of Common Stock, the Holders of
the unexercised Warrants shall be entitled, in addition to the shares of Common
Stock or other securities receivable upon the exercise of the Warrants, to
receive such rights at the time such rights are distributed to the other
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stockholders of the Company but only to the extent of the number of shares of
Common Stock, if any, for which the Warrants remain exercisable.
(i) Notice in Event of Dissolution. In case of the
dissolution, liquidation or winding-up of the Company, all rights under the
Warrants shall terminate on a date fixed by the Company, such date to be no
earlier than ten (10) days prior to the effectiveness of such dissolution,
liquidation or winding-up and not later than five (5) days prior to such
effectiveness. Notice of such termination of purchase rights shall be given to
each registered holder of the Warrants, as the same shall appear on the books of
the Company maintained by the Warrant Agent, by registered mail at least thirty
(30) days prior to such termination date.
(j) Computations. The Company may retain a firm of independent
public accountants (who may be any such firm regularly employed by the Company)
to make any computation required under this Section 9, and any certificate
setting forth such computation signed by such firm shall be conclusive evidence
of the correctness of any computation made under this Section 9.
Section 10. Fractional Interests. The Warrants may only be exercised to
purchase full shares of Common Stock and the Company shall not be required to
issue fractions of shares of Common Stock on the exercise of Warrants. However,
if a Warrantholder exercises all Warrants then owned of record by him and such
exercise would result in the issuance of a fractional share, the Company will
pay to such Warrantholder, in lieu of the issuance of any fractional share
otherwise issuable, an amount of cash based on the Market Price on the last
trading day prior to the exercise date.
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Section 11. Notices to Warrantholders.
(a) Upon any adjustment of the Warrant Price and the number of
shares of Common Stock issuable upon exercise of a Warrant, then and in each
such case, the Company shall give written notice thereof to the Warrant Agent,
which notice shall state the Warrant Price resulting from such adjustment and
the increase or decrease, if any, in the number of shares purchasable at such
price upon the exercise of a Warrant, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based. The
Company shall also mail such notice to the holders of the Warrants at their
respective addresses appearing in the Warrant register. Failure to give or mail
such notice, or any defect therein, shall not affect the validity of the
adjustments.
(b) In case at any time after the Closing Date:
(i) the Company shall pay dividends payable in stock
upon its Common Stock or make any distribution (other than regular cash
dividends) to the holders of Common Stock; or
(ii) the Company shall offer for subscription pro
rata to all of the holders of Common Stock any additional shares of stock of any
class or other rights; or
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with, or sale of substantially all of its assets to another
corporation; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company; then in any one or more
of such cases, the Company shall give written notice to the Warrant Agent and
the holders of the Warrants
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in the manner set forth in Section 11(a) of the date on which (A) a record shall
be taken for such dividend, distribution or subscription rights, or (B) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, as the case may be. Such
notice shall be given at least ten (10) days prior to the action in question and
not less than ten (10) days prior to the record date in respect thereof. Failure
to give such notice, or any defect therein, shall not affect the legality or
validity of any of the matters set forth in this Section 11(b).
(c) The Company shall cause copies of all financial statements
and reports, proxy statements and other documents that are sent to its
stockholders to be sent by an identical class of mail, postage prepaid, on the
date of mailing to such stockholders, to each registered holder of Warrants at
his address appearing in the Warrant register as of the record date for the
determination of the stockholders entitled to such documents.
Section 12. Disposition of Proceeds on Exercise of Warrants.
(a) The Warrant Agent shall promptly forward to the Company
all monies received by the Warrant Agent for the purchase of shares of Common
Stock through the exercise of these Warrants.
(b) The Warrant Agent shall keep copies of this Agreement
available for inspection by holders of Warrants during normal business hours.
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Section 13. Redemption of Warrants. The Warrants are redeemable by the
Company commencing on the second anniversary the date of the Prospectus (with
the consent of the Underwriter), in whole or in part, on not less than thirty
(30) days' prior written notice at a redemption price of $.05 per Warrant,
provided the average closing bid quotation of the Common Stock as reported on
the Nasdaq Stock Market, if traded thereon, or if not traded thereon, the
average closing sale price if listed on a national securities exchange (or other
reporting system that provides last sale prices), has been at least $8.00
per share, for a period of 20 consecutive trading days ending on the third day
prior to the date on which the Company gives notice of redemption. Any
redemption in part shall be made pro rata to all Warrant holders. The redemption
notice shall be mailed to the holders of the Warrants at their respective
addresses appearing in the Warrant register. Any such notice mailed in the
manner provided herein shall be conclusively presumed to have been duly given in
accordance with this Agreement whether or not the registered holder receives
such notice. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity of the proceedings for such redemption
except as to a registered holder of a Warrant (i) to whom notice was not mailed
or (ii) whose notice was defective. An affidavit of the Warrant Agent or the
Secretary or Assistant Secretary of the Company that notice of redemption has
been mailed shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. Holders of the Warrants will have exercise rights until the
close of business on the day immediately preceding the date fixed for
redemption.
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Section 14. Merger or Consolidation or Change of Name of Warrant Agent.
Any corporation or company which may succeed to the corporate trust business of
the Warrant Agent by any merger or consolidation or otherwise shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto; provided,
that such corporation would be eligible for appointment as a successor Warrant
Agent under the provisions of Section 16 of this Agreement. In case at the time
such successor to the Warrant Agent shall succeed to the agency created by this
Agreement any of the Warrants shall have been countersigned but not delivered,
any such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent and deliver such Warrants so countersigned.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior name
and deliver Warrants so countersigned. In all such cases such Warrants shall
have the full force provided in the Warrants and in this Agreement.
Section 15. Duties of Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrants, by their
acceptance thereof, shall be bound:
(a) The statements of fact and recitals contained herein and
in the Warrants shall be taken as statements of the Company, and the Warrant
Agent assumes no responsibility for the correctness of any of the same except as
such describe the Warrant
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<PAGE>
Agent or action taken or to be taken by it. The Warrant Agent assumes no
responsibility with respect to the distribution of the Warrants except as herein
expressly provided.
(b) The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants in this Agreement or in the
Warrants to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or the advice of such counsel.
(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant for any action
taken in reliance on any notice, resolution, waiver, consent, order, certificate
or other instrument believed by it to be genuine and to have been signed, sent
or presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges incurred by the Warrant Agent in the
execution of this Agreement and to indemnify the Warrant Agent and save it
harmless against any and all liabilities, including judgments, costs and
reasonable counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement except as a result of the Warrant Agent's
negligence, willful misconduct or bad faith.
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(f) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expenses unless the Company or one or more registered holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as the
Warrant Agent may consider proper, whether with or without any such security or
indemnity. All rights of action under this Agreement or under any of the
Warrants may be enforced by the Warrant Agent without the possession of any of
the Warrants or the production thereof at any trial or other proceeding. Any
such action, suit or proceeding instituted by the Warrant Agent shall be brought
in its name as Warrant Agent, and any recovery of judgment shall be for the
ratable benefit of the registered holders of the Warrants, as their respective
rights and interests may appear.
(g) The Warrant Agent and any stockholder, director, officer,
partner or employee of the Warrant Agent may buy, sell or deal in any of the
Warrants or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not the Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent and
its duties shall be determined solely by the provisions hereof.
28
<PAGE>
(i) The Warrant Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys, agents or employees, and the Warrant Agent shall
not be answerable or accountable for any such attorneys, agents or employees or
for any loss to the Company resulting from such neglect or misconduct, provided
reasonable care had been exercised in the selection and continued employment
thereof.
(j) Any request, direction, election, order or demand of the
Company shall be sufficiently evidenced by an instrument signed in the name of
the Company by its President or a Vice President or its Secretary or an
Assistant Secretary or its Treasurer or an Assistant Treasurer (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Warrant Agent by a
copy thereof certified by the Secretary or an Assistant Secretary of the
Company.
Section 16. Change of Warrant Agent. The Warrant Agent may resign and
be discharged from its duties under this Agreement by giving to the Company
notice in writing, and to the holders of the Warrants notice by mailing such
notice to the holders at their respective addresses appearing on the Warrant
register, of such resignation, specifying a date when such resignation shall
take effect. The Warrant Agent may be removed by like notice to the Warrant
Agent from the Company and the like mailing of notice to the holders of the
Warrants. If the Warrant Agent shall resign or be removed or shall otherwise
become incapable of action, the Company shall appoint a successor to the Warrant
Agent. If the Company shall fail to make such appointment within a period of
thirty (30) days
29
<PAGE>
after such removal or after it has been notified in writing of such resignation
or incapacity by the resigning or incapacitated Warrant Agent or after the
Company has received such notice from a registered holder of a Warrant (who
shall, with such notice, submit his Warrant for inspection by the Company), then
the registered holder of any Warrant may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Any
successor Warrant Agent, whether appointed by the Company or by such a court,
shall be a bank or trust company, in good standing, incorporated under New York
or federal law. After appointment, the successor Warrant Agent shall be vested
with the same powers, rights, duties and responsibility as if it had been
originally named as Warrant Agent without further act or deed and the former
Warrant Agent shall deliver and transfer to the successor Warrant Agent all
canceled Warrants, records and property at the time held by it hereunder, and
execute and deliver any further assurance or conveyance necessary for this
purpose. Failure to file or mail any notice provided for in this Section,
however, or any defect therein, shall not affect the validity of the resignation
or removal of the Warrant Agent or the appointment of the successor Warrant
Agent, as the case may be.
Section 17. Identity of Transfer Agent. Forthwith upon the appointment
of any transfer agent (other than Continental Stock Transfer & Trust Company)
for the shares of Common Stock or of any subsequent transfer agent for the
shares of Common Stock, the Company will file with the Warrant Agent a statement
setting forth the name and address of such transfer agent.
30
<PAGE>
Section 18. Notices. Any notice pursuant to this Agreement to be given
by the Warrant Agent or the registered holder of any Warrant to the Company,
shall be sufficiently given if sent by first-class mail, postage prepaid,
addressed (until another is filed in writing by the Company with the Warrant
Agent) as follows:
UNIVEC, Inc.
999 Franklin Avenue
Garden CIty, New York 11530
Attention: Joel Schoenfeld, Chairman of the Board
and Chief Executive Officer
and a copy thereof to:
Snow Becker Krauss, P.C.
605 Third Avenue
New York, New York 10158-0125
Attention: Jack Becker, Esq.
Any notice pursuant to this Agreement to be given by the Company or the
registered holder of any Warrant to the Warrant Agent shall be sufficiently
given if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing by the Warrant Agent with the Company) as follows:
Continental Stock Transfer & Trust Company
2 Broadway, 19th Floor
New York, New York 10004
Attention: Executive Vice President
Any notice pursuant to this Agreement to be given by the Warrant Agent
or the Company to the Underwriter shall be sufficiently given if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Warrant Agent) as follows:
31
<PAGE>
Maidstone Financial, Inc.
101 East 52nd Street
New York, New York 10022
Attention: Marshall Bernstein
and a copy thereof to:
Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP
101 East 52nd Street
New York, New York 10022
Attention: Jay M. Kaplowitz, Esq.
Section 19. Supplements and Amendments. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement in order to cure
any ambiguity or to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not be inconsistent with the provisions of the Warrants and which shall not
materially adversely affect the interest of the holders of Warrants; and in
addition the Company and the Warrant Agent may modify, supplement or alter this
Agreement with the consent in writing of the registered holders of the Warrants
representing not less than a majority of the Warrants then outstanding.
Section 20. New York Contract. This Agreement and each Warrant issued
hereunder shall be deemed to be a contract made under the laws of the State of
New York and shall be construed in accordance with the laws of New York without
regard to the conflicts of law principles thereof.
32
<PAGE>
Section 21. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrants any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent and the registered
holders of the Warrants.
Section 22. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
33
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
UNIVEC, INC.
By: ________________________________
Name: Joel Schoenfeld
Title: Chairman of the Board and
Chief Executive Officer
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
By: ________________________________
Name:
Title:
MAIDSTONE FINANCIAL, INC.
By: ________________________________
Name: Marshall Bernstein
Title: Chairman of the Board
34
<PAGE>
No. W_______________________ VOID AFTER_____________, 2002
WARRANTS
REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE ONE SHARE OF COMMON STOCK
UNIVEC, INC.
CUSIP [ ]
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the
number of Redeemable Warrants (the "Warrants") specified above. Each Warrant
initially entitles the Registered Holder to purchase, subject to the terms and
conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and nonassessable share of Common Stock,
par value $.001 per share (the "Common Stock"), of UNIVEC, Inc., a Delaware
corporation (the "Company"), at any time from _________ __, 1999 (the "Initial
Warrant Exercise Date"), and prior to the Expiration Date (as hereinafter
defined) upon the presentation and surrender of this Warrant Certificate with
the Exercise Form on the reverse hereof duly executed, at the corporate office
of Continental Stock Transfer and Trust Company, 2 Broadway, New York, New York
10004, as Warrant Agent, or its successor (the "Warrant Agent"), accompanied by
payment of $4.50, subject to adjustment (the "Exercise Price"), in lawful money
of the United States of America in cash or by certified or bank check made
payable to the Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement, dated as of ___________ ___, 1997 (the "Warrant
Agreement"), among the Company, Maidstone Financial, Inc. (the "Underwriter")
and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Exercise Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares will be issued. In the case of the
exercise of less than all the Warrants represented hereby, the Company shall
cancel this Warrant Certificate upon the surrender hereof
A-1
<PAGE>
and shall execute and deliver a new Warrant Certificate or Warrant Certificates
of like tenor, which the Warrant Agent shall countersign, for the balance of
such Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (New York time)
on_________ ___, 2002 [the date which is the fifth anniversary of the Initial
Warrant Exercise Date]; provided, that if such date is not a business day, it
shall mean 5:00 p.m., New York City time, on the next following business day.
For purposes hereof, the term "business day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in New York City, New
York, are authorized or obligated by law to be closed.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of the Warrants represented hereby unless at the time of
exercise the Company has filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933, as amended (the "Act"),
covering the securities issuable upon exercise of the Warrants represented
hereby and such registration statement has been declared and shall remain
effective and shall be current, and such securities have been registered or
qualified or be exempt under the securities laws of the state or other
jurisdiction of residence of the Registered Holder and the exercise of the
Warrants represented hereby in any such state or other jurisdiction shall not
otherwise be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon the presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder, as such, shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, at a redemption price of $.05 per
Warrant, at any time commencing __________ ___, 1999 [the second anniversary of
the date of the Prospectus] (with the prior written consent of the Underwriter),
provided that the average closing bid quotation of the Common Stock as reported
on The Nasdaq Stock Market, if traded thereon, or if not traded thereon, the
average closing sale price if listed on national exchange (or other reporting
system that provides last sale prices), shall have for a period of 20
consecutive days on which such market is open for trading ending on the third
day prior to the date on which the Company gives the Notice of Redemption (as
defined below) has been at least $8.00. Notice of redemption (the "Notice
A-2
<PAGE>
of Redemption") shall be given by the Company no less than thirty days before
the date fixed for redemption, all as provided in the Warrant Agreement. On and
after the date fixed for redemption, the Registered Holder shall have no right
with respect to this Warrant except to receive the $0.05 per Warrant upon
surrender of this Certificate.
Under certain circumstances described in the Warrant Agreement, the
Underwriter shall be entitled to receive as a solicitation fee an aggregate of
eight percent (8%) of the Exercise Price of the Warrants represented hereby.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
conflicts of law principles thereof.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated __________ ___, 1997
SEAL UNIVEC, INC.
By: ____________________________________
Chief Executive Officer
By: ____________________________________
Secretary
COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER AND TRUST COMPANY,
as Warrant Agent
By: __________________________________________________
Authorized Officer
A-3
<PAGE>
EXERCISE FORM
To Be Executed by the Registered Holder
in order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to exercise
_________ Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
___________________________
___________________________
___________________________
(please print or type name and address)
and be delivered to
___________________________
___________________________
___________________________
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. If the exercise of this Warrant was solicited by Maidstone Financial,
Inc., please check the following box. [ ]
2. THE EXERCISE OF THIS WARRANT WAS SOLICITED BY
---------------------------------------------------------------
A-4
<PAGE>
3. IF THE EXERCISE OF THIS WARRANT WAS NOT SOLICITED, PLEASE CHECK THE
FOLLOWING BOX. [ ]
Dated: _____________________________ X__________________________________
__________________________________
__________________________________
Address
__________________________________
Social Security or Taxpayer
Identification Number
__________________________________
Signature Guaranteed
A-5
<PAGE>
ASSIGNMENT
To be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, ____________________________, hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
___________________________
___________________________
___________________________
(please print or type name and address)
________________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
______________________________________ as its/his/her attorney-in-fact to
transfer this Warrant Certificate on the books of the Company, with full power
of substitution in the premises.
Dated: ______________________ X_______________________________
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE EXERCISE FORM MUST CORRESPOND TO THE NAME
AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY A BANK, BROKER, DEALER, CREDIT UNION, SAVINGS ASSOCIATION OR OTHER
ENTITY WHICH IS A MEMBER IN GOOD STANDING OF THE SECURITIES TRANSFER AGENTS
MEDALLION PROGRAM.
A-6
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED
OF UNTIL A REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED EFFECTIVE
UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY THAT
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.
UNIVEC, INC.
8% Promissory Note
$
UNIVEC, INC., a Delaware corporation (the "Company"), for value received,
hereby promises to pay to the order of______________________ (the "Payee"),
residing at__________________ , on the earlier of November 27, 1997, or the
consummation of an initial public offering or private placement of the Company's
debt and/or equity securities resulting in gross proceeds to the Company of at
least $5,000,000 (the "Offering"), the principal sum of______________
($ ) Dollars (or such lesser principal amount as may then be outstanding),
together with unpaid interest (computed on the basis of a 360-day year of twelve
30-day months) (i) on the unpaid balance at the rate of 8% per annum from the
date hereof and (ii) to the extent legally enforceable, on any overdue
installment of interest at the rate of 8% per annum until the principal hereof
and interest thereon shall have been paid. The principal amount of the Note may
be prepaid by the Company, in whole or in part, without premium or penalty, at
any time. Upon any prepayment of this Note, all accrued but unpaid interest on
the principal amount being prepaid shall be paid to the holder on the date of
prepayment. All payments hereunder shall be applied first to interest then to
principal.
If the Company shall fail to make a payment of principal or interest when
due; or shall make an assignment for the benefit of creditors, file a petition
in bankruptcy, be adjudicated insolvent or bankrupt, suffer an order for relief
under any federal bankruptcy law, petition or apply to any tribunal for the
appointment of a custodian, receiver or any trustee for the Company or any
substantial part of his assets, or shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
affect; or if there shall have been filed any such petition or application, or
any such proceeding shall have been commenced against the Company, which remains
undismissed for a period of sixty (60) days or more; or if the Company, by any
act or omission shall indicate consent to, approve of or acquiescence in any
such petition, application or proceeding or the appointment of, a custodian,
receiver or any trustee for all or any substantial part of its properties, or if
the Company shall suffer such custodianship, receivership, or trusteeship to
continue undischarged for a period of sixty (60) days or more, or the Company
violates any term or provision of this Note and same remains unsecured for a
period of 15 days after notice thereof by any Noteholder, then and in any such
event (each such event, an "Event of Default"), the outstanding principal amount
of this Note, together with all accrued and unpaid interest thereon, shall be
and become immediately due and payable.
<PAGE>
This Note is issued pursuant to a Subscription Agreement, dated as of the
date hereof, between the Company and the Payee (the "Subscription Agreement").
Payments of principal, premium, if any, and interest are to be made in
lawful money of the United States of America at the principal office of the
Company.
1. Restrictions on Transfer.
The holder acknowledges that he has been advised by the Company that this
Note has not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), that the Note is being issued, on the basis of the statutory
exemptions provided by Sections 4(2) and 4(6) of the Securities Act and
Regulation D promulgated under Section 4(2) of the Securities Act ("Regulation
D") relating to transactions by an issuer not involving any public offering, and
that the Company's reliance upon these statutory exemptions are based in part
upon the representations made by the holder in the holder's Subscription
Agreement, including the representation that the holder is an "accredited
investor" (as defined in Rule 501(a) of Regulation D. The holder acknowledges
that he has been informed by the Company of, or is otherwise familiar with, the
nature of the limitations imposed by the Securities Act and the rules and
regulations thereunder on the transfer of securities. In particular, the holder
agrees that no sale, assignment, hypothecation or transfer of this Note shall be
valid or effective, and the Company shall not be required to give any effect to
any such sale, assignment, hypothecation or transfer, unless (i) the sale,
assignment, hypothecation or transfer of this Note is registered under the
Securities Act (and the Company has no obligation or intention to so register
the Note) or (ii) the Note is sold, assigned, hypothecated or transferred in
accordance with all the requirements and limitations of Rule 144 under the
Securities Act, or such sale, assignment, or transfer is otherwise exempt from
registration under the Securities Act.
2. Covenants of Company.
a. The Company covenants and agrees that, so long as this Note shall be
outstanding, it will:
(i) Promptly pay and discharge all lawful taxes, assessments and
governmental charges or levies imposed upon the Company or upon its income
and profits, or upon any of its property, before the same shall become in
default, as well as all lawful claims for labor, materials and supplies
which, if unpaid, might become a lien or charge upon such properties or any
part thereof; provided, however, that the Company shall not be required to
pay and discharge any such tax, assessment, charge, levy or claim so long
as the validity thereof shall be contested in good faith by appropriate
proceedings, and the Company shall set aside on its books adequate reserves
with respect to any such tax, assessment, charge, levy or claim so
contested.
(ii) Do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, rights and franchises and
comply with all laws applicable to the Company as its counsel may advise;
(iii) At all times maintain, preserve, protect and keep its property
used
2
<PAGE>
and useful in the conduct of its business in good repair, working order and
conditions, and from time to time make all needful and proper repairs,
renewals, replacements, betterments and improvements thereto, so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times;
(iv) Will not issue or incur any indebtedness which is senior to or in
parity with the Company's obligations under this Note, except for certain
Notes of which this Note forms a part of a series aggregating a principal
amount not in excess of $1,000,000.
(v) Keep adequately insured by financially sound insurers, all
property of a character usually insured by similar corporations and carry
such other insurance as is usually carried by similar corporations; and
(vi) At all times keep true and correct books, records and accounts.
3. Miscellaneous.
3.1 All the covenants and agreements made by the Company in this Note shall
bind its successors and assigns.
3.2 No recourse shall be had for the payment of the principal, interest or
premium, if any, on this Note or for any claim based hereon or otherwise in any
manner in respect hereof, against any incorporator, stockholder, officer or
director, past, present or future, of the Company or of any predecessor
corporation, whether by virtue of any constitutional provision or statute or
rule of law, or by the enforcement of any assessment or penalty or in any other
manner, all such liability being expressly waived and released by the acceptance
hereof and as part of the consideration for the issue hereof.
3.3 No course of dealing between the Company and the holder hereof shall
operate as a waiver of any right of any holder hereof, and no delay on the part
of the holder in exercising any right hereunder shall so operate. Any such
waiver must be in writing and signed by the Holder and the Company.
3.4 This Note may be amended only by a written instrument executed by the
Company and the holder hereof. Any amendment shall be endorsed upon this Note,
and all future holders shall be bound thereby.
3.5 All communications provided for herein shall be sent, except as may be
otherwise specifically provided, by registered or certified mail if to the
holder of this Note, to the address shown on the books of the Company; and if to
the Company, to: UNIVEC, Inc., 999 Franklin Avenue, Garden City, New York 11530,
Attention: Chief Executive Officer, or to such other address as the Company may
advise the holder of this Note in writing. Notices shall be deemed given when
mailed.
3.6 The provisions of this Note shall in all respects be construed
according to, and the rights and liabilities of the parties hereto shall in all
respects be governed by, the laws of the State of New York.
3
<PAGE>
3.7 In the event that this Note is placed in the hands of an attorney for
collection, or in the event that any action be instituted on this Note, or any
action is taken with respect to a default hereunder, the holder hereof shall be
entitled to the payment by the Company and any other party liable for the
obligations of the Company hereunder of all expenses in connection therewith,
including, without limitation, reasonable attorney fees.
3.8 The headings of the Sections of this Note are inserted for convenience
only and shall not be deemed to constitute a part of this Note.
IN WITNESS WHEREOF, UNIVEC, INC. caused this Note to be executed in its
corporate name by its Chief Executive Officer, and its seal to be affixed
hereto.
Dated: November 27, 1996
UNIVEC, INC.
By: /s/ Joel Schoenfeld
----------------------
Joel Schoenfeld
Chief Executive Officer
[seal]
/s/ Flora Schoenfeld
- --------------------
Flora Schoenfeld
Secretary
4
<PAGE>
No. UBW- Warrant to Purchase___________shares
of Common Stock
UNIVEC, INC.
Common Stock Purchase Warrant
November 27, 1996
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNTIL A REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED EFFECTIVE UNDER
SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY THAT AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE.
THIS CERTIFIES THAT___________________________(hereinafter sometimes called
the "Holder"), residing at______________________ , is entitled to purchase from
UNIVEC, Inc., a Delaware corporation (the "Company"), at the price and during
the period hereinafter specified, up to____________ ( ) shares of the Company's
common stock, $.001 par value (the "Common Stock"). Capitalized terms used
herein without definition shall have the meanings assigned to them in the
Company's Confidential Private Placement Memorandum dated October 17, 1996 (the
"Memorandum").
This Warrant, together with warrants of like tenor, is subject to
adjustment in accordance with Paragraph 7 of this Warrant.
1. (a) The rights represented by this Warrant shall be exercisable at any
time during the period commencing November 27, 1997 and ending on November 26,
2001 (the "Expiration Date") at a purchase price of $4.50 per share (the
"Exercise Price"), subject to adjustment in accordance with Paragraph 7. After
the Expiration Date, the Holder shall have no right to purchase any shares of
Common Stock purchasable upon exercise of this Warrant.
(b) Notwithstanding anything herein contained to the contrary, the Company
and the Holder agree that in the event that the terms and conditions of the
redeemable warrants to be registered in the registration statement for the
Company's Initial Public Offering are not identical to the terms and conditions
of this Warrant, this Warrant will be modified upon the closing of such Initial
Public Offering to conform exactly to the terms and conditions of the Warrants
offered pursuant to such registration statement.
2. The rights represented by this Warrant may be exercised at any time
prior to the Expiration Date, in whole or in part, by (i) the surrender of this
Warrant (with the purchase
1
<PAGE>
form at the end hereof properly executed) at the principal executive office of
the Company (or such other office or agency of the Company as it may designate
by notice in writing to the Holder at the address of the Holder appearing on the
books of the Company); and (ii) payment to the Company of the Exercise Price
then in effect for the number of shares specified in the above-mentioned
purchase form together with applicable stock transfer taxes, if any. This
Warrant shall be deemed to have been exercised, in whole or in part to the
extent specified, immediately prior to the close of business on the date this
Warrant is surrendered and payment is made in accordance with the foregoing
provisions of this Paragraph 2, and the person or persons in whose name or names
the certificates for shares of Common Stock shall be issuable upon such exercise
shall become the holder or holders of record of such Common Stock at that time
and date. The certificate or certificates for the Common Stock so purchased
shall be delivered to such person or persons within a reasonable time, not
exceeding thirty (30) days, after the rights represented by this Warrant shall
have been so exercised.
3. Neither this Warrant nor the shares of Common Stock issuable upon
exercise hereof have been registered under the Securities Act of 1933, as
amended (the "1933 Act"), nor under any state securities law and shall not be
sold, transferred, assigned, hypothecated or otherwise disposed of until a
registration statement with respect thereto becomes or is declared effective
under the 1933 Act or the Company receives an opinion of counsel to the Company
stating that an exemption from the registration requirements of the 1933 Act and
such state securities laws is available.
4. Except as set forth in the Registration Rights Agreement annexed as
Exhibit D to the Memorandum, the Company shall not be obligated to register this
Warrant or the shares of Common Stock issuable upon exercise of this Warrant in
accordance with the 1933 Act.
5. The Company covenants and agrees that all shares of Common Stock which
may be issued upon exercise of this Warrant will, upon issuance, be duly and
validly issued, fully paid and nonassessable and no personal liability will
attach to the Holder thereof. The Company further covenants and agrees that
until the Expiration Date, the Company will at all times have authorized and
reserved a sufficient number of shares of its Common Stock to provide for the
exercise of this Warrant.
6. This Warrant shall not entitle the Holder to any rights, including,
without limitation, voting rights, as a stockholder of the Company.
7. The Exercise Price in effect at any time and the number of shares
purchasable upon the exercise of this Warrant shall be subject to adjustment
from time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) issue shares of Common Stock as a
dividend or distribution on its outstanding shares of Common Stock, (ii)
subdivide or reclassify its outstanding shares of Common Stock into a greater
number of shares, or (iii) combine or
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<PAGE>
reclassify its outstanding shares of Common Stock into a smaller number of
shares, or (iv) the outstanding shares of Common Stock are at any time changed
into or exchanged for a different number or kind of shares or other security of
the Company or of another corporation through reorganization, merger,
consolidation, liquidation or recapitalization, then appropriate adjustments in
the number and kind of such securities subject to this Warrant shall be made and
the Exercise Price in effect at the time of the record date for such dividend or
distribution or of the effective date of such subdivision, combination,
reclassification, reorganization, merger, consolidation, liquidation or
recapitalization shall be proportionately adjusted so that the holder of this
Warrant exercised after such date shall be entitled to receive the aggregate
number and kind of shares of which, if this Warrant had been exercised by such
Holder immediately prior to such date, he would have owned upon such exercise
and been entitled to receive upon such dividend, distribution, subdivision,
combination, liquidation or recapitalization. For example, if the Company
declares a 2 for 1 stock distribution and the Exercise Price immediately prior
to such event was $4.50 per share and the number of shares purchasable upon
exercise of this Warrant was 62,500, the adjusted Exercise Price immediately
after such event would be $2.25 per share and the adjusted number of shares
purchasable upon exercise of this Warrant would be 125,000 shares. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) Whenever the Exercise Price payable upon exercise of this Warrant is
adjusted pursuant to Subparagraph (a) above, the number of shares purchasable
upon exercise of this Warrant shall simultaneously be adjusted by multiplying
the number of shares issuable upon exercise of this Warrant by the Exercise
Price in effect on the date hereof and dividing the product so obtained by the
Exercise Price, as adjusted.
