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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
Veridien Corporation
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(Name of Small Business Issuer in its charter)
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Delaware 59-3020382
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(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11800 28th Street North, St. Petersburg, Florida 33716
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(Address of principal executive offices) (Zip Code)
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Issuer's telephone number (727) 572-5500
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Securities to be registered under Section 12(b) of the Act:
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Title of each class Name of each exchange on which
to be so registered each class is to be registered
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Securities to be registered under Section 12(g) of the Act:
Common Stock
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(Title of class)
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(Title of class)
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TABLE OF CONTENTS
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PART I PAGE
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Item 1 Description of Business 5
Item 2 Management's Discussion and Analysis or Plan of Operation 12
Item 3 Description of Property 16
Item 4 Security Ownership of Certain Beneficial
Owners and Management 17
Item 5 Directors, Executive Officers, Promoters and Control Persons 19
Item 6 Executive Compensation 22
Item 7 Certain Relationships and Related Transactions 24
Item 8 Description of Securities 24
PART II
Item 1 Market Price of and Dividends on the Registrant's Common Equity
and Other Shareholder Matters 32
Item 2 Legal Proceedings 33
Item 3 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 34
Item 4 Recent Sales of Unregistered Securities 34
Item 5 Indemnification of Directors and Officers 38
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FINANCIAL STATEMENTS
See attached Financial Statements
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EXHIBIT INDEX
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No. Description of Exhibit
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3.1 Certificate of Incorporation of VCT Acquisitions II, Inc. - Dated June
4, 1991
3.2 Restated Certificate of Incorporation of VCT Acquisitions II, Inc. -
Dated September 13, 1991
3.3 Certificate of Amendment of Restated Certificate of Incorporation -
November 6, 1991
3.4 Bylaws of Veridien Corporation - 1998 as amended to date
3.5 Certificate of the Powers, Preferences, Rights, Qualifications,
Limitations and Restrictions of Series B Convertible Preferred Stock -
Dated September 11, 1998
3.6 Certificate of Designation - Dated April 3, 1995
3.7 Certificate of Amendment to the Certificate of Incorporation - Dated
February 16, 1996
4.1 Debenture Sample
4.2 General Security Agreement between Veridien Corp. and Dunvegan Mortgage
Corp. - Dated October 19, 1995
4.3 Loan and Security Agreement between Veridien Corp. and Dunvegan
Mortgage Corp. - Dated October 19, 1995
4.4 General Security Pledge between Veridien Corp. and Dunvegan Mortgage
Corp. - Dated October 19, 1995
4.5 Warrant Agreement regarding Warrants to purchase Common Stock of
Veridien Corporation-Series I - Dated October 19, 1995
4.6 Warrant Agreement regarding Warrants to purchase Common Stock of
Veridien Corporation-Series II - Dated October 19, 1995
4.7 Warrant to purchase Common Stock Series I and Series II - Dated
December 12, 1995
4.8 Common Stock Purchase Warrant: $0.135 per share - Dated June 10, 1998
10.1 Building Lease
10.2 Canadian Licensing Agreement - Dated February 28, 1998
10.3 Contract Fill and Sub-lease Agreement with Horizon Pharmaceuticals,
Inc. - Dated August 1, 1998
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10.4 Trademark - Virahol
10.5 Trademark - Viraguard
10.6 Trademark - Viragel
10.7 Trademark - Vira- CD7
10.8 Australian Patent No. 667,930/Sterihol
10.9 Australian Patent No. 628,932/Virahol
10.10 Canadian Patent No. 1,337,329/Virahol
10.11 Mexican Patent No. 185,884/Virahol
10.12 U.K. Patent No. 2,294,639/Virahol
10.13 U.K. Patent No. 2,245,171/Virahol
10.14 U.S. Patent No. 5,405,602/Sterihol
10.15 U.S. Patent No. 5,145,663/Virahol
10.16 U.S. Patent No. 5,441,723/Virahol
10.17 U.S. Patent No. 5,637,307/Method of Immersion Sterilization & Organic
Cold Chemical Sterilant
10.18 New Zealand Patent No. 269,419/Virahol
21.1 Subsidiaries
27 Financial Data Schedule
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
ORGANIZATION/HISTORICAL BACKGROUND
We were incorporated in Delaware on June 4, 1991 as "VCT Acquisitions II, Inc.".
We then acquired all of the assets of another Delaware corporation called Viral
Control Technology, Inc. On September 13, 1991 we changed our name to Viral
Control Technology, Inc. On November 8, 1991, we again changed our name and
became Veridien Corporation.
The "Viral Control Technology, Inc." from which we acquired our assets was
created on August 3, 1989 by a reverse acquisition of a public shell called
Valencia Enterprises, Inc. by a private company named Viral Control Technology,
Inc. The original Viral Control Technology, Inc. was organized in Delaware on
August 10, 1988 while Valencia Enterprises was organized in Utah on February 10,
1984. Valencia, which had changed its name to Viral Control Technology, Inc.
after the reorganization, was redomesticated in Delaware on December 14, 1990.
The original private company called Viral Control Technology, Inc. was organized
by Paul L. Simmons and his wife. Mr. Simmons continues to be a director and a
substantial stockholder.
BUSINESS
We were founded to develop, manufacture, distribute and sell disinfectants,
antiseptics, and sterilants which are inherently non-toxic, posing no hazard to
people who use them and which are environmentally friendly, decomposing into
harmless naturally occurring organic molecules. To this end, we have developed
and patented a hard surface disinfectant, VIRAHOL(R), which has been registered
with the Environmental Protection Agency (EPA), and an antiseptic hand gel
sanitizer, made in accordance with the applicable Food and Drug Administration
(FDA) monograph, containing the patented VIRAHOL(R) composition. In April, 1998,
we added a First Aid Antiseptic Spray containing the VIRAHOL(R) composition,
made in accordance with the applicable FDA Monograph, to our product line. Our
products are manufactured in a leased 38,000 square foot facility located in St.
Petersburg, Florida, under Good Manufacturing Practices (GMPs).
We operate both a microbiological and chemical laboratory operating under Good
Laboratory Practices (GLPs) and perform directly or contract out our research
and development activities (R&D). R&D activities currently underway include
development of a unique, fast acting, cold chemical sterilant for medical and
dental instruments, various medical and dental devices (some of which employ the
VIRAHOL(R) product), and on different applications for our existing technology.
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PRODUCTS
Our products are designed for use both in health care delivery environments and
for consumer and commercial applications where disinfectants and antiseptics are
sought. The patented VIRAHOL(R) composition is the basic infection control
ingredient used in the majority of our products. Our disinfectant products are
sold ready to use, not requiring dilution, and accomplish their germicidal
effects without the need for inherently toxic compounds, such as quaternary
ammonium compounds, phenols, iodophors, and chlorine, which may leave sublethal
toxic films that can exert genetic pressure on pathogens to alter themselves to
more resistant forms.
VIRAHOL(R) has been acknowledged by the United States Department of Agriculture
(USDA) as acceptable as an antimicrobial agent for surfaces requiring a water
rinse and requires no mask and/or gloves for application.
VIRAHOL(R) usage eliminates the need to use toxic chemicals, however dilute they
may be, as disinfectants and antiseptics in the home, hospital, dental office,
restaurant, and any other environment where people are exposed to pathogens.
Our products include the following under our own trademarks or as private label
products.
VIRAHOL(R) - Non-toxic, ready to use, hard surface
disinfectant/cleaner, tuberculocide, bactericide, virucide, and
fungicide packaged in sizes ranging from 1.2 oz. pump sprays to 55
gallon drums. No aerosols, which may harm the environment, are employed
in any of our packaging. VIRAHOL(R) can be sprayed or wiped onto
surfaces such as toilet seats, door handles, public telephones, counter
tops, etc. Because of its wide range of materials compatibility, it can
be used full strength on bedspreads and all types of fabrics. Because
VIRAHOL(R) is not water-based, it is a cleaner and disinfectant product
for all types of electronic equipment, including computer keyboards and
monitors.
VIRAGEL(R) - Waterless, antiseptic hand sanitizer packaged in sizes
ranging from a 1/2 oz. packet or purse container to 800 ml wall mounted
commercial sized dispensers with sealed replacement bags supplying over
1,000 applications. VIRAGEL(R) is to be used to supplement routine hand
washing for the family or for the person on the job when no water is
available, to kill a wide variety of pathogens fast. VIRAGEL(R)
contains a moisturizing formula and will not dry out the hands.
VIRAGEL(R) employs a premium grade thickener, insuring long product
stability and the right feel in the hands. Among the many pathogens
killed in 30 seconds or less with VIRAGEL(R) are bacteria known to
cause intestinal disorders, such as Salmonella and E.coli, and
secondary infections such as Staphylococcus, including strains of
genetically altered pathogens resistant to certain antibiotics.
VIRAGUARD(R) First Aid Antiseptic Spray - Packaged in a 3 oz. pump
spray size. VIRAGUARD(R) First Aid Antiseptic Spray contains the
patented VIRAHOL(R)
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composition. A special no-sting formula is featured with lidocaine.
VIRAHOL(R) products are also marketed in several different kit assemblies
designed for sales through various consumer market segments. Different kits are
available for catalog sales, direct TV and radio sales, multi-level marketing,
fund raising sales and the travel and hospitality industry.
NEED AND DEMAND FOR VIRAHOL(R) PRODUCTS
Until recently, consumers and the service industries thought chemical sanitation
and disinfection applied only to isolated and specific environments like
hospitals, pharmaceutical and medical research facilities, emergency and
operating rooms, or other areas involving highly virulent contagions.
Today, however, there is a greater understanding of how diseases are
transmitted. The Philadelphia Enquirer estimated that over 40 million Americans
get sick each year from hand borne bacteria. They also estimate that as many as
80,000 people die annually from diseases picked up from shopping carts, ATM
machines, telephones, toilet seats, and even the kitchen. Several TV news
magazine exposes have shown the most germ infected area in the home to be the
kitchen. In the workplace, the uncleaned fax machine, computer keyboard, copier,
printer, and telephone harbor pathogens that are passed to worker after worker.
Although some recent estimates put the cost to treat this problem at $4.5
billion per year, that amount does not include lost productivity, wages, or
increases in health insurance premiums. The consumers in North America and the
major industrial nations are becoming more aware of the problem of unchecked
pathogen transmission and recognize that prevention is the key. At the same time
as this increasing awareness is the drive by the EPA and the FDA to reduce or
eliminate toxic materials from disinfectants and antiseptics, no matter how
dilute they may be. There is great fear that little is known of the cumulative
effects of various toxins in the body and how sub-lethal doses of toxic films
genetically alter germs to become more and more resistant.
VIRAHOL(R) products are engineered to be used full strength without fear of
toxicity. Because they leave no surface film, they cannot alter germs to become
resistant to continued use. They are completely user and environmentally
friendly, requiring no gloves or masks for application; and they leave a fresh
scent, not a disinfectant odor. Because they are essentially 99% compatible with
all materials, they can be used wherever necessary without fear of stain,
discoloration or telltale odor--from clothes to wallpaper to carpet. They are
distinctly different from pine oil, ammonia, phenol or chlorine containing
products which have dominated the disinfectant market to-date.
THE COMPETITION AND VIRAHOL(R)
We have many competitors in our major product categories; (i) hard surface
disinfectants, (ii)
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waterless antiseptic hand sanitizers, and (iii) first aid antiseptic sprays. The
competitors, which include such companies as Johnson & Johnson, Proctor &
Gamble, Clorox, Quest Inc., Betco, and Gojo Industries, have recognized national
brands that include Clorox, Lysol, First Medic, Quest, Sporidicin, Metricide and
Purell. The competitors' products are based primarily on an aqueous solution.
Many of these products contain ingredients from one of the following four
families of ingredients.: ammonium, phenol, chlorine and or glutaraldehyde. One
of the common characteristics of these types of active ingredients is that they
are toxic skin penetrants. Our product line, containing the patented VIRAHOL(R)
composition, has as the basic underlying characteristic that the products are
non-toxic and non-skin penetrating. The products are non- aqueous based with the
primary active ingredient being isopropyl alcohol. Other active ingredients in
our composition are propylene glycol and citrus oils. Propylene glycol is a
wetting agent that retards evaporation and aids in the penetration of cell walls
as well as lowers flammability. Isopropyl alcohol and propylene glycol combine
to create a synergistic action which makes the formulation more effective than
alcohol without other ingredients.
To the best of our knowledge, no competitive products have the inherently
non-toxic feature of the patented VIRAHOL(R) composition, complete
biodegradability and efficacy against a broad range of pathogens. It has been
easier and cheaper for our competition to-date to employ toxic materials,
diluted with water, as disinfectants than to find how to create an inherently
non-toxic formulation. That is why we have a proliferation of products
containing chlorine, ammonia, and pine oil. Recently, the EPA has directed that
such toxic materials be eliminated in all disinfectants so our competition is
now seeking the type of breakthrough already provided by VIRAHOL(R).
Many of our competitors, recognizing an untapped market potential in changing
consumer awareness in disease transmission, are expanding the market through
various marketing campaigns. The top five competitors are each expending a
minimum of $25 million a year in advertising. This market expansion is deemed to
be of great importance to us as increased market growth of the market base (due
to increased awareness) will allow for an easier penetration by our products.
COMPANY SALES AND PRICING STRATEGIES
Our sales and management personnel serve the consumer markets along with key
specialty agents. In the commercial market segments, multi-line industry segment
distributors and manufacturers' representatives are guided by Company sales
personnel. Our management and sales personnel provide distributor support and
sales training.
Although the VIRAHOL(R) composition is inherently more expensive than the raw
materials of the competitive products, our pricing strategy is to remain as
close as possible to competitors' pricing to emphasize the clear price/value
comparison.
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AVAILABILITY OF RAW MATERIALS
The largest ingredients by weight for the VIRAHOL(R) composition are isopropyl
alcohol and propylene glycol. Both of these chemicals are readily available from
a wide variety of sources nationally and internationally, at competitive prices.
Although we prefer to use isopropyl alcohol as the monohydric alcohol and
propylene glycol as the polyhydric alcohol, our patent covers the full range of
both of these alcohols so that a wide variety of choices are available should a
shortage in one or more chemicals occur. Substantial numbers of companies
produce both the plastic and corrugated packaging used by the Company. Trade
secret ingredients are employed for fragrance used in the Company's products but
are available from several sources.
MARKETING STRATEGY AND KEY MARKET SEGMENT
We have elected to pursue domestic marketing activities as a niche marketer,
recognizing that the large competitors, many of whom are part of large,
national, and multinational companies, pose formidable threats in head-to-head
marketing strategies at either the consumer or commercial user level. By
developing carefully crafted niche strategies in both the consumer and
commercial markets, avoiding the most traditional levels of distribution, we
expect results that might only be expected through costly advertising and
promotional campaigns. Within the consumer market segment, the following niche
markets have been targeted: (i) multi-level marketing sales, (ii) direct
marketing through short form radio and TV infomercials, (iii) potential direct
marketing through Home Shopping Network ("HSN"), (iv) catalog sales, (v) fund
raising sales, and (vi) travel and hospitality sales. For the commercial
markets: (i) dental office sales, (ii) medical offices and clinics, (iii)
specialty hospital sales, (iv) schools and office buildings, (v) restaurant/fast
food sales, and (vi) emergency medical, police and fire.
Currently we are selling the VIRAHOL(R) product line under the Enviro Defense
System label to the 100,000 distributors of Nutrition for Life International,
the Houston-based, NASDAQ multi-level marketing company (MLM). We plan to expand
the sales of our products through several different private labels to at least
two additional MLMs during 1999.
Our product has been featured in the Healthy Home Catalog (affiliated with
Aetna/U.S. Health Care) for the sale of kits of VIRAHOL(R) to consumers through
more than 4 million catalogs. Additional marketing activities are underway for
the major introduction of fund-raising product sales through a variety of
schools and the travel and hospitality market, as well as sourcing direct
marketing with outside resources.
We are expecting growth in our consumer marketing, with distributors from coast
to coast. Additionally, we are expecting growth in our dental and medical
markets with increasing sales of the waterless antiseptic hand sanitizer.
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GOVERNMENTAL REGULATION
VIRAHOL(R) as a hard surface disinfectant falls under the jurisdiction of the
EPA. We have registered VIRAHOL(R) with the federal EPA as well as in all the
states and have been assigned an EPA Establishment number. Those products which
fall under the jurisdiction of the FDA are produced in accordance to the
appropriate FDA monograph and the appropriate labels are registered with the
FDA. We manufacture all of our products, both FDA and EPA regulated, in
compliance with Good Manufacturing Practices ("GMPs") as required.
CANADIAN LICENSING
We have entered into an agreement with Backcourt Industries, Inc. (BII),
Toronto, Canada, licensing BII to produce and market the VIRAHOL(R) line in
Canada. BII has completed product registrations with Health Canada and plans to
market VIRAHOL(R) under the VIRAGUARD(R) trade name primarily through retail
distribution channels in specialty and mass merchandisers in Canada. The product
has received strong preliminary acceptance in Canada and aggressive sales are
forecast.
RESEARCH AND DEVELOPMENT
Research and development for 1998 was $377,344. This was an increase of $131,940
or 53% compared with expenditures of $245,404 in 1997. The increase can be
attributed primarily to increased activity associated with development of
Sterihol(R). Part of the additional costs were incurred in patent application.
COMPLIANCE WITH ENVIRONMENTAL LAWS
We have had no need to spend monies on compliance with local, state and federal
laws.
NUMBER OF EMPLOYEES
We employ nineteen persons, all of whom are full-time employees.
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Department Number of Employees
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Management & Finance 3
Sales 3
R & D 3
Production & Administrative 10
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CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
This report contains some forward-looking statements. "Forward-looking
statements" describe our current expectations or forecasts of future events.
These statements do not relate strictly to historical or current facts. In
particular, these include statements relating to future actions,
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prospective products, future performance or results of current and anticipated
products, sales efforts, the outcome of contingencies and financial results. Any
or all of the forward-looking statements we make may turn out to be wrong. They
can be affected by inaccurate assumptions we might make or by known or unknown
risks and uncertainties. Many factors, such as product acceptance, competition
and marketing capabilities will be important in determining future results.
Consequently, no forward-looking statements can be guaranteed. Actual future
results may vary materially.
We undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise. You are
advised, however, to consult any future disclosures we make on related subjects
in our 10-QSB, 8-KSB, and 10-KSB reports to the SEC.
We provide the following cautionary discussion of risks, uncertainties and
possible inaccurate assumptions relevant to our business and our products. These
are factors that we think could cause our actual results to differ materially
from expected results. Other factors besides those listed here could adversely
affect us.
RISKS OF OUR BUSINESS
We are a small and relatively new company. To date, we have expended much of our
efforts and funds on development of products. We have only recently begun
concerted sales and marketing efforts. We are uncertain about the market
acceptance of our products.
As a small company, we are highly dependent upon the efforts and abilities of
our management. The loss of the services of any of them could have a substantial
adverse effect on us. We have not purchased "key man" insurance policies on any
of them.
To date the Company has not had significant sales. We expect the growth in our
sales to come primarily from others, such as independent manufacturer's
representatives and accessing existing distribution and fulfillment systems. We
cannot be certain about our ability to attract and retain representatives until
we have had greater experience with these groups and organizations. We are also
uncertain about their sales effectiveness for our products.
We have expended substantial capital on developing our products and beginning
sales and marketing. Until we are cashflow-positive from sales, we will need
additional financing to fund our growth. We are uncertain about our ability to
secure the financing. We are also uncertain about the costs of any financing
which we may obtain.
We have many competitors in our major product categories. We are uncertain about
our ability to compete effectively.
We must be able to manage our expected growth. This means we must increase our
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manufacturing capacity, expand and improve our timely management of orders, and
secure sufficient, reliable shipping. We must also have the systems to handle
ordering of raw materials and packaging supplies, as well as managing our
inventories.
Our current product line depends upon VIRAHOL(R), which is patented. If
VIRAHOL(R) were to become subject to a problem, such as loss of patent
protection, regulatory proceedings, or pressure from a directly competitive
products, the impact on our revenues could be significant.
RISKS OF OUR PRODUCTS
Our products, disinfectants and antiseptics, are subject to regulation by
various governmental agencies. Typically, they must be tested before they can be
introduced into the market. Our VIRAHOL(R) product is approved. We are uncertain
about approvals of future products.
Any failure of our products to fulfill their stated purpose could result in law
suits for product liability or breech of contract. We currently maintain product
liability insurance. A successful claim against us in excess of our insurance
coverage could have a material adverse effect on our results of operations,
financial condition or business. Even unsuccessful claims would result in
expenditure of funds in litigation, as well as diversion of management time and
resources.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis should be read in conjunction with the
financial statements and related notes contained elsewhere in this document. The
discussion contained herein relates to the financial statements, which have been
prepared in accordance with GAAP.
OVERVIEW
We are organized as a Delaware corporation to engage in the development,
manufacture, distribution and sale of disinfectants, antiseptics, and sterilants
which are inherently non-toxic, posing no hazard to people who use them, and
which are environmentally friendly, decomposing into harmless, naturally
occurring organic molecules. To this end, we have developed and patented a hard
surface disinfectant, VIRAHOL(R), which has been registered with the
Environmental Protection Agency (EPA), and an antiseptic hand gel sanitizer,
made in accordance with the applicable FDA Monograph, to our product line. We
have incurred losses since our incorporation. At December 31, 1998, we had an
accumulated deficit of $ 27,589,451. We have financed our ongoing research
program and business activities through a combination of sales, equity
financing, and debt.
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RESULT OF OPERATIONS
FISCAL 1998 COMPARED WITH FISCAL 1997
Consolidated revenues decreased by $49,254 or 5.6% to $ 820,065 compared with
$869,319 in 1997. The decrease in revenue was primarily due to discontinuance of
one line of product previously sold to the hospitality industry. Product was
returned by hospitality customers.
During 1998, a license agreement was granted to a Canadian company for an
initial license fee payment of $345,000 Canadian, of which $87,418 US has been
recorded as deferred revenue on the 1998 statements.
Interest income for 1998 decreased by 53% to $ 2,899 compared with $ 6,213 in
1997.
Rental income for 1998 increased by 1500% to $ 51,290 compared with $ 3,459 in
1997. A major portion of the company's leased 38,000 square foot manufacturing
facility is subleased to a contract filler which manufactures Veridien's
products which relocated to our facility during August 1998. This space is
leased for an annual base amount of approximating $ 100,000 per annum.
The cost of goods sold for 1998 increased by 2% to $ 601,037 compared with $
589,215 in 1997. The increase in the cost of goods ratio as a percentage of
sales was 73% in 1998 compared to 68% in 1997. The increase in the cost of sales
resulted primarily from the increased labor of certain overhead items during the
transition to contract fill operator fulfilling production within the plant
facility.
General, selling, and administrative expenses for 1998 were $1,399,251 compared
with $1,627,518 in 1997. Increases that affected general and administrative
costs were associated with professional fees for 1998 that increased by 36% to $
361,878 compared with $ 264,927 in 1997. During 1998, sales expense decreased by
70% to $ 212,177 compared with $ 697,496, primarily due to discontinued direct
operations in Nevada which had been set up to sell to the hospitality industry.
These direct operations were abandoned during 1997 in favor of servicing this
market through alternative means.
Research and development for 1998 increased by $131,940 or 53% compared with
expenditures of $ 245,404 in 1997. The increase can be attributed primarily to
increased activity associated with development of Sterihol(R). Part of the
additional costs were incurred in patent application.
Interest expense for 1998 increased by 27% to $525,872 compared with $413,882 in
1997. The increase in interest expense was due primarily to the issuance during
1997 of $1,566,273 in Convertible Debentures bearing interest at the rate of
eleven percent compounded semi-annually due at maturity which has been extended
to June 30, 2000.
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Operating losses decreased from $1,973,074 in 1997 to $1,883,554 in 1998. This
represented a 4.5% decrease, or $ 89,521 in the loss between the two years. This
1998 decrease was a result of constant sales accompanied by decreases in selling
expenses, including the closing of the Las Vegas, Nevada distribution center.
YEAR ENDED DECEMBER 31, 1998, VS. YEAR ENDED DECEMBER 31, 1997
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Year Ended Percentage of
December 31 net revenue
1997 1998 1997 1998
(In thousands)
<S> <C> <C> <C> <C>
Net Sales $ 869 $ 820 100% 100%
Cost of Goods Sold 589 601 68% 73%
Gross Profit 280 219 32% 27%
Operating Expenses
General & Administrative 1,627 1,399 187% 171%
Research & Development 245 377 28% 46%
(Loss) from Operations (1,592) (1,557) (183)% (190)%
Other Income (Expense) Net (380) (326) (44)% (40)%
Net (Loss) Before Taxes (1,972) (1,883) (227)% (229)%
Income Taxes 0 0 0% 0%
Net (Loss) (1,972) (1,883) (227)% (229)%
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LIQUIDITY AND WORKING CAPITAL
Historically, our principal source of financing for our research & development
and business activities has been through sales, equity offerings, and debt. As
of December 31, 1998, and December 31, 1997, we had working capital deficits of
approximately $2,219,479 and $3,373,547, respectively. Our independent certified
public accountants stated in their reports on the 1998 and 1997 consolidated
financial statements that due to losses from operations and a working capital
deficit, there is substantial doubt about the Company's ability to continue as a
going concern. We believe that we are addressing the going concern issue in
virtually every aspect of our operation. We have cut operating expenses and have
signed two major distribution agreements which we believe will provide improved
profit margins. Because of our significant losses incurred since inception, we
have become substantially dependent on loans from officers, directors, third
parties and from private placements of our securities to fund operations. These
financings and equity placements are included in the following description.
