As filed with the Securities and Exchange Commission on October 28, 1997
Registration No. 33-____
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BIOXIDE CORPORATION
(Name of small business issuer in its charter)
Nevada 3821 13-3883624
(State of incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
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380 North 200 West, Suite 101
Bountiful, Utah 84010
(801) 294-8306
(Address and telephone number of registrant's principal executive offices
and principal place of business)
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Dale G. Karren
Chief Executive Officer
Bioxide Corporation
380 North 200 West, Suite 101
Bountiful, Utah 84010
(801) 294-8306
(Name, Address and telephone number of agent for service)
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Copies to:
J. Gordon Hansen, Esq.
Scott R. Carpenter, Esq.
William R. Gray, Esq.
Parsons Behle & Latimer
201 South Main, #1800
Salt Lake City, Utah 84145-0898
(801) 532-1234
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Approximate date of commencement of proposed sale to the public: As
soon as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
====================================== ================== ==================== ===================== ================
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Each Class to be Offering Price Aggregate Registration
of Securities to be Registered Registered Per Share Offering Price (1) Fee
- -------------------------------------- ------------------ -------------------- --------------------- ----------------
Common Stock, $.0001 par value 1,533,332 shares $5.00 $7,666,660 $2,324
====================================== ================== ==================== ===================== ================
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457.
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The Registrant hereby amends this Registration Statement on such a date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
[Information contained herein is subject to completion or amendment. A
registration statement relating to the securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of securities in any
State in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities law of any such state.]
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1997
PROSPECTUS
BIOXIDE CORPORATION
[LOGO]
1,533,332 Shares of Common Stock
---------------
Of the 1,533,332 shares of Common Stock offered hereby (the "Shares")
1,200,000 Shares are being sold by Bioxide Corporation (the "Company") and
333,332 Shares are being sold by certain stockholders of the Company (the
"Selling Stockholders"). See "Principal and Selling Stockholders." Prior to this
offering (the "Offering"), there has been no established public market for the
Company's Common Stock. The offering price of the Shares was arbitrarily
determined by the Company and may have no relation to the book value or earnings
of the Company. See "Description of Securities." The Company will apply to list
the Shares for quotation on the Nasdaq market under the symbol "BOXI."
---------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS," BEGINNING ON PAGE 7.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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========================= ================= ============================ ================= =========================
Underwriting Discounts Proceeds to Proceeds to
Price to Public and Commissions(1) Company (2) Selling Stockholders
- ------------------------- ----------------- ---------------------------- ----------------- -------------------------
Per Share......... $5.00 $--- $ $
- ------------------------- ----------------- ---------------------------- ----------------- -------------------------
Total.............. $7,666,660 $--- $ $
========================= ================= ============================ ================= =========================
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(1) The Company has not engaged the services of an Underwriter in connection
with the offering and/or sale of the Shares. The Company, however, reserves
the right to engage the services of one or more Underwriters.
See "Underwriting."
(2) Before deducting estimated expenses of the Offering of $______ payable by
the Company and the Selling Stockholders.
The Company intends to distribute to stockholders annual reports
containing audited financial statements examined by an independent public
accounting firm and quarterly reports for the first three quarters of each
fiscal year containing unaudited financial information.
The Shares are offered by the Company (on its behalf and on behalf of
the Selling Stockholders), when, as and if delivered to and accepted by it,
subject to its right to withdraw, cancel or reject orders in whole or in part
and subject to other conditions. It is expected that delivery of certificates
will be made against payments therefor on or about ____________, 1997 at the
offices of the Company in Bountiful, Utah.
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October 28, 1997
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus,
including information set forth under "Risk Factors." This Prospectus contains
forward-looking statements which involve risk and uncertainties. The Company's
actual operating results may differ significantly from the results discussed in
these forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed in "Risk Factors" and
"Management's Discussion and Analysis or Plan of Operations."
The Company
Introduction
Bioxide Corporation (the "Company") is in the business of identifying,
evaluating, developing, manufacturing and marketing devices and products
utilizing a proprietary sterilization technology known as the "Deligen II"
technology. The Deligen II technology incorporates a combination of ultraviolet
light and ozone for the sterilization of products, water and air.
The Company believes the Deligen II technology offers benefits not
currently found in existing purification, disinfectant and sterilization
systems. The Deligen II system operates at room temperature, so materials can be
sterilized that would normally degrade at high temperature, such as that
produced by dry heat or steam sterilization. Since the Deligen II system does
not require elevated pressure to be effective, the Company believes Deligen II
sterilization devices will not need to be constructed of heavy gauge metal, a
disadvantage of both the ethylene oxide sterilization and steam sterilization
methods, where pressures in excess of atmospheric pressure are routinely used in
processing. Further, in contrast to sterilization systems (such as ethylene
oxide sterilization) that typically require the use of heavy and bulky high
pressure gas cylinders and enclosures and require expensive disposal of
sterilization residuals, the Deligen II technology requires no special container
construction or contaminant removal. Moreover, although some precautions need to
be taken while working with the Deligen II technology, the Company believes they
are relatively minor in comparison to the precautions that need to be observed
when using sterilization methods such as gamma radiation, accelerated ion beams
and ethylene oxide. Finally, unlike gamma radiation and accelerated ion beam
processes, the Deligen II technology is simple to use, does not require
extensive shielding, does not require regulation by the Nuclear Regulatory
Commission, and is relatively inexpensive to use.
Company Products
The Company is evaluating a number of potential products and devices
for the Deligen II technology and, in conjunction with a laboratory equipment
manufacturer, has developed marketing prototypes of two products, a carbon
dioxide incubator and a glassware washer for clinical laboratories. The Company
has also initiated preliminary development of a portable, self-contained
sterilization unit or "kit" that the Company believes may be able to be
retrofitted into a number of existing devices or incorporated into products that
currently do not have sterilization or disinfectant functions. The Company has
also conducted early-phase studies for the development of a purification system
which the Company believes may be able to be used in commercial aircraft, and
has had preliminary discussions with a large commercial aircraft manufacturer
regarding the incorporation of a Deligen II-based air purification system in the
manufacturer's aircraft. Based on testing and clinical data, the Company also
believes that the Deligen II technology may be able to be incorporated in a
number of other products and devices, including heating, ventilation and air
conditioning ("HVAC") systems, water treatment systems, dishwashers and laundry
equipment, and that it may be used for contract sterilization of medical devices
and other reusable items that require low-microbe levels.
<PAGE>
Company Strategy
The Company's primary business goal is to establish the Deligen II
technology as a cost effective preferred means of providing purification,
sterilization and disinfectant functions in a wide range of industrial,
commercial and residential products. The Company's strategy for achieving this
goal includes (i) pursuing development of products and systems that may be
incorporated into commercial, municipal and residential products that currently
incorporate some type of sterilization or disinfectant function, (ii) developing
a portable, self-contained component "kit" which may allow the Deligen II
technology to be used in products that either currently provide disinfectant or
sterilization functions (such as retrofitting existing incubators and clean
rooms) or currently do not include disinfectant or sterilization functions (such
as residential dishwashers, HVAC systems and water and air treatment devices),
(iii) pursuing contract sterilization projects, particularly in the medical
device and reusable products markets, and (iv) pursing new sterilization and
disinfectant technology through collaborative relationships, in-licensing and
acquisitions.
Company Offices
The Company was incorporated in Nevada in March of 1996. The Company's
executive offices are located at 380 North 200 West, Suite 101, Bountiful, Utah
84010, and its telephone number is (801) 294-8306.
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The Offering
<S> <C>
Common Stock offered hereby................................. 1,533,332 shares
Common Stock to be outstanding after the Offering........... 5,583,664 shares (1)
Use of Proceeds............................................. For identification and evaluation of potential
products; research and development; creation and
expansion of sales and marketing; equipping Company
facilities and working capital for general
corporate purposes, including the repayment of
indebtedness. See "Use of Proceeds."
Proposed NASDAQ SmallCap Market Symbol...................... "BOXI"
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(1) Based on 4,383,664 shares of Common Stock outstanding on October 1, 1997.
Excludes (i) 770,000 shares of Common Stock issuable upon exercise of options
granted pursuant to the Company's stock option plans, at a weighted average
price of $1.50 per share, and (ii) 1,230,000 shares of Common Stock reserved for
future grants of options or awards under the Company's stock option plans. See
"Management - Employee Benefits Plans - Stock Option Plans" and "Description of
Capital Stock."
<PAGE>
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Summary Financial Data
<S> <C> <C> <C>
Nine Months
Inception to Inception to Ended
December 31, September 30, September 30,
1996 1996 1997
---------- ------------ -------------
Statement of Operations Data:
Net Sales $ --- $ --- $ ---
Costs and expenses:
Technology license acquisition and
royalty expense.............................. 1,000,000 1,000,000 275,500
Consulting, legal, and accounting fees......... 130,008 106,009 197,150
Salaries, wages and payroll taxes.............. 91,766 57,674 150,027
Other general and administrative............... 31,722 27,4650 65,723
---------- ---------- ----------
Total operating expenses.................. 1,253,496 1,191,148 688,400
---------- ---------- ----------
Loss from operations.............................. (1,253,496) (1,191,148) (688,400)
Interest income, net.............................. 9,526 2,556 10,519
------ ------ ----------
Loss before provision for income taxes............ (1,243,970) (1,188,592) (677,881)
Provision for income taxes........................ --- --- ---
------------ ------------ -----------
Net loss.......................................... $(1,243,970) $(1,188,592) $(677,881)
============ ============ ===========
Per Share Data(1):
Loss per common share............................. $ (0.65) $ (0.82) $ (0.16)
============ ============ ===========
Weighted average number of shares of
common stock................................... 1,910,000 1,455,000 4,179,000
September 30, 1997
Balance Sheet Data: Actual Pro forma(3)
------ ------------
Cash and cash equivalents(2)............................................... $ 20,280 $________
Total assets............................................................... $ 61,208 $________
Long term debt, including current portion.................................. $ --- $________
Stockholders' equity (deficit)............................................. $ (39,251) $________
- -------------------------
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(1) See Note 1 of the Notes to Financial Statements for information concerning
the computation of per share amounts.
(2) Includes cash and investments with original maturities to the Company of
three months or less.
(3) Adjusted to reflect the sale of the 1,200,000 Shares offered hereby on
behalf of the Company, at an assumed initial public offering price of $5.00
per Share, and the receipt and application of the net proceeds therefrom.
See "Use of Proceeds."
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective purchasers of the Shares should consider carefully the following
factors in evaluating an investment in the Shares offered hereby. Prospective
investors are cautioned that the statements in this section that are not
descriptions of historical facts may be forward-looking statements that are
subject to risks and uncertainties. Actual results could differ materially from
those currently anticipated due to a number of factors, including those
identified in this section, "Management's Discussion and Analysis or Plan of
Operations," "Business" and elsewhere in this Prospectus.
Limited Operating History. The Company began active business operations
in March 1996 and remains a start up entity. Therefore, prospective investors
have limited historical financial information about the Company upon which to
base an evaluation of its performance and the merits of an investment in the
Shares. Given the Company's limited operating history, there can be no assurance
that it will be able to develop any products or applications for its proprietary
technology and achieve profitability, or that it will be able to compete
successfully in the medical, clinical, laboratory, industrial, consumer
products, or device sterilization or disinfectant industries. The Company is
still evaluating the efficacy and safety of its proprietary technology and there
has been no sales by the Company of any products using that technology. See
"Business" and "Management's Discussion and Analysis or Plan of Operations."
Production Identification & Development. The Company believes that its
proprietary technology offers benefits which are not currently found in existing
purification, disinfection and sterilization systems. To date, the Company has
not brought to market any products which incorporate the technology and, with
the exception of the two medical and clinical laboratory products it has
identified, has not conducted other than preliminary clinical, engineering or
other tests to determine the feasibility of products which could incorporate the
technology, although it believes that the technology may be incorporated into,
and provide added benefits for, such products as heating ventilation and air
conditioning systems ("HVAC systems"), water treatment facilities, dishwashers,
laundry equipment, refrigerators, food handling equipment and general
sterilization or disinfection products and devices. The Company has conducted
proof-of-concept engineering and development tests on the two products into
which it intends to initially incorporate its sterilization technology and has
developed marketing prototypes of those products. There can be no assurance that
the Company will be able to develop or market any such products, or that the
Company's technology may be successfully incorporated into any existing or
future products.
Best Efforts Offering. The Company is negotiating with a number of
underwriters, with the intent of entering into a contractual arrangement
pursuant to which one or more of such underwriters will place the Shares on a
"firm commitment" basis. To date, however, the Company has not retained the
services of an underwriter for those purposes and, accordingly, the Shares will
be offered by the Company only on a best efforts basis by the Company. There can
be no assurance that the Company will be able to sell any or all of the Shares
offered hereby.
Further, although the Company will place the Shares offered on its
behalf before the Shares offered hereunder for the Selling Stockholders, there
is no minimum number of Shares that the Company will be required to sell in
order to close the Offering. As a result, fewer than the 1,200,000 Shares
offered on behalf of the Company, and the 333,332 Shares offered hereby on
behalf of the Selling Stockholders, may be sold by the Company pursuant to the
terms of the Offering. The Company's failure or inability to sell all of the
Shares offered on its behalf hereby could have a material and adverse effect on
the Company's business, financial condition and results of operations. If the
Company is unable to sell all of the Shares offered by it hereby, it may be
required to reallocate and/or reprioritize the use of the net proceeds from the
sale of the Shares to uses (and for purposes) which may differ from the uses of
proceeds set forth elsewhere in this Prospectus. See " Use of Proceeds."
All amounts obtained through the sale of the Shares will be immediately
available to the Company and the Selling Stockholders, and will not be placed in
any escrow or other segregated account pending the completion of the Offering.
Early Stage of Development; Technological Uncertainty. The Company is
at an early stage of development, and, other than the two medical and laboratory
products it has tentatively identified and for which it has developed marketing
prototypes, it has not yet identified any specific product into which its
technology may be incorporated. Further, the Company has not applied for or
received any required governmental approvals for the use or application of its
sterilization technology in any medical or other clinical product or device, and
it has not yet realized any revenues from the sale or license of any products.
<PAGE>
Product revenues may not be realized from the sale or licensing of any such
products (if they are identified and developed) for several years, if at all.
Many of the products the Company is currently evaluating will require
significant research and development efforts prior to any commercial use, and
those additional research and development efforts may include pre-clinical and
clinical testing, as well as lengthy regulatory approvals. There can be no
assurance the Company's research and development efforts will be successful,
that the Company's potential products will prove to be safe and effective in any
required clinical trial or other governmental tests, or that any commercially
successful products will ultimately be developed by the Company. See
"Business--Government Regulation."
Management of Growth. The Company anticipates that there will be rapid
growth in the number of its employees and the scope of its operating and
financial systems. This growth will result in an increase in the level of
responsibility for both existing and new management personnel. To manage its
growth effectively, the Company will be required to continue to implement and
improve its operating and financial systems and to expand, train and manage its
employees. There can be no assurance the management personnel and systems
currently in place, which are limited as to both experience and depth, will be
adequate as the Company grows. See "Management."
Lack of Profitable Operations. The Company has recorded net losses
since its inception. These losses are attributable to start-up costs, research
and development costs, interest expense and depreciation, amortization of
capital expenditures, and other recurring and non-recurring items. The Company
expects to continue to experience losses during the next several years. These
losses could continue for a longer period of time, especially if the Company
engages in substantial research and development, or if it manufactures its own
products. See "Business" and "Management's Discussion and Analysis or Plan of
Operations." The Company has tentatively identified two products into which it
intends to incorporate its sterilization technology. There can be no assurance
that the sales, if any, of those products will be profitable, or that the
Company will be able to identify and market (either on its own behalf or through
joint ventures or other collaborative arrangements) additional products, or that
if it does, that sales of those products will be profitable.
Difficulties and Uncertainties of New Technology. The sterilization,
purification and disinfection of medical, clinical, industrial and residential
products is not a new industry, but the use of a combination of ultraviolet
light and an atmosphere including ozone having a significant amount of 03
radicals and hydroxyl radicals for sterilization is relatively new. Potential
investors should be aware of the difficulties and uncertainties normally
associated with new industries or the application of new technologies in new or
existing industries, such as lack of consumer acceptance, difficulty in
obtaining financing, increasing competition, advances in competing or other
technologies, and changes in laws and regulations. See "Business."
Potential Dependence On Strategic Alliances. The Company's strategy for
the identification, development, testing, manufacture, marketing and
commercialization of its sterilization technology includes entering into various
collaborations with corporate partners, licensors, licensees and others. The
Company is currently in negotiations with the manufacturer of the two products
the Company has initially identified for the incorporation of its sterilization
technology for the manufacture of those products with or for the Company and for
the development of one or more products in the medical and laboratory
sterilization industry, but there can be no assurance that the negotiations will
lead to a definitive agreement between the parties. There can be no assurance
that the Company will be able to negotiate strategic alliances with other
parties on acceptable terms, if at all, or that such collaborative arrangements
will be successful. To the extent the Company chooses not, or is not able, to
establish such arrangements, it could experience increased capital requirements
as a result of its undertaking such activities at its own risk and expense. In
addition, the Company may encounter significant delays in introducing products
or product applications currently under development into the marketplace or find
that the development, manufacture or sale of its proposed products are adversely
affected by the absence of such collaborative agreements.
Under typical collaborative relationships, the collaborative partners
have the right to pursue parallel development of other products which may
compete with the products of the other collaborative partner, and to terminate
the agreements without significant penalty under certain conditions. Any
parallel development by a collaborative partner of the Company of competing
products, or the failure by a collaborative partner to devote sufficient
resources to the development and commercialization of the Company's products,
could have a material adverse effect on the Company's business, financial
condition or results of operations.
<PAGE>
The Company's success may depend upon, among other things, the skills,
experience and efforts of the Company's collaborative partners, employees who
are responsible for the collaborative project, such partners' commitment to the
collaborative arrangement, and the financial condition of such partners, all of
which are beyond the control of the Company. If one or more of the Company's
collaborative partners defaulted on their obligations under their collaborative
arrangements, the Company could be forced to engage in litigation to enforce
those obligations (which could be time consuming and costly) or seek to enter
into agreements with other parties upon similar terms.
Future Capital Needs; Uncertainty of Additional Funding. The
identification, development and commercialization of the Company's products and
technology will require a commitment of substantial funds to conduct research
and development activities, including possible preclinical and clinical studies,
to create and expand distribution and marketing capabilities and to acquire and
expand manufacturing capacity. Although the Company believes that the net
proceeds of the Offering, together with existing cash balances, will be
sufficient to fund the operations of the Company for approximately the next two
years, the Company may be required or elect to raise additional capital before
that time. The Company's actual capital requirements will depend on many
factors, including but not limited to, the costs and timing of the Company's
research and development activities, the number and type of clinical or other
tests the Company may be required to conduct in seeking approval of its products
from governmental or other agencies, the success of the Company's development
efforts, the cost and timing of establishing or expanding the Company's sales
and marketing and/or manufacturing activities, the extent to which the Company's
products (if any) gain market acceptance, the Company's ability to establish and
maintain collaborative relationships, competing technological and market
developments, the progress of the Company's commercialization efforts and the
commercialization efforts of the Company's marketing partners, the costs
involved in preparing, filing, prosecuting, maintaining and enforcing and
defending patent claims and other intellectual property rights, developments
related to regulatory issues, and other factors.
To satisfy its capital requirements, the Company may seek to raise
funds through public or private financings, collaborative relationships or other
arrangements. Any additional equity financing may be dilutive to stockholders,
and debt financing, if available, may involve significant restrictive covenants.
Collaborative arrangements, if necessary to raise additional funds, may require
the Company to relinquish its rights to certain of its technologies, products or
marketing territories. The Company's failure to raise capital when needed could
also have a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that any such
financing, if required, will be available on terms satisfactory to the Company,
if at all. See "Management's Discussion and Analysis or Plan of Operations."
Governmental Regulation. The research, development, manufacture and
marketing of the Company's products which constitute medical devices or products
will be extensively regulated by a number of governmental agencies, including
the United States Food & Drug Administration ("FDA"). The FDA requires
governmental clearance of all medical devices and drugs before they can be
marketed in the United States. Similar approvals are required from other
regulatory bodies in virtually every foreign country. The regulatory processes
established by these government agencies are lengthy, expensive, uncertain and
may require extensive and expensive clinical trials. There can be no assurance
that any future products developed by the Company and which are subject to the
FDA's authority will prove to be safe and effective and meet all of the
applicable regulatory requirements necessary to be marketed. The results the
Company obtains from its testing activities could be susceptible to varied
interpretations which could delay, limit or prevent required regulatory
approvals. In addition, the Company may encounter delays or denials of approval
based on a number of factors, including future legislation, administrative
action or changes in FDA policy made during the period of product development
and FDA regulatory review. The Company may encounter similar delays in foreign
countries. Furthermore, approval may entail ongoing requirements for, among
other things, post-marketing studies. Even if a product developer obtains
regulatory approval, a marketed product, its manufacturer and its manufacturing
facility are subject to on-going regulation and inspections. Discovery of
previously unknown problems with a product, manufacturer or facility could
result in FDA sanctions, restrictions on a product or manufacturer, or an order
to withdraw and/or recall a specific product from the market. There can also be
no assurance that changes in the legal or regulatory framework or other
subsequent developments will not result in limitation, suspension or revocation
of regulatory approvals granted to the Company. Any such events, were they to
occur, could have a material adverse effect on the Company's business, financial
condition and results of operations.
<PAGE>
The Company may also be required to comply with FDA regulations for
manufacturing practices, which mandate procedures for extensive control and
documentation of product design, control and validation of the manufacturing
process and overall product quality. Foreign regulatory agencies have similar
manufacturing standards. Any third parties manufacturing the Company's products
or supplying materials or components for such products may also be subject to
these manufacturing practices and mandatory procedures. If the Company, its
management or its third party manufacturers fail to comply with applicable
regulations regarding these manufacturing practices, it could be subject to a
number of sanctions, including fines, injunctions, civil penalties, delays,
suspensions or withdrawals of market approval, seizures or recalls of product,
operating restrictions and, in some cases, criminal prosecutions.
The Company's products may also be subject to regulation, inspection
and licensing by other governmental agencies, including the Environmental
Protection Agency ("EPA"), state agencies similar to the FDA and EPA and the
Occupational Health and Safety Administration ("OSHA"). In addition, if the
Company engages in contract sterilization services, the Company's products and
operations may be subject to the infection control or other requirements of the
Joint Commission on Accreditation of Health Care Organizations, the Center for
Disease Control, the Association for Advancement of Medical Instrumentation and
other federal and state agencies that have established or maintain testing
methods or sterilization process monitoring.
Uncertainty Associated with Clinical Trials and Other Tests. Certain of
the Company's products may constitute medical devices within the meaning of the
Food, Drug and Cosmetic Act (the "FDA Act") and, therefore, may be subject to
the FDA's regulations governing medical devices. Products regulated as medical
devices may not be commercially distributed in the United States unless they
have been cleared or approved by the FDA, or unless they are otherwise exempted
from the FDA's regulations. Currently, there are two methods for obtaining FDA
approval or clearance of medical devices. Devices deemed to pose less risk are
placed in class I (general controls) or class II (general and special controls)
and qualify for "510(k) notification," a procedure under ss. 510(k) of the FDA
Act. In order for a device to qualify under that procedure, the manufacturer
must, among other things, establish that the product is substantially equivalent
in intended use, safety and effectiveness to another legally marketed class I or
class II device or to a "pre-amendment" class III device for which the FDA has
not called for preliminary market approval ("PMA"). Medical class III is the
class reserved for devices deemed by the FDA to pose the greatest risk.
Manufacturers of class III devices must file a PMA under ss. 515 of the FDA Act.
PMA applications generally require a much more complex submission than a 510(k)
notification and typically require a showing that the device is safe and
effective based on extensive and costly clinical and other testing. There can be
no assurance that any product developed by the Company which is deemed to be a
medical device for FDA Act purposes will qualify for approval under the 510(k)
notification process or that any such products will be deemed to be safe and
effective if required to be qualified under a PMA.
The time required to obtain FDA approval is uncertain, and frequently
takes several years or more, if approval is ever granted. There can be no
assurance that any future products developed or identified by the Company alone
or in conjunction with others will prove to be safe and efficacious in any
required clinical trials, or that they will meet the applicable regulatory
requirements necessary for their marketing, including the receipt of a marketing
clearance, should such be required. Further, if regulatory approval is granted,
that approval would generally be limited to the uses for which the product has
been demonstrated through clinical studies and other means to be safe and
effective. Furthermore, approval may entail ongoing requirements for, among
other things, post-marketing studies. Even if regulatory approval is obtained, a
marketed product, its manufacturer and its manufacturing facilities and
pertinent operations are subject to extensive regulation and periodic
inspections. The regulatory requirements pertinent to medical device
manufacturing and related activities are stringently applied and enforced by the
FDA and similar governmental agencies in other countries.
If the Company is required to conduct clinical or other testing or
trials of its products, any such testing will need to made in compliance with
regulations promulgated by the FDA under the authority granted it under the FDA
Act.
<PAGE>
In other countries, governmental agencies similar to the FDA also regulate the
sale of medical devices and products, generally in a manner similar to the FDA's
regulation of those products. Sales of any products to Europe also require a
"CE" mark, which shows that the product has been manufactured in accordance with
required standards. The Company's sterilization technology has not been approved
for use in connection with or as part of any device, and there can be no
assurance that the Company will not encounter problems in the conduct of any
clinical trials or tests it is required to complete which will cause the FDA, or
any other regulatory agencies to delay or suspend the tests or otherwise not
approve the sale of the Company's products. If any of the Company's products
under development are not shown to be safe and effective in any required
clinical trials, the resulting delays in developing other products or conducting
related preclinical testing and clinical trials, as well as the need for
financing to complete any such testing and trials, could have a material adverse
effect on the Company's business, financial condition and results of operations.
No Manufacturing Capability. The Company has no manufacturing
capability or capacity to produce any products utilizing its sterilization
technology, including any products to be used in any required clinical or other
tests. The Company initially intends to develop relationships with other
companies to manufacture those components and/or products, with the Company
being primarily in the role of specification developer and final assembly
manufacturer for selected products only. The two products currently being
developed by the Company have never been manufactured on a commercial scale and
there can be no assurance that such products can be manufactured at a cost or in
quantities necessary to make them commercially viable. Any delay in availability
of products may result in a delay in the submission of products for any required
regulatory approval or market introduction, subsequent sales of such products,
which could have a material adverse effect on the Company's and business,
financial condition, or results of operations. The Company's manufacturing
processes may be labor intensive and, if so, significant increases in production
volume would likely require changes in both product and process design in order
to facilitate increased automation of the Company's then-current production
processes. There can be no assurance that any such changes in products or
processes or efforts to automate all or any portion of the Company's
manufacturing processes would be successful, or that manufacturing or quality
problems will not arise as the Company initiates production of any products it
might develop.
In addition, some or all of the Company's potential products, or
products in which the Company's sterilization technology may be incorporated,
may be required to be manufactured in accordance with current FDA or other
governmental agency manufacturing regulations. If the manufacturing facilities
cannot pass a plant inspection by the FDA, the manufacturer's ability to
manufacture the products will be adversely affected. There can be no assurance
the Company can successfully acquire manufacturing capacity on a profitable
basis, or contract with another party on terms acceptable to the Company, if at
all.
No Sales or Marketing Capability. The Company has no experience in
sales, marketing or distribution. To market any of its products directly, the
Company would be required to develop a marketing and sales force with technical
expertise and with supporting distribution capability. Alternatively, the
Company may obtain the assistance of other companies with an established
distribution and sales force. To this end, the Company would be required to
enter into agreements with such parties regarding the use and maintenance of
such distribution systems and sales forces. There can be no assurance the
Company will be able to establish sales and distribution capabilities, or that
it will be successful in gaining market acceptance for its products through the
use of the efforts of third parties.
The Company intends to develop and maintain a marketing and sales
organization for its products with a portion of the proceeds of the Offering.
There can be no assurance the Company will be able to recruit, train and
maintain successfully any such sales and marketing personnel, or that the
efforts of such personnel will be successful.
Uncertainty of Protection of Patents or Proprietary Rights. The
Company's success will depend, in large part, on its ability to obtain and
enforce patents, maintain its trade secrets and operate without infringing on
the proprietary rights of others, both in the United States and in other
countries. The patent positions of companies can be uncertain to some extent and
involve complex legal and factual questions, and, therefore, the scope and
enforceability of claims allowed in patents are not systematically predictable
with absolute accuracy.
<PAGE>
The patent forming the basis of the Company's sterilization technology
is a United States patent which was filed in the names of the inventors
(Castberg, et al.) and subsequently assigned to Elopak Systems, A.G., a Swiss
corporation ("Elopak"). The rights under the patent were subsequently licensed
to Biomed Patent Development, LLC and then sublicensed to the Company.
The Company's license rights in the patent depends, in part, upon the
breadth and scope of protection provided by the patent and the validity of the
patent. Any failure to maintain the issued patent could adversely affect the
Company's business. The Company intends to file additional patent applications
(both United States and foreign), when appropriate, relating to its
technologies, improvements to its technologies and for specific products it
develops. There can be no assurance that any issued patents or pending patent
applications of the Company will not be challenged, invalidated or circumvented.
There can also be no assurance that the rights granted thereunder will provide
proprietary protection or competitive advantages to the Company.
The commercial success of the Company will also depend, in part, on the
Company not infringing patents issued to others and not breaching any technology
licenses upon which the Company's products and services are based. It is
uncertain whether any third party patents will require the Company to alter its
products or processes, obtain licenses or cease certain activities. In addition,
if patents have been issued to others which contain competitive or conflicting
claims and such claims are ultimately determined to be valid, the Company may be
required to obtain licenses to those patents or to develop or obtain alternative
technology. If any licenses are required, there can be no assurance the Company
will be able to obtain any such licenses on commercially favorable terms, if at
all. The Company's breach of an existing license or its failure to obtain a
license to any technology that it may require in order to commercialize its
products may have a material adverse impact on the Company's business, results
of operations and financial condition. Further, litigation, which could result
in substantial costs to the Company, may also be necessary to enforce patents
licensed or issued to the Company or to determine the scope or validity of third
party proprietary rights. If competitors of the Company prepare and file patent
applications in the United States that claim technology also claimed by the
Company, the Company may have to participate in interference proceedings
declared by the U.S. Patent and Trademark Office to determine priority of
invention, which could result in substantial cost to the Company, even if the
eventual outcome is favorable to the Company. An adverse outcome could subject
the Company to significant liabilities to third-parties, require disputed rights
to be licensed from third-parties or require the Company to cease using such
technology.
The Company also relies on secrecy to protect portions of its
technology for which patent protection has not yet been pursued or which is not
believed to be appropriate or obtainable in addition to any information of a
confidential and proprietary nature relating to the Company, including but not
limited to its know-how, trade secrets, methods of operation, names and
information relating to the Company's vendors or suppliers and customer names
and addresses. This technology includes technology which the Company acquired
from two parties in connection with, but separate from, the patented technology
from Elopak, a portion of which the Company has acquired and a portion of which
it has obtained a license to use. There can be no assurance that the Company's
undivided ownership and/or license rights in such technology is enforceable.
The Company intends to protect this unpatentable and unpatented
proprietary technology and processes, in addition to other confidential and
proprietary information in part, by confidentiality agreements with its
employees, collaborative partners, consultants and certain contractors. There
can be no assurance that these agreements will not be breached, that the Company
will have adequate remedies for any breach, whether the Company's trade secrets
and other confidential and proprietary information will not otherwise become
known or be independently discovered or reverse-engineered by competitors.
Uncertainty of Market Acceptance. The Company's technology is a new
method of sterilization, and no assurance can be given that the Company's
products, if any, will ever achieve market acceptance. Physicians, lab
assistants and other medical users will not use the Company's products unless
they determine, based on experience, clinical data, advertising or other
factors, that those products are a preferable alternative to currently available
products. Consumers and industrial product users rely on similar evidence in
their decisions to use a new product. In addition, the adoption of new medical
devices (such as those which might incorporate the Company's technology) is
greatly influenced by health care administrators, inclusion on hospital
formularies and reimbursement by third party payors. No assurance can be given
that health care administrators, hospitals or third party payors will accept the
<PAGE>
Company's products. The Company may be required to, among other things, offer
substantial discounts on its products or potential products to stimulate demand.
The failure of the Company's products, if any, to achieve significant market
acceptance could have a material adverse effect on the Company's business,
financial condition and results of operations.
Intense Competition; Rapid Technological Change. The Company's
potential product markets include industries which are rapidly changing,
including the medical and clinical products industries, and consumer and
industrial sterilization devices industry and industries relating to devices
used in water and air sterilization and purification. Existing products and uses
for sterilization, as well as technological approaches to developing such
products and sterilization techniques, will compete directly with the products
the Company anticipates seeking to develop and market. The Company's
sterilization technology will compete directly with other sterilization systems
and technology, and, although the Company believes its technology has advantages
over those competing systems, there can be no assurance the Company's technology
will have advantages which will be significant enough to cause users to adopt
its use. The products in which the Company's technology may be incorporated will
compete with products currently marketed, and competition from such products is
expected to increase.