(c) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least five cents ($0.05)
in such price; provided, however, that any adjustments which by reason of this
Subparagraph (c) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment required to be made hereunder. All
calculations under this Paragraph 7 shall be made to the nearest cent or
one-hundredth of a share, as the case may be. Anything in this Paragraph 7 to
the contrary notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the Exercise Price, in addition to those
required by this Paragraph 7, as it shall determine, in its sole discretion, to
be advisable in order that any dividend or distribution in shares of Common
Stock, or any subdivision, reclassification or combination of Common Stock,
hereafter made by the Company shall not result in any Federal income tax
liability to the holders of Common Stock or securities convertible into or
exercisable for Common Stock.
(d) Whenever the Exercise Price is adjusted as herein provided, the Company
shall compute the adjusted Exercise Price in accordance with this Paragraph 7
and shall prepare a certificate signed by the chief financial officer or
accounting officer of the Company setting forth the adjusted Exercise Price, and
shall promptly cause a notice setting forth the adjusted Exercise Price and
adjusted number of shares issuable upon exercise of this Warrant to be
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mailed to the Holder, at its address set forth herein, and shall cause a
certified copy thereof to be mailed to the Company's transfer agent, if any. The
Company may (but shall not be required to) retain a firm of independent
certified public accountants selected by the Board of Directors (which may be
the regular accountants employed by the Company) to make any computation
required by this Section 7, and a certificate signed by such firm shall be
conclusive evidence of the correctness of such adjustment.
(e) In the event that at any time, as a result of an adjustment made
pursuant to the provisions of this Paragraph 7, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the Company other than
Common Stock thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subparagraphs (a) to (c), inclusive,
above.
(f) Notwithstanding any adjustment in the Exercise Price or the number or
kind of shares of Common Stock purchasable upon the exercise of this Warrant,
certificates for Warrants issued prior or subsequent to such adjustment may
continue to express the same price and number and kind of shares of Common Stock
as are initially issuable pursuant to this Warrant.
(g) The Company may, but under no circumstances is obligated to, modify the
terms of this Warrant to provide for an earlier commencement of the Exercise
Period, or to extend the Exercise Period or to lower the Exercise Price, at any
time prior to the expiration of this Warrant.
8. Upon the consummation of an initial public offering of the Company's
Common Stock and redeemable Common Stock purchase warrants ("the Public
Warrants") underwritten by Maidstone Financial, Inc., this Warrant automatically
will be converted into the same number of Public Warrants as the number of
shares of Common Stock purchasable upon exercise of this Warrant immediately
prior thereto.
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9. This Agreement shall be governed by and in accordance with the laws of
the State of New York.
IN WITNESS WHEREOF, UNIVEC, Inc. has caused this Warrant to be signed by
its duly authorized officer as of the date set forth below.
UNIVEC, INC.
By: /s/ Joel Schoenfeld
----------------------
Joel Schoenfeld
Chief Executive Officer
Dated: November 27, 1996
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EXERCISE FORM
To Be Executed by the Holder
in Order to Exercise Warrant
The undersigned Holder hereby irrevocably elects to exercise this Warrant
and to purchase shares of the Company's Common Stock issuable upon the exercise
of such Warrant, and requests that certificates for such securities shall be
issued in name of:
______________________________________________________
______________________________________________________
______________________________________________________
(please print or type name and address)
______________________________________________________
(please insert social security or other identifying number)
and be delivered:
______________________________________________________
______________________________________________________
______________________________________________________
(please print or type name and address)
______________________________________________________
(please insert social security or other identifying number)
and if such number of shares of Common Stock shall not be all the shares
evidenced by this Warrant Certificate, that a new Warrant Certificate for the
balance of such shares be registered in the name of, and delivered to, the
Holder.
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of _______, 1996 by and
between UNIVEC, Inc., a Delaware corporation (the "Company"), and the person
whose name appears on the signature page attached hereto (individually a
"Holder", and together with the holders of other securities of the Company
issued in connection with the private placement offering hereinafter described,
the "Holders").
WHEREAS, pursuant to a Confidential Private Placement Memorandum dated
October 17, 1996 (the "Memorandum") and accompanying Subscription Agreement, the
Company has offered in an offering (the "Offering") exempt from the registration
requirements of the Securities Act of 1933, as amended (the "1933 Act"), a
minimum of 20 Units and a maximum of 40 Units, each Unit consisting of (i) the
Company's 8% promissory note (the "Note") in the principal amount of $25,000,
due upon the earlier of 12 months following the date of the initial closing of
the Offering or the consummation of an initial public offering or private
placement of the Company's debt and/or equity securities resulting in gross
proceeds to the Company of at least $5,000,000, and (ii) warrants (the
"Warrants") to purchase up to 62,500 shares of the Company's Common Stock,
$0.001 par value (the "Common Stock");
WHEREAS, the Warrants are exercisable for a period of five (5) years
commencing 12 months following the date of the initial closing of the Offering,
and each Warrant entitles the Holder thereof to purchase one share of Common
Stock at an initial exercise price of $4.50 per share;
WHEREAS, in order to induce the Purchasers of the Units to enter into the
Subscription Agreement and to purchase the Units, the Company and the Holders
have agreed to enter into this Agreement; and
WHEREAS, it is intended by the Company and the Holders that this Agreement
shall become effective immediately upon the acquisition by the Holder of Units;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and in the Subscription Agreement, the Company hereby agrees as
follows:
REGISTRATION RIGHTS.
1. Registration Rights
a. "Piggyback Registration". If the Company at any time proposes to
register any of its securities under the 1933 Act (other than in connection with
a dividend reinvestment, employee stock option or other employee benefit plan,
or in connection with an acquisition, merger, consolidation or reorganization),
the Company shall request that the managing underwriter (if any) of such
offering include in such registration the shares of
<PAGE>
Common Stock issued and issuable upon exercise of the Warrants (the "Warrant
Shares"), and if warrants are being offered in the public offering, the Warrants
(which shall automatically convert to be identical to the warrants offered in
the public offering). If such managing underwriter agrees to include the
Registrable Securities (as hereinafter defined) in the underwritten offering,
the Company shall at such time give prompt written notice to all Holders of its
intention to effect such registration and of such Holders' right to include
Registrable Securities in such proposed registration, and upon the request of
any such Holder delivered to the Company within twenty (20) days after giving
such notice (which request shall specify the Registrable Securities intended to
be disposed of by such Holder and the intended method of disposition thereof),
the Company shall include such Registrable Securities held by such Holder
requested to be included in such registration; provided, however, that:
(i) If, at any time after giving such written notice of the Company's
intention to register any of the Holders' Registrable Securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay the registration of such Registrable Securities, at its sole election, the
Company may give written notice of such determination to each Holder and
thereupon shall be relieved of its obligation to register any Registrable
Securities issued or issuable in connection with such registration (but not from
its obligation to pay registration expenses in connection therewith or to
register the Registrable Securities in a subsequent registration); and in the
case of a determination to delay a registration shall thereupon be permitted to
delay registering any Registrable Securities for the same period as the delay in
respect of securities being registered for the Company's own account.
(ii) If the managing underwriter (if any) of such offering shall advise the
Company that the inclusion of all or a portion of the Registrable Securities
requested by the Holders to be included in the registration statement would
materially and adversely effect such offering, then all or a specified portion
of the Registrable Securities shall be excluded from such registration statement
(in case of an exclusion as to a portion of the Registrable Securities, such
portion to be excluded shall be allocated among the Holders and any affiliates
of the Company including securities of the same class to be registered in such
underwritten offering in proportion to the respective number of Registrable
Securities and other securities of the same class requested to be registered by
each such Holder and affiliate). In such event the Company shall give the
applicable Holders prompt notice of the number of Registrable Securities
excluded from such registration at the request of the managing underwriter. No
such exclusion shall reduce the securities being offered by the Company for its
own account to be included in such registration statement.
As used herein, "Registrable Securities" shall mean the Warrants and the
Warrant Shares as long as such securities are ineligible for sale under
subparagraph (k) of Rule 144 or are not registered; provided, however,
Registrable Securities shall not include any securities that have been sold
pursuant to Rule 144 or an effective registration statement.
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<PAGE>
(b) Option to Include Registrable Securities in Offering. The Holders,
subject to the provisions of Section 1, shall have the option to include their
Registrable Securities in the Company's underwritten offering. The Company shall
not be required to include any of the Holders' Registrable Securities in an
underwritten offering of the Company's securities unless such Holders accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (provided such terms are usual and customary for
selling stockholders) and the Holders agree to execute and/or deliver such
documents in connection with such registration as the Company or the managing
underwriter may reasonably request.
(c) Mandatory Registration. In the event the Holders have not sold all of
their Registrable Securities in connection with a registration statement
pursuant to Section l(a), the Company shall use its best efforts to effect the
registration of all remaining Registrable Securities as soon as practicable, but
not later than 180 days after the effective date of such registration statement;
provided, however, that such period may be extended or delayed by the Company
for one period of up to 90 days if, upon the advice of counsel at the time such
registration statement is required to be filed, or at the time the Company is
required to exercise its best efforts to cause such registration statement to
become effective, such delay is advisable and in the best interests of the
Company because of the existence of non-public material information, or to allow
the Company to complete any pending audit of its financial statements.
(d) Registration Rights Not Applicable If Rule 144 or Other Exemption
Available. Notwithstanding anything to the contrary in Section 1(a) and (c)
hereof, the registration rights granted in Section 1(a) and 1(c) hereof shall
not apply if in the opinion of counsel to the Company an exemption from the
registration requirements of the 1933 Act is available for the resale of the
Registrable Securities pursuant to Rule 144 or otherwise.
(e) Cooperation with Company. The Holder will cooperate with the Company in
all respects in connection with this Agreement, including, timely supplying all
information reasonably requested by the Company and executing and returning all
documents reasonably requested in connection with the registration and sale of
the Registrable Securities.
2. Registration Procedures. If and whenever the Company is required by any
of the provisions of this Agreement to use its best efforts to effect the
registration of any of the Registrable Securities under the 1933 Act, the
Company shall (except as otherwise provided in this Agreement), as expeditiously
as possible:
(a) prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement and shall use its best efforts to cause
such registration statement to become effective until all of the Registrable
Securities are sold or become capable of being publicly sold without
registration under the 1933 Act.
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<PAGE>
(b) prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the 1933 Act with respect to the sale or other
disposition of all securities covered by such registration statement whenever
the Holder or Holders of such securities shall desire to sell or otherwise
dispose of the same (including prospectus supplements with respect to the sales
of securities or the exercise of Warrants from time to time in connection with a
registration statement pursuant to Rule 415 of the Commission);
(c) furnish to the Holder such numbers of copies of a summary prospectus or
other prospectus, including a preliminary prospectus or any amendment or
supplement to any prospectus, in conformity with the requirements of the 1933
Act, and such other documents, as the Holder may reasonably request in order to
facilitate the public sale or other disposition of the securities owned by the
Holder;
(d) use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or blue sky laws of such
jurisdictions as the Holder shall reasonably request, and do any and all other
acts and things which may be reasonably necessary or advisable to enable such
Holder to consummate the public sale or other disposition in such jurisdictions
of the securities owned by such Holder, except that the Company shall not for
any such purpose be required to qualify to do business as a foreign corporation
in any jurisdiction wherein it is not so qualified or to file therein any
general consent to service of process;
(e) use its best efforts to list such securities on any securities exchange
on which any securities of the Company is then listed, if the listing of such
securities is then permitted under the rules of such exchange;
(f) enter into and perform its obligations under an underwriting agreement,
if the offering is an underwritten offering, in usual and customary form, with
the managing underwriter or underwriters of such underwritten offering;
(g) notify the Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto covered
by such registration statement is required to be delivered under the 1933 Act,
of the happening of any event of which it has knowledge as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing; and
(h) take such other actions as shall be reasonably requested by any Holder
to facilitate the registration and sale of the Registrable Securities; provided,
however, that the Company shall not be obligated to take any actions not
specifically required elsewhere herein which in the aggregate would cost in
excess of $5,000.
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<PAGE>
3. Restrictions on Transfer of Registrable Securities. The Holder agrees
that, at the request of the managing underwriter (the "Managing Underwriter")
for a public offering of the Company's securities, the undersigned will enter
into an agreement with such Managing Underwriter pursuant to which the
undersigned shall agree (i) not to sell, transfer, convey or otherwise dispose
of any of the securities of the Company owned by the undersigned, including but
not limited to the Registrable Securities, whether by registration or otherwise,
for a period of 24 months after the date the Company's registration statement
relating to said underwritten public offering becomes or is declared effective
by the Commission, without the prior written consent of said Managing
Underwriter, and furthermore, that by execution of the signature page of this
Registration Rights Agreement, the undersigned hereby appoints the directors and
officers of the Company, and each of them acting in the absence of the others,
with full power of substitution, as attorney-in-fact to execute an agreement
with the Managing Underwriter to the effect set forth above, in the event the
undersigned, upon the request of the Managing Underwriter, fails or refuses to
execute such an agreement with the Managing Underwriter after a reasonable
period of time following such request.
4. Expenses. All expenses incurred in any registration of the Holder's
Registrable Securities under this Agreement shall be paid by the Company,
including, without limitation, printing expenses, fees and disbursements of
counsel for the Company, expenses of any audits to which the Company shall agree
or which shall be necessary to comply with governmental requirements in
connection with any such registration, all registration and filing fees for the
Holders' Registrable Securities under federal and state securities laws, and
expenses of complying with the securities or blue sky laws of any jurisdictions
pursuant to Section 2(d); provided, however, the Company shall not be liable for
(a) any discounts or commissions to any underwriter; (b) any stock transfer
taxes incurred with respect to Registrable Securities sold in the Offering or
(c) the fees and expenses of counsel for any Holder, provided that the Company
will pay the costs and expenses of Company counsel when the Company's counsel is
representing any or all selling security holders.
5. Indemnification. In the event any Registrable Securities are included in
a registration statement pursuant to this Agreement:
(a) Company Indemnity. Without limitation of any other indemnity provided
to any Holder, either in connection with the Offering or otherwise, to the
extent permitted by law, the Company shall indemnify and hold harmless each
Holder, the affiliates, officers, directors and partners of each Holder, any
underwriter (as defined in the 1933 Act) for such Holder, and each person, if
any, who controls such Holder or underwriter (within the meaning of the 1933 Act
or the Securities Exchange Act of 1934 (the "Exchange Act"), against any losses,
claims, damages or liabilities (joint or several) to which they may become
subject under the 1933 Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained
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<PAGE>
in any registration statement including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, (iii) any violation or
alleged violation by the Company of the 1933 Act, the Exchange Act, or any state
securities law or any rule or regulation promulgated under the 1933 Act, the
Exchange Act or any state securities law, and in each case, the Company shall
reimburse the Holder, and each such affiliate, officer or director or partner,
underwriter or controlling person for any legal or other documented
out-of-pocket expenses incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company shall not be liable to any Holder or any other party in any
such case for any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by the Holder or any underwriter or any other
officer, director or controlling person thereof.
(b) Holder Indemnity. The Holder shall indemnify and hold harmless the
Company, its affiliates, its counsel, officers, directors, shareholders and
representatives, any underwriter (as defined in the 1933 Act) and each person,
if any, who controls the Company or the underwriter (within the meaning of the
1933 Act or the Exchange Act), against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the 1933
Act, the Exchange Act or any state securities law, and the Holder shall
reimburse the Company and each such affiliate, counsel, officer, director,
shareholder, partner, or representative, underwriter or controlling person for
any legal or other documented out-of-pocket expenses incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; insofar as such losses, claims, damages or liabilities (or
actions and respect thereof) arise out of or are based upon any statements or
information provided in writing by such Holder to the Company in connection with
the offer or sale of Registrable Securities. Notwithstanding the above, the
Holder's indemnification shall be limited to an amount equal to the proceeds to
the Holder of the Registrable Securities sold for the account of the Holder.
(c) Notice: Right to Defend. Promptly after receipt by an indemnified party
under this Section 5 of notice of the commencement of any action (including any
governmental action), such indemnified party shall, if a claim in respect
thereof is to be made against any indemnifying party under this Section 5,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in and if the
indemnifying party agrees in writing that it will be responsible for any
documented out-of pocket costs or expenses, judgments, damages and losses
incurred by the indemnified party with respect to such claim, jointly with any
other indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and documented out-of pocket expenses to be paid by the indemnifying party, if
the indemnified party reasonably believes that representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified
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<PAGE>
party and any other party represented by such counsel in such proceeding. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall relieve such indemnifying
party of any liability to the indemnified party under this Agreement only if and
to the extent that such failure is prejudicial to its ability to defend such
action, and the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Agreement.
(d) Contribution. If the indemnification provided for in this Agreement is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other
hand in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the indemnifying party and the indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the amount the Holder shall be obligated to
contribute pursuant to the Agreement shall be limited to an amount equal to the
proceeds to the Holder of the Registrable Securities sold pursuant to the
registration statement which gives rise to such obligation to contribute (less
the aggregate amount of any damages which the Holder has otherwise been required
to pay in respect of such loss, claim, damage, liability or action or any
substantially similar loss, claim, damage, liability or action arising from the
sale of such Registrable Securities).
(e) Survival of Indemnity. The indemnification provided by this Agreement
shall be a continuing right to indemnification and shall survive the
registration and sale of any Registrable Securities by any person entitled to
indemnification hereunder and the expiration or termination of this Agreement.
6. Assignment of Registration Rights. The rights of the Holder under this
Agreement, including the rights to cause the Company to register Registrable
Securities may not be assigned without the written prior consent of the Company.
7. Limitations on Other Registration Rights. Except as otherwise set forth
in this Agreement, the Company shall not, without the prior written consent of
the Holder of Registrable Securities, file any registration statement filed on
behalf of any person (including
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<PAGE>
the Company) other than the Holder to become effective during any period when
the Company is not in compliance with this Agreement.
8. Remedies Upon Default or Delay. The Company acknowledges that the
material breach of any part of this Agreement may cause irreparable harm to the
Holder and that monetary damages alone may be inadequate in certain
circumstances. The Company therefore agrees that in the event of such a material
breach of any part of this Agreement by the Company, the Holder shall be
entitled to injunctive relief or such other applicable remedy as a court of
competent jurisdiction may provide. Nothing contained herein will be construed
to limit a Holder's right to any remedies at law, including recovery of damages
for breach of any part of this Agreement.
9. Notices.
(a) All communications under this Agreement shall be in writing and shall
be mailed by first class mail, postage prepaid, or telegraphed or telexed (with
confirmation of receipt transmitted by mail, or delivered by hand or by
overnight delivery service as provided herein), or delivered by hand or by
overnight delivery service,
i. If to the Company, at:
UNIVEC, Inc.
999 Franklin Avenue
Garden City, New York 11530
Attention: Joel Schoenfeld
or at such other address as it may have furnished in writing to the Holder of
Registrable Securities at the time outstanding, or
ii. if to the Holder of any Registrable Securities, to the
address of such Holder as it appears in the stock and/or warrant ledger of the
Company.
(b) Any notice so addressed, when mailed by registered or certified mail
shall be deemed to be given three days after so mailed, when telegraphed or
telexed shall be deemed to be given when transmitted, or when delivered by hand
or overnight shall be deemed to be given when delivered.
10. Successors and Assigns. Except as otherwise expressly provided herein,
this Agreement shall inure to the benefit of and be binding upon the successors
and permitted assigns of the Company and the Holder.
11. Amendment and Waiver. This Agreement may be amended, and the observance
of any term of this Agreement may be waived, but only with the written consent
of the Company and the Holder; provided, however, that no such amendment or
waiver shall
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take away any registration right of the Holder of Registrable securities or
reduce the amount of reimbursable costs to the Holder of Registrable Securities
in connection with any registration hereunder without the consent of the Holder.
No delay on the part of any party in the exercise of any right, power or remedy
shall operate as a waiver thereof, nor shall any single or partial exercise by
any party of any right, power or remedy preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy.
12. Counterparts. One or more counterparts of this Agreement may be signed
by the parties, each of which shall be an original but all of which together
shall constitute one and the same instrument.
13. Governing Law. This Agreement shall be construed in accordance with and
governed by the internal laws of the State of New York, without giving effect to
conflicts of law principles.
14. Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
15. Headings. The headings in this Agreement are for convenience of
reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first set forth above.
UNIVEC, INC.
____________________________
Signature of Holder
By: /s/ Joel Schoenfeld
-----------------------
Joel Schoenfeld, Print Name of Holder
Chief Executive Officer
____________________________
____________________________
Print Address of Holder
-9-
<PAGE>
EXHIBIT 10.1
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O.E.M. SUPPLY AGREEMENT
THIS AGREEMENT, made effective this _____ day of______, 1996, by and
between Sherwood Medical Company, doing business as Sherwood-Davis & Geck, a
corporation organized and existing under the laws of the State of Delaware,
having an office at 1915 Olive Street, St. Louis, Missouri 63103 (hereinafter
referred to as "Sherwood-D&G") and Univec, Inc., a corporation organized and
existing under the laws of the State of New York, having an office at 999
Franklin Avenue, Garden City, New York 11530 (hereinafter referred to as
"Customer").
SECTION 1. DEFINITIONS
As used in this Agreement, the following terms shall be deemed to have the
following meanings:
1(a) "Contract Year" shall mean each twelve (12) month period during the
term of the Agreement beginning with the Commencement Date.
1(b) "Products" shall mean hypodermic syringe component sets, each
consisting of a syringe barrel with or without a permanently pre-attached
cannula and sheath or a separate hooded needle, and a plunger tip (a "Component
Set); and single-use syringe plungers ("Plungers"), each as more fully described
in Exhibit A hereto, and as amended from time to time in writing by the parties.
1(c) "Specifications" shall mean the specifications and protocols set forth
in Exhibit B attached hereto.
1(d) "Sufficient Production Capacity" shall mean having sufficient
manufacturing facilities, equipment, staff, raw materials and shipping
facilities to manufacture and deliver to Customer at least fifty million
(50,000,000) Component Sets during each Contract Year.
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SECTION 2. PURCHASE AND SALE OF PRODUCTS
2(a) In accordance with the terms and conditions of this Agreement,
Sherwood-D&G shall manufacture and sell the Products to Customer, and Customer
shall purchase the Products from Sherwood-D&G.
2(b) Sherwood-D&G shall maintain Sufficient Production Capacity at all
times during the term of this Agreement. Upon receipt of written purchase orders
from Customer using Customer's standard form of purchase Order, Sherwood-D&G
shall manufacture and deliver Component Sets and Plungers in accordance with
such written purchase orders, provided, however, notwithstanding anything to the
contrary herein, Sherwood-D&G shall only be obligated to manufacture and deliver
an average of four million one hundred sixty-six thousand six hundred
sixty-seven (4,166,667) Component Sets and the quantity of acceptable Plungers
that it has the capacity and capability to manufacture, as set forth in Section
2(c) hereof, each month against such purchase orders during the term of this
Agreement. Sherwood-D&G shall keep Customer informed of its capacity and
capability to manufacture acceptable Plungers. Nothing contained herein shall
require Customer to order any minimum quantity of Products at any time during
the term of this Agreement.
2(c) Sherwood-D&G shall exert reasonable business efforts to manufacture
and deliver to Customer the quantity of acceptable Plungers ordered by Customer
each month up to an average of eight million three hundred thirty-three thousand
three hundred thirty-three (8,333,333) Plungers per month. Beginning on the
Commencement Date, Sherwood-D&G and Customer shall cooperate to develop mutually
acceptable Specifications for the Plungers that will allow the greatest yield
from Sherwood-D&G's plunger mold while functioning in a reasonably acceptable
manner in Customer's assembly process without sacrificing the quality of the
finished product. Specifically, Sherwood-D&G shall exert its reasonable business
efforts to refine its plunger mold and manufacturing process for the Plungers to
increase its capacity and capability
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to manufacture acceptable Plungers and Customer shall exert its reasonable
business efforts to refine its syringe assembly process to accept such Plungers.
2(d) Customer may place its orders on Customer's purchase order forms,
specifying shipping instructions and destinations. Any terms and conditions
included in any such purchase order form of Customer or any acknowledgment or
other form of Sherwood-D&G shall be of no force and effect and shall form no
part of the agreement between the parties. Minimum order quantities are ten
million (10,000,000) Component Sets or Plungers. Minimum shipment quantities are
two million (2,000,000) Component Sets or Plungers. Sherwood-D&G shall satisfy
all purchase orders promptly after receipt of Customer's written purchase order
or, except for the quantities of Products set forth in Section 2(b) which may
not be objected to or rejected, shall object to or reject any such purchase
order within fifteen (15) days after receipt thereof. Any purchase order for the
Products received by Sherwood-D&G and not objected to or rejected within fifteen
(15) days after receipt shall be deemed accepted by Sherwood-D&G. Delivery shall
be required by Customer no sooner than ninety (90) days from receipt of
Customer's written purchase order. Customer shall provide Sherwood-D&G with six
(6) month non-binding forecasts of purchases of the Products sixty (60) days in
advance of each six (6) month period throughout the term of this Agreement.
Within thirty (30) days of receipt of such non-binding forecasts from Customer,
Sherwood-D&G shall notify Customer in writing whether, in its sole judgment, it
has available production capacity to supply Customer with more than twenty-five
million (25,000,000) Component Sets during the applicable six (6) month period
covered by such forecast. If Customer desires to purchase from Sherwood-D&G in
excess of twenty-five million (25,000,000) Component Sets during such six (6)
month period, it shall, within fifteen (15) days of receipt of the notice of
sufficient available capacity from Sherwood-D&G, issue to Sherwood-D&G binding
purchase orders for such additional Component Sets up to the available capacity
set forth in Sherwood-D&G's notice. The parties agree that said purchase orders
for such additional Component Sets shall be binding on both Sherwood-D&G and
Customer for the quantities set
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forth therein. All purchase orders and forecasts shall be sent to Sherwood-D&G
in accordance with Section 10 hereof.
SECTION 3. TERM OF AGREEMENT
3(a) This Agreement shall commence on the effective date first written
above (the "Commencement Date") and, unless sooner terminated or extended in
accordance with the provisions of Sections 3(b) or 6 hereof, shall continue for
a period of five (5) years (the "Initial Term") from the initial delivery and
acceptance of commercial quantities of Products.
3(b) In the event that Sherwood-D&G exercises the option set forth in
Section 9 hereof to enter into the Non-Exclusive License Agreement (U.S.), the
Initial Term shall continue from the Commencement Date until the greater of (A)
five (5) years or (B) the sooner to occur of (i) market introduction and
commercial sale by Sherwood-D&G of Licensed Product (as defined in the
Non-Exclusive License Agreement (U.S.), or (ii) two and one-half (2-1/2) years
from execution of the Non-Exclusive License Agreement (U.S.) by both of the
parties hereto.
SECTION 4. PRICE AND PAYMENT TERMS
4(a) For all Products purchased from Sherwood-D&G for delivery to Customer
during the first twelve (12) months of the Initial Term, Customer shall pay to
Sherwood-D&G the price for each of the Products set forth in Exhibit A
(hereinafter referred to as the "Product Purchase Price"), FOB Sherwood-D&G's
manufacturing facility. All prices are exclusive of sales, use and other taxes.
All export, import and other duties, tariffs and customs shall be paid by
Customer. If exemption is claimed by Customer from any of the foregoing,
Customer shall furnish to Sherwood-D&G satisfactory proof of such exemption. For
the first fifty million (50,000,000) Components Sets and Plungers ordered by
Customer, Sherwood-D&G shall maintain an inventory of a ninety (90) day supply
of such Products (or such lesser amount as may be requested from
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time to time by Customer) until needed by Customer, with payment terms of net
sixty (60) days from date of shipment. Thereafter, payment terms are net thirty
(30) days from date of shipment.
4(b) Sherwood-D&G shall have the right to revise the prices set forth in
Exhibit A not more often than once during any twelve (12) month period
commencing twelve (12) months after the Commencement Date, by giving Customer
thirty (30) days written advance notice. Such revisions in price shall not
exceed the actual changes in the cost to Sherwood-D&G for parts, materials,
labor and overhead directly related to the manufacture, packaging and labeling
of the Products, utilizing generally accepted accounting principles, but in no
event will any price increase for any Product exceed five percent (5%) in any
twelve (12) month period. Customer may, at its option, request verification of
such increases by independent certified public accountants, reasonably
acceptable to Sherwood-D&G. In no event shall any such upward price revision
take into account any amount with respect to any lease payments or amortization
charges or any increase in maintenance, overhead or any other cost or expense
relating to the plunger mold leased by Sherwood-D&G from Customer to make the
Plunger.
4(c) Customer will be charged and will pay to Sherwood-D&G a surcharge
equal to fourteen and nine hundred twenty-five thousandths percent (14.925%) of
the invoice price of Products ordered and received by Customer up to a maximum
invoiced amount of Six Million Seven Hundred Thousand Dollars ($6,700,000) of
Product purchases. Sherwood-D&G will give Customer a discount on Product
Purchase Prices by a credit equal to the amount of the surcharge on invoiced
amounts up to a maximum aggregate of Three Million Three Hundred Fifty Thousand
Dollars ($3,350,000) of Product purchases. No surcharge shall be applied to
invoiced amounts in excess of an aggregate amount of Six Million Seven Hundred
Thousand Dollars ($6,700,000) and no credits shall be applied to invoiced
amounts in excess of an aggregate amount of Three Million Three Hundred Fifty
Thousand Dollars ($3,350,000). In no event shall
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Customer pay or be required to pay more than Five Hundred Thousand Dollars
($500,000) in surcharges net of the above credits.
SECTION 5. WARRANTIES, COVENANTS AND INDEMNIFICATION
5(a) Sherwood-D&G warrants that it has title to all Products sold to
Customer hereunder free of all liens and encumbrances of any kind or nature.
Sherwood-D&G further warrants and guarantees that at the time of shipment of
Products to Customer pursuant to Customer's purchase orders, the Products shall
conform to the Specifications and shall have been manufactured in accordance
with all applicable federal, state and local laws, including the Federal Food,
Drug and Cosmetic Act, as amended, and the regulations issued thereunder.
5(b) The parties represent and warrant that they have the full right to
enter into this Agreement and that this Agreement does not conflict with any
other agreements so long as the other terms of this Agreement are met.
5(c) THE FOREGOING WARRANTIES OF THE PARTIES ARE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. Except as
otherwise provided herein, in no event will either party be liable for any
indirect, special, consequential, incidental or contingent damages in connection
with the purchase, use or sale of the Products. Notwithstanding anything to the
contrary contained herein, in the event that Sherwood-D&G fails to deliver to
Customer Products meeting the Specifications, on a timely basis, as required by
any Customer purchase orders delivered to and accepted by Sherwood-D&G pursuant
to this Agreement, Customer shall be entitled, in addition to any other remedy
available to it, to recover the profits that Customer would have made on the
sale of single-use syringes that would have incorporated such Products had such
Products been delivered.