During 1998, we received proceeds from the sale of preferred and common stock in
the amount of $687,036.
During 1998, we issued 450,000 common shares in exchange for a note receivable
in the amount of $22,500.
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During 1997, we issued convertible debentures in the amount of $1,566,273 and
during 1998 in the amount of $585,333 to three investment companies in exchange
for cash received. The convertible debentures carry interest at a rate of 10% -
11% which has been accrued through December 31, 1998. The convertible debentures
maturing on December 31, 1997, were extended to June 30, 2000, and in
consideration for the extension, the conversion rate was reduced to the lower of
the existing conversion rate or $.15 to August 31, 1999, thereafter reverting to
the original conversion price which ranges from $.1851 to $.3868 per share.
During 1997 and 1998 we also issued 9,563,677 warrants for additional common
shares in connection with the convertible debentures. The warrants are
exercisable at 100%-105% of the conversion price of the common shares associated
with the convertible debentures. The warrants expire five years from the
original issue date of the convertible debentures.
During 1998, we received net borrowings of $86,979 from various sources at zero
interest rate. We have classified all such debt outstanding at December 31,
1998, as a currently liability.
During 1997, we received $250,000 through the issuance of 1,000,000 shares of
common stock. We received an additional $956 and issued an additional 95,646
shares through the exercise of warrants.
During 1998, we decreased inventory by 59% to $92,549 compared with $227,978 in
1997. The decrease resulted primarily from bartering a substantial amount of
obsolete inventory in exchange for purchase credits which the company
anticipates utilizing beginning in 1999.
We plan to utilize our current debt financing arrangements and pursue additional
equity and debt financing while managing cash flow in an effort to provide funds
to increase revenues to support operation, research and development activities.
We believe that our long-term success depends on revenues from operations from
product sales and ongoing royalties from technologies. If such sources of funds
are not adequate, we may seek to obtain financing to meet operating and research
expenses from other sources including, but not limited to, future equity or debt
financings.
As of March 1999, we have cash of approximately $124,000 and during March we
expect cash flow of $80,000 from operating activities. This level of liquidity
is sufficient to operate the Company for 60 days. The Company anticipates the
continuation of increasing sales, reduced operating expenses, and additional
private placement funding will contribute to continuous operations of the
Company.
YEAR 2000 COMPLIANCE
We are in the process of formulating a Year 2000 conversion plan. We are
utilizing both internal and external resources to identify, correct or
reprogram, and test the computer system for the Year 2000 compliance. We are
also continuing to monitor our computer systems and monitoring the adequacy of
the processes and progress of third-party computer vendors of systems that may
15
<PAGE> 16
be affected by the Year 2000 issue. We are dependent on third-party computer
systems consultants and applications, particularly with respect to such critical
tasks as accounting. While we believe our procedures are designed to be
successful, because of the complexity of the Year 2000 issue and the
interdependence or organizations using computer systems, our efforts, or those
of third parties with whom we interact, may not be satisfactorily completed in a
timely fashion. If we fail to satisfactorily address the Year 2000 issue, then
our business, results of operations and financial condition could be materially
adversely affected.
ITEM 3. DESCRIPTION OF PROPERTY
At present, we lease a 38,000 square foot facility that integrates offices,
warehouse space, manufacturing space and research and development space, located
at 11800 28th Street North, St. Petersburg, Florida 33716. We are currently on a
renewal option year of the lease which ends on August 31, 1999. The rent is
$19,237.53 a month. We have successive options to renew year-to-year at the same
rental. These premises should suffice for our administrative offices for the
foreseeable future.
In addition we own full commercial chemical and microbiological research
laboratories. We have a lease-to-buy on our phone system for $277.89 per month
and currently lease a postage meter and copier. We own all of the equipment and
furniture currently at the premises which consists of computers, computer
accessories, office furniture, file cabinets and miscellaneous equipment.
PATENTS AND TRADEMARKS
Our VIRAHOL(R) composition is covered under U.S. patents 5,145,663 and
5,441,723. These patents have been assigned by the inventor to us. In addition,
the VIRAHOL(R) composition is patented in Great Britain, Canada, Australia, New
Zealand, and Mexico and pending in Japan. We have additional patents in the U.S.
and the European Economic Community for various formulations and medical devices
which remain under development. (See "Property of the Company")
The Company also has numerous trade names registered in the U.S. The Company has
patents for VIRAHOL(R) (Disinfectant) DSI, composition and usage are covered
under US Patent No. 5,145,663 issued September 8, 1992 and US Patent No.
5,441,723 issued August 15, 1995. VIRAHOL(R) is also patented in Australia
(DSI), United Kingdom (DSI), Great Britain (DSII), Canada (DSI), New Zealand
(DSII), Mexico (DSII); Patents pending in Japan DSI (S.N. P2- 503111), Australia
DSII (S.N. 73298/94), Canada DSII (S.N. 2166810). The company also holds patents
for STERIHOL(R) (Cold Chemical) (CCSII) US Patent No. 5,405,602 issued April 11,
1995 and METHOD (Sterilant) (CCSS) US Patent No. 5,637,307 issued June 10, 1997.
The Company has a U.S. patent pending for a Cold Chemical Sterilant-UREA,
S.N.09/186,432. STERIHOL(R) is also patented in Australia (CCSII); Patent
pending EPO (CCSII). The Company has US Patents pending for a Method and
Accessory Adaptor Apparatus of Disinfecting Medical
16
<PAGE> 17
and Dental Instruments, S.N. 08/814,613, a Diagnostic Syringe Actuator Device,
S.N. 08/882,570, a 911 Medical Diagnostic Console, S.N. 60,020,625, and an
Umbilical Surgical Scissors, S.N. 08/882,180. The Company has Trademarks for the
following brands: VIRAHOL(R) (USA) registered September 24, 1991 Trademark
number 1,657,969; VIRAGEL(R) (USA) registered July 20, 1993, Trademark number
1,783,204; VIRAHOL(R) (Mexico) registered September 27, 1994, Trademark number
474,986; VIRASONIC(R) (USA) Registered November 15, 1994, Trademark number
1,863,033; VIRASCRUB(R) (USA) registered January 31, 1995, Trademark number
1,877,118; STERIHOL(R) (USA) registered February 28, 1995, Trademark number
1,881,134; VERIDIEN registered September 5, 1995, Trademark number 1,917,134;
VIRAWASH (R)(USA) registered March 12, 1996, Trademark number 1,962,158;
STERIHOL(R) (USA) registered June 16, 1998, Trademark number 2,166,502;
VIRASCRUB(R) (USA) registered June 16, 1998, trademark number 2,166,503;
VIRASONIC(R) (USA) registered June 16, 1998, Trademark number 2,166,504; VIRA-CD
7(R) registered January 6, 1998, Trademark number 2,127,866; VIRA-RD 12(R)
registered March 24, 1998, Trademark number 2,146,770; VIRA- GC18(R) registered
May 12, 1998, Trademark number 2,157,635; VIRALUBE(R) (USA) registered July 7,
1998, Trademark number 2,171,823; and VIRAGUARD(R) (USA) registered September 1,
1998, Trademark number 2,186,559.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of December 31, 1998, information regarding
the beneficial ownership of shares of Common Stock by each person known by the
Company to own five percent or more of the outstanding shares of Common Stock,
by each of the Officers, by each of the Directors, and by the Officers and
Directors as a group. At the close of business on December 31, 1998 there were
78,152,833 shares issued and outstanding of record.
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE
COMMON AS OF
NAME &ADDRESS OF BENEFICIAL OWNERS STOCK 12/31/98(1)
- ---------------------------------- --------- -----------
<S> <C> <C>
Mark E. Schlussel 345,750(2) 0.44%
100 Renaissance Center, 36th Flr.
Detroit, MI 48243-1157
</TABLE>
- --------
(1) Based upon 78,152,833 shares issued and outstanding as of December
31, 1998.
(2) Does not include Options to purchase 200,000 shares of Common Stock
at an exercise price of $.25 (see "Certain Relationships and Related
Transactions"). Also does not include Options to purchase 200,000 shares of
Common Stock from Dunvegan Mortgage Corporation at an exercise price of $.10
17
<PAGE> 18
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE
COMMON AS OF
NAME & ADDRESS OF BENEFICIAL OWNERS STOCK 12/31/98
- ----------------------------------- --------- ----------
<S> <C> <C>
Sheldon C. Fenton 183,000(3) 0.23%
160 Eglinton Avenue East, Suite 500
Toronto, Ontario, Canada M4P 3B5
Rene A. Gareau 0 --
4273 Boca Point Drive
Sarasota, FL 34238
Dunvegan Mortgage Corporation 20,610,551(4) 26.37%
222 Delaware Ave., PO Box 2306
Wilmington, DE 19899
Paul L. Simmons 3,087,000 3.95%
8825 Laurel Drive
Pinellas Park, FL 33782
Russell Van Zandt 15,000 0.02%
1741 Brightwaters Blvd.
St. Petersburg, FL 33704
Andrew T. Libby, Jr. 152,857 0.20%
806 South MacDill Avenue
Tampa, FL 33609
Martin E. Kovnats 10,000 0.01%
Aird & Berlis
BCE Place, PO Box 754
181 Bay Street, Suite 1800
</TABLE>
- --------
(3) Does not include $471,215 of convertible debentures owned by
Dunvegan Mortgage Corporation or 2,236,264 convertible debenture warrants owned
by Dunvegan Mortgage Corporation, of which Mr. Fenton is an officer and
director. Also does not include 244,621 shares owned by Delevan Energy Services,
Inc. of which Mr. Fenton is an officer and director. Also does not include
25,174,039 Series I ($.499) and Series II ($.001) Warrants previously owned by
Dunvegan Mortgage Corporation but assigned to 1192615 Ontario Limited which is
owned by Mr. Fenton's brother and in which he disclaims any beneficial interest.
(4) Does not include $471,215 of convertible debentures or 2,236,264
convertible debenture warrants or 154,163 shares of Series B Preferred Stock or
90,515 Preferred Stock Warrants.
18
<PAGE> 19
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE
COMMON AS OF
NAME &ADDRESS OF BENEFICIAL OWNERS STOCK 12/31/98
- ---------------------------------- ----- --------
<S> <C> <C>
Alfred A. Ritter 0 ---
Rua Baronesa DeBeck
Malveira Da Serra
2750 Cascais Portugal
All Directors and Officers 3,793,607 4.85%
as a Group (8 persons)
</TABLE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
DIRECTORS AND EXECUTIVE OFFICERS. The position(s) held by each of our executive
officers and Directors as of December 31, 1998 is shown in the following table.
Biographical information for each is set forth following the table. Our current
Directors were elected at the Annual Meeting held on November 6, 1998. Each
Director serves for a one year term and until a successor is elected and has
qualified. Currently, our Directors are not compensated for their services,
although their expenses in attending meetings are reimbursed.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Mark E. Schlussel 58 Chairman of the Board of Directors
Rene A. Gareau 57 Vice Chairman of the Board of
Directors
Paul L. Simmons 70 Founder & Director
Sheldon C. Fenton 47 President & CEO/Director
Martin E. Kovnats 47 Director
Alfred A. Ritter 55 Director
Russell Van Zandt 58 Director
Andrew T. Libby, Jr. 50 Executive Vice President, COO &
CFO, Secretary/Director
</TABLE>
MARK E. SCHLUSSEL was first named to the Board of Directors on April 3, 1995.
Since January 1995 he has served Of Counsel to the law firm of Pepper Hamilton &
Scheetz in Detroit, Michigan. Previously, he was a partner at the law firm of
Miller Canfield in Detroit, Michigan.
19
<PAGE> 20
Mr. Schlussel was appointed Chairman of Med-I-Bank, Inc. in 1996 and CEO in
1998. He was a board member of the Great Lakes Health Plan from 1996 to 1998.
Currently, he is Trustee of Immerman and Embargement Foundations, and Chairman
of the Jewish Fund. Mr. Schlussel was graduated with a Bachelor of Arts from
Wayne State University in 1962 and a Juris Doctor from the University of
Michigan Law School in 1965. He was admitted to practice before the U.S. Supreme
Court in 1982.
RENE A. GAREAU was first named to the Board of Directors on March 13, 1996.
Since 1989, Mr. Gareau has been Chairman of the Board of Sarasota Quay, a
real-estate management company located in Sarasota Florida, specializing in
property and asset management for commercial properties. From 1982 to 1989, Mr.
Gareau was the Chairman of a private Canadian real estate development company
involved in the development and syndication of residential condominium and
commercial projects in a number of Canadian provinces. From 1981 to 1982 he was
President of Bank of America (Canada) with responsibilities for overseeing all
retail and mortgage banking operations in Canada. From 1974 to 1981 he was
Senior Vice President of Citicorp-Citibank in their International Division. He
had responsibilities in corporate and consumer banking with assignments in Asia,
Europe, South America and the U.S.A.
PAUL L. SIMMONS, has been a member of the Board of Directors since our
incorporation in 1991. He is a recognized authority by both the industry and the
FDA in plant manufacturing validation and certification, as well as
manufacturing plant and process design for the genetic, pharmaceutical, bulk
pharmaceutical chemical, device and diagnostic industries. Mr. Simmons (with his
wife, Diane) is the founder of our Company, commencing with one of our
predecessors, ROST, Inc. founded in 1980.
Mr. Simmons served in a consulting capacity for manufacturing plant and process
design and regulatory compliance to more than 45 major biotech, pharmaceutical
and device firms, in 72 plant locations in the U.S., U.K., Europe and the Far
East. Mr. Simmons has formulated and designed many of the
qualification/validation programs and testing methods now in use in the
industry. He is a noted author, having written many technical papers for
national trade journals, as well as the writing and publication of a long list
of technical and procedural manuals. As a lecturer, Mr. Simmons has addressed
more than 55 trade and professional associations in 26 states and several
foreign countries, including the Parenteral Drug Association, Pharmaceutical
Manufacturer's Association, Association for Professionals In Infection Control,
Quality Control Managers Association, Philadelphia Academy of Pharmaceutical
Sciences, Biotech 84, Scale-up 84, Interphex and FDA Small Business Seminars.
Books published by Mr. Simmons include: Master Plan for Infection Control,
Hospital Engineering, Dry Heat Sterilization (1978 Technical Paper, Validation
of Steam Sterilizers (1079) Technical Paper, Pharmaceutical Lubrication Manual
(1980), Engineering Design and Construction Standards (1980) (Electrical,
Mechanical & Environmental), The Applications of the GMPs to the Genetic
Engineering and the Biotechnology Industry, The Impact of International GMPs on
the Drug, Device and Diagnostic Industries, The Impact of Good Manufacturing
20
<PAGE> 21
Practice Regulations on the Manufacture of Bulk Pharmaceutical Chemicals, The
Impact of Good Manufacturing Practice Regulations on the Design and Manufacture
of Production Equipment (1987), The Design, Construction, Commissioning and
Compliance of a New Facility in Accordance with GMPs (1987).
On October 6, 1998, Mr. Simmons filed a Petition for Reorganization under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the Middle District of Florida, docketed to Number 98-17181-8P1.
SHELDON C. FENTON is President and CEO. Mr. Fenton was first named to the Board
of Directors on June 3, 1998. Since 1981 Mr. Fenton has been President and CEO
of Tanlon Corporate Holdings Ltd. (and predecessor corporations), located in
Toronto, Canada. Tanlon is privately owned, fully integrated management services
company. They are involved with a number of private and public companies,
providing them with expertise and assistance, notably in the areas of
capitalization and management. The group also has knowledge and experience in
the areas of strategic acquisitions, real estate development and syndication,
financing for private & public ventures, as well as asset and property
management. They are regarded as specialists in the areas of structuring and
restructuring of investments and negotiation with lenders and other corporate
stakeholders.
Mr. Fenton is also an officer and director of Dunvegan Mortgage Corporation, a
company which has been a primary lender to the Company, as described under
"Principal Shareholders".
From 1979-1981 Mr. Fenton was employed by the Canadian Imperial Bank of Commerce
alternatively as Solicitor and Manager. In 1977-1978 he practiced corporate and
real estate law with the firm of Day Wilson & Campbell in Toronto, Canada and in
1976-1979 worked as a financial consultant for FF. Management in Toronto Canada.
Mr. Fenton was graduated with honors with a Bachelor of Science Degree from the
University of Toronto in 1974 and was graduated from the Faculty of Law with an
L.L.B. degree from the University of Western Ontario, Canada.
MARTIN E. KOVNATS was first named to the Board of Directors on October 28, 1997.
Mr. Kovnats has been a partner with the Securities Law Group of the Law firm of
Aird & Berlis in Toronto, Canada since 1995. He practices primarily in the area
of mergers and acquisitions and debt and equity financings. Previously, he
practiced law for sixteen years with the law firm of Goodman and Carr, also
located in Toronto. Mr. Kovnats is a past president of the Securities Advisory
Committee, appointed by the Ontario Securities Commission. Mr. Kovnats was
graduated with a Bachelor of Science from the University of Manitoba in 1972 and
an L.L.B. from the University of Manitoba in 1975. Mr. Kovnats has lectured on
securities, commercial law and border issues and has published articles on
equity investments, acquisitions and securities law. Since 1979, he has been a
member of the Canadian Bar Association and the Law Society of Upper Canada.
21
<PAGE> 22
ANDREW T. LIBBY, JR. was named Executive Vice President, C.O.O., C.F.O., and
Corporate Secretary on July 31, 1998. From November 1994 until joining the
Company, he was the owner of Financial Management Consultants, Inc., a
management and consulting firm specializing in helping manufacturing and
distribution companies. From June 1994 to November 1994 he served as C.F.O. and
Corporate Secretary of Veridien Corporation. Previously, he held a series of
positions with different companies and governmental agencies in the area of
finance and accounting. From 1987 to 1994 he served as Director of Finance and
Accounting at University Medical Service Association, Inc. and Medical Services
Support Corporation. Mr. Libby was graduated from the University of Tampa with
an M.B.A. in 1981 and was graduated from the University of South Florida with a
Bachelor of Arts in Management in 1971 and a Bachelor of Arts in Accounting in
1976. He holds licenses as a C.P.A., a Certified Internal Auditor (C.I.A.) And a
Licensed Mortgage Broker.
ALFRED A. RITTER was first named to the Board of Directors on March 26, 1993.
Mr. Ritter has held positions with Credit Suisse in Zurich, Switzerland; the
Bank of London and South America, in London, England; and Lloyd's Bank Ltd., in
New York City. He currently operates a securities private placement and
investment management company in Lisbon, Portugal, and Vaduz, Liechtenstein.
RUSSELL D. VAN ZANDT was first named to the Board of Directors on October 28,
1997. Mr. Van Zandt was graduated in June, 1972, with a B.A. in Mathematics from
St. Michael's College in Vermont; and was graduated in June, 1973 with a M.B.A.
from Florida Atlantic University in Florida. He also completed course work in
1975 for a Doctorate in Business Administration from George Washington
University in Washington, D.C.
Since July, 1992, Mr. Van Zandt has been a corporate Vice President at Datascope
Corp., a NASDAQ listed company engaged in the health care and medical device
products industry. On behalf of Datascope Corp., he has alternatively headed two
divisions as President. From July, 1992 through September, 1996, he was
President of the Intervascular, Inc. Division. This division is responsible for
manufacturing and marketing vascular grafts and patches on a worldwide basis.
Since 1996, he has been President of the Cardiac Assist Division which
manufactures and markets intro-aortic balloon pumps and catheters. From
November, 1969 until August, 1992, Mr. Van Zandt worked with C.R. Bard, Inc. a
health care and medical device company listed on the New York Stock Exchange. He
started as personnel director at a division level and rose through the company's
ranks to reach, in 1992, the position of President of Bard Vascular Systems
Division and serve at the corporate headquarters of C.R. Bard, Inc.
ITEM 6. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Currently, our Directors are not compensated for their services, although their
expenses in
22
<PAGE> 23
attending meetings are reimbursed.
COMPENSATION OF MANAGEMENT
We have entered into a series of employment agreements with Paul Simmons. He has
a written employment agreement under which he is paid $36,000.00 annually
personally for management services. Moreover ICT, Inc. (a company owned by Paul
Simmons) receives a 3%-5% sales commission for the service of procuring and
managing accounts initiated by ICT, Inc. We have also entered into an employment
agreement with Andrew T. Libby, Jr., our Executive Vice President, C.O.O.,
C.F.O., and Corporate Secretary under which he is to be paid $130,000 annually,
although he will receive only $90,000, with the balance accrued, until such time
as we have sufficient cash flow to make payment of the accruals and the full
salary.
The table set forth on the following page sets forth the compensation paid to
our Chief Executive Officer or such other officer who fulfilled the duties of
the Chief Executive Officer for the periods indicated:
<TABLE>
<CAPTION>
NAME & PRINCIPAL OTHER
- ---------------- -----
POSITION YEAR SALARY BONUS COMPENSATION
- -------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
John Priest, CEO 1/96-6/96 -0- -0- -0-
Rene Gareau, CEO 11/27/96 -0- -0- -0-
10/21/96
Robert M. Morrow, COO(1) 1996 $162,500 -0- -0-
Vic Conant, CEO 1997 -0- -0- -0-
Robert M. Morrow, COO 1/97-10/97 $135,000 -0- -0-
Michael B. Whiteman, COO(2) 11/97-12/97 $ 14,000 -0- -0-
Michael B. Whiteman, COO 1/98-7/98 $ 42,000 -0- -0-
Sheldon C. Fenton, 7/98 -0- -0- -0-
President & CEO Present
</TABLE>
None of the named persons has received stock options or other such non-cash
compensation.
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with Paul Simmons and Andrew T.
Libby, Jr. They will receive base salaries of $36,000 and $130,000 a year
respectively. However, Mr. Libby will be paid at the rate of only $90,000 per
year with $40,000 accrued to be paid when we have sufficient cash flow.
- --------
(1) Robert Morrow had an annual salary of $165,000.00
(2) Michael B. Whiteman had an annual salary of $84,000.00
23
<PAGE> 24
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have entered into numerous financing transactions with Dunvegan Mortgage
Corporation, a corporation of which Sheldon C. Fenton, the Company's
President/CEO and a director, is an officer and a director. These transactions
are detailed elsewhere in this Form 10-SB. (See "Description of Securities")
On September 14, 1998 Dunvegan Mortgage Corporation and loan participants
converted $1,575,166 principal of their loan under the Loan and Security
Agreement of October 19, 1995 to 33,530,973 shares of Common Stock and 154,163
shares of Series B Cumulative Preferred Stock. Dunvegan retained 20,610,551
shares of the Common Stock and distributed the balance to its loan syndicate
participants.
On June 30, 1998, the Company purchased certain inventory for $120,000 (in
promissory notes) from International Center for Technology Transfer, Inc., a
corporation owned by Paul L. Simmons, a director.
In June, 1998, Mark E. Schlussel, Chairman of the Board, converted $24,500 owed
to him by the Company for consulting fees, to 122,500 shares of the Company's
Common Stock, a conversion price of $.20 per share.
Options to purchase 200,000 shares of the Company's Common Stock at a price of
$.50 per share held by Mark Schlussel, Chairman of the Board, would have expired
on October 17, 1998 but were extended to October 17, 1999 with an adjustment of
the exercise price to $.25 per share.
ITEM 8. DESCRIPTION OF SECURITIES
CAPITAL STRUCTURE OF THE COMPANY
Our authorized capital structure consists of Convertible Debentures, shares of
Preferred Stock and Common Stock, both having a par value of $.001, and
Preferred Stock Purchase Warrants and Common Stock Purchase Warrants and
Options, all of which are described below following the table. The authorized
classes, and the amount or number of each which are authorized and outstanding
as of December 31, 1998, are as follows:
<TABLE>
<CAPTION>
AUTHORIZED OUTSTANDING
<S> <C> <C>
Convertible Debentures $ -- (1) $ 2,494,198 (1)
$10 Conv. Red. Pref. Stock 100,000 shrs 6,000 shrs
Series B Pref. Stock 244,678 shrs 154,163 shrs
</TABLE>
- --------
(1) The authorized value of the Company's Convertible Debentures
varies. The Board of Directors specifically authorizes each issuance. The
$2,494,198 represents the principal sum issued and outstanding on December 31,
1998.
24
<PAGE> 25
<TABLE>
<CAPTION>
AUTHORIZED OUTSTANDING
<S> <C> <C>
Common Stock 200,000,000 shrs 78,152,833 (2) shrs
Pref. Stock Purchase Warrants 21,250,000 4,125,000 (3)
Common Share Warrants
Conv. Deb. Wts. (LSA) 2,236,264 2,236,264
Conv. Deb Wts. (PTC) 465,357 465,357
Conv. Deb. Wts. (Wardeb) 2,705,465 2,705,465
Consultant Series 4,825,000 (4) 200,000 (4)
Series $0.01 6,177,478 (5) 110,000
Series B Dunvegan 245,344 90,515
Series C-1 Wardeb 115,184 115,184
Series C-11 Wardeb 41,893 41,893
Series D Dunvegan 890 890
Loan and Security Agreement Warrants
Series I ($.499) -- -- (6)
Series II ($.001) -- --
Options 1,100,000 200,000 (7)
</TABLE>
During 1998, the Company completed a previously authorized and approved capital
restructuring plan.
