SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
|X| Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1997 or
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|_| Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
___________________ to ___________________ .
Commission file number 000-23039
ORALABS HOLDING CORP.
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(Exact name of registrant as specified in its charter)
Colorado 14-1623047
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2901 South Tejon Street,
Englewood, CO 80110
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (303) 783-9499
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None
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Securities registered pursuant to Section 12(g) of the Act:
Common Shares, par value $0.001 per share
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(Title of class)
- --------------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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As of March 20, 1998, 9,123,555 shares of the Company's Common Stock were
outstanding and the aggregate market value of Common Stock held by
non-affiliates of the Registrant, computed by reference to the last trade of the
Common Stock on that date, was approximately $6,399,990.
Documents incorporated by reference. Portions of the Company's definitive Proxy
Statement to be mailed to stockholders in connection with the Annual Meeting of
Stockholders of the Registrant to be held on May 29, 1998 (the "1998 Definitive
Proxy Statement"), which will be filed with the Commission not later than 120
days after the end of the fiscal year to which this report relates, are
incorporated by reference in Part III hereof.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. |X|
<PAGE>
PART I
Item 1. Business.
Background. On May 1, 1997, OraLabs, Inc., a privately held company, became
a wholly-owned subsidiary of SSI Capital Corp. (the predecessor of the Company).
The name of the Company was changed from SSI Capital Corp. to OraLabs Holding
Corp. soon thereafter. As a result of these transactions, which have been
previously reported upon by the Company, the Company is the sole stockholder of
OraLabs, Inc.
At the time that OraLabs, Inc. became a subsidiary of the Company, the
Company was only engaged in seeking a suitable business to be the subject of an
acquisition or merger transaction. The Company was not then engaged in any
operating business and had not been engaged in an operating business for at
least five (5) years. The business in which the Company had been involved was
totally unrelated to that of the Company's subsidiary.
The following discussion, insofar as it is for time periods prior to May 1,
1997, will, in effect, be about the business of OraLabs, Inc. (which may be
referred to as the "Subsidiary"), as SSI Capital Corp. was not then engaging in
any substantive business. The term "Company" or "OraLabs" will mean OraLabs
Holding Corp., successor to SSI Capital Corp.
General Development of Business. The Subsidiary was formed in 1990 by its
current CEO and President, for the purposes of manufacturing and distributing
its tooth-whitening products under the brand name of Amazing White, as well as
under the names of private label brands. The private label brands were sold via
infomercials on television, and eventually those brands and the Amazing White
brand began to be distributed through retail outlets.
The name of the Subsidiary was originally AmWhite Labs, Incorporated, which
was changed in April 1994 to OraLabs, Inc., after the sale of the Amazing White
product line. In 1992 the OraLabs flagship product, Ice Drops (R), a breath drop
product sold in a small plastic bottle, was introduced as an alternative to
breath sprays and candy breath mints. In 1995 the Company introduced its brand
of breath sprays under the Ice Drops(R) name. This low-priced product was
distributed substantially under the same distribution network established for
the Ice Drops(R) breath drops. The Subsidiary sought to have both products
displayed at checkout counters and in convenience stores to be positioned as
consumer impulse purchases.
In 1996 the Subsidiary introduced a line of lip balms sold in a patent
pending mini-size package, in furtherance of the Subsidiary's consumer impulse
marketing strategy. In addition, three new SPF-30 sun block lip balms were
introduced.
In 1997 OraLabs introduced its extreme sour drops, which are a line of
liquid sour candy drops packaged in the same small bottle as the traditional Ice
Drops(R). The product was developed to capitalize upon what the Subsidiary
believed was a growing market for sour, tart, hard candies being purchased by
pre-teens and teenagers. In 1997 the Company also introduced a line of sore
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throat sprays and zinc sprays under the brand name Zinc-7(TM). The goal of the
Company was to create a pocket size sore throat spray that could be carried with
the consumer all day long, as opposed to relatively bulky, larger containers
that were on the market. The zinc spray was introduced as an alternative to zinc
lozenges, which became popular in recent years as a possible way to reduce the
duration of the common cold.
In 1998 the Company begins its distribution of VitaSpray brand spray
vitamins. The product line is intended to include both adult and child
multi-vitamin spray as well as other vitamin sprays. The strategy behind these
products is to provide convenience for taking vitamins as well as to provide an
alternative for those people who are adverse to swallowing pills.
The Company's marketing strategy has been to develop and sell products
which the Company believes are niche products that can be differentiated from
products of its competitors. The marketing strategy includes capitalizing on the
distribution network of nearly 50,000 retail stores that currently carry one or
more of the Company's products, and building upon the business relationships
that have been established.
All of the Company's products and packaging have been conceptualized and
developed in-house. The Company's products are all packaged at its manufacturing
facility in Englewood, Colorado. Most packaging, filling and automated
manufacturing equipment has been designed, built and maintained by the Company's
own staff. This allows the Company to rapidly introduce and manufacture new
products, reducing lengthy lead times and some of the cost of capital
expenditures associated with some new product introductions. It also allows the
Company to test new products before committing capital to full-scale
manufacturing endeavors.
OraLabs recently entered the private label category. The Company's initial
private label contracts include lip balm products for Rite-Aid (including
Thrifty and Payless), and Sally's Beauty Supply. The Company also does some
contract packaging for its breath spray products. These contracts have helped
establish the Company as a private label manufacturer, which gives it an entry
with these customers to pursue other accounts.
The Company does business in approximately 25 international markets and the
Company is actively seeking to expand its international distribution. The
Company is currently supplying numerous airlines and hotels with its products,
including a specially packaged mouthwash, as part of those businesses' amenity
programs.
Narrative Description of Business.
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Principal Products and Their Markets. As discussed above, the general
business done by the Company is to produce and sell consumer products relating
to health, beauty care and vitamins. The products are sold through wholesale
distributors as well as by direct sale to mass retailers, grocery stores,
convenience stores and drug stores. The principal products produced by the
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Company can be categorized into four groups: breath fresheners, including liquid
drops under the brand name Ice Drops(R), as well as sour drops; lip balm
products under the name Ice Drops(R) as well as under private label names; cold
and cough products, including sore throat sprays and zinc sprays; and a line of
vitamin sprays to be introduced under the name VitaSpray.
The following table sets forth for each of the last three fiscal
years, the percentage of total revenue (in excess of 15%) contributed by the
three groups of products then sold by the Company.
Approximate Approximate Approximate
Percentage of Percentage of Percentage of
Company's Company's Company's
Product Group 1997 Revenues 1996 Revenues 1995 Revenues
------------- ------------- ------------- -------------
Breath Fresheners 57% 82% 100%
Lip Balm 28% 18% --
Cough and Cold 15% -- --
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Status of New Product. Of the above list of products, the only product
in the preliminary stages is the line of spray vitamins which is in the process
of being introduced for sale in the second quarter of fiscal 1998. All
anticipated expenses of introducing the new line of products, including
advertising budgets, have not yet been completed by the Company. It is possible
that the introduction of this product line could require the investment of a
material amount of the assets of the Company. However, the Company believes that
its expenditures could be gradually increased if and when sales increase, rather
than the Company being required to expend substantially all of its investment in
advance of shipping the products.
Sources and Availability of Raw Materials. In general, the sources and
availability of materials used by the Company in its business are fairly
widespread, and the Company believes that it could obtain secondary sources of
raw materials to the extent that an existing business relationship terminates.
However, at this stage the Company is purchasing all of its raw materials for
the line of spray vitamins from a single supplier. In the event that
relationship were to terminate, the Company would be required to obtain another
supplier in order to continue the production of its spray vitamins, and the
Company does not believe that alternate suppliers are readily available.
Patents, Trademarks, Licenses, Franchises and Concessions. Although
there can be no assurance of proprietary protection respecting pending patents
and trademarks held by the Company (see, "Cautionary Statement Regarding
Forward-Looking Statements, No Assurance of Proprietary Protection"), and
although the Company intends to vigorously seek to enforce and protect its
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proprietary rights, the Company does not believe that the loss of any such
proprietary right would in and of itself, adversely affect the Company in a
material manner.
Seasonality. The Company believes that its sore throat spray and zinc
spray, as well as its vitamin-C spray in the process of introduction, all fall
into the cough and cold category of consumer products. The Company believes that
cough and cold products as well as moisturizing lip balms typically enjoy
greater sales from September through February of each year.
Practices of the Company in the Industry. The Company's typical
practices with respect to all of its products is to keep adequate inventory on
hand for shipments within a two to three week period, and the Company generally
extends credit on purchases for a term of 30 days after shipment. The Company
does not formally provide a right of customers to return merchandise. However,
the Company believes that it is a common practice in the industry, and the
Company subscribes to such practice on a case-by-case basis, to permit a
retailer who has not sold all of the goods it has purchased within a reasonable
time, to ask the Company to accept a return of the unsold merchandise.
Dependence Upon a Single Customer. The Company does not believe that
its business with respect to any particular product or products would be
eliminated by the loss of any one of its customers. However, the Company did
sell to one customer, Rite-Aid Corporation, an amount comprising in excess of
10% of fiscal 1997 revenues. The Company had over 1,500 purchasing customers in
fiscal 1997 and believes that the loss of a customer, even one as large as
Rite-Aid, would gradually be replaced.
Backlog Orders. As of December 31, 1997, the Company carried
approximately $470,000 of orders with future ship dates. Orders are not booked
as sales until product is shipped. The Company has no reason to expect that any
orders with future ship dates will not be fulfilled.
Government Contracts. Not applicable.
Competitive Conditions. Competition for all of the Company's products
is very significant. With respect to the Company's breath freshening products,
direct competitors who manufacture liquid or spray breath products consist of
less than five. The Company believes that its primary competitors for those
products are Binaca(R) and Sweet Breath(R). However, if one considers candy
breath mints as competition for the same group of products, the Company believes
that there are more than 50 competitors.
With respect to the Company's lip balm products, the Company believes
that approximately 80% of the market is controlled by three dominant competitors
(who sell Chapstick(R), Blistex(R) and Carmex), and the balance of the market
consists of more than 50 different companies. With respect to the Company's
cough and cold related products, the Company's market share is insignificant and
there is a large number of strong competitors. Sales of vitamin products is also
highly competitive but the Company does not believe that any single competitor
totally dominates the market.
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The Company has sought to anticipate competition by the distinguishing
size and packaging of its products, as well as by competing with respect to
pricing. The Company believes that for some of its products, its smaller size
and lower price than that of its competitors is an advantage to the Company.
However, other factors such as a competitor's greater brand recognition or
preferable product placement at retail locations with respect to competitive
products may nullify or reduce whatever competitive advantage the Company's
products have.
Research and Development Expenses. The Company has not expended a
material amount of its resources on research and development activities.
However, as noted above, a material amount of the Company's assets may be
expended in connection with the introduction of the Company's new line of
vitamin products.
Costsand Expenses of Compliance With Environmental Laws. The Company
does not have any material amount of cost related to environmental regulations
and the Company does not expect to incur material expenses for that purpose in
fiscal year 1998.
Number of Employees. The approximate number of employees hired by the
Company as of the end of fiscal year 1997 was 65.
Item 2. Properties.
The Company's headquarters are located in an office-warehouse building
of approximately 16,000 square feet located in Englewood, Colorado, which
the Company leases from the Company's President. The property includes the
executive offices of the Company, as well as the Company's manufacturing
facilities and a portion of its warehouse facilities. The Company's lease
expires in the year 2000, and the Company believes that its rental rate is
comparable to that which would be charged by an unaffiliated landlord.
The Company also subleases an additional approximate 6,000 square feet
of warehouse space from an unaffiliated landlord in a building located near
the Company's headquarters. The sublease expires in 1999.
The Company does not believe that it would be difficult to locate
comparable space for its business operations at such time as either of the
leases expires.
Item 3. Legal Proceedings.
The Company is not a party to any material pending legal proceedings
to which either it or its subsidiary is a party or of which any of its
property is subject.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders.
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PART II.
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
(a) (i)Market Price of and Dividends on the Company's Common Stock.
For many years prior to closing the transaction by which the Company
acquired its wholly-owned subsidiary, OraLabs, Inc., there was no
established public trading market for the Company's common stock.
Commencing approximately in September 1997, the common stock of the Company
began to be traded on the OTC Bulletin Board.
The following sets forth the range of high and low bid information for
the Company's common stock for the third and fourth quarters of fiscal year
1997. The source of such information is an OTC Bulletin Board Quarterly
Quote Summary prepared by NASDAQ Trading and Market Services.
Reported High Bid Reported Low Bid
Third quarter, fiscal 1997 $3.00 $2.50
Fourth quarter, fiscal 1997 $4.50 $2.75
The above over-the-counter market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
present actual transactions.
(ii) Recent Sales of Unregistered Securities. In June 1997, the
Company completed a private placement of its Common Stock by which 325,000
shares of the Common Stock were sold at a price of $1.00 per share to
accredited investors only. The Company did not use the services of any
underwriters in that transaction. The private placement was exempt from the
registration requirements of the Securities Act of 1933, as amended,
pursuant to Sections 4(6), 4(2), and 3(b), as well as pursuant to
Regulation D promulgated under that Act. All of the certificates
representing shares sold in the private placement contain a legend
denominating the shares as "restricted securities".
A total of 340,000 shares of Common Stock were issued to two employees
of the Company pursuant to the terms of written employment agreements
between them and the Company. The stock was issued pursuant to employment
agreements covering the period of January 1, 1997 through December 31,
1997. These transactions were exempt from the registration requirements of
the Act under Sections 4(6) and 4(2) as being private transactions to
accredited investors. The certificates for the shares issued to the
employees contain the legend denominating the shares as "restricted
securities" under the Act.
In October 1997, the Company issued 20,000 options to a newly
appointed member of the board of directors of the Company. The transaction
was exempt from the registration requirements of the Act pursuant to
Sections 4(6) and 4(2) of the Act. The options vest in five equal
installments over a period of five years, with each option having an
exercise price of $1.00 per share.
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(b) As of February 16, 1998, there were approximately 964 record
holders of the common stock of the Company.
(c) The Company has not paid any cash dividends and it is not intended
that any cash dividends will be paid in the foreseeable future.
Item 6. Selected Financial Data.
The following table shows a five year comparison of selected financial
data. The information presented is in thousands of dollars, except for the
per share amounts. All of the information except for fiscal year 1993, and
except for the total assets and stockholders' equity presented for fiscal
year 1994, are derived from the Company's audited financial statements for
December 31, 1997, 1996 and 1995, as well as the Company's audited
financial statements for December 31, 1995 and 1994.
<TABLE>
<CAPTION>
Year Ended December 31
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1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Sales 6,762 4,985 5,447 3,606 452
Cost of Sales 3,028 2,385 1,910 1,708 269
Gross Profit 3,734 2,600 3,537 1,898 183
Total Operating Expenses 2,119 1,461 1,074 773 135
Net Operating Income 1,616 1,139 2,463 1,125 48
Net Income Per Common Share $0.13 $0.16 $0.30 $1,357 $52
Weighted Average Shares Outstanding 8,707 7,459 7,459 0.999 0.999
Total Assets 2,083 1,141 1,451 1,100 126
Stockholders' Equity (1) 2,007 768 1,159 949 8
</TABLE>
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(1) The Company has not paid cash dividends on its common stock.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
Results of Operations. For the period ending December 31, 1997 as compared
with the periods ending December 31, 1996 and December 31, 1995.
Sales increased from 1996 to 1997 by 35.7% and from 1995 to 1997 by 24.1%.
The Company attributes this growth in part to the introduction of our lip balm
product, which occurred in July 1996, and in part to expanded international
distribution and an increased volume of sales. Prices for the Company's products
have remained relatively stable.
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Gross profit increased from 1996 to 1997 by 43.6% and from 1995 to 1997 by
5.6%. The Company attributes the increase in gross profit in part to volume
discounts from material suppliers and in part to increased automation reducing
cost of labor. Gross profit significantly decreased from 1995 to 1996 primarily
as a result of the Company's shift from selling bulk goods to blister-carded
goods which require both higher labor and materials costs.
Salaries increased from 1996 to 1997 by 79.5% and from 1995 to 1997 by
190.8%. This was the result of an increase to additional staffing in sales and
engineering.
Bad Debts decreased from 1996 to 1997 by 40.4% and from 1995 to 1997 by
49.6%. This was the result of improved pre-qualifying of new customers and
implementation of a progressive internal collection process.
Stock Issued for Services in 1997 was to two employees of the Subsidiary
for services in the amount of $340,000 and is a non-recurring item. The
employees' services were in the areas of human resources and investor relations,
which the Subsidiary was required to address as part of preparing for its entry
into the public marketplace.
Gain(Loss) on Sale of Securities was zero in 1997. This was a result of the
Company's distributing substantially all of its securities held for investment
prior to year end 1996 and maintaining cash in liquid money markets in 1997.
The Company was an S Corporation through April 30, 1997, with net income
passing through to the owner's personal income. Effective May 1, 1997. the
Company converted to a C Corporation The $522,694 of income taxes reflects the
accrual of eight months of income taxes through December 31, 1997.
Liquidity and Capital Resources. Balance Sheet as of December 31, 1997
Compared to December 31, 1996
Cash increased $903,199. This is due to the creation of the
parent-subsidiary relationship upon closing of the merger, as approximately
$189,000 was then held by the parent, approximately $325,000 was added from
closing a private placement, and the balance was primarily additional cash from
operations. The Company believes that its cash holdings will be sufficient to
meet the Company's operating expenses and capital requirements for at least the
next twelve months.
Inventory increased by approximately 32.9%. This is a result of expanded
product lines creating a need for a broader based raw materials inventory.
Deferred Income tax for December 31, 1997 in the amount of $67,816 relates
to the tax benefit of the provision for returns and allowances of approximately
$199,460, which is not deductible from taxable income until incurred.
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Accounts payable and accrued expenses increased by approximately 49.2%.
This is a result of inventories being higher as of December 31, 1997 than on
December 31, 1996.
Income Taxes Payable for December 31, 1997 in the amount of $119,586
reflects the current provision for federal and state income taxes of $590,510
since May 1, 1997 computed at statutory rates.
Additional paid-in capital increased $996,970. This is a result of
reorganization/additional paid in capital of $160,849, common stock issued for
cash of $324,675; reclassification of undistributed S Corporation earnings of
$171,786; and stock issued for services of $339,660.
Retained earnings increased $241,257 (approximately 38.7%). This is a
result of reclassification of undistributed S Corporation earnings ($171,786),
dividends paid ($714,610) ); and net income of $1,127,653.
Trends. The Company has been broadening its product base by capitalizing on
management's research and development abilities, while utilizing existing
packaging components and manufacturing technology of the Company. This broadened
product base has given the Company more stability in the marketplace by making
the Company less reliant on any individual product. The broadened product base
has expanded the Company's customer base and helped to increase business with
existing customers. In addition to a broadened product base, the Company has
established new markets for its products, such as mass retailers and drug
stores, rather than focusing on convenience stores. The Company expects this
trend to continue, although sales to convenience stores remain an important part
of the Company's sales strategy.
As the Company has historically developed and produced its manufacturing
equipment, and has historically committed funds to new products as sales have
warranted, the Company does not foresee any material commitment for capital
expenditures during the 1998 fiscal year.
Impact of Inflation. The company's financial condition has not been
affected by the modest inflation of the recent past. The Company believes that
revenues will not be materially affected by inflation in part because the bulk
of the Company's current products are primarily very low cost, impulse items
(under $0.99 to consumers).
Year 2000. The Company does not use a computer system or program developed
specifically for the business of the Company. Rather, the Company uses software
programs and computer systems developed by third parties and readily available
for sale to end users. Although the Company has not yet made an assessment of
its year 2000 issues, and, therefore, has not determined whether it has material
year 2000 issues, the Company has been advised by its third party vendors that
year 2000 compliance has been or will be achieved. Even if it is determined that
any year 2000 problem will not pose significant operational problems for the
Company's computer systems, the Company has not determined the extent to which
the Company may be impacted by third parties' systems which may not be year 2000
compliant. Accordingly, the year 2000 computer issue may create risk for the
Company from third parties with whom the Company deals. There can be no
assurance that the systems of other companies with whom the Company deals will
be timely converted, or that any such failure to convert by another company
could not have an adverse effect on the Company.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS:
The provisions of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act") provide companies with a "safe harbor" when making forward-looking
statements. This "safe harbor" encourages companies to provide prospective
information about their companies without fear of litigation. The Company wishes
to take advantage of this "safe harbor" and is including this section in its
Annual Report on Form 10-K in order to do so. All statements in this Form 10-K
that are not historical facts, including without limitation statements about
management's expectations for any period beyond the fiscal year ended December
31, 1997, are forward-looking statements and involve various risks and
uncertainties, many of which are beyond the control of the Company, and any one
of which, or a combination of which, could materially reflect the results of the
Company's operations and whether forward-looking statements made by the Company
ultimately prove to be accurate.
The following discussion outlines certain risk factors that in the future
could affect the Company's results and cause them to differ materially from
those that may be set forth in any forward-looking statement made by or on
behalf of the Company. The Company cautions the reader, however, that this list
of risk factors and others discussed elsewhere in this report may not be
exhaustive.
Competition. The businesses in which the Company is engaged are highly
competitive and are engaged in to a large extent by companies which are
substantially larger and have significantly greater resources than the Company.
Although the Company believes that its Ice Drops(R) brand of liquid breath
freshener drops has achieved some measure of name recognition, to a large extent
the Company does not have the capital resources, marketing and distribution
networks, manufacturing facilities, personnel, product name recognition or
advertising budget of the larger companies. The industries in which the Company
competes experience consolidations of competitors from time to time and the
Company's business could be adversely affected by such activities. There can be
no assurance that the Company will be able to compete successfully in the
future.
Limited Operating History. Although the Company reported net income for the
past several year, the Company's subsidiary (OraLabs, Inc.) was only organized
in 1990 and therefore has a limited operating history upon which investors may
evaluate its performance. There can be no assurance that future operations of
the Company will be profitable. The likelihood of the Company's success must be
considered relative to the problems, difficulties and delays frequently
encountered in connection with the development and operation of a relatively new
business and the competitive environment in which the Company operates.
Unproven Markets for Certain of the Company's Products. The Company only
began selling its sore throat spray and its zinc spray products in 1997. In
addition, the Company is preparing to introduce a new line of spray vitamins
which is completely unproven. While the Company believes that there is a market
for such products, it has no prior history with spray vitamins and therefore
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cannot be assured that those products will be accepted in the marketplace, or
that if accepted, the Company will be profitable in that part of the Company's
business.
Managing Growth. The Company has experienced a period of significant growth
during fiscal years ended December 31, 1997 and 1996 which has placed, and could
continue to place, a strain on the Company's management, customer service and
support operations, sales and administrative personnel and other resources. The
Company's ability to manage continued growth may require the Company to expand
its operating, management, information and financial systems, all of which may
increase its operating expenses or otherwise strain the Company's resources. If
the Company is unsuccessful in managing growth, if such growth should occur,
there could be a material adverse effect on the Company. In addition, the loss
of a significant number of customers, or a significant reduction in purchase
volume by or financial difficulty of such customers, for any reason, could have
a material adverse effect on the Company. Successful management of growth, if it
occurs, will require the Company to improve its financial controls, operating
procedures and management information systems, and to train, motivate and manage
its employees.
Dependence on Key Personnel. The Company's future success depends in large
part on the continued service of its key personnel. In particular, the loss of
the services of Gary Schlatter, its President and Chief Executive Officer, could
have a material adverse effect on the operations of the Company. The Company's
subsidiary has an employment agreement with Mr. Schlatter which expires on April
30, 2000. The Company's future success and growth also depends on its ability to
continue to attract, motivate and retain highly qualified employees. There can
be no assurance that the Company will be able to do so.
Government Regulation. The manufacturing, processing, formulation,
packaging, labeling and advertising of some of the Company's products are
subject to regulation by one or more federal agencies, including the United
States Food and Drug Administration ("FDA"), the Federal Trade Commission
("FTC"), the Bureau of Alcohol, Tobacco and Firearms ("BATF") and the Drug
Enforcement Administration ("DEA"). Although the Company does not believe that
such regulations are presently burdensome upon the Company, there can be no
assurance that the scope of such regulations will not change or otherwise cause
an increase in the expenses and resources of the Company which must be applied
to complying with such regulations. As an example, the Company's sun-block lip
balms are considered a "drug" by the FDA. If the FDA were to conclude that any
of the Company's products determined to be a "drug" violate FDA rules or
regulations, the FDA may seek to restrict or remove such products from the
market. Such action may be taken against the Company and any entity which
manufactures products for the Company. In addition, vitamin products have been
increasingly scrutinized by government agencies, including the area of labeling,
and increasing regulation could adversely affect the Company's vitamin business
which has just recently been introduced by the Company.
The Company's business is also regulated by various agencies of the states
and localities in which the Company's products are sold and governmental
regulations in foreign countries where the Company sells or may seek to commence
sales. Such regulations could prevent or delay entry into a market or prevent or
delay the introduction of Company products. For example, the growth of
international sales is expected to be slowed by the long process of registering
new products.
12
<PAGE>
Furthermore, the Company cannot predict whether new domestic or foreign
legislation regulating its activities will be enacted. Such new legislation
could have a material adverse effect on the Company. Failure to comply with any
applicable requirements can result in sanctions being imposed on the Company or
upon the manufacturers of its products.
Dependence Upon Significant Distributors and Retailers. Rite-Aid
Corporation accounted for more than ten percent (10%) of the Company's gross
revenues in 1997. The two next largest customers of the Company in fiscal years
1997 and 1996 were distributors who collectively accounted for approximately 10%
and 15% of gross revenues, respectively. A loss of these customers could have a
material adverse effect on the Company's revenues or operations.
Dependence Upon Third Party Suppliers. With respect to some of the
Company's products, the product itself is formulated and supplied to the Company
by third party vendors, and the Company then packages the products for sale.
Should these relationships terminate, or should the vendors be otherwise unable
to supply the Company with an adequate supply of product, the Company would be
required to establish relationships with new suppliers. Although the Company
believes that a replacement supply would be readily available on comparable
terms, there can be no assurance that this will be the case, and the failure to
obtain supplies on comparable terms could have a material adverse effect upon
the Company.
No Assurance of Proprietary Protection. The Company has two patent
applications pending. The Company also holds several domestic and international
trade marks and has two applications pending. Certain aspects of the Company's
business, although not the subject of patents, include formulations and
processes considered to be proprietary in nature. There can be no assurance that
any such "proprietary" information will not be appropriated or that the
Company's competitors will not independently develop products that are
substantially equivalent or superior to the Company's. Even if the pending
patents are issued to the Company, there can be no assurance that the Company
would be able to successfully defend its patents or trademarks against claims
from or use by competitors, and there can be no assurance that the Company will
be able to obtain patent or trademark protection for any new products. In
addition, in the event that any of the Company's products are determined to
infringe upon the patents or proprietary rights of others, the Company could be
required to modify its products or obtain licenses for the manufacture or sale
of the products, or could be prohibited from selling the products.
No Assurance of Scientific Proof. Certain of the Company's products are
intended to provide various kinds of relief from colds or sore throats. If
scientific data were to conclude that the Company's products do not provide such
relief, or if for any other reason the Company's products were not viewed by the
public as providing such relief, there could be a material adverse effect upon
the sales of such products.
13
<PAGE>
Seasonal Fluctuations. To the extent that some of the Company's products
are intended to provide relief for certain symptoms of common colds and chapped
lips, sales of such products may be seasonal. The Company believes that the
consumer market for such products occurs during the primary cold season from
September to March. As a result of such fluctuations, there can be no assurance
that the Company will maintain sufficient flexibility with respect to its
working capital needs and its ability to manufacture and supply products to be
able to minimize the adverse effects of an unanticipated shortfall in or greater
than expected demand for its products. Failure to predict accurately and to
respond to consumer demand may cause the Company to produce excess inventory.
Conversely, if the product achieves greater success than anticipated for any
given quarter, the Company may not have sufficient inventory to meet customer
demand.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
This Item is not applicable due to the Company's status as a small business
issuer as defined in applicable regulations of the 1933 Act.
Item 8. Financial Statements and Supplementary Data.
Financial statements meeting the requirements specified in Item 8 of Form
10-K follow the signature page and are listed in Item 14 of this Annual Report
on Form 10-K.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
The information required by this Item is not included as it has been
previously reported as that term is defined in the Rules promulgated under the
1934 Act.
14
<PAGE>
PART III.
Item 10. Directors and Executive Officers of the Registrant.
The following table identifies each of the Company's directors and
executive officers, indicating the principal occupation or employment of each
such person and the name and principal business of any organization by which
such person is so employed:
<TABLE>
<CAPTION>
Name of Director or Principal Occupation Name and Business
Individual Executive Officer or Employment of Employer
---------- ----------------- --------------------- ------------------
<S> <C> <C> <C>
Gary H. Schlatter Director and Executive President of Company's OraLabs, Inc.
Officer Subsidiary
Suzan M. Schlatter Director Secretary of Company's OraLabs, Inc.
Subsidiary
Allen R. Goldstone Director Consultant Creative Business
Strategies, Inc.;
Business Consulting
Firm
Michael I. Friess Director Attorney Michael Friess
Emile Jordan Executive Officer Comptroller of Company's OraLabs, Inc.
Subsidiary
</TABLE>
The balance of the information required for this Item is incorporated
herein by reference to the 1998 Definitive Proxy Statement.
Item 11. Executive Compensation.
The information required for this item is incorporated herein by reference
to the 1998 Definitive Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required for this item is incorporated herein by reference
to the 1998 Definitive Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
The information required for this item is incorporated herein by reference
to the 1998 Definitive Proxy Statement.