Most of the companies currently producing sterilization products or
using sterilization techniques have significantly greater financial resources
and expertise in research and development, marketing, manufacturing,
pre-clinical and clinical testing, obtaining regulatory approvals and marketing
than the Company. Smaller companies may also prove to be significant
competitors, particularly through collaborative arrangements with large
third-parties. Academic institutions, governmental agencies and public and
private research organizations also conduct research, seek patent protection and
establish collaborative arrangements for product and clinical development and
marketing. Many of these competitors have sterilization products or techniques
approved or in development and operate large, well funded research and
development programs in the sterilization field. Moreover, these companies and
institutions may be in the process of developing technology that could be
developed more quickly or ultimately proved safer or more effective than the
Company's sterilization technology.
The Company faces competition based on product efficacy, safety, the
timing and scope of regulatory approvals, availability of supply, marketing and
sales capability, reimbursement coverage, price and patent position. There can
be no assurance the Company's competitors will not develop more effective or
more affordable products, or achieve earlier patent protection or product
commercialization than the Company. See "Business Competition."
Product Liability. The testing, marketing and sale of medical or
clinical products and other products which may utilize the Company's technology
involves unavoidable risks. The use of any of the Company's potential products
in clinical or other tests or as a result of the sale of its products, or the
use of its technology in products, may expose the Company to potential liability
resulting from the use of such products. Such liability may result from claims
made directly from consumers or by regulatory agencies, companies or others
selling such products. The Company currently has no clinical trial or product
liability insurance coverage, although it anticipates obtaining and maintaining
appropriate insurance coverage as clinical or other development of its product
candidates progresses and if and when its products are ready to be
commercialized. There can be no assurance the Company will be able to obtain
such insurance or, if it obtains such insurance, that such insurance can be
acquired at a reasonable cost or in sufficient amounts to protect the Company
against such liability. The obligation to pay any product liability claim in
excess of whatever insurance the Company is able to acquire, or the recall of
any of its products (or the products incorporating the Company's technology),
could have a material adverse effect on the Company's business, financial
condition and future prospects.
Hazardous or Toxic Materials. The Company's research and development
activities, and the application of the Company's sterilization technology, may
involve the controlled use of materials, substances or electro-magnetic
radiation which may, if used or employed improperly, prove hazardous. The
Company believes, however, that its technology employs such potentially
hazardous or toxic materials and substances in a manner which minimizes their
adverse effects. Further, where such hazards are employed, the Company intends
to utilize appropriate detection equipment and take appropriate countermeasures
in design, or in the test lab environment.
<PAGE>
Need to Attract and Retain Key Employees and Consultants. The Company
is dependent on the principal members of its scientific and management staff. In
addition, the Company anticipates that it will rely upon consultants and
advisors to assist it in formulating its research and development strategies and
operations. Retaining and attracting qualified personnel, consultants and
advisors will be critical to the Company's success. In order to pursue its
product development and marketing plans, the Company will be required to hire
additional qualified scientific personnel, as well as personnel with expertise
in clinical testing, governmental regulation, manufacturing and marketing.
Expansion of product development and marketing are also expected to require the
addition of management personnel and the development of additional expertise by
existing management personnel. The Company faces competition for qualified
individuals from numerous medical and clinical companies, universities and other
research institutions. There can be no assurance the Company will be able to
attract and retain such individuals on acceptable terms, when needed, and to the
degree required.
The Company anticipates that any clinical development or other approval
tests in which it participates will be augmented by agreements with universities
and/or medical institutions or other personnel. It is likely the Company's
academic collaborators will not be employees of the Company. As a result, the
Company will have limited control over their activities and can expect that only
limited amounts of their time will be dedicated to the Company's activities. The
Company's academic collaborators may have relationships with other commercial
entities, some of which could compete with the Company.
Uncertainty of Health Care Reform Measures and Third Party
Reimbursement. The Company currently anticipates that one or more of its
products may constitute medical products. Recently, a series of legislative and
regulatory proposals has been initiated with the aim of changing the United
States health care system. While the Company cannot predict whether any such
legislative or regulatory proposals will be adopted, or the effect such
proposals may have on its business if they are adopted, the pendency of such
proposals could have a material adverse effect on the Company's ability to raise
capital, and the adoption of such proposals could have a material adverse effect
on the Company's business, financial condition and results of operations.
Furthermore, the Company's ability to develop, identify or commercialize its
potential product portfolio (which includes medical and clinical applications)
may be adversely affected to the extent that such proposals have a material
adverse effect on the business, financial condition and profitability of other
companies that are prospective collaborators for certain of the Company's
proposed products.
Control by Existing Stockholders. After the sale of the Shares offered
hereby, the Company's existing stockholders will continue to have the power to
elect the Company's directors and, subject to certain limitations, effect or
preclude fundamental corporate transactions involving the Company. See
"Principal and Selling Stockholders" and "Description of Capital Stock".
No Public Market; Offering Price; Volatility. There is no established
public market for the Common Stock. Although the Company has applied to have the
Shares offered hereby listed for quotation on the Nasdaq, there can be no
assurance that it will be approved for such listing or that, if approved, an
active trading market will develop for the Shares or that purchasers thereof
will be able to resell them at prices equal to or greater than the public
offering price. The public offering price of the Shares was determined by the
Company and may not be indicative of its true value or its market price after
the Offering. See "Underwriting". The price of the Shares in the future may be
volatile. A variety of events, including quarter-to-quarter variations in
operating results, news announcements, general market trends and other factors,
could result in wide fluctuations in the market price of the Shares.
Dilution. Purchasers of the Shares offered hereby will experience
immediate dilution in the net tangible book value per share of their investment.
At September 30, 1997, the net (deficit) tangible book value per share of the
Company's Common Stock was ($.01). After giving effect to the Offering (at a
public offering price of $5.00 per share), and the other transactions
contemplated hereby, the adjusted pro forma net tangible book value per share
would have been $___________ as of that date, representing an immediate dilution
of $____ per share to the purchasers pursuant to the Offering. See "Dilution."
<PAGE>
Lack of Diversification. The Company's primary business operations
consist of identifying, developing, manufacturing and marketing sterilization
devices and products utilizing or incorporating the Company's sterilization
technology. The Company does not anticipate it will change its business focus in
the near future. The Company, therefore, does not intend to engage in a variety
of other businesses, and will not have the benefit of reducing risk by
diversifying its business operations among a portfolio of business activities.
However, by pursuing applications of its technology in the medical, commercial,
residential, and medical device manufacturing arenas, it hopes to spread, and
thereby decrease, such risk.
Shares Eligible for Future Sale; Potential Adverse Effect on Stock
Price. Upon completion of the Offering, the Company will have 5,583,664 shares
of Common Stock outstanding. Of these shares, the 1,533,332 Shares sold pursuant
to the terms of the Offering will be freely transferable without registration
under the Securities Act of 1933, as amended (the "Act"), except for any shares
purchased by an "affiliate" of the Company, as that term is defined under such
laws. Of the other remaining 4,050,332 shares of Common Stock, all such shares
were issued by the Company in private transactions not involving public
offerings and are "restricted securities". No current stockholder of the Company
has agreed not to sell or otherwise dispose of his Common Stock, and as a
result, those shares may be sold in the open market, subject to certain
limitations imposed by the federal securities laws. Any such sales could have a
material and adverse effect upon the price of the Shares. See "Stock Eligible
for Future Sale."
Anti-Takeover Provisions. The Nevada general corporation law contains
certain provisions that could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from attempting to
acquire, control of the Company. Such provisions could limit the price that
certain investors might be willing to pay in the future for the Shares. See
"Description of Capital Stock."
Forward-looking Statements. Certain statements under the headings
"Prospectus Summary," "Use of Proceeds," "Management's Discussion and Analysis
or Plan of Operations," "Business," and elsewhere in this Prospectus constitute
"forward-looking statements" within the meaning of the rules and regulations
promulgated by the Securities and Exchange Commission. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company,
or industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. These risks, uncertainties and other factors include, among other
things, the Company's unprofitability and the continuing uncertainty of its
profitability, the Company's ability to develop and introduce new products, the
Company's lack of sales, marketing and distribution experience and anticipated
dependence on third parties for such matters, the risks associated with
obtaining governmental approval of the Company's products, the highly
competitive industry in which the Company intends to operate and the rapid pace
of technological change within those industries, the uncertainty of patent and
proprietary technology protection and the Company's reliance on such patent and
proprietary technology (including reliance on technology licensed from third
parties), changes in or failure to comply with governmental regulation, the
uncertainty of third party reimbursement for the Company's products, the
Company's dependence on key employees, general economic and business conditions
and other factors referenced in this Prospectus.
USE OF PROCEEDS
The net proceeds to the Company of the Offering are estimated to be
$____ million after deducting expenses of the Offering. The Company intends to
use (i) approximately $2.0 million of the proceeds from the Offering for
research and development of products into which its sterilization technology
could be incorporated, including any necessary clinical or pre-clinical testing
and regulatory approval of any such products, (ii) approximately $1.5 million
for sales and marketing efforts for products into which its sterilization system
is placed, as well as for general corporate marketing efforts, and (iii) the
balance (approximately $______) for working capital and corporate expenses,
including salaries of officers and others charged with maintaining the daily
business affairs of the Company, lease payments on administrative offices, legal
and accounting fees, and for the payment of certain short-term debt owed IMG,
LLC, an affiliate of a director of the Company. The IMG debt is in the principal
amount of $50,000, bears interest at the rate of 10% per annum and is due and
payable on February 15, 1998. The IMG debt is convertible into Common Stock (at
a price of $1.00 per share) if the Company fails to pay the amounts due under
the obligation on the due date. The IMG debt is part of a $200,000 loan
commitment in favor of the Company from IMG. See "Principal and Selling
Stockholders."
<PAGE>
The amounts actually expended for each purpose set forth above may vary
significantly, depending upon numerous factors, some of which may be beyond the
control of the Company, including the Company's ability to place the Shares if
it does not engage the services of an underwriter who will take the Shares on a
"firm commitment" basis, the progress of the Company's product identification
and development programs, the results of any clinical studies it is required to
conduct, the costs and timing of any regulatory approvals it is required to
obtain, technological advances, determinations as to the commercial potential of
some or all of the Company's products and the status of competitive products.
The amounts and timing of such expenditures will depend upon the receipt and
timing of any required regulatory approvals, the development of products by the
Company, the progress of on-going research and development activities, the
results of any clinical studies the Company is required to conduct, the
determination of commercial potential, the status of competitive products, the
rate at which operating losses are incurred, the receipt of funding from any
collaborative partners of the Company and other factors. The net proceeds of the
Offering may also be used to acquire other companies, technology or products
that the Company believes will complement its business, although no such
transactions are currently being negotiated. Pending such uses, the net proceeds
of the Offering will be invested in short term, interest bearing securities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on the Common
Stock, and does not expect to declare dividends in the foreseeable future.
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the
Company as of September 30, 1997 and (ii) the capitalization of the Company as
of that date as adjusted to give effect to the sale of the 1,200,000 Shares
offered hereby on behalf of the Company at an assumed public offering price of
$5.00 per share and the application of the net proceeds therefrom. This table
should be read in conjunction with the Company's Financial Statements included
elsewhere in this Prospectus:
<TABLE>
<S> <C> <C>
As of September 30, 1997
Actual As Adjusted
------- ------------
Short-term debt obligations $50,000 $ ---
--- ---
Stockholders' Equity
Common Stock, par value $.0001 per share; 100,000,000 438 ______
shares authorized; 4,383,664 shares outstanding; 5,583,664
shares outstanding, as adjusted (1)
Additional paid-in capital 1,882,162 ______
Accumulated deficit (1,921,851) ______
-----------
Total stockholders' equity (deficit) (39,251) ______
-----------
Total capitalization $10,749 $
=========== ========
</TABLE>
- ----------------------
(1) Excludes 2,000,000 shares of Common Stock reserved under the Company's stock
option plans, pursuant to which options for 770,000 shares have been issued at a
weighted average price of $1.50 per share. See "Management" and "Description of
Capital Stock".
<PAGE>
DILUTION
The net (deficit) tangible book value of the Company at September 30,
1997 was $(39,251), or $(.01) per share. Net tangible book value per share is
determined by dividing the net tangible book value of the Company (i.e.,
tangible assets less total liabilities) by the number of shares of Common Stock
outstanding. Without taking into effect any other changes in net tangible book
value after September 30, 1997 other than to give effect to the sale by the
Company of the 1,200,000 Shares offered on behalf of the Company hereby at the
assumed public offering price of $5.00 per share and the receipt and application
of the net proceeds therefrom, the pro forma net tangible book value of the
Company as of September 30, 1997 would have been $_________, or $_________ per
share. This represents an immediate increase in net tangible book value of
$_________ per share to the existing stockholders and an immediate dilution in
net tangible book value of $_________ per share to investors purchasing Shares
in this Offering. The following table illustrates the per share dilution in net
tangible book value to investors in the Offering assuming the foregoing:
<TABLE>
<S> <C> <C>
Public offering price per share................................................... $5.00
Net tangible (deficit) book value per share at September 30, 1997... $(.01)
Increase per share attributable to the offering..................... $_____
Pro forma net tangible book value per Share after Offering........................ $________
Dilution per Share to new investors............................................... $
</TABLE>
The following table summarizes, on a pro forma basis as of September
30, 1997, the differences between the historical stockholders and the new
investors with respect to number of shares of Common Stock purchased from the
Company, the total cash consideration paid and the average cash price per share
paid by the existing stockholders and by new investors in the Offering at the
public offering price of $5.00 per share, before deduction of the estimated
offering expenses:
<TABLE>
<S> <C> <C> <C> <C> <C>
Average
Shares Purchased Total Consideration Price Per
Number Percent Amount Percent Share
Existing stockholders 4,383,664 78.5% $1,452,500 19% $.33
--------- -------- ---------- ------- ----------
New Investors 1,200,000 21.5% $6,000,000 81%
--------- -------- ---------- -------
Total 5,583,664 100% $7,452,500 100%
========= ======== ========== =======
</TABLE>
The Company has instituted stock option plans providing for the grant
of options to purchase up to an aggregate of 2,000,000 shares of Common Stock.
To date, options to acquire 770,000 shares of Common Stock at a weighted average
price per share of $1.50 have been granted under such plans. See
"Management--Stock Option Plans." The foregoing calculations assume, in all
cases, no exercise of any existing options.
SELECTED FINANCIAL DATA
The statement of operations for the fiscal year ended December 31, 1996
and the balance sheet data as of such date set forth were derived from the
financial statements of the Company which have been audited by Tanner + Co.,
independent public accountants, as indicated in their report included elsewhere
herein. The statement of operations for the nine months ended September 30, 1997
and the balance sheet data as of such date were derived from the unaudited
financial statements of the Company. Operating results for interim periods are
not necessarily indicative of results to be expected for a full fiscal year. The
Selected Financial Data should be read in conjunction with the Financial
Statements and Notes thereto of the Company included elsewhere in this
Prospectus. See also "Management's Discussion and Analysis or Plan of
Operations."
<PAGE>
<TABLE>
<S> <C> <C>
March 28, 1996
(Date of Nine
Inception) Months Ended
to December 31, September 30,
1996 1997
(Audited) (Unaudited)
---------------- ----------------
Statement of Operations Data:
Revenues $ --- $ ---
---------------- ----------------
Costs and expenses:
Technology license acquisition and royalty expense.......... $1,000,000 $275,500
Consulting, legal, and accounting fees...................... 130,008 197,150
Salaries, wages and payroll taxes........................... 91,766 150,027
Other general and administrative............................ 31,722 65,723
----------------- ---------------
Total costs and expenses............................... 1,253,496 688,400
----------------- ---------------
Loss from operations............................................. (1,253,496) (688,400)
Interest income.................................................. 9,526 10,519
----------------- ---------------
Loss before income taxes......................................... (1,243,970) (677,881)
Income tax expense............................................... --- ---
Net loss......................................................... $(1,243,970) $(677,881)
================= ===============
Per Common Share Amounts:
Net loss......................................................... $(0.65) $(0.16)
================== ===============
Shares used in computing per share amounts(1).................... 1,910,000 4,179,000
================== ===============
Balance Sheet Data:
Cash and cash equivalents........................................ $503,338 $20,280
Total assets..................................................... 510,957 61,208
Accumulated deficit.............................................. (1,243,970) (1,921,851)
Stockholders' equity (deficit)................................... 294,930 (39,251)
</TABLE>
(1) See Note 1 of the Notes to Financial Statements for information concerning
the computation of per share amounts.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following should be read in conjunction with the Company's
Financial Statements and Notes thereto and the other financial information
appearing elsewhere in this Prospectus. This section may contain forward-looking
statements that involve risks and uncertainties. The Company's actual results of
operations may differ significantly from the results discussed in such
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in "Risk Factors."
Overview. The Company is in the business of identifying, evaluating,
developing, manufacturing and marketing products and devices which use or
incorporate a proprietary sterilization technology known as the "Deligen II"
technology. The Company has been a development stage company since incorporation
in March of 1996, has been unprofitable to date, and expects to incur additional
operating losses over the next several years, primarily due to costs associated
with its product identification, research and development programs. As of
September 30, 1997, the Company's accumulated deficit was $1,921,851. The
Company's ability to achieve and sustain profitability will depend on its
ability to identify, develop, manufacture and sell products, as to which there
can be no assurances.
Since inception, the Company has incurred approximately $1,941,000 in
operating expenses, $1,275,000 or 65.5% of which were incurred to acquire
licenses to or interests in its proprietary technology. Although the Company has
ongoing obligations to pay royalties on revenues generated from the sale and use
of its licenses, management does not presently expect to incur significant
<PAGE>
amounts to acquire or license additional technologies. An additional $327,000,
or 17%, of the cumulative operating expenses was spent on consulting, legal and
accounting fees directly related to acquiring the above mentioned licenses and
technology and in identifying and developing products using the technology. The
balance of the Company's operating expenses incurred since inception,
approximately $339,000 or 17.5% of the total, were in payment of general and
administrative expenses necessary for the Company's operations.
Plan of Operation. The Company has financed its operations since
inception primarily through the sale of its equity securities. Through September
30, 1997 the Company had realized approximately $1,252,000 (net of costs) in
proceeds from such sales. As of December 31, 1996, and September 30, 1997, the
Company had cash and cash equivalents totaling $503,388 and $20,280,
respectively. During the next twelve months, the Company expects to continue to
incur substantial expenses relating to the further research and development of
its Deligen II technology, the identification and development of its products,
and the acquisition of additional capital equipment for research and development
activities.
The Company believes that existing capital resources, together with the
net proceeds of the Offering (approximately $_____ assuming the sale of all of
the Shares offered hereby by the Company), interest income earned thereon and
anticipated revenues (consisting of product sales, royalties and contract
research, if any), will enable the Company to maintain its current and planned
operations for at least the next two years. The Company's actual future capital
requirements will depend on many factors, however, including the progress of the
Company's independent and collaborative research and development programs,
payments received under any collaborative agreements with other companies, if
any, the results and costs of any required pre-clinical and clinical testing for
the Company's medical and/or clinical products or devices, the costs associated
with the timing of any required regulatory approvals, technological advances,
the status of competitive products, and the commercial success of any Company
products. There can be no assurance that additional funds, if required, will be
available to the Company on favorable terms, if at all, to prevent the Company
to continue with its plan of operations.
The Company intends to develop and commercialize two product
applications in conjunction with a collaborative partner, a clinical laboratory
washer and a carbon dioxide incubator. The Company anticipates that the costs of
developing and initiating commercialization of these two products will be
between approximately $400,000 and $600,000 during the next twelve months. The
Company is also conducting early-phase evaluation, research and development work
relating to the application of the Deligen II technology to the ventilation
systems of commercial airlines. The Company intends to expend approximately
$200,000 for the evaluation and development of a commercial aircraft ventilation
product during the next twelve months. The Company also intends to continue and
accelerate the preliminary development activities it has conducted with respect
to a component "kit" for the Deligen II technology, and anticipates that it will
expend approximately $100,000 for the research and development of that product
during the next twelve months. See "Business -- The Company's Product
Development Program."
Although the Company expects to expand its current administrative,
research and development facilities, it currently does not intend to do so in
the next twelve months. Depending upon the progress of its product
identification and development programs (particularly the commercial aircraft
ventilation product), the Company may be required to acquire additional research
and laboratory equipment.
In order to promote the sale of any products it develops during the
next twelve months, the Company intends to spend approximately $1.0 million in
sales and marketing efforts. These expenditures may be used, in part, to hire,
train and maintain a direct sales force. During the next twelve months, the
Company also intends to add approximately 3 new research and development
personnel, 2 marketing and sales personnel and increase its administrative
personnel by approximately 4 persons. The Company believes its increased
personnel requirements will require the expenditure of approximately $500,000
during the next twelve months.
<PAGE>
BUSINESS
Introduction.
The Company is in the business of identifying, evaluating, developing,
manufacturing and marketing devices and products utilizing its proprietary
Deligen II sterilization technology. The Deligen II technology incorporates a
combination of ultraviolet light and ozone for sterilization of products, water
and air. The Company believes the technology is as effective as, or is more
effective than, most other currently available methods of sterilization, but has
advantages over most other current sterilization methods by not requiring
excessive heat, humidity, pressure or the use of extremely hazardous or toxic
materials or products.
The Company is currently evaluating a number of potential products for
the Deligen II technology. These products fall into three broad categories: (1)
laboratory and clinical sterilization and disinfecting products, such as the two
products the Company is currently developing; (2) contract sterilization for
manufacturers which will allow them to sterilize products on their production
lines prior to packaging or in bulk after packaging; and (3) water and air
purification applications for commercial, industrial and residential products
such as furnaces, air conditioners, dishwashers, aircraft ventilation systems,
HVAC systems, water treatment systems and laundry equipment. The Company
believes the potential applications of the Deligen II technology include devices
and systems that can be incorporated into existing products to make their
purification and sterilization functions more safe and effective, "stand alone"
devices for sterilization or purification, and add-on components for existing
devices that may or may not currently provide sterilization or purification
functions.
The Company has initially identified two products into which it intends
to incorporate the Deligen II technology, and has developed marketing prototypes
of those products in collaboration with a laboratory equipment manufacturer. The
two products, a carbon dioxide incubator and a glassware washer, are generally
based on product designs currently manufactured by the collaborative equipment
manufacturer. The Company has also conducted early-phase studies of a
purification system the Company believes may be able to be incorporated into the
air system of commercial aircraft. In addition, the Company is pursuing an
independent research and development program for a portable, self-contained
sterilization unit or "kit" that can be retrofitted into a number of existing
devices or incorporated into devices and products that currently do not have
sterilization or disinfectant functions.
Background on Sterilization Systems.
A broad range of medical, clinical laboratory and industrial products
need to be free of essentially all objectionable levels of microbes, and a
number of other products, including devices for industrial and consumer uses,
require reduced but non-sterile microbial levels. The principal methods that
have historically been used for reducing or eliminating such contaminants are
steam sterilization, ethylene oxide, gamma radiation, dry heat, electron beams,
ultraviolet light and ozone. While there is some overlap of these sterilization
methods, different industries have addressed the need for sterilization in
different ways.
The medical products and clinical laboratories industries currently
represent the largest users of sterilization technologies. Exact figures are
difficult to determine, but the Company believes the annual medical product and
clinical laboratory market for sterilization in the United States is
approximately $875 million to $980 million, and that the world-wide annual
medical product and clinical laboratory sterilization market was in excess of
$1.7 billion in 1995. Demand is expected to grow to approximately $1.5 billion
and $3.9 billion, respectively, by 2002. The Company also believes that the
annual United States contract sterilization segment of the market is in excess
of $300 million (approximately 50% of which is attributable to contract
sterilization for third parties and approximately 50% to sterilization of
products by in-house facilities at large manufacturers).
Currently, four types of sterilization methods - steam sterilization,
ethylene oxide, radiation (gamma radiation or electron beam) and dry heat - are
principally used for sterilization. To a lesser extent, ultraviolet light and
ozone are also used individually for sterilization. The Company believes each of
these methods has advantages and disadvantages.
<PAGE>
Steam Sterilization. Steam sterilization, which is most commonly
associated with autoclave devices, uses pressurized, moist heat in the form of
steam to sterilize biological contaminants. The basic technology used in steam
sterilization was developed in the late 1870s, when it was discovered that
120(Degree) Celsius (240(Degree) Fahrenheit) was an effective sterilization
temperature. Advances in the last 100 years have enhanced steam sterilization
technology, making it a widely accepted sterilization method. Based on published
reports, the Company believes that steam sterilization is used to sterilize
approximately 20% of all medical devices in the United States.
To achieve optimum results with steam, the sterilization chamber must
be free of air. This is most commonly achieved by evacuating the chamber with
pumps. Steam sterilization does not use toxic or caustic chemicals, is easy to
control and is relatively inexpensive to use, but because of the extreme heat
and pressure conditions created in the process, not all materials can be
sterilized using steam. Many plastics melt or distort in the steam sterilization
process, and other natural materials, such as rubber, are adversely affected by
steam sterilization. In addition, it is generally difficult to sterilize large
objects, objects which are moisture-sensitive or objects which are not moisture
permeable. Moreover, because steam sterilization requires high pressure and
heat, it cannot generally be used where mobile sterilization is required, and it
is not able to kill some types of bacterial spores.
Dry Heat Sterilization. Dry heat sterilization is similar to steam
sterilization, but without the water and pressure requirements. Materials
sterilized by dry heat are placed in a chamber that reaches temperatures between
140(Degree) Celsius and 170(Degree) Celsius (284(Degree) Fahrenheit and
338(Degree) Fahrenheit for a sustained period of time). Dry heat sterilization
is simple to use, cost effective and is effective with materials that are
affected by moisture or chemicals, but resistant to heat deformation.
Dry heat also has a number of drawbacks. Some bacterial contaminants
are resistant to heat sterilization up to very high temperatures. Additionally,
processing times of materials can be quite long. As a result, dry heat has
generally has been used to sterilize heat deformation resistant surgical
instruments in small quantities.
Ethylene Oxide. Ethylene Oxide is a toxic and flammable gas that is
used extensively on heat and pressure sensitive products that cannot be
sterilized by steam or dry heat. Ethylene Oxide was developed in the 1800's and
was refined over time until it was first commercially used for sterilizing
medical devices in the 1940s. Libraries have used ethylene oxide as a way to
control degradation of books, and approximately twenty-five percent of all
spices used in the United States are treated with ethylene oxide.
Ethylene oxide sterilization can offer an effective alternate method
for sterilizing medical products that are heat and pressure sensitive (such as
cotton products), products treated with special compounds (such as lubricated
needles), and prepackaged kits and surgical procedure trays that incorporate
medications. It is often used to sterilize catheters, tracheostomy tubes,
adhesive bandages and sutures. It does, however, have a number of disadvantages.
Ethylene oxide is a toxic, mutagenic compound with possible carcinogenic
properties. To lessen these problems, ethylene oxide was often used in a mixture
of 88% chloroflourocarbon and 12% ethylene oxide. The chloroflourocarbon most
often used with ethylene oxide is freon, which can no longer be produced in, or
imported into, the United States. It is still legal to buy and sell stockpiled
freon in the United States, but its increasingly limited supply has lead to
significant price increases. Because chloroflourocarbons have been shown to
cause environmental problems, many medical device manufacturers and medical
professionals have looked for safer and less expensive ways to sterilize their
devices. The ethylene oxide sterilization industry has switched to 100% ethylene
oxide in many instances, which is highly flammable and, therefore, generally
requires a heavy investment in physical containment and personnel training.
Other ethylene oxide carriers, such as nitrogen gas, have been used only on a
limited scale. Another limitation of ethylene oxide sterilization is that it is
not always effective against some imported cotton-borne pathogens (such as
pyronema). Those products must generally be purchased pre-sterilized by
radiation (or radiated as a secondary step by the manufacturer) even though the
manufacturer uses ethylene oxide sterilization for its other products.
Gamma Radiation. Compared to steam and ethylene oxide, gamma radiation
is a relatively new method of sterilization. First used in the 1950s, the method
uses the spontaneous decay of radioisotopes, generally cobalt 60 or cesium 137,
<PAGE>
to produce ionizing gamma radiation. When uranium is used to generate
electricity through use of nuclear reactions, both cobalt 60 and cesium 137 can
be produced as by-products. These radioisotopes are expensive, limited in
quantity, and are difficult to handle, but when used as sterilants, they are
quite effective.
Gamma radiation is effective on materials that are heat and pressure
sensitive, it can sterilize quickly if high intensity radiation is used and it
has high penetrability, thereby allowing treatment of devices in shipping
cartons or pallets. Since some degradation of materials can occur in gamma
radiation sterilization, testing must be done prior to the sterilization to
ensure no hidden material changes occur. In addition, sterilization times can be
quite long if low radiation intensity is used, and some types of bacterial
spores are more resistant to ionizing radiation (such as gamma rays) than other
methods of sterilization. Gamma radiation apparatus is generally quite large,
heavy and expensive, so it is generally only used in contract sterilization
facilities and by a few large medical device manufacturers.
Before a gamma radiation facility can be used, it must be approved by
the Nuclear Regulatory Commission ("NRC") which, among other things, requires
that extensive shielding (such as 6 foot cement walls) be used in order to
protect facility employees, and by the Environmental Protection Agency ("EPA").
The use of gamma radiation as a sterilant is also hampered (primarily in the
food industry) by the public's negative perception of the process.
Accelerated Electrons. The history of accelerated electron (E-beam)
sterilization is closely tied to that of gamma radiation, since both methods use
ionization as the sterilization agent. High intensity electron beams differ from
gamma radiation, however, in that they are generated by electrical power rather
than by the spontaneous decay of radio isotopes.
Because electron beams used for sterilization are high intensity, the
sterilization process generally requires a fairly short exposure time, which
typically minimizes the degradation of the exposed materials. On the other hand,
accelerated electron sterilization requires a steady, consistent distribution of
electron beams on treated materials for effectiveness (which can result in
inconsistent sterilization results) and generally results in low penetration of
the treated materials. In addition, although electron beam facilities are
generally less costly to operate than gamma radiation facilities, they are very
expensive in comparison to other sterilization methods and typically suffers
from maintenance problems. Like gamma radiation sterilization facilities,
accelerated electron sterilization facilities are regulated by the NRC and the
EPA. These factors have limited the use of accelerated electron sterilization
facilities in the United States. Currently, only approximately 30 such
facilities are in operation.
Ultraviolet Irradiation. Ultraviolet light has been used on a
commercial basis as an effective sterilant since about the beginning of the 20th
century. Ultraviolet light, which is a form of electromagnetic radiation, is
most effective as a sterilant when it is produced in a frequency range of
220-300 nanometers (frequently referred to as the "abiotic" region), and is most
effective when the germicidal wavelengths correspond with the wavelengths most
absorbed by nucleic acids and when the materials to be sterilized are directly
exposed to the radiation. Ultraviolet light radiation acts on cellular
deoxyribonucleic acid (DNA) to effect lethal changes in microbes, and can be
used in place of chlorine in water treatment without many of its adverse affects
on wildlife and other organisms. Ultraviolet irradiation does not require the
use of harmful chemicals and does not leave harmful residues, but it is not
generally accepted in the United States, in part because it requires that the
materials to be sterilized be directly exposed to the radiation.
Ozone Gas. Ozone has been used for purification and sterilization since
at least the early 1890s, when it was used to treat drinking water in Europe.
Ozone is an unstable molecule comprising three atoms of oxygen. It is formed by
the excitation of molecular oxygen into atomic oxygen in an emerging
environment, which allows the recombination of the excited oxygen atom with an
excited oxygen molecule. Because ozone is an unstable molecule, it acts as a
powerful oxidizing agent. Ozone is effective against both microbial contaminants
and volatile organic compounds and, because of its short half-life,
sterilization personnel are generally subjected to reduced risk by the process
in comparison to other sterilization methods. Because ozone has a relatively
short half-life, however, it breaks down into regular oxygen molecules rapidly,
and, as a result, it generally must be generated on-site for sterilization
processes. Like ultraviolet light, ozone is not widely used in the United States
for sterilization purposes.
<PAGE>
The Deligen II Technology
The Deligen II technology combines two well-known sterilants,
ultraviolet light and ozone gas, to form a reliable, relatively low cost and
effective sterilization method. Singularly, neither ultraviolet light nor ozone
are particularly effective in killing all types of microorganisms. When used in
combination, however, the Company believes the two sterilants create a
synergistic effect, resulting in an enhanced effective rate of sterilization.
The Company believes the synergistic effect can be explained, in part, by the
absorption of the ultraviolet light by the ozone, which produces highly reactive
substances that effectively kill microorganisms, including hard-to-kill spores.
When ozone is exposed to ultraviolet light, singlet and triplet excited states
of molecular oxygen and excited states of atomic oxygen are created. These
singlet oxygen molecules have been shown to be cytotoxic, and the effect is
enhanced when the oxygen is exposed to ultraviolet light in an enclosed
environment.
The Company believes the Deligen II technology provides a sterilization
method which is at least as effective as other currently used sterilization
methods. See "Business--The Company's Product Development Program." The Company
also believes the Deligen II system has a number of advantages over other
commonly used sterilization methods. The Deligen II system operates at room
temperature, so many plastic materials can be sterilized that would normally
show signs of degradation through the use of heat or steam sterilization. Since
the Deligen II system does not generally require elevated pressures to be
effective, the sterilization apparatus does not need to be constructed of heavy
gauge metal, a disadvantage of both the ethylene oxide sterilization and steam
sterilization methods, both of which routinely require pressures in excess of
atmospheric pressure. The Deligen II system allows for much lighter equipment to
be used which, in turn, allows for greater portability. Another major advantage
of the Deligen II system is that all of the necessary components for singlet
oxygen and ultraviolet light production can be generated on-site, since ozone
can be produced from air with an ozone generator and ultraviolet light can be
generated by readily available lighting fixtures. Both ozone generators and
ultraviolet light sources require only electrical power sources. In contrast,
ethylene oxide sterilization systems typically require the use of heavy and
bulky high pressure gas cylinders, and capture or containment systems to dispose
of the process residuals.