CONVERTIBLE DEBENTURES
To secure funds, the Company has issued Convertible Debentures. The Debentures
bear interest at the rate of eleven percent (11%) compounded semi-annually due
at maturity, originally six months after issuance but now extended to June 30,
2000. Each of the Debentures is convertible at $0.15 until August 31, 1999,
after which it is convertible at a price per share of Common Stock
- --------
(2) This represents the actual total shares issued and outstanding of
record as of December 31, 1998.
(3) This represents the vested Warrants issued and outstanding as of
December 31, 1998, having a $.20 to $.25 exercise price. Up to an additional
4,375,000 Warrants are issuable if and when they vest having exercise prices
from $.20 to $.25. See "Preferred Stock Warrants".
(4) Warrants exercisable to purchase 100,000 shares expire January 31,
1999 and Warrants exercisable to purchase 100,000 shares expire January 31,
2000.
(5) The total number of Warrants authorized was dependent upon a
formula; this represents the actual number originally issued. Warrants for
6,067,478 shares have been exercised.
(6) The number of Warrants and the prices at which they are exercisable
are to be determined by a formula, applied at the date(s) of exercise. See "Loan
and Security Agreement Warrants" for a description.
(7) Options held by the Chairman of the Board to purchase 200,000
shares at a price of $0.25 per share are scheduled to expire October 17, 1999.
25
<PAGE> 26
based upon the closing bid price for the five trading days prior to the issuance
of the Debenture (the "Base Conversion Price"). As an inducement to the lenders,
the Company issued to each Debenture holder, as of the date of the issuance of
the Debenture, Common Stock Purchase Warrants entitling the holder to purchase
that number of shares of Common Stock equal to the number of shares obtainable
upon conversion of the Debenture at an exercise price equal to 105% of the
Debenture Base Conversion Price. For example, the Debentures issued on May 29,
1997 are convertible to 176,622 shares of Common Stock at a Base Conversion
Price of $.3114, while the holder received warrants to purchase an equal number
of shares, 176,622, at an exercise price of $.327 per share.
The Company's Convertible Debentures have been issued at various times, in
various amounts with various conversion prices:
<TABLE>
<CAPTION>
Date of Issuance Principal Amount Base Conversion Price
---------------- ---------------- ---------------------
<S> <C> <C>
November 27, 1996 $115,000.00 .3534
December 12, 1996 35,000.00 .3629
December 13, 1996 76,270.00 .3699
December 27, 1996 116,322.00 .3562
January 15, 1997 125,000.00 .3195
January 30, 1997 30,364.00 .3419
February 4, 1997 73,488.00 .3251
February 13, 1997 82,000.00 .3171
February 26, 1997 104,414.00 .3002
March 3, 1997 49,125.00 .2996
March 7, 1997 180,000.00 .3868
May 7, 1997 40,000.00 .2871
May 20, 1997 20,000.00 .2824
May 29, 1997 25,000.00 .3114
May 29, 1997 30,000.00 .3114
June 2, 1997 12,000.00 .3040
June 5, 1997 88,000.00 .2949
June 16, 1997 75,000.00 .2729
June 30, 1997 232,881.84 .2553
July 28, 1997 20,000.00 .2144
July 29, 1997 20,000.00 .1996
August 7, 1997 30,000.00 .2324
August 15, 1997 30,000.00 .1851
August 27, 1997 58,000.00 .2500
August 29, 1997 83,000.00 .2500
September 15, 1997 39,000.00 .2500
September 16, 1997 21,000.00 .2500
September 24, 1997 50,000.00 .2500
September 29, 1997 35,000.00 .2500
</TABLE>
26
<PAGE> 27
<TABLE>
<CAPTION>
Date of Issuance Principal Amount Base Conversion Price
---------------- ---------------- ---------------------
<S> <C> <C>
October 6, 1997 13,000.00 .2500
March 16, 1998 50,000.00 .1800
April 8, 1998 50,000.00 .1800
April 29, 1998 75,000.00 .1800
May 27, 1998 40,000.00 .1800
June 4, 1998 23,333.00 .1800
June 10, 1998 50,000.00 .1350
June 26, 1998 60,000.00 .1200
July 14, 1998 30,000.00 .1050
July 28, 1998 80,000.00 .1600
August 12, 1998 35,000.00 .1200
August 21, 1998 25,000.00 .1150
August 26, 1998 67,000.00 .1240
-------------
$2,494,197.84
=============
</TABLE>
PREFERRED STOCK
The 25,000,000 shares of Preferred Stock having a par value of $.001 authorized
are undesignated as to preferences, privileges and restrictions. As the shares
are issued, the Board of Directors must establish a "series" of the shares to be
issued and designate the preferences, privileges and restrictions applicable to
that series.
To date, the Board of Directors has designated two series, one called the $10
Convertible Redeemable Preferred Stock (considered to be the Series A Preferred
Stock), which consists of one hundred thousand shares, and one called the Class
B Preferred Stock, which consists of two hundred forty four thousand six hundred
seventy eight (244,678)shares.
The $10 Convertible Redeemable Preferred Stock series has been designated as
having a $10 per share par value, although the Certificate of Incorporation
originally set the par value at $.001 per share. Each share has a liquidating
preference of $10 per share plus all accrued and unpaid dividends. This series
is entitled to an annual dividend of 10% or $1.00 per share, to be paid prior to
the payment of any dividends on the Common stock. The dividends for the first
year, under the terms of the Offering Memorandum were to have been withheld from
the proceeds of the offering and paid into escrow for subsequent distribution.
The Company has not done that and legally may not do so because establishment of
the par value at the offering price of $10 prohibits any return of capital while
due to its lack of earnings and earned surplus the Company may not declare a
dividend. The series is non-voting. Each share of the series is convertible
prior to redemption into twenty shares of the Company's Common Stock at the
option of the holder. Each share of the series is redeemable by the Company at
any time at its option, at a redemption price of $10 plus all accrued and unpaid
dividends. No dividends may be declared on the Company's Common Stock until all
accrued and unpaid dividends on this series of the Preferred Stock have been
paid. Holders of the series have one-time demand registration rights and
continuing piggy-back
27
<PAGE> 28
registration rights.
The Series B Cumulative Preferred Stock was created on December 31, 1997 as a
concession to Dunvegan Mortgage Corporation to permit conversion of indebtedness
under the Loan and Security Agreement of October 19, 1995 by exercise of the
related Loan and Security Agreement Warrants without sacrificing the intent of
those warrants. See "Loan and Security Agreement Warrants" The Series B
Cumulative Preferred Stock has a par value of $.001 per share and an initial
stated capital of $10 per share, which is subject to adjustment. This Series is
senior to the Common Stock and is senior to all other classes and series except
that it is junior to the $10 Convertible Redeemable Preferred Stock with respect
to the payment of dividends. Each share has that number of votes equal to the
number of shares of Common Stock into which it is convertible on the record
date. Subject to adjustment in the event of certain future Common Stock or
convertible security issuances, each share is convertible into 20.04010695
shares of Common Stock. These Shares are entitled to receive an annual dividend
equal to the greater of:
- 10% of the stated value, as adjusted from time to time; and
- the actual dividend per share of Common Stock as declared by the
Company's Board of Directors times the number of shares of Common Stock
into which each share of Series B Convertible Preferred Stock is
convertible on the dividend record date.
The dividend is cumulative, whether or not earned and, to the extent not paid on
a quarterly dividend payment date (commencing January 1, 1999), is added to the
stated value.
COMMON STOCK
The authorized common equity of the Company consists of 100,000,000 shares of
Common Stock, with a $.001 par value, of which 78,152,833 shares of Common Stock
are issued and outstanding. Our shareholders approved, at our Annual Meeting of
November 6, 1998, an amendment increasing the authorized number of shares of
Common Stock to 200,000,000. We have not yet filed a Certificate of Amendment to
our Certificate of Incorporation to change the number of authorized shares of
Common Stock to 200,000,000 but are in the process of doing so. Shareholders (I)
have general ratable rights to dividends from funds legally available therefore,
when, as and if declared by the Board of Directors; (ii) are entitled to share
ratably in all assets of the Company available for distribution to shareholders
upon liquidation, dissolution or winding up of the affairs of the Company; (iii)
do not have preemptive, subscription or conversion rights, nor are there any
redemption or sinking fund provisions applicable thereto; and (iv) are entitled
to one vote per share on all matters on which shareholders may vote at all
shareholder meetings. All shares of Common Stock now outstanding are fully paid
and nonassessable and all shares of Common Stock to be sold in this offering
will be fully paid and nonassessable when issued.
The Common Stock does not have cumulative voting rights, which means that the
holders of more than fifty percent of the Common Stock voting for election of
directors can elect one hundred percent of the directors of the Company if they
choose to do so. The Company, which has had no earnings, has not paid any
dividends on its Common Stock and it is not anticipated that
28
<PAGE> 29
any dividends will be paid in the foreseeable future. Dividends upon Preferred
shares must have been paid in full for all past dividend periods before
distribution can be made to the holders of Common Stock. In the event of a
voluntary or involuntary liquidation, all assets and funds of the Company
remaining after payments to the holders of Preferred Stock will be divided and
distributed among the holders of Common Stock according to their respective
shares.
COMMON STOCK PURCHASE WARRANTS
There are various types or series of warrants as described as follows:
Consultant Series
The Consultant Series Warrants were issued pursuant to certain consulting and
services agreements. Each such Warrant currently outstanding entitles the holder
to purchase one share of Common Stock at exercise prices ranging from $.20 to
$.25 per share. Future such Warrants, if and when issued upon vesting, will have
exercise prices ranging from $.20 to $.25 per share.
$.01 Warrants
The $.01 Warrants were issued as part of Units sold in a private placement in
1995. The number of $.01 Warrants in each Unit was set to provide the investor,
who purchased a Unit for a set price of $.50, with an averaged per share price
equal to the current market price on the date he invested. Each such Warrant
entitles the holder to purchase one share of Common Stock at an exercise price
of $.01 per share.
Convertible Debenture Warrants
The Convertible Debenture Warrants were issued to the lenders who purchased the
Company's Convertible Debentures. The Warrants, issued as of the date of
issuance of the related Convertible Debenture, entitle the holder to purchase
the same number of shares as the related Convertible Debenture would be
convertible into, at an exercise price of 105% of the related Convertible
Debenture's conversion price. The Warrants expire three (3) years after the date
of issuance.
RESTRUCTURING WARRANTS
The following described warrants are being issued as a result of the capital
restructuring plan. These warrants are referred to as "Preferred Stock"
Warrants. However, they are exercisable to purchase Common Stock, provided that
a sufficient number of shares of Common Stock remain authorized but unissued. If
the number of shares is inadequate, the Company may substitute shares of its 10%
Convertible Redeemable Preferred Stock (see description above) which are
convertible into twenty (20) shares of Common Stock. At the Annual Meeting of
Shareholders held on November 6, 1998, the shareholders approved an increase in
the authorized number of
29
<PAGE> 30
shares of Common Stock to 200,000,000. The Company is presently amending its
Certificate of Incorporation to increase its authorized Common Stock, which
would permit the Company to issue Common Stock upon exercise.
Series B
These Warrants are being issued to Dunvegan Mortgage Corporation or assigns
based on a calculation retroactive to December 31, 1997. They are intended to
provide Dunvegan with the ability to acquire sufficient shares of Common Stock
in addition to the Loan and Security Agreement Warrants described below to
maintain the option to acquire 51% of the Company's then issued and outstanding
Common Stock, on a fully diluted basis. The Warrants are exercisable at a price
of $10 per share of a new series of Preferred Stock, each share of which would
be convertible into twenty shares of Common Stock.
Series C-I
These Warrants are being issued retroactive to December 31, 1997 to Wardeb
Investment Corporation, in exchange for previously issued Common Stock Purchase
Warrants which are being canceled. The Warrants are exercisable at a price of
$10 per share of Preferred Stock, each share of which would be convertible into
29.783 shares of Common Stock.
Series C-II
These Warrants are being issued retroactive to December 31, 1997 to Wardeb
Investment Corporation, in exchange for previously issued Common Stock Purchase
Warrants which are being canceled. The Warrants are exercisable at a price of
$10 per share of Preferred Stock, each share of which would be convertible into
40.1176 shares of Common Stock.
Series D
These Warrants are being issued to Dunvegan Mortgage Corporation as a new
issuance for a new series of Preferred Stock, each share of which will have
25,000 votes per share. The intent of this issuance is to provide Dunvegan with
voting rights equivalent to the number of votes it has otherwise given up as a
result of waiving its rights to the delivery of certain common shares and
warrants.
LOAN AND SECURITY AGREEMENT WARRANTS
On or about October 19, 1995, Dunvegan Mortgage Corporation, a Delaware
corporation of which Sheldon Fenton, current CEO of Veridien, is also an officer
and a director, and loan participants agreed to loan us $2,500,000.00
represented by a Master Promissory Note collateralized by a Security Interest on
all of our assets and our subsidiaries. We have drawn down the entire amount. As
a part of the loan transaction, we agreed to issue Dunvegan Mortgage
Corporation, its assigns and its loan participants (collectively "Dunvegan") two
series of warrants, one series exercisable at $.001 per share and the other
series exercisable at $.499 per
30
<PAGE> 31
share. The warrants must be exercised in tandem and the number of warrants of
each series to be exercised is determined by a formula.
The formula requires that Dunvegan be issued that number of warrants, each
warrant to purchase one (1) share of Common Stock, such that after exercise of
all such warrants, Dunvegan could own 51% of the total number of shares then
issued and outstanding, on a fully diluted basis. For example, the adjusted
(corrected) number of shares issued and outstanding on a fully diluted basis, on
July 31, 1998, excluding Dunvegan, was 61,587,238. However, Dunvegan had waived
its rights with respect to the issuance of 5,745,000 shares. Accordingly, if
Dunvegan were to have exercised on that date it would have received warrants to
purchase that number of shares which would equal 51% of the total shares issued
and outstanding after exercise of those Warrants, excluding the waived shares.
This would have been 58,121,513 shares. (As of December 31, 1998, this would be
61,794,461 shares of which the common share equivalent of 36,620,422 shares had
been exercised.)
The price of the warrants to be issued is also determined by the formula. The
combination of $.499 and $.001 Warrants to be exercised is calculated by (I)
dividing the $2,500,000 principal amount of the loan by the number of shares
needed to be acquired to achieve up to the 51% position so as to determine a per
share price and then (ii) calculating the number of $.499 shares and $.001
shares required to approximate that per share price as an average.
On September 14, 1998 Dunvegan exercised warrants and converted $1,575,166
principal of its loan under the Loan and Security Agreement to 33,530,973 shares
of Common Stock and 154,163 shares of Series B Cumulative Preferred Stock.
Dunvegan itself retained all of the Series B Cumulative Preferred Stock and
20,610,551 shares of the Common Stock and distributed the balance of the Common
Stock to its loan syndicate participants. Following such exercise and
conversion, Dunvegan Mortgage Corporation assigned the balance of the loan
outstanding ($924,834.00) and the remaining Loan and Security Agreement Warrants
to 1192615 Ontario Limited, a company owned by Mr. Fenton's brother. Mr. Fenton
disclaims any beneficial interest in such loan balance or in the remaining Loan
and Security Agreement Warrants.
DIVIDEND POLICY.
We have never had net profits on operations and therefore are currently
proscribed under the Delaware General Corporation Law from declaring dividends.
We have not paid any cash dividends on our Common Stock or our Preferred Stock.
Moreover, our Board of Directors has no present intention of declaring any cash
dividends, as we expect to re-invest all profits in the business for additional
working capital for continuity and growth. The declaration and payment of
dividends in the future will be determined by our Board of Directors considering
the conditions then existing, including the Company's earnings, financial
condition, capital requirements, and other factors.
At present there is a series of 100,000 shares of Preferred Stock, created on
April 3, 1995, titled "10% Cumulative Convertible Redeemable Preferred Stock".
These shares are entitled to receive an annual dividend of $1.00 per share
before any dividend is paid to holders of the Common
31
<PAGE> 32
Stock. Any dividend not declared and paid is accumulated and must be paid before
any dividend or distribution is made on our Common Stock. As of December 31,
1998 the accumulated dividend is $30,995.
Also, at present there is a series of 244,678 shares of Preferred Stock created
on December 31, 1997, titled "Series B Convertible Preferred Stock". These
Shares are entitled to receive an annual dividend equal to the greater of :
- 10% of the stated value, as adjusted from time to time; and
- the actual dividend per share of Common Stock as declared by the
Company's Board of Directors times the number of shares of Common Stock
into which each share of Series B Convertible Preferred Stock is
convertible on the dividend record date. The dividend is cumulative,
whether or not earned and, to the extent not paid on a quarterly
dividend payment date (commencing January 1, 1999) is added to the
stated value.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
(a) Our Common Stock is traded on the NASDAQ Bulletin Board.
(b) Our Common Stock was listed on the NASDAQ Bulletin Board on
approximately December 20, 1993. The closing price on that date was
$0.87 Prior to that date our stock was traded on the Pink Sheets.
(c) The Company's Common Stock is approved for trading on the NASDAQ
Bulletin Board, trading under the stock symbol "VRDE". The chart below
breaks down the high bid and the low bid prices for each of the last 8
quarters (as reported by NASDAQ Trading & Market Services) which
quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not reflect actual transactions.
During 1997 and 1998, its high and low bid and asked prices were as
follows:
<TABLE>
<CAPTION>
Quarter Ended High Bid Low Bid
------------- -------- -------
<S> <C> <C>
December 31, 1998 $.10 $.04
September 30, 1998 .17 .07
June 30, 1998 .24 .06
March 31, 1998 .45 .21
December 31, 1997 .50 .20
September 30, 1997 .62 .14
June 30, 1997 .44 .23
March 31, 1997 .45 .21
</TABLE>
On March 4, 1999 the closing prices of the Company's Common Stock were $0.125
bid and $0.133 asked, as quoted on the NASDAQ Bulletin Board.
To date no dividends have been declared or paid on the Common Stock. (See part
I, Item 8, "Dividend Policy")
32
<PAGE> 33
Veridien Corporation was formed in June, 1991 under the laws of the State of
Delaware. We initially authorized the issuance of 50,000,000 shares of Common
Stock, and 25,000,000 shares of Preferred Stock, both having a par value of
$.001. On February 20, 1996 we filed a Certificate of Amendment to our
Certificate of Incorporation to change the number of authorized shares of Common
Stock to 100,000,000 shares at a par value of $.001. Our shareholders approved,
at our Annual Meeting of November 6, 1998, an amendment increasing the
authorized number of shares of Common Stock to 200,000,000.
There are approximately 1,862 holders of record of our Common Stock.
DIVIDEND. We have never had net profits on operations and therefore are
currently proscribed under the Delaware General Corporation Law from declaring
dividends. We have not paid any cash dividends on our Common Stock or our
Preferred Stock. Our Board of Directors has no present intention of declaring
any cash dividends, as we expect to re-invest all profits in the business for
additional working capital for continuity and growth. The declaration and
payment of dividends in the future will be determined by our Board of Directors
considering the conditions then existing, including the Company's earnings,
financial condition, capital requirements, and other factors.
At present there is a series of 100,000 shares of Preferred Stock, created on
April 3, 1995, titled "10% Cumulative Convertible Redeemable Preferred Stock".
These shares are entitled to receive an annual dividend of $1.00 per share
before any dividend is paid to holders of the Common Stock. Any dividend not
declared and paid is accumulated and must be paid before any dividend or
distribution is made on our Common Stock.
Also, at present there is a series of 244,678 shares of Preferred Stock created
on December 31, 1997, titled "Series B Convertible Preferred Stock". These
Shares are entitled to receive an annual dividend equal to the greater of :
- 10% of the stated value, as adjusted from time to time; and
- the actual dividend per share of Common Stock as declared by
the Company's Board of Directors times the number of shares of
Common Stock into which each share of Series B Convertible
Preferred Stock is convertible on the dividend record date.
The dividend is cumulative, whether or not earned and, to the extent not paid on
a quarterly dividend payment date (commencing January 1, 1999) is added to the
stated value.
ITEM 2. LEGAL PROCEEDINGS
Except for the two legal actions and FAA proposed penalty described below, we
are not a party to any pending legal proceedings. We are not aware of any legal
proceedings pending, threatened or contemplated, against any of our officers or
directors, respectively, in their capacities as such.
A lawsuit was filed against Veridien Corporation on November 4, 1997 by Michael
L. Childers as
33
<PAGE> 34
Trustee of the Money Purchase Plan and Michael L. Childers and Deana F. Childers
as Joint Tenants in the Circuit Court of the Sixth Judicial Circuit in and for
Pinellas County, Florida. The suit alleges that Veridien made misleading
statements including that the Food & Drug Administration (FDA) had approved a
new product developed by Veridien. Veridien is accused of publishing
"Misinformation and fail(ing) to disclose the material, negative information at
a time when it did not know whether the information was true or was false." The
Plaintiffs bought 5,900 shares of stock at $6.00 per share whose value has been
"dramatically" reduced to less then $.50 per share. Plaintiffs seek damages in
excess of $15,000 in a trial by jury. The Company is actively defending this law
suit.
Veridien Corporation is a defendant in an action brought by Creative
Technologies, Inc. ("CTI") of Greenville, South Carolina. In the action,
docketed to No. 98-CP-23-2521 in the Court of Common Pleas of Greenville County,
South Carolina, CTI seeks to recover $45,000 claimed to be due and owing as the
result of the settlement of a consulting contract. In addition, CTI claims
actual damages, punitive damages, prejudgment interest and other remedies for
alleged false product representations which CTI relied upon in representing
Veridien to its clients. The Company has been actively defending this law suit
and the parties have entered into a settlement agreement.
On November 30, 1998, under Case No. 97-GL-76-0135 the Federal Aviation
Administration proposed to assess a civil penalty against the Company in the
amount of $60,000 for one incident which lead to alleged violations of various
Hazardous Material Regulations. This proposed civil penalty is based upon a
shipment made by a Company employee of product samples intended for use at a
trade show. It is proported that the samples were not marked as required under
the Hazardous Material Regulations nor was the shipment accompanied by a
"Shipper's Certification of Declaration of Dangerous Goods". The Company did not
direct or authorize the actions of the employee. The Company is actively
contesting the civil penalty and has retained a specialist in such matters
seeking to present facts and circumstances which do not warrant a civil penalty.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
We have selected Carter & Cartier P.A., CPA's with offices at 424 Central
Avenue, Suite 1000, St. Petersburg, Florida 33701, as our independent
accountants and auditors, for the audit of our financial statements for 1997 and
1998. We have included our audited financial statements for the fiscal years
ended December 31, 1997 and December 31, 1998, in this filing in reliance on the
report of that firm and upon the authority of that firm as expert in auditing
and accounting.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
During 1995 the Company made a private placement under Section 4(2) of Units
consisting of shares of its 10% Convertible Redeemable Preferred Stock and its
$.01 Warrants.
34
<PAGE> 35
1996
On March 19, 1996, an investor in the 1995 private placement converted 7,065
shares of the Preferred Stock to 141,300 shares of the Company's Common Stock
and exercised 402,162 Warrants to purchase 402,162 shares of the Company's
Common Stock. These issuances were considered exempt from registration by reason
of Sections 3(a)(9) and 4(2) of the Securities Act.
On June 27, 1996, another investor in the 1995 private placement converted 4,800
shares of the Preferred Stock to 96,000 shares of the Company's Common Stock and
exercised 304,000 Warrants to purchase 304,000 shares of the Company's Common
Stock. These issuances were considered exempt from registration by reason of
Sections 3(a)(9) and 4(2) of the Securities Act.
On or about August 1, 1996 the Company issued 250,000 shares of its Common Stock
to its terminated President/CEO as a severance payment in lieu of remaining
salary. This issuance was considered exempt from registration by reason of
Section 4(2) of the Securities Act.
On August 8, 1996, another investor in the 1995 private placement converted
1,000 shares of the Preferred Stock to 20,000 shares of the Company's Common
Stock . This issuance was considered exempt from registration by reason of
Section 3(a)(9) of the Securities Act.
On or about September 1, 1996, various other investors in the 1995 private
placement converted 24,065 shares of the Preferred Stock to 481,300 shares of
the Company's Common Stock . These issuances were considered exempt from
registration by reason of Section 3(a)(9) of the Securities Act.
On or about September 1, 1996 the Company issued Warrants to purchase 100,000
shares of its Common Stock and 300,000 shares of its Common Stock respectively
to two companies as payment for services. These issuances were considered exempt
from registration by reason of Section 4(2) of the Securities Act.
On or about September 26, 1996 the Company issued 2,930 shares of its Common
Stock to an investor in the 1995 private placement to settle a disagreement
about the amount of funds invested and the shares to which the investor was
entitled. This issuance was considered exempt from registration by reason of
Section 4(2) of the Securities Act.