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5 (d) Upon notification by Customer to Sherwood-D&G that there has been or
may be a claim threatened or suit for damages instituted against Customer for
personal injury or property damage related to use of the Products, Sherwood-D&G,
its successors and assigns shall defend, indemnify and save harmless Customer,
its employees, officers, subsidiaries and affiliated companies, their successors
and assigns, against such claim or suit if based upon or arising out of an
alleged defect in the Product, unless such claim or suit is based upon or arises
out of an alleged defect (i) in the design of the Product, provided that the
design of the Product (less the Plunger) is not defective as used by
Sherwood-D&G for its standard line of hypodermic syringes, or (ii) created by
the combination of the Component Sets with the Plunger, or (iii) caused by the
assembly process in which the Component Sets and Plungers are assembled into
complete single-use syringes; or is otherwise based upon or arises out of any
negligent or intentional acts or omissions of Customer. It shall be prima facie
evidence that a Product is defective if it fails to meet the Specifications.
Sherwood-D&G shall maintain comprehensive General Liability Insurance, including
contractual and product liability, in amounts not less than $1,000,000 per
occurrence and $3,000,000 annual aggregate on a date of occurrence basis (not a
date of claim basis). Upon request, Sherwood-D&G shall submit a certificate
evidencing such insurance to Customer,, which certificate shall provide that the
insurance policy evidenced thereby may not be canceled or reduced in amount
without thirty (30) days prior notification to Customer. In the event of any
claim or suit arising under this indemnity, prompt notice thereof shall be given
to Sherwood-D&G, which shall have the right to conduct and control the defense
in respect thereto, but Customer may have counsel present at its own expense and
shall be entitled to participate in the defense. Customer shall cooperate with
Sherwood-D&G in such defense as requested by Sherwood-D&G, at the expense of
Sherwood-D&G. If Sherwood-D&G shall timely fail or refuse
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to assume such defense, Customer may employ counsel with respect thereto and all
reasonable fees and expenses of such counsel shall be paid by Sherwood-D&G.
5 (e) Upon notification by Sherwood-D&G to Customer that there has been or
may be a claim threatened or suit for damages instituted against Sherwood-D&G
for personal injury or property damage related to use of the Products, Customer,
its successors and assigns shall defend, indemnify and save harmless
Sherwood-D&G, its employees, officers, subsidiaries and affiliated companies,
their successors and assigns, against such claim or suit if based upon or
arising out of an alleged defect (i) in the design of the Product, provided that
the design of the Product (less the Plunger) is not defective as used by
Sherwood-D&G for its standard line of hypodermic syringes, or (ii) created by
the combination of the Component Sets with the Plunger, or (iii) caused by the
assembly process in which the Component Sets and Plungers are assembled into
complete single-use syringes; or is otherwise based upon or arises out of any
negligent or intentional acts or omissions of Customer. Customer shall maintain
comprehensive General Liability Insurance, including contractual and product
liability, in amounts not less than One Million Dollars ($1,000,000.00) per
occurrence and Three Million Dollars ($3,000,000.00) annual aggregate on a
date-of-occurrence basis (not a date of claim basis). Upon request, Customer
shall submit a certificate evidencing such insurance to Sherwood-D&G, which
certificate shall provide that the insurance policy evidenced thereby may not be
canceled or reduced in amount without thirty (30) days prior notification to
Sherwood-D&G. In the event of any claim or suit arising under this indemnity,
prompt notice thereof shall be given to Customer, which shall have the right to
conduct and control the defense in respect thereto, but Sherwood-D&G may have
counsel present at its own expense and shall be entitled to participate in the
defense. Sherwood-D&G shall cooperate with Customer in such defense as requested
by Customer, at the expense of Customer. If Customer shall timely fail or refuse
to assume such
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defense, Sherwood-D&G may employ counsel with respect thereto and all reasonable
fees and expenses of such counsel shall be paid by Customer.
5(f) Customer, its successors, assigns and legal representatives, shall
forever defend, indemnify and save harmless Sherwood-D&G, its employees and
officers, their successors, assigns and customers against all damages, claims,
demand, seizures, injunctions, judgments, third party attorneys' fees and costs
of any kind for any actual or alleged infringement, including willful
infringement, of any patent, registered design, copyright or other industrial
property right, including rights arising from confidential disclosures or
relationships, because of the manufacture, use and/or sale of the Plunger or the
combination by or for Customer of Component Sets with the Plunger or any other
components or devices, but not with respect to the Component Sets per se. In the
event of any claim or suit arising under this indemnity, prompt notice thereof
shall be given to Customer, which shall have the right to conduct and control
the defense in respect thereto, but Sherwood-D&G may have counsel present at its
own expense and shall be entitled to participate in the defense. Sherwood-D&G
shall cooperate with Customer in such defense as requested by Customer, at the
expense of Customer.
5(g) Sherwood-D&G, its successors, assigns and legal representatives, shall
forever defend, indemnify and save harmless Customer, its employees and
officers, their successors, assigns and customers against all damages, claims,
demand, seizures, injunctions, judgments, third party attorneys' fees and costs
of any kind for any actual or alleged infringement, including willful
infringement, of any patent, registered design, copyright or other industrial
property right, including rights arising from confidential disclosures or
relationships, because of the manufacture, use and/or sale of the Component Sets
per se, but not with respect to the Plunger or to any combination of the
Component Sets with the Plunger or with any other components or devices. In the
event of any claim or suit arising under this indemnity, prompt notice thereof
shall be given
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to Sherwood-D&G, which shall have the right to conduct and control the defense
in respect thereto, but Customer may have counsel present at its own expense and
shall be entitled to participate in the defense. Customer shall cooperate with
Sherwood-D&G in such defense as requested by Sherwood-D&G, at the expense of
Sherwood-D&G.
SECTION 6. TERMINATION
6 (a) Either party may terminate this Agreement by giving written notice to
the other party in the following circumstances:
(i) following thirty (30) days notice in the event the other party
commits any material breach of any obligation of this Agreement
which is not cured within said thirty (30) day period; or
(ii) immediately upon giving notice in the event a petition of
bankruptcy is filed against the other party which is not vacated
or stayed within ninety (90) days, or in the event the other
party makes a general assignment for the benefit of creditors, or
a receiver is appointed for the other party.
6 (b) Termination of this Agreement shall not affect any rights or
obligations accrued prior to the effective date of such termination, including,
but not limited to, Customer's obligation to pay for Products ordered and
shipped to Customer. Notwithstanding the foregoing, the right to exercise the
option pursuant to Section 9 hereof shall be suspended immediately upon the
giving of notice of termination by Customer pursuant to this Section 6 and such
option shall terminate and cease to be exercisable on the thirtieth (30th) day
after the date of such notice unless Sherwood-D&G shall have cured the breach or
other cause for such notice of termination. The provisions set forth in Section
5 hereof shall survive termination of this Agreement. The rights provided in
this Paragraph shall be in addition and without prejudice to any other rights
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which the parties may have with respect to any breach or violation of the
provisions of this Agreement.
6(c) Waiver by either party of a single default or breach or of a
succession of defaults or breaches shall not deprive such party of any right to
terminate this Agreement pursuant to the terms hereof upon the occasion of any
subsequent default or breach.
SECTION 7. RETURNS AND CREDITS
Sherwood-D&G shall furnish Customer with a written certificate for each lot
of Products shipped to Customer, stating that the Products in that lot,
identified by lot number, conform to the Specifications. If the Products are not
of United States origin, Sherwood-D&G shall attempt, but shall not be required,
to inform Customer of the country or countries of manufacture. Customer, within
thirty (30) days of receipt, shall have the right to reject any lots or units
which, by inspection, fail to meet the Specifications, and to receive credit
therefor. Rejected lots of Products will be shipped to Sherwood-D&G's
manufacturing facility with an identified rejection criteria, freight collect.
SECTION 8. FORCE MAJEURE
If either party is prevented from performing any of its obligations
hereunder (other than the payment of money) for unforeseeable and unavoidable
causes beyond its control and without its fault or negligence, which wholly or
partially prevent the manufacture, delivery, transportation, receipt, sale or
use of the Products, including but not limited to fire, strike, explosion, flood
or other acts of God, the inability of a vendor to supply approved raw materials
(unless caused by the negligence or the intentional acts or omissions of the
party seeking to avail itself of this provision) or any act or order of any
governmenta1 agency, such party shall not be liable to the other party for
breach of this Agreement, provided the party so affected gives prompt notice of
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such cause to the other party and exercises due diligence to remove the cause as
soon as reasonably practical.
SECTION 9. OPTION
9(a) In consideration for the transfer by Sherwood-D&G to Customer of all
of Sherwood-D&G's right, title and interest in and to the production mold for
the Plunger, including the mold inserts and the mold base, as evidenced by the
Bill of Sale attached hereto as Exhibit D, Customer grants to Sherwood-D&G an
option, exercisable (subject to Section 6(c) hereof) at any time prior to the
sooner to occur of termination of this Agreement or three and one-half (3-1/2)
years from the Commencement Date (hereinafter referred to as the "Option
Period"), to enter into the Non-Exclusive License Agreement (U.S.) attached
hereto as Exhibit C. Subject to Section 6(c) hereof, Sherwood-D&G may exercise
its option to enter into the Non-Exclusive License Agreement (U.S.) at any time
during the Option Period by executing a copy of same and returning it to
Customer together with the applicable license fee in accordance with Section 3
of the Non-Exclusive License Agreement (U.S.). Upon receipt of the signed
Non-Exclusive License Agreement (U.S.) and payment in full of the applicable
license fee, Customer will execute the Non-Exclusive License Agreement (U.S.)
and return a fully executed copy to Sherwood-D&G.
9(b) If, during the period beginning eighteen (18) months after the
Commencement Date and ending on expiration of the Option Period, Customer
receives a bona fide written offer from an unrelated third party to exclusively
license the Licensed Patent Rights (as defined in the Non-Exclusive License
Agreement (U.S.)), Customer shall notify Sherwood-D&G of the receipt of said
offer by providing a true copy thereof to Sherwood-D&G. Upon receipt of said
written offer, Sherwood-D&G shall, within thirty (30) days of receipt, notify
Customer of its intent either:
(i) to exercise the option to enter into the Non-Exclusive License
Agreement (U.S.) pursuant to Section 9(a) hereof; or
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(ii) to enter into an exclusive license with Customer on the same terms as
set forth in the offer (but including the Movern Patents if not
included in the bona fide offer); or
(iii) to terminate its option rights hereunder in consideration of the
payment by Customer to Sherwood-D&G of the greater of One Hundred
Thousand Dollars ($100,000.00) or the balance of the surcharge amount
payable under Section 4(c) hereof as of the date of Sherwood-D&G's
notice to Customer hereunder.
If Sherwood-D&G elects Section 9(b)(i), it shall execute the Non-Exclusive
License Agreement (U.S.) and return it to Customer with the applicable license
fee in the manner set forth in Section 9(a); if Sherwood-D&G elects Section
9(b)(ii), the parties shall, as soon as practicable and in any event prior to
the expiration of the bona fide offer, negotiate and execute an exclusive
license agreement on the same terms as set forth in the third-party offer; or if
Sherwood-D&G elects Section 9(b)(iii), the parties shall agree on the balance of
the surcharge amount payable under Section 4(c) hereof and that amount, but not
less than One Hundred Thousand Dollars ($100,000.00), shall be paid to
Sherwood-D&G within ten (10) days of Sherwood-D&G's election, and the option of
Section 9 shall terminate and be of no further force and effect.
SECTION 10. DISTRIBUTION AGREEMENT
Sherwood-D&G and Customer agree to negotiate in good faith the terms of a
non-exclusive distribution agreement to become effective after the exercise of
the option and immediately upon Sherwood-D&G's introduction to the market and
commercial sale of a single-use syringe under the Non-Exclusive License
Agreement (U.S.). The parties shall commence negotiations regarding the terms of
the distribution agreement immediately upon execution of this
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Agreement and shall diligently and in good faith negotiate such terms in an
effort to reach agreement with respect thereto within thirty (30) days after the
date hereof.
SECTION 11. NOTICES
All notices specified in this Agreement shall be given in writing and shall
be effective when either served by personal delivery or facsimile transmission,
or on the day following timely delivery for next-day delivery to a national
overnight courier service guaranteeing next-day delivery, or five (5) days after
being addressed to the other party at the address specified below and deposited
first class mail. Unless otherwise specified in accordance with the provision of
this Section, the addresses of the parties shall be:
Univec, Inc.
999 Franklin Avenue
Garden City, New York 11530
Attention: Joel Schoenfeld
Facsimile No. 516/739-3343
and
Sherwood Medical Company
1915 Olive Street
St. Louis, Missouri 63103
Attention: Vice President, OEM Sales
Facsimile No. 314/241-0232
SECTION 12. MISCELLANEOUS PROVISIONS
12(a) This document constitutes the entire Agreement between the parties,
there being no warranties, representations or conditions of any kind or nature
between the parties except as set forth herein. This Agreement may not be
changed or modified except by an instrument in writing duly signed by the
parties hereto. The December 22, 1994 OEM Supply Agreement between the parties
is hereby expressly terminated and canceled, together with all rights and
obligations of the parties with respect thereto. The parties hereto, their
respective employees, officers, directors, subsidiaries, successors and assigns,
hereby waive, release and discharge
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each other, and any of their past, present or future shareholders, employees,
officers, directors, parents, subsidiaries, affiliates, successors, assigns,
agents or representatives, from any and all claims, liabilities, damages and
demands whatsoever, in law or in equity, known or unknown, arising out of the
December 22, 1994 OEM Supply Agreement, all modifications thereto, or any other
prior agreement between the parties, oral or written, express or implied,
relating to the supply by Sherwood-D&G to Customer of the Products or any other
products. This Agreement supersedes all prior agreements and arrangements,
written or oral, between the parties hereto with respect to the subject matter
hereof.
12(b) This Agreement may not be assigned by either party without the
written consent of the other except to a subsidiary or in the case of a sale or
transfer of all or substantially all of its business by way of acquisition,
consolidation or merger. Notwithstanding the foregoing, this Agreement shall be
binding upon the respective successors and assigns of either party hereto.
12(c) The laws of the State of New York, without regard to principles of
conflicts of laws shall govern the interpretation and all disputes arising out
of this Agreement.
12(d) Nothing contained in this Agreement shall permit either party to
incur any debts or liabilities on behalf of the other party except as
specifically provided in this Agreement. The parties are and will remain at all
times independent contractors, and no agency or employment relationship exists
between them.
12(e) The headings and captions contained herein are for reference only and
shall not constitute a substantive part of this Agreement.
12(f) If any part of this Agreement is rendered void, invalid or
unenforceable by a court of competent jurisdiction after the expiration or
waiver of all rights to appeal, such shall not affect the validity or
enforceability of any other provisions of this Agreement except those where the
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invalid or unenforceable provisions comprise an integral part of or are
otherwise clearly inseparable from the intent and purpose of this Agreement. In
the event any provision is held invalid or unenforceable, the parties will
attempt to agree upon a valid and enforceable provision which shall be a
reasonable substitute for such invalid or unenforceable provision in light of
the intent of this Agreement and, upon so agreeing, shall incorporate such
substitute provision in this Agreement.
12(g) The parties agree that the prevailing party in any litigation under
this Agreement shall be entitled to recover, as part of its judgment, its
reasonable attorneys' fees and any related costs and expenses.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate originals by their duly authorized representatives.
CUSTOMER: UNIVEC, INC. SHERWOOD MEDICAL COMPANY
d/b/a SHERWOOD - DAVIS & GECK
By: /s/ Joel Schoenfeld By: /s/ Peter DiGasbarro
-------------------------------- ---------------------------
(Signture) (Signature)
Joel Schoenfeld Peter DiGasbarro
-------------------------------- ---------------------------
(Print Name) (Print Name)
Title: C.E.O Sr VP Marketing
------------------------------ ---------------------------
Date: 6/7/96 5/31/96
------------------------------ ---------------------------
H:\NANCY\AGMT\UNIVEC.CLN
<PAGE>
SL-1888
5/29/96
EXHIBIT A
PRODUCTS AND PRICING
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Product
Products*** Purchase Price*
- ---------------------------------------------------------------------------------------
<S> <C>
5551-791600 1cc barrel, private label with preattached 27ga x 1/2"
cannula and sheath, non-sterile, bulk packed #
- ---------------------------------------------------------------------------------------
5551-761025 or 5551-500019 1cc plunger tip, non-sterile, bulk packed
(with or without silicone) #
- ---------------------------------------------------------------------------------------
1cc Tuberculin, Luer Slip, barrel only, private labor, non-sterile,
bulk packed
#
Hooded needle, 20-27ga x 1/2"-1", non-sterile, bulk packed
- ---------------------------------------------------------------------------------------
Univec design single-use Plungers, non-sterile, bulk packed #
- ---------------------------------------------------------------------------------------
</TABLE>
* A one-time die cost of $1,500.00 will be paid by Customer for each private
label barrel.
** 1" cannula and other gauges and cannula lengths will be made available to
Customer when Sherwood-D&G has production capacity and capability to
manufacture. Sherwood-D&G currently has the capacity to also manufacture 28
and 29 gauge by 1/2" cannula. (Product Purchase Price may vary.)
*** 1cc sliding sleeve safety syringe barrel, private label, non-sterile, bulk
packed, may be added as a Product provided that Sherwood-D&G has production
capacity and capability to manufacture and the parties agree on the Product
Purchase Price therefor.
- ---------
# Confidential treatment has been sought by the Company for the omitted
portions and such material has been filed separately with the Commission.
<PAGE>
SL-1888
5/29/96
EXHIBIT B
SPECIFICATIONS
Barrels, Hooded Needles and Plunger Tip - See attached.
Plunger - To be mutually agreed upon by the parties and attached hereto.
<PAGE>
SCHEMATIC FOR EPOXY 1 CC TUBERCULIN SYRINGE*
- ---------
* Confidential treatment has been sought by the Company for the omitted
portions and such material has been filed separately with the Commission.
<PAGE>
SCHEMATIC FOR EPOXY 1 CC INSULIN SYRINGE*
- ---------
* Confidential treatment has been sought by the Company for the omitted
portions and such material has been filed separately with the Commission.
<PAGE>
EXHIBIT B
QUALITY ASSURANCE CLASSIFICATION CD 1003
SHERWOOD MEDICAL OF DEFECTS MANUAL REV O
NORFOLK NEBRASKA COMPONENTS DATE O5/23/96
- --------------------------------------------------------------------------------
DOCUMENT COORDINATOR Q. A. MANAGER EFFECTIVE
DATE
- --------------------------------------------------------------------------------
TITLE: UNIVEC EPOXY SYRINGE SUBASSEMBLY (B/C/S)
I. VISUAL EVALUATION
------------------
Zero magnification unless otherwise specified
CL-1 Defects 0.065% A.Q.L.
--------------------------
1. Split or hole in sheath which may allow loss of sterility
CL-2 Defects 0.250% A.Q.L.
--------------------------
1. Water in assembled unit
2. Blood on syringe assembly
3. Missing point
4. Needle piercing sheath
5. Damaged or hook on point
6. Graduation printing error which will cause a volume error in excess of
+/-.02ml or +/-2 units (insulin only)
CL-3 Defects 0.400% A.Q.L.
--------------------------
1. Incomplete or incorrect assembly
2. Damaged product components (non-functional)
3. Flash which renders unit unserviceable
4. Graduation printing
a. Printing not legible
b. High or low graduation lines which cause volume to be out of
specification
c. Complete lack of printing of numbers; i.e. 1, 2, etc.
d. Non-printing of two or more graduations
5. Hole, split or crack in barrel which permits leakage
6. Impossible to remove sheath from syringe barrel
7. Epoxy flake on free length (attached)
8. Split cannula
9. Bent cannula
10. Primary grind only
11. Burr on lancet point
12. Mixed needle lengths or gage
13. Corrosion on cannula
14. Any defect visually obnoxious; i.e. hair, insect, etc.
15. Foreign material in fluid pathway
16. Missing, incorrect or illegible lot number of product identification -
packaging material
CL-4 Defects 1.500% A.Q.L.
--------------------------
1. Foreign material on outside of syringe
2. Damage components (functional but less than desired)
3. Fingernail flash exceeds 1/32" or parting line flash exceeding 1/16"
total
4. Non-printing of one graduation
5. Epoxy spillover on cannula not to exceed 1/16"
6. Printing smeared but legible
7. Globs (hardened lubricant) on cannula
8. Light burr on lancet point
1
UNAPPROVED COPY
<PAGE>
EXHIBIT B
QUALITY ASSURANCE CLASSIFICATION CD 1003
SHERWOOD MEDICAL OF DEFECTS MANUAL REV O
NORFOLK NEBRASKA COMPONENTS DATE O5/23/96
CL-5 Defects 6.500% A.Q.L.
--------------------------
1. Poor workmanship
2. Excessive lubricant, droplets or pools visible through the barrel
3. Inclusions in parts
4. Fractures exceeding 5/8" in length (sheath only)
5. Incomplete epoxy fill in barrel (recessed below flush)
6. Excessive epoxy that migrates over half the distance of the rib
II. PHYSICAL EVALUATION
-------------------
CL-1 Defects 6.500% A.Q.L.
--------------------------
1. Pull test of cannula below three (3) pounds
CL-2 Defects 0.250% A.Q.L.
--------------------------
1. None defined
CL-3 Defects 0.400% A.Q.L.
--------------------------
1. Leakage in fluid pathway
2. Clogged or partially clogged needle
3. Cleanliness of neddle: O.D. of cannula
4. Pull test of cannula below five {5) pounds
5. No lubricant on cannula
CL-4 Defects 0.500% A.Q.L.
--------------------------
1. Pull test of sheath from barrel exceeds (7) seven pounds
2. Cannula does not meet straightness specification
3. Constriction
4. Partial lubricant on cannula
CL-5 Defects 6.500% A.Q.L.
---------------------------
1. Long or short cannula free length
END OF PROCEDURE
UNAPPROVED COPY
2
<PAGE>
EXHIBIT B
[SCHEMATIC OF BARREL-LUER SLIP]
<PAGE>
EXHIBIT B
QUALITY ASSURANCE CLASSIFICATION CD 1005
SHERWOOD MEDICAL OF DEFECTS MANUAL REV O
NORFOLK NEBRASKA COMPONENTS DATE O5/23/96
DOCUMENT COORDINATOR Q A MANAGER EFFECTIVE
DATE
TITLE: UNIVEC REGULAR LUER TIP PRINTED BARREL
I. VISUAL EVALUATION
------------------
(Zero Magnification Unless Otherwise Specified)
CL-1 Defects 0.065% A.Q.L
--------------------------
1. None Defined
CL-2 Defects 0.250% A.Q.L.
--------------------------
l. Water in units
2. Blood in units
CL-3 Defects 0.400% A.Q.L.
--------------------------
1. Incomplete or incorrect assembly
2. Damaged product components (non-functional)
3. Flash which renders unit unserviceable.
4. Graduation printing
4.1 Printing not legible
4.2 High or low graduation lines which cause volume to be out of
specification
4.3 Complete lack of printing of numbers; i.e. 1, 2, etc.
4.4. Non-printing of two or more graduations
5. Hole, split or crack in barrel which permits leakage
6. Any defect visually obnoxious; i.e. hair, insect, etc. Foreign
material in fluid pathway
7. Missing, incorrect or illegible lot number or product identification -
packaging material
CL-4 Defects 1.500% A.Q.L.
--------------------------
1. Foreign material on outside of barrel
2. Damaged component (functional but less than desired)
3. Fingernail flash exceeds 1/32" or parting line flash exceeding 1/16"
total
4. Absence of top line or one whole graduation line
5. Printing clarity or numerals and lettering and graduations must be
visible and legible at 18". Questionable unreadable printing will be
judged with a plunger rod inside the barrel
6. Crazing visible at 18"
7. The printing of the unit of measurement must be in full evidence (ml,
cc, oz, etc.)
CL-5 Defects 6.500% A.Q.L.
--------------------------
1. Poor workmanship
2. Printing not in line with flat of flange
3. Printing smeared but legible
UNAPPROVED COPY
1
<PAGE>
EXHIBIT B
QUALITY ASSURANCE CLASSIFICATION CD 1005
SHERWOOD MEDICAL OF DEFECTS MANUAL REV O
NORFOLK NEBRASKA COMPONENTS DATE O5/23/96
II. PHYSICAL EVALUATION
-------------------
CL-1 Defects 0.065% A.Q.L.
--------------------------
1. None Defined
CL-2 Defects 0.250% A.Q.L.
--------------------------
1. None Defined
CL-3 Defects 0.400% A.Q.L.
--------------------------
1. Printing on syringe barrel does not pass the ink permanency test
2. Syringe printing volume check exceeds the +/- 1.5% of syringe volume
plus 2.0% expelled volume at each major graduation (audit)
3. Failed leak test ( standard luer taper)
CL-4 Defects 1.500% A.Q.L.
--------------------------
1. None defined
CL-5 Defects 6.500% A.Q.L.
---------------------------
1. None defined
END OF PROCEDURE
UNAPPROVED COPY
2
<PAGE>
EXHIBIT B
[SCHEMATIC OF LCC PLUNGER TIP]
<PAGE>
EXHIBIT B
QUALITY ASSURANCE CLASSIFICATION CD 1004
SHERWOOD MEDICAL OF DEFECTS MANUAL REV 0
NORFOLK NEBRASKA COMPONENTS DATE 05/23/96
UNAPPROVED COPY
- --------------------------------------------------------------------------------
DOCUMENT COORDINATOR Q.A. MANAGER EFFECTIVE
DATE
- --------------------------------------------------------------------------------
TITLE: UNIVEC SYRINGE RUBBER PLUNGER TIP
I. VISUAL EVALUATION
-----------------
Zero magnification unless otherwise specified
CL-1 Defects 0.065% A.Q.L.
-------------------------
1. None defined
CL-2 Defects 0.250% A.Q.L.
-------------------------
1. None defined
CL-3 Defects 0.400% A.Q.L.
-------------------------
1. Cleanliness - foreign matter or particles, grease, etc.
2. Malforms, voids and no fills (applicable to face and first ring)
3. Splits and pin holes
4. Trim in excess of ring O.D.
5. Water on units
6. Any defect visibly obnoxious; i.e. hair, insects, etc.
7. Concentricity
CL-4 Defects 1.500% A.Q.L.
-------------------------
1. Missing, incorrect or illegible lot number or product
identification - packaging material
CL-5 Defects 6.500% A.Q.L.
-------------------------
1. Poor workmanship
2. Inclusions
II. PHYSICAL EVALUATION
-------------------
CL-1 Defects 0.065% A.Q.L.
-------------------------
1. None defined
CL-2 Defects 0.250% A.Q.L.
-------------------------
1. None defined
CL-3 Defects 0.400% A.Q.L.
-------------------------
1. Leakage of water beyond the first ring during leak test. Test
conducted when visual examination is not conclusive
2. Concentricity exceeds .020 T.I.R. (dimensional check to be
conducted when visual examination is not conclusive)
CL-4 Defects 1.500% A.Q.L.
-------------------------
1. None defined
CL-5 Defects 6.500% A.Q.L.
-------------------------
1. None defined
END OF PROCEDURE
<PAGE>
EXHIBIT B
[SCHEMATIC OF M500E HOODED NEEDLE]
<PAGE>
EXHIBIT B
|----------------------------------------------------
[LOGO] SHERWOOD MEDICAL |TITLE |SPEC. NO. | REV.
CLASSIFICATIONS OF | |CD-2114 | B
DEFECTS |CLASSIFICATIONS OF DEFECTS |SHEET 1 of 3 |
| EPOXY HOODED NEEDLES |--------------------
| |ISSUE
| |DATE 9/19/88
- -------------------------------------------------------------------------------
Compiled by: | APPROVALS AND DATE
DeLand Mfg. |-----------------------------------------------------------
7-22-88 | 7-27-88 | 8-16-88 | 8-24-88 | |
| | | | |
J. Hansen | [illegible] | [illegible] | [illegible] | |
- -------------------------------------------------------------------------------
I. VISUAL EVALUATION (ZERO MAGNIFICATION UNLESS OTHERWISE SPECIFIED)
-----------------------------------------------------------------
CL-1 DEFECTS. 0.065% A.Q.L.
---------------------------
1. Split or hole in sheath which may allow loss of sterility
CL-2 DEFECTS: 0.25% A.Q.L.
---------------------------
1. Blood on needle assembly
2. Needle piercing sheath
3. Missing point
4. Hook or severe point damage
5. Reversed cannula
6. No visible epoxy
CL-3 DEFECTS: 0.4% A.Q.L.
--------------------------
1. Incorrect or incomplete assembly
2. Damaged product components (non-functional)
3. Split cannula
4. Mixed cannula
5. Bent cannula
6. Corrosion on cannula
7. Any defect visibly obnoxious i.e., hair, insect, etc.
8. Slivers, loosely attached metallic material or debris in cannula bevel
or inside hub
9. Preliminary grind only
10. Burr on lancet point
11 Incomplete or geometrically unacceptable grind
12. Hee1 of bevel improperly dulled
CL 4 DEFECTS: 1.5% A.Q.L.
--------------------------
1. Foreign material on outside of hub or cannula
2. Damaged components (functional but less than desired)
3. Light burr on lancet point
4. Globs (hardened lubricant)
5. Mixed bevels
6. Attached epoxy splatter or solid above 3/32" on cannula free length
(1" free length or less)
RELEASE FOR PRODUCTION
THIS PRINT INCORPORATES THE LATEST APPROVED
SPECIFICATIONS AND SUPERSEDES ALL PREVIOUS ISSUES
NOTICE: SHERWOOD CONFIDENTIAL
<PAGE>
EXHIBIT B
|----------------------------------------------------
[LOGO] SHERWOOD MEDICAL |TITLE |SPEC. NO. | REV.
CLASSIFICATIONS OF | |CD-2114 | B
DEFECTS |CLASSIFICATION OF DEFECTS |SHEET 3 of 3 |
| EPOXY HOODED NEEDLES |--------------------
| |ISSUE
| |DATE 9/19/88
- -------------------------------------------------------------------------------
REVISION | RELEASE NO. | DESCRIPTION | APPROVALS
- ----------|-----------------|------------------------------------|-------------
| | |
- | DR-4331 |RELEASED TO PRODUCTION | G.E. 9-19-88
| | |
A | DR-4742 |DELETED III. BIOLOGICAL EVALUATION | G.E. 3-23-91
| | |
B | DR-4840 |UNIVERSAL VISUAL EVALUATION | [ILLEGIBLE]
| |1.CL 4 ITEM 6 WAS:EPOXY SPLATTER OR | 8-20-91
| | SOLID ABOVE 3/32" ON CANNULA FREE|
| | LENGTH (ATTACHED) |
| |2.ADDED CL 5 ITEM 6 |
| | |
| | |
| | PRELIMINARY |
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USED ON USED ON USED ON
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT B
|----------------------------------------------------
[LOGO] SHERWOOD MEDICAL |TITLE |SPEC. NO. | REV.