Moreover, while some precautions need to be taken when working with the
Deligen II sterilization process, the Company believes they are relatively minor
in comparison to the precautions that need to be observed when using most other
sterilization methods. Intense ultraviolet light is capable of damaging
sensitive tissue, but since the Company believes the ultraviolet light source in
a Deligen II system will be contained in a closed chamber and controlled by
safety interlocks, the Company believes it unlikely that an operator will be
exposed to ultraviolet light. Further, although excessive exposure to ozone can
be irritating to mucus membranes, the Deligen II sterilization process uses
ozone only in low concentrations, and the Company believes that, if its
sterilization processes are conducted in a well ventilated room, workers would
not be exposed to the deleterious effects of high ozone concentrations. Finally,
unlike gamma radiation and accelerated ion beam sterilization processes, the
Company's Deligen II technology is simple to use, does not require extensive
training or shielding, does not require regulation by the NRC and is relatively
inexpensive.
The Company's Business Strategy.
The Company's long-term objective is to apply its proprietary Deligen
II technology in a number of consumer, medical, clinical and industrial areas,
and to establish the technology as a preferred means of providing purification,
sterilization and disinfectant functions. The Company is pursuing this objective
with the following four-part strategy:
o Improve Existing Sterilization Products and Devices. The Company
intends to develop improved sterilization devices by applying its
Deligen II technology to currently recognized or currently used
commercial, municipal and residential sterilization or
disinfection applications, such as medical device or glass
sterilizers, where existing methods of sterilization have cost,
efficacy, clinical or other limitations.
<PAGE>
o Develop a Deligen II "Kit." The Company intends to develop a
portable, self-contained sterilization unit that employs the
Deligen II technology and which can be incorporated into devices
as a separate "kit" or component addition to either increase the
effectiveness of existing sterilization or disinfection functions
(such as to existing incubators, clean rooms and glass washers) or
provide for a sterilization or disinfection function as a new
add-on feature (such as a new function for residential
dishwashers, washing machines and HVAC systems).
o Pursue Contract Sterilization. The Company intends to pursue
sterilization contracts with large corporate sterilization users,
such as medical device manufacturers, for the sterilization or
disinfection of products and devices as part of their original
manufacturing process or in connection with the packaging of the
products for reuse.
o Pursue New Sterilization Technology. The Company intends to pursue
new and additional sterilization and disinfectant technologies
through research and development collaborative relationships with
strategic industry partners, selective in-licensing and, where
appropriate, acquisitions.
The Company believes its business strategy offers a number of
potentially significant benefits. First, by focusing on developing improvements
to currently existing devices, products and sterilization applications, the
Company will not bear the cost and risks associated with the discovery and
development of those devices and products. Second, the Company believes its
proposed kit product will position the Company to create new commercial
opportunities for approved or contemplated products and devices which may or may
not currently have sterilization functions. Third, the Company believes its
strategy compresses the Company's `time to market' and may reduce the time
necessary to generate a positive cash flow. Finally, by entering into
relationships with strategic partners, and acquiring rights to new sterilization
techniques developed by third parties, the Company believes it will be able to
focus its resources on areas where it believes it has the greatest competitive
advantage, such as product research, clinical development and regulatory
affairs.
The Company's Product Development Program.
The Company's product development program primarily consists of its
ongoing efforts to identify uses and applications for its Deligen II technology.
The Company is also conducting on-going tests to quantify the sterilization
properties resulting from the application of the Deligen II technology.
Currently Identified Products. The Company is in the early stages of
its product development program but has identified two products in the clinical
laboratory and medical sterilization market - a carbon dioxide incubator and a
clinical laboratory glass washer - into which it will initially incorporate the
Deligen II technology. The Company believes that the experience of bringing
these products to market will allow it to identify additional products into
which the Deligen II technology can either be incorporated as an additional or
attachment feature or into which the Deligen II technology can be incorporated
as a primary component.
The total United States annual clinical laboratory and medical
sterilization market during 1998 is estimated to be approximately $1.1 billion.
The international annual market for those sterilization services in 1998 is
estimated to be approximately $1.6 billion. The laboratory and medical
sterilization market consists primarily of three market segments, the ethylene
oxide and steam sterilization market, the alternative sterilization processes
market and the accessories and consumables market. The Company believes that the
two products it has identified and is currently developing will directly compete
in the ethylene oxide and steam sterilization portion of the clinical laboratory
and medical sterilization market. The Company estimates that this market segment
will have estimated sales in 1997 of approximately $378 million in the U.S.
market and approximately $522 million in the international market for the same
year.
The Company has constructed four prototype sterilization units to
determine the sterilization efficacy of the Deligen II technology in
configurations similar to the configurations the Company believes will be used
in the carbon dioxide incubator product. The first three prototypes were gradual
<PAGE>
improvements on form and function. The final prototype, which the Company
believes will be the basis for the design of products which utilize the Deligen
II technology, is in the form of a sterilization chamber similar to chambers
typically seen in sterilization equipment found in clinical and medical
laboratories.
Based on tests using the prototypes, the Company has determined that
the fourth prototype had an effective, repeatable and verifiable sterilization
rate for S. Pyogenes and S. Aureus microorganisms of 100% in 40 minutes or less,
depending on how product is presented to the process in the sterilization
chamber. The sterilization tests on the prototypes were conducted on biotest
materials provided by a regional ISO 9001, certified, FDA-inspected research
laboratory in Salt Lake City, Utah. In addition to providing the biotest
materials, the laboratory verified the sterilization results of the prototypes.
The Company is presently evaluating the use of its Deligen II technology in a
prototype attachment to a laboratory glassware washer unit, and is testing the
washer to determine if its glass cleaning functions interfere with the
sterilization functions of the Deligen II technology add-on.
Potential Products. The Company believes there may be a significant
demand for products which currently do not, but could, provide sterilization or
purification functions as a part of their primary function. These products
include residential and commercial dishwashers and clothes washers, water
treatment systems and systems for the purification of air. Although the Company
believes the results of its preliminary research and development activities for
many of the potential products described in this section have been promising,
there can be no assurances that the Company will be able to develop all or any
of these products successfully. In most instances, the potential products
described in this section have been identified by the Company based only on
preliminary marketing, engineering and other studies. The Company has not yet
undertaken any significant steps toward verifying either the market need or the
technical feasibility of the various products described in this section.
Component Kit. A primary focus of the Company's current
research and development program is the design and development of a portable
self-contained sterilization unit that can be incorporated with minimal design
or configuration changes into existing products and devices. The Company
believes that, if developed, the unit could possibly also be used in products
which currently provide sterilization or disinfection functions but whose
performance and efficiency could be improved through the incorporation of the
Deligen II technology.
Water Sterilization and Purification Products. Water
purification encompasses such diverse industries as residential and commercial
dishwashing and laundry equipment, potable/drinking water supplies and
processors, water cooling tower treatment equipment, flood damage restoration,
lake remediation, residential and public swimming pools, and water bottling
plants. The Company estimates that in excess of 230,000 commercial laundry
washers, 80,000 commercial dishwashers and approximately 4.5 million residential
dishwashers are sold annually in the United States alone.
The Deligen II system could also potentially be used in municipal,
residential and commercial water supply systems. In the United States water
supply systems were historically designed to provide a reliable supply of water,
defined primarily as adequate pressure and adequate quantity. Water quality was
typically not an important criteria. The Company believes this emphasis is
changing, and that concerns of reuse of `gray' water or even
reclamation/recycling of sewage due to the growing concern of water shortages,
as well as ground water contamination, outbreaks of water contamination and
resultant sickness, and a growing world-wide shortage of potable water, have
heightened the awareness and importance of water quality. The traditional method
in the United States of treating municipal water supplies with chlorine has
recently been challenged by some special-interest groups. The Company estimates
that, during the last eight years, approximately 20% of all expenditures by
water supply providers in the United States was for water quality improvement,
representing an investment of approximately $6.3 billion.
Another growing problem in United States water supply system is the
aging of the water distribution infrastructure. The American Water Works
Association has estimated that nearly 240,000 water main breaks occur each year
in the United States. Such breaks and resultant repair activity provide a
constant opportunity for contaminant intrusion. The Company believes that these
problems are contributing to the recognition by local water districts that they
need to reconsider the use of additional, decentralized water treatment
facilities and disinfectant/sterilization technologies.
<PAGE>
Air Sterilization and Purification Products. The Company
believes there may also be a market for air sterilization and purification
devices which incorporate the Deligen II technology. In the last several years,
the EPA has made indoor air quality a household word. Reports of cases of "Sick
Building Syndrome" and "Legionnaires' Disease" have heightened people's
awareness to the dangers of contaminated HVAC ductwork as harbors of pathogens,
and industries such as duct cleaners have sprung up to address these concerns.
Cleaning efforts for HVAC systems are generally periodic rather than continual,
however, and often rely on mechanical rather than disinfection to reduce the
disease potential. The Company believes that the Deligen II technology could
potentially be adapted to existing and new HVAC systems, in several different
configurations, to address these concerns for closed, occupied environments. In
1996, there were in excess of 350,000 duct-mounted air cleaners and 2,625,000
household air cleaners sold in the United States. The air purification market
also includes clothes dryers, an industry that had sales of approximately
145,000 commercial dryers and 5,528,000 residential dryers in 1996.
The Company is also conducting early-phase studies to determine if the
Deligen II technology can be used (either through the use of a component kit
that may be developed by the Company or through modification of existing HVAC
systems) for air purification in passenger aircraft. The Company has had
preliminary discussions with a large commercial aircraft manufacturer regarding
the incorporation of a Deligen II-based air purification system in the
manufacturer's aircraft. In 1996, commercial aircraft manufacturers delivered
approximately 400 commercial aircraft to airlines and other commercial carriers.
In addition, the Company estimates that as of 1996 approximately 11,500
commercial aircraft are in service which could potentially benefit from a
Deligen II air purification system.
Contract Sterilization. The Company believes that, through the
use of a Deligen II kit or otherwise, it may develop products and devices which
could be used by either the Company or third parties for the sterilization and
disinfection of products as part of the original manufacturing process or in
connection with the packaging of those products for reuse. Although there are no
published industry statistics and precise numbers are difficult to determine,
the Company believes that the United States market for sterilization services
provided by sterilization processing centers (known as "contract sterilizers" in
the industry) was approximately $160 million in 1996. The Company also estimates
that in-house sterilization centers owned or leased by larger manufacturers
processed a similar volume of sterilization.
Collaborative Relationships.
The Company's commercial strategy is to develop products independently
and, where appropriate, in collaboration with established companies and
institutions. Collaborative partners may provide financial resources, research
and manufacturing capabilities and marketing infrastructure to aid in the
identification, development and commercialization of the Company's products or
products in which the Company's Deligen II technology is incorporated. Depending
on the availability of financial, marketing and scientific resources, among
other factors, the Company may license its technology or products to others and
retain profit sharing, royalty, manufacturing, co-marketing, co-promotion or
similar rights. Any such arrangements could limit the Company's flexibility in
pursuing alternatives for the commercialization of other products it identifies
and/or develops.
The Company is currently negotiating with a laboratory equipment
manufacturer regarding the formation of a collaborative relationship under which
the Company and the manufacturer would jointly develop sterilization products.
Under the proposed terms of the arrangement, the manufacturer would manufacture
all or a portion of those jointly developed products.
The Company has no manufacturing facilities. As part of the process of
identifying and developing its products, the Company may be required to
manufacture, or have third parties manufacture, certain products and devices,
including prototypes of the products. To the extent possible, the Company will
require any such manufacturing to be conducted by third parties, including those
parties with which it has collaborative relationships.
As the Company identifies and develops products, it intends (i) to
license the manufacturing rights to those products to third parties, and/or (ii)
<PAGE>
engage in the manufacture of the devices and equipment components that will
integrate the Deligen II technology into the identified product(s), and/or (iii)
engage in the manufacture of those devices and products.
Competition.
The markets in which the Company anticipates it will operate are
intensely competitive. The Company's competition includes academic institutions,
agencies and other public and private research organizations, as well as large
and small for-profit companies, some of which are currently in the process of
developing, or have developed, sterilization technologies similar to the
Company's Deligen II technology. The Company's products will also compete with
sterilization methods and systems other than those based on combination
sterilization methods. Many of the Company's competitors and potential
competitors have sterilization systems and methods which have been approved or
are in development and operate large, well funded research and development
programs devoted to the investigation and development of proprietary
sterilization methods. Some of these systems and technologies could be developed
more quickly or ultimately prove to be more safe or effective than the Company's
Deligen II technology. In addition, a number of the Company's present and
potential competitors have broad product lines, established sales and
distribution systems and greater experience in marketing, research and
development and regulatory approval, all of which may directly affect the
Company's ability to compete with those entities.
The Company anticipates that it will initially compete in three general
market areas - (i) the steam and ethylene oxide sterilization segments of the
clinical laboratory and medical sterilization market, (ii) the air and water
purification and sterilization markets, and (iii) the contract sterilization
market.
Clinical Laboratory and Medical Sterilization Market. The companies
that compete in the clinical laboratory and medical sterilization markets employ
several sterilization technologies and processes. A number of the Company's
competitors in the market manufacture and sell traditional steam sterilization
units (autoclaves), ethylene oxide gas units and products that use similar
processes. The Company believes that the ethylene oxide and steam sterilization
market is dominated by two companies, Steris (which the Company believes has a
majority of the market share) and MDT Biological Company (which manufacturers
the Castle and Harvey brands of sterilizers and which the Company believes has
in excess of 10% of the market). The remainder of the market is fragmented.
Recently, clinical laboratories and medical products manufacturers and
distributors have begun using "high level disinfection" as an alternative to
clinical and medical laboratory sterilization. Regulatory agencies, including
the FDA, have allowed clinical and medical laboratories to employ high level
disinfection in the place of sterilization in some instances, particularly with
respect to the treatment of medical devices that do not enter or touch the body.
High level disinfection typically does not result in 100% sterilization of an
object but, rather, reduces the overall exposure to adverse risks associated
with contaminants. The primary advantage of high level disinfection over
sterilization is its lower cost and faster throughput. The Company believes that
its Deligen II technology successfully competes in both such areas.
Water and Air Purification and Sterilization Markets. The Company
believes that, with respect to air purification manufacturers, the Company's
principal competitors will be Holmes, Inc., Honeywell, Inc. and Duracraft, who
the Company believes currently control the majority of the market, and that MPW
International Services Group, Inc., Service Master L.P. and Philip Services
Corp. are major competitors in the industrial air cleaning industry. The Company
believes that, with respect to the water sterilization and purification markets,
the largest competitor in the market is Culligan, Inc. and, with respect to
wastewater disinfection, Trojan Technologies, Inc., Wedeco, Infilco-Degremont,
Inc. and Hinovia/Aquionics.
Contract Sterilization Market. The Company believes that the contract
sterilization market is extremely fragmented and that it will compete with
numerous local and regional manufacturers and marketers of products in those
<PAGE>
markets, depending on the exact product and market segment in question. The
Company's currently proposed contract sterilization services will also compete
with services provided by other contract sterilization service providers that
use a number of sterilization methods. For example, companies using radiation
sterilization methods include Isomedix, Inc. ("Isomedix") and Sterigenics
International, Inc. The Company will also compete with contract sterilizers
using ethylene oxide and electron-beam technology, including Cosmed Group, Inc.,
Griffith Micro Science, Inc. and Isomedix.
Patents, Proprietary Rights and Licenses.
The Company is party to a number of agreements, licenses and other
contractual arrangements under which it acquired its proprietary technology. The
Company has also entered into a series of agreements for the protection of its
proprietary technology.
The Elopak, Biomune and Biomed Agreements. The basic technology
underlying the Company's proprietary Deligen II technology was invented by
employees of Elopak. On May 25, 1993, those parties received a United States
Patent on the technology, and the patent rights were subsequently assigned to
Elopak. In April, 1996, Biomed Patent Development, LLC ("Biomed") obtained an
exclusive world-wide license (including the right to sub-license) of the patent
rights, including the right to use, manufacture and sell products or services
relating to the sterilization of devices and equipment of all kinds as well as
the sterilization of the environment, inclusive of air and water, and excluding
only the sterilization of food containers for individual food items and in the
food packaging industry. Elopak also granted Biomed the same license to use all
unpatented technology it held related to the patent. Biomed paid Elopak a one
time license fee of $50,000 (as an advance on royalties) for its rights under
the Elopak License. Biomed subsequently obtained certain trade secrets relating
to the sterilization of products using ultraviolet light and ozone and which it
believed complemented the patented technology.
In May 1996 Biomed licensed the patent and the trade secrets rights to
the Company, and, in September 1997 assigned its rights in the patent rights and
trade secrets, and the agreements under which those rights arose, to the Company
in exchange for 150,000 shares of Common Stock, plus the assumption of certain
liabilities (the "Biomed Assignment"). As successor to Biomed, the Company must
pay Elopak a royalty of .5% of the net sales price for all licensed products and
components. Once the accrued .5% royalty exceeds the license fee already paid,
the Company must pay further royalties quarterly, based on payments for licensed
products actually received by the Company. The Elopak License lasts until the
expiration of the last to expire of the patents. Either party may terminate the
Elopak License if the other party is in material breach and fails to cure such
breach within a 30 day period.
Under the Biomed Assignment, Biomed also transferred to the Company its
rights to certain, non-patented technology which the Company believes is
complementary to the Elopak patented technology and which Biomed had previously
acquired from Biomune Systems, Inc. ("Biomune") and SZTP Technologies ("SZTP")
pursuant to two separate agreements dated May 6, 1996. Biomed purchased SZTP's
10% interest in the unpatented technology from SZTP and acquired the remaining
90% in such technology from Biomune pursuant to a license agreement (the
"Biomune License"). Under that agreement, Biomune granted Biomed an exclusive,
world-wide license to make, market and sell products and services using the
licensed technology. In the first year, Biomed was required to pay Biomune a
royalty of the greater of 7.5% of Biomed's, and its licensee's, gross sales or
$45,000. The term of the Biomune License is fifteen (15) years and it can be
terminated by either party if the other party is in material breach that
continues uncured for a period of thirty (30) days. As successor to Biomed under
the Biomed Assignment, the Company must pay Biomune a royalty for each year
during the term equal to the greater of .9% of its gross sales or $90,000. The
consideration for the Biomed Assignment is described under "Certain
Relationships and Related Transactions."
Biomed purchased all of SZTP's 10% interest in the unpatented
technology from SZTP pursuant to a purchase agreement dated May 6, 1996. Biomed
agreed to pay SZTP a total of $855,000 for the technology, a portion of which
remained unpaid as of the date of Biomed's assignment of its rights in the SZTP
technology to the Company under the Biomed Assignment. In the Biomed Assignment,
the Company received Biomed's interest in the purchased technology and agreed to
issue 67,000 shares of its Common Stock to SZTP in full payment of the remaining
technology payment.
<PAGE>
Confidentiality Agreements. The Company relies in part upon trade
secret protection for its confidential and proprietary information. There can be
no assurance that others will not independently develop substantially equivalent
proprietary information and techniques, or otherwise gain access to the
Company's trade secrets or disclose such technology or that the Company can
meaningfully protect its trade secrets.
The Company has required its employees, consultants, outside scientific
collaborators and joint venture partners to execute confidentiality agreements.
These agreements provide that all confidential information owned or developed by
the Company or made known to an individual or company during the course of the
individual's or company's relationship with the Company must be kept
confidential and not disclosed to third parties except under specific
circumstances. In the case of employees, the agreements further provide that all
inventions related to the Company's business conceived and/or developed by the
employee in the course of employment will be the exclusive property of the
Company. There can be no assurance, however, that these agreements will provide
meaningful protection or adequate remedies for the Company's trade secrets or
other patented technology.
Governmental Regulation.
Products regulated as medical devices may not be commercially
distributed in the United States unless they have been cleared or approved by
the FDA, or unless they are otherwise exempted from the FDA's regulations.
Currently, there are two methods for obtaining FDA clearance or approval of
medical devices. Certain products qualify for a pre-market notification
procedure under ss.510(k) of the FDA Act. In order for a device to qualify under
the 510(k) notification procedure, the manufacturer must, among other things,
establish that the product being marketed is substantially equivalent to another
legally marketed product. In such cases, marketing of the product may commence
when the FDA issues a letter finding that there is a substantial equivalence to
the legally marketed device. The FDA may require, in connection with a 510(k)
notification, that the manufacturer provide the FDA with results of animal
and/or human testing.
A 510(k) notification is also required when the manufacturer makes
certain changes or modifications to an already marketed device that could
significantly affect safety or effectiveness, or where there is a major change
or modification in the intended use or in the manufacture of an approved device.
In such cases, the manufacturer is the party that determines if the change or
modification is of a kind or nature that would necessitate the filing of a new
510(k) notification. The FDA's regulations provide only limited guidance in
making these determinations.
If a medical device does not qualify for the 510(k) notification
procedure, the manufacturer may file a pre-market approval (a "PMA") application
under ss. 515 of the FDA Act. A PMA application generally requires a much more
complex submission than a 510(k) notification, and typically requires a showing
that the device is safe and effective based on more extensive clinical testing.
As a result, PMAs typically result in a longer FDA review process.
The Company believes that medical products or sterilizers incorporating
the Deligen II technology will generally be classified as Class II medical
products which can be cleared through the FDA regulatory process through the
application of a 510(k) notification. The Company has not yet filed any 510(k)
notification with the FDA with respect to any application of the Deligen II
technology or with respect to any product, and there can be no assurance that
the Company will obtain the required regulatory clearance for the Deligen II
technology based on a 510(k) notification application. The FDA may require
additional testing showing that the Deligen II technology is safe and effective
under the 510(k) application procedure, may require the Company to file a PMA
for clearance of products in the marketplace that incorporate the Deligen II
technology, or may require additional testing, including clinical trials.
Although the Company believes that 510(k) notification applications are
currently being processed by the FDA in approximately 120 days, there can be no
assurance that any 510(k) notification filed by the Company with respect to its
Deligen II technology will be approved in that time period, if at all.
Furthermore, additional regulatory requirements could be imposed by legislation
or regulation once the Company receives FDA approval of its Deligen II
technology.
The FDA will also regulate the Company's quality control and
manufacturing procedures for any medical devices it develops by requiring the
Company and its contract manufacturers to demonstrate compliance with strict
manufacturing requirements. The FDA's manufacturing regulations require, among
other things, that (i) the manufacturing process be regulated and controlled by
the use of written procedures, and (ii) that the ability to produce devices
which meet the manufacturer's specifications be validated by extensive and
<PAGE>
detailed testing at every step of the manufacturing process. These regulations
also require investigation of any deficiencies in the manufacturing process, the
products produced, or record keeping. The FDA monitors compliance with these
requirements by requiring manufacturers to register their manufacturing
facilities with the FDA and by conducting periodic FDA inspections of those
facilities. If an FDA inspector observes conditions which might be in violation
of these manufacturing requirements, the manufacturer is generally required to
correct those conditions or explain them satisfactorily. If a manufacturer fails
to adhere to the manufacturing requirements, the devices manufactured by the
manufacturer could be considered to be manufactured in violation of the FDA's
rules and regulations, and subject the manufacturer to FDA enforcement action
that could include physical removal of the devices from the marketplace.
The FDA's medical service reporting regulations would also require the
Company to provide information to the FDA in the event of the occurrence of any
death or serious injuries alleged to have been associated with the use of any
medical products the Company develops, as well as any product malfunction that
would likely cause or contribute to a death or serious injury if a malfunction
were to occur. In addition, FDA regulations prohibit a medical device from being
marketed for unapproved or uncleared indications. If the FDA believes that a
company is not in compliance with these regulations, it can institute
proceedings to delay or halt the distribution of the company's devices, issue a
recall, seek injunctive relief or assess criminal and civil penalties against
the company or its executive officers, directors or employees.
Agencies similar to the FDA regulate medical devices in some foreign
countries, whereas other countries allow unregulated marketing of those devices.
The Company will be required to meet the regulations of any foreign country
where it markets its products. There can be no assurance that any of the
Company's future medical products will receive FDA clearance or similar
clearance in foreign countries. It is also possible that regulations governing
the manufacture and sale of the Company's products could change in the future.
The Company cannot predict the impact of such changes on its business
activities.
In the future, and assuming that the Company actually manufacturers
products, it plans to implement ISO 9001, a certification showing that the
Company's procedures and manufacturing facilities comply with certain standards
for quality assurance and manufacturing process control. This certification,
along with the European medical device directive certification, would evidence
the Company's compliance with the requirements, thereby enabling the Company to
affix the "CE" mark to its products. The CE mark is used to show that a product
is manufactured in conformity with European standards for safety, and allows
certified devices to be placed on the market in all European union countries.
After June of 1998, medical devices may not be sold in European union countries
unless they display the CE mark.
Near future plans to apply the Deligen II system to certain other
applications used to disinfect air and water may also place the Company's
business operations under the regulation of the EPA or other governmental
agencies. The EPA regulations provide scrutiny to assure all devices comply with
federal laws regulating the environment. The EPA can impose sanctions, institute
legal actions, or impose fines or all if the Company is not in compliance with
the laws concerning environmental activities and concerns. The EPA can also
refuse or revoke clearance for the Company to sell devices in the United States.
Any such actions by the EPA could result in the disruption of the Company's
operations for an indeterminate period of time. Various states in which the
Company's products may be sold in the future may also impose similar or other
requirements.
At the present time, the Company is in the process of completing
in-house validations of the application of the Deligen II to two devices. The
first is the application of the Deligen II system in a carbon dioxide incubator.
The change in the incubator is designed to enable the incubator to
self-disinfect at the end of each usage cycle. The second application of the
Deligen II system is in a laboratory glassware washer, and is designed to enable
the device to also sterilize the glassware. Upon completion of its in-house
validations, the Company intends to make 510(k) notification applications with
the FDA for both products.
The Company may also be subject to occupational safety and health and
other federal, state and local laws and regulations relating to such matters as
safe working conditions and manufacturing conditions and practices. There can be
no assurance that the company will not be required to incur significant costs to
<PAGE>
comply with these laws, regulations or policies in the future, or that such
laws, regulations or policies will not increase the cost of producing the
Company's devices or products or otherwise have a material adverse effect on the
Company's ability to do business.
Product Liability Insurance.
The testing, marketing and sale of products relating to human health
care or medical procedures entail an inherent risk of allegations of product
liability, and there can be no assurance the product liability claims will not
be asserted against the Company. Although the Company currently has in force
general liability insurance, it does not currently have product liability
insurance. There can be no assurance that the Company will be able to obtain or
maintain product liability insurance on acceptable terms or with adequate
coverage against potential liability. In addition, the Company currently has no
clinical trial liability insurance for any human clinical trials in which it may
engage, and there can be no assurance that it will be able to obtain and
maintain such insurance for any clinical trials in which it engages.
Employees.
As of October 15, 1997, the Company had nine employees and consultants,
of whom five hold Ph.D., or other advanced medical, scientific or business
degrees. Five employees or consultants are engaged in research and development
activities and four are devoted to support and administrative activities.
Several of the Company's management and professional employees have had prior
experience with medical or clinical device or product companies. The Company
believes it maintains good relations with its employees and understands that its
success will depend in large part upon its ability to attract and retain its
current employees and future employees. The Company faces competition in this
regard from other companies, research and academic institutions and governmental
entities.
Facilities.
The Company currently occupies approximately 912 sq. ft. of leased
office, support and administrative space in Bountiful, Utah. The lease has a
term of one year, and expires on April 30, 1998. The monthly rental under the
terms of the lease is $874. The Company also leases approximately 1,000 sq. ft.
of laboratory space located in Salt Lake City, Utah. The lease has a term of one
year, and expires September 30, 1998. The monthly rental under the terms of the
lease is $1,000.
The Company believes it will have access to facilities adequate to meet
its needs for the foreseeable future. Should the Company need additional space,
management believes it will be able to secure these facilities on reasonable
rates and terms.
Legal Proceedings.
The Company is not a party to any material litigation or legal
proceedings.
<PAGE>
MANAGEMENT
Executive Officers, Directors and Key Employees
The Company's directors, executive officers and key employees, and
their respective ages and positions with the Company, are set forth below in
tabular form. There are no family relationships among the Company's directors or
executive officers. The Company's Board of Directors is currently comprised of
three members, each of whom are elected for 1 year terms. Executive officers
were chosen by and serve at the discretion of the Board of Directors. The
Company anticipates that it will have a five member board. It has identified and
had discussions with, one candidate, Mr. Kenneth D. Taylor, to fill a board
position. Mr. Taylor has 36 years of experience in the aviation industry,
including purchasing, selling and leasing commercial and executive aircraft.
There is no assurance that Mr. Taylor will agree to serve as a director or that
he will be nominated or elected.
<TABLE>
<S> <C> <C>
Name Age Position
Dale G. Karren 49 President, Chief Executive Office and Director
E. Wayne Nelson 55 Secretary, Treasurer and Chief Financial Officer
Frank Eldredge, Ph.D 57 Director of Research and Development
David Derrick 46 Director
David Sorensen 58 Director
</TABLE>
Dale G. Karren is a Director of the Company and serves as its President and
Chief Executive Officer. For the past 8 years, Mr. Karren has been in the
management consulting business, providing corporate strategic and business
services to his corporate clients. Between 1991 and 1994 he was a partner in
Synergy, Inc., a management consulting firm, and most recently owned his own
management consulting firm, Equibuilders, LLC. Mr. Karren began his career with
Deloitte & Touche, LLP in New York, New York in 1972 and is a certified public
accountant. Mr. Karren graduated from Utah State University in 1972 with a
Bachelors of Science Degree in Accounting.
Wayne Nelson is the Company's Secretary, Treasurer, and Chief Financial Officer.
Between 1993 and 1995 he served as president of Utah Health Cost Management
Foundation, a foundation that seeks more healthcare access and less cost for the
residents of Utah. From 1991 to 1992 he served as President and Chief Executive
Officer of Comlink International, a multimedia and televideo technology company.
Between 1988 and 1991 he was Vice-President and Chief Financial Officer of
Geneva Steel Corporation in Orem, Utah. Since 1995 and continuing through the
present, Mr. Nelson also acts as Recorder (the equivalent of a senior or
administrative vice president) of the Jordan River Temple for the Church of
Jesus Christ of Latter Day Saints. Mr. Nelson received his Bachelor of Science
from the University of Utah in 1966 and his Masters of Business Administration
from the University of Utah in 1967.
Frank A. Eldredge, Ph.D serves as the Company's Director of Research and
Development. Between 1992 and 1997, Dr. Eldredge served as Executive Vice
President in New Product Development for Biomune, a biotechnology company. Prior
to that, he acted as an independent science consultant for two years. Dr.
Eldredge received his Bachelor of Arts degree from the University of Utah in
1965, a Masters of Science in Cytogenics from the University of Utah in 1969,
and a Ph.D. in Genetics plus allied fields from the University of Utah in 1972.
<PAGE>
David G. Derrick has served as a Director of the Company since July 1997. Mr.
Derrick has also served as the Chief Executive Officer of Optim, Inc. (a
subsidiary of Biomune Systems, Inc. ("Biomune"), a company in the nutracuetical
and nutritional products business) since May 1, 1996, and since 1989 as Chairman
of the Board of Directors of Biomune. From September 1979 to June 1983, Mr.
Derrick was a faculty member at the University of Utah College of Business,
Department of Finance. Mr. Derrick graduated from the University of Utah College
of Business with a Bachelor of Science degree in Economics in 1975 and with a
Masters in Business Administration degree with an emphasis in Finance in 1976.
David K. Sorensen has served as a Director since September 1997. He is currently
the Executive Director of the Utah Manufacturing Extension Partnership (UMEP)
and the Executive Director of WestCAMP, Inc., a manufacturing industry
management company. Between 1985 and 1993 he also served as Chairman and Chief
Executive Officer of ECHO Solutions, Inc., a software products and services
company, and between 1983 and 1985 has served as Executive Vice President of
Eyring Research Institute, Inc., a 300 person software development company.
Between 1981 and 1983 he was General Manager at EG&G, a high-technology
engineering and design company. Mr. Sorensen held engineering, manufacturing,
marketing and management positions with General Electric between 1966 and 1970,
Bunker Ramo (a power utility equipment manufacturer) between 1970 and 1974, and
Aerojet Nuclear Corporation (the Idaho Nuclear Engineering Laboratory prime
contractor) between 1974 and 1976. Mr. Sorensen has a Bachelor of Science degree
in Mechanical Engineering from Brigham Young University, which he received in
1966.
The Board of Directors has two standing committees: the Audit Committee
(comprised of Messrs. __________and __________) and the Compensation Committee
(comprised of Messrs. _________and __________). The Audit Committee is primarily
charged with the review of professional services provided by the Company's
independent auditors, the determination of the independence of such auditors,
the annual financial statements of the Company and the Company's system of
internal accounting controls. The Audit Committee also reviews such other
matters with respect to the accounting, auditing and financial reporting
practices and procedures of the Company as it may find appropriate or as may be
brought to its attention. The Compensation Committee is charged with the
responsibility of reviewing executive salaries, administering bonuses, incentive
compensation and stock option plans of the Company, and approving the salaries
and other benefits of the executive officers of the Company. The Compensation
Committee also consults with the Company's management regarding retirement and
other benefit plans, and the Company's compensation policies and practices in
general.