On or about September 1, 1996 another investor in the 1995 private placement
converted 250 shares of the Preferred Stock to 5,000 shares of the Company's
Common Stock and exercised 155,000 Warrants to purchase 155,000 shares of the
Company's Common Stock. These issuances were considered exempt from registration
by reason of Sections 3(a)(9) and 4(2) of the Securities Act.
At various times between November 27, 1996 and December 27, 1996 an investor
advanced funds totaling $342,592 and was issued Convertible Debentures for that
principal sum together with 954,610 Convertible Debenture Warrants. This
issuance was considered exempt from registration by reason of Section 4(2) of
the Securities Act.
35
<PAGE> 36
1997
On January 31, 1997 the Company issued 100,000 Common Stock Purchase Warrants as
compensation for services of a company. This issuance was considered exempt from
registration by reason of Section 4(2) of the Securities Act.
On November 14, 1997 an investor in the 1995 private placement exercised 91,111
Warrants to purchase 91,111 shares of the Company's Common Stock. This issuance
was considered exempt from registration by reason of Section 4(2) of the
Securities Act.
On November 19, 1997 the Company issued 1,000,000 shares of its Common Stock to
an investor in a private placement. This issuance was considered exempt by
reason of Rule 506 of Regulation D and Section 4(2) of the Securities Act.
On December 4, 1997 an investor in the 1995 private placement exercised 4,535
Warrants to purchase 4,535 shares of the Company's Common Stock. This issuance
was considered exempt from registration by reason of Section 4(2) of the
Securities Act.
At various times during 1997 various lenders advanced funds totaling $1,566,272
and were issued Convertible Debentures for that principal sum together with
5,534,138 Convertible Debenture Warrants. These issuances were considered exempt
from registration by reason of Section 4(2) of the Securities Act.
1998
On February 13, 1998 the entity to which the Company had previously issued
300,000 Common Stock Purchase Warrants for services in 1996 exercised such
Warrants. This issuance was considered exempt from registration by reason of
Section 4(2) of the Securities Act.
On February 13, 1998 the Company issued 231, 667 shares of its Common Stock as
compensation for services. This issuance was considered exempt from registration
by reason of Section 4(2) of the Act.
On April 1, 1998 another investor in the 1995 private placement converted 5,000
shares of the Preferred Stock to 100,000 shares of the Company's Common Stock .
This issuance was considered exempt from registration by reason of Section
3(a)(9) of the Securities Act.
On April 1, 1998 the Company issued 450,000 shares of its Common Stock to an
investor in the 1995 private placement for a promissory note for $22,500 to
settle a dispute about the conversion ratio. This issuance was considered exempt
from registration by reason of Sections 3(a)(9) and 4(2) of the Securities Act.
On September 14, 1998 the Company issued 122,500 shares of its Common Stock to a
creditor upon conversion of existing indebtedness. This issuance was considered
exempt from registration by reason of Section 4(2) of the Securities Act.
36
<PAGE> 37
On September 14, 1998 another investor in the 1995 private placement converted
10,000 shares of the Preferred Stock to 200,000 shares of the Company's Common
Stock and exercised 911,111 Warrants to purchase 911,111 shares of the Company's
Common Stock. In addition, in lieu of the accrued dividend on the Preferred
Stock the Company issued 73,059 shares of its Common Stock. These issuances were
considered exempt from registration by reason of Sections 3(a)(9) and 4(2) of
the Securities Act.
On September 14, 1998 investors under the Loan and Security Agreement were
issued 33,530,973 shares of the Company's Common Stock upon exercise of the Loan
and Security Agreement Warrants and received 154,163 shares of the Series B
Preferred Stock. These issuances were considered exempt from registration by
reason of Sections 3(a)(9) and 4(2) of the Securities Act.
On November 24, 1998 the Company issued 221,055 shares of its Common Stock as
compensation for past services. This issuance was considered exempt from
registration by reason of Section 4(2) of the Securities Act.
On December 15, 1998 the Company issued 1,000,000 shares of its Common Stock to
an investor in a private placement. This issuance was considered exempt from
registration by reason of Section 4(2) of the Securities Act.
At various times after July 31, 1998 the Company issued 6,929,295 shares of its
Common Stock in an offering conducted under Rule 504 of Regulation D. These
issuances were considered exempt from registration by reason of Rule 504 of
Regulation D and Section 3(b) of the Securities Act.
At various times during 1998 various lenders advanced funds totaling $585,333
and were issued Convertible Debentures for that principal sum together with
4,029,540 Convertible Debenture Warrants. These issuances were considered exempt
from registration by reason of Section 4(2) of the Securities Act.
1999
At various times to February 28, 1999 the Company issued 3,866,226 shares of its
Common Stock for cash and 428,572 shares of its Common Stock for services in a
continuation of the offering conducted under Rule 504 of Regulation D. These
issuances were considered exempt from registration by reason of Rule 504 of
Regulation D and Section 3(b) of the Securities Act.
During the period to February 28, 1999 the Company issued 3,450,000 shares of
its Common Stock to eight investors in a private placement. This issuance was
considered exempt from registration by reason of Section 4(2) of the Securities
Act.
37
<PAGE> 38
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
DELAWARE GENERAL CORPORATION LAW
Section 145 of the Delaware General Corporation Law contains provisions
authorizing our indemnification of directors, officers, employees or agents
against certain liabilities and expenses which they may incur as directors,
officers, employees or agents of the Company or of certain other entities. The
law also provides that such indemnification may include payment by the Company
of expenses incurred in defending a civil or criminal action or proceeding in
advance of the final disposition of such action or proceeding upon receipt of an
undertaking by the person indemnified to repay such payment if he shall be
ultimately found not to be entitled to indemnification. Indemnification may be
provided even though the person to be indemnified is no longer a director,
officer, employee or agent of the Company or such other entities. Section 145(g)
also contains provisions authorizing the Company to obtain insurance on behalf
of any such director, officer employee or agent against liabilities, whether or
not the Company would have the power to indemnify such person against such
liabilities under the provisions of the Section
The indemnification and advancement of expenses provided pursuant to Section
145(f) are not exclusive, and subject to certain conditions, we may make other
or further indemnification or advancement of expenses of any of our directors,
officers, employees or agents. Because our Articles of Incorporation, as
amended, do not otherwise provide, notwithstanding our failure to provide
indemnification and despite a contrary determination by the Board of Directors
or our shareholders in a specific case, a director, officer, employee or agent
of the Company who is or was a party to a proceeding may apply to a court of
competent jurisdiction for indemnification or advancement of expenses or both,
and the court may order indemnification and advancement of expenses, including
expenses incurred in seeking court-ordered indemnification or advancement of
expenses if it determines that the petitioner is entitled to mandatory
indemnification pursuant to Section 145(c) because he has been successful on the
merits, or because the Company has the power to indemnify on a discretionary
basis pursuant to Section 145(b) or because the court determines that the
petitioner is fairly and reasonably entitled indemnification or advancement of
expenses or both in view of all the relevant circumstances.
ARTICLES OF INCORPORATION AND BY-LAWS
The Articles of Incorporation and By-laws of the Company, as amended, empower
the Company to indemnify our current or former directors, officers, employees or
agents of the Company or persons serving by our request of the Company in such
capacities in any other enterprise or persons who have served by our request of
the Company in such capacities in any other enterprise to the full extent
permitted by the laws of the State of Delaware.
LIMITATION ON LIABILITY
Our Articles of Incorporation limit directors' and officers' liabilities to the
maximum permitted under Delaware Law. Thus, even if such an officer or director
loses a lawsuit, it is possible,
38
<PAGE> 39
unless such officer or director was guilty of gross negligence or willful
misconduct in the performance of his/her duties, that we or our insurance
carrier will pay the amount of such judgment or settlement and reasonable legal
fees.
OFFICERS AND DIRECTORS LIABILITY INSURANCE
At present, we maintain Officers and Directors Liability Insurance with
Executive Risk Indemnity, Inc. of Dover, Delaware.
INDEMNITY AGREEMENTS
At present, we do not have indemnity agreements in place with any of our current
officers or directors.
SEC POSITION ON INDEMNIFICATION FOR SECURITY ACT LIABILITY
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that is the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933, as amended, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action, suite
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company 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 of whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933, as amended, and will be governed by the final adjudication of such
issue.
39
<PAGE> 40
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Veridien Corporation
--------------------------------------------
(Registrant)
Date By
------------------------ ------------------------------------------
Andrew T. Libby, Jr., COO
By
------------------------------------------
Sheldon C. Fenton, CEO
40
<PAGE> 41
VERIDIEN CORPORATION
AND SUBSIDIARIES
Consolidated Financial Statements
and Independent Auditors' Report
December 31, 1998 and 1997
<PAGE> 42
INDEPENDENT AUDITORS' REPORT
[LOGO]
CARTER and CARTIER P.A.
Certified Public Accountants
To the Board of Directors
Veridien Corporation
We have audited the accompanying consolidated balance sheets of Veridien
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1998
and 1997, and the related statements of operations, changes in deficit in
stockholders' equity for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
the significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Veridien
Corporation and subsidiaries as of December 31, 1998 and 1997, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note B to the
consolidated financial statements, the Company, since its inception, has
sustained substantial losses, has a deficit in stockholders' equity, a deficit
in working capital, and is experiencing a continued cash flow deficiency. Those
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans regarding these matters are described in Note
B. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ Carter and Cartier P.A.
Carter and Cartier, P.A.
February 24, 1999
SUITE 1000, FIRST UNION TOWER
424 CENTRAL AVENUE
ST. PETERSBURG, FLORIDA 33701-3828
(813)821-4900
FAX (813)823-0558
<PAGE> 43
VERIDIEN CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
Assets
------
<S> <C> <C>
Current assets:
Cash $ 17,158 $ 88,045
Accounts receivable - trade
Less allowance for doubtful accounts
Of $6,096 and $24,231, respectively 203,148 59,382
Note receivable 22,500 --
Inventory 92,549 227,978
Prepaid expenses and other current assets 20,580 19,272
-------- --------
Total current assets 355,935 394,677
Property and equipment:
Leasehold Improvements 83,806 83,806
Furniture and fixtures 372,697 356,490
-------- --------
456,503 440,296
Less accumulated depreciation 414,333 399,778
-------- --------
42,170 40,518
Other Assets:
Patents, less accumulated amortization of
$482,378 and $479,230, respectively 32,004 35,152
Loan costs, less accumulated amortization of
$49,633 and $33,541, respectively 28,160 44,251
Security deposits and other assets 40,389 40,389
-------- --------
100,553 119,792
-------- --------
$498,658 $554,987
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
2
<PAGE> 44
VERIDIEN CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets - Continued
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
Liabilities and Deficit in Stockholders' Equity
-----------------------------------------------
<S> <C> <C>
Current liabilities:
Notes payable $ 1,066,273 $ 2,704,460
Accounts payable 244,343 353,611
Accrued compensation 39,000 12,483
Other accrued liabilities 949,059 673,513
Due to stockholders 189,321 24,157
Deferred revenue - licensing agreement 87,418 --
------------ ------------
Total current liabilities 2,575,414 3,768,224
Convertible debentures 2,494,198 1,908,865
Undesignated preferred stock, $.001 par value,
25,000,000 shares authorized
Convertible redeemable preferred stock,
$10 par value, 100,000 authorized; 6,000 and 16,000
issued and outstanding at December 31, 1998
and 1997 60,000 160,000
Series B Preferred Stock,
$.001 par value, 245,344 authorized, 154,163 and 0
issued and outstanding at December 31, 1998 and 1997 154 --
Deficit in stockholders' equity
Common stock - $.001 par value; 200,000,000 shares
authorized, 78,152,833 and 33,463,173 shares issued
and outstanding at December 31, 1998 and 1997 78,154 33,464
Additional paid-in capital 22,858,790 17,796,043
Common stock warrants 26,399 2,599,288
Accumulated deficit (27,589,451) (25,705,897)
------------ ------------
(4,626,108) (5,277,102)
Stock subscriptions receivable 5,000 5,000
------------ ------------
(4,631,108) (5,282,102)
------------ ------------
$ 498,658 $ 554,987
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE> 45
VERIDIEN CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Sales $ 820,065 $ 869,319
Operating costs and expenses:
Cost of sales 601,037 589,215
General and administrative 1,399,251 1,627,518
Research and development 377,344 245,404
------------ ------------
2,377,632 2,462,137
------------ ------------
Loss from operations (1,557,567) (1,592,818)
Other Income (expense):
Interest expense (525,872) (413,882)
Rental income 51,290 3,459
Licensing fees 145,696 --
Miscellaneous -- 23,954
Interest income 2,899 6,213
------------ ------------
(325,987) (380,256)
------------ ------------
Net loss $ (1,883,554) $ (1,973,074)
============ ============
Net loss per common share $ (.04) $ (.06)
============ ============
Weighted average shares outstanding 48,299,890 32,549,756
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE> 46
VERIDIEN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN DEFICIT IN STOCKHOLDERS' EQUITY
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Number Additional
common Common paid-in Stock Accumulated
shares stock capital warrants deficit
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1997 32,367,527 $32,367 $ 17,561,242 $ 2,608,092 $(23,732,823)
Exercise of stock warrants for notes 91,111 91 8,109 (7,289) --
Exercise of stock warrants for cash 4,535 6 1,554 (1,515) --
Issuance of stock warrants for cash 1,000,000 1,000 249,000 -- --
Amortization of preferred stock costs -- -- (23,862) -- --
Net (loss) -- -- -- -- (1,973,074)
----------------------------------------------------------------------
Balances at December 31, 1997 33,463,173 33,464 17,796,043 2,599,288 (25,705,897)
Exercise of warrants conversion for services 300,000 300 (300) -- --
Issuance of stock for services 452,722 453 123,347 --
Conversion of preferred shares to common --
correction to prior conversion 100,000 100 (100) -- --
Issuance of stock for note 450,000 450 22,050 -- --
Issuance of stock for debt conversion 742,500 743 178,757 --
Conversion of preferred shares to common --
and exercise of warrants 1,184,170 1,184 185,391 (72,889) --
Conversion of partial loan/security agreement 33,530,973 33,531 4,041,481 (2,500,000) --
Proceeds from Section 504 offering 6,929,295 6,929 463,121 -- --
Proceeds from Private Placement 1,000,000 1,000 49,000 --
Net (loss) -- -- -- -- (1,883,554)
----------------------------------------------------------------------
Balances at December 31, 1998 78,152,833 $78,154 $ 22,858,790 $ 26,399 $(27,589,451)
======================================================================
<CAPTION>
Stock Stockholders'
subscriptions equity
receivable (deficit)
--------------------------
<S> <C> <C>
Balances at January 1, 1997 $(5,000) $(3,536,122)
Exercise of stock warrants for notes -- 911
Exercise of stock warrants for cash -- 45
Issuance of stock warrants for cash -- 250,000
Amortization of preferred stock costs -- (23,862)
Net (loss) -- (1,973,074)
--------------------------
Balances at December 31, 1997 (5,000) (5,282,102)
Exercise of warrants conversion for services -- --
Issuance of stock for services -- 123,800
Conversion of preferred shares to common
correction to prior conversion -- --
Issuance of stock for note -- 22,500
Issuance of stock for debt conversion 179,500
Conversion of preferred shares to common
and exercise of warrants -- 113,686
Conversion of partial loan/security agreement -- 1,575,012
Proceeds from Section 504 offering -- 470,050
Proceeds from Private Placement 50,000
Net (loss) -- (1,883,554)
--------------------------
Balances at December 31, 1998 $(5,000) $(4,631,108)
==========================
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE> 47
VERIDIEN CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities
Net (loss) $(1,883,554) $ (1,973,074)
Adjustments to reconcile net (loss) to net cash
(used) by operating activities:
Depreciation and amoritization 33,794 61,500
(Increase) decrease in:
Accounts receivable (143,766) (4,223)
Prepaid and other current assets (1,308) (9,238)
Inventories 135,429 (134,837)
Increase (decrease) in:
Accounts payable and accrued expenses 192,795 274,364
Due to stockholders 165,164 (165,257)
Deferred revenue 87,418 --
----------- ----------
Net cash (used) by operating activities (1,414,028) (1,950,765)
Cash flow from investing activities:
Purchases of property and equipment (16,207) (3,949)
Patent development -- (20,283)
----------- ----------
Net cash (used) by investing activities (16,207) (24,232)
Cash flow from financing activities:
Proceeds from convertible debentures 585,333 1,566,273
Net proceeds from borrowings 86,979 129,757
Proceeds from sale of preferred and common stock 687,036 250,956
----------- ----------
Net cash provided by financing activities 1,359,348 1,946,986
----------- ----------
Net (decrease) in cash (70,887) (28,011)
Cash at beginning of year 88,045 116,056
----------- ----------
Cash at end of year $ 17,158 $ 88,045
=========== ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
6
<PAGE> 48
VERIDIEN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies consistently applied
in the preparation of the accompanying consolidated financial statements
follows.
1. Organization, Business and Control
On June 4, 1991, the Company was incorporated in Delaware as "VCT Acquisitions
II, Inc." The Company then acquired all of the assets of another Delaware
corporation called Viral Control Technology, Inc. On September 13, 1991, the
Company changed its name to Viral Control Technology, Inc. Subsequently, on
November 8, 1991, the Company again changed its name and became Veridien
Corporation (the Company).
The "Viral Control Technology, Inc." from which the Company acquired its assets
was created on August 3, 1989, by a reverse acquisition of a public shell called
Valencia Enterprises, Inc., by a private company named Viral Control Technology,
Inc. The original Viral Control Technology, Inc., was organized in Delaware on
August 10, 1988, while Valencia Enterprises was organized in Utah on February
10, 1984. Valencia, which had changed its name to Viral Control Technology,
Inc., after the reorganization, was redomesticated in Delaware on December 14,
1990. The original private company called Viral Control Technology, Inc., was
organized by Paul L. Simmons and his wife.
The Company was founded to develop disinfectants and sterilants which will pose
no hazard to people who use them and will not harm the environment. To this end,
the Company has developed a hard surface disinfectant (VIRAHOL(R)), which has
been registered with the Environmental Protection Agency (EPA), and a cold
chemical sterilant (STERIHOL(R)), for which the Company is currently seeking
regulatory approval. The Company's research and development efforts are
currently focused on further development of infection control chemicals and on
devices, both medical and commercial, which utilize the Company's liquid
products and are in keeping with the corporate philosophy of environmentally
friendly products. In June 1996, the Company added Vira-RD12(TM) a heavy-duty
rotational disinfectant and Vira-CD7(TM) a detergent disinfectant for large
areas to its infection control line.
In October 1995, the Company entered into a 10% Convertible Senior Secured Term
Loan agreement to finance marketing efforts for its line of products, to fund
operating cash flow deficiencies, and to continue its research and development
activities.
7
<PAGE> 49
VERIDIEN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-
CONTINUED
The agreement requires the Company to issue to the lender warrants, in
sufficient quantity, that at all times the loan agreement is in force the lender
can obtain 51% of all classes of outstanding stock for a $2,500,000 exercise
price. During 1998, $1,575,166 of the debt and the lender's warrants were
converted into 33,530,973 common shares. During 1998, the Company was authorized
to increase its capital structure to 200,000,000 authorized shares of common
stock.
2. Principles of Consolidation
The accompanying financial statements include the accounts of the Company and
its subsidiaries, each of which is wholly-owned. All intercompany balances and
transactions have been eliminated in consolidation.
3. Accounting Estimates
The presentation 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.
4. Accounts Receivable
The Company uses the allowance method of accounting for doubtful accounts. The
year-end balance is based on historical collections and management's review of
the current status of existing receivables and estimate as to their
collectibility.
5. Inventories
Inventories, consisting primarily of raw materials and finished goods, are
stated at the lower of cost or market. Cost is determined by the first-in,
first-out method. At December 31, 1998, raw materials and finished goods
amounted to approximately $64,000 and $29,000, respectively. At December 31,
1997, raw materials and finished goods amounted to approximately $78,000 and
$150,000, respectively.
8
<PAGE> 50
VERIDIEN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
6. Property and Equipment
Property and equipment are stated at cost. Depreciation on property and
equipment is calculated on the straight-line method over their estimated useful
lives ranging from three to seven years. Leasehold improvements are amortized on
the straight-line method over the shorter of the lease term or estimated useful
life. Major renewals, betterments and replacements are capitalized. Maintenance
and repairs are charged to expense as incurred.
7. Patents
The Company capitalizes certain costs, primarily legal and other fees, related
to patents. Accumulated costs are amortized over the estimated lives of the
patents using the straight-line method, commencing at the time the patents are
issued.
8. Loan Costs
Loan costs are amortized by the straight-line method over the term of the
respective loans.
9. Income Taxes
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
9
<PAGE> 51
VERIDIEN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-
CONTINUED
10. Reclassification
Certain reclassifications have been made to the 1997 financial statements to be
in conformity with the 1998 presentation.
11. Net Loss per Share
Net loss per share is calculated by dividing the net loss by the weighted
average number of common shares outstanding during the period. Weighted average
number of common shares outstanding is calculated as the sum of the month-end
balances of shares outstanding, divided by the number of months. The weighted
average shares outstanding were 48,299,890 and 32,549,756 for the years ended
December 31, 1998 and 1997, respectively. Common stock equivalents (stock
options, warrants, convertible debentures and convertible redeemable preferred
stock) are not included in the weighted average number of common shares because
the effects would be anti-dilutive.
NOTE B - REALIZATION OF ASSETS
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. Since inception, the Company has
incurred losses of approximately $27.6 million, resulting primarily from
research and development, sales and marketing, and administrative expenses being
substantially in excess of sales revenue. The Company has a deficit in
stockholders' equity of $4,631,108, a deficit in working capital of $2,219,479,
and is experiencing a continuing cash flow deficiency.
For the year ended December 31, 1998, the Company's operating activities
resulted in cash outflows of $1,414,028. In addition, the Company used $16,207
for patent development and equipment purchases. In order to fund these cash
outflows, the Company sold $687,036 of preferred and common stock and received
net proceeds of $672,312 from notes payable and convertible debentures. These
proceeds, together with the cash balance at the beginning of the year, did not
fund the Company's cash outflows, resulting in a net cash decrease of $70,887
for the year ended December 31, 1998.
10
<PAGE> 52
VERIDIEN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE B - REALIZATION OF ASSETS-CONTINUED
The company plans to utilize its current debt financing arrangements and pursue
additional equity and debt financing while managing cash flow in an effort to
provide funds to increase revenues to support operations, research and
development activities. Management anticipates cash flow from product sales will
meet and exceed cash requirements in the Fall of 1999. The company plans to
pursue additional cash through sales of equity, through Rule 504 and 506
offering(s).
In view of the matters described in the preceding paragraphs, recoverability of
a major portion of the recorded asset amounts shown in the accompanying
consolidated balance sheet is dependent upon the continued operations of the
Company and that such operations will be profitable and provide adequate cash
flows. Further, the ability of the Company to continue its operations and
successfully defend itself against potential claims or assessments is dependent
on the ability to obtain additional debt and equity financing, employ cash
management techniques and aggressively market its products.
The consolidated financial statements do not contain any adjustments relating to
the recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue in existence.
NOTE C - RELATED PARTY TRANSACTIONS
In March 1996, the Company entered into a repayment agreement with the principal
stockholder to reimburse for costs incurred in prior years for the development
of certain products. The agreement provides for the repayment of $169,000 from a
percentage of income derived from future product sales or earlier at the option
of the Company. The amount was charged to research and development expense for
the year ended December 31, 1996. During 1997, the Company exercised its option
and paid the balance due.
In June 1996, the Company entered into a settlement and general release
agreement with the then Chief Executive Officer and Chairman of the Board for
voluntary resignation of employment and resignation from the Board of Directors.
The agreement provides for the payment of $135,000 in twelve equal monthly
installments. In addition, the Company delivered 250,000 shares of common stock
and assumed an existing note payable to the principal stockholder in the amount
of $32,000. This obligation was satisfied in full during 1997.
11
<PAGE> 53
VERIDIEN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE C - RELATED PARTY TRANSACTIONS-CONTINUED
At December 31, 1998 and 1997, the Company owed $189,321 and $24,157,
respectively to stockholders who have made advances of cash or material to the
Company.
During 1998, the Company purchased $104,444 of inventory from a company owned by
a shareholder and has recorded the advance in Due to stockholder. The Company
has the ability to convert the advances into Company common stock at $.20 per
share.
The Company has entered into numerous financing transactions with Dunvegan
Mortgage Corporation, a corporation of which the Company's President and CEO is
an officer and a director. These transactions are detailed elsewhere in these
footnotes.
NOTE D - NOTES RECEIVABLE
The Company issued 450,000 of common stock to a shareholder in exchange for a
note receivable in the amount of $22,500. The note is non-interest bearing, can
be satisfied in full by the return of the Company common stock, and is due in
full on December 31, 1999. At December 31, 1998, the 450,000 common shares had
an approximate market value of $27,000.