CLASSIFICATIONS OF | |CD-2114 | B
DEFECTS |CLASSIFICATION OF DEFECTS |SHEET 2 of 3 |
| EPOXY HOODED NEEDLES |--------------------
| |ISSUE
| |DATE 9/19/88
- -------------------------------------------------------------------------------
CL-5 DEFECTS: 6.5% A.Q.L.
------------
1. Poor workmanship
2. Fractures in sheath exceeding 5/8" in length
3. Inclusions in plastic parts
4. Foreign material on outside of sheath
5. Excessive epoxy on outside of hub
6. Attached epoxy splatter or solid above 3/32" on cannula free length
(1 1/4 free length or longer)
II. PHYSICAL EVALUATION
---------------------
CL-1 DEFECTS: 0.065% A.Q.L.
-------------
1. Pull test of cannula to hub below three (3) pounds
CL-2 DEFECTS: 0.25% A.Q.L.
-------------
NONE
CL-3 DEFECTS: 0.4% A.Q.L.
-------------
1. Clogged or partially clogged needle
2. Pull test of cannula below specification (over three (3) pounds)
3. Cleanliness of needle: OD of cannula
4. Leakage at cannula junction or luer taper
5. No lubricant on cannula
CL-4 DEFECTS: 1.5% A.Q.L.
-------------
1. Cannula does not meet straightness specification
2. Partial lubricant on cannula
3. Tight sheath to hub fit
CL-5 DEFECTS: 6.5% A.Q.L.
-------------
1. Long or short cannula free length
APPLICATION SPECIFICATIONS
- --------------------------
The following documents form a part of this specification:
CD 2001 - Definitions of Monoject Quality Requirements.
PRELIMINARY
<PAGE>
EXHIBIT D
BILL OF SALE
THIS BILL OF SALE is made, executed and delivered as of ____________, 1996,
by Sherwood Medical Company, doing business as Sherwood - Davis & Geck, a
Delaware corporation ("Sherwood-D&G"), to Univec, Inc., a New York corporation
("Customer"). Unless otherwise defined herein, capitalized terms used in this
Bill of Sale shall have the meanings given to them in the OEM Supply Agreement
(the "Agreement"), dated as of the date hereof, between Sherwood-D&G and
Customer.
Sherwood-D&G hereby conveys, grants, bargains, sells, transfers, sets over,
assigns, delivers and confirms unto Customer, its successors and assigns
forever, the 128 cavity plunger mold, including the mold base and the inserts,
Sherwood-D&G Asset No. 1713 (the "Mold"), used by Sherwood-D&G to mold the
Plungers, as described in the Agreement. TO HAVE AND TO HOLD the Mold, unto
Customer, its successors and assigns, to its and their own use forever.
Sherwood-D&G further covenants and agrees that it will do, execute and
deliver, or will cause to be done, executed and delivered, all such further
acts, transfers, assignments and conveyances, confirmations, powers of attorney,
assurances and consents, conveying and confirming unto Customer of all the
rights, title and interests of Sherwood-D&G in and to the Mold, as Customer
shall reasonably require.
Sherwood-D&G does hereby bind itself, its successors, heirs and assigns to
forever warrant and defend transfer to title to the Mold unto Customer, its
successors and assigns, against any person claiming the same, or any part
thereof.
1
<PAGE>
IN WITNESS WHEREOF, Sherwood-D&G has caused this Bill of Sale to be
executed as of the day and year first above written.
SHERWOOD MEDICAL COMPANY,
D/B/A SHERWOOD - DAVIS & GECK
By:___________________________
Title:________________________
STATE OF MISSOURI )
) ss.
COUNTY OF ST. LOUIS )
On this ________day of_______, 1996, before me, the undersigned notary
public, personally appeared ___________, known to me to be the person whose name
is subscribed to the within instrument and acknowledged that he executed the
same for the purposes therein contained.
In witness whereof, I hereunto set my hand and official seal.
----------------------------
Notary Public .
2
<PAGE>
EXHIBIT C
NON-EXCLUSIVE LICENSE AGREEMENT (U.S.)
THIS AGREEMENT, made effective as of the ____ day of_______ 199_, by and
between SHERWOOD MEDICAL COMPANY, a corporation incorporated under the laws of
the State of Delaware of the United States of America, doing business as
Sherwood-Davis & Geck and having its principal offices at 1915 Olive Street, St.
Louis, Missouri 63103 (hereinafter referred to as "Sherwood"), and UNIVEC, INC.,
a corporation incorporated under the laws of the State of New York, having
offices at 999 Franklin Avenue, Garden City, New York 11530 (hereinafter
referred to as "Licensor");
WITNESSETH:
WHEREAS, Licensor owns an invention relating to single-use syringes
(hereinafter defined and referred to as "Licensed Invention") which is disclosed
in an Application for United States Letters Patent identified as Serial Number
08/237,749 filed on April 25, 1994, entitled "Single Use Syringe" (hereinafter
further identified, defined and referred to as the "Licensed Patent
Application"); and
WHEREAS, Licensor has entered into a License Agreement (hereinafter
referred to as the "Movern License") effective June 17, 1994 between Licensor
and Verna Movern whereby Licensor is granted exclusive rights under certain
United States patents (hereinafter referred to as the "Movern Patents")
including the right in Licensor to grant non-exclusive sublicenses under the
Movern Patents; and
WHEREAS, Sherwood is desirous of securing, and Licensor is willing to grant
to Sherwood, a non-exclusive license to make, have made for it, use and/or sell
in the hereinafter defined Licensed Territory, the Licensed Invention under said
Licensed Patent Application and/or utilizing any know-how heretofor developed by
Licensor relating to the Licensed Invention, all upon the terms and conditions
hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
Sherwood and Licensor agree as follows:
<PAGE>
SECTION 1. DEFINITIONS
As used in this Agreement, the following terms shall be deemed to have the
following meanings:
1 (a) "Licensed Invention" shall mean the invention claimed and/or
disclosed in the Licensed Patent Application, as herein defined.
1 (b) "Licensed Patent Application" shall mean the application for United
States Letters Patent, Serial Number 08/232,749 filed on April 25, 1994 by Joel
Schoenfeld and David Shonfeld entitled "Single Use Syringe".
1 (c) "Licensed Patent Rights" shall mean (i) the Licensed Patent
Application, (ii) any other patent applications filed by the Licensor on the
Licensed Invention in the Licensed Territory, (iii) any divisional,
continuation, continuation-in-part, or substitute patent applications filed by
the Licensor on the Licensed Invention in the Licensed Territory, (iv) any
patents that shall issue on any of the above-described patent applications, (v)
any reissues, reexaminations and extensions of the above, and (vi) any patent
application or patent filed and/or issued in the Licensed Territory on any
invention which embraces the Licensed Invention and which is owned or controlled
by Licensor before or during the term of this Agreement or which is licensed to
the Licensor during the term of this Agreement with a right to sublicense
(excluding the Movern Patents).
1 (d) "Licensed Product", singular or plural, shall mean:
(i) any product made and/or sold in the Licensed Territory and claimed in
any pending claim in any pending patent application of the Licensed
Patent Rights in the Licensed Territory, or claimed in any valid,
enforceable claim in any unexpired patent of the Licensed Patent
Rights in the Licensed Territory, or
(ii) any product made and sold, or sold and used, in the Licensed Territory
employing, or intended to be utilized employing, a process or method
claimed in any pending claim in any pending patent application of the
Licensed Patent Rights in the Licensed Territory, or claimed in any
valid, enforceable claim in any unexpired patent of the Licensed
Patent Rights in the Licensed Territory.
1 (e) "Net Sales" shall mean the total or gross billings for sales or other
transfers of Licensed Products by Sherwood, any sublicensees and/or any Related
Companies, as hereinafter defined, in any arm's-length transactions to unrelated
third-party distributors, retailers or end users, less the following deductions
where factually applicable: (i) discounts and rebates allowed and taken, in
amounts customary to the trade; (ii) outbound transportation and insurance
charges separately billed to the customer or prepaid; (iii) special outbound
packing separately billed to the customer or prepaid; (iv) sales, excise, use,
turnover, inventory, value-added and similar taxes
2
<PAGE>
and/or duties imposed upon and with specific reference to the particular sales
of Licensed Products, but not including net income tax; (v) free samples and
replacements in amounts refunded or credited upon purchase price on returned or
defective Licensed Products; and (vi) the purchase price of any Licensed
Products or components of Licensed Products purchased from Licensor or any
source designated by Licensor. Sales shall be accounted for when invoiced and
credits and refunds shall be accounted for when allowed.
1 (f) "Licensed Know-how" shall mean any and all data, technology,
drawings, documentation, and other proprietary and confidential information
owned, acquired or developed by or for Licensor before or during the term of
this Agreement that relate to the Licensed Invention, the design and/or
manufacture thereof (excluding any such data, technology, drawings,
documentation and other information relating to the design and/or construction
of the SMT Machine), and/or the Licensed Products.
1 (g) "Licensed Territory" shall mean the United States of America and its
territories and possessions.
1 (h) "Related Company", singular or plural, shall mean any parent,
subsidiary or affiliate company of Sherwood, or any subsidiary or affiliate of
any parent or subsidiary of Sherwood.
l(i) "Sherwood Developments" shall mean any modifications of or
improvements to the Licensed Invention or the Licensed Product, whether patented
or not, made, owned, acquired or developed by Sherwood or made for Sherwood by
another, and/or licensed to Sherwood by another with the right to sublicense,
before or during the term of this Agreement.
SECTION 2. WARRANTY; COVENANT
2 (a) Licensor warrants that Licensor is the owner of the entire right,
title and interest in and to the Licensed Invention, the Licensed Patent Rights
and the Licensed Know-how, that no license embracing said Invention, Patent
Rights and/or Know-how has heretofore been granted, that Licensor has the right
to grant the licenses granted in Section 4 hereof, that to Licensor's best
knowledge and belief the Licensed Patent Rights are, or will be, valid and
enforceable, and that manufacture, use and/or sale of the Licensed Invention
will not infringe any patent presently known to Licensor.
2 (b) Licensor warrants that Licensor has disclosed or will timely disclose
to Sherwood any and all Licensed Know-how presently owned or heretofore
developed by Licensor, and warrants and agrees that Licensor will timely
disclose to Sherwood any additional Licensed Know-how that Licensor may own,
acquire or develop during the term of this Agreement.
3
<PAGE>
2 (c) Licensor warrants that Licensor will cooperate in prosecution and
maintenance of the Licensed Patent Rights. The responsibility for directing
payment of any patent maintenance fees shall be in Licensor. Licensor further
warrants that after execution of this Agreement, any fee payable to the United
States Patent and Trademark Office for any of the Licensed Patent Rights will
not be paid based on a claim of small entity status and that Licensor will
instruct Licensor's attorneys to that effect, and that Licensor will provide to
Sherwood, within thirty (30) days of any request by Sherwood, any information
and copies of any records that Licensor has concerning conception and/or first
reduction to practice of the Licensed Invention and the dates thereof. Licensor
further warrants that Licensor will instruct Licensor's attorneys (i) to pay any
maintenance fee for the Licensed Patent Rights, (ii) to keep Sherwood informed
of the status of the Licensed Patent Rights, (iii) to provide Sherwood with
copies of all official papers relating to the filing, prosecution and
maintenance of such Licensed Patent Rights, (iv) to promptly notify Sherwood of
issuance of any patent included in the Licensed Patent Rights, and (v) to
counsel with Sherwood attorneys in an effort to secure the broadest possible
patent protection on the Licensed Invention that is reasonably available.
However, Licensor shall have the right to control and finally decide any matters
in regard to preparation, filing, prosecution and/or maintenance of the Licensed
Patent Rights.
2 (d) Licensor represents and warrants that Licensor and any direct or
ultimate parent entities of Licensor do not have total assets and/or annual net
sales of Ten Million Dollars ($10,000,000.00) or more within the meaning of
Title 11 of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (15 U.S.C.
ss. 18a) and the regulations promulgated thereunder, 16 C.F.R. 801.1 et seq.
2 (e) Sherwood warrants, covenants and agrees that it shall timely disclose
to Licensor any and all information relating to Sherwood Developments, including
without limitation, all data, technology, drawings, documentation, and other
proprietary and/or confidential information.
SECTION 3. INITIAL PAYMENT
3 (a) Upon execution of this Agreement, Sherwood will pay to Licensor the
sum of One Thousand Dollars ($ 1,000.00) in full payment for the non-exclusive
license to utilize the Licensed Know-how granted in Paragraph 4(a) hereof.
3 (b) Additionally, upon execution of this Agreement, Sherwood will pay to
Licensor the sum of One Hundred Thousand Dollars ($100,000.00) as an advance
payment of, and offsettable against, any payments due under Paragraphs 5(a),
5(b) and 5(c) hereof.
4
<PAGE>
SECTION 4. LICENSES GRANTED
4(a) Licensor hereby grants to Sherwood and Sherwood hereby accepts a
paid-up non-exclusive license to utilize the Licensed Know-how in perpetuity to
make, have made for it, use and/or sell the Licensed Invention, and/or the
Licensed Products in the Licensed Territory.
4(b) Licensor hereby grants to Sherwood and Sherwood hereby accepts a
non-exclusive license under the Licensed Patent Rights and a non-exclusive
sub-license under the Movern Patent to make, have made for it, use and/or sell
the Licensed Invention and/or the Licensed Products in the Licensed Territory.
4(c) Sherwood hereby grants to Licensor and Licensor hereby accepts a
perpetual, fully paid, royalty free, non-exclusive license to make, use and/or
sell the Sherwood Developments or products incorporating the Sherwood
Developments.
SECTION 5. ROYALTIES
5 (a) As consideration for the non-exclusive license herein granted in
Paragraph 4(b) hereof, Sherwood agrees to pay to Licensor an earned royalty
equal to five percent (5 %) of Net Sales of Licensed Products invoiced for sale
by Sherwood. Such royalty payment shall be mailed to Licensor within sixty (60)
days (the "Royalty Payment Date") after the end of each six-month period ending
June 30 and December 31 (each a "Royalty Reporting Period") of each year (each,
a "Royalty Year") during the term of this Agreement.
5 (b) It is understood that this Agreement includes no obligation on the
part of Sherwood, expressed or implied, to commercialize Licensed Product, to
sell any specific number of Licensed Products, or to do so in any set period of
time. However, if Sherwood shall either (i) fail to introduce to the market and
make commercial sales of Licensed Product within two (2) years from the
effective date of this Agreement, or (ii) fail to sell any Licensed Product for
a continuous period of five (5) years at any time during the term of this
Agreement, then in either event, Licensor shall have the option, upon sixty (60)
days written notice to Sherwood, to terminate this Agreement.
5 (c) In the event that any of the Licensed Patent Rights in the Licensed
Territory is finally declared abandoned, lapsed, unenforceable or, in whole or
in part, invalid to the extent that no claim of the Licensed Patent Rights
survives which claims Licensed Products made and/or sold by Sherwood or any
Related Company within the Licensed Territory, then thereafter, Sherwood shall
not be required to pay any royalty under this Agreement. In the event that a
valid, enforceable patent claiming Licensed Products made and/or sold by
Sherwood or any Related Company in the Licensed Territory is not granted to
Licensor within three (3) years after the effective date of this Agreement,
then, unless otherwise mutually agreed in writing or unless and until a valid,
enforceable patent claiming Licensed Products is subsequently granted to
Licensor within the Licensed Territory, Sherwood shall thereafter only be
required to pay to Licensor
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one-half (1/2) the applicable royalty set forth in Paragraph 5(a) hereof on the
Net Sales in the Licensed Territory of products previously meeting the
definition of Licensed Products under Paragraph 1 (d) hereof for the remainder,
if any, of a period of three (3) years from the date of first sale of Licensed
Products by Sherwood or Related Company. Sherwood and any sublicensees shall
thereafter be deemed to have a fully paid-up, royalty-free non-exclusive license
under the Licensed Patent Rights within the Licensed Territory, unless and until
a valid, enforceable patent claiming Licensed Products is subsequently granted
to Licensor, in which event the obligation to pay a full royalty under Paragraph
5(a) hereof for the future shall be reinstated.
5 (d) Sherwood shall have the right to deduct from any payments due to
Licensor under Paragraphs 5(a), 5(b) and/or 5(c) hereof, the full amount of any
payments required to be made and actually made by Sherwood with respect to any
rights under the Movern Patents or the Movern License in connection with the
Licensed Invention, the Licensed Patent Rights or this Agreement.
SECTION 6. ROYALTY CALCULATION, REPORTS AND RECORDS
6 (a) Sherwood agrees, and will require any Related Companies to agree,
to keep true and accurate records adequate to establish any royalty payable
under this Agreement and to permit an independent certified public accountant
selected by Licensor and reasonably acceptable to Sherwood, to inspect, on a
confidential basis and at Licensor's expense, said records once annually at
reasonable times upon reasonable notice, but only within a period of three (3)
years after the last day of the Royalty Reporting Period to which such records
relate. On the Royalty Payment Date, Sherwood shall provide to Licensor a report
(a "Royalty Report") for each Royalty Reporting Period, setting forth the earned
royalty due and payable on Net Sales, if any, of Sherwood and/or any Related
Companies of Licensed Products during such Royalty Reporting Period, accompanied
by payment of all amounts shown to be so due and payable, if any.
6 (b) Earned royalty, as provided in Paragraph 5(a) hereof, shall accrue
upon the first sale of Licensed Product to an unrelated third-party distributor,
retailer or end user.
6 (c) Only a single royalty under Paragraph 5(a) hereof shall be payable to
Licensor for each specific unit of Licensed Product regardless of the number of
countries in which manufacture, importation, sale, resale and/or use is made by
Sherwood, any Related Companies and/or any direct or indirect customer thereof.
Nothing herein is intended nor shall it be construed to grant Sherwood any right
to sell or export or manufacture for sale to any place outside the Licensed
Territory. Each Royalty Report shall contain a certification that no sale of
Licensed Product was made outside the Territory by Sherwood during the Royalty
Reporting Period to which such Royalty Report relates.
6 (d) All taxes, assessments and fees of any nature levied by any
governmental entity in the Licensed Territory of this Agreement on the sale of
Licensed Products by Sherwood, or any Related Company shall be paid by Sherwood,
or any Related Company for its account. However,
6
<PAGE>
if an income or other tax is levied on the recipient of any royalty under this
Agreement by any governmental entity and is legally required to be withheld from
the payment of royalty from Sherwood or from any Sherwood sublicensee and/or
Related Company to Sherwood, such tax shall be paid by Sherwood, its sublicensee
and/or Related Company for the account of Licensor, in which event an official
receipt will be secured evidencing such payment, the receipt forwarded to
Licensor, and the amount of such tax deducted from royalty paid to Licensor.
6(e) The provisions herein as to payment of royalties shall not apply to
Licensed Products embodying only the subject matter of claims of the Licensed
Patent Rights which have become abandoned, lapsed, expired or which have been
finally declared invalid or unenforceable.
SECTION 7. PATENT ENFORCEMENT AND DEFENSE
7(a) If Sherwood obtains notice or knowledge that a third party is
infringing or misappropriating any patent, trademark, copyright or other
proprietary rights with respect to the Licensed Patent Rights, the Movern
Patent, the Licensed Invention or the Licensed Products, Sherwood shall promptly
notify Licensor of such infringement or misappropriation. Sherwood agrees to
cooperate with Licensor in the conduct of any litigation which Licensor or its
licensors may elect to undertake with respect to such infringement or
misappropriation. Sherwood shall have the right but not the obligation to be
represented in such litigation by its own counsel at its own cost and expense.
7(b) Licensor shall not be obligated to undertake by litigation or
otherwise the collection of any claim against any person for loss of, damage to,
or governmental taking of the Licensed Invention, the Licensed Patent
Application, the Licensed Patent Rights or the Licensed Products, but Licensor
will cooperate with Sherwood at Sherwood's expense if Sherwood elects to pursue
such claims.
7(c) Licensor shall indemnify and hold Sherwood harmless from and against
any liabilities, losses, damages, expenses (including without limitation
reasonable attorneys' fees and expenses), causes of action, suits, claims, or
judgments asserted by third parties (a "Third Party Claim") against Sherwood
arising out of a Third Party Claim with respect to the infringement or
misappropriation of a patent or other proprietary rights, which may be asserted
by such third party, because of Sherwood's making, using or selling the Licensed
Invention or the Licensed Products pursuant to and in accordance with the terms
and conditions of this Agreement, provided that Sherwood shall give Licensor (i)
prompt written notice of the institution or the assertion of a Third Party Claim
for which indemnity is or will be claimed hereunder and (ii) to the extent
permitted by law, the opportunity to take over, control, settle and defend such
Third Party Claim, at the sole expense of Licensor and with counsel selected by
Licensor. Sherwood has the right but not the obligation to be represented in any
such Third Party Claim by its own counsel, at its own cost and expense, provided
that such right does not prejudice the right of Licensor to take over, control,
settle and defend such Third Party Claim to the extent permitted by law. If
making, using or selling the Licensed
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Invention or the Licensed Products, or part thereof is enjoined for any reason
whatsoever during the term of this Agreement, Licensor has the right at its own
expense to (i) procure for Sherwood the right to continue to make, have made for
it, use and/or sell the Licensed Invention and the Licensed Products, or part
thereof which is the subject of such injunction, or (ii) to terminate this
Agreement without further obligation of either party to the other. This Section
7 contains Sherwood's sole and exclusive remedy and Licensor's only obligations
with respect to the infringement or misappropriation of a patent or other
proprietary right which may be asserted by an owner thereof or any other person
having an interest therein.
7(d) Licensor shall not indemnify Sherwood, hold Sherwood harmless or
defend Sherwood in respect of any claim of infringement or misappropriation
where such infringement or misappropriation is the result of any modification or
change in the Licensed Invention or Licensed Products (including but not limited
to the Sherwood Developments) which departs in any manner from the terms of the
Licensed Patent Rights.
SECTION 8. PATENT NOTICE MARKING
Sherwood shall, and shall require each Related Company, to mark all
Licensed Products with the number of any applicable patent or other
identification of the Licensed Patent Rights in accordance with the provisions
of 35 U.S.C. ss.287.
SECTION 9. FORCE MAJEURE
Neither party to this Agreement shall be responsible to the other party for
nonperformance or delay in performance of any terms or conditions of this
Agreement due to acts of God, acts of governments, wars, riots, strikes,
accidents in transportation, or other causes beyond the reasonable control of
the parties. Failure to pay money shall not be excused under this Section.
SECTION 10. TERM OF AGREEMENT
Unless this Agreement shall be terminated by either party pursuant to the
provisions hereof, this Agreement shall remain in force and effect during the
pendency and until the expiration of the last-to-expire of the Licensed Patent
Rights in the Licensed Territory, at which time this Agreement will expire.
However, Sherwood and any Related Companies shall thereafter have a fully
paid-up, royalty-free non-exclusive license to make, have made for it, use
and/or sell the Licensed Invention and any other invention claimed in the
Licensed Patent Rights without limitation.
SECTION 11. TERMINATION
11 (a) In the event that either party hereto shall fail to comply with any
of its material obligations under this Agreement after the other party shall
have given thirty (30) days written notice of such failure to the first party,
which notice shall fully specify the obligation with which
8
<PAGE>
the first party has not complied, then the other party, by further written
notice to the first party, may terminate this Agreement.
11(b) All rights and licenses granted under or pursuant to this Agreement
by Licensor to Sherwood are, and shall otherwise be deemed to be, for purposes
of Section 365(n) of Title 11 U.S. Code (the "Bankruptcy Code"), licenses and
rights to "intellectual property" as defined under Section 101 of the Bankruptcy
Code. The parties agree that Sherwood, as a licensee of such rights under this
Agreement, shall retain and may fully exercise all of its rights and elections
under the Bankruptcy Code. Licensor shall also have the right to terminate this
Agreement in the event of the filing of a voluntary or involuntary petition of
bankruptcy of Sherwood.
11 (c) Sherwood may terminate this Agreement at any time on thirty (30)
days notice in writing to Licensor.
SECTION 12. ASSIGNABILITY
12(a) This Agreement may be assigned by Licensor and shall inure to the
benefit of its successors, assigns or other legal representatives. Without the
prior written consent of Licensor, which may be withheld for any or no reason
whatsoever, Sherwood may not assign any rights arising under this Agreement
except to a Related Company or to the successor in interest to the entire
syringe business of Sherwood which, in any case, expressly assumes, in writing,
the obligations hereunder.
12(b) Licensor agrees to notify Sherwood in writing within thirty (30) days
of any change in ownership or transfer of rights in any of the Licensed Patent
Rights from any owner to any third party.
SECTION 13. NOTICES AND PAYMENTS
13(a) Any notice, request, consent, demand or other communication given or
required to be given under this License shall be effective only if in writing
and shall be sent by one of the following means to the addressee at the address
set forth in Sections 13(b) below (or at such other address as shall be
designated in accordance with this Section 13, and shall be deemed conclusively
to have been given: (i) on the first business day following the day timely
deposited with an international or national overnight courier, with the cost of
delivery prepaid, assuming proof of delivery; (ii) on the third business day
following the day duly sent by certified or registered mail, postage prepaid and
return receipt requested; (iii) on the first business day after it is otherwise
actually delivered to the addressee by courier; or (iv) on the first business
day after the day it is duly sent by both confirmed facsimile transmission and
one of the forms provided in (i), (ii) or (iii) above, with the cost of
transmission prepaid.
9
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13(b) The addresses and facsimile telephone numbers of the parties and
those persons receiving copies are as follows:
To Lessor: Univec, Inc.
999 Franklin Avenue
Garden City, New York 11530
Attention: Joel Schoenfeld
Facsimile No.: 516-739-3343
Telephone No.: 516-294-1000
Copy to: Sazer, Vaccaro & Prisco LLP
325 Wireless Boulevard
Hauppauge, New York 11788
Attention: Gary Sazer, Esq.
Facsimile No.: 516-273-9685
Telephone No.: 516-273-7171
To Lessee: Sherwood-Davis & Geck
1915 Olive Street
St. Louis, Missouri 63103-1642
Attention: Vice President -- OEM Sales
Facsimile No.: (314) 241-0232
Telephone No.: (314) 621-7788
Copy to: Sherwood-Davis & Geck
1915 Olive Street
St. Louis, Missouri 63103-1642
Attention: Corporate Counsel
Facsimile No.: (314) 241-5855
Telephone No.: (314) 621-7788
13(c) All payments to be made hereunder shall be sent to Univec, Inc. at
999 Franklin Avenue, Garden City, New York 11530, Attention: President.
SECTION 14. APPLICABLE LAW; JURISDICTION
The parties hereto agree that this Agreement shall be considered to have
been made in, and shall be construed and interpreted in accordance with the law
of, the State of New York, without regard to any principles of conflicts of
laws. The parties further agree that the courts of the State of New York shall
have exclusive jurisdiction over any dispute arising hereunder.
10
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SECTION 15. TECHNICAL AND OTHER INFORMATION; CONFIDENTIALITY
15(a) To the best of Licensor's knowledge, any Licensed Know-how disclosed
under this Agreement is correct. However, nothing herein shall be construed to
indicate that Licensor in any manner guarantees the correctness of the Licensed
Know-how, or that Licensor assumes any liability whatsoever for any products or
parts thereof manufactured and sold by Sherwood in accordance with said Licensed
Know-how, or as a result of the use thereof. Sherwood shall assume all such
liabilities and hold Licensor harmless from any liability resulting from the
manufacture, use and sale of the Licensed Products under this Agreement, except
as herein provided.
15(b) Subject to the provisions of this Agreement, until the end of five
years after the expiration of the last-to-expire of the Licensed Patent Rights
in the Licensed Territory, Sherwood shall respect and ensure respect for the
strict confidentiality of all aspects of the information, data, studies,
processes and secrets pertaining to the Licensed Know-how and shall not disclose
nor allow the same to be disclosed to any other person without the prior written
consent of Licensor. In furtherance hereof, Sherwood hereby covenants and agrees
that it shall:
(1) not disclose any Licensed Know-how or permit access to any
Licensed Know-how by any person except as reasonably required to fulfill
its obligations under this Agreement; and
(2) take all reasonable measures deemed necessary or expedient to
ensure respect for the confidentiality and continued protection of the
Licensed Know-how and to prevent unauthorized access to the Licensed
Know-how or possession, reproduction, modification, use or distribution
thereof, and in particular to take appropriate measures, by agreement or
otherwise, to ensure that its employees and former employees are prevented
from doing anything that Sherwood is prohibited from doing pursuant to this
Agreement.
15(c) The obligations of Sherwood under this Section 15 shall not apply to
any Licensed Know-how that:
(1) is now, or comes to be publicly known through no breach of this
Agreement by Sherwood; or
(2) can be established by documentary evidence that prior to
disclosure by Licensor, was in Sherwood's possession without restriction on
disclosure imposed by any third party (and not in violation of any
obligation by such third party directly or indirectly to Licensor to keep
such information confidential); or
(3) is disclosed to Sherwood on a non-confidential basis by a third
party having no obligation of confidentiality, directly or indirectly, to
Licensor in regard thereto.
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15(d) Sherwood shall use its reasonable business efforts to assure that all
information relating to Sherwood Developments disclosed to Licensor pursuant to
this Agreement shall be correct. However, nothing herein shall be construed to
indicate that Sherwood in any manner guarantees the correctness of the Sherwood
Developments, or that Sherwood assumes any liability whatsoever for any products
or parts thereof manufactured and sold by Licensor in accordance with said
Sherwood Developments, or as a result of the use thereof. Licensor shall assume
all such liabilities and hold Sherwood harmless from any liability resulting
from the manufacture, use and sale of the Sherwood Developments under this
Agreement, except as herein provided.