Director Compensation
Directors do not receive cash compensation for serving on the Board of
Directors or any committee of the Board, or for any other services rendered to
the Company (except for those Directors who are also employees), but are
reimbursed for expenses they incur in connection with attending Board of
Directors or committee meetings, and have received stock options.
Executive Compensation
Between May 1996 and March 1997, Lynn L Summerhays acted as the
Company's President, Chief Executive Officer and Chairman of the Board. In March
1997, Mr. Karren replaced Mr. Summerhays as the Company's President and Chief
Executive Officer. See "Management -- Employment Agreements" below. During the
Company's fiscal year ended December 31, 1996, Mr. Summerhays received the cash
compensation and stock options set forth in the tables below.
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
<S> <C> <C> <C> <C>
Long Term
Annual Compensation Compensation
---------------------------------------------------- ---------------
Name and Principal Position Year Salary ($) Bonus ($) Options
- ------------------ -------- ---- ---------- --------- -------
Lynn L. Summerhays 1996 $100,000 --- 70,000(1)
President, Chief Executive
Officer and Chairman of
the Board
- -------------------------------
</TABLE>
(1) Mr. Summerhays' option is exercisable through May 31, 2000. The exercise
price per share is $1.50.
<TABLE>
<CAPTION>
Option/ Grants in Last Fiscal Year
<S> <C> <C> <C> <C>
Number of
Securities
Underlying % of Total Options
Options Granted Granted to Employees Exercise or Base
Name (#) in Fiscal Year(1) Price ($/Sh) Expiration
- ------------------------------- ----------------- --------------------- ------------------- -----------------
Lynn L. Summerhays
President, Chief Executive 70,000 20% $1.50 May 31, 2000
Officer and Chairman of the
Board
- -----------------------
</TABLE>
(1) Based on options for a total of 350,000 shares granted during 1996.
<TABLE>
<CAPTION>
Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Value
<S> <C> <C> <C> <C>
Shares Exercisable/Unexercisable
Acquired on Securities Underlying Options Value of
Exercise Value Securities Underlying Options Unexercised
Name Exercise Realized Options Options(1)
- --------------------------------- ------------- ----------- ------------------------------- --------------
Lynn L. Summerhays
President, Chief Executive -- $-- 70,000 $18,200
Officer and Chairman of the
Board
- -----------------------
</TABLE>
(1) For purposes of determining the values of the options held by Mr.
Summerhays, the Company has assumed that the Common Stock underlying the options
had a value of $1.50 per share in May 1996, which is the estimated fair market
value the Board of Directors attributed to the Common Stock in May 1996 in
connection with the proposed sale by the Company of the Common Stock. The option
value is based on the difference between the fair market value of the shares in
May 1996 (approximately $1.76 per share) and the option exercise price per
share, multiplied by the number of Shares subject to the option.
<PAGE>
Employment Agreements.
In May 1996, the Company entered into an employment agreement with Lynn
L. Summerhays, under which Mr. Summerhays agreed to serve as the Chairman of the
Company's Board of Directors, Chief Executive Officer and President. The
employment agreement had an initial term of two years and, under its terms, Mr.
Summerhays' base salary was $100,000 per year. The employment agreement
contained confidentiality and non-competition provisions that restrict Mr.
Summerhays' right to disclose the Company's confidential information and to
compete with the Company.
In March 1997, Mr. Summerhays resigned as the Company's President and
Chief Executive Officer, but remained on the Board of Directors. In connection
with Mr. Summerhays' resignation, Mr. Summerhays and the Company entered into a
termination agreement that provides for the continuation of the confidentiality
and non-competition provisions of Mr. Summerhays' employment agreement for a
period of two years. Under the termination agreement, Mr. Summerhays also
retained his option to acquire up to 70,000 shares of Common Stock. Mr.
Summerhays resigned as a member of the Board of Directors in May 1997 and the
Company retained Mr. Summerhays as a consultant in June 1997.
In April 1997, the Company entered into an employment agreement with
Dale G. Karren pursuant to which he agreed to serve as Chief Executive Officer
and President of the Company for an initial term of two years. The Company will
pay Mr. Karren an annual salary of $136,000 pursuant to an amendment that was
effective July 1997. Mr. Karren is required to devote up to 80% of his business
time, attention and skill to the business of the Company, and he must promote
the Company's business and cooperate with the Board of Directors to advance the
best interests of the Company and its stockholders. Mr. Karren may terminate the
agreement at any time upon thirty days written notice to the Company, but the
Company may only terminate the agreement for cause. "Cause" means a material
breach of the employment agreement which remains unremedied after any applicable
cure period, a material failure to adhere to certain written policies of the
Company if such failure continues after the applicable cure period,
misappropriation of Company funds, or in the event of Mr. Karren's conviction of
a felony or crime of moral turpitude which is related to the business of the
Company and which is injurious to its business. Mr. Karren's employment
agreement also contains confidentiality and non-competition provisions. In
connection with Mr. Karren's employment, the Company granted Mr. Karren an
option to purchase up to 70,000 shares of Common Stock at $1.50 per share.
Stock Incentive Plans.
In September, 1996, the Board of Directors adopted the 1996 Stock
Option (the "1996 Plan"). An aggregate of 1,000,000 shares of Common Stock are
reserved for issuance under the Plan. In September 1997, the Board of Directors
adopted the 1997 Stock Incentive Plan (the "1997 Plan"). The 1997 Plan will be
submitted to the Company's stockholders for approval in connection with the
closing of the Offering. Under the plans, all employees (including officers) of
the Company, together with other persons who perform substantial services for or
on behalf of the Company, will be eligible to receive incentive and nonstatutory
options to purchase Common Stock, as well as stock. An aggregate of 2,000,000
shares of Common Stock are reserved for issuance under each plan. Incentives may
be granted under the plans at any time prior to the expiration of 10 years from
the date upon which the plan was adopted by the Board of Directors. Options to
acquire 770,000 shares were issued under the 1996 Plan and, as of October, 1997,
no option to acquire shares under the 1997 Plan had been issued.
The plans are administered by a committee of the Board of Directors
consisting of at least two members, and are presently administered by the
Compensation Committee. Under the plans, the exercise price at which the shares
of Common Stock covered by each grant may be purchased will be determined on the
date of grant by the committee, but can be no less than the par value of such
shares and, in the case of incentive stock options, may not be less than the
fair market value of such shares on the date of grant. The number of shares
covered under the options granted under the plans are subject to adjustments for
stock splits, mergers, consolidations, combinations of shares, reorganizations
and other recapitalizations.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company originally obtained its license to the Diligen II
technology under a license agreement dated May 6, 1996 between the Company and
Biomed (the "Biomed License"). Biomed is an affiliate and former stockholder of
the Company. Under the Biomed License, Biomed licensed the rights it obtained
under the Elopak License, the Biomune License and the SZTP purchase agreement to
the Company. The Company agreed to pay Biomed a royalty in the first year equal
to the greater of 7.5% of the Company's gross sales or $1,000,000. The Company
had no sales and so was obligated to pay the $1,000,000 minimum royalty in four
installments of $250,000 each. The Biomed License also required the Company to
pay a royalty in subsequent years equal to the greater of 1.5% of gross sales or
$150,000. The Company also issued a warrant to Biomed in connection with the
Biomed License. The warrant gave Biomed the right to purchase 1,750,000 shares
of the Company's common stock for $.1429 per share for a total of $250,075.
The Company paid Biomed a total of $700,000 cash for the first year
royalty and Biomed exercised its warrant and paid the warrant exercise price by
forgiving the final $250,000 installment for first year royalties. The Company
did not pay any royalty during the second year of the Biomed License.
On September 15, 1997, the Company entered into the Biomed Assignment
with Biomed. Pursuant to the Biomed Assignment, Biomed transferred all of its
interest in the Deligen II technology, including its rights under the Elopak
License, the Biomune License and the purchase agreement with SZTP, to the
Company in exchange for 150,000 shares of the Company's Common Stock. The
Company also agreed to pay SZTP 67,000 shares of its Common Stock as payment in
full for the purchase of SZTP's interest in the unpatented technology. The
Company's stock payments satisfied all amounts owing under the Biomed License as
of the date of the Biomed Assignment. Biomune is controlled by Mr. Derrick, a
director and 5% stockholder of the Company. Biomed is also controlled by Mr.
Derrick, and Mr. Victor Krasan, a former director of the Company, was the
founder and is the current president of Biomed.
On August 8, 1997, the Company entered into a loan agreement with IMG,
L.C., a Utah limited liability company ("IMG"). Under that loan agreement, IMG
purchased certain accounts receivable from the Company for $50,000 cash and
provided a $200,000 line of credit to the Company. The Company borrowed $50,000
on the line of credit, which is evidenced by the Company's promissory note dated
September 15, 1997 in favor of IMG. IMG is owned and controlled by a member of
the Company's board of directors and the Company's former president and chief
executive officer.
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The table below sets forth certain information regarding the beneficial
ownership of the Company's outstanding Common Stock on October 15, 1997 and as
adjusted to reflect the sale of the Shares hereby by (i) all persons or entities
known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock; (ii) each director; (iii) each executive
officer; (iv) all directors and executive officers as a group; and (iv) the
Selling Stockholders. The beneficial ownership shown in the table below is based
on information provided to the Company by the 5% stockholders, the directors,
executive officers, and Selling Stockholders. Unless otherwise indicated, each
such person (alone or with family members) has voting and dispositive power of
the shares listed opposite such person's name.
<TABLE>
<S> <C> <C> <C> <C> <C>
Beneficial Ownership Beneficial Ownership
Before Offering(1) Shares After Offering
Shares Percent Offered Shares Percent
5% Stockholders
- ----------------------------------- --------- ------- ------- --------- -------
James Dalton(2) 1,277,000 29.1% -- 1,277,000 22.9%
2401 South Foothill Drive
Salt Lake City, Utah 84109
David Pomerantz(3) 250,000 5.7% -- 250,000 4.5%
100 Cedarhurst Ave. Ste. 210
Cedarhurst, New York 11516
Larry Horowitz 225,000 5.1% -- 225,000 4.0%
1335 Club Drive
Hewlett, New York 11557
Lynn L. Summerhays(4) 295,000 6.6% -- 295,000 5.2%
942 North Oakridge Drive
Farmington, Utah 84025
Victor J. Krasan, Ph.D(5)
8437 Avon Street
Jamaica Estates, New York 11432
Officers & Directors
- -----------------------------------
Dale G. Karren(6) 70,000 1.6% -- 70,000 1.2%
380 North 200 West Ste. 101
Bountiful, Utah 84010
E. Wayne Nelson(7) 70,000 1.6% -- 70,000 1.2%
2681 Willow Bend Dr.
Sandy, Utah 84093
Frank A. Eldredge, Ph.D -- -- -- -- --
538 Villager Lane
Midvale, Utah 84047
David G. Derrick(8) 680,000 15.2% -- 680,000 12%
362 South 200 West
Farmington, Utah 84025
David K. Sorensen(9) 70,000 1.6% -- 70,000 1.2%
1025 East 690 South
Orem, Utah 84058
Directors and Executive Officers as a Group 890,000 19% -- 890,000 15.1%
(5 persons) (10)
<PAGE>
Selling Stockholders
- -----------------------------------
Albert Greenspoon 66,666 1.5% 33,333 33,333 *
c/o Kaufman Laramee
800 Rene Lavaseque Blvd., West Suite 2220
Montreal, Quebec H3B 1X9
Canada
Carter Investments, Inc. 216,666 4.9% 108,333 108,333 1.9%
c/o Kaufman Laramee
800 Rene Lavaseque Blvd, West Suite 2200
Montreal, Quebec H3B 1X9
Canada
Steven Shein 33,333 * 16,666 16,667 *
c/o Kaufman Laramee
800 Rene Lavaseque Blvd, West Suite 2200
Montreal, Quebec H3B 1X9
Canada
Elaine Mintz 33,333 * 16,666 16.667 *
c/o Kaufman Laramee
800 Rene Lavaseque Blvd, West Suite 2200
Montreal, Quebec H3B 1X9
Canada
Pension Plan for Employees of 8,333 * 4,166 4,167 *
Federation Pension Bureau
225 West 34th Street, Room 1220
New York, New York 10122
David M. Cahn 8,333 * 4,166 4,167 *
225 West 34th Street, Room 1220
New York, New York 10122
Jerome L. Grushkin 16,667 * 8,334 8,333 *
3 Whitwell Place
Staten Island, New York 10304
Philip Stashin 8,333 * 4,166 4,167 *
225 West 34th Street, Room 1220
New York, New York 10122
Peter Greenblatt 25,000 * 12,500 12,500 *
6510 N.W. 39th Terrace
Boca Rotan, Florida 33496
Sharlene Slutsky 33,333 * 16,666 16,667 *
20 Equestrian Court
West Hills, New York 11743-6636
William K. Martin 16,667 * 8,334 8,333 *
175 East 400 South, #710
Salt Lake City, Utah 84111
Charles W. Hostenske 8,333 * 4,166 4,167 *
7735 Redman Lane
Reynoldsburg, Ohio
J. Michael Martin 16,667 * 8,334 8,333 *
9 Exchange Place #1112
Salt Lake City, Utah 84111
Kennth L. Nochta 16,667 * 8,334 8,333 *
331 Garesche
Collinsville, Illinois
Richard B. Carlock 33,333 * 8,334 8,333 *
22324 Anasazi Way
Golden, Colorado 80401
John P. Fox 8,333 * 4,166 4,167 *
22 West 122 Sheffield Place
Glen Ellyn, Illinois 60137-6804
Kenneth F. and Peggy Z. Tortoriello 16,667 * 16,666 16,667 *
1069 Hohlfelder Road
Gencoe, Illinois 60022
Reno Hartfiel 33,333 * 16,666 16,667 *
712 Main Street, Suite 2000
Houston, Texas 77002
Clarence R. Shima 33,333 * 16,666 16,667 *
1172 Akipola Street
Kailua, Hawaii 96734
John DiPace 16,667 * 8,334 8,333 *
1515 Frank Street
Scotch Plains, New Jersey 07076
John Audiffern 16,667 * 8,334 8,333 *
304 West 102nd Street, Apt. 2C
New York, New York 10025
Selling Stockholders as a Group (22 persons) 666,664 15.2% 333,332 333,332 6.0%
- -----------------------------------
</TABLE>
* Less than 1%.
(1)Assumes 4,383,664 shares of Common Stock issued and outstanding. The
inclusion herein of any shares of Common Stock as beneficially owned does
not constitute an admission of beneficial ownership of those shares. Unless
otherwise indicated, each person listed has sole investment and voting
power with respect to the shares listed. In accordance with the rules of
the Securities and Exchange Commission, each person is deemed to
beneficially own any shares issuable upon exercise of share options or
warrants held by that person that are currently exercisable or that become
exercisable within 60 days after the date hereof, and any reference in
these footnotes to shares that become exercisable within 60 days after the
date hereof and any reference in these footnotes to shares subject to share
options or warrant held by the person in question refers only to such
shares.
(2)Includes 1,139,000 shares held of record by CTM, LC. Mr. Dalton does not
disclaim beneficial ownership of such shares.
(3)Includes 250,000 shares held of record by Daliz Associates. Mr. Pomerantz
does not disclaim beneficial ownership of such shares.
(4)Includes an option to acquire 70,000 shares.
(5)Includes an option to acquire 70,000 shares.
(6)Includes an option to acquire 70,000 shares.
(7)Includes an option to acquire 70,000 shares.
(5)Includes an option to acquire 70,000 shares.
(8)Includes 485,000 shares held of record by IMG, LC, a Utah limited liability
Company, which is owned 85% by Mr. Derrick and 60,000 shares held of record
by ADP Management. Mr. Derrick does not disclaim beneficial ownership of
such shares. Also includes a stock option to acquire 70,000 shares.
(9)Includes an option to acquire 70,000 shares.
(10)Includes options to acquire 280,000 shares.
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company, a Nevada corporation, is authorized to issue 100 million
shares of Common Stock, $.0001 par value. After being issued, the shares of
Common Stock are not subject to further assessment or call.
The holders of Common Stock are entitled to one vote for each share
held of record on each matter submitted to a vote of stockholders. There is no
cumulative voting for election of directors. Holders of Common Stock are
entitled to receive ratably such dividends as may be declared by the Company's
Board of Directors out of funds legally available therefor, and, in the event of
the liquidation, dissolution or winding up of the Company, are entitled to share
ratably in all assets remaining after the payment of liabilities. The holders of
Common Stock have no preemptive rights and have no rights to convert their
Common Stock into any other securities. The outstanding Common Stock is, and the
Common Stock to be outstanding upon the completion of the Offering will be,
validly issued, fully paid and non-assessable.
The present stockholders of the Company will own approximately 72.5% of
the outstanding Common Stock upon completion of the Offering. As a result, they
will be in a position through their voting to control to elect the members of
the Board of Directors and will effectively continue to control the Company.
Indemnification
Neither the Company's Articles of Incorporation nor its bylaws contain
any express provisions relating to indemnification of the Company's officers,
directors and/or employees. Nevada corporate law, as codified in the Nevada
Private Corporation Law ("NPCL") contains provisions that permit a corporation
to indemnify and advance expenses to a person made a party to a proceeding
because he is or was a director, officer, employee or agent of the corporation,
or because he acted in such capacity for another entity at the corporation's
request, against damages and expenses if such person acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to criminal proceedings, he had
no reason to believe his conduct was unlawful. The NPCL requires the corporation
to indemnify a director, officer, employee or agent to the extent he was
successful on the merits or otherwise in defense of any action, or claim
therein, against expenses, including attorneys' fees, reasonably incurred in
connection with the defense.
In an agreement between the Company and its chief financial officer
executed in January 1997, the Company agreed to indemnify that party to the
fullest extent permitted by the NPCL and to advance expenses incurred by that
person in any proceeding in which the person is entitled to indemnification. At
present, there is no pending litigation or proceeding involving any director,
officer, employee, or agent of the Company or indemnification by the Company.
The Company is not aware of any threatened litigation or proceeding which would
result in a claim for such indemnification.
Anti-Takeover Effect of Nevada Law
Under the NPCL, once a person has acquired or offers to acquire
one-fifth, one-third or a majority of the stock of the corporation, a
stockholders meeting must be held after delivery of the "offerors statements",
so the stockholders can vote on whether the shares proposed to be acquired (the
"control shares") may exercise voting rights. Except as otherwise provided in a
company's articles of incorporation, the approval of a majority of the
outstanding stock not held by the offeror is required to approve any voting
rights. The control share acquisition provisions are applicable to any
acquisition of a controlling interest unless the articles of incorporation or
bylaws of a corporation in effect on the 10th day following the acquisition of a
controlling interest by an acquiring person provide that the control share
acquisition provisions of the NPCL do not apply.
The NPCL also provides that a corporation may not engage in any
"combination" (which is broadly defined to include mergers, sales and leases of
assets, issuances of securities, and similar transactions) with an "interested
stockholder" (which is defined as the beneficial owner of 10% or more of the
voting power of the company) and certain affiliates and associates for three
years after the interested stockholder's date of acquiring the shares, unless
the combination or the purchase of shares by the interested stockholder is
approved by the Company's board of directors before the date the interested
stockholder acquires the shares. After the initial three year period, any
combination must still be approved by a majority of the voting power not
beneficially owned by the interested stockholder or the interested stockholder's
affiliates or associates, unless the aggregate amount of cash and the market
value of consideration other than cash to be received by stockholders as a
result of the combination meets certain minimum requirements set forth in the
NPCL. Those minimum requirements are met if the consideration received by the
stockholders is at least equal to the highest of: (i) the highest price per
share paid by the interested stockholder within the three year period
immediately preceding the date of announcement of the combination or in the
transaction in which he became an interested stockholder; (ii) the market value
per share of each class or series of shares, including the common shares, on the
date of the announcement of the combination or on the date interested
stockholder acquired his shares; or (iii) for holders of preferred stock, the
highest liquidation value of the preferred stock.
<PAGE>
Further, under the NPCL, the selection of a period for the achievement
of corporate goals is the responsibility of the directors. In addition, the
directors and officers, in exercising their respective powers with a view to the
interests of the corporation, may consider (i) the interests of the
corporation's employees, suppliers, creditors and customers, (ii) the economy of
the state and nation, (iii) the interests of the community and of society, and
(iv) the long-term as well short-term interests of the corporation and its
stockholders, including the possibility that these interests may be best served
by the continued independence of the corporation. The directors also may resist
a change or potential change in control of the corporation if the directors, by
a majority vote of a quorum, determine that the change or potential change is
opposed to or not in the best interests of the corporation "upon consideration
of the interests of the corporation's stockholders" or for one of the other
reasons described above. Finally, the directors may take action to protect the
interests of the corporation and its stockholders by adopting or executing plans
that deny rights, privileges, power or authority to a holder of a specified
number of shares or percentage of share ownership or voting power.
The provisions set forth above might diminish the likelihood that a
potential acquirer would make an offer for the Common Stock, impede a
transaction favorable to the interests of stockholders or make it more difficult
to effect a change in control of the Company and replace incumbent management.
As a result, the existence of these provisions may have a negative effect on the
market price of the Shares.
Transfer Agent and Registrar
The Company will act as the transfer agent and registrar for the Common
Stock.
STOCK ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no established public market for
the Common Stock. Future sales of substantial amounts of Common Stock in the
public market could adversely affect the prevailing market prices of the Common
Stock.
Upon completion of the Offering, the Company will have 5,583,664 shares
of Common Stock outstanding. Of these shares, the 1,533,332 shares of Common
Stock sold pursuant to the Offering will be freely transferable without
restriction under the Act, except for shares purchased by an "affiliate" of the
Company (as that term is defined in the rules and regulations issued under the
Act), which will be subject to the resale limitations of Rule 144, as
promulgated under the Act ("Rule 144"). The remaining 4,050,332 shares of Common
Stock were issued by the Company in private transactions not involving public
offerings, and are "restricted securities." As such, they may not be resold
unless registered under the Act or unless they are sold in accordance with an
exemption therefrom. All or a portion of these remaining 4,050,332 shares will
become eligible for sale in the public marketplace in reliance on Rule 144,
subject to the volume and other restrictions contained therein. Also, the
Company has adopted the 1996 Plan and 1997 Plan, which will allow it to issue
options covering up to an aggregate of 2,000,000 shares of Common Stock to its
key managerial employees and consultants. The Company has issued options for a
total of 770,000 shares in connection with its stock option plans. The shares
acquired upon any exercise of such options would, subject to applicable federal
securities laws (including certain volume and other restrictions contained
therein), become eligible for sale in the public marketplace.
The Company has not sought or obtained any contractual agreements with
the holders of the currently outstanding shares (or the holders of options to
acquire shares) which would limit, prohibit or defer their rights to dispose
(subject to the provisions of Rule 144 and other federal securities laws
provisions) of their shares. As a result, persons will have the right to effect
transactions in their shares. Those transactions could have a material and
adverse effect on the market price of the Shares offered hereby.
UNDERWRITING
The Company is negotiating with a number of underwriters to place the
Shares on a "firm commitment" or "best efforts" basis. At present, however, the
Company has not engaged the services of any underwriters and, accordingly, no
person or entity is required to acquire any of the Shares hereunder. The
Offering will, in all respects, represent a best efforts offering by the
<PAGE>
Company, and the Shares will be sold by the Company's officers and directors.
The Company intends first to place Shares for the benefit of the Company (and to
the extent of the 1,200,000 Shares being offered by it hereunder), and then for
the benefit of the Selling Stockholders, pro rata in accordance with their
respective interests in the aggregate 333,332 Shares being offered by them
hereunder. See "Risk Factors - Best Efforts Offering."
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
In September, 1997, the Company's Board of Directors retained Tanner +
Co., as its independent public accountants. The Company's former auditors,
Arthur Andersen LLP, issued their report on the Company's financial statements
for the period ended December 31, 1996, however, such report does not cover the
financial statements of the Company included in this Prospectus. The former
auditors' report did not contain an adverse or disclaimer of opinion and was not
modified as to audit scope or accounting principles. However, such report
included an explanatory paragraph that described certain factors discussed in
Note 2 to the Financial Statements that raises substantial doubt about the
ability of the Company to continue as a going concern. There were no
disagreements with the former auditors on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure at the
time of the change which, if not resolved to the former auditors' satisfaction,
would have caused them to make reference to the subject matter of the
disagreement in connection with their report. Prior to retaining Tanner + Co.,
the Company had not consulted with Tanner + Co. regarding accounting principles.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby by the
Company will be passed upon for the Company by Parsons Behle & Latimer, Salt
Lake City, Utah.
EXPERTS
The audited financial statements of the Company as of December 31, 1996
included in this Prospectus and elsewhere in the Registration Statement have
been included herein and in the Registration Statement in reliance upon the
report of Tanner + Co., independent certified public accountants, and upon the
authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
As a result of the Offering the Company will become subject to the
information and reporting requirements of the Securities and Exchange Act of
1934, as amended, and in accordance therewith will file periodic reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). The Company intends to furnish to its stockholders annual
reports containing financial statements audited by and independent public
accounting firm and will make available copies of quarterly reports containing
unaudited financial statements for the first three quarters each fiscal year.
The Company has filed with the Commission, Washington, D.C., 20548, a
Registration Statement (which term shall include all amendments, exhibits and
schedules thereto) on Form SB-2 which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission, to which Registration Statement reference is
hereby made. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. The Registration
<PAGE>
Statement and the exhibits thereto may be inspected and copied at prescribed
rates at the public reference facilities maintained by the Commission at N.W.,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the regional offices of the Commission located at Seven World Trade Center,
13th floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. In addition, the Company is required to file
electronic versions of these documents with the Commission through the
Commission's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system.
The Commission maintains a World Wide Web site at http://www.sec.gov that
contains reports, proxy and information statements an other information
regarding registrants that file electronically with the Commission.
<PAGE>
BIOXIDE CORPORATION
Index to Financial Statements
Page
Report of Tanner + Co........................................................F-2
Balance sheet................................................................F-3
Statement of operations......................................................F-4
Statement of shareholders' equity (deficit)..................................F-5
Statement of cash flows......................................................F-6
Notes to financial statements................................................F-8
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Bioxide Corporation
We have audited the balance sheet of Bioxide Corporation (a development
stage entity) as of December 31, 1996 and the related statements of
operations, shareholders' equity (deficit), and cash flows for the period
March 28, 1996 (date of inception) through 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 the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bioxide Corporation (a
development stage entity) as of December 31, 1996, and the results of its
operations and its cash flows for the period March 28, 1996 (date of
inception) through December 31, 1996 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has not generated revenues from
operations and has incurred an operating loss. This raises substantial
doubt about its ability to continue as a going concern. Management's plans
regarding those matters also are described in Note 2. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
TANNER + CO.
Salt Lake City, Utah
October 1, 1997
F-2
<PAGE>
<TABLE>
<CAPTION>
BIOXIDE CORPORATION
(A Development Stage Company)
Balance Sheet
____________________________________________________________________________________________________________________
<S> <C> <C>
September 30, December 31,
1997 1996
(Unaudited) (Audited)
------------- ------------
Assets
Current assets:
Cash ............................................................................ $ 20,280 $ 503,388
Prepaid expenses ................................................................ 2,199 993
------------- -------------
Total current assets ............................................... 22,479 504,381
Property and equipment, net .......................................................... 38,729 6,576
------------- -------------
$ 61,208 $ 510,957
============= =============
____________________________________________________________________________________________________________________
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
Accounts payable ................................................................ $ 19,756 $ 6,671
Accrued expenses ................................................................ 30,703 9,356
License fee payable ............................................................. -- 200,000
Notes payable ................................................................... 50,000 --
------------- -------------
Total current liabilities .......................................... 100,459 216,027
------------- -------------
Commitments and contingencies ........................................................ -- --
Shareholders= equity (deficit):
Common stock, $.0001 par value, 100,000,000 shares
authorized; 4,383,664 and 4,166,664 shares issued
and outstanding at September 30, 1997 and
December 31, 1996, respectively ............................................... 438 417
Capital in excess of par value .................................................. 1,882,162 1,538,483
Accumulated deficit ............................................................. (1,921,851) (1,243,970)
------------- -------------
Total shareholders= equity (deficit) ............................... (39,251) 294,930
------------- -------------
$ 61,208 $ 510,957
============= =============
____________________________________________________________________________________________________________________
See Accompanying Notes to financial statements. F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BIOXIDE CORPORATION
(A Deveolpment Stage Company)
Statement of Operations
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Period Period Period
March 28, 1996 March 28, 1996 March 28,
Nine (Date of (Date of 1996 (Date of
Months Ended Inception) to Inception) Inception to
September 30, September 30, to December September 30,
1997 1996 31, 1996 1997
(Unaudited) ................... (Unaudited) (Unaudited) (Audited) (Unaudited)
------------- -------------- -------------- ------------
Net sales .............................................................. $ --- $ --- $ --- $ ---
------------- -------------- -------------- -----------
Costs and expenses:
Technology license acquisition
and royalty expense ................................................ 275,500 1,000,000 1,000,000 1,275,500
Consulting, legal, and
accounting fees .................................................... 197,150 106,009 130,008 327,158
Salaries, wages, and payroll
taxes .............................................................. 150,027 57,674 91,766 241,793
Other general and
administrative ..................................................... 65,723 27,465 31,722 97,445
------------- -------------- -------------- ------------
688,400 1,191,148 1,253,496 1,941,896
------------- -------------- -------------- ------------
Loss from operations ................................................... (688,400) (1,191,148) (1,253,496) (1,941,896)
Interest income ........................................................ 10,519 2,556 9,526 20,045
------------- -------------- -------------- ------------
Loss before provision for
income taxes ......................................................... (677,881) (1,188,592) (1,243,970) (1,921,851)
Provision for income taxes ............................................. --- --- --- ---
------------- -------------- --------------- -----------
Net loss ...................................................... $(677,881) $(1,188,592) $(1,243,970) $(1,921,851)
============= ============== =============== ===========
Loss per common share .................................................. $ (.16) $ (.82) $ (.65) $ (.63)
============= ============== =============== ===========
Weighted average number of
common stock and common
stock equivalent shares .............................................. 4,179,000 1,455,000 1,910,000 3,044,000
============= ============== =============== ===========
____________________________________________________________________________________________________________________________________
See accompanying noted to financial statements. F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BIOXIDE CORPORATION
(A Developemnt Stage Company)
Statement of Shareholders' Equity (Deficit)
Nine Months Ended September 30, 1997 (Unaudited) and
Period March 28, 1996 (Date of Inception)
to December 31, 1996 (Audited)
_________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Deficit
Accumulated
Common Stock Additional During the
--------------------- Paid-in Development
Shares Amount Capital Stage Total
----------------------------------------------------------------------
Balance at March 28, 1996 ............ -- $ -- $ -- $ -- $ --
Issuance of common stock for
cash, net of issuance costs of
$200,000.............................. 2,416,664 242 1,252,258 -- 1,252,500
Exercise of warrants through
conversion of technology
license fees payable ................. 1,750,000 175 249,825 -- 250,000
Grant of options for
consulting services .................. -- -- 36,400 -- 36,400
Net loss ............................. -- -- -- (1,243,970) (1,243,970)
----------------------------------------------------------------------
Balance at December 31, 1996
(audited) ............................ 4,166,664 417 1,538,483 (1,243,970) 294,930
Issuance of common stock for
license rights and royalties
(unaudited) .......................... 217,000 21 325,479 -- 325,500
Grant of stock options for
consulting services (unaudited) ...... -- -- 18,200 -- 18,200
Net loss (unaudited) ................. -- -- -- (677,881) (677,881)
----------------------------------------------------------------------
Balance at September 30, 1997
(unaudited) .......................... 4,383,664 $ 438 $1,882,162 $(1,921,851) $ (39,251)
======================================================================
_________________________________________________________________________________________________________________
See accompanying notes to financial statements. F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BIOXIDE CORPORATION
(A Developemnt Stage Company)
Statement of Cash Flows
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Period Period
March 28, 1996 March 28, 1996 Period
Nine Months (Date of (Date of March 28, 1996
Ended September Inception) to Inception) to (Date of
30, 1997 September 30, December 31, 1996 Inception) to
(Unaudited) 1996 (Unaudited) (Audited) September 30,
1997 (Unaudited)
_____________________________________________________________________
Cash flows from operating
activities:
Net loss ................................................. $ (677,881) $(1,188,592) $(1,243,970) $(1,921,851)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation .......................................... 4,110 590 951 5,061
Noncash technology
license acquisition
expense recognized as
part of stock options ............................... -- -- 250,000 250,000
Common stock issued for
services ............................................ 293,700 -- -- 293,700
Issuance of stock options
for services ........................................ -- 36,400 36,400 36,400
(Increase) in prepaid
expenses ............................................ (1,206) (993) (993) (2,199)
Increase in license fee
payable ............................................. (150,000) 500,000 200,000 50,000
Increase in payables and
accrued expenses .................................... 34,432 15,663 16,027 50,459
--------------------------------------------------------------------
Net cash used in
operating activities .............................. (496,845) (636,932) (741,585) (1,238,430)
--------------------------------------------------------------------
Cash flows from investing
activities -
purchase of property and
equipment .............................................. (36,263) (7,078) (7,527) (43,790)
--------------------------------------------------------------------
Cash flows from financing
activities:
Proceeds from short-term
borrowing .............................................. 50,000 -- -- 50,000
Net proceeds from Issuance
of common stock ........................................ -- 1,252,500 1,252,500 1,252,500
--------------------------------------------------------------------
Net cash provided by
financing activities .............................. 50,000 1,252,500 1,252,500 1,302,500
--------------------------------------------------------------------
____________________________________________________________________________________________________________________________________
See accompanying notes to financial statements. F-6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BIOXIDE CORPORATION
(A Developemnt Stage Company)
Statement of Cash Flows
Continued
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Period Period
March 28, 1996 March 28, 1996 Period
Nine Months (Date of (Date of March 28, 1996
Ended September Inception) to Inception) to (Date of
30, 1997 September 30, December 31, 1996 Inception) to
(Unaudited) 1996 (Unaudited) (Audited) September 30,
1997 (Unaudited)
_____________________________________________________________________
Net (decrease) increase in
cash ..................................................... (483,108) 608,490 503,388 20,280
Cash, beginning of period .................................. 503,388 -- -- --
--------------------------------------------------------------------
Cash, end of period ........................................ $ 20,280 $ 608,490 $ 503,388 $ 20,280
====================================================================
Supplemental cash flow
information
Cash paid for:
Interest .......................................... $ -- $ -- $ -- $ --
====================================================================
Income taxes ...................................... $ -- $ -- $ -- $ --
====================================================================
<FN>
Period ending September 30, 1997 (Unaudited)
During the nine months ended September 30, 1997, the Company issued stock in satisfaction of the $50,000 remaining balance of the
license fee payable (see Note 6).