NOTE E - NOTES PAYABLE
In October 1995, the Company secured a 10% Convertible Senior Secured Term Loan
of up to $2,500,000 with a mortgage company of which the Company's current
President and CEO (since June 1998) is an officer and director. During 1998, the
mortgage company and loan participants converted $1,575,166 of the $2,500,000
debt into 33,530,973 common shares. On October 5, 1998, the remaining balance of
$924,834 was assigned to another lender. The maturity date and other terms
remain the same.
The loan agreement grants the lender warrants to purchase 51% of the Company's
outstanding common and preferred stock. The note is collateralized by the assets
and intellectual properties of the Company and its subsidiaries and requires
semi-annual payments of interest only with the entire principal balance due in
November 2000. As of December 31, 1998, the Company was advanced $924,834 and
has accrued $308,995 of interest under the agreement. The Company has been in
technical default on the loan since March 1996 with respect to certain financial
criteria. Furthermore, the lender has not waived compliance regarding these
criteria and has continued to fund
12
<PAGE> 54
VERIDIEN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE E - NOTES PAYABLE-CONTINUED
the monthly working capital needs of the Company, as previously agreed.
Accordingly, the accompanying consolidated financial statements have presented
the amounts advanced under the note as a current liability.
During 1998, the original lender advanced $75,000 under a short-term bridge loan
at 0% stated interest rate.
The company has negotiated promissory notes with a leasing company at varying
terms and maturities. The remaining balance amounted to $66,439 and $54,460 at
December 31, 1998 and 1997, respectively. The Company renegotiated the loans
during April 1998. The note carries an interest rate of 9% per annum payable
monthly, with principal payments of $21,924 due on May 1, 1999, and 2000, with
the remaining principal due on May 1, 2001.
The Company had borrowed funds from an individual in the amount of $150,000 at
December 31, 1997. Interest at 8% per annum is payable quarterly starting
September 20, 1997. During the second quarter of 1998, the note and all accrued
interest thereon was converted by the holder to equity.
NOTE F - DEFERRED REVENUE/LICENSING FEES
During 1998, the Company entered into a marketing agreement with a Canadian
company and awarded exclusive sales rights in Canada for a period of five years.
The Company is entitled to minimum annual license fees and in 1998 received
$233,114 for year one. The initial period for determining sales subject to the
licensing agreement is February 28, 1998, through June 30, 1999. At December 31,
1998, $87,418 of this licensing fee has been deferred.
Minimum annual license fees have scheduled increases through approximately
$676,000 in year five. The licensing fees are based on 10% of sales as defined
in the agreement and are subject to a yearly minimum.
NOTE G - CONVERTIBLE DEBENTURES
During 1998 and 1997, the Company received $585,333 and $1,566,273, respectively
of proceeds from the sale of convertible debentures to various investment
companies, including a company of which this Company's President and CEO is an
officer and director. Terms and conditions of these funding transactions were
comparable to other
13
<PAGE> 55
VERIDIEN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE G - CONVERTIBLE DEBENTURES-CONTINUED
sources available to the Company. Interest is accrued at various rates from 10%
- - 11% per annum, compounded in full at maturity of December 31, 1998. Prior to
the retirement of the debentures, the investment companies may convert any or
all amounts owed into common stock. The conversion price for each debenture
ranges from $.1050 to $.3868 per share. The conversion privilege terminates when
all principal plus interest due has been paid in full. In addition, the
investment companies were issued 10,518,287 warrants for additional common
shares for 100 - 105% of the convertible debentures per share conversion price.
The additional warrants expire five years from the original date of the
debentures.
The expiration of the convertible debentures were extended to June 30, 2000, and
in consideration for the extension, the conversion rate was reduced to the lower
of the existing conversion rate or $.15 to August 31, 1999, thereafter reverting
to the original conversion price.
NOTE H - COMMITMENTS AND CONTINGENCIES
Claims and Litigation
The Company is being sued by a shareholder for a potential rescission of common
stock in the amount of $15,000 as defined above. The company is vigorously
defending the suit and believes it to be without merit.
The Company is involved in additional litigation arising in the normal course of
business. The Company has filed suit against a former Chairman and certain
former officers and directors seeking recovery of over $110,000 which the
Company alleges such persons misappropriated from the Company. Further, the
Company successfully defended itself in a suit by that former Chairman claiming
damages for alleged misrepresentations in the sale of Company stock which he
purchased. The former Chairman was seeking damages of at least $285,000. In
addition, the Company was awarded and received approximately $100,000 as
reimbursement for attorney fees and costs incurred in defense of the suit.
In 1997 the Federal Aviation Authority (FAA) notified the Company that it had
violated certain rules regarding the labeling and air transportation of one
shipment of product considered to be hazardous material. During 1998, the FAA
proposed a potential fine in the amount of $60,000. The Company is working with
an outside consultant to reduce or eliminate the proposed penalty.
14
<PAGE> 56
VERIDIEN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE H - COMMITMENTS AND CONTINGENCIES-CONTINUED
Operating Leases
The company leases manufacturing and office facilities under a lease that
expires June 2001 with an additional five year option period. Rent expense was
approximately $214,000 and $209,000 in 1998 and 1997, respectively.
The following table reflects approximate future minimum annual rental expense
amounts:
<TABLE>
<CAPTION>
Year Amount
----------- -------------
<S> <C>
1999 $ 233,500
2000 238,900
2001 244,500
2002 123,700
</TABLE>
NOTE I - CONVERTIBLE REDEEMABLE PREFERRED STOCK
In 1994, the Company prepared an Offering Circular to raise approximately
$1,000,000 of 10% Cumulative Convertible Redeemable Preferred Stock with a $10
par value. At the option of the Company, the shares can be redeemed after two
years at $10 per share plus accrued and unpaid dividends in aggregate amounts
not to exceed $250,000 annually. Each preferred share is convertible into twenty
common shares. Additionally, the Offering Circular provides for common stock
purchase warrants with an exercise price of $.01 per share. The number of
warrants issued, when exercised in combination with conversion of the preferred
stock into common stock, will result in an effective cost for each share of the
common stock equal to the closing bid price of the common stock, in the
over-the-counter market, on the day of the subscription to the Offering
Circular. The warrants may be redeemed for $.001, at the election of the
Company, upon thirty days' written notice after the bid price of the common
stock in the then existing public market has been $1.00 or more for thirty
continuous days in which the market is open for business. Through December 31,
1997, $622,000 of preferred stock was issued for cash and $318,150 was issued in
satisfaction of debt and services at $10 per share. Preferred shareholders have
converted 88,015 shares of preferred stock into 1,760,300 shares of common
stock. At December 31, 1998, preferred stock dividends in arrears totaled
approximately $24,000.
15
<PAGE> 57
VERIDIEN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE J - SERIES B CUMULATIVE PREFERRED STOCK
The Series B Cumulative Preferred Stock was created on December 31, 1997, as a
mechanism of permitting the conversion of part of the indebtedness under the
Loan and Security Agreement, without sacrificing the intent of the original Loan
and Security Agreement warrants. The Series B Cumulative Preferred Stock has a
par value of $.001 per share and an initial stated capital of $10 per share,
which is subject to adjustment. This Series is senior to the Common Stock and is
senior to all other classes and series except that it is junior to the
Convertible Redeemable Preferred Stock with respect to the payment of dividends.
Each share has that number of votes equal to the number of share of Common Stock
into which it is convertible on the record date. Subject to adjustment in the
event of certain future Common Stock or convertible security issuances, each
share is convertible into 20.04010695 shares of Common Stock. These shares are
entitled to receive an annual dividend equal to the greater of 10% of the stated
value and the actual dividend per share of common stock declared by the
Company's Board of Directors times the number shares of Common stock into which
each share of Series B is convertible on the dividend record date. The dividend
is cumulative, whether or not earned and, to the extent not paid on a quarterly
dividend payment date is added to the stated value.
NOTE K - STOCK OPTIONS
Options to acquire 200,000 shares were granted in 1995 to a director of the
Company in consideration of his efforts relating to business services. These
options remain in force at December 31, 1998 and expire on October 17, 1999.
16
<PAGE> 58
VERIDIEN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE K - STOCK OPTIONS-CONTINUED
Non-qualified stock option activity is summarized as follows:
<TABLE>
<CAPTION>
Shares Under Exercise
Option Price Range
------------ ------------
<S> <C> <C> <C>
Outstanding at January 1, 1997 1,357,822 $ .01 - 3.00
1997 Granted -- N/A
Expired (257,822) .01 - 3.00
------------ ------------
Outstanding at December 31, 1997 1,100,000 .50 - 3.00
1998 Granted -- N/A
Expired (900,000) .50 - 3.00
------------ ------------
Outstanding at December 31, 1998 200,000 $ .25
============ ============
</TABLE>
NOTE L - STOCK WARRANTS
In 1998, as additional consideration for the convertible debentures, the Company
issued 4,029,539 warrants at exercise prices ranging from $.105 to $.180, 100%
of the debenture conversion price, and that expire five years from date of
issuance.
In 1997, as additional consideration for the convertible debentures, the Company
issued 4,338,138 warrants at exercise prices ranging from $.1944 to $.3590, 105%
of the debenture conversion price, and that expire five years from the date of
issuance.
In 1996, as additional consideration for the convertible debentures, the Company
issued 954,610 warrants at exercise prices ranging from $.3711 to $.3884, 105%
of the debenture conversion price, and that expire five years from the date of
issuance.
17
<PAGE> 59
VERIDIEN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE L - STOCK WARRANTS-CONTINUED
In 1997, as additional consideration for a consulting agreement, the Company
issued 100,000 warrants. The warrants have an exercise price of $1.00 per share
and expire three years from the date of issuance.
In September 1993, the Company granted a stock purchase warrant to a foreign
private foundation in recognition of its purchases of over 1,000,000 shares of
common stock. The warrant entitles the holder to acquire up to 250,000 shares of
the Company's authorized common stock. The purchase price of each share is
$1.00, and the warrant was exercisable through October 31, 1998. During 1998,
the warrant expired.
As described in Note I, the Company offered $1,000,000 of 10% Cumulative
Convertible Redeemable Preferred Stock along with common stock purchase warrants
at $.01 per share. The number of warrants issued, when exercised in combination
with conversion of the preferred stock into common stock results in an effective
cost for each share of the common stock equal to the closing bid price of the
common stock, in the over-the-counter market, on the day of the subscription to
the Offering Circular. The warrants are recorded at their fair market value at
the time of issuance less the exercise price of $.01 and reported as a reduction
to preferred stock. The value assigned to the warrants is amortized over the
shorter of the life or the exercise of the warrant. Through December 31, 1998,
6,177,478 warrants were issued in connection with sales of the preferred stock,
701,595 warrants have been issued for services, and 1,606,134 were issued for
extinguishment of debt. At December 31, 1998, 110,000 of these warrants had not
been exercised.
18
<PAGE> 60
VERIDIEN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE L - STOCK WARRANTS-CONTINUED
Warrants issued and exercised is summarized as follows:
<TABLE>
<CAPTION>
Exercise
Price
Common Stock Warrants Range
-------------------------------------- ----------- ------------
<S> <C> <C>
Outstanding at January 1, 1997 41,988,340 $ .01 - 1.00
1997:
Granted 17,491,653 .01 - .406
Exercised (95,646) .01
Converted to preferred warrants (10,027,922) .25 - .34
----------- ------------
Outstanding at December 31, 1997 49,356,425 .01 - 1.00
1998:
Granted 14,712,853 .105 -.180
Exercised (1,211,111) .01 - .125
Expired (250,000) 1.00
Loan & Security Agreement
Conversion (33,530,973) .001- .499
----------- ------------
Outstanding at December 31, 1998 29,077,194 $ .01 - 1.00
=========== ============
</TABLE>
Effective December 31, 1997, the Board of Directors created the Series B
Cumulative Preferred Stock (as discussed in Note J) and issued 245,344 warrants
for this Preferred Stock to the lender under the Loan and Security Agreement to
replace 4,916,720 common stock warrants already issued to them. The warrants
expire on November 18, 2000, and have a $10 exercise price. During 1998, 154,163
of these warrants were exercised by the holder and 666 warrants were cancelled
due to recalculation of the warrant entitlement.
Effective December 31, 1997, the Board of Directors created the Series CI
Preferred Stock and issued 115,184 warrants for this Preferred Stock to a
Convertible Debenture holder to replace 3,430,555 common stock warrants already
issued to them. The warrants expire on December 31, 2001, and have a $10
exercise price. No warrants have been exercised to date.
19
<PAGE> 61
VERIDIEN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE L - STOCK WARRANTS-CONTINUED
Effective December 31, 1997, the Board of Directors created the Series CII
Preferred Stock and issued 41,893 warrants for this Preferred Stock to a
Convertible Debenture holder to replace 1,680,647 common stock warrants already
issued to them. The warrants expire on December 31, 2001, and have a $10
exercise price. No warrants have been exercised to date.
<TABLE>
<CAPTION>
Equivalent
# Common
Shares on
Pref. Share Exercise Pref. Share
Preferred Stock Warrants Price Conversion
- -------------------------------- -------- -------- ----------
<S> <C> <C> <C>
Outstanding at January 1, 1997 0 0
1997 Granted:
Series B 245,344 $ 10.00 4,916,720
Series CI 115,184 $ 10.00 3,430,555
Series CII 41,893 $ 10.00 1,680,647
-------- ----------
Outstanding at December 31, 1997 402,421 10,027,922
1998 Exercised:
Exercised Series B (154,163) $ 10.00 (3,089,443)
Cancelled Series B (665) (13,347)
-------- ----------
Outstanding at December 31, 1998 247,593 6,925,132
======== ==========
</TABLE>
NOTE M - INCOME TAXES
There is no income tax provision for the years ended December 31, 1998 and 1997
due to net operating losses for which no benefit is currently available. The
Company has net operating loss carryforwards of approximately $25,674,000 at
December 31, 1998, available to offset future taxable income from 1999 through
2018.
20
<PAGE> 62
VERIDIEN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE M - INCOME TAXES-CONTINUED
In October 1995, in connection with a loan and security agreement in the amount
of $2,500,000 (See Note E), the Company to outside lenders granted rights to
acquire up to 51% of the common stock of the Company. Under Internal Revenue
Code Section 382 and the Treasury Regulations promulgated thereunder, the
Internal Revenue Code Service might take the position that under all the facts
and circumstances the Company experienced a change in ownership that has the
effect of limiting the carryforward of net operating losses incurred since that
date. If the IRS were to take that position and a court of competent
jurisdiction were to agree with the IRS, the actual amount of net operating loss
carryforward that would agree with the IRS, the actual amount of net operating
loss carryforward that would be deductible each year for a maximum carryfoward
period of twenty years, is based on the value of the Company at the date of the
deemed change of ownership multiplied by the applicable tax-exempt long-term
bond rate.
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets are presented below:
<TABLE>
<CAPTION>
December 31,
1998 1997
----------- -----------
<S> <C> <C>
Deferred Tax Assets:
Net Operating loss carry forwards $ 9,628,000 $ 9,082,000
Less valuation allowance (9,628,000) (9,082,000)
----------- -----------
Net deferred tax assets $ -- $ --
=========== ===========
</TABLE>
21
<PAGE> 63
VERIDIEN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE N - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest amounted to $4,435 and $11,291 for 1998 and 1997,
respectively.
During 1998, the Company issued 450,000 common shares in exchange for a note
receivable of $22,500. The Company issued 34,130,973 common shares in exchange
for debt conversion in the amount of $1,725,012. In 1998, $100,000 of preferred
stock and $72,889 of stock warrants (representing 911,111 warrants) were
converted into 1,184,170 shares of common stock.
In 1997, common stock warrants of $7,289 were exercised for 91,111 shares of
common stock in exchange for a note receivable of $911. The Company recorded
warrant amortization of $23,862 to additional paid in capital upon the lapse of
time. The Company accepted services for the exercise of common stock warrants at
a value of $100,000.
NOTE O - FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has financial instruments, none of which are held for trading
purposes. The Company estimates that the fair value of all financial instruments
at December 31, 1998 and 1997, do not differ materially from the aggregate
carrying value of its financial instruments recorded in the accompanying
consolidated balance sheet. The estimated fair value amounts have been
determined by the Company using available market information and appropriate
valuation methodologies. Considerable judgment is 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.
22
<PAGE> 64
VERIDIEN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE P - SUBSEQUENT EVENTS
(1) Deficit Funding
Subsequent to year-end, the Company received $351,800 in proceeds from
the remainder of the 504 offering. In addition, the Company received
$263,500 from private placement. These funds will be utilized to
partially fund operations.
(2) Computer Software
The Company is analyzing methods of complying with the year 2000 issue
concerning computer software. An initial systems analysis has been
performed by a competent computer software company and a recommended
course of action has been accepted. The Company anticipates implementing
upgrades to the software and hardware system prior to June 30, 1999. In
conjunction with this systems analysis, a review of all internal control
procedures will be done to verify that new system upgrades will provide
adequate protection for company assets and information. Management
expects that the cost of obtaining the upgraded software and network
support will be less than $50,000.
23
<PAGE> 1
EXHIBIT 3.1
DIVISION OF CORPORATIONS
FILED 03:00 PM 06/04/1991
721155148 - 2264857
CERTIFICATE OF INCORPORATION
OF
VCT ACQUISITIONS II, INC.
1. The name of the corporation is:
VCT ACQUISITIONS II, INC.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at
such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. The total number of shares of all classes of stock which the
corporation is authorized to issue is Seventy-Five Million (75,000,000)
shares of which Fifty Million (50,000,000) shares shall be Preferred
Stock of a par value of $.001 amounting in the aggregate to
Seventy-Five Thousand Dollars ($75,000.00).
5. The board of directors is authorized to make, alter or repeal the
By-Laws of the corporation. Election of directors need not be by
written ballot.
6. The name and mailing address of the incorporator is:
L.M. Custis
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware
19801
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of
Delaware, do make this certificate, hereby declaring and certifying that this
is my act and deed and the facts herein stated are true, and accordingly have
hereunto set my hand this 4th day of June, 1991.
----------------------------------
L.M. Custis
<PAGE> 1
EXHIBIT 3.2
DIVISION OF CORPORATIONS
FILED 10:46 AM 09/13/1991
912565054 - 2264857
RESTATED CERTIFICATE OF INCORPORATION
OF
VCT ACQUISITIONS II, INC.
VCT ACQUISITIONS II, INC., a corporation organized on June 4, 1991 and existing
under and by virtue of the General Corporation Law of the State of Delaware
(the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: That the Corporation has not received any payment for any of
its stock;
SECOND: That the Board of Directors of the Corporation at a meeting
duly held and in accordance with the provisions of Sections 241 and 245 of the
General Corporation Law of the State of Delaware has duly approved and adopted
the following resolution amending in its entirety the Certificate of
Incorporation of the Corporation:
RESOLVED, that the Corporation amend its Certificate of Incorporation
and that the Restated Certificate of Incorporation of the Corporation
attached to these resolutions as Exhibit A, be, and hereby is,
approved and adopted.
IN WITNESS WHEREOF, said VCT Acquisitions II, Inc. has caused this
certificate to be signed by its Senior Vice President this 13th day of
September, 1991.
----------------------------------
Wayne L. Taylor
Senior Vice President
Attest:
By:
--------------------------------
Brent Bullock
Secretary
<PAGE> 2
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
VIRAL CONTROL TECHNOLOGY INC.
FIRST. The name of this corporation is Viral Control Technology,
Inc.
SECOND. The registered office in the State of Delaware is to be
located at 1209 Orange Street in the City of Wilmington, County of New Castle.
The registered agent in charge thereof is The Corporation Trust Company at 1209
Orange Street in the City of Wilmington, County of New Castle.
THIRD. The nature of the business and the objects and purposes
proposed to be transacted, promoted and carried on, are to do any or all of the
things herein mentioned, as fully and to the same extent as natural persons
might or could do, and in any part of the world, viz:
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH. Section 1. The total number of shares of all classes of stock
which the corporation shall have authority to issue is seventy-five million
(75,000,000) shares.
The corporation shall have authority to issue two (2) classes of
stock. Fifty million (50,000,000) shares shall be common stock having a par
value of $.001 (hereinafter referred to as "Common Stock") and twenty-five
million (25,000,000) shares shall be preferred stock issuable in series and
have a par value of $.001 (hereinafter referred to as "Preferred Stock").
Section 2. Statement of Preferences, Limitations and Relative Rights
in Respect of Shares of Each Class. A description of the different classes of
stock and a statement of the designations, preferences, voting rights,
limitations and relative rights of the holders of stock of such classes are as
follows:
A. Preferred Stock.
(1) Shares of Preferred Stock may be issued from time to
time in one or more series. The preferences and relative, participating,
optional and other special rights of each of such series and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series already outstanding; and the Board of
Directors of the corporation is hereby expressly granted authority to fix, by
resolution or resolutions adopted prior to the issuance of any shares of a
particular series of Preferred Stock, the designations, preferences and
relative, participating, optional and other special rights, or the
qualifications, limitations or restrictions thereof, of such series, including,
without limiting the generality of the foregoing, the following:
<PAGE> 3
(a) The rate, if any, and times at which, and
the terms and conditions on which, dividends on the Preferred Stock of such
series shall be paid;
(b) The redemption price or prices, if any, and
the times at which Preferred Stock of such series may be redeemed;
(c) The rights of the holders of Preferred
Stock of such series upon the voluntary or involuntary liquidation,
distribution or sale of assets, dissolution or winding up of the corporation;
(d) The terms of the sinking fund or redemption
of purchase account, if any, to be provided for the Preferred Stock of such
series;
(e) The right, if any, of the holders of
Preferred Stock of such series to convert the same into, or exchange the same
for, other classes of stock of the corporation and the terms and conditions of
such conversation or exchange; and
(f) The voting powers, if any, of the holders
of the Preferred Stock of such series.
(2) All Shares of a particular series shall be identical
in all respects. The rights of the Common Stock of the corporation may be
subject to the preferences and relative, participating, optional and other
special rights of the Preferred Stock of each series as fixed from time to time
by the Board of Directors as aforesaid.
(3) The holders of the Preferred Stock, in preference to
the holders of the Common Stock of the corporation, may be entitled to receive,
if and when declared by the Board of Directors, dividends at the rate
established by the Board of Directors at the time of the issuance of the shares
of each series. Such dividends, when and if declared, may be cumulative so that
if dividends in respect of any dividend period shall not have been paid upon,
or declared and set apart for, the Preferred Stock, the deficiency shall be
fully paid or declared and set apart before any dividends shall be paid upon,
or declared or set apart for the Common Stock.
B. Common Stock.
(1) After the requirements with respect to preferential
dividends upon the Preferred Stock shall have been met, if such preference be
established by the Board of Directors of the corporation, and after the
corporation shall have complied with all requirements, if any, with respect to
the setting aside of sums as a sinking fund or redemption or purchase account
for the benefit of any series of Preferred Stock, then and not otherwise, the
holders of the Common Stock shall be entitled to receive such dividends as may
be declared from time to time by the Board of Directors.
(2) After distribution in full for the preferential
amount to be distributed to the holders of all series of the Preferred Stock
then outstanding in the event of voluntary or involuntary liquidation,
dissolution or winding up of the corporation, the holders of the Common Stock
shall be entitled to receive all the remaining assets of the corporation
available for distribution to its stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
A-2
<PAGE> 4
(3) Each holder of Common Stock shall have one (1) vote
for each share of Common Stock held by him in all matters submitted to a vote
of the stockholders. Cumulative voting in the election of directors will not be
allowed.
FIFTH. The Directors shall have power to make and to alter or amend
the Bylaws , to fix the amount to be reserved as working capital, and to
authorize and cause to be executed, mortgages and liens without limit as to the
amount, upon the property and franchise of the Corporation.
With the consent in writing, and pursuant to a vote of the holders of
a majority of the capital stock issued and outstanding, the Directors shall
have the authority to dispose, in any manner, of the whole property of this
corporation.
The Bylaws shall determine whether and to what extent the accounts and
books of this Corporation, or any of them shall be open to the inspection of
the stockholders; and no stockholder shall have any right of inspecting any
account, or book or document of this Corporation, except as conferred by the
law or the Bylaws, or by resolution of the stockholders.
The stockholders and directors shall have power to hold their meetings
and keep the books, documents and papers of the Corporation outside of the
State of Delaware, at such places as may be from time to time designated by the
Bylaws or by resolution of the stockholders or directors, except as otherwise
required by the laws of Delaware.
It is the intention that the objectives, purposes and powers specified
in the third paragraph hereof shall, except where otherwise specified in said
paragraph, be nowise limited or restricted by reference or inference from the
terms of any other clause of paragraph in this certificate of incorporation,
but that the objects, purposes and powers specified in the third paragraph and
in each of the clauses or paragraphs of this charter shall be regarded as
independent objects, purposes and powers.
SIXTH. The Corporation shall have the ability to indemnify its
directors and officers to the maximum extent permitted by the General
Corporation Law of Delaware and other applicable law. The provisions relating
to such indemnification of the directors and officers of the Corporation shall
be set forth in the Bylaws of the Corporation as adopted and in force from time
to time.
SEVENTH. The provisions of Section 203 of the General Corporation Law
of Delaware shall be applicable to the outstanding voting securities of this
Corporation.