15
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as a part of this Form 10-K
immediately following the signature pages:
1. Consolidated Financial Statements (OraLabs Holding Corp. and
Consolidated Subsidiaries):
Consolidated Balance Sheets - December 31, 1997 and 1996
Consolidated Statements of Income for the years ended
December 31, 1994 through December 31, 1997
Consolidated Statement of Changes in Stockholders' Equity
from December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ende
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Independent Auditor's Report
2. Financial Statements (SSI Capital Corp.):
Balance Sheet - December 31, 1996
Statement of Operations and Accumulated (Deficit)
Statement of Cash Flows for the month ended December 31, 1996
Independent Auditor's Report
3. Financial Statement Schedules:
All schedules have been omitted because of the absence of
conditions under which they would be required or because the
required information is included in the financial tatements or
the notes thereto.
4. Exhibits required to be filed are listed below:
Certain of the following exhibits are hereby incorporated by
reference pursuant to Rule 12(b)-32 as promulgated under the
Securities and Exchange Act of 1934, as amended, from the
reports noted below:
Exhibit
No. Description
------- ------------
3.1(i)(1) Articles of Incorporation
3.1(ii)(2) Amended and Restated Bylaws
4(2) Specimen Certificate for Common Stock
10.1(2) 1997 Stock Plan
16
<PAGE>
Exhibit
No. Description
------- ------------
10.2(2) 1997 Non-Employee Directors' Option Plan
10.3(3) Amended and Restated Employment Agreement Between the
Company's Subsidiary and Gary Schlatter
10.4(2) Stock Option Grant to Michael Friess
10.5(2) Lease Agreement Between the Company's Subsidiary and
Gary Schlatter
10.6(2) Sublease Agreement Between the Company's Subsidiary
and Modern Plastics, Inc.
10.7(2) Employment Agreement Between the Company's Subsidiary
and Allen R. Goldstone, with accompanying
termination agreement
10.8(2) Employment Agreement Between the Company's Subsidiary
and Sanford Schwartz, with accompanying termination
agreement
10.9(4) Merger Agreement and Plan of Reorganization Between
the Company's Subsidiary, SSI Capital Corp.,
Oralmerge, Inc., et al.
10.10 No statement re: computation of per share earnings is
required since such computation can be clearly
determined from the material contained in this
Annual Report on Form 10-K.
212 List of Subsidiaries of the Company
23.1(2) Consent of Independent Accountants
27.1(2) Financial Data Schedule for OraLabs Holding Corp. and
Consolidated Subsidiaries
27.2(2) Financial Data Schedule for SSI Capital Corp.
(December 1996)
- ------------------
(1) Incorporated herein by reference to Exhibit C of the Definitive Information
Statement filed by the Company's predecessor, SSI Capital Corp., on July
24, 1997.
(2) Filed herewith.
(3) Incorporated herein by reference to Exhibit B of the Form 8-K filed by the
Company's predecessor, SSI Capital Corp., on May 14, 1997.
(4) Incorporated herein by reference to Exhibit A of the Form 8-K filed by the
Company's predecessor, SSI Capital Corp., on May 14, 1997.
(b) No reports on Form 8-K have been filed during the fourth quarter of
fiscal 1997.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ORALABS HOLDING CORP.
By: /s/ Gary H. Schlatter
------------------------------------
Gary H. Schlatter, President
By: /s/ Emile Jordan
-------------------------------------
Emile Jordan, Chief Financial Officer
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Gary H. Schlatter Director, President, March 31, 1998
---------------------------------- Chief Executive Officer
Gary H. Schlatter
/s/ Allen R. Goldstone Director March 31, 1998
----------------------------------
Allen R. Goldstone
/s/ Michael I. Friess Director March 31, 1998
---------------------------------
Michael I. Friess
/s/ Suzan M. Schlatter Director March 31, 1998
----------------------------------
Suzan M. Schlatter
</TABLE>
18
<PAGE>
ORALABS HOLDING CORP. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
and
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
December 31, 1997, 1996 and 1995
F-1
<PAGE>
ORALABS HOLDING CORP. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------------
Table of Contents
Page
----
Report of Independent Certified Public Accountants F-3
Consolidated Financial Statements:
Consolidated Balance Sheets F-4
Consolidated Statements of Income F-5
Consolidated Statement of Changes in
Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-8
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
The Board of Directors
Oralabs Holding Corp.
We have audited the consolidated balance sheets of Oralabs Holding Corp. and
Consolidated Subsidiaries as of December 31, 1997 and 1996 and related
statements of income, changes in stockholders' equity and cash flows for the
three years ended December 31, 1997, 1996 and 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Oralabs Holding
Corp. and Consolidated Subsidiaries as of December 31, 1997 and 1996 and the
results of its operations, its changes in stockholders' equity and its cash
flows for the three years ended December 31, 1997, 1996 and 1995 in conformity
with generally accepted accounting principles.
/s/ Schumacher & Associates, Inc.
----------------------------------
Schumacher & Associates, Inc.
Certified Public Accountants
12835 E. Arapahoe Road
Tower II, Suite 110
Englewood, CO 80112
February 24, 1998
F-3
<PAGE>
ORALABS HOLDING CORP. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------------
CONSOLIDATED BALANCE SHEETS
December 31,
1997 1996
---------- ----------
Current Assets
Cash in bank $1,023,598 $ 120,399
Accounts receivable, net of
allowance for doubtful accounts
of $33,770 (Note 8) 686,668 392,469
Inventory 599,270 450,984
Deferred income taxes (Note 11) 67,816 --
Prepaid expenses 91,863 19,128
---------- ----------
Total Current Assets 2,469,215 982,980
Property and equipment, net of accumulated
depreciation of $170,490 (Note 4) 214,732 157,822
---------- ----------
Total Assets $2,683,947 $1,140,802
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued
expenses $ 556,865 $ 373,199
Income taxes payable (Note 11) 119,586 --
---------- ----------
Total Current Liabilities 676,451 373,199
---------- ----------
Commitments (Notes 5,6,7,8,9,10,11 and 13) -- --
Stockholders' Equity:
Preferred stock - $.001 par value,
1,000,000 shares authorized,
None issued and outstanding -- --
Common stock - $.001 par value,
100,000,000 shares authorized,
9,123,555 shares issued and
outstanding 9,124 7,459
Additional paid-in capital 1,134,427 137,457
Retained earnings 863,945 622,688
---------- ----------
Total Stockholders' Equity 2,007,496 767,604
---------- ----------
Total Liabilities and Stockholders' Equity $2,683,947 $1,140,803
========== ==========
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
ORALABS HOLDING CORP. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------------
STATEMENTS OF INCOME
For the Years Ended December 31
1997 1996 1995
----------- ----------- -----------
Revenue:
<S> <C> <C> <C>
Sales $ 6,762,361 $ 4,985,009 $ 5,447,498
Cost of sales 3,027,733 2,385,076 1,910,469
----------- ----------- -----------
Gross Profit 3,734,628 2,599,933 3,537,029
----------- ----------- -----------
Operating Expenses
Salaries and payroll
taxes 775,765 432,236 266,796
Bad debts 34,943 58,670 69,338
Rent 72,362 62,709 24,139
Commissions 247,449 201,730 316,273
Trade shows 83,666 90,542 65,175
Depreciation 52,757 47,466 32,840
Stock issued for services
(Note 12) 340,000 -- --
Other operating expenses 512,089 567,424 299,370
----------- ----------- -----------
Total Operating Expenses 2,119,031 1,460,777 1,073,931
----------- ----------- -----------
Net Operating Income 1,615,597 1,139,156 2,463,098
----------- ----------- -----------
Other Income (Expenses)
Interest and other income 34,750 72,273 70,595
Loss on sale of
securities -- (6,038) (316,560)
Interest expense -- (8,284) (9,965)
----------- ----------- -----------
Total Other 34,750 57,951 (255,930)
----------- ----------- -----------
Net Income Before Provision
for Income Taxes 1,650,347 1,197,107 2,207,168
----------- ----------- -----------
Provision for income taxes
(Note 11)
Current 590,510 -- --
Deferred (67,816)
----------- ------------ -----------
522,694
Net Income $ 1,127,653 $ 1,197,107 $ 2,207,168
=========== =========== ===========
Net Income per Common Share $ .13 $ .16 $ .30
=========== =========== ===========
Weighted Average Shares
Outstanding 8,707,362 7,458,784 7,458,784
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ORALABS HOLDING CORP. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------------
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
From December 31, 1994 through December 31, 1997
Preferred Stock Common Stock Additional
------------------ -------------------- Paid-in Retained
Shares Amount Shares Amount Capital Earnings Total
------ ------ ------- ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 - - 7,458,784 $ 7,459 $ 135,212 $ 822,029 $ 964,700
Distributions - - - - - (2,013,255) (2,013,255)
Net income for the year
ended December 31, 1995 - - - - - 2,207,168 2,207,168
-------- -------- ---------- --------- ---------- ----------- ----------
Balance at December 31, 1995 - - 7,458,784 7,459 135,212 1,015,942 1,158,613
Cash contributed - - - - 2,245 - 2,245
Distributions - - - - - (1,590,361) (1,590,361)
Net income for the year
ended December 31, 1996 - - - - - 1,197,107 1,197,107
-------- -------- ---------- --------- ---------- ----------- -----------
Balance at December 31, 1996 - - 7,458,784 7,459 137,457 622,688 767,604
Reorganization/additional
paid-in capital - - 999,771 1,000 160,849 - 161,849
Common stock issued for cash - - 325,000 325 324,675 - 325,000
Reclassification of
undistributed S Corporation - - - - 171,786 (171,786) -
earnings
Stock issued for services - - 340,000 340 339,660 - 340,000
Distributions - - - - - (714,610) (714,610)
Net income for the year
ended December 31, 1997 - - - - - 1,127,653 1,127,653
-------- -------- ---------- --------- ---------- ----------- -----------
Balance at December 31, 1997 - $ - 9,123,555 $ 9,124 $1,134,427 $ 863,945 $ 2,007,496
======== ======== ========== ========= ========== =========== ===========
The accompanying notes are an integral part of the financial statements.
F-6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ORALABS HOLDING CORP. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------------
STATEMENTS OF CASH FLOWS
For the Years Ended December 31
1997 1996 1995
---------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 1,127,653 $ 1,197,107 $ 2,207,168
Adjustments to reconcile net
income to net cash used
in operating activities
Depreciation 52,757 47,466 32,840
Increase (decrease) in
accounts payable and
accrued expenses 183,666 210,463 (2,041)
Decrease (Increase) in
accounts receivable (294,199) 56,045 (257,826)
Increase in income taxes
payable 51,770 -- --
Decrease in notes
receivable -- -- 67,026
(Increase) in inventory (148,286) (173,459) (189,242)
Stock issued for services 340,000 -- --
Other, net (72,634) 685 (17,564)
----------- ----------- -----------
Net Cash Provided by
Operating Activities 1,240,727 1,338,307 1,840,361
----------- ----------- -----------
Cash Flows from Investing Activities:
Investments in securities -- 175,500 (175,500)
Margin account payable -- (129,556) 129,556
Investment in property and
equipment (109,767) (134,480) (57,514)
----------- ----------- -----------
Net Cash (Used in) Investing
Activities (109,767) (88,536) (103,458)
----------- ----------- -----------
Cash Flows from Financing Activities:
Stock issued and additional
paid-in capital 486,849 2,245 23,000
Distributions (714,610) (1,590,361) (2,013,255)
----------- ----------- -----------
Net Cash (Used in)
Financing Activities (227,761) (1,588,116) (1,990,255)
----------- ----------- -----------
Increase (Decrease) in Cash 903,199 (338,345) (253,352)
Cash, Beginning of Period 120,399 458,744 712,096
----------- ----------- -----------
Cash, End of Year $ 1,023,598 $ 120,399 $ 458,744
=========== =========== ===========
Interest Paid $ -- $ 8,284 $ 9,965
=========== =========== ===========
Income Taxes Paid $ 470,924 $ -- $ --
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
F-7
</TABLE>
<PAGE>
ORALABS HOLDING CORP. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
(1) Summary of Significant Accounting Policies
------------------------------------------
This summary of significant accounting policies of Oralabs Holding Corp.
and Consolidated Subsidiaries, (the Company) is presented to assist in
understanding the Company's financial statements. The financial statements
and notes are representations of the Company's management who is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
(a) Organization and Nature of Operations
-------------------------------------
Oralabs Holding Corp. (OHC) a Colorado corporation was formed during
June 1997. SSI Capital Corp. (SSI) a New York corporation was
incorporated on January 30, 1981. SSI originally had a November 30
year end but has recently changed to a December 31 year end. Effective
August 22, 1997, SSI was merged into Oralabs Holding Corp. and the
outstanding shares of SSI were converted to shares of Oralabs Holding
Corp. on a one for two basis. All references to common stock in the
Company's financial statements have been retroactively adjusted for
the merger and the one for two reduction in shares outstanding.
Oralabs, Inc. (ORALABS), a Colorado corporation was incorporated on
August 10, 1990. ORALABS is in the business of manufacturing and
distributing lip balm, fresh breath and other products. ORALABS has
selected December 31 as its fiscal year end. ORALABS is a wholly-owned
subsidiary of OHC.
OL Sub Corp, a Colorado corporation was incorporated on October 23,
1997. As of December 31, 1997 this corporation was inactive.
The consolidated financial statements include the accounts of ORALABS
and the accounts of SSI since the date of the reverse acquisition and
the accounts of OL Sub Corp. since inception (see Note 12). All
intercompany accounts and transactions have been eliminated.
F-8
<PAGE>
ORALABS HOLDING CORP. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1997, 1996 and 1995
(1) Summary of Significant Accounting Policies, Continued
------------------------------------------------------
(b) Cash and Cash Equivalents
-------------------------
For purposes of the statement of cash flows, the Company considers all
short-term securities purchased with a maturity of three months or
less to be cash equivalents.
(c) Inventories
-----------
Inventories consist of raw materials and finished goods which are
carried at the lower of average cost or market value.
(d) Property and Equipment
----------------------
Property and equipment are carried at cost. Depreciation of property
and equipment is provided using the straight-line method for financial
reporting purposes at rates based on the following estimated useful
lives:
Years
-----
Machinery and equipment 5 - 7
Leasehold improvements 5
For federal income tax purposes, depreciation is computed using the
accelerated cost recovery system and the modified accelerated cost
recovery system. Expenditures for major renewals and betterments that
extend the useful lives of property and equipment are capitalized.
Expenditures for maintenance and repairs are charged to expense as
incurred.
(e) Income Taxes
------------
No provision for income tax has been provided in the financial
statements for 1996 and 1995 since the Company had elected to be taxed
under Subchapter S of the Internal Revenue Code, whereby all income or
losses flow through to the stockholder for income tax reporting
purposes. Effective May 1, 1997, the S Corporation election was
terminated. See Note 11.
F-9
<PAGE>
ORALABS HOLDING CORP. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1997, 1996 and 1995
(1) Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
(f) Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities 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.
(g) Marketable Securities
--------------------
The Company's former investments in marketable securities were
considered trading securities since they were bought and held for the
purpose of selling them in the near term. Unrealized holding gains and
losses for trading securities have been included in the statement of
operations with realized gains and losses. See Note 2.
(2) Marketable Securities
---------------------
During the year ended December 31, 1996 the Company's marketable trading
securities had been distributed to the Company's shareholders. As of
December 31, 1996 the Company had a margin account payable related to these
securities totalling $80 shown as a liability in the financial statements.
During 1996 the Company incurred $8,284 of interest expense on this margin
account.
(3) Inventories
-----------
At December 31, 1997 and 1996 inventories consisted of the following:
1997 1996
--------- -------
Raw materials $ 599,270 $ 402,778
Finished goods - 48,206
--------- ---------
$ 599,270 $ 450,984
========= =========
Inventories are stated at the lower of cost or market. Cost is determined
by the average cost method.
(4) Property and Equipment
----------------------
Property and equipment at December 31, 1996 are summarized as follows:
1997 1996
--------- --------
Machinery and equipment $ 324,269 $ 214,501
Leasehold improvements 60,954 60,954
--------- ----------
385,223 275,455
Less accumulated
depreciation (133,276) (117,633)
--------- ----------
$ 251,947 $ 157,822
========= ==========
F-10
<PAGE>
ORALABS HOLDING CORP. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1997, 1996 and 1995
(5) Transaction with Related Party
------------------------------
The Company pays the monthly lease payments and all operating expenses for
two vehicles used by the Company's president and his spouse who is also an
officer of the Company. Lease payments for these two vehicles total
approximately $1,150 per month.
(6) Operating Lease
---------------
The Company leases its office and manufacturing facilities under an
operating lease for a building owned by the Company's President. The lease
commenced September 1, 1995 with monthly payments of $4,000. Effective July
1, 1996 the payment was increased to $5,500 per month based upon additional
space being used by the Company. The lease expires September 1, 2000. This
lease is a net lease whereby the Company pays all expenses. The Company has
incurred $60,954 of leasehold improvements related to this property, which
are being amortized on a straight-line basis over the five year term of the
lease.
The following is a schedule by years of future minimum rental payments
required under the operating lease as of December 31, 1997:
Year Ending
December 31, Amount
------------ ----------
1998 $ 66,000
1999 66,000
2000 44,000
----------
Total minimum payments required $ 176,000
==========
(7) Concentration of Business and Credit Risk
-----------------------------------------
The Company is engaged primarily in the manufacture and sale of lip balm,
breath and other products throughout North America and internationally. The
potential for severe financial impact can result from negative effects of
economic conditions within the market or geographic area. Since the
Company's business is principally in one area, this concentration of
operations results in an associated risk and uncertainty. Since the
Company's products are inexpensive, the potential negative effect of
changes in economic conditions are less than would be expected for higher
priced products of other industries.
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments and trade accounts receivables. Concentrations of credit with
respect to trade receivables are limited due to the large number of
F-11
<PAGE>
ORALABS HOLDING CORP. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1997, 1996 and 1995
(7) Concentration of Business and Credit Risk, Continued
----------------------------------------------------
customers comprising the Company's customer base and their dispersion
across different industries and geographic locations. As of December 31,
1997, the Company had no significant concentrations of credit risk, other
than the Company had $1,029,846 invested in a mutual fund. While the
underlying investment securities of the fund are guaranteed by the U.S.
government, the shares of the fund are not guaranteed and therefore are
considered to be a concentration of credit risk.
(8) Major Customers
---------------
The Company currently has one customer with net purchases of $890,430
during the year ended December 31, 1997. During the years ended December
31, 1996 and 1995 one customer had net purchases from the Company of
$433,353 and $615,937, respectively. These purchases represent
approximately 13%, 9% and 11% respectively of gross sales revenue.
(9) Line of Credit
--------------
The Company entered into a line of credit agreement with a bank in the
amount of $750,000 which expires May 13, 1998. As of December 31, 1997 the
company had available the entire $750,000 unused line of credit. The
initial interest rate was 7.5% per annum to be adjusted periodically based
on 1.0% under the banks index rate. The line of credit is collateralized by
a first lien on all of the Company's business assets.
(10) Terminated Agreement
--------------------
The Company had an agreement with an employee whereby compensation paid to
the employee equaled 2% of sales. In addition, according to the agreement,
the employee would receive 2% of the sales price of the Company if the
Company is sold. The agreement had a provision that allowed for its
termination by written notice during a thirty day period each year prior to
September 1. On April 30, 1997, the agreement was terminated and the
Company granted 186,000 stock options to this employee at $1.00 per share.
The option terminates on April 1, 2007. This option grant vests one third
immediately and the balance over future years.
F-12
<PAGE>
ORALABS HOLDING CORP. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1997, 1996 and 1995
(11) Income Taxes
------------
Prior to completion of the business combination, ORALABS had elected to be
taxed under Subchapter S of the Internal Revenue Service Code. The election
was automatically terminated effective May 1, 1997. No provision for income
taxes was recorded prior to May 1, 1997 since shareholders of ORALABS
included the net income from the Company on their personal returns and were
responsible for the payment of the related income taxes. ORALABS had
$171,786 of undistributed earnings on May 1, 1997 which has been
reclassified in the financial statements from retained earnings to
additional paid-in capital. This treatment assumes a constructive
distribution to the owners followed by a contribution to the capital of the
Company.
Income taxes payable at December 31, 1997 totalling approximately $119,586
and the current provision for income taxes of $590,510 relate to Federal
and State income taxes on taxable income since May 1, 1997 computed at
statutory rates. The deferred income tax receivable and credit for
provision for deferred income taxes of $67,816 relate to the tax benefit of
the provision for returns and allowances of approximately $199,460, which
is not deductible from taxable income until incurred.
(12) Business Combination
--------------------
Effective May 1, 1997, SSI and ORALABS completed a business combination
whereby ORALABS became a wholly-owned subsidiary of SSI. Prior to the
business combination, SSI had 874,771 shares of common stock outstanding.
An additional 125,000 shares were issued to the two largest shareholders of
SSI and one additional individual upon closing the business combination.
Effective January 1, 1997 ORALABS issued shares of its common stock to two
individuals for services which were exchanged for 340,000 shares of SSI on
May 1, 1997. Also on May 1, 1997, 7,458,784 shares of SSI were issued for
the ownership of ORALABS. As a result of these transactions, ORALABS became
a wholly-owned subsidiary of SSI. Since the former controlling shareholders
of ORALABS owned approximately 85% of SSI after the business combination,
the transaction has been accounted for as a reverse acquisition. The net
monetary assets of SSI at the time of the reverse acquisition of
approximately $161,849 have been accounted for as issuance of stock and
additional paid-in capital. See Note 1 for merger of SSI into Oralabs
Holding Corp.
F-13
<PAGE>
ORALABS HOLDING CORP. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1997, 1996 and 1995
(13) Stock Options
-------------
The Company has adopted an incentive stock option plan for employees. The
option terms are for ten years at $1.00 per share. As of December 31, 1997
the Company had outstanding 500,000 incentive options including the 186,000
described in Note 10. These options vest on an annual percentage basis over
the future terms of employment.
F-14
<PAGE>
SSI CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
and
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
December 31, 1996
F-1
<PAGE>
SSI CAPITAL CORP.
-----------------
(A DEVELOPMENT STAGE COMPANY)
Table of Contents
Page
----
Report of Independent Certified Public Accountants F-3
Financial Statements:
Balance Sheet F-4
Statement of Operations and Accumulated (Deficit) F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
SSI Capital Corp.
We have audited the balance sheet of SSI Capital Corp. as of December 31, 1996
and related statements of operations and accumulated (deficit) and cash flows
for the one month period ended December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SSI Capital Corp. as of
December 31, 1996 and the results of its operations, changes in accumulated
(deficit) and its cash flows for the one month period ended December 31, 1996 in
conformity with generally accepted accounting principles.
/s/ Schumacher & Associates, Inc.
----------------------------------
Schumacher & Associates, Inc.
Certified Public Accountants
12835 E. Arapahoe Road
Tower II, Suite 110
Englewood, CO 80112
March 12, 1998
F-3
<PAGE>
SSI CAPITAL CORP.
-----------------
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
December 31, 1996
Current Assets
Cash in bank $ 192,146
---------
Total Assets $ 192,146
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accrued expenses $ 27,760
---------
Total Current Liabilities 27,760
---------
Commitments (Note 2) --
Stockholders' Equity:
Preferred stock - $.01 par value
1,000,000 shares authorized
none issued and outstanding --
Common stock - $.001 par value,
100,000 shares authorized;
1,749,541 shares issued and
outstanding 1,749
Additional paid-in capital 182,066
Accumulated (deficit) (19,429)
---------
Total Stockholders' Equity 164,386
Total Liabilities and Stockholders' Equity $ 192,146
=========
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
SSI CAPITAL CORP.
-----------------
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS AND ACCUMULATED (DEFICIT)
For the One
Month Ended
December 31,
1996
-----------
Revenue:
Interest income $ 651
-----------
Operating Expenses
Legal and professional 731
Transfer fees 142
Storage 667
Miscellaneous 26
Other 117
-----------
Total Expenses 1,683
-----------
Net Loss $ (1,032)
===========
Loss per Share $ nil
===========
Weighted Average Shares Outstanding 1,749,541
===========
Accumulated (Deficit), Beginning of Period $ (18,397)
Net Loss (1,032)
-----------
Accumulated (Deficit), End of Period $ (19,429)
===========
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
SSI CAPITAL CORP.
-----------------
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
For the One
Month Ended
December 31,
1996
------------
Cash Flows from Operating Activities:
Net loss $ (1,032)
Changes in operating liabilities 176
---------
Net Cash (Used by) Operating Activities (856)
Cash, Beginning of Period 193,002
---------
Cash, End of Year $ 192,146
=========
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
SSI CAPITAL CORP.
-----------------
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(1) Summary of Significant Accounting Policies.
-------------------------------------------
This summary of significant accounting policies of SSI Capital, Inc, (SSI)
is presented to assist in understanding the Company's financial statements.
The financial statements and notes are representations of the Company's
management who is responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting principles and
have been consistently applied in the preparation of the financial
statements.
(a) Nature of Operations
--------------------
SSI Capital Corp. (SSI) a New York corporation, was incorporated on
January 30, 1981. SSI originally had a November 30 year end and has
changed its year end to December 31. This financial statement has been
prepared for the one month transition period related to the change in
fiscal year end. As of December 31, 1996 the Company was inactive
other than it was attempting to locate a business combination
candidate (see Note 2).
(b) Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
(2) Subsequent Event - Business Combination
---------------------------------------
Effective May 1, 1997 SSI and Oralabs, Inc. (ORALABS) completed a business
combination whereby ORALABS became a wholly-owned subsidiary of SSI. Prior
to the business combination, SSI had 1,749,541 shares of common stock
outstanding. An additional 250,000 shares were issued to the two largest
shareholders of SSI and one additional individual upon closing the business
combination. Effective January 1, 1997 ORALABS issued shares of its common
stock to two individuals for services which were exchanged for 680,000
F-7
<PAGE>
SSI CAPITAL CORP.
-----------------
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(2) Subsequent Event - Business Combination, Continued
--------------------------------------------------
shares of SSI on May 1, 1997. Also on May 1, 1997, 14,917,399 shares of SSI
were issued for the ownership of ORALABS. As a result of those
transactions, ORALABS became a wholly-owned subsidiary of SSI. Since the
former controlling shareholders of ORALABS own approximately 85% of SSI
after the business combination, the transaction has been accounted for as a
reverse acquisition. The net monetary assets of SSI at the time of the
reverse acquisition of approximately $161,849 have been accounted for as
issuance of stock and additional paid-in capital.
F-8
<PAGE>
EXHIBIT LIST
Exhibit
No. Description
--- -----------
3.1 (i)(1) Articles of Incorporation
3.1(ii)(2) Amended and Restated Bylaws
4(2) Specimen Certificate for Common Stock
10.1(2) 1997 Stock Plan
10.2(2) 1997 Non-Employee Directors' Option Plan
10.3(3) Amended and restated Employment Agreement Between the Company's
Subsidiary and Gary Schlatter
10.4(2) Stock Option Grant to Michael Friess
10.5(2) Lease Agreement Between the Company's Subsidiary and Gary
Schlatter
10.6(2) Sublease Agreement Between the Company's Subsidiary and Modern
Plastics, Inc.
10.7(2) Employment Agreement Between the Company's Subsidiary and Allen
R. Goldstone, with accompanying termination agreement
10.8(2) Employment Agreement Between the Company's Subsidiary and Sanford
Schwartz, with accompanying termination agreement
10.9(4) Merger Agreement and Plan of Reorganization Between the Company's
Subsidiary, SSI Capital Corp., Oralmerge, Inc., et al.
10.10 No statement re: computation of per share earnings is required
since such computation can be clearly determined from the
material contained in this Annual Report on Form 10-K.
21(2) List of subsidiaries of the Company
23.1(2) Consent of Independent Accountants
27.1(2) Financial Data Schedule for OraLabs Holding Corp. and
Consolidated Subsidiaries
27.2(2) Financial Data Schedule for SSI Capital Corp. (December 1996)
- --------------
(1) Incorporated herein by reference to Exhibit C of the Definitive Information
Statement filed by the Company's predecessor, SSI Capital Corp., on July
24, 1997.
(2) Filed herewith.
(3) Incorporated herein by reference to Exhibit B of the Form 8-K filed by the
Company's predecessor, SSI Capital Corp., on May 14, 1997.
(4) Incorporated herein by reference to Exhibit A of the Form 8-K filed by the
Company's predecessor, SSI Capital Corp., on May 14, 1997.
Table of Contents
Article Page
I. Offices ........................................... 1
II. Shareholders ...................................... 1
III. Board of Directors ................................ 7
IV. Officers and Agents ............................... 11
V. Stock ............................................. 13
VI. Indemnification of Certain Persons ................ 14
VII. Miscellaneous ..................................... 18
Effective: January 5, 1998
AMENDED AND RESTATED BYLAWS
OF
ORALABS HOLDING CORP.
ARTICLE I
Offices
-------
The principal office of the corporation shall be designated from time to
time by the corporation and may be within or outside of Colorado.
The corporation may have such other offices, either within or outside
Colorado, as the board of directors may designate or as the business of the
corporation may require from time to time.
The registered office of the corporation required by the Colorado Business
Corporation Act to be maintained in Colorado may be, but need not be, identical
with the principal office, and the address of the registered office may be
changed from time to time by the board of directors.