Period ending December 31, 1996 (Audited)
In December 1996, amounts payable under the technology license agreement of $250,000 were satisfied by issuing 1,750,000 shares of
common stock through the exercise of existing common stock warrants (see Note 6).
</FN>
____________________________________________________________________________________________________________________________________
See accompanying notes to finanacial statements F-7
</TABLE>
<PAGE>
BIOXIDE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1996 (Audited) and
September 30, 1997 (Unaudited)
1. Summary of Organization
Business and Bioxide Corporation ("Company") was incorporated on
Significant March 28, 1996 in the state Significant of Nevada.
Accounting Policies The Company is pursuing the development of various
products using certain licensed sterilization
technology it acquired during 1996 (see Note 6).
Presently, sterilization is accomplished by methods
such as heat, steam, gases, gamma radiation, and
accelerated electrons. The Company's licensed
technology employs the synergistic use of
ultraviolet light and ozone gas to accomplish
sterilization. The Company believes that this
technology can be utilized in various product
applications. However, the Company is currently
focusing its efforts on the development and testing
of devices to be used in the clinical lab and
medical industries.
The Company is considered a development stage
company as defined in Statement of Financial
Accounting Standards ("SFAS") No. 7. The Company
has, at the present time, not paid any dividends and
any dividends that may be paid in the future will
depend upon the financial requirements of the
Company and other relevant factors.
Cash Equivalents
For purposes of the statement of cash flows, cash
includes all cash and investments with original
maturities to the Company of three months or less.
Property and Equipment
Property and equipment are recorded at cost, less
accumulated depreciation. Depreciation and
amortization on property and equipment are
determined using the straight-line method over the
estimated useful lives of the assets. Expenditures
for maintenance and repairs are expensed when
incurred and betterments are capitalized. Gains and
losses on sale of property and equipment are
reflected in operations.
Income Taxes
The Company recognizes deferred income tax assets or
liabilities for the expected future tax consequences
of events that have been recognized in the financial
statements or tax returns. Under this method,
deferred income tax assets or liabilities are
determined based upon the difference between the
financial and income tax bases of assets and
liabilities using enacted tax rates expected to
apply when differences are expected to be settled or
realized.
F-8
<PAGE>
BIOXIDE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Continued
1. Summary of Loss Per Common and Common Equivalent Share
Business and Net loss per common share is based on the net loss
Significant and the weighted average number of common shares
Accounting outstanding, during each period after giving effect
Policies to stock options considered to be dilutive common
Continued stock equivalents, determined using the treasury
stock method.
Concentration of Credit Risk
The Company maintains its cash in bank deposit
accounts which, at times, may exceed federally
insured limits. The Company has not experienced any
losses in such account and believes it is not
exposed to any significant credit risk on cash and
cash equivalents.
Use of Estimates in the Preparation of Financial
Statements
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial
statements and the reported amounts of revenues and
expenses during the reporting period. Actual results
could differ from those estimates.
Research and Development
Research and development costs are expensed when
incurred. Purchased research and development is
expensed when acquired.
Unaudited Financial Information
The unaudited financial statements include the
accounts of the Company and include all adjustments
(consisting of normal recurring items), which are,
in the opinion of management, necessary to present
fairly the financial position of the Company as of
September 30, 1997 and the results of operations and
cash flows for the nine months ended September 30,
1997 and the period March 28, 1996 (date of
inception) to September 30, 1996 and the cumulative
amounts from March 28, 1996 (date of inception)
through September 30, 1997. The results of
operations for the nine months ended September 30,
1997 are not necessarily indicative of the results
to be expected for the entire year.
F-9
<PAGE>
BIOXIDE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Continued
2. Going Concern The Company is developing its Licensed Technology,
which is expected to require significant funds and
time to commercialize into salable products. As of
December 31, 1996, revenue generating operating
activities are not in place. The Company has
incurred a loss from inception through December 31,
1996 of $1,243,970 and expects to continue to incur
losses at least through 1997. These factors raise
substantial doubt about the Company's ability to
continue as a going concern.
Management intends to seek additional funding in
order to further develop and commercialize its
Licensed Technology. Since inception, the Company
raised net proceeds of $1,252,500 through private
placements of common stock. Additional funds may be
required to complete the technology and then
generate profitable operations from such technology.
There can be no assurance that such funds will be
available to the Company, or available on terms
acceptable to the Company. Factors that could cause
the estimates of costs to increase include, but are
not limited to, testing, failures, regulatory
approval delays and manufacturing difficulties.
<TABLE>
<S> <C> <C>
3. Property and September 30, December 31,
Equipment 1997 1996
(Unaudited) (Audited)
Property and equipment consists of the following:
Equipment and fixtures $ 43,790 $ 7,527
Less accumulated depreciation
and amortization (5,061) (951)
$ 38,729 $ 6,576
</TABLE>
4. Notes Payable In 1997, the Company executed a promissory note in
favor of a shareholder of the Company bearing
interest at 10% and due February 15, 1998. As of
September 30, 1997 (unaudited), the balance was
$50,000. The promissory note is convertible into
common stock at a rate of $1 of debt per share of
common stock should the Company default on the
promissory note.
F-10
<PAGE>
BIOXIDE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Continued
5. Related Party In 1996, the Company entered into a license
agreement to sublicense the Licensed Technology for
$1,000,000 with a company which is under common
control (see Note 6).
The Company paid investment advisors commissions for
the placement of 666,664 shares of its common stock.
One of the investment advisors who is related to a
director of the Company, was paid $95,000 (see Note
7).
6. Technology License Pursuant to a license agreement dated May 6, 1996
("License Agreement"), Biomed Patent Development,
LLC ("Biomed") granted the Company the exclusive
right to manufacture, market and sell products which
utilize certain patent rights along with certain
technology relating to the sterilization and
decontamination of medical devices and waste (the
ALicensed Technology@).
For the first year of the License Agreement, the
Company is required to pay royalties to Biomed equal
to the greater of (i) seven and one-half percent of
the Company's gross sales or (ii) $1,000,000,
payable as follows: $250,000 upon the execution of
the License Agreement, $250,000 within 90 days,
$250,000 within 180 days and $250,000 within 270
days from the date of the License Agreement. For
each subsequent year under the License Agreement,
the Company is required to pay royalties equal to
the greater of 1.5 percent of the Company's gross
sales or $150,000.
In connection with obtaining the License Agreement,
the Company issued to Biomed a warrant to purchase
1,750,000 shares of common stock for $250,000,
payable in cash or by releasing the Company from one
of its $250,000 license payments previously
described.
During 1996, the Company made the first two required
license payments totaling $500,000. In December
1996, in accordance with an amendment to the License
Agreement, the Company paid $50,000 of the third
$250,000 installment and the remaining $200,000 is
due upon the Company receiving $200,000 from a
private placement of equity. In December 1996,
Biomed exercised its option to purchase 1,750,000
shares of common stock and paid for such shares by
releasing the Company from its obligation to pay the
final $250,000 license installment.
F-11
<PAGE>
BIOXIDE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Continued
6. Technology License The $1,000,000 paid under the technology License
Continued Agreement has been accounted for as purchased
research and development and expensed accordingly.
During the nine months ended September 30, 1997
(unaudited), the Company made an additional cash
payment of $150,000 and issued 150,000 shares of its
common stock to Biomed in exchange for the
termination of the License Agreement, an assignment
of all of their interest in the Licensed Technology
to the Company, and satisfaction of the remaining
$50,000 payable and any and all royalty expenses
incurred. The Company also assumed royalty
agreements from Biomed with two companies as
described in Note 10.
Pursuant to the assumption, the Company also issued
67,000 shares of its common stock to another company
to complete payment of the unpatented Licensed
Technology, an obligation that Biomed was under and
which the Company assumed.
The amount of the license fee payable at September
30, 1997 (unaudited) and December 31, 1996 (audited)
was $-0- and $200,000, respectively.
7. Common Stock In connection with its formation, the Company sold
Transactions 250,000 shares of common stock to Daliz Associates
for $2,500. At the time of the stock issuance Daliz
Associates was owned by a former director of the
Company.
In May 1996, the Company sold 1,500,000 shares of
common stock to IMG, LLC ("IMG"), an entity owned by
the president, chief executive officer, and chairman
of the board of the Company for $450,000. Subsequent
to December 31, 1996, the president of the Company
resigned and the Company hired a new president.
In September 1996, in connection with a private
placement offering of common stock, the Company sold
666,664 shares of its common stock for $1,000,000.
The Company paid commissions to three investment
advisors totaling $200,000, which have been offset
against additional paid-in capital in the
accompanying financial statements. Two of the
investment advisors receiving commissions totaling
$105,000 are affiliates of entities that have the
contractual right to become indirect shareholders of
the Company. The other investment advisor is related
to a director of the Company.
F-12
<PAGE>
BIOXIDE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Continued
7. Common Stock In December 1996, Biomed exercised its warrant to
Transactions purchase 1,750,000 shares of common stock for
Continued $250,000 (see Notes 5 and 6).
In September 1997 (unaudited), the Company approved
the issuance of 217,000 shares of common stock in
connection with the termination of the License
Agreement and the assignment of, and assumption and
satisfaction of obligations related to, the Licensed
Technology (see Note 6).
<TABLE>
<CAPTION>
8. Income Taxes The provisions for income taxes differs from the
amount computed at federal statutory rates as
follows:
<S> <C>
Tax at statutory rates $ (423,000)
State Tax (41,000)
Change in valuation allowance 464,000
----------------
$ -
================
The deferred income tax benefit (liability for the year is as follows:
License fee amortization $ 354,000
Start up costs amortization 66,000
Net operating loss carryforward 30,000
Other 14,000
Valuation allowance (464,000)
----------------
$ -
================
</TABLE>
At December 31, 1996, the Company has approximately
$1,243,000 of net operating losses to use to offset
future income. These net operating losses expire in
the year 2011. If certain substantial changes in the
Company's ownership should occur, there would be an
annual limitation of the amount of net operating
loss carryforwards which could be utilized.
F-13
<PAGE>
BIOXIDE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Continued
8. Income Taxes It is not possible to estimate the utilization of
Continued carrying forward the available net
operating losses to future periods to offset income.
The amount of the net operating losses which can be
used are limited by the future operations and the
tax laws in effect at the time of the utilization.
Consequently, a valuation allowance has been
established to offset any tax asset.
9. Non-Qualified The Company has established the 1996 Stock Incentive
Stock Option Plan (the "Plan"). The Plan provides
for the issuance Plan of a maximum of 1,000,000
shares of common stock to officers, directors,
consultants and other employees. The Plan allows for
the grant of incentive or nonqualified stock
options, stock appreciation rights, performance
share awards and restricted stock grants, and is
administered by the Board of Directors. The Board of
Directors determines the number, type of award, and
terms and conditions, including any vesting
conditions. The number of shares available for
granting awards in any year is increased by the
number of shares for which options or other benefits
granted under the plan have lapsed, expired,
terminated, or been canceled or reacquired. The
maximum term of an option may not exceed ten years.
The Plan expires in 2006.
The Company accounts for stock options issued to
employees, officers and directors under APB Opinion
No. 25 ("APB 25"). Under APB 25, compensation cost
is recognized if an option's exercise price is below
the intrinsic fair value of the Company's stock at
the grant date. Options issued to individuals other
than employees, officers, and directors are
accounted for in accordance with SFAS No. 123.
At September 30, 1997, December 31, 1996, and
September 30, 1996, aggregate nonqualified options
to purchase 210,000, 140,000, and 140,000 shares of
common stock had been granted to consultants for
services performed. In accordance with SFAS No. 123,
the Company recorded consulting expense of $18,200,
$36,400, and $36,400, respectively. These options
have an exercise price of $1.50 per share and expire
between May 1999 and April 2000.
F-14
<PAGE>
BIOXIDE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Continued
9. Non-Qualified At September 30, 1997, December 31, 1996, and
Stock Option September 30, 1996, aggregate nonqualified options
Plan to purchase 560,000, 350,000, and 280,000 shares of
Continued common stock had been granted to various employees,
officers and directors, respectively. These options
have exercise prices of $1.50 per share. As of
September 30, 1997, December 31, 1996, and September
30, 1996, these options have a remaining weighted
average contractual life of 2.1 years, 2.4 years,
and 2.6 years, respectively. The fair value of each
option is approximately $.26 per share as determined
in accordance with SFAS No. 123. Had the Company
recorded expenses totaling approximately $55,000,
$91,000, and $73,000, respectively, related to these
options in accordance with SFAS No. 123, the
Company's net loss would have increased to
approximately $733,000, $1,335,000, and $1,262,000,
respectively, for the periods ended September 30,
1997, December 31, 1996, and September 30, 1996.
The fair value of each option grant is estimated on
the date of grant using the Black-Scholes option
pricing model with the following weighted-average
assumptions used for grants: risk-free interest rate
of between 5.7 and 6.5 percent; expected dividend
yields of zero percent; and expected lives of three
years.
<TABLE>
<CAPTION>
Information regarding the Option Plan is summarized
below:
<S> <C> <C>
Number of Option Price
Options Per Share
Outstanding at March 28, 1996
(date of inception) - -
Granted 490,000 1.50
Exercised ----------- -
Outstanding at December 31, 1996
(Audited) 490,000 1.50
Granted 280,000 1.50
-----------
Outstanding at September 30, 1997
(Unaudited) 770,000
===========
</TABLE>
F-15
<PAGE>
BIOXIDE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Continued
<TABLE>
<CAPTION>
9. Non-Qualified Options exercisable and shares available for future grant are as follows:
Stock Option
Option Plan
Continued
<S> <C> <C>
September 30, December 31,
1997 1996
(Unaudited) (Audited)
Options exercisable 770,000 490,000
======= =======
Shares available for grant 230,000 510,000
======= =======
</TABLE>
10. Commitments and Employment Agreements In April 1996, the Company
Contingencies entered into a two-year employment agreement with its
chairman, chief executive officer and president.
Under the agreement, the Company was required to pay
an annual salary of $100,000. In connection with this
agreement, the Company granted options to purchase
70,000 shares of common stock at an exercise price of
$1.50 per share. In March 1997, the employment
agreement was terminated, however. The stock option
agreement was extended and expires in April 2002.
In December 1996, the Company entered into a one-year
employment agreement with its secretary, treasurer
and chief financial officer. Under the agreement, the
Company is required to pay that executive an annual
salary of $17,000. The Company granted him an option
to purchase 70,000 shares of common stock at an
exercise price of $1.50 per share.
In April 1997, the Company entered into a two-year
employment agreement with its new president and chief
executive officer. Under the agreement, the Company
was required to pay an annual salary of $90,000. The
Company also granted to the new president options to
purchase 70,000 shares of common stock at an exercise
price of $1.50 per share. In July 1997, the Company
amended the employment agreement to increase the
executive's annual salary to $136,000 which expires
in June 1999.
In March 1997, the Company entered into a one year
employment agreement with its director of research
and development. Under the agreement the Company is
required to pay the person an annual salary of
$84,000.
F-16
<PAGE>
BIOXIDE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Continued
10. Commitments and Consulting Agreements
Contingencies In May 1996, the Company entered into a one-year
Continued consulting agreement with a consultant. The agreement
requires the Company to pay the consultant $31 per
hour (minimum $2,000 per month) for providing
assistance in the development and design of the
Company's products. The Company also granted the
consultant an option to purchase 70,000 shares of
common stock at an exercise price of $1.50 per share.
In May 1996, the Company entered into a two-year
consulting agreement with a director and stockholder
of the Company. The agreement requires the Company to
pay $4,000 per month for the individual's services as
head of the Company's scientific and advisory board.
The Company also granted the consultant an option to
purchase 70,000 shares of common stock at an exercise
price of $1.50 per share.
In April 1997, the Company entered into a one year
consulting agreement with a consultant. The agreement
requires the Company to pay the consultant $1,500 per
day for his services. The Company also granted the
consultant an option to purchase 70,000 shares of
common stock at an exercise price of $1.50 per share.
Royalty Agreements
In connection with the assignment and assumption
agreement pertaining to the Licensed Technology in
September 1997 (unaudited), the Company assumed
certain royalty agreements as follows:
The Company assumed a royalty agreement for the
unpatented licensed technology requiring annual
payments of 0.9% of gross revenues received by
the Company from the sale of products or
services, or $90,000, whichever is greater.
The Company also assumed a royalty agreement for
the patented licensed technology to pay 0.5% of
the net sales price for all licensed products
and components. An amount of $50,000 was
required to be paid at the beginning of the
royalty agreement and will be used against the
first $50,000 of royalties.
The Company has not realized revenues from the
sale of products, and thus no royalties under
these agreements have been paid. However, the
Company is obligated to pay the minimum royalty
of $90,000 under the royalty agreement for the
unpatented licensed technology.
F-17
<PAGE>
BIOXIDE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Continued
11. Fair Value of All financial instruments are held for purposes other
Financial than trading. The Company estimates that the fair
Instruments value of all financial instruments at December 31,
1996, does not differ materially from the aggregate
carrying values of its financial instruments recorded
in the accompanying balance sheet. The estimated fair
value amounts have been determined by the Company
using available market information and appropriate
valuation methodologies. Considerable judgement is
necessarily required in interpreting market data to
develop the estimates of fair value, and,
accordingly, the estimates are not necessarily
indicative of the amounts that the Company could
realize in a current market exchange.
12. Recent Accounting There are no recently issued Financial Accounting
Pronouncements Standards from the Financial Accounting Standards
Board that would have a material impact on the
financial statements of the Company.
13. Subsequent Events In 1997, the following transactions occurred:
(Unaudited)
* The Company terminated its employment
agreement with its chairman, chief executive
officer, and president, and entered into a
new two year employment agreement with its
new president and chief executive officer as
described in Note 10.
* The Company issued stock options to four
individuals allowing each to purchase 70,000
shares of the Company's stock for $1.50 per
share. Three of the individuals are
employees or directors of the Company and
one is a consultant (see Note 9).
* In September 1997, the Company entered into
an agreement to be assigned, and assume, the
Licensed Technology rights and obligations
previously owned by Biomed. In connection
with the agreement the license between the
Company and Biomed was terminated. The
Company assumed certain royalty agreements
associated with the Licensed Technology
(see Notes 6 and 10).
F-18
<PAGE>
BIOXIDE CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Continued
13. Subsequent Events * The Board of Directors approved the 1997
(Unaudited) Stock Incentive Plan ("The 1997
Plan") which provides for the Continued
issuance of a maximum of 1,000,000 shares of
common stock to officers, directors,
consultants, and other employees. The 1997
Plan allows for the grant of incentive or
nonqualified stock options, stock
appreciation rights, performance share
awards and restricted stock grants, and is
administered by the Board of Directors. The
Board of Directors determines the number,
type of award, and terms and conditions,
including any vesting conditions. The number
of shares available for granting awards in
any year is increased by the number of
shares for which options or other benefits
granted under the plan have lapsed, expired,
terminated, or been canceled or reacquired.
The maximum term of an option may not exceed
ten years. The 1997 Plan expires in 2007.
* The Company entered into a loan agreement
with one of its shareholders as described in
Note 4.
F-19
<PAGE>
[Left Side of Back Cover]
No dealer, sales representative or other person is authorized in
connection with any offering made hereby to give any information or to make any
representation not contained herein and, if given or made, such information or
representation must not be relied upon as having been authorized by the Company
or the Underwriters. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the Common Shares
offered hereby to any person in any jurisdiction in which it is unlawful to make
such an offer or solicitation. Neither the delivery of this Prospectus nor any
sale made hereunder shall under any circumstances create any implication that
there has been no change in the affairs of the Company since the date hereof or
that information contained herein is correct as of any time subsequent to the
date hereof.
TABLE OF CONTENTS
Prospectus Summary ..................................\
Risk Factors ........................................\
Use of Proceeds .....................................\
Dividend Policy .....................................\
Capitalization ......................................\
Dilution ............................................\
Selected Financial Data .............................\
Management's Discussion and Analysis or
Plan of Operations .............................\
Business ............................................\
Management ..........................................\
Certain Relationships and Related Transactions ......\
Principal and Selling Stockholders ..................\
Description of Capital Stock ........................\
Stock Eligible for Future Sale ......................\
Underwriting ........................................\
Changes in and Disagreement with Accountants on
Accounting and Financial Disclosure .................\
Legal Matters .......................................\
Experts .............................................\
Additional Information ..............................\
Financial Statements ................................\
Until , 1997 (25 days after the date of this Prospectus), all dealers
effecting transactions in the Common Shares, whether or not participating in
this distribution, may be required to deliver a Prospectus.
[Right Side of Back Cover]
1,533,332 Shares
[LOGO]
-------------------
PROSPECTUS
-------------------
October , 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The NPCL provides for the indemnification of officers, directors, and
other corporate agents in terms sufficiently broad to indemnify such persons
under certain circumstances for liabilities (including reimbursement for
expenses incurred) arising under the Securities Act of 1933, as amended (the
"Act"). In January 1997, the Company entered into an indemnification agreement
with its chief financial officer/treasurer/secretary. Under the agreement the
Company indemnifies the executive to the fullest extent permitted by the NPCL
and to advance expenses incurred in any proceeding in which the executive is
entitled to indemnification. The Company also intends to enter into agreements
with its directors and officers that will require the Company, among other
things, to indemnify those parties against certain liabilities that may arise by
reason of their status or service as directors or officers to the fullest extent
prohibited by law.
<TABLE>
<CAPTION>
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses expected to be
incurred by the Company in connection with the sale and distribution of the
securities being registered hereby. All amounts are estimated except the
Securities and Exchange Commission registration fee and the National Association
of Securities Dealers, Inc. filing fee.
<S> <C>
Securities and Exchange Commission registration fee......................... $2,324
National Association of Securities Dealers, Inc. filing fee................. --
Blue Sky fees and expenses..................................................
Accounting fees and expenses................................................
Legal fees and expenses.....................................................
Printing and engraving expenses.............................................
Registrar and Transfer Agent's fees.........................................
Nasdaq market listing fees..................................................
Miscellaneous fees and expenses.............................................
Total..............................................................
</TABLE>
Item 26. Recent Sales of Unregistered Securities
The Company has entered into several transactions involving the sale of
unregistered securities. These transactions generally occurred during the period
before the Company began active business operations, when the value of the
Company's securities was negligible and when there was no market for its
securities.
In March 1996 and in connection with the formation of the Company, the
Company issued 250,000 shares of common stock to Daliz Associates, a entity
controlled by a former officer and director of the Company in exchange for
$2,500. The Company believes the transaction was exempt from registration under
Section 4(2) of the Act.
In May 1996 the Company issued 1,500,000 shares of common stock to IMG,
LLC, a Utah limited liability company controlled by Mr. Derrick, in exchange for
$450,000. The Company's former president, chief executive office and chairman of
the board owns the other interest in IMG. The Company believes that the
transaction was exempt from registration under Section 4(2) of the Act.
In May 1996, the Company issued a warrant to Biomed for 1,750,000
shares of common stock in connection with the Biomed License. In December 1996,
Biomed exercised the warrant to purchase all 1,750,000 shares of common stock.
The Company believes that those separate transactions were exempt from
registration under Section 4(2) of the Act.
In September 1997, the Company issued 150,000 shares of common stock to
Biomed and 67,000 shares of common stock to SZTP under the Biomed Assignment in
exchange for Biomed's assignment of its rights in the Deligen II technology. The
Company believes that those transactions were was exempt from registration under
Section 4(2) of the Act.
In September 1996, the Company sold a total of 666,664 shares of its
Common Stock to 22 individuals and entities in transactions which were intended
to qualify under the exemption from registration provided under Regulation D, as
promulgated under the Act (the "Regulation D Offering"). Each of the purchasers
in the Regulation D Offering represented that he or it was an "accredited
investor," as that term is defined under Regulation D, and received, in
connection with his or its investment, a disclosure document relating to the
Company, its business prospects and financial condition. Each purchaser in the
Regulation D Offering also represented and warranted to the Company that he or
it (i) was aware that the securities had not been registered under the Federal
securities laws, (ii) acquired the securities for his or its own investment, for
investment purposes, and not with a view to or for the resale in connection with
any distribution for purposes of the Federal securities laws, (iii) understood
that the securities would need to be held indefinitely unless registered or an
exemption for registration applied to a proposed disposition, (iv) was aware
that the certificate representing the securities would bear a legend restricting
their transfer, and (v) was aware that there was no public market for the
securities. Each of the investors in the Regulation D Offering also had the
right to ask questions of, and receive answers from, the Company relating to its
business operations, financial condition, business prospects, assets,
liabilities and other matters.
The Company believes that, in light of the foregoing, and in light of
the sophisticated nature of each of the purchasers in the Regulation D Offering,
the sale of the Company's securities to the respective acquirers did not
constitute the sale of an unregistered security in violation of the Federal
security laws and regulations by reason of the exemption provided under Section
4(2) of the Act, and the rules and regulations promulgated thereunder.
Item 27. Exhibits
(a) Exhibits
Exhibit
Number Description of Document
3.1 Articles of Incorporation
3.2 Bylaws of the Company
4.1 Reference is made to Exhibits 3.1 and 3.2
4.2* Specimen of Common Share Certificate
5.1* Opinion of Parsons Behle & Latimer
10.1* Assignment Agreement between the Company and Biomed Patent
Development L.L.C., dated September 15, 1997
10.2* Purchase Agreement between Biomed Patent Development, L.L.C.
and SZTP Technologies, dated May 6, 1996.
10.3* License Agreement between Biomed Patent Development, L.L.C.
and Biomune Systems, Inc., dated May 6, 1996
10.4 Employment Agreement between the Company and Dale Karren
Dated April 1, 1997
10.5 Amendment to Employment Agreement between the Company and
Dale Karren, dated July 1, 1997
10.6 Employment Agreement between the Company and Frank Eldredge,
dated September 25, 1997
10.7 1996 Stock Option Plan
10.8 1997 Stock Incentive Plan
10.9 Form of Stock Option Grant and Agreement
10.10 Indemnification Agreement between the Company and E. Wayne
Nelson dated January 20, 1997
10.11 Loan Agreement between the Company and IMG, L.C. dated August
13, 1997
10.12 Promissory Note of the Company in favor of IMG, L.C. dated
September 15, 1997
10.13* Agreement between Elopak Systems A.G. and Biomed Patent
Development LLC dated April 26, 1996
11 Statement regarding computation of per share earnings (No
Statement is included because the computation can be clearly
deternined from the Registration Statement)
23.1 Consent of Parsons Behle & Latimer
23.2 Consent of Tanner + Co.
24 Power of Attorney (See Signature Page)
27 Financial Data Schedules
* To be filed by amendment.
(b) Financial Statement Schedules
Schedules other than those referred to above have been omitted because
they are not applicable or not required or because the information is included
elsewhere in the Financial Statements or the notes thereto.
Item 28. Undertakings
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned small business issuer hereby undertakes that it will:
(1) For determining any liability under the Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the small business issuer under Rule
424(b)(1) o (4) or 497(h) under the Act as part of this registration
statement as of the time the Commission declared it effective.
(2) For determining any liability under the Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the
initial bona fide offering thereof.
(3) Provide to the Underwriters at the closing(s) specified in
the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit
prompt delivery to each purchaser.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Company certifies that it has reasonable grounds to believe that it meets all of
the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Bountiful, Utah, on the 28th day of October, 1997.
BIOXIDE CORPORATION
By /s/ DALE G. KARREN
Dale G. Karren
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Dale G. Karren, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments, including post-effective amendments,
to this Registration Statement, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Act, this Registration
Statement was signed by the following persons in the capacities and on the dates
stated.
<TABLE>
<S> <C> <C>
Signature Title Date
/s/ Dale G. Karren Chief Executive Officer, President, October 22, 1997
Dale G. Karren Director
(Principal Executive Officer)
/s/ E. Wayne Nelson Chief Financial Officer, Secretary October 22, 1997
E. Wayne Nelson and Treasurer
(Principal Financial Officer)
/s/ David G. Derrick Director October 22, 1997
David G. Derrick
/s/ David K. Sorensen Director October 22, 1997
David K. Sorensen
Salt Lake City, Utah
October 22, 1997
</TABLE>
ARTICLES OF INCORPORATION
OF
BIOXIDE CORPORATION
FIRST: The name of this corporation is:
BIOXIDE CORPORATION
SECOND: Its principal office in the State of Nevada is located at 502 E
John St Carson City Nv 89706, The name and address of its resident agent is CSC
Services Of Nevada, Inc. at the above address.
THIRD: The nature of the business or objects or purposes proposed may be
organized under the General Corporation Law of the State of Nevada;
To engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Nevada.
FOURTH: The total authorized capital stock of the corporation is One
Hundred Million (100,000,000) shares with a par value of 0.0001 per share.
FIFTH: The governing board of this corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided in the by-laws of this
corporation, provided that the number of directors shall not be reduced less
than one unless there is less than one stockholder.
The name and post office address of the first board of directors, which shall be
1 in number, is as follows:
NAME POST OFFICE ADDRESS
David Pomerantz 8 West 38th Street, 9th Floor New York, NY
SIXTH: The capital stock, after the amount of the subscription price, or
par value, has been paid in, shall not be subject to assessment to pay the debts
of the corporation.
SEVENTH: The name and post office address of the incorporator signing the
articles of incorporation is as follows:
NAME POST OFFICE ADDRESS
B. Gould 502 E John St.
Carson City, NV 89706
EIGHTH: The corporation is to have perpetual existence.
NINTH: In furtherance and not in limitation of the powers conferred by
statue, the board of directors is expressly authorized, subject to the by-laws,
if any, adopted by the shareholders, to make, alter or amend the by-laws of the
corporation.
TENTH: Meetings of stockholders may be held outside of the State of
Nevada at such place or places as may be designated from time to time by the
board of directors or in the by-laws of the corporation.
ELEVENTH: This corporation reserves the right to amend, alter, change
or repeal any provision contained in the articles of incorporation, in the
manner now or hereafter prescribed, and all rights conferred upon stockholders
herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the sole incorporator herein before named for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Nevada, do make and file these articles of incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand this twenty-eighth day of March, A.D. 1996.
/s/ B. Gould
B. Gould, Incorporator
STATE OF NEVADA )
SS
COUNTY OF CARSON CITY)
On this twenty-eighth day of March, A.D., 1996 before me a Notary
Public, personally appeared, B. Gould , who severally acknowledged that
she executed the above instrument.
/s/Nancy L. McClain
Nancy L. McClain
Notary Public
I, B. Gould, Authorized Representative, on behalf of CSC Services of Nevada,
Inc, hereby accept appointment. as Resident Agent of the above-named
corporation.
/s/ B. Gould March 28, 1996
B. Gould
Authorized Representative
BYLAWS
OF
BIOXIDE CORPORATION
ARTICLE I
NAME, REGISTERED OFFICE, AND REGISTERED AGENT
Section 1. Name. The name of this corporation is "Bioxide
Corporation."
Section 2. Registered Office and Registered Agent. The board
of directors shall designate and the corporation shall maintain a registered
office. The location of the registered office may be changed by the board of
directors. The initial registered agent of this corporation is The Corporation
Trust Company of Nevada.
ARTICLE 11
STOCKHOLDERS MEETINGS
Section 1. Date of Meetings. The annual meeting of the
stockholders of the corporation shall be held at such time and on such day as
shall be determined by the board of directors. This meeting shall be for the
election of directors and for the transaction of such other business as may
properly come before the stockholders.
Section 2. Place of Meetings. The board of directors may
designate any place, either within or without the State of Nevada, as the place
of meeting for any annual meeting or for any special meeting called by the board
of directors. A waiver of notice signed by all stockholders entitled to vote at
a meeting may also designate any place, either within or without the State of
Nevada, as the place for the holding of such meeting.
Section 3. Special Meetings. A special meeting of
stockholders, other than one regulated by statute, may be called at any time by
the president or by a majority of the directors, and must be called by the
president upon written request of the holders of a majority of the outstanding
shares entitled to vote at such meeting. Written notice of such meeting shall be
given, which shall state the place, the date and the hour of the meeting, the
purpose or purposes for which it is called, and the name of the person by whom
or at whose direction the meeting is called. The notice shall be given to each
stockholder of record in the same manner as the notice of the annual meeting. No
business other than that specified in the notice of the meeting shall be
transacted at any such special meeting.