15(e) Subject to the provisions of this Agreement, until the end of five
years after the expiration of the last-to-expire of the Licensed Patent Rights
in the Licensed Territory, Licensor shall respect and ensure respect for the
strict confidentiality of all aspects of the information, data, studies,
processes and secrets pertaining to the Sherwood Developments and shall not
disclose nor allow the same to be disclosed to any other person without the
prior written consent of Sherwood. In furtherance hereof, Licensor hereby
covenants and agrees that it shall:
(1) not disclose any Sherwood Developments or permit access to any
Sherwood Developments by any person except as reasonably required to
fulfill its obligations under this Agreement; and
(2) take all reasonable measures deemed necessary or expedient to
ensure respect for the confidentiality and continued protection of the
Sherwood Developments and to prevent unauthorized access to the Sherwood
Developments or possession, reproduction, modification, use or distribution
thereof, and in particular to take appropriate measures, by agreement or
otherwise, to ensure that its employees and former employees are prevented
from doing anything that Licensor is prohibited from doing pursuant to this
Agreement.
15(f) The obligations of Licensor under this Section 15 shall not apply to
any Sherwood Developments that:
(1) is now, or comes to be publicly known through no breach of this
Agreement by Licensor; or
(2) can be established by documentary evidence that prior to
disclosure by Sherwood, was in Licensor's possession without restriction on
disclosure imposed by any third party (and not in violation of any
obligation by such third party directly or indirectly to Sherwood to keep
such information confidential); or
(3) is disclosed to Licensor on a non-confidential basis by a third
party having no obligation of confidentiality, directly or indirectly, to
Sherwood in regard thereto.
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SECTION 16. MISCELLANEOUS
16(a) Upon the termination of this Agreement, Sherwood and any Related
Companies shall have the right to dispose of all Licensed Products then on hand,
including work in process, and to meet all pending orders for Licensed Products.
All earned royalties which would otherwise be payable pursuant to Paragraph 5(a)
of this Agreement, had such termination not become effective, shall be paid with
respect to all such Licensed Products when sold as though this Agreement had not
been terminated.
16(b) Neither termination nor expiration of this Agreement shall terminate
Sherwood's obligation to pay all earned royalties which shall accrue through the
date of such expiration or termination. Sherwood's obligation to report royalty
due and to submit its books and records for inspection as provided in Paragraph
6(a) hereof shall continue until Sherwood's royalty obligations shall have been
fully determined and discharged by proper payment.
16(c) This Agreement contains all of the agreements and understandings made
between the parties hereto concerning Licensed Products in the Licensed
Territory, and any prior agreements, express or implied, relating to the subject
matter hereof are expressly superseded and canceled. No amendment of this
Agreement shall be effective unless in writing and signed by the parties hereto.
16(d) This Agreement may be executed in one or more counterparts which
taken together shall constitute one and the same agreement.
13
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IN WITNESS WHEREOF, the parties have executed this Agreement effective on
the day and year first above written.
SHERWOOD MEDICAL COMPANY,
doing business as SHERWOOD-DAVIS & GECK
By: ATTEST:
____________________________ __________________________
____________________________ By: _____________________________
(Type or Print Name)
Title: ____________________________
Date:
____________________________
UNIVEC, INC.
By: ATTEST:
____________________________ __________________________
____________________________ By: _____________________________
(Type or Print Name)
Title: ____________________________
Date:
____________________________
14
<PAGE>
GUARANTY
The undersigned hereby jointly and severally guaranty to Sherwood Medical
Company, a Delaware corporation doing business as Sherwood-Davis & Geck
("Sherwood"), its successors and assigns, the payment of the maximum aggregate
amount of one million dollars ($ 1,000,000.00), reduced as hereinafter provided,
upon receipt of written notice from Sherwood that the Triggering Event (as
hereinafter defined) has occurred. For purposes of this Guaranty, "Triggering
Event" shall mean the failure of Univec, Inc., a New York corporation
("Univec"), to order Products having an aggregate purchase price of $6,700,000
based on the invoice price (the "Invoice Price") to Univec during the thirty-six
(36) month period (the "Order Period") commencing on the date hereof, all in
accordance with the terms of that certain O.E.M. Supply Agreement (the "OEM
Supply Agreement") dated the date hereof between Sherwood and Univec and to take
delivery of and pay for such Products as are so ordered and actually delivered
by Sherwood to Univec; provided. however, that if Sherwood accepts an order from
Univec and fails to fulfill such order for any reason then solely for the
purpose of this Guaranty, Univec shall be credited for the full Invoice Price
that would have been charged to Univec had such order been fulfilled by
Sherwood. The maximum aggregate amount payable by the undersigned under this
Guaranty shall be reduced by an amount equal to 14.925% of the Invoice Price for
Products ordered by Univec and paid for (or credited to Univec in accordance
with the proviso set forth in the immediately preceding sentence) in accordance
with the OEM Supply Agreement.
Sherwood shall give written notice of the occurrence of a Triggering Event.
Upon receipt of such notice, Univec, or the Guarantors on Univec's behalf, shall
have thirty (30) days during which to cure any deficiency. Any waiver, extension
of time or other indulgence granted to Univec from time to time by Sherwood, its
agents, successors or assigns, with respect to any payments due under the OEM
Supply Agreement shall not modify or amend this Guaranty which shall continue in
accordance with its terms.
This Guaranty shall terminate, become void and of no further force and
effect immediately upon the earliest to occur of the following: (i) the ordering
of Products and payment therefor by Univec having an aggregate purchase price of
$6,700,000 based on the Invoice Price thereof (including in the aggregate amount
of such payments any and all credits in Univec's favor for Products ordered and
not delivered by Sherwood as provided above) and (ii) the last day of the Order
Period if, prior to that date, Sherwood shall have failed for any reason to
deliver against Univec purchase orders therefor at least 100,000,000 Plungers
complying with the Specifications (as the same shall be agreed upon from time to
time) in accordance with the OEM Supply Agreement. Unless otherwise indicated
herein, capitalized terms used in this Guaranty shall have the meanings ascribed
to them in the OEM Supply Agreement. Any notices permitted or required under
this
<PAGE>
Guaranty shall be delivered to Sherwood at 1915 Olive Street, St. Louis,
Missouri 63103 and to any Guarantor at the address set forth below his signature
hereto in the manner provided in Section 11 of the OEM Supply Agreement.
IN WITNESS WHEREOF, the undersigned have signed this Guaranty this 30th day
of May, 1996.
/s/ Joel Schoenfeld
-------------------------------
Joel Schoenfeld
Address: 3 EAGLE CHASE
-------------------------------
WOODBURY NEW YORK 11797
-------------------------------
/s/ John Frank
-------------------------------
John Frank
Address: 74 Essex Road
-------------------------------
Summit, New Jersey 07901
-------------------------------
/s/ Alan Gold
-------------------------------
Alan Gold
Address: 68 EAGLE CHASE
-------------------------------
WOODBURY, N.Y. 11797
-------------------------------
/s/ David Shonfeld
-------------------------------
David Shonfeld
Address: 20 Breuer Avenue
-------------------------------
Great Neck 11023
-------------------------------
<PAGE>
EQUIPMENT LEASE
EQUIPMENT LEASE dated May 30, 1996 by and between UNIVEC, INC., a New York
corporation ("Lessor"), having its principal place of business at 999 Franklin
Avenue, Garden City, New York 11530 and SHERWOOD MEDICAL COMPANY, doing business
as Sherwood-Davis & Geck, a Delaware corporation ("Lessee"), having its
principal place of business at 1915 Olive Street, St. Louis, Missouri 63103.
WITNESSETH:
WHEREAS, Lessee has made or caused to be made a 128 cavity mold and mold
inserts for the manufacture of Lessor's proprietary design of single-use syringe
plungers ("Plungers") and spare parts for such mold (collectively, the "Plunger
Mold");
WHEREAS, concurrently herewith Lessee is selling, transferring and
conveying all right, title and interest in and to the Plunger Mold to Lessor;
WHEREAS, Lessee desires to lease back from Lessor the Plunger Mold for use
in the manufacture and production of Plungers for use in the assembly of
single-use hypodermic syringes (collectively, the "Products") using Lessor's
proprietary design specifications previously provided to Lessee and as the same
may hereafter from time to time be agreed upon by the parties;
WHEREAS, Lessor desires to lease the Plunger Mold to Lessee for use in the
manufacture and production of the Plungers;
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein set forth, the parties hereby agree as follows:
1. Agreement to Lease.
(a) This Agreement sets forth the terms and conditions upon which
Lessor shall lease to Lessee and Lessee shall lease from Lessor the Plunger
Mold. Lessee hereby confirms, represents, warrants and agrees that the
Plunger Mold is being leased (and will be used solely) for commercial or
business purposes (and not for consumer, personal, family or household
purposes).
(b) Lessee acknowledges that Lessor is not responsible for any
repairs, maintenance, service, latent or other defects in the Plunger Mold
or in the operation thereof, or for compliance of the Plunger Mold with
requirements of any laws, ordinances, governmental rules or regulations
(including, but not limited to, laws with respect to environmental
matters), or
<PAGE>
for infringement of any patent, trademark, copyright or trade secret, or
for any direct, indirect, special, incidental, consequential or contingent
damages, including without limitation any lost profits, arising out of the
use of or inability to use the Plunger Mold, whether for Lessor or Lessee.
(c) Lessee acknowledges that it has undertaken to design and
manufacture the Plunger Mold to produce Plungers suitable for use in the
manufacture and assembly of the Products. Lessee has inspected the Plunger
Mold and Plungers produced by the Plunger Mold and hereby accepts the
Plunger Mold and acknowledges that it is capable of producing commercial
quantities of Plungers in compliance with the specifications now and
hereafter from time to time agreed upon by the parties.
2. Rent and Lease Term. Lessee shall pay Lessor rent (the "Rent") for the
Plunger Mold in 36 equal consecutive monthly (the "Rent Term") installments of
$54,056 payable on or before the first day of each month commencing on the first
day of the month immediately following the date this Lease is executed.
Notwithstanding the full payment of the Rent during the Rent Term, the term of
this Lease shall be the six year period commencing on the date hereof (the
"Lease Term"). The Lease Term may not be terminated by Lessee for any reason.
3. Payment Obligation: Net Lease. All Rent and other payments under this
Lease shall be made to Lessor at its address shown above, or at such other
address as Lessor may designate, in immediately available funds in such coin or
currency of the United States of America which at the time of payment shall be
legal tender for the payment of public and private debts. THIS LEASE IS A "NET
LEASE" AND LESSEE'S OBLIGATION TO PAY ALL RENT AND OTHER SUMS HEREUNDER SHALL BE
ABSOLUTE AND UNCONDITIONAL, AND SHALL NOT BE SUBJECT TO ANY ABATEMENT,
REDUCTION, DEDUCTION, DIMINUTION, SETOFF, DEFENSE, COUNTERCLAIM, INTERRUPTION,
DEFERMENT OR RECOUPMENT, FOR ANY REASON WHATSOEVER. This Lease shall not
terminate, nor shall Lessee's obligations hereunder be affected, by reason of
any defect in, damage to or loss of the Plunger Mold from any cause whatsoever,
the prohibition of or interference with Lessee's use thereof by any person,
corporation or governmental authority, the validity or unenforceability or lack
of due authorization of this Lease, or for any other cause whether similar or
dissimilar to the foregoing, it being the express intention of Lessor and Lessee
that all Rent and other amounts payable by Lessee under this Lease shall be, and
continue to be, payable in all events.
4. Statement of Lease. This Lease is a lease of personal property. Lessee
agrees to take all action necessary or reasonably requested by Lessor to ensure
that the Plunger Mold shall be and remain personal property, and nothing in this
Lease shall be construed as conveying to Lessee any interest in the Plunger Mold
other than its interest as a Lessee hereunder. Lessee shall, at its expense:
protect and defend the interests of Lessor in the Plunger Mold against all third
party claims other than claims arising out of Lessor's actions or omissions
-2-
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or arising out of Lessor's negligence or wilful misconduct; keep the Plunger
Mold free and clear of any mortgage, security interest, pledge, lien, charge,
claim or other encumbrance (each, a "Lien", and collectively, "Liens"), except
any Liens created by or through Lessor or acts or omissions of Lessor
(collectively, "Lessor's Liens"); give Lessor immediate notice of the existence
of any such Lien; and indemnify and defend Lessor against any claim, liability,
loss, damage or expense arising in connection with any of the foregoing, other
than Lessor's Liens. Lessee, at its expense, shall promptly pay, satisfy and
duly and promptly discharge, any Lien (other than Lessor's Liens).
5. Permitted Use.
(a) The Plunger Mold shall be used and operated by Lessee only in the
ordinary conduct of its business by qualified employees of Lessee and in
accordance with all applicable manufacturer and vendor instructions, as
well as with all applicable legal and regulatory requirements. Except as
expressly provided in Section 5(b) hereof, Lessee shall use the Plunger
Mold exclusively for the manufacture and assembly of the Plungers for or at
the request of Lessor. Lessee shall procure and maintain in effect all
licenses, certificates, permits, approvals and consents required by
federal, state or local laws and regulations in connection with the
delivery, installation, use and operation of the Plunger Mold. During the
Lease Term, the Plunger Mold shall be installed at Lessee's manufacturing
facility located in Norfolk, Nebraska. Lessee shall not change the location
of the Plunger Mold without obtaining Lessor's prior written consent, which
shall not be unreasonably withheld. In no event shall the Plunger Mold be
located in a facility that is either (i) outside the United States of
America or (ii) not approved by the United States Food and Drug
Administration.
(b) Subject to the conditions set forth herein, Lessor agrees to
permit Lessee to use the Plunger Mold as a back-up mold for its own syringe
production. Lessee shall not use the Plunger Mold for its own syringe
production if there is an unfilled order for Plungers from Lessor
outstanding. If Lessee receives an order for Plungers from Lessor while the
Plunger Mold is being used by Lessee for its own syringe production, Lessee
covenants and agrees that it will cause the Plunger Mold to be converted
over for production of Plungers for Lessor within not more than ten (10)
days after receipt of Lessor's order.
6. Maintenance and Alterations.
(a) Lessee shall, at its expense, repair and maintain the Plunger Mold
so that it will remain in the same condition as when delivered to Lessee,
or as modified to improve the quantity or quality of Plungers produced by
the Plunger Mold, ordinary wear and tear from proper use excepted,
including, without limitation, repairing and restoring the Plunger Mold to
good operating condition if it becomes damaged. Lessee shall maintain the
Plunger Mold in accordance with all good manufacturing practices and shall
maintain an adequate supply of spare parts. Such repair and maintenance
shall be performed in compliance with all requirements necessary to enforce
all warranty rights and in accordance with all applicable legal
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and regulatory requirements. If Lessee fails to maintain the Plunger Mold
in accordance with the terms hereof, Lessee shall enter into and keep in
effect during the Lease Term any maintenance agreements with respect to the
Plunger Mold as reasonably may be requested by Lessor. Lessee's obligation
to repair, maintain and preserve the Plunger Mold shall not constitute
authority to incur mechanic's or supplier's liens. Lessee shall, at its
expense, make such alterations (collectively, "Required Alterations") to
the Plunger Mold during the Lease Term as may be required by applicable
legal and regulatory requirements. In addition, Lessee may at its expense,
without Lessor's consent, so long as no Event of Default, or event which
with the passage of time or giving of notice, or both, would constitute an
Event of Default (each, an "Incipient Default"), has occurred and is
continuing, make alterations (collectively, "Permitted Alterations") to the
Plunger Mold which do not impair the commercial value or function or use of
the Plunger Mold for the manufacture and production of Plungers and which
are readily removable without causing material damage to the Plunger Mold.
Any Permitted Alterations not removed by Lessee prior to the return of the
Plunger Mold to Lessor, and all Required Alterations, shall immediately
without further action become the property of Lessor and part of the
Plunger Mold for all purposes of this Lease.
(b) In furtherance of the provisions of Section 5(b) hereof and solely
in accordance with the limitations set forth therein, Lessee may make such
temporary and readily reversible alterations (the "Change-Over
Alterations") to the Plunger Mold as may be necessary to permit the Plunger
Mold to be used as a back-up mold for Lessee's own syringe production.
Change-Over Alterations must be removed within ten (10) days of receipt of
an order for Plungers from Lessor and prior to the return of the Plunger
Mold in accordance with Section 7 hereof.
(c) Other than as provided in this Section 6, Lessee may make no
alterations to the Plunger Mold. Any prohibited alterations to the Plunger
Mold shall, at Lessor's election, immediately become the property of Lessor
without further action and without Lessor thereby waiving any Event of
Default or remedies with respect thereto.
7. Return. Within fifteen (15) days after the expiration of the Lease Term
or earlier termination of this Lease, Lessee shall, at its expense, return the
Plunger Mold to Lessor at such location in the continental United States as may
be specified by Lessor, and in the condition required by Section 6 hereof.
Unless otherwise directed in writing by Lessor, the Plunger Mold shall be
returned to Lessor with inserts installed and assembled in the mold base for the
manufacture and production of Plungers.
8. Identification. Lessee shall, at its expense, place and maintain
permanent markings on the Plunger Mold evidencing Lessor's ownership, security
and other interests therein, as specified from time to time by Lessor. Lessee
shall not place or permit to be placed any other markings on the Plunger Mold
which might indicate any ownership or security interest in the Plunger Mold. Any
markings on the Plunger Mold not made at Lessor's request shall be
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removed by Lessee, at its expense, prior to the return of the Plunger Mold, in
accordance with Section 7 hereof.
9. Inspection. Upon reasonable prior notice, Lessee shall make the Plunger
Mold and all related records available to Lessor or its agents for inspection
during regular business hours at the location of the Plunger Mold.
10. No Lessee Sublease or Assignment. Without the prior written consent of
Lessor, which may be withheld for any or no reason whatsoever, Lessee shall not
sublease or otherwise relinquish possession or control of, or assign, pledge,
hypothecate or otherwise transfer, dispose of or encumber the Plunger Mold, this
Lease, or any part thereof or interest therein, or any right or obligation with
respect thereto.
11. Lessor Assignment. Lessor may from time to time without notice to
Lessee sell, mortgage, pledge, grant a security interest in, assign or otherwise
transfer (each, a "Transfer"), in whole or in part, this Lease, the Plunger
Mold, or any of its interests, rights or obligations with respect hereto or
thereto, including, without limitation, all Rent and other sums due or to become
due under this Lease, to one or more persons or entities (each an "Assignee").
Each Assignee shall have, to the extent provided in any document effecting such
Transfer, Lessor's rights, powers, privileges and remedies with respect thereto
but shall not be obligated to Lessee, except to the extent expressly provided in
any document, instrument or agreement executed by such Assignee in connection
with a Transfer (each, a "Transfer Document"), to observe or perform any duty,
covenant or condition required to be observed or performed by Lessor. Except to
the extent expressly assumed by an Assignee in any Transfer Document, no
Transfer shall relieve Lessor from any of its obligations to Lessee. Lessee
shall, upon receipt of notice of a Transfer from Lessor, be bound by such
Transfer. The rights of any such Assignee in and to any sums payable to Lessor
under provisions of this Lease shall not be subject to any abatement whatsoever
and shall not be subject to any claim, defense, counterclaim, setoff or
recoupment whatsoever that Lessee may at any time have against Lessor. Lessee
agrees that any such transfer or assignment will not impair the prospect of
obtaining return performance by, materially change the duty of, or materially
increase the burden or risk imposed on, Lessee under this Lease, and Lessee
waives any rights or remedies it may otherwise have, under Article 2A of the
Uniform Commercial Code (the "UCC") in effect in the State of New York or in any
other jurisdiction, or otherwise, to oppose, prohibit, claim damages with
respect to or otherwise affect any such transfer or assignment. Any Assignee
shall be considered a third party beneficiary of all of Lessee's
representations, warranties and obligations hereunder to Lessor. Lessee agrees
(a) in connection with any such transfer or assignment, to provide such
instruments, documents, acknowledgments and further assurances as Lessor or any
Assignee may deem necessary or advisable to effectuate the intents of this Lease
or any such Transfer, with respect to such matters as this Lease, the Plunger
Mold, Lessee's obligations to such Assignee and such other matters as may be
reasonably requested, and (b) that after receipt by it of written notice of any
Transfer from Lessor or from Lessor's Assignee, all Rent and other amounts which
are then and thereafter due under this Lease shall be paid unconditionally to
such Assignee at the place of
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payment designated in such notice. Notwithstanding the foregoing, Lessee shall
not be required to provide to Lessor or any Assignee any financial statements
that Lessee does not make available to its other creditors.
12. Risk of Loss. Lessee shall bear all risk of loss, damage, theft,
taking, destruction, confiscation or requisition (each a "Loss") with respect to
the Plunger Mold, however caused or occasioned (except any such Loss caused or
occasioned by the acts or omissions of Lessor), which shall occur prior to the
return of the Plunger Mold in accordance with Section 7 hereof. In addition,
Lessee hereby assumes all other risks and liabilities, including, without
limitation, personal injury or death and property damage, arising with respect
to the Plunger Mold (unless arising directly as a result of Lessor's negligence
or willful misconduct), including, without limitation, those risks and
liabilities arising with respect to the manufacture, purchase, ownership,
shipment, transportation, delivery, installation, leasing, possession, use,
storage and return of the Plunger Mold, howsoever arising, in connection with
any event occurring prior to such Plunger Mold's return in accordance with
Section 7.
13. Casualty. If the Plunger Mold shall become lost, stolen, destroyed or
irreparably damaged from any cause whatsoever, or shall be taken, confiscated or
requisitioned, unless, in each case, same is caused by Lessor, (any such event
herein called an "Event of Loss"), Lessee shall promptly notify Lessor of the
occurrence of such Event of Loss, and shall pay Lessor, within 15 days after the
date of such Event of Loss (but in no event later than the Rent payment date
next following such Event of Loss), an amount equal to the then unpaid balance
of the Rent, reduced by the amount of insurance proceeds paid or payable
directly to Lessor on account of such loss. Upon Lessor's receipt of such
payment for the entire unpaid balance of the Rent, the Lease shall automatically
terminate as to such Plunger Mold. Upon such termination after an Event of Loss,
Lessor shall instruct Lessee with respect to the disposition of any damaged or
destroyed Plunger Mold. In the alternative, upon receipt of the entire unpaid
balance of the Rent, Lessor may by written notice to Lessee transfer, convey and
assign all of its right, title and interest in such Plunger Mold to Lessee, on
an as-is, where-is basis, without recourse or warranty.
14. Insurance.
(a) Lessee shall keep the Plunger Mold insured (or shall self insure the
Plunger Mold) against all risks of loss or damage from every cause whatsoever
occurring during the Lease Term for an amount not less than the higher of the
full replacement cost of the Plunger Mold or the entire aggregate unpaid Rent.
Lessee shall also carry public liability insurance, both personal injury and
property damage, covering the Plunger Mold, and Lessee shall be liable for any
deductible portions of all such insurance.
(b) All insurance required under this Section 14 shall name Lessor as
additional insured and loss payee. Such insurance shall be maintained with such
insurers and shall be in such forms as are reasonably satisfactory to Lessor or,
if Lessee elects to self insure
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the Plunger Mold, the terms of such self insurance shall be disclosed in writing
and be reasonably acceptable to Lessor. All applicable policies shall provide
that no act, omission or breach of warranty by Lessee shall give rise to any
defense against payment of the insurance proceeds to Lessor. Lessee shall pay
the premiums for such insurance and, at the request of Lessor, deliver to Lessor
a current certificate evidencing such insurance coverage that is reasonably
satisfactory to Lessor. In any event, Lessee shall provide Lessor with
endorsements upon the policies issued by the insurers which evidence the
existence of insurance coverage required by this Section 14 and by which the
insurers agree to give Lessor written notice at least thirty (30) days prior to
the effective date of any expiration, modification, reduction, termination or
cancellation of any such policies.
(c) The proceeds of insurance required under this Section 14 and payable as
a result of loss or damage to the Plunger Mold shall be applied as set forth in
Section 13 above. Lessee covenants and agrees promptly to make claim for,
receive payment of, execute and endorse in favor of and deliver to Lessor for
immediate and direct payment to Lessor all documents, checks or drafts received
in payment for loss or damage under any insurance policies required by this
Section 14.
(d) Notwithstanding anything herein, Lessor shall not be under any duty to
examine any evidence of insurance furnished hereunder, or to ascertain the
existence of any policy or coverage, or to advise Lessee of any failure to
comply with the provisions of this Section 14.
15. Lessee's Representations And Warranties. Lessee hereby represents and
warrants to Lessor, and agrees with Lessor, as follows:
(a) Lessee is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware; Lessee has full
power and authority and all necessary licenses and permits to carry on its
business as presently conducted, to own or hold under lease its properties
and to enter into this Lease and to perform its obligations under this
Lease; and Lessee is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the character of its
properties or the nature of its business or the performance of its
obligations under this Lease requires such qualification. Lessee is a
wholly-owned subsidiary of American Home Products Corporation, a Delaware
corporation.
(b) The execution and delivery by Lessee of this Lease and the
performance by Lessee of its obligations under this Lease have been duly
authorized by all necessary corporate action on the part of Lessee; do not
contravene any law, governmental rule or regulation or any order, writ,
injunction, decree, judgment, award, determination, direction or demand
(each, an "Order") binding on Lessee or its properties or the corporate
charter or by-laws of Lessee; and do not and will not contravene the
provisions of, or constitute a default (either with or without notice or
lapse of time, or both) under, or result in the creation of any Lien upon,
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the Plunger Mold or any property of Lessee under any indenture, mortgage,
contract or other instrument to which Lessee is a party or by which Lessee
or any of its properties is bound.
(c) No consent or approval of, giving of notice to, registration with,
or taking of any other action by, any state, federal or other governmental
commission, agency or regulatory authority or any other person or entity is
required for the consummation or performance by Lessee of the transactions
contemplated under this Lease.
(d) This Lease has been duly entered into and delivered by Lessee and
constitutes a legal, valid and binding agreement of Lessee enforceable
against Lessee in accordance with its terms, except as limited by any
bankruptcy, insolvency, reorganization or other similar laws of general
application affecting the enforcement of creditor or Lessor rights.
(e) There are no actions, suits or proceedings pending or to the
knowledge of Lessee threatened against or affecting Lessee or any property
of Lessee in any court, before any arbitrator of any kind or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality (each, a "Governmental Body"),
which, if adversely determined, would materially adversely affect the
business, assets, operations or condition, financial or otherwise, of
Lessee, or adversely affect the ability of Lessee to perform its
obligations under this Lease; and Lessee is not in default with respect to
any order of any court, arbitrator or Governmental Body.
(f) Lessee is not a party to any agreement or instrument or subject to
any charter or other corporate restriction which materially adversely
affects or, so far as Lessee can now foresee, will materially adversely
affect the business, operations or properties of Lessee or the ability of
Lessee to perform its respective obligations under this Lease.
(g) Lessee has filed all required tax returns in all jurisdictions in
which such returns were required to be filed and has paid, or made
provision for, all taxes shown to be due and payable on such returns and
all other taxes and assessments which are payable by it, except for any
taxes and assessments of which the amount, applicability or validity is
currently being contested in good faith by appropriate proceedings and
which in the aggregate do not involve material amounts.
(h) Lessee is not in default in the payment of the principal of or
interest on any indebtedness for borrowed money or in default under any
instrument or agreement under or subject to which any indebtedness for
borrowed money has been issued; no event has occurred and is continuing
under the provisions of any such instrument or agreement which with the
lapse of time or the giving of notice, or both, would constitute a default
or an event of default thereunder. Lessee is not in violation of any
provision of its corporate charter or by-laws or of any term of any
material agreement, lease of real or personal property, including, without
limitation, any term providing for the payment of rent or other instrument;
and no Event of Default has occurred and is continuing with respect to this
Lease as of the date hereof.
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(i) Lessee has not taken and will not take any action or maintain any
position inconsistent with treating this Lease as a valid leasehold
interest in the Plunger Mold.
16. Income Tax Status. This Lease has been entered into on the basis that
it shall be construed as a lease for the purposes of all federal, state and
local taxes and that Lessor shall be entitled to such credits, deductions and
other benefits as are provided to a Lessor of tangible personal property. This
is a "net lease" with all insurance, maintenance and taxes for the account of
the Lessee.
17. Taxes and Fees. Lessee hereby assumes liability for, and shall pay when
due, and on a net after-tax basis to Lessor shall indemnify and defend Lessor
against, all fees, taxes and governmental charges (including, without
limitation, interest and penalties) of any nature imposed upon Lessee with
respect to this Lease or the Plunger Mold, including, without limitation,
Lessee's manufacture, purchase, ownership, shipment, transportation, delivery,
installation, leasing, possession, use, operation, storage and return of the
Plunger Mold. Lessee shall at its expense file when due with the appropriate
authorities any and all tax and similar returns and reports required to be filed
with respect to this Lease or the Plunger Mold (with copies to Lessor).
18. Indemnification. Lessee hereby assumes liability for, and shall pay
when due, and shall indemnify, defend and hold Lessor and its assigns harmless
from and against (a) any and all liabilities, losses, damages, penalties,
claims, actions, suits, costs and expenses in any way relating to or arising out
of Lessee's performance or failure to perform under this Lease or out of
Lessee's use or possession of the Plunger Mold, including without limitation the
manufacture, ordering, purchase, ownership, shipment, transportation, delivery,
acceptance or rejection, installation, leasing, possession, use, operation,
storage, removal, return, sale or other disposition of the Plunger Mold,
including, without limitation, any of such as may arise from (whether
discoverable by Lessee or Lessor) any claims based on strict liability in tort
unless arising as a result of Lessor's negligence or willful misconduct, and (b)
all UCC and other applicable filing and recording fees and lien searches and the
like, (no matter how described in any jurisdiction) with respect to this Lease.
Lessee shall give Lessor prompt notice of any occurrence, event or condition in
connection with which Lessor may be entitled to indemnification hereunder. The
provisions of this Section 18 are in addition to, and not in limitation of, the
provisions of Section 17 hereof. Lessee's obligations under this Section 18
shall survive the expiration of or earlier termination of this Lease.
19. Warranties Excluded. LESSOR, MAKES NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT LIMITATION
THE DESIGN OR CONDITION OF THE PLUNGER MOLD, ITS MERCHANTABILITY, DURABILITY,
CAPACITY, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, THE QUALITY OF THE
MATERIAL OR WORKMANSHIP OF THE PLUNGER MOLD, OR THE CONFORMITY OF THE PLUNGER
MOLD TO PROVISIONS OR SPECIFICATIONS
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OF ANY PURCHASE ORDER RELATING THERETO, OR PATENT INFRINGEMENT OR PATENT OR
LATENT DEFECTS, AND LESSOR HEREBY DISCLAIMS ANY AND ALL SUCH REPRESENTATIONS AND
WARRANTIES. LESSEE ACKNOWLEDGES THAT IT HAS LEASED THE PLUNGER MOLD BASED UPON
ITS OWN JUDGMENT AND EXPRESSLY DISCLAIMS ANY RELIANCE ON STATEMENTS MADE BY
LESSOR.