ARTICLE II
Shareholders
------------
Section 1. Annual Meeting. The annual meeting of the shareholders shall be
held during the month of May of each year on a date and at a time fixed by the
board of directors of the corporation (or by the president in the absence of
action by the board of directors), beginning with the year 1998, for the purpose
of electing directors and for the transaction of such other business as may come
before the meeting. If the election of directors is not held on the day fixed as
provided herein for any annual meeting of the shareholders, or any adjournment
thereof, the board of directors shall cause the election to be held at a special
meeting of the shareholders as soon thereafter as it may conveniently be held.
A shareholder may apply to the district court in the county in Colorado
where the corporation's principal office is located or, if the corporation has
no principal office in Colorado, to the district court of the county in which
the corporation's registered office is located to seek an order that a
<PAGE>
shareholder meeting be held (i) if an annual meeting was not held within six
months after the close of the corporation's most recently ended fiscal year or
fifteen months after its last annual meeting, whichever is earlier, or (ii) if
the shareholder participated in a proper call of or proper demand for a special
meeting and notice of the special meeting was not given within thirty days after
the date of the call or the date the last of the demands necessary to require
calling of the meeting was received by the corporation pursuant to C.R.S. ss.
7-107-102(1)(b), or the special meeting was not held in accordance with the
notice.
Section 2. Special Meetings. Unless otherwise prescribed by statute,
special meetings of the shareholders may be called for any purpose by the
president or by the board of directors. The president shall call a special
meeting of the shareholders if the corporation receives one or more written
demands for the meeting, stating the purpose or purposes for which it is to be
held, signed and dated by holders of shares representing at least ten percent of
all the votes entitled to be cast on any issue proposed to be considered at the
meeting.
Section 3. Place of Meeting. The board of directors may designate any
place, either within or outside Colorado, as the place for any annual meeting or
any special meeting called by the board of directors. A waiver of notice signed
by all shareholders entitled to vote at a meeting may designate any place,
either within or outside Colorado, as the place for such meeting. If no
designation is made, or if a special meeting is called other than by the board,
the place of meeting shall be the principal office of the corporation.
Section 4. Notice of Meeting. Written notice stating the place, date, and
hour of the meeting shall be given not less than ten nor more than sixty days
before the date of the meeting, except (i) that if the number of authorized
shares is to be increased, at least thirty days' notice shall be given, or (ii)
if any other longer notice period is required by the Colorado Business
Corporation Act. Notice of a special meeting shall include a description of the
purpose or purposes of the meeting. Notice of an annual meeting need not include
a description of the purpose or purposes of the meeting except the purpose or
purposes shall be stated with respect to (i) an amendment to the articles of
incorporation of the corporation, (ii) a merger or share exchange in which the
corporation is a party and, with respect to a share exchange, in which the
corporation's shares will be acquired, (iii) a sale, lease, exchange or other
disposition, other than in the usual and regular course of business, of all or
substantially all of the property of the corporation or of another entity which
this corporation controls, in each case with or without the goodwill, (iv) a
dissolution of the corporation, or (v) any other purpose for which a statement
of purpose is required by the Colorado Business Corporation Act. Notice shall be
given personally or by mail, private carrier, telegraph, teletype,
electronically transmitted facsimile or other form of wire or wireless
communication by or at the direction of the president, the secretary, or the
officer or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting. If mailed and if in a comprehensible form, such notice
shall be deemed to be given and effective when deposited in the United States
mail, addressed to the shareholder at his address as it appears in the
corporation's current record of shareholders, with postage prepaid. If notice is
given other than by mail, and provided that such notice is in a comprehensible
form, the notice is given and effective on the date received by the shareholder.
If requested by the person or persons lawfully calling such meeting, the
secretary shall give notice thereof at corporate expense. No notice need be sent
to any shareholder if three successive notices mailed to the last known address
of such shareholder have been returned as undeliverable until such time as
another address for such shareholder is made known to the corporation by such
-2-
<PAGE>
shareholder. In order to be entitled to receive notice of any meeting, a
shareholder shall advise the corporation in writing of any change in such
shareholder's mailing address as shown on the corporation's books and records.
When a meeting is adjourned to another date, time or place, notice need not
be given of the new date, time or place if the new date, time or place of such
meeting is announced before adjournment at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
which may have been transacted at the original meeting. If the adjournment is
for more than 120 days, or if a new record date is fixed for the adjourned
meeting, a new notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting as of the new record date.
A shareholder may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such shareholder. Such waiver shall
be delivered to the corporation for filing with the corporate records. Further,
by attending a meeting either in person or by proxy, a shareholder waives
objection to lack of notice or defective notice of the meeting unless the
shareholder objects at the beginning of the meeting to the holding of the
meeting or the transaction of business at the meeting because of lack of notice
or defective notice. By attending the meeting, the shareholder also waives any
objection to consideration at the meeting of a particular matter not within the
purpose or purposes described in the meeting notice unless the shareholder
objects to considering the matter when it is presented.
Section 5. Fixing of Record Date. For the purpose of determining
shareholders entitled to (i) notice of or vote at any meeting of shareholders or
any adjournment thereof, (ii) receive distributions or share dividends, or (iii)
demand a special meeting, or to make a determination of shareholders for any
other proper purpose, the board of directors may fix a future date as the record
date for any such determination of shareholders, such date in any case to be not
more than seventy days, and, in case of a meeting of shareholders, not less than
ten days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed by the
directors, the record date shall be the date on which notice of the meeting is
mailed to shareholders, or the date on which the resolution of the board of
directors providing for a distribution is adopted, as the case may be. When a
determination of shareholders entitled to vote at any meeting of shareholders is
made as provided in this Section, such determination shall apply to any
adjournment thereof unless the board of directors fixes a new record date, which
it must do if the meeting is adjourned to a date more than 120 days after the
date fixed for the original meeting.
Notwithstanding the above, the record date for determining the shareholders
entitled to take action without a meeting or entitled to be given notice of
action so taken shall be the date a writing upon which the action is taken is
first received by the corporation. The record date for determining shareholders
entitled to demand a special meeting shall be the date of the earliest of any of
the demands pursuant to which the meeting is called.
Section 6. Voting Lists. The secretary shall make, at the earlier of ten
days before each meeting of shareholders or two business days after notice of
the meeting has been given, a complete list of the shareholders entitled to be
given notice of such meeting or any adjournment thereof. The list shall be
arranged by voting groups and within each voting group by class or series of
shares, shall be in alphabetical order within each class or series, and shall
show the address of and the number of shares of each class or series held by
each shareholder. For the period beginning the earlier of ten days prior to the
-3-
<PAGE>
meeting or two business days after notice of the meeting is given and continuing
through the meeting and any adjournment thereof, this list shall be kept on file
at the principal office of the corporation, or at a place (which shall be
identified in the notice) in the city where the meeting will be held. Such list
shall be available for inspection on written demand by any shareholder
(including for the purpose of this Section 6 any holder of voting trust
certificates) or his agent or attorney during regular business hours and during
the period available for inspection. The original stock transfer books shall be
prima facie evidence as to the shareholders entitled to examine such list or to
vote at any meeting of shareholders.
Any shareholder, his agent or attorney may copy the list during regular
business hours and during the period it is available for inspection, provided
(i) the shareholder has been a shareholder for at least three months immediately
preceding the demand or holds at least five percent of all outstanding shares of
any class of shares as of the date of the demand, (ii) the demand is made in
good faith and for a purpose reasonably related to the demanding shareholder's
interest as a shareholder, (iii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iv) the records are directly connected with the described purpose, and (v) the
shareholder pays a reasonable charge covering the costs of labor and material
for such copies, not to exceed the estimated cost of production and
reproduction.
Section 7. Recognition Procedure for Beneficial Owners. The board of
directors may adopt by resolution a procedure whereby a shareholder of the
corporation may certify in writing to the corporation that all or a portion of
the shares registered in the name of such shareholder are held for the account
of a specified person or persons. The resolution may set forth (i) the types of
nominees to which it applies, (ii) the rights or privileges that the corporation
will recognize in a beneficial owner, which may include rights and privileges
other than voting, (iii) the form of certification and the information to be
contained therein, (iv) if the certification is with respect to a record date,
the time within which the certification must be received by the corporation, (v)
the period for which the nominee's use of the procedure is effective, and (vi)
such other provisions with respect to the procedure as the board deems necessary
or desirable. Upon receipt by the corporation of a certificate complying with
the procedure established by the board of directors, the persons specified in
the certification shall be deemed, for the purpose or purposes set forth in the
certification, to be the registered holders of the number of shares specified in
place of the shareholder making the certification.
Section 8. Quorum and Manner of Acting. A majority of the votes entitled to
be cast on a matter by a voting group shall constitute a quorum of that voting
group for action on the matter. If less than a majority of such votes are
represented at a meeting, a majority of the votes so represented may adjourn the
meeting from time to time without further notice, for a period not to exceed 120
days for any one adjournment. If a quorum is present at such adjourned meeting,
any business may be transacted which might have been transacted at the meeting
as originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum, unless the meeting is
adjourned and a new record date is set for the adjourned meeting.
If a quorum exists, action on a matter other than the election of directors
by a voting group is approved if the votes cast within the voting group favoring
the action exceed the votes cast within the voting group opposing the action,
unless the vote of a greater number or voting by classes is required by law or
the articles of incorporation.
-4-
<PAGE>
Section 9. Proxies. At all meetings of shareholders, a shareholder may vote
by proxy by signing an appointment form or similar writing, either personally or
by his duly authorized attorney-in-fact. A shareholder may also appoint a proxy
by transmitting or authorizing the transmission of a telegram, teletype, or
other electronic transmission providing a written statement of the appointment
to the proxy, a proxy solicitor, proxy support service organization, or other
person duly authorized by the proxy to receive appointments as agent for the
proxy, or to the corporation. The transmitted appointment shall set forth or be
transmitted with written evidence from which it can be determined that the
shareholder transmitted or authorized the transmission of the appointment. The
proxy appointment form or similar writing shall be filed with the secretary of
the corporation before or at the time of the meeting. The appointment of a proxy
is effective when received by the corporation and is valid for eleven months
unless a different period is expressly provided in the appointment form or
similar writing.
Any complete copy, including an electronically transmitted facsimile, of an
appointment of a proxy may be substituted for or used in lieu of the original
appointment for any purpose for which the original appointment could be used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate votes
before the proxy exercises his authority under the appointment. Other notice of
revocation may, in the discretion of the corporation, be deemed to include the
appearance at a shareholders' meeting of the shareholder who granted the proxy
and his voting in person on any matter subject to a vote at such meeting.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment.
The corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by the
shareholder (including a shareholder who is a successor to the shareholder who
granted the proxy) either personally or by his attorney-in-fact, notwithstanding
that the revocation may be a breach of an obligation of the shareholder to
another person not to revoke the appointment.
Subject to Section 11 and any express limitation on the proxy's authority
appearing on the appointment form, the corporation is entitled to accept the
proxy's vote or other action as that of the shareholder making the appointment.
Section 10. Voting of Shares. Each outstanding share of common stock shall
be entitled to one vote, except in the election of directors, and each
fractional share shall be entitled to a corresponding fractional vote on each
matter submitted to a vote at a meeting of shareholders. Each outstanding share
of preferred stock shall have no voting rights except as expressly stated by the
Board of Directors when it specifies the preferences, rights and limitations of
any such preferred shares, or as required by law. Cumulative voting shall not be
permitted in the election of directors or for any other purpose. Each record
holder of common stock shall be entitled to vote in the election of directors
and shall have as many votes for each of the shares owned by him as there are
directors to be elected and for whose election he has the right to vote.
-5-
<PAGE>
At each election of directors, that number of candidates equaling the
number of directors to be elected, having the highest number of votes cast in
favor of their election, shall be elected to the board of directors.
Except as otherwise ordered by a court of competent jurisdiction upon a
finding that the purpose of this Section would not be violated in the
circumstances presented to the court, the shares of the corporation are not
entitled to be voted if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and the first corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation except to the extent the second corporation holds the shares
in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of redemption
is mailed to the holders and a sum sufficient to redeem the shares has been
deposited with a bank, trust company, or other financial institution under an
irrevocable obligation to pay the holders the redemption price on surrender of
the shares.
Section 11. Corporation's Acceptance of Votes. If the name signed on a
vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment or
proxy appointment revocation and give it effect as the act of the shareholder.
If the name signed on a vote, consent, waiver, proxy appointment or proxy
appointment revocation does not correspond to the name of a shareholder, the
corporation, if acting in good faith, is nevertheless entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and to
give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports to be that of
an officer or agent of the entity;
(ii) the name signed purports to be that of an administrator, executor,
guardian or conservator representing the shareholder and, if the corporation
requests, evidence of fiduciary status acceptable to the corporation has been
presented with respect to the vote, consent, waiver, proxy appointment or proxy
appointment revocation;
(iii) the name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests, evidence of this
status acceptable to the corporation has been presented with respect to the
vote, consent, waiver, proxy appointment or proxy appointment revocation;
(iv) the name signed purports to be that of a pledgee, beneficial owner or
attorney-in-fact of the shareholder and, if the corporation requests, evidence
acceptable to the corporation of the signatory's authority to sign for the
shareholder has been presented with respect to the vote, consent, waiver, proxy
appointment or proxy appointment revocation;
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(v) two or more persons are the shareholder as co-tenants or fiduciaries
and the name signed purports to be the name of at least one of the co-tenants or
fiduciaries, and the person signing appears to be acting on behalf of all the
co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy appointment or
proxy appointment revocation is otherwise proper under rules established by the
corporation that are not inconsistent with this Section 11.
The corporation is entitled to reject a vote, consent, waiver, proxy
appointment or proxy appointment revocation if the secretary or other office or
agent authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the signatory's
authority to sign for the shareholder.
Neither the corporation nor its officers nor any agent who accepts or
rejects a vote, consent, waiver, proxy appointment or proxy appointment
revocation in good faith and in accordance with the standards of this Section is
liable in damages for the consequences of the acceptance or rejection.
Section 12. Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a written consent (or counterparts thereof) that sets forth the
action so taken is signed by all of the shareholders entitled to vote with
respect to the subject matter thereof and received by the corporation. Such
consent shall have the same force and effect as a unanimous vote of the
shareholders and may be stated as such in any document. Action taken under this
Section 12 is effective as of the date the last writing necessary to effect the
action is received by the corporation, unless all of the writings specify a
different effective date, in which case such specified date shall be the
effective date for such action. If any shareholder revokes his consent as
provided for herein prior to what would otherwise be the effective date, the
action proposed in the consent shall be invalid. The record date for determining
shareholders entitled to take action without a meeting is the date the
corporation first receives a writing upon which the action is taken.
Any shareholder who has signed a writing describing and consenting to
action taken pursuant to this Section 12 may revoke such consent by a writing
signed by the shareholder describing the action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the corporation before the effectiveness of the action.
Section 13. Meetings by Telecommunication. Any or all of the shareholders
may participate in an annual or special shareholders' meeting by, or the meeting
may be conducted through the use of, any means of communication by which all
persons participating in the meeting may hear each other during the meeting. A
shareholder participating in a meeting by this means is deemed to be present in
person at the meeting.
ARTICLE III
Board of Directors
------------------
Section 1. General Powers. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of its board of directors, except as otherwise
provided in the Colorado Business Corporation Act or the articles of
incorporation.
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Section 2. Number, Qualifications and Tenure. The number of directors of
the corporation shall be fixed from time to time by the board of directors,
within a range of no less than three or more than nine, but no decrease in the
number of directors shall have the effect of shortening the term of any
incumbent director. A director shall be a natural person who is eighteen years
of age or older. A director need not be a resident of Colorado or a shareholder
of the Corporation.
Directors shall be elected at each annual meeting of shareholders. Each
director shall hold office until the next annual meeting of shareholders
following his election and thereafter until his successor shall have been
elected and qualified. Directors shall be removed in the manner provided by the
Colorado Business Corporation Act. The members of the board may either designate
one member of the board as its Chairman or elect to operate without a Chairman.
Section 3. Vacancies. Any director may resign at any time by giving written
notice to the corporation. Such resignation shall take effect at the time the
notice is received by the corporation unless the notice specifies a later
effective date. Unless otherwise specified in the notice of resignation, the
corporation's acceptance of such resignation shall not be necessary to make it
effective. Any vacancy on the board of directors may be filled by the
affirmative vote of a majority of the shareholders or the board of directors. If
the directors remaining in office constitute fewer than a quorum of the board,
the directors may fill the vacancy by the affirmative vote of a majority of all
the directors remaining in office. If elected by the directors, the director
shall hold office until the next annual shareholders' meeting at which directors
are elected. If elected by the shareholders, the director shall hold office for
the unexpired term of his predecessor in office; except that, if the director's
predecessor was elected by the directors to fill a vacancy, the director elected
by the shareholders shall hold office for the unexpired term of the last
predecessor elected by the shareholders.
Section 4. Regular Meetings. A regular meeting of the board of directors
shall be held without notice immediately after and at the same place as the
annual meeting of shareholders. The board of directors may provide by resolution
the time and place, either within or outside Colorado, for the holding of
additional regular meetings without other notice.
Section 5. Special Meetings. Special meetings of the board of directors may
be called by or at the request of the president or at the request of any two
directors (or one director if there are then less than three (3) persons serving
as directors). The person or persons authorized to call special meetings of the
board of directors may fix any place, either within or outside Colorado, as the
place for holding any special meeting of the board of directors called by them,
provided that no meeting shall be called outside the State of Colorado unless a
majority of the board of directors has so authorized.
Section 6. Notice. Notice of any special meeting shall be given at least
two days prior to the meeting by written notice either personally delivered or
mailed to each director at his business address, or by notice transmitted by
telegraph, telex, electronically transmitted facsimile or other form of wire or
wireless communication. If mailed, such notice shall be deemed to be given and
to be effective on the earlier of (i) three days after such notice is deposited
in the United States mail, properly addressed, with postage prepaid, or (ii) the
date shown on the return receipt, if mailed by registered or certified mail
return receipt requested. If notice is given by telex, electronically
transmitted facsimile or other similar form of wire or wireless communication,
such notice shall be deemed to be given and to be effective when sent, and with
respect to a telegram, such notice shall be deemed to be given and to be
effective when the telegram is delivered to the telegraph company. If a director
has designated in writing one or more reasonable addresses or facsimile numbers
for delivery of notice to him, notice sent by mail, telegraph, telex,
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electronically transmitted facsimile or other form of wire or wireless
communication shall not be deemed to have been given or to be effective unless
sent to such addresses or facsimile numbers, as the case may be.
A director may waive notice of a meeting before or after the time and date
of the meeting by a writing signed by such director. Such waiver shall be
delivered to the corporation for filing with the corporate records. Further, a
director's attendance at or participation in a meeting waives any required
notice to him of the meeting unless at the beginning of the meeting, or promptly
upon his later arrival, the director objects to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice and does not thereafter vote for or assent to action taken at the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need to be specified in the
notice or waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by the board
of directors pursuant to Section 2 or, if no number is fixed, a majority of the
number in office immediately before the meeting begins, shall constitute a
quorum for the transaction of business at any meeting of the board of directors.
If less than such majority is present at a meeting, a majority of the directors
present may adjourn the meeting from time to time without further notice, for a
period not to exceed sixty days at any one adjournment.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 9. Compensation. By resolution of the board of directors, any
director may be paid any one or more of the following: his expenses, if any, of
attendance at meetings of the board and of committees and subcommittees of the
board, a fixed sum for attendance at each such meeting, a stated salary as
director, or such other compensation as the corporation and the director may
reasonably agree upon. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Section 10. Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors or committee or subcommittee of
the board at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless (i) the director objects at the
beginning of the meeting, or promptly upon his arrival, to the holding of the
meeting or the transaction of business at the meeting and does not thereafter
vote for or assent to any action taken at the meeting, (ii) the director
contemporaneously requests that his dissent or abstention as to any specific
action taken be entered in the minutes of the meeting, or (iii) the director
causes written notice of his dissent or abstention as to any specific action to
be received by the presiding officer of the meeting before its adjournment or by
the corporation promptly after the adjournment of the meeting. A director may
dissent to a specific action at a meeting, while assenting to others. The right
to dissent to a specific action taken at a meeting of the board of directors or
a committee or subcommittee of the board shall not be available to a director
who voted in favor of such action.
Section 11. Committees and Subcommittees. Committees of the board shall
consist of an Audit Committee as described in Section 12 of these bylaws as well
as an executive committee and one or more other committees and/or subcommittees.
Each committee and subcommittee shall have such powers and responsibilities as
may be established for the same in these bylaws and such other powers and
responsibilities as may be delegated to such committee by the board. To the
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extent provided in these bylaws or in the board's resolution, each committee
and/or subcommittee shall have all the authority of the board of directors,
except that no such committee or subcommittee shall have the authority to (i)
authorize distributions, (ii) approve or propose to shareholders actions or
proposals required by the Colorado Business Corporation Act to be approved by
shareholders, (iii) fill vacancies on the board of directors or any committee or
subcommittee thereof, (iv) amend articles of incorporation, (v) adopt, amend or
repeal the bylaws, (vi) approve a plan of merger not requiring shareholder
approval, (vii) authorize or approve the reacquisition of shares unless pursuant
to a formula or method prescribed by the board of directors, or (viii) authorize
or approve the issuance or sale of shares, or contract for the sale of shares or
determine the designations and relative rights, preferences and limitations of a
class or series of shares, except that the board of directors may authorize a
committee or subcommittee or officer to do so within limits specifically
prescribed by the board of directors. The committee or subcommittee shall then
have full power within the limits set by the board of directors to adopt any
final resolution setting forth all preferences, limitations and relative rights
of such class or series and to authorize an amendment of the articles of
incorporation stating the preferences, limitations and relative rights of a
class or series for filing with the Secretary of State under the Colorado
Business Corporation Act.
The Chairman of the board, if any (or if none, by resolution adopted by a
majority of all the directors in office when the action is taken), shall have
the power, subject to the approval of the board, to: (i) appoint any director to
membership on any committee or subcommittee who shall be willing to serve on the
same and (ii) remove any person from membership on any committee or subcommittee
without cause. The Chairman of the board, if any, subject to the approval of the
board, shall reappoint the membership of the committees and subcommittees at
each annual meeting of the board and any person's membership on any committee or
subcommittee shall automatically terminate at each annual meeting of the board
unless such person shall be reappointed to such membership at such annual
meeting. A person's membership on any committee or subcommittee shall
automatically terminate when such person ceases to be a director of the
corporation.
Sections 4, 5, 6, 7, 8 and 12 of Article III, which govern meetings,
notice, waiver of notice, quorum, voting requirements and action without a
meeting of the board of directors, shall apply to committees, subcommittees and
their members appointed under this Section 11.
Neither the designation of any such committee or subcommittee, the
delegation of authority to such committee or subcommittee, nor any action by
such committee or subcommittee pursuant to its authority shall alone constitute
compliance by any member of the board of directors or a member of the committee
or subcommittee in question with his responsibility to conform to the standard
of care set forth in Article III, Section 14 of these bylaws.
Section 12. Audit Committee. The corporation shall have a standing Audit
Committee which shall be deemed created under and pursuant to the provisions of
Section 11 of these bylaws. The board shall have the power to establish the
number of membership positions on the Audit Committee from time to time and to
change the number of membership positions on such committee from time to time.
The members of the Audit Committee shall be determined by the Chairman of the
board, if any, subject to the approval of the board, provided that the majority
of the members of the Audit Committee shall be independent directors.
The Audit Committee shall: (i) recommend to the board annually a firm of
independent public accountants to act as auditors for the corporation and its
subsidiaries to be included in the corporation's consolidated financial
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statements; (ii) review with the auditors in advance the scope of their annual
audit for the corporation, (iii) review with the auditors and the management
from time to time, the accounting principles, policies, and practices of the
corporation and its reporting policies and practices for the corporation; (iv)
review with the auditors annually the results of their audit for the
corporation; (v) review from time to time with the auditors and the internal
financial personnel the adequacy of the accounting, financial and operating
controls for the corporation; and (vi) exercise such other authority which shall
from time to time be delegated to the committee by the board or which the
committee shall deem reasonably related to any authority expressly delegated to
the committee in or pursuant to this Section. 12.
Section 13. Informal Action by Directors. Any action required or permitted
to be taken at a meeting of the directors or any committee or subcommittee
designated by the board of directors may be taken without a meeting if a written
consent (or counterparts thereof) that sets forth the action so taken is signed
by all of the directors entitled to vote with respect to the action taken. Such
consent shall have the same force and effect as a unanimous vote of the
directors or committee or subcommittee members and may be stated as such in any
document. Unless the consent specifies a different effective date, action taken
under this Section 12 is effective at the time the last director signs a writing
describing the action taken, unless, before such time, any director has revoked
his consent by a writing signed by the director and received by the president or
the secretary of the corporation.
Section 14. Telephonic Meetings. The board of directors may permit any
director (or any member of a committee or subcommittee designated by the board)
to participate in a regular or special meeting of the board of directors or a
committee or subcommittee thereof through the use of any means of communication
by which all directors participating in the meeting can hear each other during
the meeting. A director participating in a meeting in this manner is deemed to
be present in person at the meeting.
Section 15. Standard of Care. A director shall perform his duties as a
director, including without limitation his duties as a member of any committee
of the board, in good faith, in a manner he reasonably believes to be in the
best interests of the corporation, and with the care an ordinarily prudent
person in a like position would exercise under similar circumstances. In
performing his duties, a director shall be entitled to rely on information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared or presented by the person herein
designated. However, he shall not be considered to be acting in good faith if he
has knowledge concerning the matter in question that would cause such reliance
to be unwarranted. A director shall not be liable to the corporation or its
shareholders for any action he takes or omits to take as a director if, in
connection with such action or omission, he performs his duties in compliance
with this Section 14.
The designated persons on whom a director is entitled to rely are (i) one
or more officers or employees of the corporation whom the director reasonably
believes to be reliable and competent in the matters presented, (ii) legal
counsel, public accountant, or other person as to matters which the director
reasonably believes to be within such person's professional or expert
competence, or (iii) a committee or subcommittee of the board of directors on
which the director does not serve if the director reasonably believes the
committee or subcommittee merits confidence.
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ARTICLE IV
Officers and Agents
-------------------
Section 1. General. The officers of the corporation shall be a president,
one or more vice presidents, a secretary, and a controller, each of whom shall
be a natural person eighteen years of age or older. The board of directors or an
officer or officers authorized by the board may appoint such other officers and
assistants as they may consider necessary. The board of directors or the officer
or officers authorized by the board shall from time to time determine the
procedure for the appointment of officers, their term of office, their authority
and duties and their compensation. One person may hold more than one office. In
all cases where the duties of any officer, agent or employee are not prescribed
by the bylaws or by the board of directors, such officer, agent or employee
shall follow the orders and instructions of the president of the corporation.
Section 2. Appointment and Term of Office. The officers of the corporation
shall be appointed from time to time as determined by the board of directors. If
any officer or officers are to be appointed by another officer or officers of
the corporation, such appointments shall be made as soon as conveniently may be.
Each officer shall hold office until the first of the following occurs: his
successor shall have been duly appointed and qualified, his death, his
resignation, or his removal in the manner provided in Section 3.
Section 3. Resignation and Removal. An officer may resign at any time by
giving written notice of resignation to the corporation. The resignation is
effective when the notice is received by the corporation unless the notice
specifies a later effective date.
Any officer or agent may be removed at any time with or without cause by
the board of directors or an officer or officers authorized by the board. Such
removal does not affect the contract rights, if any, of the corporation or of
the person so removed. The appointment of an officer or agent shall not in
itself create contract rights.
Section 4. Vacancies. A vacancy in any office, however occurring, may be
filled by the board of directors, or by the officer or officers authorized by
the board, for the unexpired portion of the officer's term. If an officer
resigns and his resignation is made effective at a later date, the board of
directors, or officer or officers authorized by the board, may permit the
officer to remain in office until the effective date and may fill the pending
vacancy before the effective date if the board of directors or officer or
officers authorized by the board provide that the successor shall not take
office until the effective date. In the alternative, the board of directors or
officer or officers authorized by the board of directors may remove the officer
at any time before the effective date and may fill the resulting vacancy.
Section 5. President. Subject to the direction and supervision of the board
of directors, the president shall have general and active control of its affairs
and business and general supervision of its officers, agents and employees.
Unless otherwise directed by the board of directors, the president shall attend
in person or by substitute appointed by him, or shall execute on behalf of the
corporation written instruments appointing a proxy or proxies to represent the
corporation, at all meetings of the stockholders of any other corporation in
which the corporation holds any stock. On behalf of the corporation, the
president may in person or by substitute or proxy execute written waivers of
notice and consents with respect to any such meetings. At all such meetings and
otherwise, the president, in person or by substitute or proxy, may vote the
stock held by the corporation, execute written consents and other instruments
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with respect to such stock, and exercise any and all rights and powers incident
to the ownership of said stock, subject to the instructions, in any, of the
board of directors. The president shall have custody of the controller's bond,
if any. The president shall have such additional authority and duties as are
appropriate and customary for the office of president and chief executive
officer, except as the same may be expanded or limited by the board of directors
from time to time.
Section 6. Vice Presidents. The vice presidents shall assist the president
and shall perform such duties as may be assigned to them by the president or by
the board of directors. In the absence of the president, the vice president, if
any (or, if more than one, the vice presidents in the order designated by the
board of directors, of if the board makes no such designation, then the vice
president designated by the president, or if neither the board nor the president
makes any such designation, the senior vice president as determined by first
election of that office), shall have the powers and perform the duties of the
president.