A-3
<PAGE> 1
EXHIBIT 3.3
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 11:00 AM 11/08/1991
721312012 - 2264857
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
Viral Control Technology, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY pursuant to Section 242 of the General Corporation Law of
the State of Delaware:
FIRST: That at a meeting of the Board of Directors of Viral Control
Technology, Inc. held on October 18, 1991 resolutions were duly adopted setting
forth proposed amendments to the Restated Certificate of Incorporation of said
corporation, declaring said amendments to be advisable, subject to the approval
of such amendment by the majority of the stockholders pursuant to Section 228
of the General Corporation Law of the State of Delaware. The resolutions
setting forth the proposed amendments are as follows:
RESOLVED that the Restated Certificate of Incorporation of the
Corporation hereby is amended by deleting the first paragraph in its entirety
and substituting the following:
"FIRST. The name of this corporation is Veridien Corporation".
RESOLVED that the Restated Certificate of Incorporation of the
Corporation hereby is further amended by adding an eighth paragraph to read as
follows:
"EIGHTH. Commencing at the Annual Meeting of stockholders held in
1991, the terms of office of the Board of Directors shall be divided into three
classes, Class I, Class II and Class III, as shall be determined by the Board
of Directors. All classes shall be as nearly equal in number as possible, and
no class shall include less than two nor more than four directors. Directors
elected to fill a newly created directorship or other vacancies shall be
classified and hold office as provided by Statute.
The terms of office of the directors initially classified shall be as
follows: (1) that of Class I shall expire at the Annual Meeting of stockholders
to be held in 1992; (2) that of Class II shall expire at the Annual Meeting of
stockholders to be held in 1993; and (3) that of Class III shall expire at the
Annual Meeting of stockholders to be held in 1994. At each Annual Meeting of
stockholders after the aforementioned initial classification, the successors to
directors whose terms shall then expire shall be elected to serve from the time
of election and qualification until the third Annual Meeting following election
and until a successor shall have been duly elected and shall have qualified.
The directors of any class of directors of the Corporation may not be
removed prior to the expiration date of their terms of office, except for cause
and by an affirmative vote for the holders of at least seventy-five percent
(75%) of the outstanding shares of all classes of capital stock of the
Corporation entitled to vote for the Board of Directors at the Annual Meeting
of stockholders, or at any Special Meeting of stockholders called by the Board
of Directors or by the Chairman of the Board or by the Chief Executive Officer
for this purpose.
<PAGE> 2
2
Notwithstanding any other provisions of this Certificate of
Incorporation or the By-Laws of the Corporation (and notwithstanding the fact
that a lesser percentage or separate class vote may be specified by law, this
Certificate of Incorporation, the By-Laws of the Corporation or otherwise), any
proposal to amend, alter, repeal or adopt any provision inconsistent with this
or the preceding paragraphs of this paragraph EIGHTH, shall require the
affirmative vote of not less than seventy five percent (75%) of the outstanding
shares entitled to vote thereon".
SECOND: That said amendments were duly adopted on October 18, 1991, by
a Written Consent of a Majority of the Stockholders, in accordance with Section
228 of the General Corporation Law of the State of Delaware.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Viral Control Technology, Inc. has caused
this certificate to be signed by Wayne L. Taylor, its Executive Vice President
and attested by Brent Bullock, its Secretary, this 6th day of November, 1991.
By:
----------------------------------
Wayne L. Taylor
Executive Vice President
ATTEST:
By:
------------------------------
Brent Bullock
Secretary
<PAGE> 1
EXHIBIT 3.4
VERIDIEN CORPORATION
BYLAWS
1998
<PAGE> 2
BYLAWS
of
VERIDIEN CORPORATION
a Delaware Corporation
ARTICLE I - OFFICES
Section 1. Business Offices. VERIDIEN CORPORATION (herein the
"Corporation"), may have such offices, either within or without the State of
Delaware, as the Board of Directors may designate from time to time.
Section 2. Registered Office. The Corporation shall maintain a
registered office in the State of Delaware, which may be changed from time to
time by the Board of Directors.
ARTICLE II - STOCKHOLDERS
Section 1. Annual Meeting. The Annual Meeting of Stockholders
of the Corporation shall be held subsequent to the end of each fiscal year of
the Corporation, on such date and at such hour as the Chairman shall annually
determine.
Section 2. Special Meetings. Special meetings of the
stockholders may be called by the Board of Directors, the Chairman of the Board
of Directors, or the Chief Executive Officer of the Corporation. No business
shall be transacted at any special meeting unless such business is stated in
the notice of the meeting as one of the purposes of that special meeting.
Section 3. Place and Time of Meeting. The Board of Directors
shall designate the place and time of any annual meeting or special meeting of
the stockholders. The place so designated may be either within or without the
State of Delaware, as the Board may choose.
Section 4. Notice of Meeting. Notice of the meeting, 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, shall be delivered not
less than ten (10) calendar days nor more than sixty (60) calendar days before
the date of the meeting, by, written, telegraphic, or any other means of
communication, by or at the direction of the Chief Executive Officer, the
Secretary, or the other person(s) calling the meeting, 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 his address as it appears on the stock transfer books of the
Corporation, with postage thereon prepaid.
Section 5. Notice of Adjourned Meeting. When a meeting is
adjourned to another time or place, it shall not be necessary to give any
notice of the adjourned meeting if the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken. If
the adjournment is for more than thirty (30) days, or if after the adjournment,
a new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall then be given to each stockholder of record entitled to vote at
the meeting. At an adjourned meeting, any business may be transacted that might
have been transacted on the original date of the meeting.
Section 6. Waiver of Notice of Meeting of Stockholders.
Whenever any notice is required to be given to any stockholder of the
Corporation under the provisions of any statute, or under the provisions of the
Bylaws, a waiver thereof signed by the person(s) entitled to such notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting
for the expressed purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully
<PAGE> 3
called or convened. Neither the business to be transacted at, nor the purpose
of, any annual or special meeting of the stockholders need be specified in any
written waiver of notice.
Section 7. Fixing of Record Date. For the purpose of
determining stockholders entitled to notice of, or to vote at, any meeting of
stockholders or any adjournment thereof, or stockholders entitled to receive
payment of any dividend, or in order to make a determination of stockholders
for any other proper purpose, the Board of Directors shall fix in advance a
date as the record date for any such determination of stockholders, such date
in any case to be not more than sixty (60) days prior to the date on which the
particular action requiring such determination of stockholders is to be taken
and, in the case of a meeting of stockholders, not less than ten (10) days
prior to the date on which the particular action requiring such determination
of stockholders is to be taken.
When a determination of stockholders entitled to vote at any meeting
of stockholders has been made as provided in this Section, such determination
shall apply to any adjournment thereof, unless the Board of Directors fixes a
new record date for the adjourned meeting.
All notice and record periods established herein shall be adjusted
where required to conform to any prescribed periods now or hereafter provided
by the Delaware General Corporation Act.
Section 8. Stockholder Quorum and Action. A majority of the
shares entitled to vote, represented in person or by proxy, shall constitute a
quorum at a meeting of stockholders. The stockholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting and entitled to vote on the subject matter,
shall be the act of the stockholders, unless otherwise provided by law.
Section 9. List of Stockholders. The Secretary of the
Corporation shall prepare and make available at least ten (10) days before
every meeting of the stockholders, a complete list of the stockholders entitled
to vote at the meeting, as required by statute.
Section 10. Voting. Each outstanding share entitled to vote
shall be entitled to one vote upon each matter submitted to a vote at a meeting
of stockholders.
Section 11. Proxies. Every stockholder entitled to vote at a
meeting of stockholders, or to express consent or dissent to corporate action
in writing without a meeting, may authorize any other person(s) to act for him
by proxy. However, no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Corporation generally.
Section 12. Organization. Meetings of the stockholders shall be
presided over by the Chairman of the Board, if any, the Vice Chairman of the
Board, if any, the Chief Executive Officer, the President, any Vice President,
or in their absence, by a chairman to be chosen by a majority of the
stockholders entitled to vote at the meeting who are present in person or by
proxy. The Secretary, an Assistant Secretary, or in their absence, any person
appointed by the chairman of the meeting, shall act as secretary of the
meeting.
Section 13. Action by Stockholders Without a Meeting. Any action
required or permitted 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 the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Within ten (10) days after obtaining such authorization by written
consent, notice shall be given to those stockholders who have not consented in
writing. The notice shall fully summarize
<PAGE> 4
the material features of the authorized action and, if the action be a merger,
consolidation, or sale or exchange of assets for which dissenters' rights are
provided by law, the notice shall contain a clear statement of the rights of
stockholders dissenting therefrom.
ARTICLE III - DIRECTORS
Section 1. Powers. Except as otherwise provided by law or by
the Corporation's Articles of Incorporation, all corporate powers shall be
exercised by or under the authority of, and the property, business, and affairs
of the Corporation shall be managed under the direction of, the Board of
Directors.
Section 2. Number, Tenure, and Qualification. The number of
directors of the Corporation shall be no fewer than six nor more than twelve,
with the exact number of directors to be determined by the stockholders of the
Corporation, subject, however, to the right of the Board, at any time between
the conduct of annual stockholder meetings, to increase such number by one.
Following the conclusion of the 1998 annual meeting of stockholders, there
shall be only one class of Company directors, each with a one year term. No
director need be a resident of the State of Delaware or a stockholder of the
Company.
Section 3. Election of Directors. At the Annual Meeting of
Stockholders, directors shall be elected by the affirmative vote of the
majority of the shares represented at the meeting and entitled to vote for the
election of directors. If the election of directors is not held on the day
designated by the Board of Directors for any Annual Meeting of Stockholders, or
at any adjournment thereof, the Board of Directors may cause the election to be
held at a special meeting of stockholders specifically called for that purpose.
Section 4. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately after,
and at the same place as, the annual election of directors. The Board of
Directors may, from time to time, by resolution appoint the time and place,
either within or without the State of Delaware, for holding other regular
meetings of the Board, if by it deemed advisable. Such regular meetings shall
thereupon be held at the time and place so appointed, without the giving of any
notice with regard thereto.
Section 5. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman, the Chief Executive
Officer, or any two directors. The person(s) authorized to call special
meetings of the Board of Directors may fix any place, either within or without
the State of Delaware, and any time, as the place and time for holding any
special meeting of the Board of Directors called by him or them.
Section 6. Notice of Special Meeting. Notice to a director of
any special meeting may be given in writing by mailing the same to the
residence or place of business of the director, as shown on the books of the
Corporation, so that the director receives such notice not less than 24 hours
before the meeting on the day on which the meeting is to be held.
Alternatively, notice to a director of any special meeting may be given by (a)
sending the same to him at this residence or place of business by telegraph,
(b) transmitting the same to him at such place by facsimile transmission, (c)
delivering the same to him personally, (d) leaving the same for him at his
residence or place of business, or (e) giving the same to him by telephone, any
of these not later than three hours before such meeting. If mailed, such notice
shall be deemed to be delivered when received. If notice is given by telegram
or cablegram, such notice shall be deemed to be delivered when the telegram or
cablegram, such notice shall be deemed to be delivered when the telegram or
cablegram is delivered to the telegraph company. If faxed, such notice shall be
deemed to be delivered when transmitted by the sender. Except as otherwise
provided in the Bylaws, or as may be indicated in the notice thereof, any and
all business may be transacted at any special meeting.
When a special meeting of the Board of Directors is adjourned to
another time and place, no notice of the adjourned meeting need be given if the
time and place to which the meeting is adjourned are announced at the meeting
at which the adjournment is taken.
Section 7. Waiver of Notice. A director may waive the
requirement of notice of a special meeting of the Board of Directors by signing
a waiver of notice whether before or after the meeting. The attendance of a
director at a meeting shall constitute a waiver of notice of such meeting and a
waiver of any and
<PAGE> 5
all objections to the place or time of such meeting or the manner in which it
has been called or convened, except when the director states, at the beginning
of the meeting, any objection to the transaction of business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
Section 8. Quorum and Action. A majority of the total number of
directors then in office shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than such
majority is present at the meeting, a majority of the directors present may
adjourn the meeting from time to time until a quorum shall have been obtained.
However, whenever the Board of Directors or the stockholders shall
determine that there be only one (1) member of the Board of Directors, then and
only then, one Director shall constitute a quorum.
Directors shall be deemed present at a meeting of the Board of
Directors if a conference telephone, or similar communications equipment by
means of which all persons participating in the meeting can hear each other, is
used.
The affirmative vote of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of
Directors.
Section 9. Presumption of Assent. A director of the Corporation
who is present at a meeting of its Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless he votes against such action or abstains from voting in respect
thereto because of an asserted conflict of interest.
Section 10. Action Without a Meeting. Any action required or
permitted to be taken by the Board of Directors at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors and filed in the minutes of the
proceedings of the Board of Directors.
Section 11. Interested Directors. No contract or other
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers or have a financial interest, shall be void
or voidable solely for this reason, or solely because such director or officer
is present at or participates in the meeting of the Board of Directors or a
committee thereof, which authorizes, approves, or ratifies such contract or
transaction or solely because his or their votes are counted for such purpose,
if:
(a) The material facts as to such relationship or interest and as
to the contract or transaction are disclosed or known to the Board of Directors
or committee, and the Board or committee in good faith authorizes the contract
or transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(b) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair to the Corporation as of
the time it is authorized, approved, or ratified, by the Board of Directors, a
committee, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves, or ratifies such contract or transaction.
<PAGE> 6
Section 12. Compensation of Directors. The Board of Directors
may pay each director a stated salary as such, or a fixed sum for attendance at
meetings of the Board of Directors or any committee thereof, or both, and may
reimburse each director for his expenses of attendance at each such meeting.
The Board of Directors may also pay to each director rendering services to the
Corporation not ordinarily rendered by directors, as such, special compensation
appropriate to the value of such services, as determined by the Board of
Directors from time to time. None of these payments shall preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor. The Board of Directors may determine the compensation of a director
who is also an officer, for service as an officer, as well as for service as a
director.
Section 13. Resignations. Any director of the Corporation may
resign at any time upon written notice to the Corporation. Such resignation
shall take effect at the time specified therefor, and unless otherwise
specified with respect thereto, the acceptance of such resignation shall not be
necessary to make it effective.
Section 14. Removal. No director may be removed from office by
the stockholders except for and by the affirmative vote of the holders of not
less than seventy-five percent (75%) of the total voting power of all
outstanding securities of the Corporation then entitled to vote generally in
the election of directors, voting together as a single class.
Section 15. Vacancies. Any vacancy occurring in the membership
of the Board of Directors, whether resulting from death, resignation, removal
or otherwise, and any newly created directorship resulting from any increase in
the number of directors, may be filled by the affirmative vote of a majority of
all remaining members of the Corporation's Board of Directors. Each director so
selected shall hold office only until the next succeeding election of directors
by the Corporation's stockholders and the subsequent qualification and seating
of his or her successor.
Section 16. Audit Committee. The Board of Directors shall
designate from among its members an Audit Committee. A majority of the
directors so designated as members of the Audit Committee shall be
non-employee, non-officer directors. The Audit Committee shall meet at least
quarterly, as soon as is practical after the close of the previous fiscal
quarter, to review the financial results of the Corporation for the quarter
then ended, and to make such inquiries into such results, and the underlying
accounts and records, as the Audit Committee may, in its sole discretion, deem
reasonable.
Section 17. Other Committees. The Chairman of the Board may
designate from among members of the Board one or more other committees, to
consist of one or more Directors of the Corporation. The Chairman shall have
power at any time to fill vacancies in, change the membership of, designate one
or more Directors as alternate members of, or discharge any such committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting who are not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board to act at the meeting in place of any such absent or
disqualified member.
Section 18. Powers and Duties of Committees. All Committees
shall serve at the direction of the Chairman, and shall have the powers granted
to it from time to time by the Chairman, unless restricted by the Article of
Incorporation. Duties of the committees are to be assigned by the Chairman in
writing, unless the assignment is made during a Board meeting and the minutes
of such meeting clearly indicates the assignment.
No such committee shall have or be granted the power or authority to
amend the Certificate of Incorporation, adopt an agreement of merger or
consolidation, recommend to the stockholders the sale, lease or exchange of all
or substantially all of the Corporation's property and assets, recommend to the
stockholders a dissolution of the Corporation or revocation of dissolution, or
amend these Bylaws; and, unless the resolution of these Bylaws expressly so
provide, no such committee shall have the power or authority to declare a
dividend or the authorize the issuance of stock.
Section 19. Chairman of the Board of Directors. The Chairman of
the Board of Directors shall be elected by the directors at the regular meeting
of the Board of Directors following the annual election of directors. The
Chairman shall hold office until the regular meeting of the Board of Directors
following the annual election of directors in the next subsequent year and
until his successor shall have been duly elected and
<PAGE> 7
shall have qualified, or until his earlier resignation, removal from office, or
both. The Chairman shall preside, when available, at all meetings of the
stockholders and the Board of Directors. He shall have the specific powers
conferred by these Bylaws.
ARTICLE IV - OFFICERS
Section 1. Executive Officers. The executive officers of the
Corporation shall include a Chief Executive Officer, a President, a Secretary,
a Treasurer and such other officers and assistant officers as may be deemed by
the Board of Directors necessary or appropriate to the operation of the
Corporation. Each executive officer shall be elected by the Board of Directors.
Any two or more offices herein designated may be held by the same individual.
Section 2. Election and Term of Office. The executive officers
of the Corporation shall be elected at the regular meeting of the Board of
Directors immediately following the annual election of directors. Each such
officer shall hold office until the regular meeting of the Board of Directors
immediately following the annual election of directors in the succeeding year
and until his or her successor shall have been duly elected and shall have
qualified, or until his or her earlier resignation, removal from office or
death.
Section 3. Removal from Office. Any executive officer may be
removed from office by action of the Board of Directors taken with or without
cause.
Section 4. Vacancies. A vacancy in any executive office may be
filled by action of the Board, and its appointees shall hold office for the
unexpired term or until his or her successor is elected and qualified.
Section 5. Chief Executive Officer. The Chief Executive
Officer, in the absence of the Chairman of the Board, shall preside at meetings
of the stockholders and of the Board of Directors. The Chief Executive Officer
shall have general charge of the business of the Corporation and the power to
formulate all plans and policies in connection therewith, subject to the
control of the Board of Directors. He shall keep the Board of Directors fully
informed and shall consult with the Board of Directors concerning the business
of the Corporation. The Chief Executive Officer shall have the authority to
bestow upon (and to remove from) one or more individual employees of the
Corporation the title of vice president and designate the particular
operational function to which his or her service is directed, notwithstanding
that such designee shall not have been elected by the Board of Directors. Such
title shall be administrative in nature and shall not have been elected by the
Board of Directors. Such title shall be administrative in nature and shall not
be treated as providing the designee with any executive authority granted to
the executive officers identified in Section 1. above. The Chief Executive
Officer shall also have such additional powers and perform such additional
duties as may, from time to time, be specified by the Board of Directors.
Section 6. President. The President shall have general
responsibility for the day to day management and direction of the business,
properties and affairs of the Corporation. He shall have general executive
powers, including all powers required by law to be exercised by a president of
a profit seeking corporation, as well as the specified powers conferred by
these Bylaws and by the Board of Directors. When the offices of the Chief
Executive Officer and the President are occupied by different individuals, the
President shall report to and be under the direct supervision and control of
the Chief Executive Officer.
Section 7. Vice President. In the absence of the President, or
in the event of his death, inability, or refusal to act, the Vice President, if
one has been appointed or elected by the Board of Directors (or in the event
there be more than one Vice President, the Vice Presidents in the order
designated at the time of their appointment or election, or in the absence of
any designation, then in the order of their appointment or election), shall
perform the duties of the President and, when so acting, shall have all of the
powers of, and be subject to all of the restrictions upon, the President.
Section 8. Secretary. The Secretary shall (a) keep the minutes
of the proceedings of the Board of Directors and the stockholders in one or
more books provided for that purpose, (b) see that all notices are duly given
in accordance with the provisions of these Bylaws or as required by law, (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all
<PAGE> 8
documents the execution of which on behalf of the Corporation under its seal is
duly authorized, (d) be the registrar of the Corporation and keep a register of
the addresses of all stockholders which shall be furnished to the Secretary by
the stockholders or by the Corporation's transfer agent, (e) have general
charge of the stock transfer books and records of the Corporation, and (f) in
general, perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Board of Directors.
Section 9. Treasurer. The Treasurer shall (a) have charge and
custody of, and be responsible for, all funds and securities of the
Corporation, (b) receive and give receipts for monies due and payable to the
Corporation from any source whatsoever, and deposit all such monies in the name
of the Corporation in such banks, trust companies, or other depositories as the
Board of Directors may direct or authorize, and (c) in general, perform all of
the duties as from time to time may be assigned to him by the Chief Executive
Officer or the Board of Directors. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such
sum, and with such surety or sureties, as the Board of Directors shall
determine.
Section 10. Salaries. No officer shall be prevented from
receiving a salary by reason of the fact that he is also a director of the
Corporation.
ARTICLE V - CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for or Shares. Certificates
representing shares of the Corporation shall be in such form as shall be
determined by the Board of Directors. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by the Chairman or Chief
Executive Officer and by the Secretary, and sealed with the corporate seal or a
facsimile thereof, certifying the number of shares owned by him in the
Corporation. Each certificate 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. No certificate shall be
issued for any share until such share is fully paid. In case any officer,
transfer agent, or registrar who has signed, or whose facsimile signature has
been placed upon, a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue. Each certificate shall be sealed with the seal
of the Corporation, or a facsimile thereof.
Section 2. Transfer of Shares. The Corporation or its duly
authorized agent shall register a certificate for shares presented to it for
transfer if (a) the certificate is endorsed by the appropriate person(s), (b)
reasonable assurance is given that those endorsements are genuine and
effective, (c) the Corporation or its duly authorized agent has no duty to
inquire into adverse claims, or has discharged any such duty, (d) any
applicable law relating to the collection of taxes has been complied with, and
(e) the transfer is in fact rightful, or is to a purchaser for value in good
faith, and without notice of any adverse claim. The new certificate(s) shall be
issued only upon surrender of the old certificate, which shall be canceled upon
the issuance of the new certificate(s). 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, and the Corporation shall not be bound to
recognize an equitable or other claim to, or interest in, such share on the
part of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of the State of Delaware.
Section 3. Lost, Stolen, or Destroyed Stock Certificates:
Issuance of New Certificates. The Corporation may issue a new certificate of
stock in the place of any certificate theretofore issued by it, alleged to have
been lost, stolen, or destroyed, and the Corporation may require the owner of
the lost, stolen, or destroyed certificate, or his legal representative, to
give the Corporation a bond sufficient to indemnify the Corporation against any
claim that may be made against it on account of the alleged loss, theft, or
destruction of any such certificate, or the issuance of such new certificate.
ARTICLE VI - BOOKS AND RECORDS
Section 1. Books and Records. The Corporation shall keep
correct and complete books and records of account, and shall keep minutes of
the proceedings of its Board of Directors and stockholders. The
<PAGE> 9
Corporation shall also keep, at its principal place of business or with its
duly authorized agent, a record of its stockholders, giving names and addresses
of all stockholders and the number of shares held by each.
Section 2. Stockholders' Inspection Rights. Any stockholder, in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the Corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean a purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or
other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the Corporation at its
registered office in the State of Delaware, or at its principal place of
business, if different.
ARTICLE VII - INDEMNIFICATION
Section 1. The Corporation shall have the power to indemnify
any person who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by, or in the
right of, the Corporation) by reason of the fact that he is or was a director,
officer, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against any expenses (including attorneys' fees), judgements, fines, and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit, or proceeding, if he 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 any criminal action or
proceeding, had no reasonable cause to believe that his conduct was unlawful.
The termination of any action, suit, or proceeding by arbitration, consent
agreement, voluntary settlement, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act 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 any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 2. The Corporation shall have the power to indemnify
any person who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action, suit, or proceeding by, or in the
right of, the Corporation to procure a judgement in its favor, by reason of the
fact that he is or was a director, officer, employee, or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation, partnership,
joint venture, trust, of other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action, suit, or proceeding, if such person acted
in good faith and in a manner which he reasonably believed to be in, and not
opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue, or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless, and only to the extent that, the Court of Chancery or the court in
which such action or suit was brought, shall determine upon application that,
despite the adjudication of liability, but in view of all of the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for
such expenses as such court shall deem proper.
Section 3. To the extent that a director, officer, employee, or
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit, or proceeding referred to in Section 1 or 2 of
this Article, or in defense of any claim, issue, or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 4. Any indemnification under Section 1 or 2 of this
Article (unless ordered by a court), shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in Section 1 or
2 of this Article. Such determination shall be made (a) by the Board of
Directors by a majority vote of a quorum consisting of Directors who were not
party to such action, suit, or proceeding, or (b) if such a quorum is not
obtainable or, even if obtainable, a quorum of disinterested Directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders.
<PAGE> 10
Section 5. Expenses incurred by an officer or director in
defending a civil or criminal action, suit, or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit, or
proceeding upon receipt of an undertaking by, or on behalf of, such director or
officer to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Corporation as authorized in this
section. Such expenses incurred by other employees and agents may be paid upon
such terms and conditions, if any, as the Board of Directors deems appropriate.