20. Events of Default. An "Event of Default" shall occur hereunder if: (a)
Lessee fails to make any Rent or other payment under the Lease when due and such
failure continues for a period of five (5) days after notice of non-payment; (b)
Lessee violates any other provision of this Lease or document furnished to
Lessor in connection herewith and such violation shall continue unremedied for a
period of at least twenty (20) days after notice from Lessor; (c) Lessee shall
become or be adjudicated insolvent or bankrupt or makes an assignment for the
benefit of creditors or becomes unable or admits in writing its inability to pay
its debts as they become due, or a trustee, receiver or liquidator shall be
appointed for Lessee, or for a substantial part of its property, with or without
its consent, or bankruptcy, arrangement, reorganization, composition,
readjustment, liquidation, insolvency, dissolution or similar proceedings under
any present or future statute, law or regulation shall be instituted by or
against Lessee; or Lessee shall file an answer admitting the material
allegations of a petition filed against it in any such proceeding, or any
execution or writ or process shall be issued under any proceeding whereby any of
the Plunger Mold may be taken or restrained; or Lessee shall cease doing
business as a going concern; (d) any representation or warranty made by Lessee
herein or other document furnished Lessor under or pursuant to this Lease shall
be incorrect or incomplete at the time when made in any material respect; or (e)
a material adverse change shall occur in the financial condition, business
and/or prospects of the affairs of Lessee. Lessee shall promptly notify Lessor
of the occurrence of any Event of Default.
21. Remedies. If one or more Events of Default shall have occurred, Lessor,
at its option, may (a) proceed by appropriate court action or actions, either at
law or in equity, to enforce performance by Lessee of the applicable covenants
hereunder or to recover damages for the breach thereof, including, without
limitation, net after-tax losses of federal, state and local income tax benefits
to which Lessor would otherwise be entitled as a result of owning the Plunger
Mold or leasing such Plunger Mold to Lessee; or (b) by notice to Lessee,
terminate this Lease and accelerate and demand payment of the entire unpaid
balance of the Rent (including all Rent which may then be due and payable) as
liquidated damages and not as a penalty, together with all damages, losses,
liabilities, claims and expenses including, without limitation, expenses
incurred in connection with the recovery, repair, repainting, return and
remarketing of the Plunger Mold or other exercise of Lessor's remedies hereunder
and reasonable out-of-pocket attorneys' fees which Lessor shall sustain in
connection with any Event of Default. No remedy referred to herein shall be
deemed exclusive, but all such remedies shall be cumulative and shall be in
addition to all other remedies in Lessor's favor existing under this Lease or
otherwise at law or in equity.
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22. Affirmative Covenant. At the request of Lessor, Lessee shall execute
and deliver to Lessor UCC-1 financing statements in favor of Lessor or any
Assignee in any jurisdiction where the Plunger Mold is or will be located.
23. Late Charges. Any nonpayment of Rent or other amounts payable under the
Lease shall result in Lessee's obligation to promptly pay Lessor as additional
Rent on such overdue payment, for the period of time during which it is overdue
(without regard to any grace period), interest at a rate equal to the lesser of
(a) the prime lending rate as announced from time to time by Chase Manhattan
Bank plus 5%, or (b) the maximum rate of interest permitted by law.
24. Lessor's Right to Perform for Lessee. If Lessee fails to duly and
promptly pay, perform or comply with any of its obligations, covenants or
agreements under this Lease, Lessor may itself pay, perform or comply with any
of such obligations, covenants or agreements for the account of Lessee without
thereby waiving any Event of Default. In such event, any amount paid or expense
incurred by Lessor in connection therewith shall immediately on demand, together
with interest at the rate provided in Section 23 hereof, be paid to Lessor as
additional Rent, and Lessee shall indemnify and defend Lessor against any
damage, loss, claim, liability or expense suffered or incurred by Lessor in
connection therewith.
25. Notices.
(a) Any notice, request, consent, demand or other communication given or
required to be given under this Lease shall be effective only if in writing and
shall be sent by one of the following means to the addressee at the address set
forth in Sections 25(b) below (or at such other address as shall be designated
in accordance with this Section 25, and shall be deemed conclusively to have
been given: (i) on the first business day following the day timely deposited
with an international or national overnight courier, with the cost of delivery
prepaid, assuming proof of delivery; (ii) on the third business day following
the day duly sent by certified or registered mail, postage prepaid and return
receipt requested; (iii) on the first business day after it is otherwise
actually delivered to the addressee by courier; or (iv) on the first business
day after the day it is duly sent by both confirmed facsimile transmission and
one of the forms provided in (i), (ii) or (iii) above, with the cost of
transmission prepaid.
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(b) The addresses and facsimile telephone numbers of the parties and those
persons receiving copies are as follows:
To Lessor: Univec, Inc.
999 Franklin Avenue
Garden City, New York 11530
Attention: Joel Schoenfeld
Facsimile No.: 516-739-3343
Telephone No.: 516-294-1000
Copy to: Sazer, Vaccaro & Prisco LLP
325 Wireless Boulevard
Hauppauge, New York 11788
Attention: Gary Sazer, Esq.
Facsimile No.: 516-273-9685
Telephone No.: 516-273-7171
To Lessee: Sherwood Medical Company
1915 Olive Street
St. Louis, Missouri 63103-1642
Attention: Vice President-- OEM Sales
Facsimile No.: (314) 241-0232
Telephone No.: (314) 621-7788
Copy to: Sherwood Medical Company
1915 Olive Street
St. Louis, Missouri 63103-1642
Attention: Corporate Counsel
Facsimile No.: (314) 241-5855
Telephone No.: (314) 621-7788
26. Miscellaneous.
(a) Lessee shall, upon Lessor's demand, promptly execute, acknowledge and
deliver any and all further documents, instruments and agreements as may be
reasonably required by Lessor and any Assignee and take any and all other action
requested by Lessor from time to time, for the purpose of fully effectuating the
intent and purposes of this Lease, and to protect the interests of Lessor, its
successors and assigns. Lessee also authorized Lessor to act on its behalf as
its attorney-in-fact to file financing statements with respect to this Lease and
the Plunger Mold by signing Lessee's name thereto.
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(b) Any provision of this Lease which is prohibited or not fully
enforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without otherwise
invalidating or diminishing Lessor's rights thereunder or under the remaining
provisions thereof in such jurisdiction, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(c) No term or provision of this Lease may be amended, altered, waived,
discharged or terminated except by an instrument in writing signed by a duly
authorized officer of the party against which the enforcement of the amendment,
alteration, waiver, discharge or termination is sought. No delay by either party
in exercising any right, power or remedy under this Lease shall constitute a
waiver, and any waiver by a party on any one occasion or for any one purpose
shall not be construed as a waiver on any future occasion or for any other
purpose.
(d) This Lease shall be governed in all respects by, and construed in
accordance with, the laws (without giving effect to the principles governing
conflicts of laws) of the State of New York. The federal and state courts
located in New York County, New York, U.S.A., shall have exclusive jurisdiction
and venue over any and all actions and proceedings relating to or arising out of
this Lease and/or the Plunger Mold. Lessor and Lessee each hereby irrevocably
consent to the exclusive jurisdiction of such courts and waive any right they
may have to transfer or change the venue of any such action or proceeding.
Lessor and Lessee each agree that any summons or notice relating to any such
action or proceeding may be served on such party in the manner provided for the
giving of notices under Section 25 hereof.
(e) All of the covenants and agreements of Lessee and Lessor contained in
this Lease shall survive the expiration or earlier termination hereof. Subject
to all of the terms and provisions of this Lease, all of the covenants,
conditions and obligations contained in this Lease shall be binding upon and
inure to the benefit of the respective successors and permitted assigns of
Lessor and Lessee. This Lease shall constitute the entire agreement of Lessor
and Lessee with respect to the lease of the Plunger Mold, and shall
automatically cancel and supersede any and all prior oral or written
understandings with respect thereto.
(f) This Lease may be executed in any number of counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts taken together shall constitute one and the same instrument. The
headings in this Lease shall be for convenience of reference only and shall form
no part of this Lease.
27. Lessee's Waivers: Limitation on Actions. To the fullest extent
permitted by applicable law, with respect to this Lease Lessee irrevocably
waives any and all: (a) rights it may otherwise have under Sections 2A-401 and
2A-402 of UCC 2A to suspend performance of any of its obligations under this
Lease, (b) rights and/or remedies it may otherwise have under Sections 2A-508
through 2A-522 of UCC 2A to: (i) cancel or repudiate this Lease, (ii) reject or
-13-
<PAGE>
revoke acceptance of the Plunger Mold, (iii) recover damages from Lessor for
breach of warranty or for any other reason, (iv) deduct from the rental payments
all or any part of any claimed damages resulting from any default by Lessor
under this Lease, (v) "cover" by making a purchase or lease of other property in
substitution for property due from Lessor, (vi) recover from Lessor any general,
special, incidental or consequential damages, for any reason whatsoever, and
(vii) specific performance, replevin or the like for all or any part of the
Plunger Mold; and (c) rights now or hereafter conferred by any applicable
statute or otherwise under which Lessor may be required to sell, re-lease or
otherwise use or dispose of all or any part of the Plunger Mold in mitigation of
Lessor's damages as determined under this Lease or otherwise or which may
otherwise limit or modify any of Lessor's rights and remedies under this Lease
or otherwise.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their authorized representatives as of the date first above
written.
UNIVEC, INC., Lessor
By: /s/ Joel Schoenfeld
-------------------------------------
Name:
Title: CEO
SHERWOOD MEDICAL COMPANY
Doing business as Sherwood-Davis & Geck,
Lessee
By:
-------------------------------------
Name:
Title:
Address:
Phone:
<PAGE>
EXHIBIT 10.4
<PAGE>
PURCHASE AGREEMENT
AGREEMENT dated as of June 27, 1996 by and between Univec, Inc., a New York
corporation having its principal office and place of business at 999 Franklin
Avenue, Garden City, NY 11530 ("Seller"), and Paramount Financial Corporation, a
Delaware corporation having an office and place of business at One Jericho
Plaza, Jericho, NY 11753 ("Buyer").
WITNESSETH:
That in consideration of the mutual undertakings herein contained, the parties
agree as follows:
1. Sale. Seller agrees to sell and Buyer agrees to purchase from Seller the
equipment (the "Equipment") listed on Schedule A attached hereto (the
"Schedule") and incorporated herein by reference.
2. Purchase Price. The purchase price of the Equipment shall be $1,600,000.00,
which amount shall be paid upon Buyer's receipt of (i) all documents specified
herein and of all customary documents reasonably requested by Buyer in
connection with the transactions contemplated hereby and (ii) loan proceeds in
an amount not less than $1,600,000.00 in connection with a non-recourse loan to
be made by Republic National Bank of New York ("Republic") to Buyer (which loan
relates to the financing of the Equipment and the Lease (as hereinafter
defined)). Buyer shall not be obligated to make the purchase hereunder unless
and until Buyer receives the aforementioned loan proceeds.
3. Delivery. Buyer shall accept delivery of the Equipment at the location
specified in the Schedule.
4. Title. Title will be free and clear of all liens, leases, claims and
encumbrances of any kind except for the rights of Sherwood Medical Company
("Lessee") (a Delaware corporation doing business as Sherwood-Davis & Geck) as
lessee under Equipment Lease dated May 30, 1996 between Seller as lessor and
Lessee as lessee (such Equipment Lease is called the "Lease"). Simultaneously
with the payment of the purchase price, Seller shall deliver to Buyer a bill of
sale (in the form of exhibit A hereto) for the Equipment (the "Bill of Sale")
transferring good and marketable title thereto to Buyer free and clear of all
liens, leases, claims and encumbrances of any kind other than the rights of the
Lessee under the Lease. Simultaneously herewith, Buyer and Seller are entering
into an Assignment, Assumption & Indemnity Agreement in the form of Exhibit B
hereto (the "Assignment Agreement"), pursuant to which (i) all rights of Seller
as lessor under the Lease are being assigned to Buyer and (ii) all rights of
Seller under the Bond (as hereinafter defined)
<PAGE>
are being assigned to Buyer. The term "Bond" means Bond No. 8145-4178 dated June
20, 1996 issued by Federal Insurance Company (as surety) ("Federal") and Lessee
(as principal) which insures the Lessee's obligations under the Lease.
Simultaneously herewith, Seller is delivering to Buyer a conditional bill of
sale for the Equipment (in the form of Exhibit C hereto).
5. Representations and Warranties.
5.1 Representations and warranties of Seller. Seller represents and warrants to,
and covenants and agrees with, Buyer as follows:
(a) On the date hereof (i) the Lease has been duly executed and delivered, is in
full force and effect, constitutes the valid and binding obligations of the
Seller, as lessor, and the Lessee, as lessee, thereunder, is enforceable against
Seller and the Lessee in accordance with its terms (subject to applicable
bankruptcy and insolvency laws and other laws of general application affecting
creditor's rights) and no defaults or conditions which, with the passage of time
or giving of notice or both, would constitute defaults, exist thereunder by the
Lessee or by Seller, (ii) there are no setoffs, counterclaims, or defenses on
the part of the Lessee to pay any amounts due under the Lease, (iii) the Bond
has been duly executed and delivered, is in full force and effect and
constitutes the valid and binding agreement of Federal and Lessee, enforceable
in accordance with its terms (subject to applicable bankruptcy and insolvency
laws and other laws of general application affecting creditors' rights), (iv)
the Equipment is located at the place designated in the Schedule and the
Equipment has been accepted and installed under the Lease and is in good
operating condition and repair, (v) Lessee has not prepaid any rentals due or to
become due under the Lease (and Lessee has not made any deposits) and there
remains unpaid and owing under the firm lease term of the Lease the monthly
rental payments set forth in the Schedule, and Buyer shall be entitled to
receive directly all of such payments and all other monies payable under the
Lease (except for the June 1996 rental payment and the July 1996 rental payment
which shall belong to Seller) and (vi) the initial firm lease term of the lease
commenced on May 30, 1996 and expires on May 29, 2002.
(b) By the delivery of the Bill of Sale to Buyer and upon execution and delivery
of the Assignment Agreement, Seller will convey to Buyer good and marketable
title to the Equipment and the Lease (including, without limitation, the Bond)
free and clear of any and all leases, liens, claims and encumbrances other than
the rights of the Lessee under the Lease.
(c) Seller is a corporation duly and validly organized and existing in good
standing under the laws of the State of New York and has full power and
authority to own its properties and carry on its business in the places where
such properties are located and such business is conducted.
2
<PAGE>
(d) Seller has the power and authority to enter into, execute and deliver this
Agreement, the Bill of Sale, the Assignment Agreement and all other instruments
and documents executed and delivered and/or received, or to be executed and
delivered and/or received, in connection with the transactions herein referred
to and to carry out the sale and transfer of the Equipment and the Lease
(including, without limitation the Bond) to Buyer and the transactions
contemplated hereunder and thereunder. (This Agreement, the Bill of Sale, the
Assignment Agreement and all such other instruments and documents are
hereinafter referred to collectively as the "Documents"). There is no action,
suit or proceeding pending against Seller before or by any court, administrative
agency or other governmental authority which brings into question the validity
of, or might in any way impair, the execution, delivery or performance by Seller
of any Document. No approval of, or consent from, any governmental authority is
required for the execution, delivery or performance by Seller of any Document.
(e) The execution and delivery of the Documents by Seller and the performance by
it of its obligations thereunder, including, without limitation, the conveyance
of the Equipment and the Lease {including, without limitation, the Bond) and the
acceptance of the purchase price in exchange therefor, have been duly authorized
by all necessary corporate and/or other action of Seller and do not contravene,
violate or conflict with (i) any provision of Seller's articles of incorporation
by-laws or other organizational documents or (ii) any law or any order, writ,
injunction, decree, rule or regulation of any court, administrative agency or
any other governmental authority (applicable to Seller or its assets).
(f) The execution and delivery of the Documents by Seller, and the performance
by Seller of its obligations thereunder, do not conflict and are not
inconsistent with, and will not result (with or without the giving of notice or
passage of time or both) in a breach of or constitute a default or require any
consent under or result in the creation of any lien, charge or encumbrance upon
the Equipment or the Lease or the Bond pursuant to the terms of any credit
agreement, indenture, mortgage, purchase agreement, deed of trust, security
agreement, lease, guarantee or other instrument or agreement to which Seller is
a party or by which Seller may be bound or to which it may be subject. Without
limiting the foregoing, Seller is not subject to any restriction or agreement
(including, without limitation, the Lease) which, with or without the giving of
notice, the passage of time or both, prohibits or would be violated by, the
execution, delivery and consummation of the Documents and the transactions
referred to therein.
(g) The Documents constitute, or when executed and delivered will constitute,
the legal, valid and binding obligations of Seller enforceable in accordance
with their respective terms, subject, however, to applicable bankruptcy and
insolvency laws
3
<PAGE>
and other laws of general application affecting creditors' rights and to
judicial discretion to which equitable remedies are subject.
(h) All sales, use, property, value added or other taxes, licenses, tolls,
inspection or other fees, bonds, permits or certificates which were or may be
required to be paid or obtained in connection with the acquisition of the
Equipment by Seller or the leasing of the Equipment to the Lessee have been, or
when due will promptly be, paid in full or obtained.
(i) Seller has delivered to Buyer the one and only original counterpart (the
only counterpart constituting "chattel paper" and marked "Original") of the
Lease (and related documents thereto) and the one and only original of the Bond,
and Seller has delivered to Buyer an original (to the extent available) or a
true, correct and complete copy (if an original is not available) of each and
every other document delivered to or by Seller in connection with the purchase
of the Equipment by Seller and the leasing of the Equipment to Lessee under the
Lease. All counterparts of the Lease, other than the aforementioned original
counterpart being delivered to Buyer, are marked "Duplicate".
(j) Seller hereby assigns to Buyer (to the extent assignable), and agrees to
enforce (upon Buyer's written request and at Buyer's expense) for the benefit of
Buyer (to the extent not assignable), the benefits of all warranties,
representations, covenants and indemnities made to Seller by, or which Seller is
entitled to enforce against, any predecessor in title to the Equipment or the
manufacturer of the Equipment. Seller shall not amend or modify the Lease or
waive any provisions thereof or cause a default thereunder or exercise any
rights thereunder.
(k) EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, THE ASSIGNMENT
AGREEMENT, THE CONDITIONAL BILL OF SALE OR IN THE BILL OF SALE, THE EQUIPMENT IS
BEING SOLD "AS IS" AND "WHERE IS" AND SELLER DOES NOT WARRANT THE EQUiPMENT IN
ANY RESPECT, EITHER EXPRESSLY OR BY IMPLICATION, AND WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, SELLER EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTY OF
MERCHANTABILITY, FITNESS OR ADEQUACY FOR ANY PURPOSE OR USE, QUALITY,
PRODUCTIVENESS OR CAPACITY.
5.2 Representations and Warranties of the Buyer. The Buyer represents and
warrants to, and agrees with, the Seller as follows:
{a) Buyer is a corporation duly and validly organized and existing in good
standing under the laws of the State of its incorporation and has full power and
authority to own its properties and carry on its business where such properties
are located and such business is conducted.
4
<PAGE>
(b) Buyer has the power and authority to enter into the Documents and to carry
out the transactions contemplated thereunder.
(i) The execution and delivery of the Documents by Buyer, and the performance of
its obligations thereunder, have been duly authorized by all necessary corporate
and/or other action of Buyer and do not violate or conflict with (i) any
provision of Buyer's certificate of incorporation, by-laws or other
organizational documents, or (ii) any law or any order, writ, injunction,
decree, rule or regulation of any court, administrative agency or any other
governmental authority (applicable to Buyer or its assets). There is no action,
suit or proceeding pending against Buyer before or by any court, administrative
agency of other governmental authority which brings into question the validity
of, or might in any way impair, the execution, delivery or performance by Buyer
of any Document. No approval of, or consent from, any governmental authority is
required for the execution, delivery or performance by Buyer of any Document.
(d) The execution and delivery of the Documents by Buyer and the performance by
Buyer of its obligations thereunder do not conflict with and are not
inconsistent with, and will not result (with or without the giving of notice or
passage of time or both) in a breach of or constitute a default or require any
consent under the terms of any credit agreement, indenture, mortgage, purchase
agreement, deed of trust, security agreement, lease, guarantee or other
instrument or agreement to which Buyer is a party or by which Buyer may be
subject. Without limiting the foregoing, Buyer is not subject to any restriction
or agreement which, with or without the giving of notice, the passage of time or
both, prohibits or would be violated by, the execution, delivery and
consummation of the Documents and the transactions referred to therein.
(e) The Documents constitute, or when executed and delivered will constitute,
the legal, valid and binding obligations of Buyer enforceable in accordance with
their respective terms, subject, however, to applicable bankruptcy and
insolvency laws and other laws of general application affecting creditors'
rights and to judicial discretion to which equitable remedies are subject.
6. Indemnification. Each of Seller and Buyer will indemnify the other and
protect, defend and hold it harmless from and against any and all loss, cost,
damage, injury or expense, including, without limitation, reasonable attorneys'
fees and court costs, wheresoever and howsoever arising, which the indemnified
party or its subsidiaries or stockholders, or any of its, or their, directors,
officers, agents, employees, stockholders or partners, may incur by reason of
any breach by the indemnifying party of any of its representations, covenants,
warranties or obligations set forth in the Documents. Seller
5
<PAGE>
also hereby indemnifies and shall hold Buyer harmless against any loss sustained
or reasonable expenses incurred by Buyer as the result of or arising out of the
imposition on the Equipment of any Federal or other tax lien or the foreclosure
thereof by virtue of the failure to pay or underpayment by the Seller of the
Federal or other taxes payable by Seller.
7. Miscellaneous.
7.1 Survival. The covenants, agreements, indemnities, representations and
warranties made herein shall survive the execution and delivery of the Documents
and the consummation of the transactions described therein.
7.2 Successors and Assigns. The rights and obligations of the parties hereunder
shall inure to the benefit of, and be binding and enforceable upon, the
respective successors, assigns and transferees of either party.
7.3 Notices. Any notice, request or other communication to either party by the
other hereunder shall be given in writing and shall be deemed given on the
earlier of the same is (i) personally delivered with receipt acknowledged, or
(ii) mailed by certified mail, return receipt requested, postage prepaid and
addressed to the party for which it is intended at the address set forth at the
head of this Agreement. The place to which notices or copies of notices are to
be given to either party may be changed from time to time by such party by
written notice to the other party.
7.4 Governing Law. This Agreement shall be governed by and interpreted under the
laws of the state of New York applicable to contracts made and to be performed
therein without giving effect to the principles of conflict of laws thereof.
7.5 Captions. Captions used herein are inserted for reference purposes only and
shall not affect the interpretation or construction of this Agreement.
7.6 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same agreement.
7.7 Amendments. This Agreement may be amended or varied only by a document, in
writing, of even or subsequent date hereof, executed by Buyer and Seller.
8. Further Assurances. Each party hereto shall promptly execute and deliver all
such further instruments and documents, and promptly take such further action,
as may reasonably be requested by the other party in order to fully carry out
the intent and accomplish the purposes of the Documents and the transactions
referred to therein. Without limiting the foregoing, Assignor shall promptly
execute and deliver, and cause
6
<PAGE>
the Lessee to promptly execute and deliver, (a) a Notice and Acknowledgment of
Assignment (in form and substance satisfactory to Republic) and (b) such other
documents as Republic may reasonably request.
IN WITNESS WHEREOF, the Buyer and Seller have executed this Agreement as of
the date first above written.
Seller: Univec, Inc.
By: /s/ Joel Schoenfeld
----------------------------
Name: Joel Schoenfeld
--------------------------
Title: C.E.O.
-------------------------
Buyer: Paramount Financial
Corporation
By: /s/ Paul Vecker
----------------------------
Name: Paul Vecker
--------------------------
Title: Sr. Vice President
-------------------------
7
<PAGE>
Schedule A
Equipment Description: 128 cavity plunger mold and mold base and mold inserts
and spare parts, Serial No. 1713
Remaining Rental Payments: 34 consecutive monthly rental payments each in the
amount of $54,056.00, due on July 1, 1996 and on the first day of each month
thereafter.
Equipment Location: Sherwood-Davis & Geck
1915 Olive Street
St. Louis, MO 63103
8
<PAGE>
Exhibit A
Bill of Sale
For the sum of $1.00 and other value received, receipt of which is hereby
acknowledged, Univec, Inc. ("SELLER"), a New York corporation having its
principal office and place of business at 999 Franklin Avenue, Garden City, NY
11530, does hereby sell, grant, assign, transfer and convey to Paramount
Financial Corporation ("BUYER"), a Delaware corporation having an office and
place of business at One Jericho Plaza, Jericho, NY 11753, the following
equipment ("Equipment"):
128 cavity plunger mold and mold inserts and mold base and spare parts. Serial
No. 1713.
The SELLER represents and warrants that the SELLER is the lawful owner of
the Equipment, that the Equipment is free and clear of all liens, leases, claims
and other encumbrances (except for the lease of the Equipment pursuant to
Equipment Lease dated May 30, 1996 between SELLER as lessor and Sherwood Medical
Company (a Delaware corporation doing business as Sherwood-Davis & Geck) as
lessee) and that SELLER has a good right to sell, grant, assign, transfer and
convey the Equipment and will at its expense, warrant and defend the title
thereto. SELLER reaffirms as of the date hereof, the representations,
warranties, covenants, indemnities and assignments made by SELLER to BUYER in
the Purchase Agreement dated June 27, 1996 between SELLER and BUYER, as if such
representations, warranties, covenants, indemnities and assignments were set
forth herein in haec verba.
Date: June __, 1996
Univec, Inc.
By:________________________
Title:_____________________
Name:______________________
asas&inag
<PAGE>
EXHIBIT B
ASSIGNMENT, ASSUMPTION & INDEMNITY AGREEMENT
AGREEMENT dated as of June 27, 1996 by and between Univec, Inc., a New York
corporation having its principal office and place of business at 999 Franklin
Avenue, Garden City, NY 11530 ("Assignor"), and Paramount Financial Corporation,
a Delaware corporation having an office and place of business at One Jericho
Plaza, Jericho, NY 11753 ("Assignee").
WITNESSETH:
THAT in consideration of the mutual undertakings herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
mutually acknowledged, Assignor and Assignee agree as follows:
1. Assignment. Assignor hereby assigns and sets over unto Assignee, effective on
the date hereof, all of its rights, title and interest in, under and to (i)
Equipment Lease dated May 30, 1996 between Assignor as lessor and Sherwood
Medical Company ("Lessee") (a Delaware corporation doing business as
Sherwood-Davis & Geck) as lessee (such Equipment Lease is called the "Lease")
and (ii) any guaranty of Lessee's obligations thereunder, including (without
limitation) the Bond (as hereinafter defined), except for the rental payments
due on June 1, 1996 and July 1, 1996 under the Lease. The term "Bond" means Bond
No. 8145-4178 dated June 20, 1996 issued by Federal Insurance Company (as
surety) and Lessee (as principal) which insures the Lessee's obligations under
the Lease. The Assignor shall not be liable for payment of the Lessee's
obligations under the Lease, except that, notwithstanding the foregoing,
Assignor shall be liable for any damages suffered by the Assignee as a result of
any breach or inaccuracy of any of the representations, warranties, covenants,
agreements or indemnities of Assignor in this Agreement, the Purchase Agreement
(as hereinafter defined) or any documents or instruments executed in connection
herewith or therewith.
2. Obligations. Assignee hereby accepts such assignment, provided, however,
that Assignor (and not Assignee) shall remain responsible to perform all
obligations of the lessor under the Lease, and Assignor (and not Assignee)
agrees to perform same in accordance with the terms thereof.
3. Representations of Assignor. Assignor hereby represents, convenants and
warrants and Assignee may rely on the following:
(a) All of the representations, covenants and warranties contained in
Section 5.1 of that certain purchase agreement (the "Purchase Agreement")
dated June 27, 1996 between Assignor as Seller and Assignee as Buyer are
incorporated herein by reference with the same force and effect as if set
forth herein in full.
<PAGE>
(b) Assignor is assigning all right, title and interest in, under and
to the Lease and the Bond to Assignee, free and clear of any and all liens,
claims or encumbrances {except for the rental payments due on June 1, 1996
and July 1, 1996 under the Lease).
4. Representations of Assignee. Assignee hereby represents, covenants and
warrants and Assignor may rely on the following:
All of the representations, covenants and warranties contained in Section
5.2 of the Purchase Agreement are incorporated herein by reference with the same
force and effect as if set forth herein in full.
5. MISCELLANEOUS.
(a) Survival. All representations, warranties, covenants, agreements
and indemnities made by Assignor and Assignee shall survive the execution,
delivery and performance of this Agreement and all other documents executed
in connection herewith.
(b) Successors and Assigns. This Agreement and all covenants,
representations, warranties, indemnities and agreements contained herein as
well as all other documents executed in connection herewith shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
(c) Indemnification.
(i) Assignor shall indemnify and hold Assignee harmless from and
against any and all loss, cost, damage, injury or expense (including,
without limitation, court costs and reasonable attorneys' fees)
wheresoever and howsoever arising which Assignee may incur by reason
of any breach by Assignor of any of its warranties, representations,
covenants, agreements or obligations set forth herein or in any
documents executed in connection herewith.
(ii) Assignee shall indemnify and hold Assignor harmless from and
against any and all loss, cost, damage, injury or expense (including,
without limitation, court costs and reasonable attorneys' fees)
wheresoever and howsoever arising which Assignor may incur by reason
of any breach by Assignee of any of its warranties, representations,
covenants, agreements or obligations set forth herein or in any
documents executed in connection herewith.
<PAGE>
(d) Titles. The titles appearing in this Agreement and in any
other documents relating to this transaction are inserted only as a
matter of convenience and in no way define, limit or describe the
scope or intent hereof nor in any way affect this Agreement or any
other documents relating to this transaction.
(e) Further Instruments. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further
instruments or documents and to take such other action as may be
required to carry out effectively the transactions contemplated
herein.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Assignor and
Assignee have caused this Agreement to be executed and do each hereby warrant
and represent that their respective signatories whose signatures appear below
have been and are on the date of this agreement duly authorized by all necessary
and appropriate action to execute this Agreement.
ASSIGNEE: ASSIGNOR:
Paramount Financial Univec, Inc.