Section 4. Notice of Stockholders' Meetings. The secretary
shall give written notice stating the place, day, and hour of the meeting, and
in the case of a special meeting, the purpose or purposes for which the meeting
is called, which shall be delivered not fewer than ten (10) or more than sixty
(60) days prior to the date of the meeting, either personally or by mail, to
each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at its address as it appears on the books of the
corporation, with postage thereon prepaid.
Section 5. Record Date. The board of directors may fix a date
not fewer than ten (10) or more than sixty (60) days prior to any meeting as the
record date for the purpose of determining the stockholders entitled to notice
of and to vote at such meeting of the stockholders. The transfer books may be
closed by the board of directors for a stated period not to exceed sixty (60)
days for the purpose of determining stockholders entitled to receive payment of
any dividend, or in order to make a determination of stockholders for any other
purpose.
Section 6. Quorum. Stockholders holding a majority of the
voting power of the corporation, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If a quorum is not present at
a meeting, then stockholders holding a majority of the voting power represented
may adjourn the meeting without further notice. At a meeting resumed after any
such adjournment at which a quorum shall be present or represented, any business
may be transacted which might have been transacted at the meeting as originally
noticed. The stockholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of
stockholders in such number that less than a quorum remains.
Section 7. Voting. Every stockholder shall be entitled to one
vote for each share standing in his name on the books of the corporation, and
all corporate action shall be determined by a majority of the votes cast at a
meeting of stockholders entitled to vote thereon.
Section 8. Proxies. At all meetings of stockholders, a
stockholder may vote in person or by proxy executed in writing by the
stockholder or by his duly authorized agent. Such proxy shall be filed with the
Secretary of the corporation before or at the time of the meeting. No proxy
shall be valid after six (6) months from the date of its execution unless
otherwise provided in the proxy.
Section 9. Informal Action by Stockholders. Any action
required to be taken at a meeting of the stockholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by stockholders entitled to vote with respect to the subject matter
thereof who hold at least a majority of the voting power or, if a different
proportion of votes is required, who hold such proportion of the voting power.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. Subject to the limitations in the
Nevada Revised Statutes (the "Statutes") or the articles of incorporation, the
board of directors shall have full control over the affairs of the corporation.
The board of directors may adopt such rules and regulations for the conduct of
its meetings and the management of the corporation as it deems proper.
Section 2. Number, Tenure and Qualification. The number of
directors of the corporation shall be within a range of from one to seven,
inclusive, as determined from time to time by the directors or the stockholders.
Each director shall hold office until the next annual meeting of stockholders
and until his or her successor shall have been elected and qualified, unless
said director is removed or resigns in accordance with the provisions of these
bylaws. Directors need not be residents of the State of Nevada or stockholders
of the corporation.
Section 3. Regular Meetings. A regular meeting of the board of
directors shall be held without other notice than by these bylaws immediately
following and at the same place as the annual meeting of stockholders.
Section 4. Special Meetings. Special meetings of the board of
directors may be called by any director or by the president. The secretary shall
give notice of the time, place and purpose or purposes of each special meeting
to each director by mailing the same at least three days before the meeting or
by telephoning the same at least one day before the meeting.
Section 5. Quorum. A majority of the members of the board of
directors shall constitute a quorum for the transaction of business, but less
than a quorum may adjourn any meeting until a quorum shall be present, whereupon
the meeting may be held. At any meeting at which every director shall be
present, even though without any notice, any business may be transacted.
Section 6. Manner of Acting. At all meetings of the board of
directors, each director shall have one vote. The act of directors holding a
majority of the voting power of the directors at a meeting at which a quorum is
present is the act of the board of directors.
Section 7. Vacancies. A vacancy in the board of directors
shall be deemed to exist in case of death, resignation, or removal of any
director, or if the authorized number of directors be increased, or if the
stockholders fail, at any meeting of the stockholders at which any director is
to be elected, to elect the full authorized number to be elected at that
meeting. Any such vacancy shall be filled by the directors then in office,
though less than a quorum, with the person elected to fill the vacancy to hold
office until the next annual meeting or until his or her successor is duly
elected and qualified.
Section 8. Removals. Unless otherwise provided in the Statutes
or the articles of incorporation, directors may be removed from office by the
vote of stockholders representing not less than two-thirds of the voting power
of the corporation. No reduction of the authorized number of directors shall
have the effect of removing any director prior to the expiration of his or her
term of office.
Section 9. Resignation. A director may resign at any time by
delivering written notification thereof to the president or secretary of the
corporation. Resignation shall become effective upon its acceptance by the board
of directors; provided, however, that if the board of directors has not acted
thereon within ten (10) days from the date of its delivery, then the resignation
shall be deemed accepted upon the tenth day.
Section 10. Presumption of Assent. A director of the
corporation who is present at a meeting of the board of directors at which
action on any corporate matter is taken shall be presumed to have assented to
the action taken unless his or her dissent is entered in the minutes of the
meeting or unless he files his or her written dissent to such action with the
person acting as the secretary of the meeting or by registered mail to the
secretary of the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who votes in favor of such
action.
Section 11. Directors' Compensation. The board of directors
may, by resolution, fix the compensation of directors for services in any
capacity.
Section 12. Informal Action by Directors. Any action that may
or is required to be taken at a meeting of directors may be taken without a
meeting pursuant to the unanimous written consent of the directors of the
corporation.
Section 13. Committees. Unless prohibited by the articles of
incorporation, the board of directors may designate one or more committees which
have and may exercise the powers of the corporation. The names of the committees
shall be stated in the resolution of the board of directors creating such
committees.
Section 14. Chairman. The board of directors may elect a
chairman of the board, who shall preside at all meetings of the board of
directors and perform such other duties as may be prescribed from time to time
by the board of directors.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation shall be a
president, a secretary and a treasurer, each of whom shall be elected by a
majority of the board of directors. Such other officers and assistant officers
as may be deemed necessary may be elected or appointed by the board of
directors. Any natural person may hold two or more offices.
Section 2. Election and Term of Office. The officers of the
corporation shall be elected annually by the board of directors immediately
after each annual meeting of the stockholders. If for any reason the election of
officers is not held at such meeting, such election shall be held as soon
thereafter as possible. Each officer shall hold office until his successor shall
have been duly elected and qualified or until his resignation, removal, or
death.
Section 3. Resignations. Any officer may resign at any time by
delivering a written resignation either to the president or to the secretary.
Unless otherwise specified therein, such resignation shall take effect upon
delivery.
Section 4. Removal. Any officer or agent may be removed by the
board of directors in its judgment. Any such removal shall require a majority
vote of the board of directors, exclusive of the officer in question if he or
she is also a director.
Section 5. Vacancies. A vacancy in any office because of
death, resignation, or removal, or if a new office shall be created, may be
filled by the board of directors for the unexpired portion of the term.
Section 6. President. The president shall be the chief
executive and administrative officer of the corporation. He or she shall preside
at all meetings of the stockholders and, in the absence of the chairman of the
board, at meetings of the board of directors if he or she has been elected as a
director. The president shall exercise such duties as customarily pertain to the
office of president and shall have general and active supervision over the
property, business, and affairs of the corporation and over its several
officers. He or she may appoint agents or employees other than those appointed
by the board of directors. The president may sign, execute and deliver in the
name of the corporation powers of attorney, contracts, bonds and other
obligations, and shall perform such other duties as may be prescribed from time
to time by the board of directors, the Statutes or by these bylaws.
Section 7. Secretary. The secretary shall, subject to the
direction of the president, keep the minutes of the meetings of the stockholders
and of the board of directors and, to the extent ordered by the board of
directors or the president, the minutes of meetings of all committees. The
secretary shall cause notice to be given of meetings of stockholders, of the
board of directors, and of any committee appointed by the board. He or she shall
have custody of the corporate seal, if any, and general charge of the records,
documents and papers of the corporation not pertaining to the performance of the
duties vested in other officers. He or she may sign or execute contracts with
the president or a vice president thereunto authorized in the name of the
corporation and affix the seal of the corporation thereto. The secretary shall
perform such other duties as may be prescribed from time to time by the
president, the board of directors or by these bylaws.
Section 8. Treasurer. The treasurer shall, subject to the
direction of the president, have general custody of the collection and
disbursement of the funds of the corporation. He or she shall endorse on behalf
of the corporation for collection checks, notes and other obligations, and shall
deposit the same to the credit of the corporation in such bank or banks or
depositories as the board of directors may designate. The treasurer may sign,
with the president or such other persons as may be designated by the board of
directors, all bills of exchange or promissory notes of the corporation. He or
she shall enter or cause to be entered regularly in the books of the corporation
a full and accurate account of all monies received and paid by him on account of
the corporation, and shall at all reasonable times exhibit his or her books and
accounts to any director of the corporation upon application at the office of
the corporation during business hours. The treasurer shall, whenever required by
the board of directors or the president, render a statement of his accounts. He
or she shall perform such other duties as may be prescribed from time to time by
the president, the board of directors or these bylaws.
Section 9. Salaries. The salaries or other compensation of the
officers of the corporation shall be fixed from time to time by the board of
directors, except that the board of directors may delegate to any person or
group of persons the power to fix the salaries or other compensation of any
subordinate officers or agents. No officer shall be prevented from receiving any
such salary or compensation by reason of the fact that he or she is also a
director of the corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The board of directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation; such
authority may be general or confined to specific instances.
Section 2. Loans. No loan or advance shall be contracted on
behalf of the corporation, no negotiable paper or other evidence of its
obligation under any loan or advance shall be issued in its name, and no
property of the corporation shall be mortgaged, pledged, hypothecated or
transferred as security for the payment of any loan, advance, indebtedness or
liability of the corporation unless and except as authorized by the board of
directors. Any such authorization may be general or confined to specific
instances.
Section 3. Deposits. All funds of the corporation not
otherwise employed shall be deposited from time to time to the credit of the
corporation in such banks, trust companies or other depositories as the board of
directors may select, or as may be selected by any officer or agent authorized
to do so by the board of directors.
Section 4. Checks and Drafts. All checks, drafts, and other
evidences of indebtedness of the corporation shall be signed by such officer or
officers of the corporation in such manner as the board of directors from time
to time may determine. Endorsements for deposit to the credit of the corporation
in any of its duly authorized depositories shall be made in such manner as the
board of directors from time to time may determine.
Section 5. Bonds and Debentures. Every bond or debenture
issued by the corporation shall be evidenced by an appropriate instrument and be
signed by the president.
ARTICLE VI
CAPITAL STOCK
Section 1. Stock Certificates. The stock of the corporation
may shall be represented by certificates signed by the president and by the
secretary, and may bear the seal of the corporation. All certificates for shares
shall be consecutively numbered or otherwise identified. The name and address of
the person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
corporation. All certificates issued by the corporation shall bear the following
restrictive legend unless they are duly registered with the Securities and
Exchange Commission:
THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE SOLD, PLEDGED, OR TRANSFERRED UNLESS
THEY ARE REGISTERED UNDER THE SECURITIES ACT
OF 1933, OR THE COMPANY RECEIVES AN OPINION
FROM COUNSEL SATISFACTORY TO IT THAT SUCH
REGISTRATION IS NOT REQUIRED FOR SALE OR
TRANSFER, OR THAT THE SHARES HAVE BEEN
LEGALLY SOLD IN BROKER TRANSACTIONS PURSUANT
TO RULE 144 OF THE RULES AND REGULATIONS OF
THE SECURITIES AND EXCHANGE COMMISSION.
No new certificate shall be issued in exchange for the surrender or transfer of
shares until the former certificate is surrendered to the corporation and
canceled, except that in case of a lost, destroyed or mutilated certificate, a
new one may be issued therefor upon such terms and indemnity to the corporation
as the board of directors may prescribe.
Section 2. Uncertificated Shares. The corporation may issue
uncertificated shares of any class or series of the corporation's stock. Within
a reasonable time after the issuance or transfer of uncertificated shares, the
corporation shall send the stockholder a written statement confirming the
information required on the certificates pursuant to section 78.235(l) of the
Statutes.
Section 3. Transfer of Shares. Transfer of shares of the
corporation shall be made only on the stock transfer books of the corporation by
the holder of record thereof or by his legal representative (who shall furnish
proper evidence of authority to transfer) or by his attorney thereunto
authorized by power of attorney duly executed and filed with the secretary of
the corporation, and on surrender for cancellation of the certificate for such
shares, if any. The person in whose name shares stand on the books of the
corporation shall be deemed by the corporation to be the owner thereof for all
purposes.
Section 4. Transfer Agent and Registrar. The board of
directors shall have power to appoint one or more transfer agents and registrars
for the transfer and registration of certificates of stock of any class, and may
require that stock certificates shall be countersigned and registered by one or
more of such transfer agents and registrars.
Section 5. Lost or Destroyed Certificates. The board of
directors may direct a new certificate to be issued to replace any certificate
theretofore issued by the corporation and alleged to have been lost or destroyed
if the new owner swears by affidavit that the certificate is lost or destroyed.
The board of directors may, at its discretion, require the owner of such
certificate or his legal representative to give the corporation a bond in such
sum and with such sureties as the board of directors may direct to indemnify the
corporation and transfer agents and registrars, if any, against claims that may
be made on account of the issuance of such new certificates.
Section 6. Consideration for Shares. The capital stock of the
corporation shall be issued for such consideration, but not less than the par
value thereof, if any, as shall be fixed from time to time by the board of
directors. Such consideration may be in the form of cash, property, or prior
services rendered to the corporation, subject to the requirements of the
Statutes, but not in contemplation of future services to the corporation. In the
absence of fraud, the determination of the board of directors as to the value of
any property or services received in full or partial payment of shares shall be
conclusive.
Section 7. Registered Stockholders. The corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder thereof, in fact, and shall not be bound to recognize any equitable or
other claim to or interest in the shares.
ARTICLE VII
WAIVER OF NOTICE
Whenever any notice is required to be given to any stockholder
or director of the corporation under the provisions of these bylaws, or under
the provisions of the articles of incorporation, or under the provisions of the
Statutes, a waiver thereof in writing signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Attendance at any meeting shall
constitute a waiver of notice of such meeting, except where attendance is for
the express purpose of objecting to the legality of that meeting.
ARTICLE VIII
AMENDMENTS
These bylaws may be altered, amended, repealed, or new bylaws
adopted by a majority of the entire board of directors at any regular or special
meeting. Any bylaw adopted by the board may be repealed or changed by action of
the stockholders.
ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall be fixed and may be
varied by resolution of the board of directors.
ARTICLE X
DIVIDENDS
The board of directors may at any regular or special meeting,
as it deems advisable, declare dividends payable out of the surplus of the
corporation.
ARTICLE XI
CORPORATE SEAL
The corporation may adopt an official seal which shall bear
the name of the corporation and the state and year of incorporation.
* * * * * *
This is to certify that the foregoing bylaws were duly adopted
by the unanimous written consent of the board of directors.
/s/ David Pomerantz
David Pomerantz, Secretary
Dated April 19, 1996
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and shall be effective as of the 1st
day of April, 1997, by and between BIOXIDE CORPORATION, a Nevada corporation
(the "Company"), and DALE G. KARREN, an individual (the "Executive"). Each of
the Company and the Executive are referred to herein individually as a "Party,"
and collectively as the "Parties."
RECITALS:
A. The Company is in the business of developing, manufacturing
and selling various medical products and devices and maintains its principal
office in Bountiful, Utah.
B. The Company wishes to engage the Executive to serve as the
Chief Executive Officer and President of the Company, and the Executive wishes
to accept employment in such capacities, upon the terms and conditions set forth
in this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and
the covenants and agreements set forth herein, together with other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree as follows:
1. Employment. The Company hereby employs the Executive, and the
Executive hereby accepts employment with the Company, upon the terms and
conditions set forth in this Agreement.
2. Term. Subject to the provisions of paragraph 8 hereof, the initial
term of the Executive's employment under this Agreement will be two (2) years,
beginning on the date hereof and ending on the two year anniversary of the date
hereof (the "Initial Term").
3. Duties. While this Agreement remains in effect, the Executive will
serve as the Chief Executive Officer and President of the Company. The Executive
shall have such additional duties as may be assigned or delegated to the
Executive by the Board of Directors of the Company, from time to time, so long
as such additional duties are consistent with and do not detract from his
positions as the Chief Executive Officer and President of the Company. The
Executive will not devote his entire business time, attention, skill and energy
to the business of the Company, but will promote the success of the Company's
business, and will cooperate fully with the Board of Directors in the
advancement of the best interests of the Company and its shareholders. Nothing
in this paragraph 3 will prevent the Executive from engaging in additional
activities in connection with personal investments and community affairs that
are not inconsistent with his duties under this Agreement.
4. Compensation.
(a) The Executive will be paid an annual salary of $90,000
(the "Salary"), which will be payable in equal periodic installments according
to the Company's payroll practices, but no less frequently than monthly.
(b) In addition to the Salary, the Company may, in its
absolute discretion, pay the Executive bonus or incentive compensation, as
determined by the Board of Directors.
5. Stock Option. The Company shall, within two (2) months from the date
hereof, grant to Executive an option to purchase up to 70,000 shares of the
Company's capital stock at a purchase price of $1.50 per share. Such grant and
the procedures pertaining to the exercise of the option shall be in accordance
with the Company's standard procedures.
6. Facilities and Expenses. The Company will furnish the Executive with
office space, equipment, supplies, facilities and personnel sufficient to enable
the Executive to appropriately carry out his duties and obligations under this
Agreement. The Company will pay on behalf of the Executive (or reimburse the
Executive for) all reasonable expenses incurred by the Executive at the request
of, or on behalf of, the Company in the performance of the Executive's duties
pursuant to this Agreement, including expenses for business related
entertainment, travel and similar items. The Company shall reimburse the
Executive for all such expenses upon presentation by the Executive of itemized
accounts of such expenses, accompanied by such expense reports and receipts as
the Company may reasonably require in order to satisfy the requirements of the
Internal Revenue Code in regard to the deductibility of such expenses.
7. Death During Employment. If the Executive dies while this Agreement
remains in effect, the Company shall promptly pay to the estate of the Executive
all compensation and bonuses (on a pro rata basis) due Executive as of the date
of his death. 8. Termination. Prior to its expiration pursuant to paragraph 2
hereof, this Agreement may only be terminated in the manner set forth in this
paragraph 8.
(a) This Agreement shall terminate automatically and
immediately upon the death of the Executive.
(b) The Executive may terminate this Agreement, and his
employment with the Company hereunder, at any time upon thirty (30) days prior
written notice to the Company.
(c) The Company may terminate this Agreement, for cause, at
any time upon written notice to the Executive. For purposes of this paragraph
8(c), the phrase "for cause" means:
i. The Executive's material breach of any material
provision of this Agreement which remains unremedied thirty (30) days after the
Executive receives notice of such breach from the Company;
ii. The Executive's material failure to adhere to any
material written policy of the Company if the Executive has been given a
reasonable opportunity to comply with such policy or to cure his failure to
comply (which reasonable opportunity must, at least, be granted during the ten
(10) day period preceding termination of this Agreement);
iii. The misappropriation of any of the Company's
funds or property; or
iv. The final conviction of the Executive of a felony
or crime of moral turpitude which is related to the business of the Company and
which (in the good faith judgment of the board of directors) is injurious to the
business of the Company as determined in good faith by the board of directors of
the Company.
(d) The Company and the Executive may terminate this
Agreement, by mutual agreement in writing, subject to any terms and conditions
specified in such Agreement.
9. Effect of Termination.
(a) Upon the termination of this Agreement , the Company shall
pay to the Executive, in cash and upon the effective date of such termination,
that portion of the Executive Salary which has accrued and remains unpaid up to
and including the date upon which such termination becomes effective.
(b) The obligations set forth in paragraphs 10, 11, 13 and 14
hereof shall survive the expiration or termination of this Agreement.
10. Confidentiality.
(a) Executive agrees that, both during the term of this
Agreement and thereafter, Executive shall not use, disclose or permit any person
to obtain any "Confidential Information" (as defined in paragraph 10(b) hereof)
of the Company (whether or not the Confidential Information is in written or
tangible form), except as specifically authorized in writing by the Company or
as may be necessary, in the Executive's good faith judgment, to perform his
duties hereunder on behalf of the Company.
(b) The term "Confidential Information" shall mean any data,
documents or other information that is material to the Company and not generally
known by the public. Confidential Information shall include, without limitation,
any trade secrets, know-how, technical information, design, process, procedure,
product specifications formula, algorithm, improvement or computer program
source code. The term shall also include the sales records, profit and
performance reports, pricing procedures and financing methods of the Company;
the customer lists, special demands of particular customers, and current and
anticipated requirements of customers generally for products of the Company; the
sources of supply for integrated components and materials used for production,
assembly and packaging by the Company and the quality, prices and usage of those
components and materials; and the business and marketing plans and internal
financial statements and projections of the Company.
(c) Executive covenants and agrees that he will, upon
termination of this Agreement or, if later, upon termination of his employment
with the Company, deliver to the Company any and all Confidential Information in
his possession or under his control, regardless of the physical form of such
Confidential Information, and he shall not retain memoranda or copies of any
such Confidential Information.
(d) Executive will not use for or disclose to the Company any
proprietary information or trade secrets of any of his former employers in
violation of any obligation he may have to such former employers in regard to
confidentiality or non-use.
(e) None of the obligations and restrictions set forth in this
paragraph 10 shall apply to any part of the Confidential Information that the
Executive can demonstrate was or became generally available to the public other
than as a result of a disclosure by the Executive.
11. Competition. The Executive (i) at any time during the term hereof
or (ii) at any time during the 2 year period following the termination of this
Agreement, shall not in any manner, directly or indirectly engage in a business
which is competitive with the business in which the Company was actually engaged
(or which was demonstrably the subject of the Company's research or development
plans) on the effective date of the termination of the Executive's employment.
Executive acknowledges that in the event his employment with the Company
terminates for any reason, he will be able to earn a livelihood without
violating the foregoing restrictions and that his ability to earn a livelihood
without violating such restrictions is a material condition to his employment
with the Company. The Company and Executive agree that the covenant not to
compete contained in this paragraph 11 is fair and reasonable in light of all
the facts and circumstances of the relationship between Executive and the
Company. The Parties further agree that in the event a court should decline to
enforce any provision of this paragraph 11, it shall be deemed to be modified to
restrict Executive's competition with the Company to the maximum extent, in both
time and geography, which the court shall find enforceable; however, in no event
shall such modified provisions be deemed to be more restrictive to Executive
than those contained herein.
12. Default. Neither party to this Agreement shall be in breach of, and
no act or failure to act shall constitute a default under, any provision of this
Agreement until notice is given and the cure period lapses as described in this
paragraph 12. Upon an alleged default or breach of any provision of this
Agreement, the non-defaulting party shall give the defaulting party written
notice specifying in reasonable detail the alleged default or breach. The
defaulting party shall have thirty (30) days from receipt of such notice of
default to cure the alleged default. If the nature of the alleged default or
breach is such that it is incapable of being cured within such thirty (30) days,
then the defaulting party shall be deemed to have cured such breach or default
if, within such thirty (30) days, the defaulting party begins to cure such
default or breach and, thereafter, diligently continues to take such actions as
are reasonably necessary to cure such breach or default until the same is cured.
13. Injunctive Relief. Upon a breach or threatened breach by Executive
of any of the provisions of paragraph 10 or 11 of this Agreement, the Company
shall be entitled to an injunction restraining Executive from such breach.
Nothing herein shall be construed as prohibiting the Company from pursuing any
other remedies for such breach or threatened breach, including recovery of
damages from Executive.
14. Arbitration. All controversies and claims of any nature arising
directly or indirectly out of this Agreement or the employment relationship
between the Parties shall be submitted to binding arbitration under the
Commercial Rules of the American Arbitration Association. The arbitration shall
occur in Salt Lake City, Utah before three arbitrators chosen in accordance with
such rules. The decision of the arbitrators shall be final, binding and
nonappealable, and judgment upon an award rendered in the arbitration proceeding
may be entered in any court having jurisdiction. The prevailing Party shall be
entitled to recover from the other Party his or its reasonable attorneys' fees
and costs if the arbitrators so determine.
15. Notices. Any notice which is required or permitted to be given to a
Party to this Agreement shall be deemed to have been given only if such notice
is reduced to writing and delivered personally, or by United States mail with
postage prepaid and return receipt requested, or by telecopier (fax)
transmission, or by overnight courier to the appropriate party as set forth
below:
The Company: Bioxide Corporation
Attn: Rebekah Summerhays, Secretary
300 North 200 West, #101
Bountiful, UT 84010
The Executive: Dale G. Karren
358 Shepard Ridge Road
Farmington, UT 84025
Either Party may change his or its address by giving notice of such change in
the manner set forth herein. Any notice given to a Party by mail or by overnight
courier shall be deemed delivered two days following the date upon which it is
deposited in the United States mail, with postage prepaid and return receipt
requested, or delivered to the courier, as the case may be, addressed to the
Party in question as set forth herein. Any notice given to a party by FAX shall
be deemed effective on the date it is actually transmitted to the Party in
question at the FAX number specified herein, by confirmed transmission.
16. Assignment. This Agreement may not be assigned by either Party
hereto without the express written consent of the other Party.
17. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the Parties hereto, their respective heirs,
beneficiaries, successors and permitted assigns.
18. Entire Agreement. This Agreement supersedes any prior
understandings or agreements, whether written or oral, between the Parties in
regard to the subject matter hereof, and contains the entire agreement between
the Parties in regard to the subject matter hereof. This Agreement may not be
changed or modified orally, but only by an agreement, in writing, signed by both
of the Parties.
19. Savings Clause. Should any part or provision of this Agreement be
rendered or declared invalid by reason of any state or federal law, or by decree
of a court of competent jurisdiction, the invalidation of such part or provision
of this Agreement shall not invalidate the remaining parts or provisions hereof,
and such remaining parts and provisions of this Agreement shall remain in full
force and effect.
20. Waiver. Neither the failure nor delay on the part of any Party to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right or privilege
preclude any other or further exercise thereof or of any other right or
privilege.
21. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Utah, without giving effect to the
choice of law rules thereof.
22. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be a binding agreement, but all of which
together shall constitute but one document.
IN WITNESS WHEREOF, the Parties have executed this Employment Agreement
as of the date first herein written.
THE COMPANY:
BIOXIDE CORPORATION
By /s/ Lynn L. Summerhays
Its Chairman
THE EXECUTIVE:
/s/ Dale G. Karren
DALE G. KARREN
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (this "Amendment") is executed
effective as of July 1, 1997, by and between BIOXIDE CORPORATION, a Nevada
corporation (the "Company"), and DALE G. KARREN, an individual (the
"Executive").
RECITALS
A. The Company and the Executive entered into an Employment Agreement
dated effective April 1, 1997 (the "Employment Agreement").
B. The Company and the Executive hereby desire to amend the Employment
Agreement by entering into this Amendment.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Executive agree
as follows:
1. Amendment. Paragraph 4(a) of the Employment Agreement is hereby
amended to increase the Executive's annual salary from $90,000 to $136,000.
2. Ratification. The Company and the Executive hereby ratify and affirm
each of the provisions of the Employment Agreement as amended by this Amendment.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and date first noted above.
BIOXIDE CORPORATION
By: /s/ David G. Derrick
Its: Director
/s/ Dale G. Karren
Dale G. Karren
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and shall be effective as of the 1st
day of April, 1997, by and between BIOXIDE CORPORATION, a Nevada corporation
(the "Company"), and FRANK A. ELDREDGE, an individual (the "Executive"). The
Company and the Executive are referred to herein individually as a "Party," and
collectively as the "Parties."
RECITALS:
A. The Company is in the business of developing, manufacturing
and selling various medical products and devices and maintains its principal
office in Bountiful, Utah.
B. The Company wishes to engage the Executive to serve as the
Director of Research and Development of the Company, and the Executive wishes to
accept employment in such capacity, upon the terms and conditions set forth in
this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and
the covenants and agreements set forth herein, together with other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree as follows:
1. Employment. The Company hereby employs the Executive, and the
Executive hereby accepts employment with the Company, upon the terms and
conditions set forth in this Agreement.
2. Term. Subject to the provisions of paragraph 7 hereof, the initial
term of the Executive's employment under this Agreement will be one (1) year,
beginning on the date hereof and ending on the first anniversary of the date
hereof (the "Initial Term").
3. Duties. While this Agreement remains in effect, the Executive will
serve as the Company's Director of Research and Development. The Executive shall
have such additional duties as may be assigned or delegated to the Executive by
the Board of Directors and the President of the Company, from time to time, so
long as such additional duties are consistent with and do not detract from his
position as the Director of Research and Development. The Executive is and shall
remain an employee of Biomune Systems, Inc., a Nevada corporation ("Biomune"),
and so will not devote his entire business time, attention, skill and energy to
the business of the Company, but he will promote the success of the Company's
business, and will cooperate fully with the Board of Directors in the
advancement of the best interests of the Company and its shareholders. Nothing
in this paragraph 3 will prevent the Executive from engaging in additional
activities in connection with personal investments and community affairs that
are not inconsistent with his duties under this Agreement. Employee represents
and warrants to the Company that his duties hereunder and this Agreement do not
and will not conflict with or violate any term or provision of his employment
with Biomune.
4. Compensation.
(a) The Executive will be paid an annual salary of $42,000
(the "Salary"), which will be payable in equal periodic installments according
to the Company's payroll practices, but no less frequently than monthly.
(b) In addition to the Salary, the Company may, in its
absolute discretion, pay the Executive bonus or incentive compensation, as
determined by the Board of Directors.
5. Facilities and Expenses. The Company will furnish the Executive with
office space, equipment, supplies, facilities and personnel sufficient to enable
the Executive to appropriately carry out his duties and obligations under this
Agreement. The Company will pay on behalf of the Executive (or reimburse the
Executive for) all reasonable expenses incurred by the Executive at the request
of, or on behalf of, the Company in the performance of the Executive's duties
pursuant to this Agreement, including expenses for business related
entertainment, travel and similar items. The Company shall reimburse the
Executive for all such expenses upon presentation by the Executive of itemized
accounts of such expenses, accompanied by such expense reports and receipts as
the Company may reasonably require in order to satisfy the requirements of the
Internal Revenue Code in regard to the deductibility of such expenses.
6. Death During Employment. If the Executive dies while this Agreement
remains in effect, the Company shall promptly pay to the estate of the Executive
all compensation and bonuses (on a pro rata basis) due Executive as of the date
of his death. 7. Termination. Prior to its expiration pursuant to paragraph 2
hereof, this Agreement may only be terminated in the manner set forth in this
paragraph 7.
(a) This Agreement shall terminate automatically and
immediately upon the death of the Executive.
(b) The Executive may terminate this Agreement, and his
employment with the Company hereunder, at any time upon thirty (30) days prior
written notice to the Company.
(c) The Company may terminate this Agreement, for cause, at
any time upon written notice to the Executive. For purposes of this paragraph
7(c), the phrase "for cause" means:
i. The Executive's material breach of any material
provision of this Agreement which remains unremedied thirty (30) days after the
Executive receives notice of such breach from the Company;
ii. The Executive's material failure to adhere to any
material written policy of the Company if the Executive has been given a
reasonable opportunity to comply with such policy or to cure his failure to
comply (which reasonable opportunity must, at least, be granted during the ten
(10) day period preceding termination of this Agreement);
iii. The misappropriation of any of the Company's
funds or property; or iv. The final conviction of the Executive of a felony or
crime of moral turpitude which is related to the business of the Company and
which (in the good faith judgment of the board of directors) is injurious to the
business of the Company as determined in good faith by the board of directors of
the Company.
(d) The Company and the Executive may terminate this
Agreement, by mutual agreement in writing, subject to any terms and conditions
specified in such Agreement.
8. Effect of Termination.
(a) Upon the termination of this Agreement , the Company shall
pay to the Executive, in cash and upon the effective date of such termination,
that portion of the Executive Salary which has accrued and remains unpaid up to
and including the date upon which such termination becomes effective.
(b) The obligations set forth in paragraphs 9, 10, 12 and 13
hereof shall survive the expiration or termination of this Agreement.
9. Confidentiality.
(a) Executive agrees that, both during the term of this
Agreement and thereafter, Executive shall not use, disclose or permit any person
to obtain any "Confidential Information" (as defined in paragraph 9(b) hereof)
of the Company (whether or not the Confidential Information is in written or
tangible form), except as specifically authorized in writing by the Company or
as may be necessary, in the Executive's good faith judgment, to perform his
duties hereunder on behalf of the Company.
(b) The term "Confidential Information" shall mean any data,
documents or other information that is material to the Company and not generally
known by the public. Confidential Information shall include, without limitation,
any trade secrets, know-how, technical information, design, process, procedure,
product specifications formula, algorithm, improvement or computer program
source code. The term shall also include the sales records, profit and
performance reports, pricing procedures and financing methods of the Company;
the customer lists, special demands of particular customers, and current and
anticipated requirements of customers generally for products of the Company; the
sources of supply for integrated components and materials used for production,
assembly and packaging by the Company and the quality, prices and usage of those
components and materials; and the business and marketing plans and internal
financial statements and projections of the Company.
(c) Executive covenants and agrees that he will, upon
termination of this Agreement or, if later, upon termination of his employment
with the Company, deliver to the Company any and all Confidential Information in
his possession or under his control, regardless of the physical form of such
Confidential Information, and he shall not retain memoranda or copies of any
such Confidential Information.