Section 7. Secretary. The secretary shall (i) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders and the
board of directors, a record of all actions taken by the shareholders or board
of directors without a meeting, a record of all actions taken by a committee of
the board of directors in place of the board of directors on behalf of the
corporation, and a record of all waivers of notice of meetings of shareholders
and of the board of directors or any committee thereof, (ii) see that all
notices are duly given in accordance with the provisions of these bylaws and as
required by law, (iii) serve as custodian of the corporate records and of the
seal of the corporation and affix the seal to all documents when authorized by
the board of directors, (iv) keep at the corporation's registered office or
principal place of business a record containing the names and addresses of all
shareholders in a form that permits preparation of a list of shareholders
arranged by voting group and by class or series of shares within each voting
group, that is alphabetical within each class or series and that shows the
address of, and the number of shares of each class or series held by, each
shareholder, unless such a record shall be kept at the office of the
corporation's transfer agent or registrar, (v) maintain at the corporation's
principal office the originals or copies of the corporation's articles of
incorporation, bylaws, minutes of all shareholders' meetings and records of all
action taken by shareholders without a meeting for the past three years, all
written communications within the past thee years to shareholders as a group or
to the holders of any class or series of shares as a group, a list of the names
and business addresses of the current directors and officers, a copy of the
corporation's most recent corporate report filed with the Secretary of State,
and financial statements showing in reasonable detail the corporation's assets
and liabilities and results of operations for the last three years, (vi) have
general charge of the stock transfer books of the corporation, unless the
corporation has a transfer agent, (vii) authenticate records of the corporation,
and (viii) in general, perform all duties incident to the office of secretary
and such other duties as from time to time may be assigned to him by the
president or by the board of directors. Assistant secretaries, if any, shall
have the same duties and powers, subject to supervision by the secretary. The
directors and/or shareholders may however respectively designate a person other
than the secretary or assistant secretary to keep the minutes of their
respective meetings. The board of directors may appoint the person serving as
vice president and general counsel to act as the secretary of the corporation.
Any books, records, or minutes of the corporation may be in written form or
in any form capable of being converted into written form within a reasonable
time.
Section 8. Controller. The controller shall be the principal financial
officer of the corporation, shall have the care and custody of all funds,
securities, evidences of indebtedness and other personal property of the
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corporation and shall deposit the same in accordance with the instructions of
the board of directors. He shall receive and give receipts and acquittances for
money paid in on account of the corporation, and shall pay out of the
corporation's funds on hand all bills, payrolls and other just debts of the
corporation of whatever nature upon maturity. He shall perform all other duties
incident to such office and, upon request of the board, shall make such reports
to it as may be required at any time. He shall, if required by the board, give
the corporation a bond in such sums and with such sureties as shall be
satisfactory to the board, conditioned upon the faithful performance of his
duties and for the restoration to the corporation of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation. He shall have such other powers and
perform such other duties as may from time to time be prescribed by the board of
directors or the president.
The controller shall also be the principal accounting officer of the
corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account as
required by the Colorado Business Corporation Act, prepare and file all local,
state and federal tax returns, prescribe and maintain an adequate systems of
internal audit and prepare and furnish to the president and the board of
directors statements of account showing the financial position of the
corporation and the results of its operations.
Section 9. Treasurer. The treasurer, if any, shall serve as an assistant to
the controller and shall perform the duties of the controller to the extent the
board so designates.
ARTICLE V
Stock
-----
Section 1. Certificates. The board of directors shall be authorized to
issue any of its classes of shares with or without certificates. The fact that
the shares are not represented by certificates shall have no effect on the
rights and obligations of shareholders. If the shares are represented by
certificates, such shares shall be represented by consecutively numbered
certificates signed, either manually or by facsimile, in the name of the
corporation by one or more persons designated by the board of directors. In case
any officer who has signed or whose facsimile signature has been placed upon
such certificate shall have ceased to be such officer before such certificate is
issued, such certificate may nonetheless be issued by the corporation with the
same effect as if he were such officer at the date of its issue. Certificates of
stock shall be in such form and shall contain such information consistent with
law as shall be prescribed by the board of directors. If shares are not
represented by certificates, within a reasonable time following the issue or
transfer of such shares, the corporation shall send the shareholder a complete
written statement of all of the information required to be provided to holders
of uncertificated shares by the Colorado Business Corporation Act.
Section 2. Consideration for Shares. Certificated or uncertified shares
shall not be issued until the shares represented thereby are fully paid. The
board of directors may authorize the issuance of shares for consideration
consisting of any tangible or intangible property or benefit to the corporation,
including cash, promissory notes, services performed or other securities of the
corporation. Future services shall not constitute payment or partial payment for
shares of the corporation. The promissory note of a subscriber or an affiliate
of a subscriber shall not constitute payment or partial payment for shares of
the corporation unless the note is negotiable and is secured by collateral,
other than the shares being purchased, having a fair market value at least equal
to the principal amount of the note. For purposes of this Section 2, "promissory
note" means a negotiable instrument on which there is an obligation to pay
independent of collateral and does not include a non-recourse note.
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Section 3. Lost Certificates. In case of the alleged loss, destruction or
mutilation of a certificate of stock, the board of directors may direct the
issuance of a new certificate of stock, the board of directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as the board may prescribe. The board of directors may in
its discretion require an affidavit of lost certificate and/or a bond in such
form and amount and with such surety as it may determine before issuing a new
certificate.
Section 4. Transfer of Shares. Upon surrender to the corporation or to a
transfer agent of the corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and receipt of such documentary stamps as may be required by law and
evidence of compliance with all applicable securities laws and other
restrictions, the corporation shall issue a new certificate to the person
entitled thereto, and cancel the old certificate. Every such transfer of stock
shall be entered on the stock books of the corporation which shall be kept at
its principal office or by the person and the place designated by the board of
directors.
Except as otherwise expressly provided in Article II, Sections 7 and 11,
and except for the assertion of dissenters' rights to the extent provided in
Article 113 for the Colorado Business Corporation Act, the corporation shall be
entitled to treat the registered holder of any shares of the corporation as the
owner thereof for all purposes, and the corporation shall not be bound to
recognize any equitable or other claim to, or interest in, such shares or rights
deriving from such shares on the part of any person other than the registered
holder, including without limitation any purchaser, assignee or transferee of
such shares or rights deriving from such shares, unless and until such other
person becomes the registered holder of such shares, whether or not the
corporation shall have either actual or constructive notice of the claimed
interest of such other person.
Section 5. Transfer Agent, Registrars and Paying Agents. The board may at
its discretion appoint one or more transfer agents, registrars and agents for
making payment upon any class of stock, bond, debenture or other security of the
corporation. Such agents and registrars may be located either within or outside
Colorado. They shall have such rights and duties and shall be entitled to such
compensation as may be agreed.
ARTICLE VI
Indemnification of Certain Persons
----------------------------------
Section 1. Definitions. The following definitions shall apply to the terms
as used in this Article:
a. "Corporation" includes this corporation and any domestic or foreign
predecessor entity of the corporation in a merger, or other transaction in which
the predecessor's existence ceased upon consummation of the transaction.
b. "Director" means an individual who is or was a director of the
corporation and an individual who, while a director of the corporation, is or
was serving at the corporation's request as a director, officer, partner,
trustee, employee, or agent of any other foreign or domestic corporation or of
any partnership, joint venture, trust, other enterprise or person, or employee
benefit plan. A director shall be considered to be serving an employee benefit
plan at the corporation's request if his or her duties to the corporation also
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impose dutiess on or otherwise involve services by him or her to the plan or to
participants in or beneficiaries of the plan. "Director" includes, unless the
context otherwise requires, the estate or personal representative of a director.
c. "Expenses" includes attorneys fees.
d. "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expense incurred with respect to a proceeding.
e. "Official capacity," when used with respect to a director, means
the office of director in the corporation, and, when used with respect to a
person other than a director, means the office in the corporation held by the
officer or the employment or agency relationship undertaken by the employee or
agent on behalf of the corporation. "Official capacity" does not include service
for any other foreign or domestic corporation or for any partnership, joint
venture, trust, other enterprise, or employee benefit plan.
f. "Party" includes a person who was, is, or is threatened to be made
a named defendant or respondent in a proceeding.
g. "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
and whether formal or informal.
Section 2. Indemnification for Liability.
a. Except as provided in paragraph d. of this Section 2, the
corporation shall indemnify against liability incurred in any proceeding any
person made a party to the proceeding because he or she is or was a director or
officer if: (i) he or she conducted himself or herself in good faith; (ii) he or
she reasonably believed: (a) in the case of conduct in his or her official
capacity with the corporation, that his or her conduct was in the corporation's
best interests, or (b) in all other cases, that his or her conduct was at least
not opposed to the corporation's best interests; and (iii) in the case of any
criminal proceeding, he or she had no reasonable cause to believe his or her
conduct was unlawful.
b. A director's or officer's conduct with respect to an employee
benefit plan for a purpose he or she reasonably believed to be in the interests
of the participants in or beneficiaries of the plan is conduct that satisfies
the requirements of this Section 2. A director's or officer's conduct with
respect to an employee benefit plan for a purpose that he or she did not
reasonably believe to be in the interests of the participants in or
beneficiaries of the plan shall be deemed not to satisfy the requirements of
this Section 2.
c. The termination of any proceeding by judgment, order, settlement,
or conviction, or upon a plea of nolo contendere or its equivalent, is not of
itself determinative that the person did not meet the standard of conduct set
forth in paragraph a. of this Section 2.
d. The corporation may not indemnify a director or officer under this
Section 2 either: (i) in connection with a proceeding by or in the right of the
corporation in which the director or officer was adjudged liable to the
corporation; or (ii) in connection with any proceeding charging improper
personal benefit to the director or officer, whether or not involving action in
his or her official capacity, in which he or she was adjudged liable on the
basis that personal benefit was improperly received by him or her.
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<PAGE>
e. Indemnification permitted under this Section 2 in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
Section 3. Mandatory Indemnification.
a. Except as limited by these bylaws, the corporation shall be
required to indemnify a director or officer of the corporation who was wholly
successful, on the merits or otherwise, in defense of any proceeding to which he
or she was a party because the person is or was a director or officer, against
reasonable expenses incurred by him or her in connection with the proceeding.
b. Except as otherwise limited by these bylaws, a director or officer
who is or was a party to a proceeding may apply for indemnification to the court
conducting the proceeding or to another court of competent jurisdiction. On
receipt of an application, the court, after giving any notice the court
considers necessary, may order indemnification in the following manner:
(i) If it determines the director or officer is entitled to
mandatory indemnification, the court shall order indemnification under paragraph
a. of this Section 3, in which case the court shall also order the corporation
to pay the director's or officer's reasonable expenses incurred to obtain
court-ordered indemnification.
(ii) If it determines that the director or officer is fairly and
reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not he or she met the standard of conduct set forth in
paragraph a. of Section 2 of this Article or was adjudged liable in the
circumstances described in paragraph d. of Section 2 of this Article, the court
may order such indemnification as the court deems proper; except that the
indemnification with respect to any proceeding in which liability shall have
been adjudged in the circumstances described in paragraph d. of Section 2 of
this Article is limited to reasonable expenses incurred.
c. Notwithstanding Section 3(b) above in this Article, no person shall
be entitled to be reimbursed for any expense incurred in connection with a court
proceeding to obtain court-ordered indemnification unless such person has first
made a reasonable application to the corporation for indemnification, and the
corporation has either unreasonably denied such application or, through no fault
of the applicant, has been unable to consider such application within a
reasonable time.
Section 4. Limitation on Indemnification.
a. The corporation may not indemnify a director or officer under
Section 2 of this Article unless authorized in the specific case after a
determination has been made that indemnification of the director or officer is
permissible in the circumstances because he or she has met the standard of
conduct set forth in paragraph a. of Section 2 of this Article.
b. The determination required to be made by paragraph a. of this
Section 4 shall be made (i) by the board of directors by a majority vote of a
quorum, which quorum shall consist of directors not parties to the proceeding;
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<PAGE>
or (ii) if a quorum cannot be obtained, by a majority vote of a committee of the
board designated by the board, which committee shall consist of two or more
directors not parties to the proceeding; except that directors who are parties
to the proceeding may participate in the designation of directors for the
committee.
c. If the quorum cannot be obtained or the committee cannot be
established under paragraph b. of this Section 4, or even if a quorum is
obtained or a committee designated if such quorum or committee so directs, the
determination required to be made by paragraph a. of this Section 4 shall be
made: (i) by independent legal counsel selected by a vote of the board of
directors or the committee in the manner specified in subparagraph (i) or (ii)
of paragraph b. of this Section 4 or, if a quorum of the full board cannot be
obtained and a committee cannot be established, by independent legal counsel
selected by a majority vote of the full board; or (ii) by the shareholders.
d. Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as the determination
that indemnification is permissible; except that, if the determination that
indemnification is permissible is made by independent legal counsel,
authorization of indemnification and evaluation as to reasonableness of expenses
shall be made by the body that selected said counsel.
Section 5. Advance of Expenses.
a. The corporation may pay for or reimburse the reasonable expenses
incurred by a director, officer, employee or agent who is a party to a
proceeding in advance of final disposition of the proceeding if:
(i) The director, officer, employee or agent furnishes the
corporation a written affirmation of his or her good faith belief that he or she
has met the standard of conduct described in subparagraph (i) of paragraph a. of
Section 2 of this Article;
(ii) The director, officer, employee or agent furnishes the
corporation a written undertaking, executed personally or on his or her behalf,
to repay the advance if it is determined that he or she did not meet such
standard of conduct; and
(iii) A determination is made that the facts then known to those
making the determination would not preclude indemnification under this Article.
b. The undertaking required by subparagraph (ii) of paragraph a. of
this Section 5 shall be an unlimited general obligation of the director,
officer, employee or agent, but need not be secured and may be accepted without
reference to financial ability to make repayment.
c. Determinations and authorizations of payments under this Section
shall be made in the manner specified under Section 4 of this Article.
Section 6. Reimbursement of Witness Expenses. The sections of this Article
do not limit the corporation's authority to pay or reimburse expenses incurred
by a director in connection with his or her appearance as a witness in a
proceeding at a time when he or she has not been made a named defendant or
respondent in the proceeding.
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<PAGE>
Section 7. Insurance for Indemnification. The corporation may purchase and
maintain insurance on behalf of a person who is or was a director, officer,
employee, fiduciary, or agent of the corporation or who, while a director,
officer, employee, fiduciary, or agent of the corporation, is or was serving at
the request of the corporation as a director, officer, partner, trustee,
employee, fiduciary, or agent of any other foreign or domestic corporation or of
any partnership, joint venture, trust, other enterprise, or employee benefit
plan against any liability asserted against or incurred by him or her in any
such capacity or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify him or her against such liability
under the provisions of this Article. Any such insurance may be procured from
any insurance company designated by the Board of Directors of the corporation,
whether such insurance company is formed under the laws of Colorado or
elsewhere, including any insurance company in which the corporation has equity
or any other interest, through stock or otherwise.
Section 8. Notice of Indemnification. Any indemnification of or advance of
expenses to a director in accordance with this Article, if arising out of a
proceeding by or on behalf of the corporation, shall be reported in writing to
the shareholders with or before the notice of the next shareholders' meeting.
Section 9. Indemnification of Officers, Employees and Agents of the
Corporation. The Board of Directors may indemnify and advance expenses to an
officer, employee or agent of the corporation who is not a director of the
corporation to the same or greater extent as to a director if such
indemnification and advance expense payment is provided for in the Articles of
Incorporation, these bylaws, by resolution of the shareholders or directors or
by contract, in a manner consistent with the Colorado Business Corporation Act.
ARTICLE VII
Miscellaneous
-------------
Section 1. Seal. The corporate seal of the corporation shall be circular in
form and shall contain the name of the corporation and the words, "Seal,
Colorado."
Section 2. Fiscal Year. The fiscal year of the corporation shall be as
established by the board of directors.
Section 3. Amendments. The board of directors shall have power, to the
maximum extent permitted by the Colorado Business Corporation Act, to make,
amend and repeal the bylaws of the corporation at any regular or special meeting
of the board unless the shareholders, in making, amending or repealing a
particular bylaw, expressly provide that the directors may not amend or repeal
such bylaw. The shareholders also shall have the power to make, amend or repeal
the bylaws of the corporation at any annual meeting or at any special meeting
called for that purpose.
Section 4. Gender. The masculine gender is used in these bylaws as a matter
of convenience only and shall be interpreted to include the feminine and neuter
genders as the circumstances indicate.
Section 5. Conflicts. In the event of any irreconcilable conflict between
these bylaws and either the corporation's articles of incorporation or
applicable law, the latter shall control.
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<PAGE>
Section 6. Receipt of Notices by the Corporation. Notices, shareholder
writings consenting to action, and other documents or writings shall be deemed
to have been received by the corporation when they are actually received: (i) at
the registered office of the corporation in Colorado; (ii) at the principal
office of the corporation (as that office is designated in the most recent
document filed by the corporation with the Secretary of State for Colorado
designating a principal office) addressed to the attention of the secretary of
the corporation; (iii) by the secretary of the corporation wherever the
secretary may be found; or (iv) by any other person authorized from time to time
by the board of directors or the president to receive such writings, wherever
such person is found.
Section 7. Definitions. Except as otherwise specifically provided in these
bylaws, all terms used in these bylaws shall have the same definition as in the
Colorado Business Corporation Act.
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OraLabs Holding Corp.
INCORPORATED UNDER THE LAWS OF THE STATE OF COLORADO
25,000,000 COMMON SHARES, $.001 PAR VALUE
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 684029 10 1
This Certifies That
is the owner of
FULLY PAID AND NONASSESSABLE COMMON SHARES, $.001 PAR VALUE, OF
OraLabs Holding Corp.
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized attorney upon the surrender of this Certificate properly
endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed.
Dated:
/s/ Suzan M. Schlatter /s/ Gary H. Schlatter
----------------------------- ----------------------------
SUZAN M. SCHLETTER, SECRETARY GARY H. SCHLATTER, PRESIDENT
[ Corporate Seal ]
Countersigned:
Corporate Stock Transfer, Inc.
370 - 17th Street, Suite 2350
Denver, Colorado 80202
By:
-----------------------------------------------
Transfer Agent and Registrar Authorized Officer
<PAGE>
OraLabs Holding Corp.
Corporate Stock Transfer, Inc.
Transfer Fee: $15.00 Per Certificate
- --------------------------------------------------------------------------------
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian for
----- ------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of Act of
survivorship and not as tenants ------------------------------
in common (State
Additional abbreviations may also be used though not in the above list.
For value received hereby sell, assign and transfer unto
-------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
---------------------------------------
Please print or type name and address of assignee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------Shares
of common stock represented by the within Certificate and do hereby irrevocably
constitute and appoint
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within named
Corporation, with full power of substitution in the premises.
Dated 19
--------------------- ----------
SIGNATURE GUARANTEED: X
------------------------------------
X
------------------------------------
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER. THE SIGNATURE(S)) MUST BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan
Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM PURSUANT TO S.E.C. RULE 17Ad-15.
ORALABS HOLDING CORP.
1997 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees and Consultants of the Company and
its Parent and/or Subsidiaries (if any) and to promote the success of the
Company's business. Options granted under the Plan may be incentive stock
options (as defined under Section 422 of the Code) or nonstatutory stock
options, as determined by the Administrator at the time of grant of an option
and subject to the applicable provisions of Section 422 of the Code, as amended,
and the regulations promulgated thereunder. Stock purchase rights may also be
granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
a. "Administrator" means the Board or any of its Committees or
subcommittees thereof appointed pursuant to Section 4 of the Plan.
b. "Board" means the Board of Directors of the Company.
c. "Code" means the Internal Revenue Code of 1986, as amended.
d. "Committee" means the Committee (or any subcommittee thereof)
appointed by the Board of Directors in accordance with paragraph (a) of Section
4 of the Plan.
e. "Common Stock" means the Common Stock of the Company.
f. "Company" means OraLabs Holding Corp., a Colorado corporation.
g. "Consultant" means any person, including an advisor, who is engaged
by the Company or any Parent or Subsidiary to render consultative or advisory
services and is compensated for such services, and any director of the Company
whether compensated for such services or not provided that if and in the event
the Company registers any class of any equity security pursuant to the Exchange
Act, the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.
h. "Continuous Status as an Employee" means the absence of any
interruption of service or termination of the employment relationship with the
Company (or its Parent or Subsidiary, if any). Continuous Status as an Employee
shall not be considered interrupted in the case of: sick leave, military leave
or any other leave of absence approved by the Board in the exercise of its sole
discretion, provided that such leave is for a period of not more than ninety
(90) days, unless reemployment upon the expiration of such leave is guaranteed
by contract or statute, or unless provided otherwise pursuant to Company policy
adopted from time to time; or in the case of transfers between locations of the
Company or between the Company, its Parent or Subsidiaries, or its successor.
i. "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
j. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
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<PAGE>
k. "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation
the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation ("NASDAQ") System,
its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported, as quoted
on such system or exchange for the last market trading day prior
to the time of determination) as reported in the Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but
not on the National Market System thereof) or regularly quoted by
a recognized securities dealer but selling prices are not
reported, its Fair Market Value shall be the mean between the
high and low asked prices for the Common Stock; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good
faith by the Board.
l. "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
m. "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.
n. "Option" means a stock option granted pursuant to the Plan.
o. "Optioned Stock" means the Common Stock subject to an Option.
p. "Optionee" means an Employee or Consultant who receives an Option.
q. "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424 (e) of the Code.
r. "Plan" means this 1997 Stock Plan, as amended from time to time.
s. Intentionally Left Blank.
t. "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
u. Intentionally Left Blank.
v. "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the number of Shares that may be issued pursuant to Options granted
under the Plan shall not exceed in the aggregate 500,000 Shares. The Shares may
be authorized, but unissued, or reacquired Common Stock. If an Option should
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<PAGE>
expire or become unexercisable for any reason without having been exercised in
full, the unpurchased Shares which were subject thereto shall, unless the Plan
shall have been terminated, become available for future grant under the Plan.
4. Administration of the Plan.
a. Procedure.
(i) Administration With Respect to Directors and Officers.
With respect to grants of Options to Employees who are also
officers or directors of the Company, the Plan shall be
administered by the Board or a Committee or subcommittee thereof
designated by the Board to grant Options under the Plan without
further approval by the Board. The Administrator shall take such
actions and/or be comprised of such individuals so as to be, at
the time of making a grant of Options, in compliance with Rule
16b-3 promulgated under the Exchange Act or any successor thereto
("Rule 16b-3") with respect to a plan intended to qualify
thereunder for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
(ii) Multiple Administrative Bodies. If permitted by Rule
16b-3, the Plan may be administered by different bodies with
respect to directors, nondirector officers and Employees who are
neither directors nor officers.
(iii) Administration with Respect to Consultants and Other
Employees. With respect to grants of Options to Employees or
Consultants who are neither directors nor officers of the
Company, the Plan shall be administered by (A) the Board or (B) a
Committee (or subcommittee thereof) designated by the Board,
which Committee or subcommittee shall be constituted in such a
manner as to satisfy any legal requirements relating to the
administration (i) of Incentive Stock Option plans (if
applicable), if any, (ii) of governing corporate and securities
laws, and (iii) of the Code (the "Applicable Laws"). Once
appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board or of
the Committee. From time to time the Board may, with respect to
any Committee or subcommittee, increase the size and appoint
additional members thereof, remove members (with or without
cause) and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the
Committee (and any subcommittee) and thereafter directly
administer the Plan, all to the extent permitted by the
Applicable Laws.
b. Powers of the Administrator. Subject to the provisions of the Plan
and in the case of a Committee or subcommittee, the specific duties delegated by
the Board to such Committee or subcommittee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(k) of the Plan:
(ii) to select the officers, Consultants and Employees to
whom Options may from time to time be granted hereunder;
(iii) to determine whether or to what extent Options or any
combination thereof, are granted hereunder;
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<PAGE>
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder
(including, but not limited to the share price and any
restriction or limitation, based in each case on such factors as
the Administrator shall determine in its sole discretion);
(vii) Intentionally Left Blank; and
(viii) to make any other such determinations with respect to
awards under the Plan as it shall be deemed appropriate.
c. Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. Eligibility for Options.
a. Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options.
b. Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
c. For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
d. The Plan shall not confer upon any Optionee any right with respect
to continuation of any employment or consulting relationship with the Company,
nor shall it interfere in any way with his right or the Company's right to
terminate his employment or consulting relationship at any time, with or without
cause.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the stockholders of
the Company as described in Section 19 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 15 of the
Plan.
7. Term of Option. The term of each Option shall be the term stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
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<PAGE>
8. Option Exercise Price and Consideration.
a. The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) in the case of an Incentive Stock Option
(a) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock
representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less
than One hundred ten percent (110%) of the Fair Market Value
per Share on the date of grant.
(b) granted to any Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value
per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(a) granted to any person, the per Share exercise price
shall be no less than Eighty-five percent (85%) of the Fair
Market Value per Share on the date of grant.
b. The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (i) cash, (ii)
check, (iii) other Shares which (x) in the case of Shares acquired upon exercise
of an Option either have been owned by the Optionee for more than six (6) months
on the date of surrender or were not acquired, directly or indirectly, from the
Company, and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, (iv) authorization for the Company to retain from the total number of
Shares as to which the Option is exercised, that number of Shares whose Fair
Market Value on the date of exercise equals the total exercise price for the
Options being exercised, (v) any combination of the foregoing methods of
payment, or (vi) such other consideration and method of payment for the issuance
of Shares as determined by the Administrator, to the extent permitted under
Applicable Laws.
9. Exercise of Option.
a. Procedure for Exercise; Rights as a Stockholder. Any Option shall
be exercisable at such times and under such conditions as determined by the
Administrator, including the allotment of any number of Options in periodic
installments (which may, but need not, be equal) and including performance
criteria with respect to the Company and/or the Optionee, and as shall be
permitted under the terms of the Plan. An Option may not be exercised for a
fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
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<PAGE>
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued. Exercise of an Option in
any manner shall result in a decrease in the number of Shares which thereafter
may be available, both for purposes of the Plan and for sale under the Option,
by the number of Shares as to which the Option is exercised.
b. Termination of Employment. In the event of termination of an
Optionee's consulting relationship or Continuous Status as an Employee with the
Company (as the case may be), such Optionee may, but only by the earlier of the
expiration date of the term of the Option as set forth in the Option Agreement
or the date that is ninety (90) days after the date of such termination (or, in
the case of a Nonstatutory Stock Option, such other period as is set out by the
Administrator in the Option Agreement, but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent that Optionee was entitled to exercise it at the date
of such termination. To the extent that Optionee was not entitled to exercise
the Option at the date of such termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate and the Shares covered by such Option shall revert and
again become available for issuance under the Plan.
If the Optionee ceases to be an employee, officer or director of, or
consultant to the Company as a result of dismissal by the Company for "cause" as
defined herein, all Options theretofore granted to such Optionee but not
theretofore exercised shall terminate immediately upon such dismissal. For the
purposes of the Plan, the term "cause" shall mean: (i) with respect to an
Optionee who is a party to a written agreement with or, alternatively,
participates in a compensation or benefit plan of the Company, which agreement
or plan contains a definition of "for cause" or "cause" (or words of like
import) for purposes of termination of employment thereunder by the Company,
"for cause" or "cause" as defined in the most recent of such agreements or
plans; or (ii) in all other cases, as determined by the Board, in its sole
discretion, the wilful commission by the Optionee of a criminal or other act
that causes or probably will cause substantial economic damage to the Company or
substantial injury to the business reputation of the Company, the commission by
the Optionee of an act of fraud in the performance of such Optionee's duties on
behalf of the Company, the continuing wilful failure of an Optionee to perform
the duties of such Optionee to the Company (other than such failure resulting
from the Optionee's incapacity due to physical or mental illness) after written
notice thereof (specifying the particulars thereof in reasonable detail) and a
reasonable opportunity to be heard and cure such failure are given to the
Optionee by the Board or the order of a court of competent jurisdiction
requiring the termination of the Optionee's relationship with the Company. For
purposes of the Plan, no act or failure to act on the Optionee's part shall be
considered "wilful" unless done or omitted to be done by the Optionee not in
good faith and without reasonable belief that the Optionee's action or omission
was in the best interest of the Company.
c. Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event of termination of an Optionee's Consulting relationship
or Continuous Status as an Employee as a result of his disability (as determined
by the Board in accordance with the policies of the Company), Optionee may, but
only within six (6) months from the date of such termination (or in the case of
a Nonstatutory Stock Option, such other longer period as is set out by the
Administrator in the Option Agreement, but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of disability, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate.
d. Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate or
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<PAGE>
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of death, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate.
e. Rule 16b-3. Options granted to persons subject to Section 16(b) of
the Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
10. Transferability of Options. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent or distribution, and shall
be exercisable during the lifetime of the person to whom the Option is granted
only by such person. A nonstatutory stock option may be transferrable to the
extent expressly provided in the Option Agreement. To the extent that the
transfer constitutes a bona fide gift or a transfer by will or the laws of
descent and distribution, such transfer shall be permitted only to the extent
that such disposition is exempt from the operation of Section 16(b) of the
Exchange Act in accordance with the provisions of Rule 16b-5 promulgated
thereunder or otherwise.