Corporation
By:___________________________ By:__________________________
Title:________________________ Title:_______________________
Name:_________________________ Name:________________________
asas&inag
<PAGE>
Exhibit C
Conditional Bill of Sale
(Where payment of the purchase price
has not been received and a purchase
money security interest is reserved)
For the sum of $1.00 and other value received, receipt of which is hereby
acknowledged, Univec, Inc ("SELLER"), a New York corporation having its
principal office and place of business at 999 Franklin Avenue, Garden City, NY
11530, does hereby sell, grant, assign, transfer and convey to Paramount
Financial Corporation ("BUYER"), a Delaware corporation having an office and
place of business at One Jericho Plaza, Jericho, NY 11753, the following
equipment ("Equipment"):
128 cavity plunger mold and mold inserts and mold base and spare parts. Serial
No. 1713.
The SELLER represents and warrants that the SELLER is the lawful owner of
the Equipment, that the Equipment is free and clear of all liens, leases, claims
and other encumbrances (except for the lease of the Equipment pursuant to
Equipment Lease dated May 30, 1996 between SELLER as lessor and Sherwood Medical
Company (a Delaware corporation doing business as Sherwood-Davis & Geck) as
lessee and that SELLER has a good right to sell, grant, assign, transfer and
convey the Equipment and will at its expense, warrant and defend the title
thereto. SELLER reaffirms as of the date hereof, the representations,
warranties, covenants, indemnities and assignments made by SELLER to BUYER in
the Purchase Agreement dated June _, 1996 between SELLER and BUYER, as if such
representations, warranties, covenants, indemnities and assignments were set
forth herein in haec verba. Notwithstanding the foregoing, SELLER expressly
reserves a purchase money security interest in the Equipment to secure the
payment of the balance of the purchase price of the Equipment (such balance
being $1,597,763.00). Upon receipt by SELLER of such $1,597,763.00, such
purchase money security interest shall be satisfied and automatically
terminated.
Date: June __, 1996
Univec, Inc.
By: __________________________
Title:________________________
Name:_________________________
<PAGE>
Conditional Bill of Sale
(Where payment of the purchase price
has not been received and a purchase
money security interest is reserved)
For the sum of $1.00 and other value received, receipt of which is hereby
acknowledged, Univec, Inc ("SELLER"), a New York corporation having its
principal office and place of business at 999 Franklin Avenue, Garden City, NY
11530, does hereby sell, grant, assign, transfer and convey to Paramount
Financial Corporation ("BUYER"), a Delaware corporation having an office and
place of business at One Jericho Plaza, Jericho, NY 11753, the following
equipment ("Equipment"):
128 cavity plunger mold and mold inserts and mold base and spare parts. Serial
No. 1713.
The SELLER represents and warrants that the SELLER is the lawful owner of
the Equipment, that the Equipment is free and clear of all liens, leases, claims
and other encumbrances (except for the lease of the Equipment pursuant to
Equipment Lease dated May 30, 1996 between SELLER as lessor and Sherwood Medical
Company (a Delaware corporation doing business as Sherwood-Davis & Geck) as
lessee and that SELLER has a good right to sell, grant, assign, transfer and
convey the Equipment and will at its expense, warrant and defend the title
thereto. SELLER reaffirms of the date hereof, the representations, warranties,
covenants, indemnities and assignments made by SELLER to BUYER in the Purchase
Agreement dated June 27, 1996 between SELLER and BUYER, as if such
representations, warranties, covenants, indemnities and assignments were set
forth herein in haec verba. Notwithstanding the foregoing, SELLER expressly
reserves a purchase money security interest in the Equipment to secure the
payment of the balance of the purchase price of the Equipment (such balance
being $1,600,000.00). Upon receipt by SELLER of such $1,600,000.00, such
purchase money security interest shall be satisfied and automatically
terminated.
Date: June __, 1996
Univec, Inc.
By: /s/ Joel Schoenfeld
--------------------------------
Title: C.E.O.
-----------------------------
Name: Joel Schoenfeld
------------------------------
<PAGE>
[LOGO] paraMounT
Paramount
Financial
Corporation
July 1, 1996
Univec, Inc.
999 Franklin Avenue
Garden City, NY 11530
Gentlemen:
Reference is made to (i) the Purchase Agreement dated June 27, 1996 (the
"Purchase Agreement") between Univec, Inc. ("Univec") s Seller and Paramount
Financial Corporation ("Paramount") as Buyer and (ii) a related Assignment,
Assumption & Indemnity Agreement (the "Assignment Agreement") dated June 27,
1996 between Univec as Assignor and Paramount as Assignee. Pursuant to the
Purchase Agreement, Univec is selling to Paramount 128 cavity plunger mold and
mold base and mold inserts and spare parts (serial no. 1713) (the "Equipment").
Pursuant to the Assignment Agreement, Univec is assigning the Lease (as defined
in the Purchase Agreement) to Paramount.
Paramount will be financing the Equipment and the Lease with Republic
National Bank of New York (the "Bank"). In connection therewith, Paramount will
be granting to the Bank a lien on, among other things, the Equipment and the
Lease. Upon the satisfaction and termination of such lien (and Paramount
receiving confirmation thereof from the Bank), Paramount will transfer to Univec
(for the sum of $1.00) Paramount's interest in the Equipment and in the Lease,
without representation or warranty of Paramount.
One Jericho Plaza
Jericho, NY 11750
516-938-3400
516-938-3995 fax
- -----------------
http:/www.pramountfin.com
Very truly yours,
PARAMOUNT FINANCIAL CORPORATION
By: /s/ Paul Vecker
----------------------------
Title: Senior Vice President
-------------------------
Name: PAUL VECKER
--------------------------
<PAGE>
EXHIBIT 10.5
<PAGE>
MANUFACTURING AGREEMENT
Between
HARMAC MEDICAL PRODUCTS, INC.
&
UNIVEC, INC.
Effective December 4, 1996, Harmac Medical Products, Inc., 2201 Bailey Avenue,
Buffalo, NY 14211-1797 and UNIVEC, Inc., 999 Franklin Avenue, Garden City, NJ
11530 agree to enter into a MANUFACTURING AGREEMENT whereby Harmac will assemble
and package a single use syringe for UNIVEC.
1. Length of Agreement:
The length of the agreement is December 4, 1996 through December 31, 1997.
Each year thereafter the agreement is automatically renewable for an
additional calendar year unless either party notifies the other in writing
within ninety (90) days of the end of the agreement period that it wishes
to terminate the agreement.
2. Pricing
A. Price for initial order (8,857,400 units; PO# 01318) is estimated at
per thousand finished units. The price is made up of two
components:
o Packaging Materials * per thousand units
o Value Added Component * per thousand units
This price is subject to modification based on a review of the
assumptions relating to throughput, labor requirements and scrap costs
described in 2B., to be determined when the assembly machine is
completed and qualified prior to starting production of the initial
order.
B. The estimated price of * is based upon the following assumptions:
o All components except packaging materials are to be supplied by
UNIVEC and will meet agreed upon Product Specifications. Harmac
will be notified in advance of any planned changes in
specifications.
o Packaging material costs were based on estimates made by UNIVEC.
o Assembly and packaging labor requirements were based on estimates
provided by UNIVEC as follows:
1. Assembly machine requires two (2) operators per 8-hour shift
yielding 14,040 units per hour with a 90% efficiency factor.
2. Packaging machine requires four (4) operators per 8-hour
shift yielding 13,500 units per hour with a 90% efficiency
factor.
3. Two (2) material handlers will be required per shift.
o Production scrap is estimated at 2.5% of Harmac's cost.
o UNIVEC will be responsible for all costs associated with outside
storage and handling of components and finished products.
- ---------
* Confidential treatment has been sought by the Company for the omitted
portions and such material has been filed separately with the Commission.
1
<PAGE>
MANUFACTURING AGREEMENT Page 2
Harmac Medical Products, Inc.
& UNIVEC, Inc.
C. If necessary, Harmac will revise pricing after the initial order for
deliveries made during the balance of the agreement period, subject to
approval by UNIVEC, to reflect actual costs incurred during production
of the initial order, including packaging material costs. If Harmac
revises the pricing for the balance of the agreement period, it will
provide UNIVEC a letter explaining the increase or decrease in terms
of assumptions affecting packaging materials and value added component
(2A and 2B). In the event UNIVEC does not approve of price revisions,
this agreement may be terminated by Harmac after completion of the
initial order.
After the first agreement period, prices will be adjusted annually by
mutual consent of both parties.
3. Payment Terms
A. For the initial order, UNIVEC will advance Harmac an amount equal to
35% of the value of Harmac purchase commitments for Packaging
Materials; advances to be made at the time Harmac makes purchase
commitments. In addition UNIVEC will advance Harmac an amount equal to
35% of the Value Added Component ( * per thousand units) of the
first month's shipments; advance shall be no less than $25,000 and is
to be made prior to the first shipment of product.
B. Terms of payment for product shall be net 30 days after the date of
invoice. The maximum amount of accounts receivable from UNIVEC at any
time shall be no greater than $50,000. Prices do not include sales,
use, excise or similar taxes or tariffs or duties, all of which shall
be the responsibility of UNIVEC.
C. Products shall be delivered F.O.B. Harmac plant of manufacture.
4. Limited Warranty and Disclaimer
A. Harmac warrants that all Products supplied will meet the Product
Specifications for such products as provided in writing by UNIVEC and
agreed to by Harmac.
Additionally, Harmac warrants that procedures as documented by Harmac
Quality Assurance Specifications will be executed and that such
execution can be evidenced to UNIVEC's reasonable satisfaction.
- ---------
* Confidential treatment has been sought by the Company for the omitted
portions and such material has been filed separately with the Commission.
<PAGE>
MANUFACTURING AGREEMENT Page 3
Harmac Medical Products, Inc.
& UNIVEC, Inc
B. The foregoing warranty is in lieu of all other warranties, expressed
or implied, AND NO OTHER WARRANTIES ARE GRANTED INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE. If the Product does not conform to the warranty
set forth herein, Harmac's sole liability and obligation shall be to
replace the Product or refund the purchase price as Harmac may elect.
Harmac's liability under the above warranty with respect to the
Products or their use (including liability for negligence or
otherwise) is limited exclusively to the remedies provided above and
no other right or remedy will be available to UNIVEC or any other
person. Harmac will in no event be liable to any person for any
special, incidental or consequential damages to person or property
arising from or under the above warranty or otherwise from or under
the agreement, except to the extent mandated by applicable state law.
C. UNIVEC shall have a period of thirty (30) days from the date of
receipt to inspect and reject any shipment of Products on the grounds
that it does not conform with the Product Specifications, provided
UNIVEC confirms such non-compliance through generally acceptable
quality control procedures. UNIVEC shall have the right to return any
Product for which non-conformance to Product Specifications has been
confirmed and receive, at its option, credit, replacement or refund.
Products returned for failure to conform to the Specifications will
not be accepted for credit unless the Products are returned in
accordance with Harmac's instructions accompanied by an explanation of
the nature of the failure that is satisfactory to Harmac.
5. Confidentiality
Harmac will keep confidential all information related to UNIVEC'S patents
and manufacturing processes. This information includes knowledge discovered
while implementing or providing manufacturing services to UNIVEC. UNIVEC
also agrees to keep confidential all information and knowledge related to
Harmac's manufacturing processes.
6. Documentation
All documentation relating to UNIVEC'S patents and manufacturing processes
shall become the property of UNIVEC regardless of who produces the
documentation.
<PAGE>
MANUFACTURING AGREEMENT Page 4
Harmac Medical Products, Inc.
& UNIVEC, Inc
7. Insurance
Both parties shall maintain adequate insurance coverage for workers'
compensation, property, casualty and product liability. Policies will be
available for inspection upon request. Certificates of insurance will be
provided upon request and both parties agree to notify each other in the
event of changes in coverage.
8. UNIVEC Equipment
Harmac will be responsible for both routine and preventative maintenance on
equipment owned by UNIVEC and used by Harmac. UNIVEC will be responsible
for costs associated with any design flaws in equipment and with normal
wear and tear on equipment.
9. Capacity
Harmac will provide sufficient labor and floor space for one syringe line
for the length of the agreement. A syringe line consists of a clip
manufacturing station, an assembly station and a packaging station.
UNIVEC will keep Harmac advised of plans to expand its assembly and
packaging capacity by adding new syringe lines. UNIVEC shall provide Harmac
with the right of first refusal to manage additional syringe lines and
Harmac will respond within a reasonable time with its intentions to provide
sufficient capacity to handle additional lines.
10. Right to Inspect
Harmac shall permit UNIVEC or its designee the right as reasonable
requested to enter the manufacturing and storage facilities of Harmac
during regular business hours to inspect and spot check Products, goods
tools and molds, in order to confirm Harmac's compliance with the terms of
this Agreement. Harmac shall make available an authorized representative of
its organization to facilitate UNIVEC's exercise of the foregoing
inspection rights.
<PAGE>
MANUFACTURING AGREEMENT Page 5
Harmac Medical Products, Inc.
& UNIVEC, Inc.
11. Termination
A. Right to Termination. In the event that either party breached, in any
material respects, any of the terms of this Agreement or defaults in
the performance of any of its duties or obligations hereunder, in any
material respects, and such breach or default is not remedied within
sixty (60) days after delivery of written notice of such breach or
default, the other party may immediately terminate this Agreement by
giving written notice of termination. In the event of the liquidation,
bankruptcy, proceedings under a debtor's relief law, inability to meet
debts as they mature or insolvency of either party, or in the event
that either party's business or assets or any part thereof are seized
or expropriated by judicial or governmental process, this agreement
shall automatically terminate.
B. Effect of Termination
Termination of this Agreement shall not relieve either party of any of
its obligations which have matured as of the date of termination. Upon
expiration or termination of this Agreement, all tooling, equipment,
molds and/or other material owned by UNIVEC shall be crated and
shipped to UNIVEC promptly as directed by UNIVEC and at UNIVEC's
expense. In addition, all amounts owed to Harmac by UNIVEC will become
due and payable immediately upon termination of the Agreement.
12. Other Terms
The Standard Terms and Conditions of Sale stated on the attached invoice
shall apply to sales made pursuant to this Agreement. In the event of any
conflict between the terms of this Agreement and such invoice, the terms of
this Agreement shall control.
AGREED TO:
Harmac Medical Products, Inc. UNIVEC, Inc.
/s/ David L. Benton /s/ David Chabut
David L. Benton David Chabut
Chief Financial Officer Chief Financial Officer
Date: 12/4/96 Date: 1/7/97
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT dated as of October 15, 1996 between UNIVEC, Inc., a Delaware
corporation (the "Company"), having its principal office at 999 Franklin Avenue,
Garden City, New York 11530, and David Chabut, an individual (the "Employee")
residing at 50 Prince Street, Apartment No. 22, New York, New York 10012.
WHEREAS, the Employee has been employed by the Company as Chief Financial
Officer since October 1995;
WHEREAS, the Company desires to continue the employment of the Employee and
Employee agrees to continue his employment with the Company on the terms and
conditions herein provided;
NOW THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
1. Employment and Duties. During the term of this Agreement, the Employee
shall serve as the Company's Chief Financial Officer, and in such capacity shall
be the principal financial and accounting officer of the Company, and Employee
shall perform such other duties consistent with his position as may be assigned
to him from time to time by the Company's Chief Executive Officer, to whom he
shall report.
2. Term. Subject to the termination provisions of Section 5 hereof,
Employee's employment by the Company hereunder is for a term commencing on the
date hereof and ending on September 30, 1997 (the "Employment Term").
<PAGE>
3. Compensation.
(a) Base Salary. During the Employment Term, the Company shall pay the
Employee for his services hereunder at a base salary of $120,000 per annum,
inclusive of health benefits. The base salary (after deduction for health
insurance premiums) shall be paid to the Employee in appropriate installments in
accordance with the Company's usual and customary payroll practices for its
executive officers.
(b) Stock Option. As an inducement to his entering into this Agreement, the
Company agrees to recommend to the Board of Directors that the Company grant the
Employee incentive stock options to purchase 20,513 shares of Common Stock under
a stock option plan to be adopted by the Company, (the "Plan") at an exercise
price of $3.50 per share, which options may be exercised during the five year
period following the date of grant, or the earlier termination of his employment
with the Company in accordance with the provisions of the Plan.
4. Benefits. Employee shall be entitled to participate in any and all
benefit plans of the Company made available to executive officers of the
Company.
5. Reimbursement. During the Employment Term, the Company shall reimburse
the Employee for all reasonable and necessary business expenses incurred and
paid directly by him in the performance of his duties hereunder, upon submission
to the Company of reasonably detailed expense reports and appropriate vouchers
and/or receipts prepared in accordance with the applicable provisions and
regulations of the Internal Revenue Code of 1986, as amended.
6. Termination. Notwithstanding any provision of this Agreement to the
contrary, the Employee's employment hereunder shall be subject to earlier
termination as follows:
-2-
<PAGE>
(a) Death. This Agreement shall terminate immediately upon the death of the
Employee.
(b) Cause. The Company may terminate Employee's employment hereunder for
"cause" (as hereinafter defined) immediately upon written notice of termination
to the Employee. For purposes of this Paragraph 6(b), "cause" means: (i) willful
and gross misconduct with respect to the business or affairs of the Company;
(ii) willful and gross neglect of duties or willful and gross failure to act
which adversely affects the business or affairs of the Company; (iii) gross
negligence in the performance of the Employee's duties hereunder; (iv) fraud,
embezzlement or criminal conduct (other than misdemeanors and motor vehicle
related incidents), whether or not directed against the Company; or (v) failure
of Employee to cure or remedy any alleged violation of Employee's obligations
under Paragraphs 7, 8, 9 and 10 of this Agreement after ten (10) days prior
written notice from the Company.
(c) Right to Compensation Upon Termination. Except as otherwise
specifically provided herein or as accrued for services performed through the
date of termination, all of Employee's rights to compensation hereunder shall
cease to exist effective upon the date of termination.
lj
7. Developments. The Employee agrees promptly to disclose in writing to the
Company any invention or discovery made by him during his employment with the
Company, whether during or after working hours, that relates to (i) any
disposable medical devices for drug delivery, including but not limited to
hypodermic needles, (ii) inventions developed for the Company through projects
participated in by Employee and (iii) processes, including equipment used to
produce items covered by clauses (i) and (ii) (the items referred to in clauses
(i), (ii) and
-3-
<PAGE>
(iii) being hereinafter referred to collectively as "Covered Inventions"), and
such inventions and discoveries shall be the Company's sole property. Upon the
Company's request, whether during or after the term of his employment, Employee
shall execute and assign to the Company all applications for letters patent and
copyrights of the United States and such foreign countries as the Company may
designate relating to Covered Inventions, and Employee shall execute and deliver
to the Company such other instruments as the Company deems necessary to vest in
the Company the sole ownership of all exclusive rights in and to such inventions
and discoveries, as well as the patents and/or copyrights. If services in
connection with applications for patents and/or copyrights are performed by
Employee at the Company's request after the termination of his employment, the
Company shall pay him reasonable compensation for such services rendered after
termination of this Agreement.
8. Non-Competition. During the Employment Term and for a period of twelve
(12) months after the termination of this Agreement, however occasioned,
Employee shall not within the United States, Canada, Mexico or Japan, directly
or indirectly, as principal, agent, stockholder, joint venturer, investor,
employee, consultant, officer, director, partner, adviser, guarantor or in any
other capacity, render services or provide advice relating to, or otherwise
engage in or assist others in engaging in, any Competitive Business, or own or
control any interest in any entity which is so engaged. As used herein,
"Competitive Business" means the design, manufacture, marketing, sale or
distribution of any Covered Inventions. Anything to the contrary in the
foregoing notwithstanding, Employee may own, beneficially or legally, up to one
percent (1%) of the outstanding securities of any organization registered under
Section 12 of the Securities Exchange Act of 1934, as amended, or which are
otherwise publicly traded.
-4-
<PAGE>
9. Non-Solicitation. The Employee agrees that he will not during the term
of this Agreement and for a period of one (1) year following the termination of
his employment with the Company for any reason, directly or indirectly, solicit
or contact any employee of the Company with a view to encouraging such employee
to leave the employ of the Company for the purpose of being hired by him, or any
employer affiliated with him, or any competitor of the Company.
10. Confidentiality. Executive agrees that he will not, during the term of
this Agreement and thereafter, use or disclose to any individual, firm,
corporation, partnership, business trust, or other business entity (any of the
foregoing being hereinafter referred to as a "Person") any confidential or
proprietary information of the Company for any reason or purpose whatsoever, nor
shall he make use of any such confidential or proprietary information for his
own purpose or for the benefit of any Person other than the Company, including
but not limited to any and all patents (issued or pending), designs, drawings,
blueprints, manufacturing processes, specifications, test data, graphics, charts
and all other technical information, currently in existence or subsequently
developed, relating to the Company's research and development activities and
marketing strategy, or information relating to the Company's costs, pricing
practices, customer lists or financial data; except that nothing herein shall be
construed to prohibit him from complying with legal process or using or
disclosing such information if it shall have become public knowledge other than
by or as a result of disclosure by a Person not having a right to make such
disclosure.
-5-
<PAGE>
11. Specific Performance. Employee acknowledges that the covenants set
forth in Paragraphs 7, 8, 9 and 10 are reasonable and necessary for the
protection of the Company and that his violation of any of the such provisions
shall cause the Company immediate and irreparable harm and he agrees that in
such event, an injunction restraining him from such violation or threatened
violations may be entered against him in addition to any other remedy available
to the Company. Employee waives any right which he may otherwise have to assert
in any such proceeding that the Company has an adequate remedy at law.
12. Assignment. This Agreement shall be binding and inure to the benefit of
the Company, its successors and permitted assigns and to the Employee, his heirs
and personal representatives. However, neither this Agreement nor any of the
rights of the parties hereunder may be transferred or assigned by either party
hereto, except that if the Company merges or consolidates with or into or sells
or otherwise transfers substantially all its assets to another corporation which
assumes the Company's obligations under this Agreement, the Company may assign
its rights hereunder to that corporation. Any other attempted transfer or
assignment in violation of this paragraph shall be void. Since this is a
contract for personal services, only the Employee is deemed capable of
performing the services contemplated hereunder.
13. Waiver. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver thereof
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver of any breach of any
provision of this Agreement shall not constitute a waiver of any other breach of
such provision or any other provision hereof.
-6-
<PAGE>
14. Notices. Any demand, notice or other communication under this Agreement
shall be in writing and shall be deemed duly given, and received by the
addressee at the address stated above (or at such other address as may be
specified by a party in a written notice delivered in accordance with the
provisions of this Paragraph) upon receipt, duly evidenced if (i) mailed by
certified or registered mail, return receipt requested, with postage prepaid
(ii) deposited with a recognized overnight courier service such as Federal
Express, UPS or Express Mail, (iii) by hand delivery, or (iv) upon the receipt
of actual written notice.
15. Indemnification. Employee shall be entitled throughout the term of this
Agreement and thereafter to indemnification in respect of any actions or
omissions as an officer of the Company (or any successor pursuant to Paragraph
11 hereof) to the fullest extent permitted by the Delaware General Corporation
Law or other applicable law.
16. Entire Agreement. This Agreement constitutes the entire agreement
between the parties as of the date hereof with respect to Employee's employment
by the Company, superseding all prior or contemporaneous understandings or
agreements, oral or written. This Agreement may not be modified or amended,
except by subsequent written agreement of the parties which specifically states
that it is intended to be a modification, amendment or supplement to this
Agreement, and is signed by all of the parties hereto. No course of dealing or
custom shall be referred to as modifying any of the terms and conditions of this
Agreement.
17. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts made
and to be performed wholly within that State, and any action, suit or proceeding
which shall be permitted by this Agreement, or by action of law, shall be
commenced in any court having jurisdiction in
-7-
<PAGE>
New York County, or in the United States District Court for the Southern
District of New York, and the parties hereto hereby waive any objection to
jurisdiction or venue in any such action, suit or proceeding commenced in such
courts.
18. Arbitration. Except as specifically provided in Paragraph 11 of this
Agreement, any and all claims, disputes and other matters in question with
respect to, arising out of, under or in connection with this Agreement,
including without limitation, the validity, interpretation, performance and
breach hereof, or the rights and privileges provided by, or responsibilities and
obligations under this Agreement, shall be finally decided by arbitration in the
City of New York before three (3) arbitrators in accordance with the Rules of
the American Arbitration Association then in effect, unless the parties mutually
agree otherwise. This Agreement to arbitrate shall be specifically enforceable
under the prevailing arbitration law. The award rendered by the arbitrators
shall be final, and judgment may be entered upon it in accordance with
applicable law in any court having jurisdiction thereof. The parties agree that
the arbitrators will have full authority to award the costs of the arbitration,
including attorneys' fees.
19. Severability. In the event any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provision hereof. Such
invalid or unenforceable provision shall be amended, if possible, in order to
accomplish the purposes of this Agreement.
-8-
<PAGE>
20. Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
UNIVEC, INC.
By:/s/ Joel Schoenfeld
---------------------------------
Joel Schoenfeld
Chairman of the Board and
Chief Executive Officer
/s/ David Chabut
---------------------------------
David Chabut
-9-
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT dated as of October 1, 1996 between UNIVEC, Inc., a New York
corporation, having an office at 999 Franklin Avenue, Garden City, New York
11530 (the "Company"), and David Shonfeld, an individual with an address at 20
Brewer Avenue, Great Neck, New York 11020 ("Employee").
WHEREAS, the Employee has been employed by the Company as Director of
Research and Development since August 1992;
WHEREAS, the Company desires to continue the employment of the Employee and
Employee agrees to continue his employment with the Company on the terms and
conditions herein provided;
NOW THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties agree as follows:
1. Employment and Duties. The Company hereby employs Employee, and Employee
hereby accepts employment, as Director of Research and Development of the
Company on the terms and conditions set forth herein. In such capacity, Employee
shall provide the Company with research and development advice and services
relating to its locking clip patent for its non-reusable syringes until
commencement of production and shall perform such other research and development
projects as may be assigned to him from time to time by the Company's President,
to whom Employee shall report. During Employee's employment hereunder, he shall
be allowed to pursue other business activities which will not conflict or
otherwise interfere with the performance of his duties hereunder, provided they
are not
1
<PAGE>
competitive with the business of the Company and the performance of his duties
hereunder has priority over such other business activities. Employee will use
his best efforts to advance the Company's interests at all times. It is
anticipated that Employee will devote an average of at least 24 hours per week
in the performance of his duties hereunder. From time to time, as necessary,
Employee and the President of the Company, or his designee, shall agree on a set
of research and development objectives for particular projects, including the
documentation required in connection therewith, and an estimate of the number of
hours to complete the project ("Estimated Project Hours").
2. Term. Subject to the termination provisions of Section 5 hereof,
Employee's employment by the Company hereunder will be for a term commencing on
the date hereof and ending on July 31, 1997 (the "Employment Term").
3. Place of Performance. Unless specifically instructed by the President of
the Company, or his designee, to perform services at some other location,
Employee shall perform his duties hereunder at the Company's offices.
4. Compensation. During the Employment Term, the Company shall pay the
Employee for his services hereunder at the rate of $50 per hour. Employee shall
submit a true and accurate daily account of the number of hours (expressed to
the nearest half hour) devoted to the performance of his duties hereunder,
together with an itemized expense report and list of objectives accomplished, to
the Company's President or his designee, on the 15th and last day of each
calendar month during the Employment Term. Employee understands and agrees that
unless specifically authorized in writing, in advance by the Company's
President, or his designee, the Employee shall not be entitled to compensation
for (i) more than forty (40) hours
2
<PAGE>
per week, (ii) any time in excess of the Estimated Project Hours for a
particular project, or (iii) his time in commuting or otherwise traveling from
home or the location of his other business pursuits to and from the Company's
offices or to such other locations at which he performs services on behalf of
the Company. The Company shall pay the Employee for services rendered hereunder
within five (5) business days following receipt of the aforementioned
documentation, which payments shall be net of deduction for FICA and Medicare.
The Company shall provide the Employee with benefits of $20,000 per annum
(before deduction for the Company's contribution to FICA and Medicare and
recomputed as if paid on a pre-tax basis using a marginal tax rate of 35%,
except for such benefits as are made available to employees generally),
including but not limited to an automobile allowance and health insurance.
During the Employment Term, the Company shall reimburse the Employee for all
reasonable and necessary business expenses incurred and paid directly by him in
the performance of his duties hereunder, upon submission to the Company of
reasonably detailed expense reports and appropriate vouchers and/or receipts
prepared in accordance with the applicable provisions and regulations of the
Internal Revenue Code; it being understood that unless specifically authorized
in writing, in advance by the President or his designee, of the Company, the
only expenses which will be reimbursed to Employee hereunder will be for travel,
lodging and meals.
5. Termination. Notwithstanding any provision of this Agreement to the
contrary, Employee's employment hereunder shall be subject to earlier
termination as follows:
(a) Death. This Agreement shall terminate upon the death of Employee.
(b) Cause. The Company may terminate Employee's employment hereunder
for "cause" (as hereinafter defined) immediately upon written notice of
termination
-3-
<PAGE>
to the Employee. For purposes of this Paragraph 5(b), "cause" means: (i) willful
and gross misconduct with respect to the business or affairs of the Company;
(ii) willful and gross neglect of duties or willful and gross failure to act
which adversely affects the business or affairs of the Company; (iii) gross
negligence in the performance of the Employee's duties hereunder; (iv) fraud,
embezzlement or criminal conduct (other than misdemeanors and motor vehicle
related incidents), whether or not directed against the Company; or (v) failure
of Employee to cure or remedy any alleged violation of Employee's obligations
under Paragraphs 6, 7, 8 or 9 of this Agreement after ten (10) days prior
written notice from the Company.
(c) Termination by Company. The Company may terminate this Agreement
at any time after December 31, 1996 upon not less than thirty (30) days prior
written notice to Employee.
(d) Termination by Employee. The Employee may terminate this Agreement
at any time after December 31, 1996 upon not less than thirty (30) days prior
written notice to the Company.
(e) Termination of Employee's Right to Compensation. Except as
otherwise specifically provided herein or as accrued for services performed
though the date of termination, all of Employee's rights to compensation
hereunder shall cease to exist effective upon the date of termination.
6. Developments. The Employee agrees promptly to disclose in writing to the
Company any invention or discovery made by him during his employment with the
Company, whether during or after working hours, that relates to (i) any
disposable medical devices for drug delivery, including but not limited to
hypodermic needles, (ii) inventions developed for the
-4-
<PAGE>
Company through projects participated in by Employee and (iii) processes,
including equipment used to produce items covered by clauses (i) and (ii) (the
items referred to in clauses (i), (ii) and (iii) being hereinafter referred to
collectively as "Covered Inventions"), and such inventions and discoveries shall
be the Company's sole property. Upon the Company's request, whether during or
after the term of his employment, Employee shall execute and assign to the
Company all applications for letters patent and copyrights of the United States
and such foreign countries as the Company may designate relating to Covered
Inventions, and Employee shall execute and deliver to the Company such other
instruments as the Company deems necessary to vest in the Company the sole
ownership of all exclusive rights in and to such inventions and discoveries, as
well as the patents and/or copyrights. If services in connection with
applications for patents and/or copyrights are performed by Employee at the
Company's request after the termination of his employment, the Company shall pay
him reasonable compensation for such services rendered after termination of this
Agreement.