(d) Executive will not use for or disclose to the Company any
proprietary information or trade secrets of any of his former employers in
violation of any obligation he may have to such former employers in regard to
confidentiality or non-use.
(e) None of the obligations and restrictions set forth in this
paragraph 9 shall apply to any part of the Confidential Information that the
Executive can demonstrate was or became generally available to the public other
than as a result of a disclosure by the Executive.
10. Competition. The Executive (i) at any time during the term hereof
or (ii) at any time during the 2 year period following the termination of this
Agreement, shall not in any manner, directly or indirectly engage in a business
which is competitive with the business in which the Company was actually engaged
(or which was demonstrably the subject of the Company's research or development
plans) on the effective date of the termination of the Executive's employment.
Executive acknowledges that in the event his employment with the Company
terminates for any reason, he will be able to earn a livelihood without
violating the foregoing restrictions and that his ability to earn a livelihood
without violating such restrictions is a material condition to his employment
with the Company. The Company and Executive agree that the covenant not to
compete contained in this paragraph 10 is fair and reasonable in light of all
the facts and circumstances of the relationship between Executive and the
Company. The Parties further agree that in the event a court should decline to
enforce any provision of this paragraph 10, it shall be deemed to be modified to
restrict Executive's competition with the Company to the maximum extent, in both
time and geography, which the court shall find enforceable; however, in no event
shall such modified provisions be deemed to be more restrictive to Executive
than those contained herein.
11. Default. Neither party to this Agreement shall be in breach of, and
no act or failure to act shall constitute a default under, any provision of this
Agreement until notice is given and the cure period lapses as described in this
paragraph 11. Upon an alleged default or breach of any provision of this
Agreement, the non-defaulting party shall give the defaulting party written
notice specifying in reasonable detail the alleged default or breach. The
defaulting party shall have thirty (30) days from receipt of such notice of
default to cure the alleged default. If the nature of the alleged default or
breach is such that it is incapable of being cured within such thirty (30) days,
then the defaulting party shall be deemed to have cured such breach or default
if, within such thirty (30) days, the defaulting party begins to cure such
default or breach and, thereafter, diligently continues to take such actions as
are reasonably necessary to cure such breach or default until the same is cured.
12. Injunctive Relief. Upon a breach or threatened breach by Executive
of any of the provisions of paragraph 9 or 10 of this Agreement, the Company
shall be entitled to an injunction restraining Executive from such breach.
Nothing herein shall be construed as prohibiting the Company from pursuing any
other remedies for such breach or threatened breach, including recovery of
damages from Executive.
13. Arbitration. All controversies and claims of any nature arising
directly or indirectly out of this Agreement or the employment relationship
between the Parties shall be submitted to binding arbitration under the
Commercial Rules of the American Arbitration Association. The arbitration shall
occur in Salt Lake City, Utah before three arbitrators chosen in accordance with
such rules. The decision of the arbitrators shall be final, binding and
nonappealable, and judgment upon an award rendered in the arbitration proceeding
may be entered in any court having jurisdiction. The prevailing Party shall be
entitled to recover from the other Party his or its reasonable attorneys' fees
and costs if the arbitrators so determine.
14. Notices. Any notice which is required or permitted to be given to a
Party to this Agreement shall be deemed to have been given only if such notice
is reduced to writing and delivered personally, or by United States mail with
postage prepaid and return receipt requested, or by telecopier (fax)
transmission, or by overnight courier to the appropriate party as set forth
below:
The Company: Bioxide Corporation
Attn: Rebekah Summerhays, Secretary
300 North 200 West, #101
Bountiful, UT 84010
The Executive: Frank A. Eldredge
538 Villager Lane
Midvale, UT 84047
Either Party may change his or its address by giving notice of such change in
the manner set forth herein. Any notice given to a Party by mail or by overnight
courier shall be deemed delivered two days following the date upon which it is
deposited in the United States mail, with postage prepaid and return receipt
requested, or delivered to the courier, as the case may be, addressed to the
Party in question as set forth herein. Any notice given to a party by FAX shall
be deemed effective on the date it is actually transmitted to the Party in
question at the FAX number specified herein, by confirmed transmission.
15. Assignment. This Agreement may not be assigned by either Party
hereto without the express written consent of the other Party.
16. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the Parties hereto, their respective heirs,
beneficiaries, successors and permitted assigns.
17. Entire Agreement. This Agreement supersedes any prior
understandings or agreements, whether written or oral, between the Parties in
regard to the subject matter hereof, and contains the entire agreement between
the Parties in regard to the subject matter hereof. This Agreement may not be
changed or modified orally, but only by an agreement, in writing, signed by both
of the Parties.
18. Savings Clause. Should any part or provision of this Agreement be
rendered or declared invalid by reason of any state or federal law, or by decree
of a court of competent jurisdiction, the invalidation of such part or provision
of this Agreement shall not invalidate the remaining parts or provisions hereof,
and such remaining parts and provisions of this Agreement shall remain in full
force and effect.
19. Waiver. Neither the failure nor delay on the part of any Party to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right or privilege
preclude any other or further exercise thereof or of any other right or
privilege.
20. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Utah, without giving effect to the
choice of law rules thereof.
21. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be a binding agreement, but all of which
together shall constitute but one document.
IN WITNESS WHEREOF, the Parties have executed this Employment Agreement
as of the date first herein written.
THE COMPANY:
BIOXIDE CORPORATION
By: /s/ Dale G. Karren
Its: President
THE EXECUTIVE:
/s/ Frank A. Eldredge
FRANK A. ELDREDGE
BIOXIDE CORPORATION
1996 STOCK INCENTIVE PLAN
THIS 1996 STOCK INCENTIVE PLAN (the "Plan") is established to encourage
employees of Bioxide Corporation, a Nevada corporation (the "Company"), and
others who perform substantial or significant services for the Company, to
acquire an ownership interest in the Company. The Company intends that the Plan
will stimulate the efforts of such persons on the Company's behalf, will
encourage such persons to provide quality services to the Company, and will
foster in such persons a continuing, personal commitment to the Company.
1. Administration
The Plan shall be administered by the Compensation Committee of the Board of
Directors of the Company (the "Committee"), which, if not otherwise separately
established, shall consist of the entire Board of Directors. The Committee is
authorized to establish such rules and regulations as it deems necessary for the
proper administration of the Plan, and to make such determinations and to take
all such actions in relation to the Plan as it deems necessary or advisable,
consistent with the Plan. The Committee may delegate some or all of its power
and authority hereunder to the Chief Executive Officer or other senior member of
Company management as the Committee deems appropriate.
2. Eligibility
Regular, full-time and part-time employees of the Company and its subsidiaries,
including officers and directors of the Company and its subsidiaries, together
with other persons who provide valuable services to the Company and who are
selected by the Committee (in its sole discretion), shall be eligible to
participate in the Plan (the "Participants"). No member of the Committee shall
participate in any decision that affects him or her personally and directly.
3. Incentives
Incentives under the Plan may be granted in any one or a combination of (a)
Incentive Stock Options (or other statutory stock options); (b) Nonqualified
Stock Options; (c) Stock Appreciation Rights; (d) Performance Share Awards; and
(e) Restricted Stock Grants (together, "Incentives"). All Incentives shall be
subject to the terms and conditions set forth herein and to such other terms and
conditions as may be established by the Committee. Determinations by the
Committee under the Plan, including determinations of the Participants, the
form, amount and timing of Incentives, the terms and provisions of Incentives,
and the agreements evidencing Incentives, need not be uniform and may be made
selectively among Participants who receive, or are eligible to receive,
Incentives hereunder, whether or not such Participants are similarly situated.
4. Shares Available for Incentives
(a) Shares Subject to Issuance or Transfer. Subject to adjustment as
provided in paragraph 4(b) hereof, there is hereby reserved for
issuance under the Plan one million (1,000,000) shares of the Company's
authorized but unissued capital stock, par value $.0001 per share (the
"Common Shares"). The number of shares available for granting awards in
any year shall be increased by the number of shares as to which options
or other benefits granted under the Plan have lapsed, expired,
terminated or been canceled, or reacquired.
(b) Recapitalization Adjustment. In the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares,
merger, consolidation, rights offering, or any other change in the
corporate structure or shares of the Company, the Committee may make
such adjustment as it deems appropriate in the number and kind of
shares authorized by the Plan, in the number and kind of shares covered
by Incentives that were previously granted, in the option price, in the
fair market value of the Common Shares, or otherwise as the Committee
determines to be appropriate to effect the purposes of the Plan.
5. Stock Options
The Committee may grant options qualifying as Incentive Stock Options under the
Internal Revenue Code of 1986, as amended or any successor code thereto (the
"Code"), other statutory options under the Code, and Nonqualified Options
(collectively "Stock Options"), and such Stock Options shall be subject to the
following terms and conditions and such other terms and conditions as the
Committee may prescribe:
(a) Employment Requirement for Incentive Stock Options. Incentive Stock
Options under the Plan shall be granted only to full or part-time
employees of the Company or its majority owned subsidiaries (an
"Employee").
(b) Option Exercise Price. The exercise price per share with respect to
each Stock Option shall be determined by the Committee. In the case of
Incentive Stock Options, the exercise price shall not be less than 100%
of the fair market value of the Common Shares on the date the Stock
Option is granted, as determined by the Committee, except that the
exercise price for an Incentive Stock Option granted to a holder of
more than ten percent (10%) of the Company's outstanding shares shall
be at least II 0% of such fair market value, and its exercise period
shall expire no later than five years from the date the option is
granted.
(c) Period of Option. The period for exercise of each Stock Option
shall be fixed by the Committee, but shall not extend beyond ten (10)
years from the date the Stock Option is granted.
(d) Payment. The option price shall be payable, in full, at the time
the Stock Option is exercised, in cash or, at the discretion of the
Committee, in whole or in part in the form of Common Shares already
owned by the grantee (based on the fair market value of the Common
Shares on the date the option is exercised as determined by the
Committee). No shares shall be issued until full payment for them has
been made. A grantee of a Stock Option shall have none of the rights of
a shareholder until a certificate representing the shares is issued.
(e) Exercise of Option. The shares covered by a Stock Option may be
purchased in such installments and on such exercise dates as the
Committee may determine. Any shares not purchased on the applicable
exercise date may be purchased thereafter at any time prior to the
final expiration of the Stock Option. In no event (including those
specified in paragraph (f) of this Section) shall any Stock Option be
exercisable after its specified expiration period. Notwithstanding any
schedule for the exercise of a Stock Option otherwise established by
the Committee, each option shall automatically become exercisable in
full immediately prior to the effectiveness of (i) the sale by the
Company of all or substantially all of its assets, or (ii) the merger
or consolidation of the Company with or into an entity which is not
controlled by the Company prior to such transaction.
(f) Termination of Employment. Upon the termination of the employment
of a Stock Option grantee that is an Employee (for any reason), Stock
Option privileges shall be limited to the shares which were immediately
exercisable at the date of such ten-nination; provided, however, that
such privilege shall terminate completely if not exercised within 60
days of the effective date of such termination. Notwithstanding the
foregoing, the Committee in its discretion, may provide that any Stock
Options outstanding but not yet exercisable upon the termination of an
Employee may become exercisable in accordance with a schedule
determined by the Committee, in which event such Stock Option
privileges shall expire unless exercised or surrendered under a Stock
Appreciation Right within such period of time after the date of such
termination as may be established by the Committee. If an Employee's
employment is ten--ninated as a result of deliberate, willful or gross
misconduct, as determined by the Company, all rights under the Stock
Option shall expire upon receipt of the notice of such termination.
(g) Limits on Incentive Stock Options. Except as may otherwise be
permitted by the Code, the Committee shall not, in the aggregate, grant
Employee Incentive Stock Options that are first exercisable during any
one calendar year to the extent that the aggregate fair market value of
the Common Shares, at the time the Incentive Stock Options are granted,
exceeds $ 1 00,000.
(h) Repricing of Stock Options. The Committee may, in its discretion,
ainend the terms of any Stock Option (with the consent of the affected
Participant) to provide that the option exercise price of the shares
remaining subject to the original award shall be reestablished at a
price to be selected by the Committee; provided that in the case of
Incentive Stock Options such price shall not be less than 100% of the
fair market value of the shares on the effective date of the amendment.
6. Stock Appreciation Rights
The Committee may grant a right to receive the appreciation in the fair market
value of Common Shares ("Stock Appreciation Right") either singly or in
combination with an underlying Stock Option. Such Stock Appreciation Rights
shall be subject to the following ten-ns and conditions and such other terms and
conditions as the Committee may prescribe:
(a) Time and Period of Grant. If a Stock Appreciation Right is granted
with respect to an underlying Stock Option, it may be granted at the
time of the Stock Option Grant or at any time thereafter but prior to
the expiration of the Stock Option grant. If a Stock Appreciation Right
is granted with respect to an underlying Stock Option, at the time the
Stock Appreciation Right is granted the Committee may limit the
exercise period for such Stock Appreciation Right, before and after
which period no Stock Appreciation Right shall attach to the underlying
Stock Option. In no event shall the exercise period for a Stock
Appreciation Right granted with respect to an underlying Stock Option
exceed the exercise period for such Stock Option. If a Stock
Appreciation Right is granted without an underlying Stock Option, the
period for exercise of the Stock Appreciation Right shall be as set by
the Committee.
(b) Value of Stock Appreciation Right. If a Stock Appreciation Right is
granted with respect to an underlying Stock Option, the grantee will be
entitled to surrender the Stock Option which is then exercisable and
receive in exchange therefor an amount equal to the excess of the fair
market value of the Common Shares on the date the election to surrender
is received by the Company over the Stock Option price multiplied by
the number of shares covered by the Stock Option which are surrendered.
If a Stock Appreciation Right is granted without an underlying Stock
Option, the grantee will receive upon exercise of the Stock
Appreciation Right an amount equal to the excess of the fair market
value of the Common Shares on the date the election to surrender such
Stock Appreciation Right is received by the Company over the fair
market value of the Common Shares on the date of grant multiplied by
the number of shares covered by the grant of the Stock Appreciation
Right.
(c) Payment of Stock Appreciation Right. Payment of a Stock
Appreciation Right shall be in the form of Common Shares, cash, or any
combination of shares and cash. The form of payment upon exercise of
such a right shall be determined by the Committee either at the time of
grant of the Stock Appreciation Right or at the time of exercise of the
Stock Appreciation Right.
7. Performance Share Awards
The Committee may grant awards under which payment may be made in Common Shares,
cash or any combination of shares and cash if the performance of the Company or
any subsidiary, unit or division of the Company selected by the Committee during
the Award Period meets certain goals established by the Committee ("Performance
Share Awards"). Such Performance Share Awards shall be subject to the following
terms and conditions and such other terms and conditions as the Committee may
prescribe:
(a) Award Period and Performance Goals. The Committee shall determine
and include in a Performance Share Award grant the period of time for
which a Performance Share Award is made ("Award Period"). The Committee
shall also establish performance objectives ("Performance Goals") to be
met by the Company, subsidiary, unit or division during the Award
Period as a condition to payment of the Performance Share Award. The
Performance Goals may include earnings per share, return on
shareholders' equity, return on assets, net income, or any other
financial or other measurement established by the Committee. The
Performance Goals may include minimum and optimum objectives or a
single set of objectives.
(b) Payment of Performance Share Awards. The Committee shall establish
the method of calculating the amount of payment to be made under a
Performance Share Award if the Performance Goals are met, including the
fixing of a maximum payment. The Performance Share Award shall be
expressed in terms of Common Shares and referred to as "Performance
Shares". After the completion of an Award Period, the performance of
the Company, subsidiary, unit or division shall be measured against the
Performance Goals, and the Committee shall determine whether all, none
or any portion of a Performance Share Award shall be paid. The
Committee, in its discretion, may elect to make payment in Common
Shares, cash or a combination of shares and cash. Any cash payment
shall be based on the fair market value of Performance Shares on, or as
soon as practicable prior to, the date of payment.
(c) Revision of Performance Goals. At any time prior to the end of an
Award Period, the Committee may revise the Performance Goals and the
computation of payment if unforeseen events occur which have a
substantial effect on the performance of the Company, subsidiary, unit
or division and which in the judgment of the Committee make the
application of the Performance Goals unfair unless a revision is made.
(d) Requirement of Continued Service. A grantee of a Performance Share
Award must continue to provide the Company with the services that he or
she was providing on the date of grant until the completion of the
Award Period in order to be entitled to payment under the Performance
Share Award, unless the Committee, in its sole discretion, provides for
a partial payment it deems to be equitable.
(e) Dividends. The Committee may, in its discretion, at the time of the
granting of a Performance Share Award, provide that any dividends
declared on the Common Shares during the Award Period, and which would
have been paid with respect to Performance Shares had they been owned
by a grantee, be (i) paid to the grantee, or (ii) accumulated for the
benefit of the grantee and used to increase the number of Performance
Shares of the grantee.
8. Restricted Stock Grants
T'he Committee may issue Common Shares to a grantee which shares shall be
subject to the following terms and conditions and such other terms and
conditions as the Committee may prescribe ("Restricted Stock Grant"):
(a) Requirement of Continued Service. A grantee of a Restricted Stock
Grant must continue to provide the Company with services during a
period designated by the Committee ("Restriction Period"). If the
grantee leaves the employment of the Company or otherwise ceases to
provide the designated services prior to the end of the Restriction
Period, the Restricted Stock Grant shall terminate and the Common
Shares shall be returned immediately to the Company, except the
Committee may, at the time of the grant, provide for the service
restriction to lapse with respect to a portion or portions of the
Restricted Stock Grant at different times during the Restriction
Period. The Committee may, in its discretion, also provide for such
complete or partial exceptions to the service restriction as it deems
equitable.
(b) Restrictions on Transfer and Legend on Stock Certificates. During
the Restriction Period, the grantee may not sell, assign, transfer,
pledge, or otherwise dispose of the Common Shares except to a successor
under Section 12 hereof. Each certificate for Common Shares issued
hereunder shall contain a legend giving appropriate notice of the
restrictions in the grant.
(c) Escrow Agreement. The Committee may require the grantee to enter
into an escrow agreement providing that the certificates representing
the Restricted Stock Grant will remain in the physical custody of an
escrow holder until all restrictions are removed or expire.
(d) Lapse of Restrictions. All restrictions imposed under the
Restricted Stock Grant shall lapse upon the expiration of the
Restriction Period if the conditions as to employment set forth above
have been met. The grantee shall then be entitled to have the legends
removed from the certificates.
(e) Dividends. The Committee shall, in its discretion, at the time of
the Restricted Stock Grant, provide that any dividends declared on the
Common Shares during the Restriction Period shall either be (i) paid to
the grantee, or (ii) accumulated for the benefit of the grantee and
paid to the grantee only after the expiration of the Restriction
Period.
9. Discontinuance or Amendment of the Plan
The Board of Directors may discontinue the Plan at any time and may from time to
time amend or revise the terms of the Plan as permitted by applicable statutes,
except that it may not revoke or alter, in a manner unfavorable to any grantee
of an Incentive hereunder, any Incentive then outstanding, nor may the Board of
Directors amend the Plan without shareholder approval, where the absence of such
approval would cause the Plan to fail to comply with Rule 16b-3 under the
Securities Exchange Act of 1934, or any other applicable law or regulation. No
Incentive shall be granted under the Plan after January 10, 2006, but Incentives
granted theretofore may extend beyond that date.
10. Written Agreement
Each Stock Option grant shall be evidenced by an agreement which shall designate
the Stock Options granted thereunder as Incentive Stock Options, other statutory
stock options, or Nonqualified Options; each Stock Appreciation Right shall be
evidenced by a stock appreciation rights agreement; and each Restricted Stock
Grant shall be evidenced by a restricted shares agreement; each in such form and
containing such terms and provisions not inconsistent with the provisions of the
Plan as the Committee from time to time shall approve; provided, that several
Incentives may be combined and evidenced by a single agreement. The effective
date of the grant of an Incentive shall be the date on which the Committee
approves such grant. Each grantee shall be notified promptly of such grant and
the Company and the grantee shall promptly execute and deliver a written
agreement evidencing the grant. A grant shall terminate if a written agreement
is not signed by the grantee (or his agent) and delivered to the Company within
30 days after the date the Committee delivers the agreement to the grantee.
11. Right of First Refusal
The agreements may contain such provisions as the Committee shall determine to
the effect that if, pursuant to an offer from a third party, a grantee elects to
sell all or any Common Shares that such grantee acquired upon the exercise of a
Stock Option or through any other Incentive granted pursuant to the Plan, then
such grantee shall not sell such shares unless such grantee shall have first
offered in writing to sell such shares to the Company at fair market value on a
specified date (which date shall be at least ten business days and not more than
20 business days following the date of such offer). Certificates representing
shares issued upon exercise of Stock Options or pursuant to and Incentive may
bear a restrictive legend to the effect that transferability of such shares is
subject to the restrictions contained in the Plan and the applicable agreement
and the Company may cause the registrar of its Common Shares to place a stop
transfer order with respect to such shares. Any such right of first reftisal
must lapse no later than five years after the date the grantee acquires
ownership of the Common Shares.
12. Nontransferability
No Incentive granted under the Plan shall be transferable other than by will or
the laws of descent and distribution, and with respect to Stock Options, shall
be exercisable, during the grantee's lifetime, only by the grantee or the
grantee's guardian or legal representative.
13. No Right of Employment
The Plan and the Incentives granted hereunder shall not confer upon any Eligible
Employee the right to employment or continued employment with the Company or
affect in any way the right of the Company to terminate the employment of an
Employee at any time and for any reason.
14. Taxes
The Company shall be entitled to withhold the amount of any tax attributable to
any amount payable or shares deliverable under the Plan after giving the person
entitled to receive such amount or shares notice as far in advance as
practicable.
15. Non-Exclusivity of the Plan
Neither the adoption of the Plan by the Board of Directors of the Company, nor
its submission of the Plan to its shareholders for approval, shall be construed
as creating any limitation on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of stock options and the awarding of stock and cash otherwise than
under the Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.
BIOXIDE CORPORATION
1997
STOCK INCENTIVE PLAN
BIOXIDE CORPORATION, a Nevada corporation, (the "Company") adopts this
Stock Incentive Plan (the "Plan"), effective September ____, 1997.
1. Purpose. The purpose of this Plan is to enable the Company to attract and
retain the services of and provide performance incentives to (1) selected
employees, officers and directors of the Company or of any subsidiary of the
Company ("Employees") and (2) selected nonemployee agents, consultants, advisors
and independent contractors of the Company or any subsidiary.
2. Shares Subject to the Plan. Subject to adjustment as provided below and in
paragraph 13, the shares to be offered under the Plan shall consist of the
common stock of the Company, par value $.0001 per share ("Common Stock"), and
the total number of shares of Common Stock that may be issued under the Plan
shall not exceed 1,000,000 shares, all of which may be issued pursuant to the
exercise of options granted pursuant to the Plan. The shares issued under the
Plan may be authorized and unissued shares or reacquired shares or shares
acquired in the market. If any award granted under the Plan expires, terminates
or is canceled, the unissued shares subject to such award shall again be
available under the Plan and if shares which are awarded under the Plan are
forfeited to the Company or repurchased by the Company, that number of shares
shall again be available under the Plan.
3. Effective Date and Duration of Plan.
(a) Effective Date. The Plan (as amended and restated) shall become
effective on the date adopted by the Board of Directors. Awards may be
granted and shares may be awarded or sold under the Plan at any time
after the effective date and before termination of the Plan.
(b) Duration. The Plan shall continue in effect for a period of 10
years from the date adopted by the Board of Directors, subject to
earlier termination by the Board of Directors. The Board of Directors
may suspend or terminate the Plan at any time, except with respect to
awards then outstanding under the Plan. Termination shall not affect
the terms of any outstanding awards.
4. Administration.
(a) Board of Directors. The Plan shall be administered by the Board of
Directors of the Company, which shall determine and designate from time
to time the individuals to whom awards shall be made, the amount of the
awards and the other terms and conditions of the awards. Subject to the
provisions of the Plan, the Board of Directors may from time to time
adopt and amend rules and regulations relating to the administration of
the Plan, advance the lapse of any waiting period, accelerate any
exercise date, waive or modify any restriction applicable to shares
(except those restrictions imposed by law) and make all other
determinations in the judgment of the Board of Directors necessary or
desirable for the administration of the Plan. The interpretation and
construction of the provisions of the Plan and related agreements by
the Board of Directors shall be final and conclusive. The Board of
Directors may correct any defect or supply any omission or reconcile
any inconsistency in the Plan or in any related agreement in the manner
and to the extent it shall deem expedient to carry the Plan into
effect, and it shall be the sole and final judge of such expediency.
(b) Committee. The Board of Directors may delegate to a committee of
the Board of Directors (the "Committee") any or all authority for
administration of the Plan. If authority is delegated to a Committee,
all references to the Board of Directors in the Plan shall mean and
relate to the Committee except (i) as otherwise provided by the Board
of Directors and (ii) that only the Board of Directors may amend or
terminate the Plan as provided in paragraphs 3 and 14.
(c) Officer. The Board of Directors or the Committee, as applicable,
may delegate to an executive officer of the Company authority to
administer those aspects of the Plan that do not involve the
designation of individuals to receive awards or decisions concerning
the timing, amounts or other terms of awards. No officer to whom
administrative authority has been delegated pursuant to this provision
may waive or modify any restriction applicable to an award to such
officer under the Plan.
5. Types of Awards; Eligibility. The Board of Directors may, from time to time,
take the following actions, separately or in combination, under the Plan: (i)
grant Incentive Stock Options, as defined in section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), as provided in paragraph 6; (ii) grant
options other than Incentive Stock Options ("Non-Statutory Stock Options") as
provided in paragraph 6; (iii) award stock as provided in paragraph 7; (iv) sell
shares subject to restrictions as provided in paragraph 8; (v) grant stock
appreciation rights as provided in paragraph 9; (vi) grant cash bonus rights a
provided in paragraph 10; (vii) grant Performance-based Rights as provided in
paragraph 11 and (viii) grant foreign qualified awards as provided in paragraph
12. Any such awards may be made to Employees, including Employees who are
officers or directors, and to other individuals described in paragraph 1 whom
the Board of Directors believes have made or will make an important contribution
to the Company or any subsidiary of the Company; provided, however, that only
Employees shall be eligible to receive Incentive Stock Options under the Plan.
The Board of Directors shall select the individuals to whom awards shall be made
and shall specify the action taken with respect to each individual to whom an
award is made. Unless otherwise determined by the Board of Directors with
respect to an award, each option, stock appreciation right, cash bonus right or
performance-based right granted pursuant to the Plan by its terms shall be
nonassignable and nontransferable by the recipient, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution of
the state or country of the recipient's domicile at the time of death. No
fractional shares shall be issued in connection with any award. In lieu of any
fractional shares, cash may be paid in an amount equal to the value of the
fraction or, if the Board of Directors shall determine, the number of shares may
be rounded downward to the next whole share. No Employee may be granted options
or stock appreciation rights under the Plan for more than an aggregate of
250,000 shares of Common Stock in any consecutive three-year period.
6. Option Grants. With respect to each option grant, the Board of Directors
shall determine the number of shares subject to the option, the option price,
the period of the option, the time or times at which the option may be exercised
and whether the option is an Incentive Stock Option or a Non-Statutory Stock
Option and any other terms of the grant, all of which shall be set forth in an
option agreement between the Company and the optionee. In the case of Incentive
Stock Options, all terms shall be consistent with the requirements of the Code
and applicable regulations. Upon the exercise of an option, the number of shares
reserved for issuance under the Plan shall be reduced by the number of shares
issued upon exercise of the option less the number of shares surrendered or
withheld in connection with the exercise of the option and the number of shares
surrounded or withheld to satisfy withholding obligations in accordance with
paragraph 17.
7. Stock Awards. The Board of Directors may award shares under the Plan as stock
bonuses or otherwise. The aggregate number of shares that may be awarded
pursuant to this provision shall not exceed 500,000 shares. Shares awarded
pursuant to this paragraph shall be subject to the terms, conditions, and
restrictions determined by the Board of Directors. The Board of Directors may
require the recipient to sign an agreement as a condition of the award, but may
not require the recipient to pay any monetary consideration other than amounts
necessary to satisfy tax withholding requirements. The agreement may contain any
terms, conditions, restrictions, representations and warranties required by the
Board of Directors. The certificates representing the shares awarded shall bear
any legends required by the Board of Directors. Upon the issuance of a stock
award, the number of shares available for issuance under the Plan shall be
reduced by the number of shares issued less the number of any shares surrendered
to satisfy withholding obligations in accordance with paragraph 17.
8. Purchased Stock. The Board of Directors may issue shares under the Plan for
such consideration (including promissory notes and services) as determined by
the Board of Directors. Shares issued under the Plan shall be subject to the
terms, conditions and restrictions determined by the Board of Directors. All
Common Stock issued pursuant to this paragraph 8 shall be subject to a purchase
agreement, which shall be executed by the Company and the prospective recipient
of the shares prior to the delivery of certificates representing such shares to
the recipient. The purchase agreement may contain any terms, conditions,
restrictions, representations and warranties required by the Board of Directors.
The certificates representing the shares shall bear any legends required by the
Board of Directors. Upon the issuance of purchased stock, the number of shares
available for issuance under the Plan shall be reduced by the number of shares
issued less the number of any shares surrendered to satisfy withholding
obligations in accordance with paragraph 17.
9. Stock Appreciation Rights.
(a) Grant. Stock appreciation rights may be granted under the Plan by
the Board of Directors, subject to such rules, terms, and conditions as
the Board of Directors prescribes.
(b) Exercise. Each stock appreciation right shall entitle the holder,
upon exercise, to receive from the Company in exchange therefor an
amount equal in value to the excess of the fair market value on the
date of grant (or, in the case of a stock appreciation right granted in
connection with an option, the excess of the fair market value of one
share of Common Stock of the Company over the option price per share
under the option to which the stock appreciation right relates),
multiplied by the number of shares covered by the stock appreciation
right or the option, or portion thereof, that is surrendered. Payment
by the Company upon exercise of a stock appreciation right may be in
Common Stock valued at fair market value, in cash, or partly in Common
Stock and partly in cash, all as determined by the Board of Directors.
The Board of Directors may withdraw any stock appreciation right
granted under the Plan at any time and may impose any conditions upon
the exercise of a stock appreciation right or adopt rules and
regulations from time to time affecting the rights of holders of stock
appreciation rights. Such rules and regulations may govern the right to
exercise stock appreciation rights granted thereafter. Upon the
exercise of a stock appreciation right for shares, the number of shares
available for issuance under the Plan shall be reduced by the number of
shares issued less the number of any shares surrendered or withheld to
satisfy withholding obligations in accordance with paragraph 17. Cash
payments of stock appreciation rights shall not reduce the number of
shares of Common Stock available for issuance under the Plan.
10. Cash Bonus Rights. The Board of Directors may grant cash bonus rights under
the Plan in connection with (i) options granted or previously granted, (ii)
stock appreciation rights granted or previously granted, (iii) stock awarded or
previously awarded and (iv) shares sold or previously sold under the Plan. Cash
bonus rights will be subject to rules, terms and conditions as the Board of
Directors may prescribe. The payment of a cash bonus shall not reduce the number
of shares of Common Stock available for issuance under the Plan. A cash bonus
right granted in connection with an option will entitle an optionee to a cash
bonus when the related option is exercised (or terminates in connection with the
exercise of a stock appreciation right related to the option) in whole or in
part if, in the sole discretion of the Board of Directors, the bonus right will
result in a tax deduction that the Company has sufficient taxable income to use.
A cash bonus right granted in connection with a stock award pursuant to
paragraph 7 or purchase of stock pursuant to paragraph 8 will entitle the
recipient to a cash bonus payable when the stock award is awarded or the shares
are purchased or restrictions, if any, to which the stock is subject lapse. If
the stock awarded or the shares purchased are subject to restrictions and are
repurchased by the Company or forfeited by the holder, the cash bonus right
granted in connection with the stock awarded or shares purchased shall terminate
and may not be exercised.
11. Performance-based Awards. The Board of Directors may grant awards intended
to qualify as performance-based compensation under section 162(m) of the Code
and the regulations thereunder ("Performance-based Awards"). Performance-based
Awards shall be denominated at the time of grant either in shares of Common
Stock ("Stock Performance Awards") or in dollar amounts ("Dollar Performance
Awards"). Payment under a Stock Performance Award or a Dollar Performance Award
shall be made, at the discretion of the Board of Directors, subject to the
limitations set forth in paragraph 2, in shares of Common Stock ("Performance
Shares"), or in cash or any combination thereof. Performance-based Awards shall
be subject to the following terms and conditions:
(a) Award Period. The Board of Directors shall determine the period of
time for which a Performance-based Award is made (the "Award Period").
(b) Performance Goals and Payment. The Board of Directors shall
establish in writing objectives ("Performance Goals") that must be met
by the Company or any subsidiary, division or other unit of the Company
("Business Unit") during the Award Period as a condition to payment
being made under the Performance-based Award. The Performance Goals for
each award shall be one or more targeted levels of performance with
respect to one or more of the following objective measures with respect
to the Company or any Business Unit: earnings, earnings per share,
stock price increases, total shareholder return (stock price increase
plus dividends), return on equity, return on assets, return on capital,
economic value added, revenues, operating income, cash flows or any of
the foregoing (determined according to criteria established by the
Board of Directors). The Board of Directors shall also establish the
number of Performance Shares or the amount of cash payment to be made
under a Performance-based Award if the Performance Goals are met or
exceeded, including the fixing of a maximum payment (subject to
paragraph 11(d)). The Board of Directors may establish other
restrictions to payment under a Performance-based Award, such as a
continued employment requirement, in addition to satisfaction of the
Performance Goals. Some or all of the Performance Shares may be issued
at the time of the award as restricted shares subject to forfeiture in
whole or in part if Performance Goals, or if applicable, other
restrictions are not satisfied.