11. Cancellation and Re-Grant of Options. The Board or the Committee (or
its subcommittee) shall have the authority to effect, at any time and from time
to time, (i) the repricing of any outstanding Options under the Plan and/or (ii)
with the consent of the affected holders of Options, the cancellation of any
outstanding Options under the Plan and the grant in substitution therefor of new
Options under the Plan covering the same or different numbers of shares of
stock, but having an exercise price per share determined on the date of the
substituted grant.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by electing to have the Company withhold
from the Shares to be issued upon exercise of the Option, that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose shall
be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
a. the election must be made on or prior to the applicable Tax Date;
b. once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made;
c. all elections shall be subject to the consent or disapproval of the
Administrator;
d. if the Optionee is subject to Rule 16b-3, the election must comply
with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
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<PAGE>
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
13. Adjustments Upon Changes in Capitalization or Merger.
a. Subject to any required action by the stockholders of the Company,
the number of shares of Common Stock covered by each outstanding Option, and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share of Common Stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option.
b. In the event of (1) a dissolution, liquidation or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; and (4) the acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or any affiliate of the Company) or the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors then either: (i) any surviving corporation
or acquiring corporation shall assume any Options outstanding under the Plan or
shall substitute similar options (including an award to acquire the same
consideration paid to the shareholders in the transaction described in this
subsection 13(a)) for those outstanding under the Plan; or in the event the
successor corporation does not agree to assume the Option or substitute an
equivalent Option, the Board shall notify Optionees at least fifteen (15) days
prior to such proposed action, and to the extent the Option is not exercised,
the Option will terminate immediately prior to the consummation of such proposed
action.
14. Time of Granting Options. The date of grant of an Option shall for all
purposes be the date on which the Administrator makes the determination granting
such Option, or such other date as is determined by the Board. However, such
grant shall not be effective until the Optionee executes a written Option
Agreement with respect to such Option. Notice of the determination shall be
given to each Employee or Consultant to whom an Option is so granted within a
reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
a. Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee
-8-
<PAGE>
under any grant theretofore made, without his or her consent. However, to the
extent that shareholder approval is necessary for the Plan to satisfy the
requirements of Section 422 of the Code, Rule 16b-3, or any other applicable law
or regulation, including the requirements of the NASD or an established stock
exchange, such amendment shall not be effective until shareholder approval is
obtained. The Board may in its sole discretion submit any other amendment to the
Plan for shareholder approval.
b. Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan has not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
16. Conditions Upon Issuance of Shares. Shares will not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitations, the Securities Act of 1933,
as amended, the Exchange Act, the rules and regulations promulgated thereunder,
and the requirements of any stock exchange upon which the Shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
The Company shall not be liable for damages due to delay in the delivery or
issuance of any stock certificate for any reason whatsoever, including, but not
limited to, a delay caused by listing requirements of any securities exchange or
any registration requirements under the Securities Act of 1933, as amended, the
1934 Act, or under any other state or federal law, rule or regulation. The
Company is under no obligation to take any action or incur any expense in order
to register or qualify the delivery or transfer of Shares under applicable
securities laws or to perfect any exemption from such registration or
qualification. Furthermore, the Company will not be liable to any Optionee for
failure to deliver or transfer Shares if such failure is based upon the
provisions of this paragraph.
17. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
18. Agreements. Options shall be evidenced by written agreements in such
form as the Board shall approve from time to time.
19. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under applicable state and federal law.
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<PAGE>
ORALABS HOLDING CORP.
1997 STOCK PLAN
NOTICE OF STOCK OPTION GRANT
----------------------------
You have been granted an option, consisting of the Stock Option Agreement
attached hereto as Exhibit A and the Notice of Stock Option Grant (together, the
"Option") to purchase Common Stock of ORALABS HOLDING CORP. (the "Company") as
follows:
Date of Grant
--------------------------------------------
Vesting Date Commencing , 1998
--------------------------------------------
Exercise Price Per Share $
--------------------------------------------
Total Number of Shares Granted
--------------------------------------------
Total Price of Shares Granted $
--------------------------------------------
Type of Option Incentive/Nonincentive Stock Option
---------
Term/Expiration Date years/ , [199 ][200 ]
--------------------------------------------
Exercise Schedule:
- ------------------
This Option may be exercised, in whole or in part, in accordance with the
Vesting Schedule set out below.
Vesting Schedule
----------------
Date of Vesting Number of Shares
--------------- ----------------
First Annual Anniversary of Vesting
Date (_______________) __0% (_______ Shares)
Second Annual Anniversary of Vesting
Date (_______________) __0% (_______ Shares)
Third Annual Anniversary of Vesting
Date (_______________) __0% (_______ Shares)
<PAGE>
Fourth Annual Anniversary of Vesting
Date (_______________) __0% (_______ Shares)
Fifth Annual Anniversary of Vesting
Date (_______________) __0% (_______ Shares)
Termination Period:
-------------------
Options may be exercised for ninety (90) days after termination of
employment or consulting relationship except as set out in Sections 7 and 8 of
the Stock Option Agreement (but in no event later than the Expiration Date).
Exercise of this Option shall be on a form of Exercise Notice provided by the
Company.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THIS OPTION IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S 1997 STOCK PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Consideration:
--------------
The following kinds of consideration may be tendered and applied toward all
or a portion of the Exercise Price in accordance with Section 3(c) of the
attached Stock Option Agreement: cash, check, other shares of the Company, and
such other consideration as accepted by the Administrator and consistent with
the treatment of the options as incentive stock options.
Exceptions to Transferability Restrictions: _______________.
Optionee acknowledges receipt of a copy of the Plan and certain information
related to it and represents that he or she is familiar with the terms and
provisions of the Plan and this Option. Optionee accepts this Option subject to
all such terms and provisions. Optionee has reviewed the Plan and this Option in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
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<PAGE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the 1997 STOCK PLAN and the Stock Option Agreement, all
of which are attached and made a part of this document. You also acknowledge
receipt of the Stock Option Manual dated August 22, 1997 and the Company's
_________________ for the periods ended _______________________.
OPTIONEE: ORALABS HOLDING CORP., a
Colorado corporation
________________________________ By:__________________________________
Signature
________________________________ Title:_______________________________
Print Name
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<PAGE>
ORALABS HOLDING CORP.
1997 STOCK PLAN
EXHIBIT A TO NOTICE OF STOCK OPTION GRANT
STOCK OPTION AGREEMENT
----------------------
1. Grant of Option. ORALABS HOLDING CORP., a Colorado corporation (the
"Company"), hereby grants to the Optionee (the "Optionee") named in the Notice
of Grant, an option (the "Option") to purchase a number of Shares, as set forth
in the Notice of Grant, at the exercise price per share set forth in the Notice
of Grant (the "Exercise Price"), subject to the terms, conditions and
definitions of the 1997 Stock Plan (the "Plan") adopted by the Company, which is
incorporated herein by reference. In the event of a conflict between the terms
and conditions of the Plan and the terms and conditions of this Option
Agreement, the terms and conditions of the Plan shall prevail. Unless otherwise
defined herein, the terms defined in the Plan shall have the same defined
meanings in this Option Agreement.
If designated in the Notice of Grant as an Incentive Stock Option, this
Option is intended to qualify as an Incentive Stock Option under Section 422 of
the Code.
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement. In the event of
Optionee's death, Disability or other termination of Optionee's employment or
consulting relationship, the exercisability of the Option is governed by the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form provided by the Company (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as to the holder's investment intent
with respect to the Exercised Shares as may be required by the Company pursuant
to the provisions of the Plan. The Exercise Notice shall be signed by the
Optionee and shall be delivered in person or by certified mail to the Secretary
of the Company. The Exercise Notice shall be accompanied by payment of the
aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed
to be exercised upon receipt by the Company of such fully executed Exercise
Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option unless
such issuance and exercise complies with all relevant provisions of law and the
requirements of any stock exchange upon which the Shares are then listed.
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<PAGE>
Assuming such compliance, for income tax purposes the Exercised Shares shall be
considered transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee:
(a) cash; or
(b) check; or
(c) such other consideration as is indicated on the Notice of Grant.
4. Optionee's Representations. In the event the Shares purchasable pursuant
to the exercise of this Option have not been registered under the Securities Act
of 1933, as amended, at the time this Option is exercised, Optionee shall, if
required by the Company, concurrently with the exercise of all or any portion of
this Option, deliver to the Company his Investment Representation Statement in
the form attached hereto as Exhibit B.
5. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation. As a condition to the
exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any applicable
law or regulation.
6. Termination of Relationship. In the event of termination of Optionee's
consulting relationship or Continuous Status as an Employee, Optionee may, to
the extent otherwise so entitled at the date of such termination (the
"Termination Date"), exercise this Option during the Termination Period set out
in the Notice of Grant. To the extent that Optionee was not entitled to exercise
this Option at the date of such termination, or if Optionee does not exercise
this Option within the time specified herein, the Option shall terminate.
7. Disability of Optionee. Notwithstanding the provisions of Section 6
above, in the event of termination of Optionee's Continuous Status as an
Employee as a result of disability (as determined by the Board in accordance
with the policies of the Company), Optionee may, but only within six (6) months
from the date of termination of employment (but in no event later than the date
of expiration of the term of this Option as set forth in Section 10 below),
exercise the Option to the extent otherwise so entitled at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of termination, or if Optionee does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall
terminate.
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<PAGE>
8. Death of Optionee. In the event of the death of Optionee, the Option may
be exercised at any time within twelve (12) months following the date of death
(but in no event later than the date of expiration of the term of this Option as
set forth in Section 10 below), by Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only to the
extent the Optionee could exercise the Option at the date of death.
9. Non-Transferability of Option. Except as provided in the Notice of Stock
Option Grant, this Option may not be transferred in any manner otherwise than by
will or by the laws or descent or distribution and may be exercised during the
lifetime of Optionee only by him. The terms of this Option shall be binding upon
the executors, administrators, heirs, successors and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Option terms and Options granted to more than
ten percent (10%) shareholders shall apply to this Option.
11. Tax Consequences. Some of the federal tax consequences relating to this
Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, DOES NOT INCLUDE ANY DISCUSSION OF STATE TAX
CONSEQUENCES, IF ANY, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
(a) Exercising the Option.
(i) Nonqualified Stock Option ("NSO"). If this Option does not
qualify as an ISO the Optionee may incur regular federal income tax liability
upon exercise. The Optionee will be treated as having received compensation
income (taxable at ordinary income tax rates) equal to the excess, if any, of
the fair market value of the Exercised Shares on the date of exercise over their
aggregate Exercise Price. If the Optionee is an employee, the Company will be
required to withhold from his or her compensation or collect from Optionee and
pay to the applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
(ii) Incentive Stock Option ("ISO"). If this Option qualifies as
an ISO, the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the fair market value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to alternative minimum tax in the year of exercise.
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<PAGE>
(b) Disposition of Shares.
(i) NSO. If the Optionee holds NSO Shares for at least one year,
any gain realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year
after exercise AND two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the LESSER OF the difference
between the FAIR MARKET VALUE OF THE SHARES ACQUIRED ON THE DATE OF EXERCISE and
the aggregate Exercise Price, or the difference between the SALE PRICE of such
Shares and the aggregate Exercise Price.
(c) Notice of Disqualifying Disposition of ISO Shares. If the Optionee
sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on
or before the later of the date two years after the grant date, or the date one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
4
<PAGE>
ORALABS HOLDING CORP.
1997 STOCK PLAN
EXERCISE NOTICE FOR VESTED SHARES
---------------------------------
OraLabs Holding Corp.
Gary Schlatter, President
2901 South Tejon Street
Englewood, CO 80110
Attention: Secretary
1. Exercise of Option. Effective as of today,
_______________________________, the undersigned ("Optionee") hereby elects to
exercise Optionee's option to purchase _______________ shares of the Common
Stock (the "Shares") of OraLabs Holding Corp. (the "Company") under and pursuant
to the Company's 1997 Stock Plan, as amended (the "Plan"), and the Notice of
Grant and [ ] Incentive [ ] Nonqualified Stock Option Agreement dated
____________________________ (together, the "Option").
2. Representations of Optionee. Optionee (the undersigned) has read the
Company's stock option manual. Optionee acknowledges that Optionee has received,
read and understood the Plan and the Option Agreement and agrees to abide by and
be bound by their terms and conditions. Optionee represents that Optionee is
purchasing the Shares for Optionee's own account for investment and not with a
view to, or for sale in connection with, a distribution of any of such Shares.
3. Compliance with Securities Laws; Federal Restrictions on Transfer.
Optionee has read and executed the Investment Representation Statement attached
as Exhibit B to the Notice of Grant. Optionee represents that he or she
understands the matters set forth in the Investment Representation Statement and
that he or she is purchasing the Shares subject to the restrictions and
limitations set forth in that document.
4. Right of First Refusal. Before any Shares held by Optionee or any
transferee (either being sometimes referred to herein as the "Holder") may be
sold or otherwise transferred (including transfer by gift or operation of law),
the Company or its assignee(s) shall have a right of first refusal to purchase
the Shares on the terms and conditions set forth in this section (the "Right of
First Refusal"). However, the other provisions of this paragraph 4
notwithstanding, the Right of First Refusal shall terminate, and be of no
further force and effect upon (i) a merger of the Company or transaction in
which over 80% of the voting power of the Company is transferred and following
which the shareholders of the Company have less than 20% of the voting power or
the resulting or combined entity and shall not apply with respect to shares sold
1
<PAGE>
in such offering or acquisition, or (ii) the existence of a Public Market for
the class of shares subject to the Right of First Refusal. A "Public Market"
shall be deemed to exist if (x) such stock is listed on a national securities
exchange (as that term is used in the Exchange Act) or (y) such stock is traded
on the over-the-counter market and prices therefor are published daily on
business days in a recognized financial journal.
(a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Sale Notice") stating: the
Holder's bona fide intention to sell or otherwise transfer such Shares; the name
of each proposed purchaser or other transferee ("Proposed Transferee"); the
number of Shares to be transferred to each Proposed Transferee; and the bona
fide cash price or other consideration for which the Holder proposes to transfer
the Shares (the "Offered Price"), and the Holder shall offer the Shares at the
Offered Price to the Company or its assignee(s).
(b) Bona Fide Transfer. Within ten (10) days after receipt of the Sale
Notice, the Company shall determine the bona fide nature of the proposed
voluntary transfer and give the Optionee written notice of the Company's
determination. If the proposed transfer is deemed not to be bona fide, the
Optionee shall be responsible for providing additional information to the
Company to show the bona fide nature of the proposed transfer. The Company shall
have the right to demand further assurances from the Optionee and the Proposed
Transferee (in a form satisfactory to the Company) that the Sale Notice fully
and accurately sets forth all of the terms and conditions of the proposed
transfer, including, without limitation, assurance that the Sale Notice fully
and accurately sets forth the consideration actually to be paid for the Shares
and all transactions, directly or indirectly, between the parties which may have
affected the price the Proposed Transferee was willing to pay for the Shares.
(c) Exercise of Right of First Refusal by Company. In the event that
the proposed transfer is deemed to be bona fide, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all,
but not less than all, of the Shares proposed to be transferred to any one or
more of the Proposed Transferees, at the purchase price determined in accordance
with subsection (d) below. Such written notice may be given within thirty (30)
days after receipt of the Sale Notice.
(d) Purchase Price. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(e) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), by cancellation of all or a portion of
any outstanding indebtedness of the Holder to the Company (or, in the case of
repurchase by an assignee, to the assignee), or by any combination thereof
within sixty (60) days after receipt of the Sale Notice, in the manner and at
the times set forth in such notice.
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<PAGE>
(f) Holder's Right to Transfer. If all of the Shares proposed in the
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s), then the Holder may sell or otherwise transfer
such Shares to that Proposed Transferee at the Offered Price or at a higher
price, provided that such sale or other transfer is consummated within one
hundred twenty (120) days after the date of the Notice and provided further that
any such sale or other transfer is effected in accordance with any applicable
securities laws and the Proposed Transferee agrees in writing that the
provisions of this section shall continue to apply to the Shares in the hands of
such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be
given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal before any Shares held by the Holder may be
sold or otherwise transferred.
(g) Exception for Certain Family Transfers. Anything to the contrary
contained in this section notwithstanding, the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this section.
"Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this section, and there shall be no further transfer of such
Shares except in accordance with the terms of this section.
(h) Transfers Not Subject to the Right of First Refusal. The Right of
First Refusal shall not apply to any transfer or exchange of the shares acquired
pursuant to the exercise of the Option if such transfer is in connection with a
Change in Capitalization, as described in Section 13 of the Plan. If the
consideration received pursuant to such transfer or exchange consists of stock
of a Parent or Subsidiary, such consideration shall remain subject to the Right
of First Refusal unless the provisions of the opening paragraph of this
paragraph 4 result in a termination of the Right of First Refusal.
(i) Assignment of the Right of First Refusal. The Company shall have
the right to assign the Right of First Refusal at any time, whether or not the
Optionee has attempted a transfer, to one or more persons as may be selected by
the Company.
5. Rights as Shareholder. Subject to the terms and conditions of this
Agreement, Optionee shall have all of the rights of a shareholder of the Company
with respect to the Shares from the time specified in Section 9(a) of the Plan
until such time as Optionee disposes of the shares or the Company and/or its
assignee(s) exercises the Right of First Refusal hereunder. Upon such exercise,
Optionee shall have no further rights as a holder of the Shares so purchased
except the right to receive payment for the Shares so purchased in accordance
with the provisions of this Agreement, and Optionee shall forthwith cause the
certificate(s) evidencing the Shares so purchased to be surrendered to the
Company for transfer or cancellation.
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6. Tax Consultation. Optionee understands that Optionee may suffer adverse
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax consultants
Optionee deems advisable in connection with the purchase or disposition of the
Shares and that Optionee is not relying on the Company for any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR, IN THE OPINION OF COUNSEL
IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER OF THESE SECURITIES, SUCH OFFER, SALE
OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFER AND RIGHT OF FIRST REFUSAL OPTIONS
HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET
FORTH IN THE EXERCISE NOTICE BETWEEN THE
ISSUER AND THE ORIGINAL HOLDER OF THESE
SHARES, A COPY OF WHICH MAY BE OBTAINED AT
THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
TRANSFER RESTRICTIONS AND RIGHT OF FIRST
REFUSAL ARE BINDING ON TRANSFEREES OF THESE
SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and that
if the Company transfers its own securities, it may make appropriate notations
to the same effect in its own records.
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(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
8. Market Standoff Agreement. Optionee hereby agrees that if so requested
by the Company or any representative of the underwriters in connection with any
registration of the offering of any securities of the Company under the 1933
Act, Optionee shall not sell or otherwise transfer any Shares or other
securities of the Company during the 180-day period following the effective date
of a registration statement of the Company filed under the 1933 Act; provided,
however, that such restriction shall only apply to the first two registration
statements of the Company to become effective under the 1933 Act which include
securities to be sold on behalf of the Company to the public in an underwritten
public offering under the 1933 Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such 180- day period.
9. Successors and Assigns. The Company may assign any of its rights under
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and
assigns.
10. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee or subcommittee thereof that
administers the Plan, which shall review such dispute at its next regular
meeting. The resolution of such a dispute by the Board or committee shall be
final and binding on the Company and on Optionee.
11. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
12. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, return receipt requested, addressed to the other party at its address
as shown below beneath its signature, or to such other address as such party may
designate in writing from time to time to the other party.
13. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
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14. Delivery of Payment. Optionee herewith delivers to the Company the full
Exercise Price for the Shares.
15. Entire Agreement. The Plan and Notice of Grant/Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Notice of
Grant/Option Agreement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof.
Submitted by:
PURCHASER: ORALABS HOLDING CORP., a Colorado
corporation
- ------------------------------------- By:
(Signature) ------------------------------------
Its:
- ------------------------------------- -----------------------------------
Address
- ------------------------------------- ---------------------------------------
Address
---------------------------------------
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ORALABS HOLDING CORP.
1997 STOCK PLAN
EXHIBIT B TO NOTICE OF GRANT
INVESTMENT REPRESENTATION STATEMENT
-----------------------------------
OPTIONEE:
COMPANY: ORALABS HOLDING CORP.
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the
undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the securities. Optionee understands that the certificate evidencing the
securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company and any other legend required
under applicable state securities laws.
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(c) Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of exercise of the Option by the Optionee, such exercise will be
exempt from registration under the Securities Act. In the event the Company
later becomes subject to the reporting requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, ninety (90) days thereafter the securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions specified by Rule 144, including among other things: (1) the sale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the
availability of certain public information about the Company, and the amount of
securities being sold during any three month period not exceeding the
limitations specified in Rule 144(e), if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of exercise of the Option, then the securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires
among other things: (1) the resale occurring not less than one year after the
party has purchased, and made full payment for, within the meaning of Rule 144,
the securities to be sold; and, in the case of an affiliate, or of a
non-affiliate who has held the securities less than two years, (2) the
availability of certain public information about the Company, (3) the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934), and (4) the amount of securities being sold
during any three month period not exceeding the specified limitations stated
therein, if applicable.
(d) Optionee agrees, in connection with the Company's initial
underwritten public offering of the Company's securities, (1) not to sell, make
short sale of, loan, grant any options for the purchase of, or otherwise dispose
of any shares of Common Stock of the Company held by Optionee (other than those
shares included in the registration) without the prior written consent of the
Company or the underwriters managing such initial underwritten public offering
of the Company's securities for one hundred eighty (180) days from the effective
date of such registration, and (2) further agrees to execute any agreement
reflecting (1) above as may be requested by the underwriters at the time of the
public offering; provided, however, that the officers and directors of the
Company who own the stock of the Company also agree to such restrictions.
(e) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
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<PAGE>
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
(f) Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities in the manner contemplated by this Agreement.
Signature of Optionee:
-----------------------------------------
Date:
------------------------------------
3
ORALABS HOLDING CORP.
1997 NON-EMPLOYEE DIRECTORS' OPTION PLAN
ADOPTED BY THE BOARD OF DIRECTORS SEPTEMBER 5, 1997
1. PURPOSE.
(a) The purpose of the 1997 Non-Employee Directors' Option Plan (the
"Plan") is to provide a means by which each director of OraLabs Holding Corp.
(the "Company") who is not otherwise at the time of grant an employee of or
consultant to the Company or of any Affiliate of the Company (each such person
being hereafter referred to as a "Non-Employee Director") will be given an
opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the Company
(the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).
(b) The Board may delegate administration of the Plan to a committee
composed of two (2) or more members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. A
majority of the Committee shall constitute a quorum at any meeting, and the acts
of a majority of its members present at any meeting at which a quorum is
present, or acts approved in writing by all of the members of the Committee,
shall be the acts of the Committee. The Board may abolish the Committee at any
time and revest in the Board the administration of the Plan.
(c) Notwithstanding the above, the selection of the directors to whom
options are to be granted, the timing of such grants, the number of shares
subject to any option, the exercise price of any option, the periods during
which any option may be exercised and the term of any option shall be as
hereinafter provided, and the Committee shall have no discretion as to such
matters.
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<PAGE>
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
the Plan shall not exceed in the aggregate Two Hundred Thousand (200,000) shares
of the Company's common stock. If any option granted under the Plan shall for
any reason expire or otherwise terminate without having been exercised in full,
the stock not purchased under such option shall again become available for the
Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY.
Options shall be granted only to Non-Employee Directors of the Company. All
grants of options to Non-Employee Directors under this Plan shall be automatic
and nondiscretionary and shall be made strictly in accordance with the
provisions of the Plan. No person shall have any discretion to select which
Non-Employee Directors shall be granted options or to determine the number of
shares of stock to be covered by options granted to Non-Employee Directors.
5. NON-DISCRETIONARY GRANTS.
(a) Each person who is first elected or appointed to the Board as a
Non-Employee Director after the date on which this Plan is approved by the
Board(the "Appointment Date"), shall automatically be granted, on the
Appointment Date, an option to purchase Twenty Thousand (20,000) shares of
common stock of the Company on the terms and conditions set forth herein
(hereinafter the "Initial Option"). In no event shall any of the Board members
serving as such at the time of adoption of this Plan be entitled to any Options
hereunder if they remain on the Board after they cease serving as employees of
the Company.
(b) Each Non-Employee Director shall be automatically granted an option to
purchase Five Thousand (5,000) shares (a "Subsequent Option") each year on the
date two business days after the day of each annual meeting of the stockholders
of the Company, provided he or she is then an Non-Employee Director and, if as
of such date, he or she shall have served on the Board for at least the
preceding six (6) months. There shall be no limit on the number of Subsequent
Options a person may receive under this Plan. Initial Options and Subsequent
Options may hereafter be referred to collectively as "Options".
(c) If the number of shares then remaining available for the grant of
Options under the Plan is not sufficient for each Non-Employee Director to be
granted the number of Options called for by the Plan, then each Non-Employee
Director shall be granted an Option for a number of whole shares equal to the
number of shares then remaining available divided by the number of Non- Employee
Directors, disregarding any fractions of shares.
6. OPTION PROVISIONS.
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<PAGE>
Each Option shall be subject to the following terms and conditions:
(a) The term of each Option commences on the date it is granted and, unless
sooner terminated as set forth herein, expires on the date ("Expiration Date")
five (5) years from the date of grant. In the event of an optionee's death, the
optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within six (6) months
following the date of death, and only to the extent that the optionee was
entitled to exercise it on the date of death (but in no event later than the
Expiration Date). To the extent that the optionee was not entitled to exercise
an Option on the date of death, or to the extent that the optionee's estate or a
person who acquired the right to exercise such Option does not exercise an
Option which was otherwise exercisable as of the date of death (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
(b) The exercise price of each Option shall be equal to one hundred percent
(100%) of the Fair Market Value of the stock (as such term is defined in
subsection 9(e)) subject to such Option on the date such Option is granted. Each
Option shall be a non-statutory stock option (i.e. an option which does not
qualify under Section 422 or 423 of the Internal Revenue Code of 1986, as
amended (the "Code")).
(c) The optionee may elect to make payment of the exercise price under one
of the following alternatives:
(i) Payment of the exercise price per share in cash at the time of
exercise;
(ii) Provided that at the time of the exercise the Company's common
stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of shares of common stock of the Company already owned by
the optionee and owned free and clear of any liens, claims, encumbrances or
security interest, which common stock shall be valued at its Fair Market Value
on the date preceding the date of exercise; or
(iii) Consideration received by the Company under a cashless exercise
program implemented by the Company in connection with this Plan; or
(iv) Payment by a combination of the methods of payment specified in
subparagraph 6(c)(i) through 6(c)(iii) above. However, payment of the exercise
price with shares shall not increase the number of shares of stock which may be
issued under the Plan as provided in Section 3(a).
(d) An Option shall be transferable only to the extent specifically
provided in the option agreement; provided, however, that if the option
agreement does not specifically provide for the transferability of an Option,
then the Option shall not be transferable except by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom the Option is granted only by such person (or by his guardian or
legal representative) or transferee pursuant to such an order. Notwithstanding
the foregoing, the optionee may, by delivering written notice to the Company in
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<PAGE>
a form satisfactory to the Company, designate a third party who, in the event of
the death of the optionee, shall thereafter be entitled to exercise the Option.
These restrictions on transferability shall not apply to the extent such
restrictions are not at the time required for the Plan to continue to meet the
requirements of Rule 16b-3 under the Securities Act of 1934, as amended (the
"1934 Act").
(e) Both Initial Options and Subsequent Options shall become exercisable
and vested in four (4) equal annual installments of one-fourth (1/4) of the
number of Options granted as the Initial Options or Subsequent Options, as
applicable, commencing on the one (1)-year anniversary of the date of grant of
the Option, provided that the optionee has, during the entire period prior to
such vesting installment date, continuously served as a Non-Employee Director,
whereupon such Option shall become fully vested and exercisable in accordance
with its terms with respect to that portion of the shares represented by that
Option.
(f) An Option may not be exercised for a fraction of a share. An Option
shall be deemed to be exercised when written notice of such exercise has been
given to the Company in accordance with the terms of the Option by the person
entitled to exercise the Option and full payment for the shares with respect to
which the Option is exercised has been received by the Company. Until the
issuance (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such shares, no right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to the optioned stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued.
(g) The Company may require any optionee, or any person to whom an Option
is transferred under subparagraph 6(d), as a condition of exercising any such
Option:
(i) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters; and
(ii) to give written assurances satisfactory to the Company stating
that such person is acquiring the stock subject to the Option for such person's
own account and not with any present intention of selling or otherwise
distributing the stock. These requirements, and any assurances given pursuant to
such requirements, shall be inoperative if
(iii) the issuance of the shares upon the exercise of the Option has
been registered under a then currently-effective registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), or
(iv) as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may require
any optionee to provide such other representations, written assurances or
information which the Company shall determine is necessary, desirable or
appropriate to comply with applicable securities laws as a condition of granting
an Option to the optionee or permitting the optionee to exercise the Option. The
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<PAGE>
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(h) Notwithstanding anything to the contrary contained herein, an Option
may not be exercised unless the shares issuable upon exercise of such Option are
then registered under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options granted under the
Plan; provided however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any Option granted under the
Plan, or any stock issued or issuable pursuant to any such Option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such Options.
8. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an Option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such Option unless
and until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(b) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate in any capacity or shall affect any right of the
Company, its Board or stockholders or any Affiliate, to remove any Non-Employee
Director pursuant to the Company's Bylaws and the provisions of the Colorado
Business Corporation Act.
(c) No Non-Employee Director, individually or as a member of a group, and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any Option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an Option granted to him.
(d) In connection with each Option made pursuant to the Plan, it shall be a
condition precedent to the Company's obligation to issue or transfer shares to a
Non-Employee Director, or to evidence the removal of any restrictions on
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<PAGE>
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal, state or local withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax. The
withholding tax obligation may be satisfied by payment of the amount in cash,
delivery of shares of common stock of the Company already owned by the optionee
(subject to the same conditions specified in Section 6(c)(ii) above), or for
consideration received by the Company under a cashless exercise program
implemented by the Company in connection with this Plan.