7. Non-Competition. During the Employment Term and for a period of twelve
(12) months after the termination of this Agreement, however occasioned,
Employee shall not within the United States, Canada, Mexico or Japan, directly
or indirectly, as principal, agent, stockholder, joint venturer, investor,
employee, consultant, officer, director, partner, adviser, guarantor or in any
other capacity, provide services or advice relating to, or compete with or
engage in, the design, manufacture, marketing, sale or distribution of
hypodermic syringes or other disposable medical devices (other than for or on
behalf of the Company), or own or control any interest in any entity which is so
engaged (other than the Company).
-5-
<PAGE>
8. Non-Solicitation. The Employee agrees that he will not during the term
of this Agreement and for a period of one (1) year following the termination of
his employment with the Company for any reason, directly or indirectly solicit
or contact any employee of the Company with a view to encouraging such employee
to leave the employ of the Company for the purpose of being hired by him, or any
employer affiliated with him, or any competitor of the Company.
9. Confidentiality. Executive agrees that he will not, during the term of
this Agreement and thereafter, use or disclose to any individual, firm,
corporation, partnership, business trust, or other business entity (any of the
foregoing being hereinafter referred to as a "Person") any confidential or
proprietary information of the Company for any reason or purpose whatsoever, nor
shall he make use of any such confidential or proprietary information for his
own purpose or for the benefit of any Person other than the Company, including
without limitation, any and all patents (issued or pending), designs, drawings,
blueprints, manufacturing processes, specifications, test data, graphics, charts
and all other technical information , currently in existence or subsequently
developed, relating to Covered Inventions, information relating to the Company's
research and development activities and marketing strategy, or information
relating to the Company's costs, pricing practices, customer lists or financial
data; except that nothing herein shall be construed to prohibit him from
complying with legal process or using or disclosing such information if it shall
have become public knowledge other than by or as a result of disclosure by a
Person not having a right to make such disclosure.
10. Specific Performance. Employee acknowledges that the covenants set
forth in Paragraphs 6, 7, 8 and 9 are reasonable and necessary for the
protection of the Company and
-6-
<PAGE>
that his violation of any of the provisions of Paragraphs 6, 7, 8 or 9 shall
cause the Company immediate and irreparable harm and, agrees that in such event,
an injunction restraining him from such violation or threatened violations may
be entered against him in addition to any other remedy available to the Company.
Employee waives any right which he may otherwise have to assert in any such
proceeding that the Company has an adequate remedy at law.
11. Assignment. This Agreement shall be binding and inure to the benefit of
the Company, its successors and permitted assigns and to Employee, and his heirs
and personal representatives. However, neither this Agreement nor any of the
rights of the parties hereunder may be transferred or assigned by either party
hereto, except that if the Company merges or consolidates with or into, or sells
or otherwise transfers substantially all its assets to, another corporation
which assumes the Company's obligations under this Agreement, the Company may
assign its rights hereunder to that corporation. Any other attempted transfer or
assignment in violation of this Paragraph shall be void. Since this is a
contract for personal services, only Employee is deemed capable of performing
hereunder.
12. Waiver. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver thereof
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver of any breach of any
provision of this Agreement shall not constitute a waiver of any other breach of
such provision or any other provision hereof.
13. Notices. Any demand, notice or other communication under this Agreement
shall be in writing and shall be deemed duly given, and received by the
addressee at the address stated above upon receipt, duly evidenced if (i) mailed
by certified or registered mail, return
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<PAGE>
receipt requested, with postage prepaid (ii) deposited with a recognized
overnight courier such as Federal Express, UPS or Express Mail, (iii) by hand
delivery, or (iv) upon the receipt of actual written notice, or at such other
address as may be specified by a party in a written notice delivered in
accordance with the provisions of this Paragraph 13.
14. Entire Agreement. This Agreement constitutes the entire agreement
between the parties as of the date hereof with respect to Employee's employment
by the Company, superseding all prior or contemporaneous understandings or
agreements, oral or written. This Agreement may not be modified or amended
except by subsequent written agreement of the parties which specifically states
that it is intended to be a modification, amendment or supplement to this
Agreement, and is signed by all of the parties hereto. No course of dealing or
custom shall be referred to as modifying any of the terms and conditions of this
Agreement.
15. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts made
and to be performed wholly within that State, and any action, suit or proceeding
which shall be permitted by this Agreement, or by action of law, shall be
commenced in any court having jurisdiction in New York County, or in the United
States District Court for the Southern District of New York, and the parties
hereto hereby waive any objection to jurisdiction or venue in any such action,
suit or proceeding commenced in such courts.
16. Arbitration. Except as specifically provided in Paragraphs 7, 8, 9 and
10 of this Agreement, any and all claims, disputes and other matters in question
with respect to, arising out of, under or in connection with this Agreement,
including without limitation, the validity, interpretation, performance and
breach hereof, or the rights and privileges provided by, or
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<PAGE>
responsibilities and obligations under this Agreement, shall be finally decided
by arbitration in the City of New York before three (3) arbitrators in
accordance with the Rules of the American Arbitration Association then in
effect, unless the parties mutually agree otherwise. This Agreement to arbitrate
shall be specifically enforceable under the prevailing arbitration law. The
award rendered by the arbitrators shall be final, and judgment may be entered
upon it in accordance with applicable law in any court having jurisdiction
thereof. The parties agree that the arbitrators will have full authority to
award the costs of the arbitration, including attorneys' fees.
17. Severability. In the event any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provision hereof. Such
invalid or unenforceable provision shall be amended, if possible, in order to
accomplish the purposes of this Agreement.
18. Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
UNIVEC, INC.
By:/s/ Joel Schoenfeld
------------------------
Joel Schoenfeld
Chief Executive Officer
and President
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<PAGE>
/s/ David Shonfeld
-------------------------
David Shonfeld
-10-
<PAGE>
SHARE OPTION AGREEMENT
AGREEMENT, made this 7th day of June, 1995, between UNIVEC INC., a New York
corporation (the "Corporation"), maintaining its principal place of business at
999 Franklin Avenue, Garden City, New York 11530, and LEONARD N. TARR
("Optionee"), an individual residing at 100 Chestnut Lane, Woodbury, New York
11797.
W I T N E S S H:
WHEREAS, Optionee desires to have the option to purchase certain shares of
the Corporation, and the Corporation is willing to grant said option, upon the
terms and conditions hereinafter set forth;
NOW, THEREFORE, for the sum of Fifty and 00/100 ($50.00) Dollars and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. GRANT OF OPTION
The Corporation hereby grants to the Optionee the option (the "Option") to
purchase at any time prior to the Expiration Date (defined below) 3.26 shares
(the "Shares") of the Corporation's common stock, no par value per share, which
on the date hereof represents, following exercise of the Option, three (3%)
percent of the issued and outstanding capital stock of the Corporation on a
fully diluted basis after giving effect to all options, warrants, convertible
debentures or other conversion or share purchase rights outstanding on the date
hereof. The Optionee may exercise this Option for the purpose of purchasing less
than the maximum number of Shares purchasable upon exercise of the Option. Such
purchase shall not affect the Optionee's ability to purchase the remaining
Shares purchasable upon exercise of the Option pursuant to the terms of this
Agreement. The number of Shares issuable upon exercise of this Option is subject
<PAGE>
to adjustment as set forth in Section 6.
2. PURCHASE PRICE
The purchase price for all of the Shares shall be Two Hundred Twenty-Five
Thousand and 00/100 ($225,000.00) Dollars (initially $69,018.404 per Share). If
less than all of the Shares are purchased pursuant to the terms of this
Agreement, the purchase price shall be calculated by multiplying the stated
amount ($225,000.00) by a fraction, the numerator being the number of Shares
purchased and the denominator being the total number of Shares subject to the
Option. All amounts shall be payable in cash or by certified check delivered at
the Option Closing (as hereinafter defined).
3. EXERCISE OF OPTION
The Option shall be exercisable by the Optionee by irrevocable notice in
writing to the Corporation as set forth herein prior to the Expiration Date
(defined below). If the Optionee exercises the Option, the Fifty and 00/100
($50.00) Dollars paid to the Corporation shall be applied against the purchase
price to be paid. If the Optionee fails to exercise the Option, the Fifty and
00/100 ($50.00) Dollars shall belong to the Corporation absolutely and all
rights under this Agreement shall terminate without further notice.
4. DURATION
The Option shall continue in full force and effect until June 30, 1998
unless terminated sooner by the exercise of the Option by the Optionee (the
"Expiration Date").
5. OPTION CLOSING
Delivery of the Shares and payment of the purchase price shall take place
at the closing (the "Option Closing") to be held between ten (10) and thirty
(30) days after delivery
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<PAGE>
of the notice exercising the Option at the Optionee's address set forth above,
at the time and on the date specified in such notice of exercise.
6. ADJUSTMENTS
In the event of any change in the number of outstanding Shares of Common
Stock of the Corporation by reason of any stock dividend, stock split,
recapitalization, reclassification, combination, or exchange of Shares, the
number of Shares of Common Stock to be delivered upon exercise of the Option and
not issued prior to the record date for such event shall be adjusted so that the
Optionee shall receive upon exercise of the Option, that number of Shares of
Common Stock that the Optionee would have been entitled to receive had the
Option been exercised immediately prior to the record date for such event. In
the event of such an adjustment, the Option price per share shall be adjusted
accordingly, so that there will be no change in the aggregate purchase price
payable upon exercise of the Option.
7. ACKNOWLEDGEMENTS OF OPTIONEE, ETC.
7.1. No Voting Rights. This Agreement shall not itself entitle the Optionee
to any voting rights or other rights as a stockholder of the Corporation it
being understood that only upon delivery of Shares shall the Optionee be
entitled to be a holder of the underlying shares of Common Stock.
7.2. Investment Intent. The Optionee represents and warrants to the
Corporation that he is acquiring the Shares to be issued upon exercise of this
Option pursuant to this Agreement for his own account for investment only and
not with a present view to, or for sale in connection with, any distribution of
such Shares (as such term is defined in the Securities Act of 1933, as amended).
The Optionee further represents and warrants that (a) he
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<PAGE>
can afford to suffer the loss of his entire investment in the Shares; (b) by
reason of his business and financial experience and the business and financial
experience of those persons, if any, retained by him to advise him with respect
to his investment in such Shares; (c) the Optionee, together with such advisors,
has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks or acquiring such
Shares; and (d) the Optionee, together with such advisors, has had the
opportunity to ask such questions of the Corporation its officers and employees
and to obtain answers thereto as the Optionee and his advisors considers
necessary to evaluate the merits and risks of the prospective investment in the
Shares. The Optionee understands, acknowledges and agrees that he may not sell
or otherwise transfer the Shares of Common Stock issuable under this Agreement
without registration under the Securities Act of 1933, as amended, or an
exemption therefrom.
7.3. Legend and Registration. (a) The Optionee acknowledges and agrees that
the Shares to be issued pursuant to the exercise of the Option shall have
imprinted thereon the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS
OF ANOTHER STATE, AND MAY NOT BE SOLD OR TRANSFERRED (1) EXCEPT IN
COMPLIANCE WITH SUCH ACT OR SUCH LAWS AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER OR (2) UPON DELIVERY TO THE CORPORATION OF A LEGAL
OPINION OF COUNSEL TO THE HOLDER (WHICH COUNSEL SHALL BE REASONABLY
ACCEPTABLE TO THE CORPORATION) TO THE EFFECT THAT SUCH TRANSFER WILL NOT
REQUIRE REGISTRATION."
The certificates shall also have imprinted thereon any other legend that
may be required by applicable law.
(b) The Optionee further acknowledges and agrees that none of the Shares
has been
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<PAGE>
registered under any Federal or state securities laws, and, as a consequence
thereof, all of the Shares issued to the Optionee under this Agreement must be
held indefinitely unless (i) subsequently registered under applicable Federal
and state securities laws; or (ii) exemptions or transfer thereof. The
Corporation has no obligation to the Optionee and no present intention to file a
registration statement under either Federal or state law.
(c) The Optionee further acknowledges and agrees that it shall be a
condition precedent to any transfer of Shares prior to the registration under
the Securities Act of 1933, as amended that counsel for the Optionee (which
counsel shall be reasonably acceptable to the Corporation) shall have furnished
the Corporation with an opinion to the effect that such transfer will not
require registration because of the availability of an exemption under the
Securities Act of 1933, as amended, and applicable state securities laws.
8. REGISTRATION RIGHTS
The Corporation agrees that each time it proposes to file a registration
statement in connection with a public offering of its securities under the
Securities Act of 1933, it will promptly give written notice to the Optionee of
such intention and of the securities to be registered. Upon the written request
(a "Registration Request") of the Optionee made within twenty (20) days after
the giving of any such notice, to include in such registration and offering any
shares issued upon exercise of this Option ("Designated Securities") which the
Optionee requests to be included in the registration and offering, the
Corporation will at its expense cause all the Designated Securities set forth in
such notice to be included in such registration statement and offering. In
connection with the registration and offering of the Designated Securities, the
Corporation will as expeditiously as possible;
-5 -
<PAGE>
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to the Designated Securities and use
its best efforts to cause such registration statement to become effective;
(b) furnish to the Optionee such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Securities Act of 1933, and such other documents as the Optionee may
reasonably request; and
(c) cause the Designated Securities to be listed on each securities
exchange on which securities of the same class issued by the Corporation
are then listed.
Nothing herein prevents the Corporation from abandoning a proposed
registration. If such offering is in connection with an underwritten offering,
the underwriter may limit the number of Designated Securities that may be
included in such offering, provided all other Selling Shareholders, if any, are
limited on a pro rata basis.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS
The Corporation represents, warrants and covenants to the Optionee as
follows:
(a) The Corporation is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York and has all requisite
corporate power and authority and is entitled to carry on its business as now
being conducted and to own, lease or operate its assets as and in the place
where such business is now conducted and its assets are now owned, leased or
operated.
(b) Neither the execution, delivery nor performance of this Agreement by
the Corporation or the Shareholders will with or without the giving of notice or
0the passage of time, or both, conflict with, result in a default, right to
accelerate or loss of rights under, or result in
-6-
<PAGE>
the creation of any lien, charge or encumbrance pursuant to any provision of the
Corporation's Certificate of Incorporation or bylaws or any mortgage, deed of
trust, lease, license, agreement, understanding, instrument, law, rule or
regulation or any order, judgment or decree to which the Corporation is a party
or by which the Corporation, or any of its assets may be bound or affected. The
Corporation has the full corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby. All proceedings
required to be taken by the Corporation and its shareholders to authorize the
execution, delivery and performance of this Agreement have been properly taken
and this Agreement constitutes a valid and binding obligation of the Corporation
and the Shareholders.
(c) The presently authorized, issued and outstanding Shares of capital
stock of the Corporation and the names of the record and beneficial owners
thereof are as set forth in Schedule I hereto. Each of such persons is the
lawful record and beneficial owner of the number of Shares set forth opposite
his name. Except as set forth on Schedule I on the date hereof, there are no
outstanding subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements or arrangements of any
character or nature whatever under which the Corporation is or may become
obligated to issue, assign or transfer any Shares of its capital stock.
(d) There has been reserved, and the Corporation shall at all times keep
reserved, out of the authorized but unissued Shares of its common stock, a
number of shares sufficient to provide for the exercise of the Option.
(e) So long as the Option is in effect or the Optionee is a shareholder of
the Corporation, the Optionee (i) shall to the extent prepared by the Company
receive within ninety
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<PAGE>
(90) days after the end of each fiscal year financial statements for such fiscal
year certified by an independent certified public accounting firm of recognized
standing, (ii) shall to the extent prepared by the Company receive copies of all
quarterly financial reports and the Corporation's annual federal income tax
return prepared for or on behalf of the Corporation and (iii) shall have the
right from time to time upon reasonable notice to the Corporation to examine the
books and records of the Corporation provided the Optionee shall keep such
information confidential.
(f) The Corporation will not, by amendment of the Corporation's articles of
incorporation or through any reorganization, transfer or 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 to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Agreement
and in the taking of all such action as may be necessary or appropriate in order
to protect the option, and other rights of the Optionee.
10. NOTICES
All notices, requests, demands and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if delivered personally or mailed by registered or certified
mail, return receipt requested, to the addresses herein designated or to such
other addresses as may be designated by notice given to the addresses set forth
below by registered or certified mail:
If to Leonard Tarr:
Leonard Tarr
100 Chestnut Lane
Woodbury, New York 11797
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<PAGE>
with copies to:
Ruskin, Moscou, Evans & Faltischek, P.C.
170 Old Country Road
Mineola, New York 11501
Attention: Irvin Brum Esq.
If to Univec, Inc.:
Univec Inc.
999 Franklin Avenue
Garden City, New York 11530
Attention: Joel Schoenfeld, President
with copies to:
Meltzer, Lippe, Goldstein, Wolf,
Schlissel & Sazer, P.C.
The Chancery
190 Willis Avenue
Mineola, New York 11501
Attn: Scott T. Mikuen, Esq.
11. GENERAL
(a) Choice of Law. This Agreement shall be governed, construed and enforced
in accordance with the laws of the State of New York without giving any effect
to the conflict of law principles thereof.
(b) Headings. The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
(c) Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties in respect of the transactions contemplated hereby
and supersedes all prior agreements, arrangement and understanding relating to
the subject matter hereof.
(d) Benefit. All the terms, covenants, representations, warranties and
conditions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto
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<PAGE>
and their respective successors and assigns.
(e) Amendments. This Agreement may be amended, modified, superseded or
canceled, and any of the terms or conditions hereof may be waived, only by a
written instrument executed by all the parties hereto or, in the case of a
waiver, by the party waiving compliance.
(f) Waivers. The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect the right at a
later time to enforce the same. No waiver by any party of any condition, or the
breach of any term contained in this Agreement whether by conduct or otherwise,
in any one or more instances shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach of any other term of this
Agreement.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE>
SCHEDULE I
CAPITALIZATION AND SHARE OWNERSHIP
Shares: Authorized 200 no par shares
- ------
Outstanding:
Flora Schoenfeld 32.5 shares
Alan Gold 32.5 shares
John Frank 5 shares
David Shonfeld 25 shares
Richard Lerner 5 shares
---
100
Options/Subscriptions:
- ----------------------
John Frank has subscribed for 3.2526 shares at $92,233.05 per share and has
an option to purchase 2.168 shares at $92,233.05 per share.
2
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals the
day and year first above written.
UNIVEC INC.
By: /s/ Joel Schoenfield
-----------------------------------------
Joel Schoenfield, President
LEONARD N. TARR, P.C., PENSION
TRUST # 1
By: /S/ Leonard N. Tarr
------------------------------------------
Leonard N. Tarr, Trustee
<PAGE>
UNIVEC, INC.
1996 STOCK OPTION PLAN
SECTION 1. PURPOSE:
The purpose of the Univec Inc., 1996 Stock Option
Plan (the "Plan") is to enable Univec, Inc. (the "Company") to
attract and retain employees, directors and consultants who
contribute to the Company's success by their ability,
ingenuity and industry, and to enable such employees and
directors to participate in the long-term success and growth
of the Company by giving them an equity interest in the
Company.
SECTION 2. ADMINISTRATION.
2.1 The Plan shall be administered by the Company's Board of
Directors (the "Board") as such Board may be composed from
time to time and/or by a Stock Option Committee (the
"Committee") appointed by the Board which shall be comprised
of at least two disinterested persons (the term
"disinterested" having the meaning ascribed to it by Rule
16b-3 of the Securities Exchange Act of 1934 (the "1934
Act")), who shall serve at the pleasure of the Board. As and
to the extent authorized by the Board, the Committee may
exercise the powers and authority vested in the Board under
the Plan. The Board of Directors, or such Committee, whichever
is serving as administrator of the Plan, is hereinafter
referred to as the "Committee".
2.2 The Committee shall have the authority to grant Stock Options
to eligible grantees under the Plan; to adopt, alter and
repeal such administrative rules, guidelines and practices
governing the Plan as it shall deem advisable; to interpret
the terms and provisions of the Plan and any Stock Options
granted under the Plan; and to otherwise supervise the
administration of the Plan. In particular, and without
limiting its authority and powers, the Committee shall have
the authority:
(a) to determine whether and to what extent any Stock
Options will be granted hereunder;
(b) to select the grantees to whom Stock Options will be
granted;
(c) to determine the number of shares of the common stock
of the Company (the "Stock") to be covered by each
Stock Option granted hereunder;
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<PAGE>
(d) to determine the terms and conditions of any Stock Option
granted hereunder, including, but not limited to, any
vesting or other restrictions based on performance and
such other factors as the Committee may determine, and to
determine whether the terms and conditions of the Stock
Option are satisfied;
(e) to determine the treatment of Stock Options upon a
grantee's retirement, disability, death, termination for
cause or other termination;
(f) to determine pursuant to a formula or otherwise the fair
market value of the Stock on a given date;
(g) to provide that the shares of Stock received as a result
of exercise of a Stock Option shall be subject to the
terms of a shareholders agreement or subject to such
other terms and conditions relating to transfer as the
Committee may specify;
(h) to amend the terms of any Stock Option, prospectively or
retroactively; provided, however, that no amendment shall
impair the rights of the award holder without his or her
consent; and
(i) to substitute new Stock Options for previously granted
Stock Options, including previously granted options
having higher option prices.
2.3 In making such determinations, the Committee may take into
account the nature of the services rendered by the
individuals, their present and potential contributions to the
Company's success, and such other factors as the Committee
shall deem relevant. All determinations made by the Committee
pursuant to the provisions of the Plan shall be final and
binding on all persons, including the Company and Plan
participants.
2.4 Notwithstanding anything contained herein to the contrary, at
any time during the period the Company's Stock is registered
pursuant to Section 12(g) of the 1934 Act, the Committee shall
have the exclusive right to grant Stock Options to persons
subject to Section 16 of the 1934 Act and set forth the terms
and conditions thereof. With respect to persons subject to
Section 16 of the 1934 Act, transactions under the Plan are
intended, to the extent possible, to comply with all
applicable conditions of Rule 16b-3, as amended from time to
time (and its successor provisions, if any) under the 1934
Act. To the extent that any provision of the Plan or action by
the Board or the Committee fails to so comply, it shall be
deemed null and void, to the extent permitted by law and
deemed advisable by the Board and/or the Committee.
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<PAGE>
SECTION 3. STOCK SUBJECT TO PLAN.
3.1 The total number of shares of Stock reserved and available for
distribution under the Plan shall be 4,709,219 (subject to
further adjustment as provided below). Such shares may consist
of authorized but unissued shares or treasury shares.
3.2 In the event of any merger, reorganization, consolidation,
sale or other distribution of substantially all assets, or
recapitalization of the Company, Stock dividend, split,
spin-off, split-up, split-off, an extraordinary distribution
of cash or assets by the Company or other change in the
Company's corporate structure affecting the Stock, a
substitution or adjustment, as may be determined to be
appropriate by the Committee in its sole discretion, shall be
made in the aggregate number of shares reserved for issuance
under the Plan, the number of shares subject to outstanding
Stock Options and the amounts to be paid by grantees with
respect to outstanding Stock Options.
SECTION 4. ELIGIBILITY.
Officers and other key employees of the Company are
eligible to be granted Stock Options under the Plan. Directors
of the Company (whether or not also employees of the Company)
and consultants to the Company also are eligible to be granted
Stock Options under the Plan. The participants under the Plan
shall be selected from time to time by the Committee, in its
sole discretion, from among those eligible.
SECTION 5. TERMS OF STOCK OPTIONS
5.1 The Stock Options awarded under the Plan may be one of two
types: (i) Incentive Stock Options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or any successor provision thereto; and (ii)
Non-Qualified Stock Options. To the extent that any Stock
Option does not qualify as an Incentive Stock Option, it shall
constitute a Non-Qualified Stock Option.
5.2 Subject to the following provisions, Stock Options awarded
under the Plan shall be in such form and shall have such terms
and conditions as the Committee may determine:
(a) Option Price. The option price per share of Stock
purchasable under a Stock Option shall be determined by
the Committee.
(b) Option Term. The term of each Stock Option shall be fixed
by the Committee, but such term shall not be longer than
10 years.
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<PAGE>
(c) Exercisability. Stock Options shall be exercisable at
such time or times and subject to such terms and
conditions as shall be determined by the Committee. If
the Committee provides that any Stock Option is
exercisable only in installments, the Committee may waive
such installment exercise provisions at any time in whole
or in part.
(d) Method of Exercise. Stock Options may be exercised in
whole or in part at any time during the option period by
giving written notice of exercise to the Company in such
form and manner as the Committee may require specifying
the number of shares to be purchased, accompanied by
payment of the purchase price. Payment of the purchase
price shall be made in such form and manner as the
Committee may provide in the award, which may include
cash, delivery of shares of Stock already owned by the
optionee, any other form and manner determined by the
Committee and permitted by law, or any combination of the
foregoing.
(e) No Stockholder Rights. An optionee shall have neither
rights to dividends, nor other rights of a stockholder
with respect to shares subject to a Stock Option until
the optionee has given written notice of exercise and has
paid for such shares.
(f) Non-transferability. No Stock Option shall be
transferable by the optionee other than by will or by the
laws of descent and distribution. During the optionee's
lifetime, all Stock Options shall be exercisable only by
the optionee.
(g) Termination of Employment or Service. If an optionee's
employment with the Company or service as a director
terminates, whether by reason of death, disability,
retirement, voluntary or involuntary termination or
otherwise, the Stock Option shall be exercisable to the
extent determined by the Committee. The Committee may
provide that, notwithstanding the option term fixed
pursuant to Section 5.2(b), a Stock Option which is
outstanding on the date of an optionee's death shall
remain outstanding for an additional period after the
date of such death.
5.3 Notwithstanding the provisions of Section 5.2, no Incentive
Stock Option shall (i) have an option price which is less than
100% of the fair market value of the Stock on the date of the
award of the Stock Option (110%, in the case of a 10%
shareholder described in Section 422(b)(6) of the Code (a "10%
Shareholder")), (ii) be exercisable more than ten years after
the date such Incentive Stock Option is awarded (5 years, in
the case of a 10% Shareholder), (iii) be awarded more than ten
years after the effective date of the Plan or (iv) be awarded
to any optionee who is not an employee of the Company or a
parent or subsidiary corporation of the Company (as defined in
Section 424 of the Code).
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<PAGE>
SECTION 6. TAX WITHHOLDING.
6.1 Each employee shall, no later than the date as of which the
value of a Stock Option first becomes includible in the
employee's gross income for applicable tax purposes, pay to
the Company, or make arrangements satisfactory to the
Committee regarding payment of, any federal, state, local or
other taxes of any kind required by law to be withheld with
respect to the Stock Option (or portion thereof). The
obligations of the Company under the Plan shall be conditional
on such payment or arrangements, and the Company shall, to the
extent permitted by law, have the right to deduct any such
taxes from any payment of any kind otherwise due to the
employee.
6.2 To the extent permitted by the Committee, and subject to such
terms and conditions as the Committee may provide, an employee
may elect to have the withholding tax obligation with respect
to any Stock Options hereunder satisfied by (i) having the
Company withhold shares of Stock otherwise deliverable to the
employee with respect to the award or (ii) delivering to the
Company shares of Stock.
SECTION 7. AMENDMENTS AND TERMINATION.
The Board may discontinue the Plan at any time and
may amend it from time to time. No amendment or
discontinuation of the Plan shall adversely affect any award
previously granted without the grantee's written consent.
SECTION 8. GENERAL PROVISIONS.
8.1 Each Stock Option under the Plan shall be subject to the
requirement that, if at any time the Committee shall determine
that (i) the listing, registration or qualification of the
Stock subject thereto upon any securities exchange or under
any state or federal law, or (ii) the consent or approval of
any government regulatory body, or (iii) an agreement by the
recipient of a Stock Option with respect to the disposition of
Stock is necessary or desirable (in connection with any
requirement or interpretation of any federal or state
securities law, rule or regulation) as a condition of, or in
connection with, the granting of such Stock Option or the
issuance, purchase or delivery of Stock thereunder, such Stock
Option shall not be granted or exercised, in whole or in part,
unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained
free of any conditions not acceptable to the Committee.
8.2 Nothing set forth in this Plan shall prevent the Board from
adopting other or additional compensation arrangements.
Neither the adoption of nor participation in the Plan nor the
grant of any Stock Option hereunder shall confer upon any
employee of the Company any right to continued employment or
any director or
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<PAGE>
consultant any right to continued service or interfere in any
way with the right of the Company to terminate such employee's
employment at any time, nor shall it interfere in any way with
the employee's right to terminate his or her employment or the
director's or consultant's right to terminate his or her
service.
8.3 Determinations by the Committee under the Plan relating to the
form, amount and terms and conditions of awards need not be
uniform, and may be made selectively among persons who receive
or are eligible to receive Stock Options under the Plan,
whether or not such persons are similarly situated.
8.4 No member of the Board or the Committee, nor any officer or
employee of the Company acting on behalf of the Board or the
Committee, shall be personally liable for any action,
determination or interpretation taken or made with respect to
the Plan, and all members of the Board and the Committee and
all officers and employees of the Company acting on their
behalf shall, to the extent permitted by law and under the
Certificate of Incorporation and By Laws of the Company, be
fully indemnified and protected by the Company in respect of
any such action, determination or interpretation.
8.5 The Plan and all rights and obligations thereunder shall be
construed and enforced in accordance with the laws of the
State of New York without regard to conflicts of law
provisions.
SECTION 9. EFFECTIVE DATE OF PLAN.
The Plan shall become effective upon approval by the
Company's stockholders.
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EXHIBIT 21.1
<PAGE>
Exhibit 21.1
SUBSIDIARIES
OF
UNIVEC, INC.
Name State of Incorporation Ownership
---- ---------------------- ---------
Rx Ultra, Inc. New York 100%
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form SB-2 (File
No. 333- ) of our report, which includes an explanatory paragraph concerning
the Company's ability to continue as a going concern, dated September 18, 1996,
except for Note 13 as to which the date is December 14, 1996, on our audits of
the financial statements of Univec, Inc. and Subsidiary. We also consent to the
reference to our Firm under the caption "Experts."
Melville, New York
January 21, 1997.