(c) Computation of Payment. During or after an Award Period, the
performance of the Company or Business Unit, as applicable, during the
period shall be measured against the Performance Goals. If the
Performance Goals are not met, no payment shall be made under a
Performance-based Award. If the Performance Goals are met or exceeded,
the Board of Directors shall certify that fact in writing and certify
the number of Performance Shares earned or the amount of cash payment
to be made under the terms of the Performance-based Award.
(d) Maximum Awards. No participant may receive Stock Performance Awards
in any fiscal year under which the maximum number of shares issuable
under the award, when aggregated with the shares issuable under any
awards made in the immediately preceding two fiscal years, exceeds
250,000 shares or Dollar Performance Awards in any fiscal year under
which the maximum amount of cash payable under the award, when
aggregated with the amount of cash payable under awards made in the
immediately preceding two fiscal years, exceeds an aggregate of
$250,000.
(e) Effect on Shares Available. The payment of a Performance-based
Award in cash shall not reduce the number of shares of Common Stock
available for issuance under the Plan. The number of shares of Common
Stock available for issuance under the Plan shall be reduced by the
number of shares issued upon payment of an award, less the number of
shares surrendered or withheld to satisfy withholding obligations.
12. Foreign Qualified Grants. Awards under the Plan may be granted to such
Employees and such other persons described in paragraph 1 residing in foreign
jurisdictions as the Board of Directors may determine from time to time. The
Board of Directors may adopt such supplements to the Plan as may be necessary to
comply with the applicable laws of such foreign jurisdictions and to afford
participants favorable treatment under such laws; provided, however, that no
award shall be granted under any such supplement with terms that are more
beneficial to the participants than the terms permitted by the Plan.
13. Changes in Capital Structure.
(a) Stock Splits; Stock Dividends. If the number of shares of
outstanding Common Stock of the Company is hereafter increased or
decreased or changed into or exchanged for a different number or kind
of shares or other securities of the Company by reason of any stock
split, combination of shares or dividend payable in shares,
recapitalization or reclassification, appropriate adjustment shall be
made by the Board of Directors in the number and kind of shares
available for grants under the Plan. In addition, the Board of
Directors shall make appropriate adjustment in the number and kind of
shares as to which outstanding options, or portions thereof then
unexercised, shall be exercisable, so that the optionee's proportionate
interest before and after the occurrence of the event is maintained.
Notwithstanding the foregoing, the Board of Directors shall have no
obligation to effect any adjustment that would or might result in the
issuance of fractional shares, and any fractional shares resulting from
any adjustment may be disregarded or provided for in any manner
determined by the Board of Directors. Any such adjustments made by
Board of Directors shall be conclusive.
(b) Mergers, Reorganizations, Etc. The Board of Directors may include
such terms and conditions, including without limitation, provisions
relating to acceleration in the event of a change in control, as it
deems appropriate in connection with any award under the Plan with
respect to a merger, consolidation, plan of exchange, acquisition of
property or stock, separation, reorganization or liquidation to which
the Company or a subsidiary is a party or a sale or all or
substantially all of the Company's assets (each, a "Transaction").
Notwithstanding the foregoing, in the event of a Transaction, the Board
of Directors shall, in its sole discretion and to the extent possible
under the structure of the Transaction, select one or the following
alternatives for treating outstanding Incentive Stock Options or
Non-Statutory Stock Options under the Plan:
(i) Outstanding options shall remain in effect in accordance
with their terms.
(ii) Outstanding options shall be converted into options to
purchase stock in the company that is surviving or acquiring
company in the Transaction. The amount, type of securities
subject thereto and exercise price of the converted options
shall be determined by the Board of Directors of the Company,
taking into account the relative values of the companies
involved in the Transaction and the exchange rate, if any,
used in determining shares of the surviving corporation to be
issued to holders of shares of the Company. Unless otherwise
determined by the Board of Directors, the converted options
shall be vested only to the extent that the vesting
requirements relating to options granted hereunder have been
satisfied.
(iii) The Board of Directors shall provide a 30-day period
prior to the consummation of the Transaction during which
outstanding options may be exercised to the extent then
exercisable, and upon the expiration of such 30-day period,
all unexercised options shall immediately terminate. The Board
of Directors may, in its sole discretion, accelerate the
exercisability of options so that they are exercisable in full
during such 30-day period.
(c) Dissolution of the Company. In the event of the dissolution of the
Company, options shall be treated in accordance with paragraph
13(b)(iii).
(d) Rights Issued by Another Corporation. The Board of Directors may
also grant options, stock appreciation rights, performance units, stock
bonuses and cash bonuses and issue restricted stock under the Plan
having terms, conditions and provisions that vary from those specified
in this Plan provided that any such awards are granted in substitution
for, or in connection with the assumption of, existing options, stock
appreciation rights, stock bonuses, cash bonuses, restricted stock and
performance units granted, awarded or issued by another corporation and
assumed or otherwise agreed to be provided for by the Company pursuant
to or by reason of a Transaction.
14. Amendment of Plan. The Board of Directors may at any time, and from time to
time, modify or amend the Plan in such respects as it shall deem advisable
because of changes in the law while the Plan is in effect or for any other
reason. Except as provided in paragraphs 9, 10 and 13, however, no change in an
award already granted shall be made without the written consent of the holder of
such award.
15. Approvals. The obligations of the Company under the Plan are subject to the
approval of state and federal authorities or agencies with jurisdiction in the
matter. The Company will use its best efforts to take steps required by state or
federal law or applicable regulations, including rules and regulations of the
Securities and Exchange Commission and any stock exchange on which the Company's
shares may then be listed, in connection with the grants under the Plan. The
foregoing notwithstanding, the Company shall not be obligated to issue or
deliver Common Stock under the Plan if such issuance or delivery would violate
applicable state or federal securities laws.
16. Employment and Service Rights. Nothing in the Plan or any award pursuant to
the Plan shall (i) confer upon any Employee any right to be continued in the
employment of the Company or any subsidiary or interfere in any way with the
right of the Company or any subsidiary by whom such Employee is employed to
terminate such Employee's employment at any time, for any reason, with or
without cause, or to decrease such Employee's compensation or benefits, or (ii)
confer upon any person engaged by the Company any right to be retained or
employed by the Company or to the continuation, extension, renewal, or
modification of any compensation, contract, or arrangement with or by the
Company.
17. Taxes. Each participant who has received an award under the Plan shall, upon
notification of the amount due, pay to the Company in cash amounts necessary to
satisfy any applicable federal, state and local withholding requirements. If the
participant fails to pay the amount demanded, the Company may withhold that
amount from other amounts payable by the Company to the participant including
salary, subject to applicable law. With the consent of the Board of Directors, a
participant may satisfy this withholding obligation, in whole or in part, by
having the Company withhold from any shares to be issued that number of shares
that would satisfy the amount due or by delivering Common Stock to the Company
to satisfy the withholding amount.
18. Rights as a Shareholder. The recipient of any award under the Plan shall
have no rights as a shareholder with respect to any Common Stock until the date
of issue to the recipient of a stock certificate for such shares. Except as
otherwise expressly provided in the Plan, no adjustment shall be made for
dividends or other rights for which the record date occurs prior to the date
such stock certificate is issued.
Approved by the Board of Directors: September, 1997.
By: /s/ E. Wayne Nelson
Secretary of Bioxide Corporation
BIOXIDE CORPORATION
300 North 200 West, #101
Bountiful, Utah 84010
Telephone: (801) 294-8306
Telecopier: (801) 294-8307
April 1, 1997
Mr. Dale G. Karren
358 Shepard Ridge Road
Farmington, Utah 84025
STOCK OPTION GRANT AND AGREEMENT
Dear Mr. Karren:
Grant of Option. Bioxide Corporation, a Nevada corporation (the
"Company"), through the Compensation Committee of its Board of Directors (the
"Committee"), hereby grants to you an option (the "Option") to purchase the
total number of shares of the Company's capital stock set forth below (the
"Shares") at the exercise price per share set forth below (the "Exercise
Price"). The Option is subject to all of the terms and conditions of this Letter
Agreement and the Company's 1996 Stock Incentive Plan (the "Plan"), a copy of
which is attached to this letter.
Description of the Option.
Type of Option: Nonqualified Stock Option.
Exercise Price Per Share: $1.50.
Effective Date of Grant: April 1, 1997.
Expiration Date: April 1, 2000.
Number of Shares Subject to Option: 70,000.
Exercise Period of Option. Subject to the terms and conditions of the
Plan and this Letter Agreement, the Option shall become exercisable in whole or
in part from the Effective Date of Grant through the Expiration Date.
The Option shall expire on the earlier of (i) the Expiration Date set
forth above, or (ii) 90 days after the termination of your employment with the
Company for any reason, including your death or disability, and must be
exercised, if at all, in accordance with the terms of the Plan and this Letter
Agreement on or before the Expiration Date.
Manner of Exercise. The Option shall be exercisable by delivery to the
Committee of an executed written Notice of Stock Option Exercise and Agreement
("Notice"), in such form as may be approved by the Committee, which shall set
forth your election to exercise all or a portion of the Option, the number of
Shares being purchased, any restrictions imposed on the Shares by the Company,
and such other representations and agreements regarding your investment intent
and access to information as may be required by the Committee in order to enable
the Company to comply with applicable securities laws.
The Notice shall be accompanied by full payment of the Exercise Price
for the Shares being purchased in cash or by bank check. Alternatively, if
approved by the Committee in its sole discretion, the Exercise Price may be paid
by surrender of issued and outstanding shares of the Company's capital stock
having a fair market value equal to the Exercise Price, by any combination
thereof, or otherwise as the Committee may determine.
Prior to the issuance of Shares upon any exercise of the Option, you
must pay or make adequate provision for any applicable federal or state
withholding obligations of the Company.
When the Company has received the Notice and payment, in form and
substance satisfactory to counsel for the Company, the Company shall issue a
certificate or certificates representing the Shares purchased, registered in
your name or in the name of your legal representative.
Right of First Refusal. Each of the Shares, when acquired through the
exercise of the Option, will be subject to a right of first refusal in favor of
the Company, as contemplated by paragraph 11 of the Plan. If you elect to sell
the Shares, or any portion thereof, you must first offer in writing to sell the
Shares, or any such portion, to the Company at fair market value on a specified
date (which date shall be at least ten business days and not more than 20
business days following the date of such offer). The Company's right of first
refusal shall lapse five years from the date you acquire the Shares.
In the event of any conflict between the provisions of the Plan and the
terms and conditions of this Letter Agreement, the provisions of the Plan shall
govern, for all purposes.
Please return the enclosed copy of this Letter Agreement, signed to
reflect your acceptance of the terms of the Option, to the undersigned in the
enclosed envelope. If you do not sign and return this Letter Agreement, the
Company will have the right to terminate the Option.
Very truly yours,
BIOXIDE CORPORATION
By: Lynn L. Summerhays
Its: Chairman
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, represents
that Optionee has read and understands the terms and provisions thereof, and
accepts the Option subject to all the terms and provisions thereof and of this
Letter Agreement. Optionee hereby agrees to accept as binding, conclusive, and
final all decisions or interpretations of the Committee appointed to administer
the Plan upon any questions arising under this Letter Agreement or the Plan.
Optionee acknowledges that he has been informed that there may be tax
consequences upon exercise of this Option or disposition of the Shares.
Dated: April 1, 1997
/s/ Dale G. Karren
DALE G. KARREN
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is made and entered
into as of January 20, 1997, by and between Bioxide Corporation, a Nevada
corporation (the "Company"), and E. Wayne Nelson, an individual ("Indemnitee").
A. WHEREAS, the Company and Indemnitee recognize the increasing
difficulty in obtaining directors' and officers' liability insurance, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance;
B. WHEREAS, the Company and Indemnitee further recognize the
substantial increase in corporate litigation in general, subjecting officers and
directors to expensive litigation risks, at the same time that the availability
and coverage of liability insurance has been severely limited;
C. WHEREAS, Indemnitee does not regard the current protection available
as adequate under the present circumstances, and Indemnitee and other officers
and directors of the Company may not be willing to continue to serve as officers
and directors of the Company without additional protection;
D. WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve as officers and
directors of the Company and to indemnity its officers and directors so as to
provide them with the maximum protection permitted by law; and
E. WHEREAS, the Company and Indemnitee expressly recognize that the
indemnification provisions contained therein are not exclusive of any other
rights to which Indemnitee may be entitled by Bylaw provision, agreement, vote
of the stockholders or disinterested directors, or otherwise, and this Agreement
is being entered into pursuant to such provision.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification. To the fullest extent permitted under Chapter 78 et
seq., Nevada Revised Statutes, the Company shall indemnify Indemnitee against
all Expenses (as that term is defined in Section 10(d) hereof) actually and
reasonably incurred by Indemnitee in connection with any Proceeding (as that
term is defined in Section 10(c) hereof), except to the extent set forth in
Section 9) hereof. The termination of any Proceeding by judgment, order of
court, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that Indemnitee did not
act in good faith and in a manner that Indemnitee reasonably believed to be in
or not opposed to the best interests of the Company, and with respect to any
criminal proceeding, that Indemnitee had reasonable cause to believe that his
conduct was lawful. Notwithstanding any other provision of this Agreement, to
the extent that Indemnitee has been successful on the merits or otherwise in
defense of any Proceeding or in defense of any claim, issue, or matter therein,
including dismissal of such without prejudice, Indemnitee shall be indemnified
against all Expenses incurred in connection therewith (except Expenses for which
Indemnitee has been reimbursed by insurance).
2. Agreement to Serve. In consideration of the protection afforded by
this Agreement, if Indemnitee is a director of the Company, Indemnitee agrees to
serve at least for the balance of the current term as a director and not to
resign voluntarily during such period without the written consent of a majority
of the Company's Board of Directors. If Indemnitee is an officer of the Company
not serving under an employment contract, Indemnitee agrees to serve in such
capacity at least for the balance of the current fiscal year of the Company and
not to resign voluntarily during such period without the written consent of a
majority of the Company's Board of Directors. Following the applicable period
set forth above, Indemnitee agrees to continue to serve in such capacity at the
will of the Company (or under separate agreement, if such agreement exists) so
long as Indemnitee is duly appointed or elected and qualified in accordance with
the applicable provisions of the Bylaws of the Company or until such time as
Indemnitee tenders his resignation in writing. Nothing contained in this
Agreement is intended to create in Indemnitee any right to employment with the
Company.
3. Expenses; Indemnification Procedure.
a. Advancement of Expenses. The Company shall advance all
Expenses incurred by Indemnitee in connection with the investigation, defense,
settlement, or appeal of any Proceeding referenced in Section 1 hereof, provided
Indemnitee provides the Company with a written affirmation of Indemnitee's good
faith belief that he has met the applicable standard of conduct required under
applicable law and further provided a determination is made as provided in the
Chapter 78 et seq., Nevada Revised Statutes, that indemnification would not be
precluded thereunder. Indemnitee hereby undertakes to repay such amounts
advanced if and to the extent that, it shall ultimately be determined that
Indemnitee has not met the applicable legal standard of conduct. The advances to
be made hereunder shall be paid by the Company to Indemnitee within twenty (20)
days following delivery of a written request therefor by Indemnitee to the
Company.
b. Notice and Cooperation by Indemnitee. Indemnitee shall, as
a condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice and the affirmation required in Section 3(a)
hereof in writing as soon as practicable of any claim made against Indemnitee
for which indemnification will or could be sought under this Agreement. Notice
to the Company shall be directed to Bioxide Corporation, 380 North 200 West,
Suite 101, Bountiful, Utah 84010, Attention: President (or to such other address
as the Company shall designate in writing to Indemnitee). Notice shall be deemed
received on the third business day after the date postmarked if sent by domestic
certified or registered mail, properly addressed; otherwise, notice shall be
deemed received when such notice is actually received by the Company. In
addition, Indemnitee shall give the Company such information and cooperation as
the Company may reasonably require and as shall be within Indemnitee's power.
c. Procedure. Any indemnification and advances provided for in
Section 1 hereof and this Section 3 shall be made no later than twenty (20) days
after receipt of the written request of Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Company's Articles
of Incorporation or Bylaws providing for indemnification, is not paid in full by
the Company within twenty (20) days after a written request for payment thereof
has first been received by the Company, Indemnitee may, but need not, at any
time thereafter bring an action against the Company to recover the unpaid amount
of the claim and, subject to Section 13 hereof, Indemnitee shall also be
entitled to be paid for the Expenses (including reasonable attorneys' fees) of
bringing such action. It shall be a defense to any such action (other than an
action brought to enforce a claim for Expenses incurred in connection with any
Proceeding in advance of its final disposition) that Indemnitee has not met the
standard of conduct that makes it permissible under applicable law for the
Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company and Indemnitee shall be entitled to
receive interim payments of Expenses pursuant to subsection 3(a) hereof unless
and until such defense may be finally adjudicated by court order or judgment
from which no further right of appeal exits. It is the parties' intention that
if the Company contests Indemnitee's right to indemnification under this
Agreement, the question of Indemnitee's right to indemnification shall be for
the court to decide, and the failure of the Company (including the Company's
Board of Directors, any committee or subgroup of the Board of Directors,
independent legal counsel, or the Company's stockholders) to have made a
determination that indemnification of Indemnitee is proper in the circumstances
because Indemnitee has not met such applicable standard of conduct, shall not
create a presumption that Indemnitee has or has not met the applicable standard
of conduct.
d. Notice to Insurers. If, at the time of the receipt of a
notice of a claim pursuant to Section 3(b) hereof, the Company has directors'
and officers' liability insurance in effect, the Company shall give prompt
notice of the commencement of such Proceeding to the insurer(s) in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurer(s) to
pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding
in accordance with the terms of such policies.
e. Selection of Counsel. If the Company is obligated under
Section 3(a) hereof to pay the Expenses of any Proceeding against Indemnitee,
the Company shall be entitled, at its sole discretion, to assume the defense of
such Proceeding, with counsel approved by Indemnitee, which approval shall not
be unreasonably withheld, upon the delivery to Indemnitee of written notice of
the Company's election to do so. After delivery of such written notice, the
Company will not be liable to Indemnitee under this Agreement for any fees of
counsel subsequently incurred by Indemnitee with respect to the same Proceeding,
provided that (i) Indemnitee shall have the right to employ his counsel in any
such Proceeding at Indemnitee's expense and (ii) if (A) the employment of
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense
or (C) the Company shall not, in fact, have employed counsel to assume the
defense of such Proceeding, then the fees and Expenses of Indemnitee's counsel
shall be at the expense of the Company.
4. Additional Indemnification Rights.
a. Scope. Notwithstanding any other provision of this
Agreement, the Company hereby agrees to indemnify Indemnitee to the fullest
extent permitted by law, notwithstanding that such indemnification is not
specifically authorized by the other provisions of this Agreement, the Company's
Articles of Incorporation, the Company's Bylaws, or by statute. In the event of
any change after the date of this Agreement in any applicable law, statute, or
rule that expands the rights of a Nevada corporation to indemnify a member of
its board of directors or an officer, such changes shall be, ipso facto, within
the purview of Indemnitee's rights and Company's obligations under this
Agreement. In the event of any change in any applicable law, statute, or rule
that narrows the right of a Nevada corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute, or rule to be applied to this Agreement, shall
have no effect on this Agreement or the parties' rights and obligations
hereunder.
b. Rights Not Exclusive. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Company's Articles of Incorporation, the Company's Bylaws,
any agreement, any vote of the Company's stockholders or disinterested
directors, Chapter 78 et seq.., Nevada Revised Statutes, or otherwise, both as
to action in Indemnitee's official capacity and as to action in another capacity
while holding such office. The indemnification provided under this Agreement
shall continue as to Indemnitee for any action taken or not taken while serving
in an indemnified capacity even though Indemnitee may have ceased to serve in
such capacity at the time of any Proceeding.
5. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses, judgments, fines, penalties actually or reasonably incurred
by Indemnitee in the investigation, defense, appeal, or settlement of any
Proceeding, but not, however, for the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion of such Expenses, judgments,
fines, or penalties to which Indemnitee is entitled.
6. Mutual Acknowledgement. Both the Company and Indemnitee acknowledge
that in certain instances, federal law or public policy may override applicable
state law and prohibit the Company from indemnifying its directors and officers
under this Agreement or otherwise. For example, the Company and Indemnitee
acknowledge that the Securities and Exchange Commission (the "SEC") has taken
the position that indemnification is not permissible for liabilities arising
under certain federal securities laws, and federal legislation prohibits
indemnification for certain violations of the Employment Retirement Income
Security Act of 1974, as amended ("ERISA"). Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the SEC to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
7. Officers' and Directors' Liability Insurance. The Company shall,
from time to time, make a good faith determination whether or not it is
practicable for the Company to obtain and maintain a policy or policies of
insurance with reputable insurance companies providing the officers and
directors of the Company with coverage for losses from wrongful acts, or to
ensure the Company's performance of its indemnification obligations under this
Agreement. Among other considerations, the Company will weigh the cost of
obtaining such insurance coverage against the protection afforded by such
coverage. In all policies of directors' and officers' liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors. If Indemnitee is a director, or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, if Indemnitee is not an officer or
director but is a key employee. Notwithstanding the foregoing, the Company shall
have no obligation to obtain or maintain such insurance if the Company
determines in good faith that such insurance is not reasonably available, if the
premium cost for such insurance is disproportionate to the amount of coverage
provided, if the coverage provided by such insurance is limited by exclusions so
as to provide an insufficient benefit, or if Indemnitee is covered by similar
insurance maintained by a parent or subsidiary of the Company.
8. Severability. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, the Company shall
nevertheless indemnify Indemnitee to the fullest extent permitted by any
applicable portion of this Agreement that shall not have been invalidated, and
the balance of this Agreement not so invalidated shall be enforceable in
accordance with its terms.
9. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
a. Claims Initiated by Indemnitee. To indemnify or advance
Expenses to Indemnitee with respect to a Proceeding initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to a
Proceeding brought to establish or enforce a right to indemnification under this
Agreement or any other law, statute, rule, or otherwise as required under
Chapter 78 et seq., Nevada Revised Statutes, but such indemnification or
advancement of Expenses may be provided by the Company in specific cases if the
Company's Board of Directors finds it to be appropriate;
b. Lack of Good Faith. To indemnify Indemnitee for any
Expenses incurred by Indemnitee with respect to any Proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determined that each of the material assertions made by Indemnitee
in such Proceeding was not made in good faith or was frivolous;
c. Insured Claims. To indemnify Indemnitee for Expenses or
liabilities of any type whatsoever (including, but not limited to judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) that
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company;
d. Claims Under Sections 10(b) and 16(b). To indemnify
Indemnitee for Expenses or the payment of profits arising from the purchase and
sale by Indemnitee of securities in violation of Section 16(b) or any violation
by Indemnitee of Section 10(b) of the Securities Exchange Act of 1934, as
amended, or any similar successor statute;
e. Fraud, Recklessness, or Willful Misconduct. To indemnify
Indemnitee for Expenses incurred on account of Indemnitee's conduct that is
finally adjudged by a court to have constituted intentionable fraud,
recklessness, or willful misconduct; and
f. Unlawful to Indemnify. To indemnify Indemnitee if a final
decision by a court having jurisdiction in the matter determines that such
indemnification is not lawful, including, without limitation, if it is
determined that Indemnitee failed to act in accordance with the standards of
conduct specified in ' 78.751(1) of the Nevada Revised Statutes.
10. Construction and Definition of Certain Phrases and Terms.
a. For purposes of this Agreement, references to the "Company"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger that, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees, or
agents, so that if Indemnitee is or was a director, officer, employee, or agent
of such constituent corporation, or it is or was serving at the request of such
constituent corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, Indemnitee
shall stand in the same position under the provisions of this Agreement with
respect to the resulting or surviving corporation as Indemnitee would have stood
with respect to such constituent corporation if its separate existence had
continued.
b. For purposes of this Agreement, references to "other
enterprise" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed against Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee, or agent of the Company
that imposes duties on, or involves services by, such director, officer,
employee, or agent with respect to an employee benefit plan, its participants,
or beneficiaries; and if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in the best interest of the participants
and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to
have acted in a manner "not opposed to the best interests of the Company" as
referred to in this Agreement.
c. For purposes of this Agreement, references to "Proceeding"
shall include any threatened, pending, or completed action, suit, or proceeding
or any inquiry or investigation, whether brought by or in the right of the
Company or otherwise and whether of a civil, criminal, administrative, or
investigative nature, in which Indemnitee was, is, or is threatened to be
involved as a party or otherwise, by reason of the fact that Indemnitee is or
was a director or officer of the Company, or by reason of the fact that
Indemnitee is or was serving at the request of the Company as a director,
officer or employee, or agent of another corporation, partnership, joint
venture, trust or other enterprise, or by reason of any action taken by
Indemnitee or any inaction on Indemnitee's part while acting in any such
capacity, in each case whether or not Indemnitee is acting or serving in any
such capacity at the time any liability or expense is incurred for which
indemnification or reimbursement can be provided under this Agreement.
d. For purposes of this Agreement, references to "Expenses"
shall include, without limitation, expenses of investigations, judicial or
administrative proceedings or appeals, judgments, fines and penalties, amounts
paid in settlement by Indemnitee, attorneys' fees (including fees and expenses
of counsel selected by Indemnitee) and disbursements, and any expenses of
establishing a right to indemnification under Section 3 hereof.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives, and assigns.
13. Attorneys' Fees. In the event any action is instituted by either
party under this Agreement to enforce or interpret any of the terms hereof, the
prevailing party in such action shall be entitled to be paid all court costs and
Expenses, including reasonable attorneys' fees, incurred by such prevailing
party with respect to such action.
14. Notice. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown in Section 3(b) hereof and on the signature
page of this Agreement, or as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Utah for
all purposes in connection with any Proceeding that arises out of or that
relates to this Agreement.
16. Choice of Law. This Agreement shall be governed by and its
provisions construed in accordance with the laws of the State of Nevada, as
applied to contracts between Utah residents entered into and to be performed
entirely within the State of Nevada. This Agreement shall not be deemed to
create any rights prohibited by Chapter 78 et. seq., Nevada Revised Statutes,
and shall be construed in a manner consistent with such law.
17. Contribution. If the full indemnification provided in Section 1
hereof may not be paid to Indemnitee because such indemnification is prohibited
by law, then in respect to any actual or threatened Proceeding in which the
Company is jointly liable with Indemnitee (or would be if joined in such
Proceeding), the Company shall contribute to the amount of Expenses incurred by
Indemnitee for which indemnification is not available in such proportion as is
appropriate to reflect (i) the relative benefits received by the Company on the
one hand, and Indemnitee on the other hand, from the transaction from which such
Proceeding arose, and (ii) the relative fault of the Company and Indemnitee, as
well as any other relevant equitable considerations. The relative fault of the
Company, which shall be deemed to include its other directors, officers, and
employees, on one hand, and of Indemnitee, on the other hand, shall be
determined by reference to, among other things, the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent the
circumstances resulting in such Expenses. The Company agrees that it would not
be just and equitable if contribution pursuant to this Section 17 were
determined by any method of allocation that does not take into account the
foregoing equitable considerations.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BIOXIDE CORPORATION
By /s/ Lynn L. Summerhays
Its Chairman
/s/ E. Wayne Nelson
E. Wayne Nelson
LOAN AGREEMENT
THIS AGREEMENT is made this 13th day of August, 1997, by and between
Bioxide Corporation, a Utah corporation ("Bioxide") and IMG, L.C., a Utah
limited liability company ("IMG").
WHEREAS, Bioxide is owed $25,000 by M.K. Financial and $25,000 by Rocky
Mountain Associates (collectively referred to as "Receivables") and;
WHEREAS, Bioxide desires to have additional funding for its operations
and to collect its Receivables; and
WHEREAS, IMG is willing to purchase the Receivables and give Bioxide a
line of credit for $200,000.
NOW THEREFORE, the parties hereto agree as follows:
1. Receivables. IMG will purchase the Receivables from Bioxide for
$50,000 cash. Such purchase shall be without recourse.
2. Credit Line. IMG will provide a credit line to Bioxide for up to
$200,000 for a period ending on February 15, 1998 at an interest rate of 10% per
annum. Bioxide may draw upon this credit line by giving notice to IMG at least
three (3) business days in advance. Draws will be in increments of $5,000 and
will be represented by promissory notes (a "Note") in customary bank form. All
Notes will be due and payable on February 15, 1998.
3. Conversion of Debt. If Bioxide does not repay any Note on or before
its due date, then IMG may convert the unpaid debt into common shares of Bioxide
at the rate of $1.00 per share.
4. Closing. The Closing of the transactions contemplated by this
Agreement will occur on September 15, 1997 at 10:00 a.m., at Bioxide's offices
in Bountiful, Utah. At the Closing, Bioxide will deliver to IMG original copies
of documents evidencing the Receivables and one or more Notes evidencing loans.
IMG will deliver to Bioxide $50,000 cash plus cash equal to the face amounts of
the Notes.
5. Investment Representation. If IMG obtains common shares of Bioxide
as contemplated by paragraph 3 above, IMG will hold such shares for investment
purposes only and not with a view to any distribution thereof. Bioxide may
imprint a restrictive legend on the certificates representing such shares and
issue appropriate stop transfer instructions with the transfer agent.
6. Miscellaneous.
(a) This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements, or representations by or among the parties.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns.
Neither party may assign either this Agreement or any of its rights, interests,
or obligations hereunder without the prior written approval of the other party.
(c) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(d) The paragraph headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(e) All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given when actually
received, if personally delivered or sent by U.S. mail, postage pre-paid and
return receipt requested, and addressed to the intended recipient as set forth
below:
If to Bioxide: 380 North 200 West
Suite 101
Bountiful, Utah 84010
Attn: Dale Karren
Fax: (801) 294-8307
If to IMG: 380 South 200 West
P.O. Box 643
Farmington, Utah 84025
Attn: David G. Derrick
Fax: (801) 582-2360
(f) This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Utah, without giving effect to
any choice or conflict of law provision or rule.
(g) This Agreement may be amended, extended or modified only
by a writing signed by the parties. No waiver of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(h) In the event there is a dispute between the parties, they
hereby consent to the exclusive jurisdiction of the state and federal courts in
Salt Lake or Davis Counties, Utah as the proper forums to resolve the dispute.
Process may be served in the manner provided herein for giving notices. The
court shall have the authority to award attorneys' fees and related costs to the
prevailing party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
IMG, L.C.
By: /s/ David G. Derrick
Its: Manager
Bioxide Corporation
By: /s/ Dale G. Karren
Its: President
PROMISSORY NOTE
$50,000.00 Date: September 15, 1997
For value received, the undersigned Bioxide Corporation ("the Promisor")
promises to pay to the order of IMG, LLC, (the "Payee"), at 380 S. 200 West #4,
Farmington, UT 84025, (or at such other place as the Payee may designate in
writing) the sum of $50,000.00 with interest from September 15, 1997, on the
unpaid principal at the rate of 10.00% per annum.
The unpaid principal and accrued interest shall be payable in full on February
15, 1998 (the "Due Date").
If the Promisor does not repay this Note on or before its due date, then the
Payee may convert the unpaid debt into common stock at the rate of $1.00 per
share.
If the Payee obtains common shares of Bioxide Corporation as contemplated by the
paragraph above, the Payee will hold such shares for investment purposes only
and not with view to any distribution thereof. The Promisor may imprint a
restrictions legend on the certificate representing such shares and appropriate
stop transfer instructions with the transfer.
All payments on this Note shall be applied first in payment of accrued interest
and any remainder in payment of principal.
If any one or more of the provisions of this Note are determined to be
unenforceable, in whole or in part, for any reason, the remaining provisions
shall remain fully operative.
All payments of principal and interest on this Note shall be paid in the legal
currency of the United States. Promisor waives presentment for payment, protest,
and notice of protest and nonpayment of this Note.
No renewal or extension of this Note, delay in enforcing any right of the Payee
under this Note, or assignment by Payee of this Note shall affect the liability
of the Promisor. All rights of the Payee under this Note are cumulative and may
be exercised concurrently or consecutively at the Payee's option.
This Note shall be construed in accordance with the laws of the State of Utah.
Signed this 26th day of September, 1997, at Bountiful, Utah.
Promisor
Bioxide Corporation
By: /s/ Dale G. Karren
Dale G. Karren
President
Consent of Counsel
The undersigned hereby consents to the refernece to the firm of Parsons
Behle & Latimer under the caption "Legal Matters" in the Registration Statement
on Form SB-2 of Bioxide Corporation.
/s/ Parsons Behle & Latimer
---------------------------
Parsons Behle & Latimer
____________________________
TANNER + Co.
CERTIFIED PUBLIC ACCOUNTANTS
____________________________
675 East 500 South Suite 610
Salt Lake City, Utah 84102
Telephone (801) 532-7441
Fax (801) 532-4911
A Professional Corporation
CONSENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
Bioxide Corporation
We hereby consent to the use in this Registration Statement on Form SB-2 of
our report dated October 1, 1997, relating to the financial statements of
Bioxide Corporation and subsidiaries, and to the reference to our Firm under the
caption "Experts" in the Prospectus.
TANNER + Co.
Salt Lake City, Utah
October 28, 1997
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