Section 6. The indemnification and advancement of expenses
provided by or granted pursuant to the foregoing sections are not exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any Bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise, both as to action in their official
capacity, and as to action in any other capacity while holding such office.
Section 7. Indemnification and advancement of expenses as
provided by, or granted pursuant to, this Article shall continue, unless
otherwise provided when authorized or ratified, as to a person who has ceased
to be a director, officer, employee, or agent, and shall inure to the benefit
of the heirs, executors, and administrators of such a person.
Section 8. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against
any liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have
the power to indemnify him against such liability under the provisions of this
Article.
ARTICLE VIII - MISCELLANEOUS
Section 1. Fiscal Year. The fiscal year of the Corporation
shall be determined by the Board of Directors upon consultation with the
Corporation's accountants.
Section 2. Dividends. The Board of Directors may from time to
time declare, and the Corporation may pay, dividends on its outstanding shares
in the manner, and upon the terms and conditions, provided by law and the
Articles of Incorporation.
Sections 3. Corporate Seal. The Board of Directors shall provide
a corporate seal which shall be circular in form and shall have inscribed
thereon the name of the Corporation and the state of incorporation.
Section 4. Execution of Instruments. All bills, notes, checks,
other instruments for the payment of money, agreements, indentures, mortgages,
deeds, conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies, and other instruments or
documents may be signed, executed, acknowledged, verified, delivered, or
accepted on behalf of the Corporation by the Chief Executive Officer, the
President, any Vice President, the Secretary, or the Treasurer. Any such
instruments may also be signed, executed, acknowledged, verified, delivered, or
accepted on behalf of the Corporation in such other manner, and by such other
officers, employees, or agents of the Corporation as the Board of Directors may
from time to time direct.
ARTICLE IX - AMENDMENTS
These Bylaws may be amended, altered, or repealed, and new Bylaws made
by the Board of Directors, except as otherwise provided in the Bylaws, and by
affirmative vote of the holders of more than 50% of the shares entitled to
vote.
<PAGE> 1
EXHIBIT 3.5
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 09/14/1998
981356079 - 2264857
VERIDIEN CORPORATION
CERTIFICATE OF THE POWERS, PREFERENCES, RIGHTS,
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SERIES B CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151
of the
Delaware General Corporation Law
VERIDIEN CORPORATION, a Delaware corporation maintaining its principal
place of business at 11800 28th Street North, St. Petersburg, Florida 33716
(the "Corporation"), hereby certifies that pursuant to authority conferred upon
its Board of Directors by the Corporation's Certificate of Incorporation and
separately by the provisions of Section 151 of the Delaware General Corporation
Law, such Board, by unanimous written action taken as of December 31, 1997, has
adopted a resolution approving and providing for the designation and issuance
of a series of its 25,000,000 shares of authorized preferred stock, $.001 par
value, the content of which resolution is hereafter set forth in its entirety:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of this Corporation by Article FOURTH, Section
2.A of its Certificate of Incorporation, a series of the Corporation's single
authorized class of preferred stock, $.001 par value, to consist of 245,344
shares, is hereby established and designated as its Series B Convertible
Preferred Stock, $.001 par value (the "Series B Preferred Stock"), the powers,
preferences and relative participating, optional or other special rights of
which, and the qualifications, limitations and restrictions to which shares of
the Series shall be subject, are as follows:
1. Stated Value. Notwithstanding its $.001 par value, the stated
value of each issued share of Series A Preferred Stock (the "Stated Value")
shall be deemed to be $10.00, and each share thereof shall be validly issued,
fully paid and nonassessable upon receipt by the Corporation of legal
consideration in an amount determined by the Corporation's Board of Directors
to be at least equal to such Stated Value.
2. Relative Seniority: Definition of Common Stock. The Series B
Preferred Stock shall rank senior in all respects to shares of the
Corporation's existing single class of common stock, $.001 par value (the
"Common Stock") and, except as specified in the succeeding sentence, to any
other class or series of capital stock which is designated as ranking, in
respect of the right to participate in the payment of dividends or other
distributions or in distributions made upon any dissolution or other winding up
of the Corporation's legal existence and the associated liquidation of its
assets, junior to the Series B Preferred Stock (the Common Stock and each such
other class or series of stock are hereinafter collectively referred to as
"Junior Stock"). The Series B Preferred Stock shall rank pari passu with any
other series of preferred stock, expressly including shares of the
Corporation's series of 10% Cumulative Convertible Redeemable
<PAGE> 2
Preferred Stock made the subject of a Certificate of Designation filed
with the Delaware Department of State as of May 16, 1995 (the "Series A
Preferred Stock"), in respect of any distribution hereafter made upon any
dissolution or other winding up of the Corporation's legal existence or
business activity (collectively the "Pari Passu Stock"), but junior to the
Series A Preferred Stock with respect to the right to participate in the
payment of dividends. As used in this Resolution the term "Common Stock" shall
be deemed to include all shares of the Corporation's common stock authorized at
the date of the initial issuance of shares of the Series B Preferred Stock or,
in the case of any future reclassification or exchange of such common stock,
shares of the Corporation's capital stock into or for which such common stock
shall be reclassified or exchanged, and all provisions of this Resolution shall
be applied appropriately thereto.
3. Voting Rights. Each issued and outstanding share of Series B
Preferred Stock shall entitle the registered holder thereof to fully
participate in all meetings of the Corporation's shareholders and to cast that
number of votes, on each matter with respect to which shareholders of the
Corporation have the right or are asked to vote or provide their written
consent, equal to the number of shares of Common Stock into which it is
convertible on the record date for determining shareholders eligible to vote on
such matter or, if no such record date is established, on the date such vote is
taken or any written consent of shareholders is solicited.
4. Dividends. Each holder of shares of Series B Preferred Stock
shall be entitled to receive an annual cash dividend with respect to each such
share owned, calculated at a rate equal to the higher of (a) 10% of the Stated
Value thereof (subject to appropriate adjustment for any stock split, whether
forward or reverse, or similar transaction with respect to the Series B
Preferred Stock), or (b) the actual dividend per share declared by the Board of
Directors as being payable on the number of shares of Common Stock into which
each share of Series B Preferred Stock is convertible on the record date for
determining eligibility to receive such dividends, which shall be payable out
of funds of the Corporation legally available for the payment of dividends.
Such dividend shall accrue cumulatively, at the rate specified in subclause (a)
above, on a day-to-day basis from the date of issuance of each share of Series
B Preferred Stock, and whether or not the dividend has been declared or there
are profits, surplus or other funds of the Corporation legally available for
the payment of dividends. Each such dividend shall be payable on the first day
of January, April, July and October (unless such day is not a business day, in
which event on the next succeeding business day) (each a "Dividend Payment
Date"), commencing January 1, 1999, to holders of record as they appear on the
register of the Corporation for the Series B Preferred Stock (the "Series B
Preferred Stock Register") on the 15th day of the calendar month immediately
preceding such Dividend Payment Date; and if not paid on any Dividend Payment
Date, all dividends which have accrued on each share of Series B Preferred
Stock outstanding during the period ending upon such Dividend Payment Date will
be added on the Dividend Payment Date to the Stated Value of such share of
Series B Preferred Stock (subject to appropriate adjustment as abovestated) and
will remain a part thereof until such dividends are paid.
5. Redemption Rights. The Corporation's Board of Directors may,
at any time following the issuance of shares of Series B Preferred Stock as of
which the closing price of a single share of the Corporation's Common Stock, as
reported on any stock exchange, or its closing bid price, as reported by The
NASDAQ Stock Market, Inc., shall have exceeded 125% of the Conversion Price (as
that capitalized term is defined in Section 6(c)(3) below) for at least 20
trading days during a period of 30 consecutive trading days, notify each such
holder of its intention to redeem some or all of such shares. Such notice (the
"Redemption Notice") shall: (a) be furnished at least 35 but not more than 60
days prior to the date identified in the notice upon
2
<PAGE> 3
which the redemption shall be consummated (the "Redemption Date"), and (b)
include a statement identifying the holder's shares of Series B Preferred Stock
and the number thereof to be redeemed, the redemption price to be paid to the
holder, the location to which the holder's certificate(s) evidencing ownership
of the subject shares are to be surrendered, and the right that the holder
shall then have to convert the shares, in accordance with the applicable
provisions of Section 6 below, called for redemption. In all cases, the
redemption price to be paid shall equal the sum of the Stated Value of each
share of Series B Preferred Stock called for redemption and the amount of any
unpaid cash dividends, as determined in the manner described in Section 4,
above, accumulated as of the Redemption Date (the "Redemption Price").
At least five business days prior to the Redemption Date (the
"Shareholder Notification Date"), each holder of shares of Series B Preferred
Stock which have been called for redemption shall surrender the certificate(s)
representing such shares at the location stated in the Redemption Notice, and
provide a statement indicating whether the holder elects to convert such shares
into shares of Common Stock in lieu of causing the same to be redeemed. A
failure by the shareholder to provide such statement shall serve as conclusive
proof of his decision to cause the shares to be redeemed rather than converted.
As to all such shares to be redeemed, the Corporation shall, on the Redemption
Date, pay the applicable Redemption Price to the person whose name appears on
such certificate(s), or in the Series B Preferred Stock register, as the owner
thereof. Upon such Payment (which shall be deemed made once the funds
representing the applicable Redemption Price have been mailed or otherwise
delivered to the registered owner), all rights of each holder of shares of
Series B Preferred Stock made the subject of the redemption shall cease with
respect to such shares, and, pending reissuance, such shares shall resume the
status of authorized but unissued shares of Series B Preferred Stock. Failure
by a shareholder of Series B Preferred Stock called for redemption to timely
surrender the holder's certificate(s) shall not affect the Corporation's
ability to satisfy the Redemption Price nor to cancel the shares made the
subject of such payment and to terminate all rights of the holder associated
with their ownership. If a shareholder owns more shares of Series B Preferred
Stock than those redeemed by the Corporation, one or more replacement
certificates, representing such excess shares, will, following the Redemption
Date, be prepared and delivered to the shareholder.
Any registered holder of shares of Series B Preferred Stock shall have
the right, exercisable upon at least 60 days prior notice furnished at any time
or times after October 1, 2001, to require the Corporation to purchase and
redeem any specifically identified number of such shares in exchange for the
Corporation's payment to such shareholder of the Redemption Price; subject,
however, to the right of the Corporation to reject such demand by furnishing
such shareholder, within the ten business day period succeeding the date of the
shareholder's notice, its separate notice (the "Rejection Notice") of an
intention to consummate an Initial Public Offering (as that capitalized term is
defined in Section 7 below) within the succeeding 180 day period (the "Intended
Offering Period"). If the Rejection Notice is timely furnished, but the
Corporation fails to timely consummate the Initial Public Offering, the
Corporation shall be required to complete the requested redemption within ten
business days following expiration of the Intended Offering Period. The
exercising shareholder shall surrender the certificate(s) representing such
shares at the Corporation's principal office on or before the date established
for any such redemption, and following payment by the Corporation of the
Redemption Price provisions of the preceding paragraph related to the manner in
which a redemption shall be effected and all rights of each holder of shares of
Series B Preferred Stock made the subject of the redemption shall cease with
respect to such shares, and, pending reissuance, such shares shall resume the
status of authorized but unissued shares of Series B Preferred Stock. If the
exercising shareholder owns more shares of Series B Preferred Stock than those
presented for redemption, one or more replacement
3
<PAGE> 4
certificates, representing such excess shares, will be prepared and promptly
delivered to the shareholder.
6. Voluntary Conversion of Series B Preferred Stock into Common
Stock.
a. In General: Subject to the remaining provisions of
this Section 6, each holder of record of one or more shares of Series B
Preferred Stock shall have the continuing right, exercisable at its option and
at any time, to convert each share of Series B Preferred Stock then held by it
into 20.04010695 fully paid and non-assessable shares of Common Stock (in its
unadjusted or subsequently adjusted form, the "Conversion Factor"). To ensure,
however, that the relative value of the shares of Common Stock to be issued in
connection with each such conversion shall not have been diluted, by prior
actions of the Corporation hereinafter described, from the value which would
exist were conversion of all shares of Series B Preferred Stock effected as of
the date of the initial issuance of Series B Preferred Stock, the Stated Value
of each share of Series B Preferred Stock shall, in connection with each
conversion, be divided by $10.00, as adjusted in accordance with the provisions
of Section 6.c(3) below (whether in its unadjusted or any adjusted form, the
"Divisor"); the resulting quotient, calculated to the nearest 1/10,000,000th,
shall be multiplied by the Conversion Factor (as adjusted in accordance with
the provisions of Section 6.c(I) and (2)); and the product of that latter
calculation shall constitute the new Conversion Factor. In turn, the product of
the new Conversion Factor multiplied by the number of shares of Series B
Preferred Stock that are made the subject of the conversion election shall
constitute the number of fully paid and non-assessable shares of Common Stock
that shall be issued upon such conversion.
b. Procedure: In order to convert shares of Series B
Preferred Stock into shares of Common Stock, a holder shall (i) notify the
Corporation of its, his or her election to convert shares of Series B Preferred
Stock and of the number of such shares to be converted; (ii) surrender each
certificate evidencing the shares of Series B Preferred Stock to be converted,
duly endorsed to the Corporation or in blank and accompanied by proper
instruments of transfer, at the executive office of the Corporation or such
other location as may reasonably be designated by the Corporation; and (iii)
state in writing the name or names in which the holder wishes each certificate
for shares of Common Stock to be issued. The date upon which the holder
satisfies the last of such requirements is herein referred to as the
"Conversion Date". As soon as possible on or after the Conversion Date, the
Corporation shall deliver a certificate for the number of full shares of Common
Stock issuable upon the conversion, a new certificate representing the
unconverted portion, if any, of the shares of Series B Preferred Stock
represented by the certificate(s) surrendered for conversion, and cash in lieu
of any fraction of a share as provided in Section 6.h below. The person in
whose name the certificate for the Common Stock is registered shall become a
shareholder of record of Common Stock on the Conversation Date. If the Common
Stock issuable upon conversion is to be registered in a name other than the
holder exercising the conversion privilege, such holder shall also deliver, on
or before the Conversion Date, such evidence of authorization for the transfer
and of the transferee's compliance with the provisions of any agreements
restricting further transfer and of any applicable securities laws as the
Corporation may reasonably request.
c. Adjustments: Except as provided in clauses (1)
through (6) of this subsection c, no adjustment to the Divisor shall be made
because the Corporation issues, in exchange for cash, property or services,
Common Stock, or any securities convertible into or exchangeable for Common
Stock, or securities carrying the right to purchase Common Stock or such
convertible or exchangeable securities. Furthermore, no adjustment to the
Divisor need be
4
<PAGE> 5
made under this Section 6 solely as a result of the par value of the Common
Stock being changed, eliminated or subsequently reinstated.
(1) If, prior to any conversion, the
outstanding shares of Common Stock are subdivided into a greater number or
combined into a smaller number of shares (by way of reclassification, forward
or reverse split or in any other manner), then, although no adjustment will be
required to be made to the Divisor, the Conversion Factor shall be increased or
reduced to an amount equal to the product of (A) a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
after the subdivision or combination and the denominator of which shall be the
number of such shares outstanding immediately prior thereto, times (B) the
pre-existing Conversion Factor.
(2) If, prior to any conversion, there is
legally paid with respect to the Common Stock, but not with respect to the
Series B Preferred Stock, any dividend or other distribution in the form of
shares of Common Stock, then the Conversion Factor shall be increased to an
amount equal to the product of (A) a fraction, the numerator of which shall be
the number of shares of Common Stock, outstanding immediately after the payment
of such dividend and the denominator of which shall be the number of such
shares outstanding immediately prior thereto, times (B) the pre-existing
Conversion Factor; provided that the Corporation may, in the discretion of its
board of directors and in lieu of obligating the Corporation to the adjustment
otherwise so required, issue the appropriate number of shares of Common Stock
as a dividend or other distribution on the outstanding shares of Series B
Preferred Stock at the same time it issues shares of Common Stock as a dividend
or other distribution on the outstanding Common Stock, and in such event no
adjustment in the number of shares of Common stock into which each share of
Series B Preferred Stock may be converted shall be made.
(3) If, prior to any conversion, the
Corporation shall issue or sell shares of Common Stock (except as provided in
clause (4) below) without consideration or for a consideration per share of
less than the then existing "Conversion Price" of a single share of the Series
B Preferred Stock (which price shall be deemed to constitute the quotient of
(a) the product of the Stated Value of each share of Series B preferred Stock
times the aggregate number of such shares, divided by (b) the number of shares
of Common Stock issuable upon conversion of all shares of Series B Preferred
Stock [which number is, itself, the product of the Conversion Factor, as
adjusted, times the aggregate number of shares of Series B Preferred Stock],
initially $.498999332), then the Divisor shall be decreased to that percentage
of itself constituting the quotient (also stated as a percentage) of (i) the
sum of (x) the number of shares of Common Stock outstanding immediately prior
to such issuance or sale, plus (y) the number of shares of Common Stock which
the aggregate consideration received by the Corporation for the total number of
such shares of Common Stock so issued or sold would purchase at the Conversion
Price, divided by (ii) the number of shares of Common Stock outstanding
immediately after such issuance or sale; and the Conversion Price, from and
after the date of such issuance and sale (and subject to further adjustment as
provided herein), shall be the product of the Conversion Price in effect
immediately prior to such issuance and sale multiplied by the same percentage
to which the Divisor shall be decreased.
As an example of the manner in which the
foregoing paragraph is intended to operate in concert with Section 6.a, assume
that at the time of issuance of the Series B Preferred Stock there are issued
and outstanding 33,367,527 shares of Common Stock and that the Corporation
subsequently (but prior to the conversion of any of the Series B Preferred
Stock) issues 5,000,000 shares of Common Stock at a per share selling price of
$.20. To determine whether an adjustment will thereafter be required to be made
to the Divisor, the Corporation must
5
<PAGE> 6
first determine whether the $.20 per share selling price of the newly issued
Common Stock is less than the then existing Conversion Price of the Series B
Preferred Stock. The Conversion Price is determined by the following formula:
SV x PS = CP
-------
CF x PS
where SV = the Stated Value of a single share of Series B Preferred Stock, or
$10;
PS = the number of shares constituting the Series B Preferred Stock, or
245,344;
CF = the Conversion Factor, or 20.04010695 in its unadjusted form; and
CP = the initial Conversion Price of a single share of Series B Preferred
Stock
or
$10 x 245,344 = .498999332
-------------
20.04010695 x 245,344
Since the Conversion Price, at its then existing level, is higher than the
selling price of the newly issued Common Stock, the Divisor must be decreased
to that percentage of itself which is determined by the following formula:
C/S + N/S
---------
A/S
where C/S = the shares of Common Stock outstanding immediately prior to the new
issue;
N/S = the shares of Common Stock that the aggregate consideration
received by the Corporation for the shares actually issued
would have purchased at the Conversion Price; and
A/S = the shares of Common Stock outstanding immediately after the
new issue
or
33,367,527 + ($1,000,000 / .498999332) = .921913419
--------------------------------------
38,367,527
or, stated as a percentage, 92.1913419%
Accordingly, the Divisor must be decreased to 92.1913419% of its former level,
or from $10.00 to $9.21913419, such that if any of the shares of Series B
Preferred Stock are thereafter converted the new Conversion Factor to be
applied to each, so as to calculate the number of shares of Common Stock to be
issued, will be determined under Section 6.a by reference to the following
formula:
Stated Value x CF = the new Conversion
------------ Factor
Divisor
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<PAGE> 7
or
$10.00 x 20.04010695 = 21.737751517
------
$9.21913419
and from the date of the new issuance and sale of Common Stock the Conversion
Price, subject to subsequent adjustment, will be decreased to 92.1913419% of
its former level.
For the purpose of this clause (3) the following
provisions shall be applicable:
(i) In the case of any issuance or sale for
cash, the consideration shall be deemed to be the cash proceeds received by the
Corporation for such shares (or if such shares are offered by the Corporation
for subscription, the subscription price, or, if such shares are sold to
underwriters or dealers for public offering without a subscription offering,
the initial public offering price), without deducting therefrom any
compensation or discount in the sale, subscription or underwriting thereof by
underwriters, dealers or others performing similar services, or for any
expenses incurred in connection therewith. In the case of any issuance or sale
(otherwise than upon conversion or exchange of securities by their terms
convertible or exchangeable into Common Stock) for a consideration other than
cash, the amount of such consideration shall be deemed to be the fair value
thereof as determined by the unanimous action of all members of the
Corporation's board of directors, irrespective of the accounting treatment
thereof, which determination shall be made at any time on or prior to the date
of issuance or sale irrespective of the fact that definitive agreements
providing for the issuance may have been previously approved by the
Corporation's board of directors or shareholders.
(ii) If the Corporation issues options
(including capital stock purchase warrants) or rights to subscribe, upon
exercise, for shares of Common Stock or issues securities convertible into,
exchangeable for, or carrying rights of purchase of, shares of Common Stock,
and if the consideration per share of the Common Stock deliverable upon any
such exercise, conversion or exchange (determined by dividing the aggregate
consideration received or receivable by the Corporation as consideration for
the granting of such options or rights or the issue or sale of such convertible
or exchangeable securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the exercise, conversion
or exchange thereof, by the total maximum number of shares of Common Stock
issuable upon such exercise, conversion or exchange), is less than the
Conversion Price of the Common Stock.
(A) In the case of options or rights,
the shares of Common Stock deliverable upon their exercise shall be deemed to
have been issued at the time of issuance of such options or rights and the
aggregate consideration shall be the minimum purchase price payable to the
Corporation upon exercise of such options or rights plus any additional
consideration received by it for such options or rights at the time of their
issuance.
(B) In the case of convertible or
exchangeable securities, the maximum number of shares of Common Stock initially
deliverable upon their conversion or exchange shall be deemed to be issued at
the time of issuance or sale of such securities, and the aggregate
consideration shall be the consideration received by the Corporation for such
securities, before deducting any discounts, commissions or other expenses in
connection with the issuance and sale of such securities, plus the minimum
additional consideration, if any, receivable by the Corporation upon the
conversion or exchange thereof.
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<PAGE> 8
(C) No further adjustment of the
number of shares of Common Stock into which each share of Series B Preferred
Stock may be converted shall be made, upon the actual issue of such Common
Stock, upon the exercise of such rights or options or upon the conversion or
exchange of such convertible or exchangeable securities.
(D) Upon the expiration of such
options or rights, or the termination of such right to convert or exchange, the
number of shares of Common Stock into which each share of Series B Preferred
Stock may be converted shall forthwith be readjusted to such number as would
have obtained had the adjustment undo upon the issuance of such options, rights
or convertible or exchangeable securities been made upon the basis of the
issuance or sale of only the number of shares of Common Stock actually issued
upon the exercise of such options or rights or upon the conversion or exchange
of such securities.
(E) In the event that, prior to the
expiration of such options or rights or the termination of such right to
convert or exchange, the consideration payable on the issuance, sale or
delivery of the shares of Common Stock shall change, or the number of shares of
Common Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable security shall change, the number of shares of
Common Stock into which each share of Series B Preferred Stock may be converted
shall forthwith be readjusted to such number as would have obtained had the
adjustment made upon the issuance of such options, rights or convertible or
exchangeable securities been made (except with respect to options or rights
exercised or securities converted or exchanged prior to such readjustment) upon
the basis of such consideration then payable or number of shares then
deliverable.
(F) Options or rights issued or
granted pro rata to shareholders without consideration and securities
convertible into, exchangeable for, or carrying rights of purchase of, shares
of Common Stock, which securities are issuable by way of dividend or other
distribution to shareholders, shall be deemed to have been issued or granted at
the close of business on the date fixed for the determination of shareholders
entitled thereto and shall be deemed to have been issued without consideration.
(G) In the case of any options or
rights which expire by their terms not more than 45 days after the date of
issue, sale or grant thereof, no adjustment of the number of shares of Common
Stock into which each share of Series B Preferred Stock may be converted be
made until the expiration or exercise of all such options or rights, whereupon
such adjustment shall be made in the manner provided in clause (D) above.
(H) Shares of Common Stock issued or
deemed to be issued pursuant to clauses (A) or (B) above with respect to which
any adjustment in the number of shares of Common Stock into which each share of
Series B Preferred Stock may be converted is required to be made shall be
deemed to be outstanding as of and after the date on which such adjustment is
made and until any readjustment is made with respect thereto pursuant to clause
(D) or (E) above, in which case the shares with respect to which such
readjustment is made shall no longer be deemed to be outstanding as of the date
of such readjustment.
(iii) Any share of Common Stock held in the
treasury of the Corporation ("Treasury Shares") shall be deemed issued and the
sale or other disposition thereof shall not be deemed an issuance or sale
thereof.
8
<PAGE> 9
(4) No adjustment in the number of
shares of Common Stock into which each share of Series B Preferred Stock may be
converted shall be made by reason of the issuance of (i) Common Stock pursuant
to any Common Stock option grant in effect on the date of this Resolution; (ii)
Common Stock upon exercise of conversion rights granted to shares of the Series
A Preferred Stock and to holders of any form of Corporation convertible debt
instrument outstanding as of the date of this Resolution; (iii) Common Stock
upon exercise of any warrant, outstanding on the date of this Resolution, to
acquire shares of Common Stock; and (iv) the Series B Preferred Stock created
hereby, or any shares of Common Stock issued upon conversion of the shares of
such Series.