(e) As used in this Plan, "Fair Market Value" means, as of any date, the
value of the common stock of the Company determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
a national market system including without limitation the National Market System
of the National Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported, as quoted on such
system or exchange for the last market trading day prior to the time of
determination) as reported in the Wall Street Journal or such other source as
the Board or Committee deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high and low asked prices for the Common Stock; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the Board or
Committee.
9. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) Subject to any required action by the stockholders of the Company, the
number of shares of common stock covered by each outstanding Option, and the
number of shares of common stock which have been authorized for issuance under
the Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per share of common stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of common stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the common stock, or any
other increase or decrease in the number of issued shares of common stock
effected without receipt of consideration by Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of common stock subject to an
Option.
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(b) In the event of (1) a dissolution, liquidation or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; and (4) the acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the 1934 Act, or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or any affiliate of the Company) or the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
1934 Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors then either
(i) any surviving corporation or acquiring corporation shall assume
any Options outstanding under the Plan or shall substitute similar Options
(including an award to acquire the same consideration paid to the shareholders
in the transaction described in this Section (9) for those outstanding under the
Plan; or
(ii) in the event the successor corporation does not agree to assume
the Option or substitute an equivalent Option, the Board shall notify optionees
at least fifteen (15) days prior to such proposed action, all outstanding
Options shall then be deemed fully vested, and to the extent the Option is not
exercised, the Option will terminate immediately prior to the consummation of
such proposed action.
10. AMENDMENT OF THE PLAN.
(a) The Board may at any time amend, alter, suspend or discontinue the
Plan, but no amendment, alteration, suspension or discontinuation shall be made
which would impair the rights of any Optionee under any grant theretofore made,
without his or her consent. However, to the extent that shareholder approval is
necessary for the Plan to satisfy the requirements of Section 422 of the Code,
Rule 16b-3, or any other applicable law or regulation, including the
requirements of the NASD or an established stock exchange, such amendment shall
not be effective until shareholder approval is obtained. The Board may in its
sole discretion submit any other amendment to the Plan for shareholder approval.
(b) Notwithstanding anything contained in this Plan to the contrary, the
Board shall have the power to amend the Plan in any manner deemed necessary or
advisable for Options granted under the Plan to qualify for the exemption
provided in Rule 16b-3 (or any successor rule relating to exemption from Section
16(b) of the 1934 Act), and any such amendment shall, to the extent deemed
necessary or advisable by the Board, be applicable to any outstanding Options
theretofore granted under the Plan notwithstanding any contrary provisions
contained in any stock option agreement. In the event of any such amendment to
the Plan, the holder of any Option outstanding under the Plan shall, upon
request of the Board or Committee and as a condition to the exercisability of
such Option, execute a conforming amendment in the form prescribed by the Board
or Committee to the option agreement referred to in Section 6 within such
reasonable time as shall be specified in such request.
7
<PAGE>
(c) Rights and obligations under any Option granted before any amendment of
the Plan shall not be impaired by such amendment unless (i) the Company requests
the consent of the person to whom the Option was granted and (ii) such person
consents in writing.
11. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on September 5, 2007. No Options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Option was granted.
(c) The Plan shall terminate upon the occurrence of any of the events
described in Section 9 above.
8
<PAGE>
ORALABS HOLDING CORP.
1997 NON-EMPLOYEE DIRECTORS' OPTION PLAN
STOCK OPTION GRANT
------------------
[Optionee's Name and Address]
You have been automatically granted this Stock Option (the "Option") to
purchase Common Stock of ORALABS HOLDING CORP. (the "Company") pursuant to the
Company's 1997 Non- Employee Directors' Option Plan (the "Plan"), a copy of
which is attached hereto. This Option is not intended to qualify and will not be
treated as an "incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). The details of your
Option are as follows:
Date of Grant
-----------------------------------------
Vesting Date
-----------------------------------------
Exercise Price Per Share
$ ---------------------------------------
Total Number of Shares Granted
-----------------------------------------
Total Price of Shares Granted
$ ---------------------------------------
Type of Option Nonstatutory Stock Option
Term/Expiration Date
----------------------------------------
Exercise Schedule:
- ------------------
This Option may be exercised, in whole or in part, in accordance with the
Vesting Schedule set out below.
Vesting Schedule
----------------
Date of Vesting Number of Shares
--------------- ----------------
First Annual Anniversary of Vesting
Date (_______) _______% (_______ Shares)
Thereafter:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
This Option may be exercised, to the extent consistent with the
above-vesting schedule, by delivering a Notice of Exercise in the form
attached hereto (with the attached Investment Representation
Statement, if required by the Company), together with the exercise
price, to the Secretary of the Company, or to such other person as the
Company may designate, during regular business hours, together with
such additional documents as the Company may then require pursuant to
Section 6 of the Plan. This Option may only be exercised for whole
shares.
Termination Period:
-------------------
If the optionee's service as a Non-Employee Director terminates for any
reason or for no reason, except as set forth in Section 6(_____) of the Plan,
the Option shall terminate on the earlier of the Expiration Date or the date
_________ (__) months following the date of termination of such service.
Exercise of this Option shall be on a form of Exercise Notice provided by the
Company.
OPTIONEE ACKNOWLEDGES THAT NOTHING IN THE PLAN OR IN ANY INSTRUMENT
EXECUTED PURSUANT THERETO SHALL CONFER UPON ANY NON- EMPLOYEE DIRECTOR ANY RIGHT
TO CONTINUE IN THE SERVICE OF THE COMPANY OR ANY AFFILIATE IN ANY CAPACITY OR
SHALL AFFECT ANY RIGHT OF THE COMPANY, ITS BOARD OR STOCKHOLDERS OR ANY
AFFILIATE, TO REMOVE ANY NON-EMPLOYEE DIRECTOR PURSUANT TO THE COMPANY'S BYLAWS
AND THE PROVISIONS OF THE COLORADO BUSINESS CORPORATION ACT.
Consideration:
--------------
The following kinds of consideration may be tendered and applied toward all
or a portion of the Exercise Price in accordance with Section 6(c) of the Plan:
(i) Payment of the exercise price per share in cash at the time of
exercise;
(ii) Provided that at the time of the exercise the Company's common
stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of shares of common stock of the Company already owned by
the optionee and owned free and clear of any liens, claims, encumbrances or
security interest, which common stock shall be valued at its Fair Market Value
on the date preceding the date of exercise; or
(iii) Consideration received by the Company under a cashless exercise
program implemented by the Company in connection with this Plan; or
(iv) Payment by a combination of the methods of payment specified in
subparagraphs (i) through (iii) above.
2
<PAGE>
Withholding:
------------
By exercising this Option, you agree that the Company may require you to
enter an arrangement providing for satisfaction by you of any tax withholding
obligation of the Company arising by reason of the exercise of this Option, as
provided in Section 8(d) of the Plan.
Exceptions to Transferability Restrictions:
-------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------.
Optionee acknowledges receipt of a copy of the Plan and certain information
related to it and represents that he or she is familiar with the terms and
provisions of the Plan and this Option. Optionee accepts this Option subject to
all such terms and provisions. Optionee has reviewed the Plan and this Option in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under, subject to and
governed by the terms and conditions of the 1997 NON-EMPLOYEE DIRECTORS' OPTION
PLAN attached and made a part of this document. You acknowledge that as of the
date of grant of this Option, this instrument and its attachments set forth the
entire understanding between you and the Company regarding the acquisition of
Common Stock in the Company, and supersedes all prior oral and written
agreements on that subject.
OPTIONEE: ORALABS HOLDING CORP., a
Colorado corporation
_________________________________ By:________________________________
Signature Date Date
_________________________________ Title:_____________________________
Print Name
3
<PAGE>
ORALABS HOLDING CORP.
1997 NON-EMPLOYEE DIRECTORS' OPTION PLAN
EXERCISE NOTICE FOR VESTED SHARES
---------------------------------
OraLabs Holding Corp.
Gary Schlatter, President
2901 South Tejon Street
Englewood, CO 80110
Attention: Secretary
1. Exercise of Option. Effective as of today,
_______________________________, the undersigned ("Optionee") hereby elects to
exercise Optionee's option to purchase _______________ shares of the Common
Stock (the "Shares") of OraLabs Holding Corp. (the "Company") under and pursuant
to the Company's 1997 Non-Employee Directors' Option Plan, as amended (the
"Plan"), and the Notice of Stock Option Grant dated ____________________________
(together, the "Option").
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions. Optionee represents that
Optionee is purchasing the Shares for Optionee's own account for investment and
not with a view to, or for sale in connection with, a distribution of any of
such Shares.
3. Compliance with Securities Laws; Federal Restrictions on Transfer.
Optionee has read and executed the Investment Representation Statement attached
as Exhibit A to the Notice of Stock Option Grant. Optionee represents that he or
she understands the matters set forth in the Investment Representation Statement
and that he or she is purchasing the Shares subject to the restrictions and
limitations set forth in that document.
4. Tax Consultation. Optionee represents that Optionee has consulted with
any tax consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. Restrictive Legends. Optionee understands and agrees that the Company
may cause one or more legends to be placed upon any certificate(s) evidencing
ownership of the Shares if determined to be necessary or advisable by counsel to
the Company.
1
<PAGE>
6. Withholding Obligation. Optionee agrees to provide such additional
documents as the Company may require pursuant to the terms of the Plan, and
Optionee further agrees to provide for the payment by Optionee to the Company
(in the manner designated by the Company) of the Company's withholding
obligation, if any, relating to the exercise of this Option.
7. Successors and Assigns. The Company may assign any of its rights under
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and
assigns.
8. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee or subcommittee thereof that
administers the Plan, which shall review such dispute at its next regular
meeting. The resolution of such a dispute by the Board or committee shall be
final and binding on the Company and on Optionee.
9. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
10. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, return receipt requested, addressed to the other party at its address
as shown below beneath its signature, or to such other address as such party may
designate in writing from time to time to the other party.
11. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
12. Delivery of Payment. Optionee herewith delivers to the Company the full
Exercise Price for the Shares.
13. Entire Agreement. The Plan and Notice of Stock Option Grant are
incorporated herein by reference. This Agreement, the Plan and the Notice of
Stock Option Grant constitute the entire agreement of the parties and supersede
in their entirety all prior undertakings and agreements of the Company and
Optionee with respect to the subject matter hereof.
2
<PAGE>
Submitted By: Accepted by:
OPTIONEE: ORALABS HOLDING CORP., a Colorado
corporation
- ----------------------------------- By:
(Signature) ------------------------------------
Its:
- ----------------------------------- -----------------------------------
Address
- ----------------------------------- ---------------------------------------
Address
---------------------------------------
3
<PAGE>
ORALABS HOLDING CORP.
1997 NON-EMPLOYEE DIRECTORS' OPTION PLAN
ATTACHMENT TO NOTICE OF GRANT
INVESTMENT REPRESENTATION STATEMENT
-----------------------------------
OPTIONEE:
COMPANY: ORALABS HOLDING CORP.
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed securities, the
undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the securities. Optionee understands that the certificate evidencing the
securities will be imprinted with a legend which prohibits the transfer of the
securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company and any other legend required
under applicable state securities laws.
1
<PAGE>
(c) Optionee is familiar with the provisions of Rule 144 promulgated
under the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions. Securities may be resold in certain limited circumstances subject to
the provisions of Rule 144, which requires among other things: (1) the resale
occurring not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities less
than two years, (2) the availability of certain public information about the
Company, (3) the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934), and (4) the amount of
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(d) Optionee understands that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the Securities and Exchange Commission has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own risk.
Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.
(e) Optionee understands that the certificate evidencing the
securities will be imprinted with a legend which prohibits the transfer of the
securities in the manner contemplated by this Agreement.
Signature of Optionee:
----------------------------------------
Date:
-----------------------------------
2
ORALABS HOLDING CORP.
1997 NON-EMPLOYEE DIRECTORS' OPTION PLAN
STOCK OPTION GRANT
------------------
Michael Friess
You have been automatically granted this Stock Option (the "Option") to
purchase Common Stock of ORALABS HOLDING CORP. (the "Company") pursuant to the
Company's 1997 Non- Employee Directors' Option Plan (the "Plan"), a copy of
which is attached hereto. This Option is not intended to qualify and will not be
treated as an "incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). The details of your
Option are as follows:
Date of Grant September 8, 1997
------------------------------------
Vesting Date September 8, 1998 (see below)
------------------------------------
Exercise Price Per Share $ 1.00
------------------------------------
Total Number of Shares Granted 20,000
------------------------------------
Total Price of Shares Granted $ 20,000
------------------------------------
Type of Option Nonstatutory Stock Option
Term/Expiration Date September 8, 2002
------------------------------------
Exercise Schedule:
- ------------------
This Option may be exercised, in whole or in part, in accordance with the
Vesting Schedule set out below.
Vesting Schedule
----------------
Date of Vesting Number of Shares
--------------- ----------------
First Annual Anniversary of Vesting
Date (September 8, 1998) 25% (5,000 Shares)
Second Annual Anniversary of Vesting
Date (September 8, 1999) 25% (5,000 Shares)
1
<PAGE>
Third Annual Anniversary of Vesting
Date (September 8, 2000) 25% (5,000 Shares)
Fourth Annual Anniversary of Vesting
Date (September 8, 2001) 25% (5,000 Shares)
This Option may be exercised, to the extent consistent with the
above-vesting schedule, by delivering a Notice of Exercise in the form
attached hereto (with the attached Investment Representation
Statement, if required by the Company), together with the exercise
price, to the Secretary of the Company, or to such other person as the
Company may designate, during regular business hours, together with
such additional documents as the Company may then require pursuant to
Section 6 of the Plan. This Option may only be exercised for whole
shares.
OPTIONEE ACKNOWLEDGES THAT NOTHING IN THE PLAN OR IN ANY INSTRUMENT
EXECUTED PURSUANT THERETO SHALL CONFER UPON ANY NON- EMPLOYEE DIRECTOR ANY RIGHT
TO CONTINUE IN THE SERVICE OF THE COMPANY OR ANY AFFILIATE IN ANY CAPACITY OR
SHALL AFFECT ANY RIGHT OF THE COMPANY, ITS BOARD OR STOCKHOLDERS OR ANY
AFFILIATE, TO REMOVE ANY NON-EMPLOYEE DIRECTOR PURSUANT TO THE COMPANY'S BYLAWS
AND THE PROVISIONS OF THE COLORADO BUSINESS CORPORATION ACT.
Consideration:
--------------
The following kinds of consideration may be tendered and applied toward all
or a portion of the Exercise Price in accordance with Section 6(c) of the Plan:
(i) Payment of the exercise price per share in cash at the time of
exercise;
(ii) Provided that at the time of the exercise the Company's common
stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of shares of common stock of the Company already owned by
the optionee and owned free and clear of any liens, claims, encumbrances or
security interest, which common stock shall be valued at its Fair Market Value
on the date preceding the date of exercise; or
(iii) Consideration received by the Company under a cashless exercise
program implemented by the Company in connection with this Plan; or
(iv) Payment by a combination of the methods of payment specified in
subparagraphs (i) through (iii) above.
2
<PAGE>
Withholding:
------------
By exercising this Option, you agree that the Company may require you to
enter an arrangement providing for satisfaction by you of any tax withholding
obligation of the Company arising by reason of the exercise of this Option, as
provided in Section 8(d) of the Plan.
Exceptions to Transferability Restrictions: None.
-------------------------------------------------
Optionee acknowledges receipt of a copy of the Plan and certain information
related to it and represents that he or she is familiar with the terms and
provisions of the Plan and this Option. Optionee accepts this Option subject to
all such terms and provisions. Optionee has reviewed the Plan and this Option in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under, subject to and
governed by the terms and conditions of the 1997 NON-EMPLOYEE DIRECTORS' OPTION
PLAN attached and made a part of this document. You acknowledge that as of the
date of grant of this Option, this instrument and its attachments set forth the
entire understanding between you and the Company regarding the acquisition of
Common Stock in the Company, and supersedes all prior oral and written
agreements on that subject.
OPTIONEE: ORALABS HOLDING CORP., a
Colorado corporation
/s/ Michael Friess By: /s/ Gary H. Schlatter
- ----------------------------------- ----------------------------------
Signature Date Date
Michael Friess Title: President
- ----------------------------------- -------------------------------
Print Name
3
BUSINESS LEASE
This lease, dated 9-1-95, is between ORAL, GARY H. SCHLATTER, as Landlord,
and ORALABS, as Tenant.
In consideration of the payment of the rent and the performance of the
covenants and agreements by the Tenant set forth herein, the Landlord does
hereby lease to Tenant the following described premises situate in ......
County, in the State of Colorado; the address of which is 2901 S. Tejon St.,
Englewood CO 80110 as of June 15, 1996 add 2975 S. Tejon to this lease.
Said premises, with all the appurtenances, are leased to the Tenant from
the date of 9-1-95 until the date of 9-1-2000 at and for a rental for the full
term of $......., payable in monthly installments of $4,000, add $1500 (Fifteen
hundred) per month upon occupancy of 2975 S. Tejon (connected to 2901) in
advance, on the 1st day of each calendar month during the term of this lease,
payable at 2901 S. Tejon St., Englewood, CO 80110, without notice.
THE TENANT, IN CONSIDERATION OF THE LEASING OF THE PREMISES AGREES AS FOLLOWS:
1. The Tenant shall pay the rent for the premises above-described.
2. The Tenant shall, at the expiration of this lease, surrender the
premises in as good a condition as when the Tenant entered the premises,
ordinary wear and tear excepted. The Tenant shall keep all sidewalks on and
around the premises free and clear of ice and snow; keep the entire exterior
premises free from all litter, dirt,debris and obstructions; and keep the
premises in a clean and sanitary condition as required by the ordinances of the
city and county in which the property is situate.
3. The Tenant shall not sublet any part of the premises, nor assign the
lease, or any interest therein, without the written consent of the Landlord.
4. The Tenant shall use the premises only as manufacturing and warehouse
and shall not use the premises for any purposes prohibited by the laws of the
United States or the State of Colorado, or of the ordinances of the city or town
in which said premises are located, and shall neither permit nor suffer any
disorderly conduct, noise or nuisance having a tendency to annoy or disturb any
persons occupying adjacent premises.
5. The Tenant shall neither hold, nor attempt to hold, the Landlord, its
agents, contractors and employees, liable for any injury, damage, claims or loss
to person or property occasioned by any accident, condition or casualty to,
upon, or about the premises including, but not limited to , defective wiring,
the breaking or stopping of the plumbing or sewage upon the premises, unless
such accident, condition or casualty is directly caused by intentional or
reckless acts or omission of the Landlord. Notwithstanding any duty the Landlord
may have hereunder to repair or maintain the premises, in the event that the
improvements upon the premises are damaged by the negligent, reckless or
intentional act or omission of the Tenant or any employees, agent, invitees,
licensees or contractors, the Tenant shall bear the full cost of such repair or
replacement. The Tenant shall hold Landlord, Landlord's agents and their
respective successors and assigns, harmless and indemnified from all injury,
loss, claims or damage to any person or property while on the demised premises
or any other part of Landlord's property, or arising in any way out of Tenant's
business, which is occasioned by an act or omission of Tenant, its employees,
agents, invitees, licensees or contractors. The Landlord is not responsible for
any damage or destruction to the Tenant's personal property.
6. The Tenant shall neither permit nor suffer said premises, or the walls
or floors thereof, to be endangered by overloading, nor said premises to be used
for any purpose which would render the insurance thereon void or the insurance
risk more hazardous, nor make any alterations in or changes in, upon, or about
said premises without first obtaining the written consent of the Landlord.
7. The Tenant shall obtain and keep in full force, at Tenant's expense,
fire and liability insurance as may be reasonably required by the Landlord.
Tenant shall provide copies of such insurance policies upon the Landlord's
request.
<PAGE>
8. The Tenant shall permit the Landlord to place a "For Rent" sign upon the
leased premises at any time after sixty (60) days before the end of this lease.
9. The Tenant shall allow the Landlord to enter upon the premises at any
reasonable hour.
IT IS EXPRESSLY UNDERSTOOD AND AGREED BETWEEN LANDLORD AND TENANT AS FOLLOWS:
10. the Tenant shall be responsible for paying the following: [X] Electric
[X] Gas [X] Water [X] Sewer [X] Phone [X] Refuse Disposal [X] Janitorial
Services [ ] Other All Expenses.
The [ ] Landlord [X] Tenant agrees to keep all the improvements upon the
premises, including but not limited to, structural components, interior and
exterior walls, floors, ceiling, roofs, sewer connections, plumbing, wiring and
glass in good maintenance and repair at their expense. In the event the Landlord
is responsible for repair of the premises, the Tenant shall be obliged to notify
the Landlord of any condition upon the premises requiring repair and the
Landlord shall be provided a reasonable time to accomplish said repair.
11. No assent, express or implied, to any breach or default of any one or
more of the agreements hereof shall be deemed or taken to be a waiver of any
succeeding or other breach or default.
12. If, after the expiration of this lease, the Tenant shall remain in
possession of the premises and continue to pay rent without a written agreement
as to such possession, then such tenancy shall be regarded as a month-to-month
tenancy, at a monthly rental, payable in advance, equivalent to the last month's
rent paid under this lease, and subject to all the terms and conditions of this
lease.
13. If the premises are left vacant and any part of the rent reserved
hereunder is not paid, then the Landlord may, without being obligated to do so,
and without terminating this lease, retake possession of the said premises and
rent the same for such rent, and upon such conditions as the Landlord may think
best, making such changes and repairs as may be required, giving credit for the
amount of rent so received less all expenses of such changes and repairs, and
the Tenant shall be liable for the balance of the rent herein reserved until the
expiration of the term of this lease.
14. The Landlord acknowledges receipt of a deposit in the amount of $ 0 to
be held by the Landlord for the faithful performance of all of the terms,
conditions and covenants of this lease. The Landlord may apply the deposit to
cure any default under the terms of this lease and shall account to the Tenant
for the balance. The Tenant may not apply the deposit hereunder to the payment
of the rent reserved hereunder or the performance of other obligations.
15. If the Tenant shall be in arrears in payment of any installment of
rent, or any portion thereof, or in default of any other covenants or agreements
set forth in this lease, and the default remains uncorrected for a period of
three (3) days after the Landlord has given written notice thereof pursuant to
applicable law, then the Landlord may, at the Landlord's option, undertake any
of the following remedies without limitation: (a) declare the term of the lease
ended; (b) terminate the Tenant's right to possession of the premises and
reenter and repossess the premises pursuant to applicable provisions of the
Colorado Forcible Entry and Detainer Statute; (c) recover all present and future
damages, costs and other relief to which the Landlord is entitled; (d) pursue
breach of contract remedies; and/or (e) pursue any and all available remedies in
law or equity. In the event possession is terminated by a reason of default
prior to expiration of the term, the Tenant shall be responsible for the rent
occurring for the remainder of the term, subject to the Landlord's duty to
mitigate such damages. Pursuant to applicable law [13-40-104(d.5),(e.5) and
13-40-107.5, C.R.S.] which is incorporated by this reference, in the event
repeated or substantial default(s) under the lease occur, the Landlord may
terminate the Tenant's possession upon a written Notice to Quit, without a right
to cure. Upon such termination, the Landlord shall have available any and all of
the above-listed remedies.
<PAGE>
16. If the property or the premises shall be destroyed in whole or in part
by fire, the elements, or other casualty and if, in the sole opinion of the
Landlord, they cannot be repaired within ninety (90) days from said injury and
the Landlord informs the Tenant of said decision; or if the premises are damaged
in any degree and the Landlord informs the Tenant it does not desire to repair
same and desires to terminate this lease, then this lease shall terminate on the
date of such injury. In the event of such termination, the Tenant shall
immediately surrender the possession of the premises and all rights therein to
the Landlord; shall be granted a license to enter the premises at reasonable
times to remove the Tenant's property; and shall not be liable for rent accruing
subsequent to said event. The Landlord shall have the right to immediately enter
and take possession of the premises and shall not be liable for any loss, damage
or injury to the property or person of the Tenant or occupancy of, in or upon
the premises.
If the Landlord repairs the premises within ninety (90) days, this lease
shall continue in full force and effect and the Tenant shall not be required to
pay rent for any portion of said ninety (90) days during which the premises are
wholly unfit for occupancy.
17. In the event any dispute arises concerning the terms of this lease or
the non-payment of any sums under this lease, and the matter is turned over to
an attorney, the party prevailing in such dispute shall be entitled, in addition
to other damages or costs, to receive reasonable attorneys' fees from the other
party.
18. In the event any payment required hereunder is not made within ten (10)
days after the payment is due, a late charge in the amount of 18% of the payment
will be paid by the Tenant.
19. In the event of a condemnation or other taking by any governmental
agency, all proceeds shall be paid to the Landlord hereunder, the Tenant waiving
all right to any such payments.
20. This lease is made with the express understanding and agreement that in
the event the Tenant becomes insolvent, the Landlord may declare this lease
ended, and all rights of the Tenant hereunder shall terminate and cease.
21. The Tenant and the Landlord further agree:
This lease shall be subordinate to all existing and future security
interests on the premises. All notices shall be in writing and be personally
delivered or sent by first class mail, unless otherwise provided by law, to the
respective parties. If any term or provision of this lease shall be invalid or
unenforceable, the remainder of this lease shall not be affected thereby and
shall be valid and enforceable to the full extent permitted by law. This lease
shall only be modified by amendment signed by both parties. This lease shall be
binding on the parties, their personal representatives, successors and assigns.
When used herein, the singular shall include the plural.
Attest: /s/ Gary Schlatter 9-1-95
-------------------------- --------------------------------
Date
Attest: By: /s/ Gary Schlatter 9-1-95
-------------------------- ---------------------------------
Date
---------------------------------
Date
<PAGE>
GUARANTEE
For value received, I guarantee the payment of the rent and the performance
of the covenants and agreements by the Tenant in the within lease.
- ----------------------------------- ---------------------------------
Signature Date
ASSIGNMENT AND ACCEPTANCE
For value received ..............., assignor, assigns all right, title and
interest in and to the within lease to ........................., assignee, the
heirs, successors and assigns of the assignee, with the express understanding
and agreement that the assignor shall remain liable for the full payment of the
rent reserved and the performance of all the covenants and agreements made in
the lease by the Tenant. The assignor will pay the rent and fully perform the
covenants and agreements in case the assignee fails to do so. In consideration
of this assignment, the assignee assumes and agrees to make all the payments and
perform all the covenants and agreements contained in the lease and agreed to by
the Tenant.
- ----------------------------------- ---------------------------------
Assignor Date Assignee Date
CONSENT OF ASSIGNMENT
Consent to the assignment of the within lease to ..........................
is hereby given, on the express condition, however, that the assignor shall
remain liable for the prompt payment of the rent and performance of the
covenants on the part of the Tenant as herein mentioned, and that no further
assignment of said lease or sub-letting of the premises, or any part thereof,
shall be made without further written agreement.
- ----------------------------------- ---------------------------------
Signature Date Signature Date
LANDLORD'S ASSIGNMENT
In consideration of One Dollar, in hand paid, I hereby assign to
..........................................my interest in the within lease, and
the rent therein reserved.
---------------------------------
Landlord Date
730 Seventeenth Street Suite 500
Denver, Colorado 80202 (303) 892-1111
Frederick Ross Company Telefax: (303) 892-6338
102 South Tejon Street Suite 1010
Colorado Springs, Colorado 80903 (719) 578-1111
Telefax: (719) 578-5993
INDUSTRIAL SUB LEASE - GROSS
1. Parties. This Lease, dated, for reference purposes only, December 18, 1997,
is made by and between Modern Plastics, Inc. (herein called "Lessor") and
OraLabs, Inc. (herein called "Lessee").
2. Premises. Lessor hereby leases to Lessee and Lessee leases from Lessor for
the term, at the rental, and upon all of the conditions set forth herein, that
certain real property situated in the County of Arapahoe State of Colorado,
commonly known as Easterly 6,000 sq. ft. of 2810 S. Raritan, Englewood, Colorado
80110 and described as All Lot 4 and South 30 feet of lot 3 TOG with por Lot 6
Ely of adj to SD Lot 4 and SD S 30 Ft. of Lot. Said real property including the
land and all improvements therein, is herein called "the Premises".
3. Term.
3.1 Term. The term of this Lease shall be for 18 Months and 13 days
commencing on December 19, 1997 and ending on June 30, 1999 unless sooner
terminated pursuant to any provision hereof.
3.2 Delay in Possession. Notwithstanding said commencement date, if for any
reason Lessor cannot deliver possession of the Premises to Lessee on said date,
Lessor shall not be subject to any liability therefor, nor shall such failure
affect the validity of this Lease or the obligations of Lessee hereunder or
extend the term hereof, but in such case, Lessee shall not be obligated to pay
rent until possession of the Premises is tendered to Lessee, provided, however,
that if Lessor shall not have delivered possession of the Premises within sixty
(60) days from said commencement date, Lessee may, at Lessee's option, by notice
in writing to Lessor within ten (10) days thereafter, cancel this Lease, in
which event the parties shall be discharged from all obligations hereunder;
provided further, however, that if such written notice of Lessee is not received
by Lessor within said ten (10) day period, Lessee's right to cancel this Lease
hereunder shall terminate and be of no further force or effect.
3.3 Early Possession. If Lessee occupies the Premises prior to said
commencement date, such occupancy shall be subject to all provisions hereof,
such occupancy shall not advance the termination date, and Lessee shall pay rent
for such period at the initial monthly rates set forth below.
4. Rent. Lessee shall pay to Lessor as rent for the Premises, monthly payments
of $2250.00, in advance, on the 1st day of each month of the term hereof. Lessee
shall pay Lessor upon the execution hereof $3,193.59 as rent for December 19,
1997 thru January 31, 1998. Rent for any period during the term hereof which is
for less than one month shall be a pro rata portion of the monthly installment.
Rent shall be payable in lawful money of the United States to Lessor at the
address stated herein or to such other persons or at such other places as Lessor
may designate in writing.
5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof $-0-
as security for Lessee's faithful performance of Lessee's obligations hereunder.
If Lessee fails to pay rent or other charges due hereunder, or otherwise
defaults with respect to any provision of this Lease, Lessor may use, apply or
retain all or any portion of said deposit for the payment of any rent or other
charge in default or for the payment of any other sum to which Lessor may become
obligated by reason of Lessee's default, or to compensate Lessor for any loss or
damage which Lessor may suffer thereby. If Lessor so uses or applies all or any
portion of said deposit, Lessee shall within ten (10) days after written demand
therefor deposit cash with Lessor in an amount sufficient to restore said
deposit to the full amount hereinabove stated and Lessee's failure to do so
shall be a material breach of this Lease. If the monthly rent shall, from time
to time, increase during the term of this Lease, Lessee shall thereupon deposit
with Lessor additional security deposit so that the amount of security deposit
held by Lessor shall at all times bear the same proportion to current rent as
the original security deposit bears to the original monthly rent set forth in
paragraph 4 hereof. Lessor shall not be required to keep said deposit separate
from its general accounts. If Lessee performs all of Lessee's obligations
hereunder, said deposit, or so much thereof as has not theretofore been applied
by Lessor, shall be returned, without payment of interest or other increment for
its use, to Lessee (or, at Lessor's option, to the last assignee, if any, of
Lessee's interest hereunder) at the expiration of the term hereof, and after
Lessee has vacated the Premises. No trust relationship is created herein between
Lessor and Lessee with respect to said Security Deposit.
<PAGE>
6. Use.
6.1 Use. The Premises shall be used and occupied only for Dead Storage or
any other use which is reasonable comparable and for no other purpose.
6.2 Compliance with Law.
(a) Lessor warrants to Lessee that the Premises, in its state existing
on the date that the Lease term commences, but without regard to the use for
which Lessee will use the Premises, does not violate any covenants or
restrictions of record, or any applicable building code, regulation or ordinance
in effect on such Lease term commencement date. In the event it is determined
that this warranty has been violated, then it shall be the obligation of the
Lessor, after written notice from Lessee, to promptly, at Lessor's sole cost and
expense, rectify any such violation. In the event Lessee does not give to Lessor
written notice of the violation of this warranty within six months from the date
that the Lease term commences, the correction of same shall be the obligation of
the Lessee at Lessee's sole cost. The warranty contained in this paragraph 6.2
(a) shall be of no force or effect if, prior to the date of this Lease, Lessee
was the owner or occupant of the Premises, and, in such event, Lessee shall
correct any such violation at Lessee's sole cost.
(b) Except as provided in paragraph 6.2(a), Lessee shall, at Lessee's
expense, comply promptly with all applicable statutes, ordinances, rules,
regulations, orders, covenants and restrictions of record, and requirements in
effect during the term or any part of the term hereof, regulating the use by
Lessee of the Premises. Lessee shall not use nor permit the use of the Premises
in any manner that will tend to create waste or a nuisance or, if there shall be
more than one tenant in the building containing the Premises, shall tend to
disturb such other tenants.
6.3 Condition of Premises.
(a) Lessor shall deliver the Premises to Lessee clean and free of
debris on Lease commencement date (unless Lessee is already in possession) and
Lessor further warrants to Lessee that the plumbing, lighting, air conditioning,
heating, and loading doors in the Premises shall be in good operating condition
on the Lease commencement date. In the event that it is determined that this
warranty has been violated, then it shall be the obligation of Lessor, after
receipt of written notice from Lessee setting forth with specificity the nature
of the violation, to promptly, at Lessor's sole cost, rectify such violation.
Lessee's failure to give such written notice to Lessor within thirty (30) days
after the Lease commencement date shall cause the conclusive presumption that
Lessor has complied with all of Lessor's obligations hereunder. The warranty
contained in this paragraph 6.3(a) shall be of no force or effect if prior to
the date of this Lease, Lessee was the owner or occupant of the Premises.
(b) Except as otherwise provided in this Lease, Lessee hereby accepts
the Premises in their condition existing as of the Lease commencement date or
the date that Lessee takes possession of the Premises, whichever is earlier,
subject to all applicable zoning, municipal, county and state laws, ordinances
and regulations governing and regulating the use of the Premises, and any
covenants or restrictions of record, and accepts this Lease subject thereto and
to all matters disclosed thereby and by any exhibits attached hereto. Lessee
acknowledges that neither Lessor nor Lessor's agent has made any representation
or warranty as to the present or future suitability of the Premises for the
conduct of Lessee's business.
7. Maintenance, Repairs and Alterations.
7.1 Lessor's Obligations. Subject to the provisions of Paragraphs 6,7.2,
and 9 and except for damage caused by any negligent or intentional act or
omission of Lessee, Lessee's agents, employees, or invitees in which event
Lessee shall repair the damage, Lessor, at Lessor's expense, shall keep in good
order, condition and repair the foundations, exterior walls and the exterior
roof of the Premises. Lessor shall not, however, be obligated to paint such
exterior, nor shall Lessor be required to maintain the interior surface of
exterior walls, windows, doors or plate glass. Lessor shall have no obligation
to make repairs under this Paragraph 7.1 until a reasonable time after receipt
of written notice of the need for such repairs. Lessee expressly waives the
benefits of any statute now or hereafter in effect which would otherwise afford
Lessee the right to make repairs at Lessor's expense or to terminate this Lease
because of Lessor's failure to keep the Premises in good order, condition and
repair.
7.2 Lessee's Obligations.
<PAGE>
(a) Subject to the provisions of Paragraphs 6,7.1 and 9, Lessee, at
Lessee's expense, shall keep in good order, condition and repair the Premises
and every part thereof (whether or not the damaged portion of the Premises or
the means of repairing the same are reasonable or readily accessable to Lessee)
including, without limiting the generality of the foregoing, all plumbing,
heating, air conditioning, (Lessee shall procure and maintain, at Lessee's
expense, an air conditioning system maintenance contract) ventilating,
electrical and lighting facilities and equipment within the Premises, fixtures,
interior walls and interior surface of exterior walls, ceilings, windows, doors,
plate glass, and skylights, located within the Premises, and all landscaping,
driveways, parking lots, fences and signs located in the Premises and all
sidewalks and parkways adjacent to the Premises. Lessee expressly waives the
benefit of any statute now or hereinafter in effect which would otherwise afford
Lessee the right to make repairs at Lessor's expense or to terminate this Lease
because of Lessor's failure to keep the Premises in good order, condition and
repair.
(b) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.2 or under any other paragraph of this Lease, Lessor may at Lessor's
option enter upon the Premises after 10 days' prior written notice to Lessee
(except in the case of emergency, in which case no notice shall be required),
perform such obligations on Lessee's behalf and put the Premises in good order,
condition and repair, and the cost thereof together with interest thereon at the
maximum rate then allowable by law shall be due and payable as additional rent
to Lessor together with Lessee's next rental installment.
(c) On the last day of the term hereof, or on any sooner termination,
Lessee shall surrender the premises to Lessor in the same condition as received,
ordinary wear and tear excepted, clean and free of debris. Lessee shall repair
any damage to the Premises occasioned by the installation or removal of its
trade fixtures, furnishings and equipment. Notwithstanding anything to the
contrary otherwise stated in this Lease, Lessee shall leave the air lines, power
panels, electrical distribution systems, lighting fixtures, space heaters, air
conditioning, plumbing and fencing on the premises in good operating condition.
7.3 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written consent make any
alterations, improvements, additions, or Utility Installations in, on or about
the Premises, except for nonstructural alterations not exceeding $2,500 in
cumulative costs during the term of this Lease. In any event, whether or not in
excess of $2,500 in cumulative cost, Lessee shall make no change or alteration
to the exterior of the Premises nor the exterior of the building(s) on the
Premises without Lessor's prior written consent. As used in this Paragraph 7.3
the term "Utility Installation" shall mean carpeting, window coverings, air
lines, power panels, electrical distribution systems, lighting fixtures, space
heaters, air conditioning, plumbing, and fencing. Lessor may require that Lessee
remove any or all of said alterations, improvements, additions or Utility
Installations at the expiration of the term, and restore the Premises to their
prior condition. Lessor may require Lessee to provide Lessor, at Lessee's sole
cost and expense, a lien and completion bond in an amount equal to one and
one-half times the estimated cost of such improvements, to insure Lessor against
any liability for mechanic's and materialmen's liens and to insure completion of
the work. Should Lessee make any alterations, improvements, additions or Utility
Installations without the prior approval of Lessor, Lessor may require that
Lessee remove any or all of the same.
(b) Any alterations, improvements, additions or Utility Installations,
in, or about the Premises that Lessee shall desire to make and which requires
the consent of the Lessor shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent, the consent shall be
deemed conditioned upon Lessee acquiring a permit to do so from appropriate
governmental agencies, the furnishing of a copy thereof to Lessor prior to the
commencement of the work and the compliance by Lessee of all conditions of said
permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in the Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law. If Lessee shall, in
good faith, contest the validity of any such lien, claim or demand, then Lessee
shall, at its sole expense defend itself and Lessor against the same and shall
pay and satisfy any such adverse judgment that may be rendered thereon before
the enforcement thereof against the Lessor or the Premises, upon the condition
that if Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to such contested lien claim or demand
indemnifying Lessor against liability for the same and holding the Premises free
from the effect of such lien or claim. In addition, Lessor may require Lessee to
pay Lessor's attorneys fees and costs in participating in such action if Lessor
shall decide it is to its best interest to do so.
<PAGE>
(d) Unless Lessor requires their removal, as set forth in Paragraph
7.3(a), all alterations, improvements, additions and Utility Installations
(whether or not such Utility Installations constitute trade fixtures of Lessee),
which may be made on the Premises, shall become the property of Lessor and
remain upon and be surrendered with the Premises at the expiration of the term.
Notwithstanding the provisions of this Paragraph 7.3(d), Lessee's machinery and
equipment, other than that which is affixed to the Premises so that it cannot be
removed without material damage to the Premises, shall remain the property of
Lessee and may be removed by Lessee subject to the provisions of Paragraph
7.2(c).
8. Insurance: Indemnity.
8.1 Liability Insurance - Lessee. Lessee shall, at Lessee's expense, obtain
and keep in force during the term of this Lease a policy which is an "A" rating
based on the best rating system of Combined Single Limit Bodily Injury and
Property Damage Insurance which names Modern Plastics as additionally insured,
insuring Lessee and Lessor against any liability arising out of the use,
occupancy or maintenance of the Premises, and all other areas appurtenant
thereto. Such insurance shall be in an amount not less than $ 1,000,000.00 per
occurrence. The policy shall insure performance by Lessee of the indemnity
provisions of this Paragraph 8. The limits of said insurance shall not, however,
limit the liability of Lessee hereunder. In addition Lessee is to have auto
liability insurance at not less than $ 1,000,000.00 per occurrence.
8.2 Liability Insurance - Lessor. Lessor shall obtain and keep in force
during the term of this Lease a policy of Combined Single Limit Bodily Injury
and Property Damage Insurance, insuring Lessor, but not Lessee, against any
liability arising out of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto in a amount not less than $500,000
per occurrence.
8.3 Property Insurance. Lessor shall obtain and keep in force during the
term of this Lease a policy or policies of insurance covering loss or damage to
the Premises, but not Lessee's fixtures, equipment or tenant improvements in an
amount not to exceed the full replacement value thereof, as the same may exist
from time to time, providing protection against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief, flood
(in the event same is required by a lender having a lien on the Premises)
special extended perils ("all risk", as such term is used in the insurance
industry) but not plate glass insurance. In addition, the Lessor shall obtain
and keep in force, during the term of this Lease, a policy of rental value
insurance covering a period of one year, with loss payable to Lessor, which
insurance shall also cover all real estate taxes and insurance costs for said
period.
8.4 Payment of Premium Increase. Omitted.
8.5 Insurance Policies. Insurance required hereunder shall be in companies
holding a "General Policyholders Rating" of at least B plus, or such other
rating as may be required by a lender having a lien on the Premises, as set
forth in the most current issue of "Best Insurance Guide". Lessee shall deliver
to Lessor copies of policies of liability insurance required under Paragraph 8.1
or certificates evidencing the existence and amounts of such insurance. No such
policy shall be cancelable or subject to reduction of coverage or other
modification except after thirty (30) days' prior written notice to Lessor.
Lessee shall, at least thirty (30) days prior to the expiration of such
policies, furnish Lessor with renewals or binders' thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee upon demand. Lessee shall not do or permit to be done anything
which shall invalidate the insurance policies refereed to in Paragraph 8.3
8.6 Waiver of Subrogation. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other
for loss or damage arising out of or incident to the perils insured against
under paragraph 8.3, which perils occur in, on or about the Premises, whether
due to the negligence of Lessor or Lessee or their agents, employees,
contractors and/or invitees. Lessee and Lessor shall, upon obtaining the
policies of insurance required hereunder, give notice to the insurance carrier
or carriers that the foregoing mutual waiver of subrogation is contained in this
Lease.
8.7 Indemnity. Lessee shall indemnify and hold harmless Lessor from and
against any and all claims arising from Lessee's use of the Premises, or from
the conduct of Lessee's business or from any activity, work or things done,
permitted or suffered by Lessee in or about the Premises or elsewhere and shall
further indemnify and hold harmless Lessor from and against any and all claims
arising from any breach or default of the performance of any obligation on
Lessee's part to be performed under the terms of this Lease, or arising from any
negligence of the Lessee, or any of Lessee's agents, contractors, or employees,
and from and against all costs, attorney's fees, expenses and liabilities
incurred in the defense of any such claim or any action or proceeding brought
thereon; and in case any action or proceeding be brought against Lessor by
reason of any such claim. Lessee, upon notice from Lessor shall defend the same
at Lessee's expense by counsel satisfactory to Lessor. Lessee, as a material
part of the consideration to Lessor, hereby assumes all risk of damage to
property or injury to persons, in, upon or about the Premises arising from any
cause and Lessee hereby waives all claims in respect thereof against Lessor.
<PAGE>
8.8 Exemption of Lessor from Liability. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers, or any other person in or about
the Premises, nor shall Lessor be liable for injury to the person if Lessee,
Lessee's employees, agents or contractors, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or from
the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said damage or injury results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Lessee. Lessor shall not be liable for any damages arising from any act or
neglect of any other tenant, if any, of the building in which the Premises are
vacated.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall herein mean damage or destruction
to the Premises to the extent that the cost of repair is less than 50% of the
fair market value of the Premises immediately prior to such damage or
destruction. "Premises Building Partial Damage" shall herein mean damage or
destruction to the building of which the Premises are a part to the extent that
the cost of repair is less than 50% of the fair market value of such building as
a whole immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is 50% or more
of the fair market value of the Premises immediately prior to such damage or
destruction. "Premises Building Total Destruction" shall herein mean damage or
destruction to the building of which the Premises are a part to the extent that
the cost of repair is 50% or more of the fair market value of such building as a
whole immediately prior to such damage or destruction.
(c) "Insured Loss" shall herein mean damage or destruction which was
caused by an event required to be covered by the insurance described in
paragraph 8.
9.2 Partial Damage - Insured Loss. Subject to the provisions of paragraphs
9.4,9.5 and 9.6, if at any time during the term of this Lease there is damage
which is an Insured Loss and which falls into the classification of Premises
Partial Damage or Premises Building Partial Damage, then Lessor shall, at
Lessor's sole cost, repair such damage, but not Lessee's fixtures, equipment or
tenant improvements, as soon as reasonable possible and this Lease shall
continue in full force and effect.
9.3 Partial Damage - Uninsured Loss. Subject to the provisions of
Paragraphs 9.4,9.5 and 9.6, if at any time during the term of this Lease there
is damage which is not an Insured Loss and which falls into the classification
of Premises Partial Damage or Premises Building Partial Damage, unless caused by
a negligent or willful act of Lessee (in which event Lessee shall make the
repairs at Lessee's expense), Lessor may at Lessor's option either (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written notice
to Lessee within thirty (30) days after the date of the occurrence of such
damage of Lessor's intention to cancel and terminate this Lease, as of the date
of the occurrence of such damage. In the event Lessor elects to give such notice
of Lessor's intention to cancel and terminate this Lease, Lessee shall have the
right within ten (10) days after the receipt of such notice to give written
notice to Lessor of Lessee's intention to repair such damage at Lessee's
expense, without reimbursement from Lessor, in which event this Lease shall
continue in full force and effect, and Lessee shall proceed to make such repairs
as soon as reasonably possible. If Lessee does not give such notice within such
10-day period this Lease shall be cancelled and terminated as of the date of the
occurrence of such damage.
<PAGE>
9.4 Total Destruction. If at any time during the term of this Lease there
is damage, whether or not an Insured Loss, (including destruction required by
any authorized public authority), which falls into the classification of
Premises Total Destruction or Premises Building Total Destruction, this Lease
shall automatically terminate as of the date of such total destruction.
9.5 Damage Near End of Term.
(a) If at any time during the last six months of the term of this
Lease there is damage, whether or not an Insured Loss, which falls within the
classification of Premises Partial Damage, Lessor may at Lessor's option cancel
and terminate this Lease as of the date of occurrence of such damage by giving
written notice to Lessee of Lessor's election to do so within 30 days after the
date of occurrence of such damage.
(b) Notwithstanding paragraph 9.5(a), in the event that Lessee has an
option to extend or renew this Lease, and the time within which said potion may
be exercised has not yet expired, Lessee shall exercise such option, if it is to
be exercised at all, no later than 20 days after the occurrence of an Insured
Loss falling within the classification of Premises Partial Damage during the
last six months of the term of this Lease. If Lessee duly exercises such option
during said 20 day period, Lessor shall, at Lessor's expense, repair such damage
as soon as reasonably possible and this Lease shall continue in full force and
effect. If Lessee fails to exercise such option during said 20 day period, then
Lessor may at Lessor's option terminate and cancel this Lease as of the
expiration of said 20day period by giving written notice to Lessee of Lessor's
election to do so within 10 days after the expiration of said 20 day period,
notwithstanding any term or provision in the grant of option to the contrary.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of damage described in paragraphs 9.2 or 9.3, and
Lessor or Lessee repairs or restores the Premises pursuant to the provisions of
this Paragraph 9, the rent payable hereunder for the period during which such
damage, repair or restoration continues shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired. Except for abatement
of rent, if any, Lessee shall have no claim against Lessor for any damage
suffered by reason of any such damage, destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence such repair or
restoration within 90 days after such obligations shall accrue, Lessee may at
Lessee's option cancel and terminate this Lease by giving Lessor written notice
of Lessee's election to do so at any time prior to the commencement of such
repair or restoration. In such event this Lease shall terminate as of the date
of such notice.
9.7 Termination - Advance Payments. Upon termination of this Lease pursuant
to this Paragraph 9, an equitable adjustment shall be made concerning advance
rent and any advance payments made by Lessee to Lessor, Lessor shall, in
addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
9.8 Waiver. Lessor and Lessee waive the provisions of any statutes which
relate to termination of leases when leased property is destroyed and agree that
such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Payment of Tax Increase. Lessor shall pay the real property tax, as
defined in paragraph 10.3, applicable to the Premises.
10.2 Omitted.
<PAGE>
10.3 Definition of "Real Property Tax". As used herein, the term "real
property tax" shall include any form of real estate tax or assessment general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed on the Premises by any authority having the direct or
indirect power to tax, including any city, state or federal government, or any
school, agricultural, sanitary, fire, street, drainage or other improvement
district thereof, as against any legal or equitable interest of Lessor in the
Premises or in the real property of which the Premises are a part, as against
Lessor's right to rent or other income therefrom , and as against Lessor's
business of leasing the Premises. The term "real property tax" shall also
include any tax, fee, levy, assessment or charge (i) in substitution of,
partially or totally, any tax, fee, levy, assessment or charge hereinabove
included within the definition of "real property tax," or (ii) the nature of
which was hereinbefore included within the definition of "real property tax," or
(iii) which is imposed for a service or right not charged prior to June1,1978,
or, if previously charged, has been increased since June 1, 1978, or (iv) which
is imposed as a result of a transfer, either partial or total, of Lessor's
interest in the Premises or which is added to a tax or charge hereinbefore
included within the definition of real property tax by reason of such transfer,
or (v) which is imposed by reason of this transaction, any modifications or
changes hereto, or any transfers hereof.
10.4 Joint Assessment. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the real property taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.5 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes assessed against and
levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere. When possible, Lessee
shall cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee
within 10 days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. Omitted.
12. Assignment and Subletting.
12.1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all of or any part of Lessee's interest in this Lease or in the
Premises, without Lessor's prior written consent, which Lessor shall not
unreasonably withhold. Lessor shall respond to Lessee's request for consent
hereunder in a timely manner and any attempted assignment, transfer, mortgage,
encumbrance or subletting without such consent shall be void, and shall
constitute a breach of this Lease.
12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph 12.1
hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by or
is under common control with Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all the assets of Lessee as a going concern of the business that is being
conducted on the Premises, provided that said assignee assumes, in full, the
obligations of Lessee under this Lease. Any such assignment shall not, in any
way, affect or limit the liability of Lessee under the terms of this Lease even
if after such assignment or subletting the terms of this Lease are materially
changed or altered without the consent of Lessee, the consent of whom shall not
be necessary.
<PAGE>
12.3 No Release of Lessee. Regardless of Lessor's consent, no subletting or
assignment shall release Lessee of Lessee's obligation or alter the primary
liability of Lessee to pay the rent and to perform all other obligations to be
performed by Lessee hereunder. The acceptance of rent by Lessor from any other
person shall not be deemed to be a waiver by Lessor of any provision hereof.
Consent to one assignment or subletting shall not be deemed consent to any
subsequent assignment or subletting. In the event of default by any assignee of
Lessee or any successor of Lessee, in the performance of any of the terms
hereof, Lessor may proceed directly against Lessee without the necessity of
exhausting remedies against said assignee. Lessor may consent to subsequent
assignments or subletting of this Lease or amendments or modifications to this
Lease with assignees of Lessee, without notifying Lessee, or any successor of
Lessee, and without obtaining its or their consent thereto and such action shall
not relieve Lessee of liability under this Lease.
12.4 Attorney's Fees. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable attorneys fees incurred in connection
therewith, such attorneys fees not to exceed $350.00 for each such request.
13. Defaults; Remedies.
13.1 Defaults. The occurrence of any one or more of the following events
shall constitute a material default and breach of this Lease by Lessee:
(a) The vacating or abandonment of the Premises by Lessee.
(b) The failure by Lessee to make any payment of rent or any other
payment required to be make by Lessee hereunder, as and when due, where such
failure shall continue for a period of three days after written notice thereof
from Lessor to Lessee. In the event that Lessor serves Lessee with a Notice to
Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes such Notice
to Pay Rent or Quit shall also constitute the notice required by this
subparagraph.
(c) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Lessee,
other than described in paragraph (b) above, where such failure shall continue
for a period of 30 days after written notice hereof from Lessor to Lessee;
provided, however, that if the nature of Lessee's default is such that more than
30 days are reasonably required for its cure, then Lessee shall not be deemed to
be in default if Lessee commenced such cure within said 30-day period and
thereafter diligently prosecutes such cure to completion.
(d) (i) The making by Lessee of any general arrangement or assignment
for the benefit of creditors; (ii) Lessee becomes a "debtor" as defined in 11
U.S.C. ss.101 or any successor statute thereto (unless, in the case of a
petition filed against Lessee, the same is dismissed within 60 days); (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Lessee's assets located at the Premises or of Lessee's interest in this Lease,
where possession is not restored to Lessee within 30 days; or (iv) the
attachment, execution or other judicial seizure of substantially all of Lessee's
assets located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within 30 days. Provided, however, in the event that
any provisions of this paragraph 13.1 (d) is contrary to any applicable law,
such provision shall be of no force or effect.
(e) The discovery by Lessor that any financial statement given to
Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any
successor in interest of Lessee or any guarantor of Lessee's obligation
hereunder, and any of them, was materially false.
<PAGE>
13.2 Remedies. In the event of any such material default or breach by
Lessee, Lessor may at any time thereafter, with or without notice or demand and
without limiting Lessor in the exercise of any right or remedy which Lessor may
have by reason of such default or breach: (a) Terminate Lessee's right to
possession of the Premises by any lawful means, in which case this Lease shall
terminate and Lessee shall immediately surrender possession of the Premises to
Lessor. In such event Lessor shall be entitled to recover form Lessee all
damages incurred by Lessor by reason of Lessee's default including, but not
limited to, the cost of recovering possession of the Premises; expenses of
reletting, including necessary renovation and alteration of the Premises,
reasonable attorney's fees, and any real estate commission actually paid; the
worth at the time of award by the court having jurisdiction thereof of the
amount by which the unpaid rent for the balance of the term after the time of
such award exceeds the amount of such rental loss for the same period that
Lessee proves could be reasonable avoided; that portion of the leasing
commission paid by Lessor pursuant to Paragraph 15 applicable to the unexpired
term of this Lease.
(b) Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have abandoned the
Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decisions of the state wherein the Premises are located.
Unpaid installments of rent and other unpaid monetary obligations of Lessee
under the terms of this Lease shall bear interest from the date due at the
maximum rate then allowable by law.
13.3 Default by Lessor. Lessor shall not be in default unless Lessor fails
to perform obligations required of Lessor within a reasonable time, but in no
event later than thirty (30) days after written notice by Lessee to Lessor and
to the holder of any first mortgage or deed of trust covering the Premises whose
name and address shall have theretofore been furnished to Lessee in writing,
specifying wherein Lessor has failed to perform such obligation; provided,
however, that if the nature of Lessor's obligation is such that more than thirty
(30) days are required for performance then Lessor shall not be in default if
Lessor commences performance within such 30-day period and thereafter diligently
prosecutes the same to completion.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed on Lessor by the
terms of any mortgage or trust deed covering the Premises. Accordingly, if any
installment of rent or any other sum due from Lessee shall not be received by
Lessor or Lessor's designee within ten (10) days after such amount shall be due,
then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a
late charge equal to 6% of such overdue amount. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs Lessor
will incur by reason of late payment by Lessee. Acceptance of such late charge
by Lessor shall in no event constitute a waiver of Lessee's default with respect
to such overdue amount, nor prevent Lessor from exercising any of the other
rights and remedies granted hereunder. In the event that a late charge is
payable hereunder, whether or not collected, for three (3) consecutive
installments of rent, then rent shall automatically become due and payable
quarterly in advance, rather than monthly, notwithstanding paragraph 4 or any
other provision of this Lease to the contrary.
<PAGE>
13.5 Impounds. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) installments of rent or any other
monetary obligation of Lessee under the terms of this Lease, Lessee shall pay to
Lessor, if Lessor shall so request, in addition to any other payments required
under this Lease, a monthly advance installment, payable at the same time as the
monthly rent, as estimated by Lessor, for real property tax and insurance
expenses on the Premises which are payable by Lessee under the terms of this
Lease. Such fund shall be established to insure payment when due, before
delinquency, of any or all such real property taxes and insurance premiums. If
the amounts paid to Lessor by Lessee under the provisions of this paragraph are
insufficient to discharge the obligations of Lessee to pay such real property
taxes and insurance premiums as the same become due, Lessee shall pay to Lessor,
upon Lessor's demand, such additional sums necessary to pay such obligations.
All moneys paid to Lessor under this paragraph may be intermingled with other
moneys of Lessor and shall not bear interest. In the event of a default in the
obligations of Lessee to perform under this Lease, then any balance remaining
from funds paid to Lessor under the provisions of this paragraph may, at the
option of Lessor, be applied to the payment of any monetary default of Lessee in
lieu of being applied to the payment of real property tax and insurance
premiums.
14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain, or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than 10% of the floor area of the
building on the Premises, or more than 25% of the land area of the Premises
which is not occupied by any building, is taken by condemnation, Lessee may, at
Lessee's option, to be exercised in writing only within ten (10) days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice, within ten (10) days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with the foregoing, this Lease shall remain in full force and effect as to the
portion of the Premises remaining, except that the rent shall be reduced in the
proportion that the floor area of the building taken bears to the total floor
area of the building situated on the Premises. No reduction of rent shall occur
if the only area taken is that which does not have a building located thereon.
Any award for the taking of all or any part of the Premises under the power of
eminent domain or any payment made under threat of the exercise of such power
shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any award for loss of or damage to Lessee's trade fixtures and removable
personal property. In the event that this Lease is not terminated by reason of
such condemnation, Lessor shall to the extent of severance damages received by
Lessor in connection with such condemnation, repair any damage to the Premises
caused by such condemnation except to the extent that Lessee has been reimbursed
therefor by the condemning authority. Lessee shall pay any amount in excess of
such severance damages required to complete such repair.
15. Broker's Fee.
(a) Upon execution of this Lease by both parties, Lessor shall pay to
Frederick Ross Company Licensed real estate broker(s), a fee as set forth in a
separate agreement between Lessor and said broker(s), or in the event there is
no separate agreement between Lessor and said broker(s), the sum of $2901.05,
for brokerage services rendered by said broker(s) to Lessor in this transaction.
<PAGE>
(b) Lessor further agrees that if Lessee exercises any Option as
defined in paragraph 39.1 of this Lease, which is granted to Lessee under this
Lease, or any subsequently granted option which is substantially similar to an
Option granted to Lessee under this Lease, or if Lessee acquires any rights to
the Premises or other premises described in this Lease which are substantially
similar to what Lessee would have acquired had an Option herein granted to
Lessee been exercised, or if Lessee remains in possession of the Premises after
the expiration of the term of this Lease after having failed to exercise an
Option, or if said broker(s) are the procuring cause of any other lease or sale
entered into between the parties pertaining to the Premises and/or any adjacent
property in which Lessor has an interest, then as to any of said transactions,
Lessor shall pay said broker(s) a fee in accordance with the schedule of said
broker(s) in effect at the time of execution of this Lease.
(c) Lessor agrees to pay said fee not only on behalf of Lessor but
also on behalf of any person, corporation, association, or other entity having
an ownership interest in said real property or any part thereof, when such fee
is due hereunder. Any transferee of Lessor's interest in this Lease, whether
such transfer is by agreement or by operation of law, shall be deemed to have
assumed Lessor's obligation under this Paragraph 15. Said broker shall be a
third party beneficiary of the provisions of this Paragraph 15.
16. Estoppel Certificate.
(a) Lessee shall at any time upon not less than ten (10) days' prior
written notice from Lessor execute, acknowledge and deliver to Lessor a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and the
date to which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to Lessee's knowledge, any uncured defaults on
the part of Lessor hereunder, or specifying such defaults if any are claimed.
Any such statement may be conclusively relied upon by any prospective purchaser
or encumbrancer of the Premises.
(b) At Lessor's option, Lessee's failure to deliver such statement
within such time shall be a material breach of this Lease or shall be conclusive
upon Lessee (i) that this Lease is in full force and effect, without
modification except as may be represented by Lessor, (ii) that there are no
uncured defaults in Lessor's performance, and (iii) that not more than one
month's rent has been paid in advance or such failure may be considered by
Lessor as a default by Lessee under this Lease.
<PAGE>
(c) If Lessor desires to finance, refinance, or sell the Premises, or
any part thereof, Lessee hereby agrees to deliver to any lender or purchaser
designated by Lessor such financial statements of Lessee as may be reasonably
required by such lender or purchaser. Such statements shall include the past
three years' financial statements of Lessee. All such financial statements shall
be received by Lessor and such lender or purchaser in confidence and shall be
used only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean only the
owner or owners at the time in question of the fee title or a lessee's interest
in a ground lease of the Premises, and except as expressly provided in Paragraph
15, in the event of any transfer of such title or interest. Lessor herein named
(and in case of any subsequent transfers then the grantor) shall be relieved
from and after the date of such transfer of all liability as respects Lessor's
obligations thereafter to be performed, provided that any funds in the hands of
Lessor or the then grantor at the time of such transfer, in which Lessee has an
interest, shall be delivered to the grantee. The obligations contained in this
Lease to be performed by Lessor shall, subject as aforesaid, be binding on
Lessor's successors and assigns, only during their respective periods of
ownership.
18. Severability. The invalidity of any provision of this Lease as determined by
a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. Interest on Past-due Obligations. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the maximum rate
then allowable by law from the date due. Payment of such interest shall not
excuse or cure any default by Lessee under this Lease, provided, however, that
interest shall not be payable on late charges incurred by Lessee nor on any
amounts upon which late charges are paid by Lessee.
20. Time of Essence. Time is of the essence.
21. Additional Rent. Any monetary obligations of Lessee to Lessor under the
terms of this Lease shall be deemed to be rent.
22. Incorporation of Prior Agreements; Amendments. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
agreement or understanding pertaining to any such matter shall be effective.
This Lease may be modified in writing only, signed by the parties in interest at
the time of the modification. Except as otherwise stated in this Lease, Lessee
hereby acknowledges that neither the real estate broker listed in Paragraph 15
hereof nor any cooperating broker on this transaction nor the Lessor or any
employees or agents of any of said persons has made any oral or written
warranties or representations to Lessee relative to the condition or use by
Lessee of said Premises and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use and
adaptability of the Premises and the compliance thereof with all applicable laws
and regulations in effect during the term of this Lease except as otherwise
specifically stated in this Lease.
23. Notices. Any notice required or permitted to be given hereunder shall be in
writing and may be given by personal delivery or by certified mail, and if given
<PAGE>
personally or by mail, shall be deemed sufficiently given if addressed to Lessee
or to Lessor at the address noted below the signature of the respective parties,
as the case may be. Either party may by notice to the other specify a different
address for notice purposes except that upon Lessee's taking possession of the
Premises, the Premises shall constitute Lessee's address for notice purposes. A
copy of all notices required or permitted to be given to Lessor hereunder shall
be concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by notice to Lessee.
24. Waivers. No waiver by Lessor or any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of any act,
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder by
Lessor shall not be a waiver of any preceding breach by Lessee of any provision
hereof, other than the failure of Lessee to pay the particular rent so accepted,
regardless of Lessor's knowledge of such preceding breach at the time of
acceptance of such rent.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.
26. Holding Over. If Lessee, with Lessor's consent, remains in possession of the
Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Lessee, but all options and rights of
first refusal, if any, granted under the terms of this Lease shall be deemed
terminated and be of no further effect during said month to month tenancy.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. Each provision of this Lease performable by Lessee
shall be deemed both a covenant and a condition.
29. Binding Effect; Choice of Law. Subject to any provisions hereof restricting
assignment or subletting by Lessee and subject to the provisions of Paragraph
17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
wherein the Premises are located.
30. Subordination.
(a) This Lease, at Lessor's option, shall be subordinate to any ground
lease, mortgage, deed of trust, or any other hypothecation or security now or
hereafter placed upon the real property of which the Premises are a part and to
any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgagee, trustee or ground lessor shall elect to have this Lease prior to the
lien of its
<PAGE>
mortgage, deed of trust or ground lease, and shall give written notice thereof
to Lessee, this Lease shall be deemed prior to such mortgage, deed of trust, or
ground lease, whether this Lease is dated prior or subsequent to the date of
said mortgage, deed of trust or ground lease or the date of recording thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be. Lessee's failure to
execute such documents within 10 days after written demand shall constitute a
material default by Lessee hereunder, or, at Lessor's option, Lessor shall
execute such documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee
does hereby make, constitute and irrevocably appoint Lessor as Lessee's
attorney-in-fact and in Lessee's name, place and stead, to execute such
documents in accordance with this paragraph 30(b).
31. Attorney's Fees. If either party or the broker named herein brings an action
to enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, on trial or appeal, shall be entitled to his reasonable
attorney's fees to be paid by the losing party as fixed by the court. The
provisions of this paragraph shall inure to the benefit of the broker named
herein who seeks to enforce a right hereunder.
32. Lessor's Access. Lessor and Lessor's agent shall have the right to enter the
Premises at reasonable times for the purpose of inspecting the same, showing the
same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Premises any ordinary "For Sale"
signs and Lessor may at any time during the last 120 days of the term hereof
place on or about the Premises any ordinary "For Lease" signs, all without
rebate of rent or liability to Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. Signs. Lessee shall not place any sign upon the Premises without Lessor's
prior written consent except that Lessee shall have the right, without the prior
permission of Lessor to place ordinary and usual for rent or sublet signs
thereon.
35. Merger. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
36. Consents. Except for paragraph 33 hereof, wherever in this Lease the consent
of one party is required to an act of the other party, such consent shall not be
unreasonably withheld.
37. Guarantor. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
<PAGE>
38. Quiet Possession. Upon Lessee paying the rent for the Premises and observing
and performing all of the covenants, conditions and provisions on Lessee's part
to be observed and performed hereunder, Lessee shall have quiet possession of
the Premises for the entire term hereof subject to all of the provisions of this
Lease. The individuals executing this Lease on behalf of Lessor represent and
warrant to Lessee that they are fully authorized and legally capable of
executing this Lease on behalf of Lessor and that such execution is binding upon
all parties holding an ownership interest in the Premises.
39. Options.
39.1 Definition. As used in this paragraph the word "Options" has the
following meaning: (1) the right or option to extend the term of this Lease or
to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option or right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right of first
refusal to lease other property of Lessor or the right of first offer to lease
other property of Lessor; (3) the right or option to purchase the Premises, or
the right of first refusal to purchase the Premises, or the right of first offer
to purchase the Premises or the right or option to purchase other property of
Lessor, or the right of first refusal to purchase other property of Lessor or
the right of first offer to purchase other property of Lessor.
39.2 Options Personal. Each Option granted to Lessee in this Lease are
personal to Lessee and may not be exercised or be assigned, voluntarily or
involuntarily, by or to any person or entity other than Lessee, provided,
however, the Option may be exercised by or assigned to any Lessee Affiliate as
defined in paragraph 12.2 of this Lease. The Options herein granted to Lessee
are not assignable separate and apart from this Lease.
39.3 Multiple Options. In the event that Lessee has any multiple options to
extend or renew this Lease a later option cannot be exercised unless the prior
option to extend or renew this Lease has been so exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary, (i) during the time
commencing from the date Lessor gives to Lessee a notice of default pursuant to
paragraph 13.1(b) or 13.1(c) and continuing until the default alleged in said
notice of default is cured, or (ii) during the period of time commencing on the
day after a monetary obligation to Lessor is due from Lessee and unpaid (without
any necessity for notice thereof to Lessee) continuing until the obligation is
paid, or (iii) at any time after an event of default described in paragraphs
13.1(a), 13.1(d), or 13.1(e) (without any necessity of Lessor to give notice of
such default to Lessee), or (iv) in the event that Lessor has given to Lessee
three or more notices of default under paragraph 13.1(b), where a late charge
becomes payable under paragraph 13.4 for each of such defaults, or paragraph
13.1(c), whether or not the defaults are cured, during the 12 month period prior
to the time that Lessee intends to exercise the subject Option.
(b) The period of time within which an Option may be exercised shall
not be extended or
<PAGE>
enlarged by reason of Lessee's inability to exercise an Option because of the
provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of 30 days after such obligation becomes due (without any necessity
of Lessor to give notice thereof to Lessee), or (ii) Lessee fails to commence to
cure a default specified in paragraph 13.1(c) within 30 days after the date that
Lessor gives notice to Lessee of such default and/or Lessee fails thereafter to
diligently prosecute said cure to completion, or (iii) Lessee commits a default
described in paragraph 13.1(a), 13.1(d) or 13.1(e) (without any necessity of
Lessor to give notice of such default to Lessee), or (iv) Lessor gives to Lessee
three or more notices of default under paragraph 13.1(b), where a late charge
becomes payable under paragraph 13.4 for each such default, or paragraph
13.1(c), whether or not the defaults are cured.
40. Multiple Tenant Building. In the event that the Premises are part of a
larger building or group of buildings then Lessee agrees that it will abide by,
keep and observe all reasonable rules and regulations which Lessor may make from
time to time for the management, safety, care, and cleanliness of the building
and grounds, the parking of vehicles and the preservation of good order therein
as well as for the convenience of other occupants and tenants of the building.
The violations of any such rules and regulations shall be deemed a material
breach of this Lease by Lessee.
41. Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of Lessee, its agents and
invitees from acts of third parties.
42. Easements. Lessor reserves to itself the right, from time to time, to grant
such easements, rights and dedications that Lessor deems necessary or desirable,
and to cause the recordation of Parcel Maps and restrictions, so long as such
easements, rights, dedications, Maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so shall
constitute a material breach of this Lease.
43. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the provisions
hereof, the party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment, and there shall survive the right on the part
of said party to institute suit for recovery of such sum. If it shall be
adjudged that there was no legal obligation on the part of said party to pay
such sum or any part thereof, said party shall be entitled to recover such sum
or so much thereof as it was not legally required to pay under the provisions of
this Lease.
44. Authority. If Lessee is a corporation, trust, or general or limited
partnership, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly
<PAGE>
authorized to execute and deliver this Lease on behalf of said entity. If Lessee
is a corporation, trust or partnership, Lessee shall, within thirty (30) days
after execution of this Lease, deliver to Lessor evidence of such authority
satisfactory to Lessor.
45. Conflict. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. Addendum. Attached hereto is an addendum or addenda containing paragraphs 47
through 50 which constitutes a part of this Lease.
47. Landlord shall install a six foot chain link fence to demise the East 6,000
sq. ft. for the tenants use.
48. Tenant can use the Easterly 10% of the fenced yard for outside storage.
49. Any and all reference herein regarding Lessor shall be changed to Sublessor
and Lessee shall be changed to Sublessee.
50. Landlord shall be responsible for the cost of all utility expenses.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
If this Lease has been filled in it has been prepared for
submission to your attorney for his approval. No
representation or recommendation is made by the real estate
broker or its agents or employees as to the legal
sufficiency, legal effect, or tax consequences of this Lease
or the transaction relating thereto.
The parties hereto have executed this Lease at the place on the dates specified
immediately adjacent to their respective signatures.
Executed at Modern Plastics, Inc.
--------------------------- ----------------------------------
on By /s/ David E. Hill
------------------------------------ ------------------------------
Address By David E. Hill
-------------------------------- ------------------------------
"LESSOR"
Executed at OraLabs, Inc.
---------------------------- ---------------------------------
on By /s/ Gary Schlatter
------------------------------------ -----------------------------
Address By Gary Schlatter
------------------------------- -----------------------------
"LESSEE"
FREDERICK ROSS COMPANY
By /s/ Peter Wycoff
-----------------------------
Peter Wycoff Agent
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is effective January 1, 1997 (the
"Effective Date") and is by and between Oralabs, Inc., a Colorado corporation
(the "Company" or the "Employer") and Allen R. Goldstone (the "Employee").
WHEREAS, the Company desires to be assured of the association and services
of the Employee for the Company; and
WHEREAS, Employee is willing and desires to be employed by the Company, and
the Company is willing to employ Employee, upon the terms, covenants and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
matters described in this Agreement, the adequacy and sufficiency of which
consideration is hereby acknowledged, the parties agree as follows:
1. Employment. Effective as of the Effective Date, the Company hereby
employs Employee and Employee hereby accepts employment with the Company,
subject to the terms and conditions hereinafter set forth.
2. Duties. Employee will be responsible for the Company's human resources
department, and will perform such functions and duties as the Company may
specify or from time to time assign to Employee and which are consistent
therewith. The Company will specify the location where Employee will perform his
duties, and at all times the Employee's performance of his duties will be
subject to the direction and control of the Company through its Board of
Directors and such executive officers of the Company as the Board of Directors
shall designate. In the absence of a different designation by the Board of
Directors, Employee acknowledges and agrees that his work will be supervised by
the President of the Company.
3. Extent of Duties. Employee agrees to devote such time and attention to
the business of the Company as may be required to fulfill the duties of his
position. Employee acknowledges and agrees that the amount of time and attention
which he shall be required to devote may vary widely from time to time. This
Agreement shall not be construed to preclude the Employee from engaging in other
business activities while he is an employee of the Company, provided that he is
available to perform and does perform the services required of him as consistent
with this Agreement.
4. Term of Employment. The term of this Agreement is for the one (1) year
period which expires on December 31, 1997. This Agreement shall automatically
renew for successive periods of one (1) year each unless and until either party
notifies the other of the termination of this Agreement, which notice must be
given at least thirty (30) days prior to the expiration date of the then current
term. If such notice is given, the Agreement shall terminate on the last day of
the then current one (1) year term. This Agreement can be so terminated for any
reason or for no reason, in the exercise of the sole and arbitrary discretion of
Employer or Employee.
<PAGE>
5. Compensation. (a) Employee's salary for services performed under this
Agreement shall be $8,000 per year, payable by the Company in equal weekly
installments of $153.84 each, and reduced by applicable withholding of federal,
state and local taxes.
(b) On or before April 30, 1997, the Company shall issue to the
Employee, as additional compensation under this Agreement, 340,000 shares of the
restricted common stock of the Company, which shall be deemed fully earned by
the Employee as of the date of issuance. The issuance of stock pursuant to this
paragraph is intended to be a one time issuance, and regardless of the number of
additional years during which the Agreement may remain in effect after December
31, 1997, nothing in this Agreement shall be construed to obligate the Company
to issue any additional shares of stock of the Company. Rather, for any year
after 1997 during which this Agreement is in effect, the sole compensation of
the Employee shall be as specified in Section 5(a) of this Agreement. Delivery
of the shares of the common stock of the Company shall not occur until the
Employee shall have paid to the Company the amount required to be withheld for
withholding taxes in respect of such delivery, which amount is agreed to be
$58,282.
(c) The compensation described in Sections 5(a) and 5(b) of this
Agreement constitute the sole compensation payable to the Employee by the
Employer. Employee shall have no right to participate in benefits provided to
any other employees, including without limitation that the Employee is not
entitled to the benefits of any medical insurance, term life insurance,
retirement benefits, profit sharing, stock option plans or grants, disability
insurance or similar benefits which the Company may provide to any of its
employees. Employee shall not be entitled to reimbursement for any expenses
incurred by Employee unless the amount of such expenses has been approved in
advance in writing by the Company.
6. Trade Secrets. Employee shall not at any time or in any manner, either
directly or indirectly, divulge, disclose or communicate to any person, firm or
entity in any manner whatsoever any non-public information concerning any
matters affecting or relating to the business of the Employer. The provisions of
this Section shall survive the termination or expiration of this Agreement.
7. Inability to Bind. Notwithstanding anything in this Agreement to the
contrary, Employee has no right and shall not have the right to make any
contracts or other commitments for or on behalf of the Employer without first
obtaining the written consent of the Employer.
8. Separate Counsel. Employee represents that he has consulted his own
legal counsel to the extent deemed necessary by Employee, and that such counsel
has advised him as to the effects of the terms and conditions of this Agreement.
Employee specifically acknowledges that legal counsel to the Company does not
represent Employee in connection herewith.
9. Miscellaneous. This Agreement shall be construed in accordance with the
laws of the State of Colorado. If it is determined that any provision of this
Agreement is invalid or of no force and effect, this shall not impair the
remainder of the Agreement and all other provisions shall remain in full force
and effect. The Agreement contains the full and complete agreement between the
parties concerning the employment of Employee, and supersedes all prior
statements, agreements, understandings and representations with respect to the
employment of Employee. This Agreement may only be modified by written amendment
-2-
<PAGE>
signed by both parties. All notices required or permitted by this Agreement to
be given shall be deemed delivered upon personal delivery to the party to whom
the notice is given or two (2) business days after such notice is deposited with
the United Stated Postal Service, postage prepaid, certified or registered,
return receipt requested, addressed to the party being given notice at the
address set forth on the signature page of this Agreement or as any party may
from time to time specify in writing to the other party. In the event of
litigation between the parties concerning this Agreement, the prevailing party
shall be entitled to reasonable attorney's fees and costs incurred in addition
to any other relief awarded by the court.
COMPANY OR EMPLOYER:
ORALABS, INC.
By: /s/ Gary Schlatter
-----------------------------------
Gary Schlatter, President
2901 South Tejon Street
Englewood, Colorado 80110
EMPLOYEE:
/s/ Allen R. Goldstone
--------------------------------------
Allen R. Goldstone
5353 Manhattan Circle, Suite 201
Boulder, Colorado 80303
-3-
<PAGE>
TERMINATION OF EMPLOYMENT AGREEMENT
By signatures below, OraLabs, Inc., a Colorado corporation (the "Employer")
and Allen R. Goldstone (the "Employee") hereby agree that the Employment
Agreement effective January 1, 1997 is terminated effective January 1, 1998, and
the Employer and the Employee agree that neither party has any remaining
obligations to the other thereunder except for any provisions in the Agreement
which by their terms are intended to survive the termination or expiration of
the Agreement.
The execution of this instrument does not constitute a resignation by
Employee of its position on the Board of Directors of the Employer's parent
corporation. However, Employee acknowledges and agrees that in accordance with
the provisions of Section 5 of the 1997 Non- Employee Directors' Option Plan of
the Employer's parent corporation, he is not entitled to any options thereunder
and Employee agrees that he will not assert any claim for any options under said
Plan. The parties agree that the provisions of this instrument are supported by
good and valuable consideration, the adequacy and sufficiency of which are
acknowledged by the parties.
EMPLOYER:
ORALABS, INC., a Colorado corporation
By: /s/ Gary Schlatter
------------------------------------
Gary Schlatter, President
EMPLOYEE:
/s/ Allen R. Goldstone
---------------------------------------
Allen R. Goldstone
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is effective January 1, 1997 (the
"Effective Date") and is by and between Oralabs, Inc., a Colorado corporation
(the "Company" or the "Employer") and Sanford L. Schwartz (the "Employee").
WHEREAS, the Company desires to be assured of the association and services
of the Employee for the Company; and
WHEREAS, Employee is willing and desires to be employed by the Company, and
the Company is willing to employ Employee, upon the terms, covenants and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
matters described in this Agreement, the adequacy and sufficiency of which
consideration is hereby acknowledged, the parties agree as follows:
1. Employment. Effective as of the Effective Date, the Company hereby
employs Employee and Employee hereby accepts employment with the Company,
subject to the terms and conditions hereinafter set forth.
2. Duties. Employee will be responsible for the Company's investor
relations department, and will perform such functions and duties as the Company
may specify or from time to time assign to Employee and which are consistent
therewith. The Company will specify the location where Employee will perform his
duties, and at all times the Employee's performance of his duties will be
subject to the direction and control of the Company through its Board of
Directors and such executive officers of the Company as the Board of Directors
shall designate. In the absence of a different designation by the Board of
Directors, Employee acknowledges and agrees that his work will be supervised by
the President of the Company.
3. Extent of Duties. Employee agrees to devote such time and attention to
the business of the Company as may be required to fulfill the duties of his
position. Employee acknowledges and agrees that the amount of time and attention
which he shall be required to devote may vary widely from time to time. This
Agreement shall not be construed to preclude the Employee from engaging in other
business activities while he is an employee of the Company, provided that he is
available to perform and does perform the services required of him as consistent
with this Agreement.
4. Term of Employment. The term of this Agreement is for the one (1) year
period which expires on December 31, 1997. This Agreement shall automatically
renew for successive periods of one (1) year each unless and until either party
notifies the other of the termination of this Agreement, which notice must be
given at least thirty (30) days prior to the expiration date of the then current
term. If such notice is given, the Agreement shall terminate on the last day of
the then current one (1) year term. This Agreement can be so terminated for any
reason or for no reason, in the exercise of the sole and arbitrary discretion of
Employer or Employee.
<PAGE>
5. Compensation. (a) Employee's salary for services performed under this
Agreement shall be $8,000 per year, payable by the Company in equal weekly
installments of $153.84 each, and reduced by applicable withholding of federal,
state and local taxes.
(b) On or before April 30, 1997, the Company shall issue to the
Employee, as additional compensation under this Agreement, 340,000 shares of the
restricted common stock of the Company, which shall be deemed fully earned by
the Employee as of the date of issuance. The issuance of stock pursuant to this
paragraph is intended to be a one time issuance, and regardless of the number of
additional years during which the Agreement may remain in effect after December
31, 1997, nothing in this Agreement shall be construed to obligate the Company
to issue any additional shares of stock of the Company. Rather, for any year
after 1997 during which this Agreement is in effect, the sole compensation of
the Employee shall be as specified in Section 5(a) of this Agreement. Delivery
of the shares of the common stock of the Company shall not occur until the
Employee shall have paid to the Company the amount required to be withheld for
withholding taxes in respect of such delivery, which amount is agreed to be
$58,282.
(c) The compensation described in Sections 5(a) and 5(b) of this
Agreement constitute the sole compensation payable to the Employee by the
Employer. Employee shall have no right to participate in benefits provided to
any other employees, including without limitation that the Employee is not
entitled to the benefits of any medical insurance, term life insurance,
retirement benefits, profit sharing, stock option plans or grants, disability
insurance or similar benefits which the Company may provide to any of its
employees. Employee shall not be entitled to reimbursement for any expenses
incurred by Employee unless the amount of such expenses has been approved in
advance in writing by the Company.
6. Trade Secrets. Employee shall not at any time or in any manner, either
directly or indirectly, divulge, disclose or communicate to any person, firm or
entity in any manner whatsoever any non-public information concerning any
matters affecting or relating to the business of the Employer. The provisions of
this Section shall survive the termination or expiration of this Agreement.
7. Inability to Bind. Notwithstanding anything in this Agreement to the
contrary, Employee has no right and shall not have the right to make any
contracts or other commitments for or on behalf of the Employer without first
obtaining the written consent of the Employer.
8. Separate Counsel. Employee represents that he has consulted his own
legal counsel to the extent deemed necessary by Employee, and that such counsel
has advised him as to the effects of the terms and conditions of this Agreement.
Employee specifically acknowledges that legal counsel to the Company does not
represent Employee in connection herewith.
9. Miscellaneous. This Agreement shall be construed in accordance with the
laws of the State of Colorado. If it is determined that any provision of this
Agreement is invalid or of no force and effect, this shall not impair the
remainder of the Agreement and all other provisions shall remain in full force
and effect. The Agreement contains the full and complete agreement between the
parties concerning the employment of Employee, and supersedes all prior
statements, agreements, understandings and representations with respect to the
employment of Employee. This Agreement may only be modified by written amendment
signed by both parties. All notices required or permitted by this Agreement to
-2-
<PAGE>
be given shall be deemed delivered upon personal delivery to the party to whom
the notice is given or two (2) business days after such notice is deposited with
the United Stated Postal Service, postage prepaid, certified or registered,
return receipt requested, addressed to the party being given notice at the
address set forth on the signature page of this Agreement or as any party may
from time to time specify in writing to the other party. In the event of
litigation between the parties concerning this Agreement, the prevailing party
shall be entitled to reasonable attorney's fees and costs incurred in addition
to any other relief awarded by the court.
COMPANY OR EMPLOYER:
ORALABS, INC.
By: /s/ Gary Schlatter
----------------------------------------
Gary Schlatter, President
2901 South Tejon Street
Englewood, Colorado 80110
EMPLOYEE:
/s/ Sanford L. Schwartz
-------------------------------------------
Sanford L. Schwartz
5353 Manhattan Circle, Suite 201
Boulder, Colorado 80303
-3-
<PAGE>
TERMINATION OF EMPLOYMENT AGREEMENT
By signatures below, OraLabs, Inc., a Colorado corporation (the "Employer")
and Sanford L. Schwartz (the "Employee") hereby agree that the Employment
Agreement effective January 1, 1997 is terminated effective January 1, 1998, and
the Employer and the Employee agree that neither party has any remaining
obligations to the other thereunder except for any provisions in the Agreement
which by their terms are intended to survive the termination or expiration of
the Agreement.
EMPLOYER:
ORALABS, INC., a Colorado corporation
By: /s/ Gary Schlatter
-------------------------------------
Gary Schlatter, President
EMPLOYEE:
/s/ Sanford L. Schwartz
----------------------------------------
Sanford L. Schwartz
LIST OF SUBSIDIAIRES OF THE COMPANY
1. OraLabs, Inc. is a wholly-owned subsidiary of the Company which is
incorporated under the laws of the State of Colorado and conducts business under
its own name.
2. OL Sub Corp. is a wholly owned, inactive subsidiary of the Company which
is incorporated under the laws of the State of Colorado.
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the OraLabs Holding Corp. 1997 Stock Plan and in the
related Prospectus, of our report dated February 24, 1998 on the consolidated
financial statements of OraLabs Holding Corp., and of our report dated March 12,
1998 on the financial statements of SSI Capital Corp., included in the Form 10-K
for the fiscal year ended December 31, 1997.
Very truly yours,
/s/ Schumacher & Associates, Inc.
----------------------------------
Schumacher & Associates, Inc.
Certified Public Accountants
12835 E. Arapahoe Road
Tower II, Suite 110
Englewood, Colorado 80112
Denver, Colorado
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ORALABS HOLDING CORP. AND CONSOLIDATED
SUBSIDIARIES (DECEMBER 31, 1997, 1996 AND 1995) AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001044577
<NAME> ORALABS HOLDING CORP. AND CONSOLIDATED SUBSIDIARIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,023,598
<SECURITIES> 0
<RECEIVABLES> 720,438
<ALLOWANCES> (33,770)
<INVENTORY> 599,270
<CURRENT-ASSETS> 2,469,215
<PP&E> 385,222
<DEPRECIATION> (170,490)
<TOTAL-ASSETS> 2,683,947
<CURRENT-LIABILITIES> 676,451
<BONDS> 0
0
0
<COMMON> 9,124
<OTHER-SE> 1,998,372
<TOTAL-LIABILITY-AND-EQUITY> 2,683,947
<SALES> 6,762,361
<TOTAL-REVENUES> 6,762,361
<CGS> 3,027,733
<TOTAL-COSTS> 3,027,733
<OTHER-EXPENSES> 2,119,031
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,650,347
<INCOME-TAX> 522,694
<INCOME-CONTINUING> 1,127,653
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,127,653
<EPS-PRIMARY> .13
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SSI CAPITAL CORP. (DECEMBER 31, 1996) AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001044577
<NAME> ORALABS HOLDING CORP.
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> NOV-30-1996<F1>
<PERIOD-END> DEC-31-1996
<CASH> 192,146
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 192,146
<CURRENT-LIABILITIES> 27,760
<BONDS> 0
0
0
<COMMON> 1,749
<OTHER-SE> 162,637
<TOTAL-LIABILITY-AND-EQUITY> 192,146
<SALES> 0
<TOTAL-REVENUES> 651
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,683
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,032)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,032)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,032)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> OraLabs Holding Corp. is the successor to SSI Capital Corp. Financial
Statements of SSI Capital Corp. for December 1996 are filed to reflect a
change in fiscal year adopted in May 1997.
</FN>
</TABLE>