(5) In case of any capital
reorganization or any reclassification of the capital stock of the Corporation,
or the consolidation or merger of the Corporation with another corporation, or
any sale or conveyance of all or substantially all of the property and assets
of the Corporation, each share of Series B Preferred Stock shall thereafter be
convertible into the number of shares of stock or other securities or cash or
other property receivable upon such capital reorganization, reclassification of
capital stock, consolidation, merger, sale or conveyance, as the case may be,
by a holder of the number of shares of Common Stock into which such share of
Series B Preferred Stock shall have been convertible immediately prior to such
capital reorganization, reclassification of capital stock, consolidation,
merger, sale or conveyance.
(6) No adjustment in the number of
shares of Common Stock into which each share of Series B Preferred Stock may be
converted, as a result of the application of the foregoing provisions, is to be
given effect unless, by making such adjustment, the number of shares of Common
Stock into which each share of Series B Preferred Stock may be converted would
be changed by 1% or more, but any adjustment which would change the number of
shares of Common Stock into which each share of Series B Preferred Stock may be
converted by less than 1% is to be carried forward and given effect in making
future adjustments; provided that the Board of Directors may make an adjustment
of less than 1% to avoid a deemed stock distribution to holders of the Common
Stock.
d. Notification to Holders: Whenever the number of
shares of Common Stock into which each share of Series B Preferred Stock may be
converted shall be adjusted pursuant to the provisions hereof, the Corporation
shall forthwith file at its principal office and with each holder of Series B
Preferred Stock a statement, signed by its President and Treasurer, stating the
adjusted number of shares of Common Stock into which each share of Series B
Preferred Stock may be converted and setting forth in reasonable detail the
method of calculation and the facts requiring such adjustment and upon which
such calculation is based. Each adjustment shall remain in effect until a
subsequent adjustment hereunder is required.
e. Reservation: The Corporation shall at all times
reserve and keep available out of its authorized but unissued Common Stock, the
full number of shares of Common Stock deliverable upon the conversion of all
outstanding shares of Series B Preferred Stock and all other outstanding shares
and other securities which are convertible into Common Stock, and upon exercise
of any outstanding rights or options to purchase Common Stock.
f. Replacement Certificates: As promptly as practicable
after the surrender for conversion of any Series B Preferred Stock, the
Corporation shall deliver or cause to be delivered at the principal office of
the Corporation (or such other place as may be designated by the Corporation),
to or upon the written order of the holder of such Series B Preferred Stock,
9
<PAGE> 10
one or more certificates representing the shares of Common Stock issuable upon
such conversion, issued in such name or names as such holder may reasonably
direct.
g. Payment of Accrued Dividends: At the time of such
conversion, to the extent it is legally able to do so, the Corporation shall
pay to the holder of record of any share of Series B Preferred Stock being
converted any accrued but unpaid dividends on the shares surrendered for
conversion. Any portion of an accrued dividend which the Corporation shall not
be legally able to pay shall be forfeited at the time of conversion.
h. No Fractional Shares: The Corporation shall not be
required to issue any fractions of shares of Common Stock upon conversions of
Series B Preferred Stock. If any interest in a fractional share of Common Stock
would otherwise be deliverable upon the conversion of any Series B Preferred
Stock, the Corporation shall make adjustment for such fractional share interest
by payment to the converting shareholder of cash in an amount bearing the same
ratio to the fair market value of a whole share of Common Stock of the
Corporation, as determined by the Corporation's Board of Directors, as the
fractional interest to which the shareholder would otherwise be entitled bears
to a whole share of Common Stock.
i. Validly Issued: All shares of Common Stock which may
be issued upon conversion of the shares of Series B Preferred Stock will upon
issuance by the Corporation be validly issued, fully paid, nonassessable and
free from all taxes, liens, and charges with respect to the issuance thereof.
j. Expenses: All issuance of certificates representing
shares of Common Stock upon conversion of the Series B Preferred Stock shall be
made to each applicable shareholder without charge for any excise tax in
respect of such issuance. However, if any certificate is to be issued in a name
other than that of the holder of record of the Series B Preferred Stock so
converted, the person or persons requesting the issuance thereof shall pay to
the Corporation the amount of any tax which may be payable in respect of any
transfer involved in such issuance, or shall establish to the satisfaction of
the Corporation that such tax has been paid or is not due and payable.
k. Status of Converted Stock: In case any shares of
Series B Preferred Stock shall be converted, the shares so converted shall
resume the status of authorized but unissued shares of preferred stock.
7. Mandatory Conversion. Any Series B Preferred Stock then
outstanding shall be converted into Common Stock contemporaneously with the
consummation of the Corporation's first fully underwritten, firm commitment
public offering, by way of an effective registration statement under the
Securities Act of 1933 (or successor legislation), of shares of Common Stock,
pursuant to which the aggregate price paid by the public for the purchase of
all shares of Common Stock sold by the Corporation and any selling shareholders
subject thereto shall be at least $10,000,000, and the per share price to be
paid by the public shall be at least five times the sum of the Stated Value of
a share of Series B Preferred Stock and all unpaid cash dividends then accrued
with respect thereto, taking into effect in determining whether such price
threshold is met all reorganization, recapitalizations, forward or reverse
stock splits and other adjustments to the capital structure of the Corporation
as are effected subsequent to the date of this Resolution (the "Initial Public
Offering"). The provisions of Section 6 regarding the number of shares of
Common Stock which shall be issuable upon the conversion of Series B Preferred
Stock into Common Stock shall be applicable to such mandatory conversion. The
Corporation shall give notice of the date of such filing (the "Mandatory
Conversion Date") to each holder of
10
<PAGE> 11
record of Series B Preferred Stock, no later than one business day after the
Mandatory Conversion Date, by certified mail, return receipt requested,
addressed to such holder at its post office address as shown on the records of
the Corporation, specifying that the shares have been converted and calling
upon such holder to surrender to the Corporation each certificate representing
its shares of Series B Preferred Stock, duly endorsed or accompanied by proper
instruments of transfer.
Within 10 days after the Mandatory Conversion Date, each
holder of shares of Series B Preferred Stock shall present and surrender its
share certificate(s) to the Corporation, at its principal executive office, and
within 30 days after such presentation shall be issued new certificates
representing the shares of Common Stock issuable upon such conversion. Upon the
Mandatory Conversion Date, each holder of Series B Preferred Stock shall be
deemed to have become the holder of the Common Stock to be issued on conversion
and not of the Series B Preferred Stock being converted, and all rights of such
holder shall cease with respect to such Preferred Stock except for rights in
connection therewith which have become matured obligations to such holder prior
to such conversion and the right to receive the certificates representing the
shares of Common Stock to be issued upon such conversion.
8. Priority in the Event of Liquidation or Dissolution. In the
event of any liquidation, dissolution or other winding up of the affairs of the
Corporation, whether voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the Corporation and before any
distribution shall be made to the holders of Junior Stock, each holder of
Series B Preferred Stock shall, subject to the limitation imposed within this
sentence, be entitled to receive, out of the net assets of the Corporation and
in exchange for the tender and cancellation for each share of Series B
Preferred Stock so held, the lesser of: (a) the sum of its Stated Value and a
monetary amount equal to all cumulative dividends accrued and unpaid on each
such share up to the date fixed for distribution; or (b) that portion of all
remaining net assets of the Corporation which bears the same ratio to such net
assets as the number of shares of Series B Preferred Stock owned by the holder
bears to all then issued and outstanding shares of Pari Passu Stock, and, in
either event, subject to appropriate adjustment for any reclassification,
forward or reverse stock split or similar transaction relating to the shares of
Series B Preferred Stock or Pari Passu Stock, as applicable. After any such
required payment shall have been made in full to the holders of Series B
Preferred Stock, or funds necessary for such payment shall have been set aside
in trust for the exclusive benefit of such holders, any excess balance of the
Corporation's net assets shall be paid to or set aside for the holders of
shares of Common Stock in an amount per share equal to the quotient of such
excess balance divided by the aggregate number of shares of Common Stock then
outstanding. For purposes of this Section 8, the voluntary sale, lease,
conveyance, exchange or transfer, for any form of consideration, of all or
substantially all of the property or assets of the Corporation, or the
consolidation by the Corporation with, or its merger with and into, one or more
other corporations, shall be deemed to be a voluntary or involuntary
liquidation, dissolution, or winding up of the affairs of the Corporation.
9. Notices. All notices, consents, elections, requests, waivers
and other communications required or allowed pursuant to this Agreement shall
be in writing and shall be deemed to have been duly given or made the third
business day after the date of mailing, if delivered by registered or certified
mail, postage prepaid and return receipt required; upon delivery, if sent by
hand delivery; upon delivery, if sent by prepaid courier and a record of
receipt is generated and furnished to the sender; or the next day after the
date of transmission, if sent by facsimile transmission (with a copy
simultaneously sent by registered or certified mail, postage prepaid, return
receipt required) and evidence of receipt is generated at the time of
transmission. Each such communication shall be transmitted, if to the
Corporation, at its principal business
11
<PAGE> 12
address, and if to a holder of Series B Preferred Stock, at the address set
forth in the shareholder records as maintained by the Corporation, or to such
other address as any such shareholder may have designated by like notice
forwarded to the Corporation. Notice of any change in any such address shall
also be given in the manner set forth above. Whenever the giving of notice
required, the giving of such notice may be waived by the party entitled to
receive such notice.
10. Amendment. The Corporation shall not authorize or issue
additional shares of Series B Preferred Stock, reissue shares of Series B
Preferred Stock redeemed or repurchased by the Corporation, alter the
preferences, special rights or powers of the Series B Preferred Stock so as to
adversely affect the Series B Preferred Stock, or create a separate class or
series of preferred stock or other equity securities (including, without
limitation, instruments convertible into, exchangeable for or otherwise
carrying rights to acquire equity securities) having priority (including,
without limitation, any priority as to dividends or liquidation rights) over or
on a parity (other than parity as to dividends, on a Common Share equivalent
basis, and as to distributions made upon a liquidation, dissolution or other
winding up of the Corporation's affairs) with the Series B Preferred Stock,
unless there is first obtained the affirmative consent (furnished in writing or
at a meeting duly called for that purpose) of the holders of a majority of the
aggregate number of shares of Series B Preferred Stock then outstanding; or,
alternatively, a waiver of the application thereof in any particular instance;
provided, however, that no such change shall be effective as to any holder of
Series B Preferred Stock which decreases the number or modifies the character
of the shares of Common Stock into which Series B Preferred Stock may be
converted, or adversely affects the rights and preferences set forth in Section
8 of this Resolution, in each case without such holder first voting in favor of
or consenting to such change.
The foregoing amendment shall become effective as of the close of
business on the date this Certificate is accepted for filing by the Delaware
Department of State and all filing fees then due have been paid, all in
accordance with the corporation laws of the State of Delaware.
IN WITNESS WHEREOF, VERIDIEN CORPORATION has caused this Certificate
to be prepared under the signature of its President this 11th day of September
1998.
VERIDIEN CORPORATION
By:
---------------------------------------
Andrew T. Libby, Jr., Executive Vice
President and Chief Operating Officer
12
<PAGE> 1
EXHIBIT 3.6
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:01 AM 05/16/1995
950082507 - 2264857
VERIDIEN LETTERHEAD
CERTIFICATE OF DESIGNATION
OF
VERIDIEN CORPORATION
We, the undersigned, John W. Priest and William H. Hicks, being
respectively the Chief Executive Officer and the Secretary of Veridien
Corporation, hereby certify, in accordance with Section 151(g), Delaware General
Corporation Law, that the following is a true and correct copy of a resolution
adopted by the Board of Directors of Veridien Corporation, by written consent
pursuant to Section 141(f) of said law, effective on April 3, 1995, and that
such resolution is now in full force and effect:
RESOLVED, that pursuant to the authority expressly vested in this Board
of Directors by Article Fourth Section 2A of the Restated Certificate of
Incorporation, as amended, of the Corporation, the Board of Directors hereby
establishes the following powers, designations, preferences, rights,
qualifications, limitations and restrictions for 100,000 shares of authorized
but unissued preferred stock:
The title of such preferred stock shall be 10% Cumulative Convertible Redeemable
Preferred Stock, each share of which shall have a $10 par and stated value per
share, have a preference in liquidation of the Corporation of $10 per share plus
accrued and unpaid dividends prior to any distribution to the holders of the
Common Stock, be entitled to receive an annual dividend of 10% ($1 per year)
beginning with the second year after issuance before any dividend is paid to the
holders of the Common Stock, any dividend not declared and paid shall be
accumulated and must be paid before any dividend or distribution is made on the
common Stock, be convertible at any time after the date of issuance and prior to
call for redemption into twenty shares of Common Stock of the Corporation, and
be redeemable, beginning two years after issuance, at the election of the
Corporation, at par plus accrued and unpaid dividends in par amounts not to
exceed $250,000 semiannually. Holders of such Preferred Stock do not have any
right to vote on any matters presented for a vote of stockholders of the
Corporation. Holders of the 10% Cumulative Convertible Redeemable Preferred
Stock and of the Common stock into which such Preferred Stock is converted shall
have a one-time right, exercisable by the holders of a majority of such
Preferred Stock or Common Stock or combination thereof, as the case may be, to
require the Corporation to include, at its cost, their stock in a registration
statement pursuant to the Securities Act of 1933, as amended, for sale to the
public and a right to have their stock included in any registration statement
filed by the Corporation for the sale of other securities to the public.
IN WITNESS WHEREOF, the foregoing officers have signed this Certificate
of Designation this 3rd day of April, 1995.
[CORPORATE SEAL]
----------------------------------
John W. Priest, Chairman
& Chief Executive Officer
----------------------------------
William H. Hicks, Secretary
<PAGE> 1
[VERIDIEN LETTERHEAD]
Exhibit 3.7
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 10:00 AM 02/20/1996
960047712 - 2264857
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION, AS AMENDED AND RESTATED
OF
VERIDIEN CORPORATION
We, the undersigned, John W. Priest and William H. Hicks, being
respectively the Chief Executive Officer and the Secretary of Veridien
Corporation, hereby certify, in accordance with Section 151(g), Delaware General
Corporation Law, that the following is a true and correct copy of a resolution
adopted by the stockholders of Veridien Corporation by written consent pursuant
to Section 141(f) of said law, effective on February 6, 1996, upon the
recommendation of the Board of Directors, and that such resolution is now in
full force and effect:
RESOLVED, that the Certificate of Incorporation, as amended and
restated, shall be, and upon filing of certification hereof with the Secretary
of State of the State of Delaware, to provide that the number of shares of
Common Stock which the Corporation is authorized to issue shall be, and hereby
is, increased to One Hundred Million Shares (100,000,000) from Fifty Million
Shares (50,000,000) without any change in the par value per share.
IN WITNESS WHEREOF, the foregoing officers have signed this Certificate
of Designation this 16th day of February, 1996.
-----------------------------------
John W. Priest
Chairman & Chief Executive Officer
-----------------------------------
William H. Hicks
Corporate Secretary
<PAGE> 1
EXHIBIT 4.1
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
APPLICABLE STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE
TRANSFERRED UNTIL (I). A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND
SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD
THERETO, OR (II). THE COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY ACTING REASONABLY TO THE EFFECT THAT REGISTRATION
UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.
Date: June 10, 1998 Principal Amount: $50,000.00
VERIDIEN CORPORATION
Debenture
Veridien Corporation, a Delaware corporation, (the "Company"), having
its principal office and place for the transaction of business at 11800 28th
Street, St. Petersburg, Florida, for value received, hereby promises to pay all
principal and accrued interest thereon to the Wardeb Investment Corporation
(the "Lender" and, together with any assignee, the "Holder") on December 31,
1998 (the "Maturity Date"). The Company may prepay any portion of the principal
due hereunder at any time prior to the Maturity Date provided that each
prepayment shall be applied firstly to all accrued and unpaid interest then due
under this Debenture with only the remaining balance being applied to principal
reduction.
Interest shall be calculated, both before and after the Maturity Date,
at the rate of eleven percent (11%) per annum, compounded semi-annually.
Interest shall be payable in full on the Maturity Date.
This Debenture may, at the option of the Lender, be converted into
shares of the common stock, $.001 par value, of the Company (the "Common
Stock") as follows:
A. The whole or any part of the principal amount due under this
Debenture, together with any accrued and unpaid interest calculated in
accordance with the terms hereof, may, at any time prior to the satisfaction
thereof, be converted into Common Stock.
B. The conversion price per share shall equal $0.1350 per share
(the "Conversion Price"). The conversion privilege terminates when all
principal plus interest due under this Debenture has been paid in full or
converted to Common Stock.
C. To exercise the conversion privilege, the Holder shall
surrender this Debenture to the Company at its principal office, accompanied by
an executed notice (which shall be irrevocable) stating that the Holder elects
to convert all or any specified part of the principal due under this Debenture,
together with any accrued and unpaid interest, into Common Stock. Such notice
shall be deemed to constitute the Holder's subscription for the number of
shares of
<PAGE> 2
2
Common Stock to which it shall be entitled hereunder. The date of receipt by
the Company of such notice is herein referred to as the "Date of Conversion".
D. As promptly as practicable, and in any event no later than
the tenth day after the Date of Conversion, the Company shall cause to be
issued and delivered to the Holder, or its designee, one or more certificates
(the "Certificates") for the whole shares of Common Stock deliverable upon the
conversion. If any fractional interest in a share of Common Stock would, except
for the provisions of this section, be deliverable upon a conversion of this
Debenture, the company shall, at its option, satisfy such fractional interest
by paying to the Holder an amount in cash equal (to the nearest cent) to the
value (as determined by the directors) of the fractional share on the business
day next preceding the Date of Conversion. Shares of Common Stock issued upon
conversion of this Debenture shall be restricted in accordance with federal and
state securities laws and each Certificate shall bear the legend reflected on
the cover hereof.
E. Such conversion shall be deemed to have been effected
immediately prior to the close of business on the Date of Conversion and each
person in whose name any Certificate shall be deliverable shall be deemed to
have become on such date the holder of record of the Common Stock, represented
thereby.
F. Where the Holder intends only to convert a portion of this
Debenture, upon surrender to the Company of this Debenture, the Holder thereof
shall be entitled to receive, without expense to such Holder, one or more new
Debentures for the unconverted portion of the principal amount, together with a
pro rata share of the interest accrued and unpaid, of this Debenture so
surrendered.
G. The Common Stock issued upon any conversion hereunder shall
be entitled to receive only those dividends whose date of declaration shall
occur on or after the Date of Conversion.
H. The Conversion Price and the number of shares purchasable
hereunder shall be subject to adjustment from time to time in accordance with
the following provisions:
(1) If the Company shall at any time subdivide, by means of a
forward stock split, stock dividend or otherwise the outstanding shares of its
Common Stock, then upon subdivision the Conversion Price in effect immediately
prior thereto shall be proportionately decreased, and upon combination or
consolidation, by means of a reverse stock split or otherwise, the Conversion
Price in effect immediately prior to such combination or consolidation shall be
proportionately increased, effective from and after the record date of such
subdivision or combination or consolidation, as the case may be.
Upon any adjustment in the Conversion Price pursuant to this
subparagraph (1) above, the Holder shall thereafter be entitled to convert this
Debenture, or any portion thereof, to Common Stock at the adjusted Conversion
Price.
(2) If at any time while this Debenture is outstanding there
shall be any reorganization or reclassification of the Common Stock of the
Company (other than a subdivision, combination or consolidation of shares
provided for in subparagraph (1.) above, or any consolidation or merger of the
Company with another corporation, the Holder shall thereafter be entitled to
<PAGE> 3
3
receive, during the term hereof and upon timely exercise of the Holder's
conversion rights hereunder, the number of shares of Common Stock or other
securities or property of the Company or of the successor corporation resulting
from such consolidation or merger, as the case may be, to which a holder of the
Common Stock of the Company, would have been entitled upon such reorganization,
reclassification, consolidation, or merger if this Debenture had been exercised
immediately prior to such reorganization, reclassification, consolidation, or
merger; and in any case appropriate adjustment (as determined by agreement of
the Holder and the Board of Directors of the Company) shall be made in the
application of the provisions herein set forth with respect to the rights and
interest thereafter of the Holder to the end that the provisions set forth
herein (including the adjustment of the Conversion Price and the number of
shares issuable upon the conversion of this Debenture) shall thereafter be
applicable , as near as reasonably may be, in relation to any shares or other
property thereafter deliverable upon the conversion thereof.
(3) Upon any adjustment of the Conversion Price and any increase
or decrease in the number of shares of Common Stock purchasable upon the
conversion of this Debenture, then, and in each such case, the Company, within
thirty days after the Holder's request, shall give written notice thereof to
the Holder at the address of Holder as shown on the books of the Company, which
notice shall state the Conversion Price as adjusted, setting forth in
reasonable detail the method of calculation of each.
(4) The issuance of certificates for shares of Common Stock upon
any conversion of this Debenture shall be made without charge to the Holder for
any stock transfer tax or expense imposed by the Company or its transfer agent
in respect to the issuance of such certificates, all of which taxes and
expenses shall be paid by the Company, and such certificates shall be issued in
the name of, or in such name or names as may be directed by the Holder;
provided, however, that in the event that certificates for shares of Common
Stock are to be issued in a name other than the name of the Holder, this
Debenture when surrendered for exercise shall be accompanied by an instrument
of transfer in form satisfactory to the Company, duly executed by Holder in
person or by an attorney duly authorized in writing, and the Holder shall pay
all stock transfer taxes payable upon issuance of such stock certificate.
(5) The Company agrees that it will not increase the par value of
the shares of the Common Stock issuable upon conversion of this Debenture above
the then applicable Conversion Price and that, before taking any action which
would cause an adjustment reducing the Conversion Price below the then par
value, if any, of the shares of any Common Stock issuable upon the conversion
hereof, the Company will take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and non-assessable shares of Common Stock at the Conversion
Price as so adjusted.
I. The Company covenants that it will at all times reserve and
keep available, solely for the purpose of issue upon the conversion hereof, a
sufficient number of shares of Common Stock to permit the conversion hereof in
full.
J. Except as otherwise provided herein, this Debenture and all
rights hereunder are transferable by the Holder in person or by duly authorized
attorney on the books of the Company.
K. Notwithstanding any provision herein to the contrary, the
Holder may not sell, transfer, or otherwise assign this Debenture or the shares
of Common Stock issuable upon
<PAGE> 4
4
conversion hereof without the consent of the Company, which consent may not
unreasonably be withheld and which consent shall not be withheld in any event
if the Company is provided with an opinion of counsel, satisfactory in form and
substance to the Company, to the effect that such sale, transfer, or assignment
does not violate the Securities Act of 1933 or applicable state securities law.
L. Notwithstanding anything herein contained, the Company shall
in no case be required to issue fractional Common Stock, upon the conversion of
the Debenture. If any fractional interest in a Common Stock would, except for
the provisions of this section, be deliverable upon the conversion of the
Debenture, the Company shall, at its option, adjust such fractional interest by
paying to the Lender an amount in cash equal (to the nearest cent) to the
appropriate fraction of the value (being a value determined by the directors)
of a Common Stock on the business day next preceding the Date of Conversion.
M. Shares of Common Stock issued upon conversion of this
Debenture shall be restricted in accordance with state and federal securities
laws except as otherwise hereinafter provided.
N. Upon the occurrence of a default under the terms of this
Debenture, the Company hereby waives demand, presentation of payment, protest,
notice of protest, dishonor and any defense by reason of any extension of time
or other indulgence granted by the Holder of this Debenture, and agrees that,
upon such occurrence, the Holder shall have the right to accelerate the
Maturity Date and constitute the then unpaid principal and interest as
immediately due and payable. Default is defined as:
(a) violation of any material term, condition or promise of this
Debenture issued by the Company to Lender this date; or,
(b) filing by or against the Company of any bankruptcy proceeding
or any filing of relief of debtors in any court or under any statute.
O. If the Holder incurs any costs in the collection or
enforcement of this Debenture, including costs of filing suit and reasonable
attorney fees, the Company agrees to pay such costs.
P. This Debenture shall be interpreted in accordance with the
laws of the State of Florida. No provision of this Debenture shall be affected
by the invalidity of any other provision or provisions contained herein.
Q. Time shall be of the essence of this Debenture and every part
hereof.
R. This Debenture shall be binding upon the Company and its
successors and assigns and shall enure to the benefit of the Holder and its
successors and assigns.
S. Subsequent to execution of this Debenture, each party hereto
shall take such further action and execute and deliver such further
documentation as may be reasonably required to implement the purposes of this
Debenture.
<PAGE> 5
5
T. This Agreement may be executed in counterparts and the
agreement outlined herein shall be effective when executed by all parties
hereto. Delivery of facsimile copies of the executed agreement shall be
sufficient evidence of its execution.
U. If any provision of this Agreement, or the application of
such provision to any person or circumstance, shall be held invalid or
unenforceable, the remainder of this Agreement, or the application of such
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby.
IN WITNESS WHEREOF, Veridien Corporation has by its duly authorized
officers executed this Debenture at St. Petersburg, Florida the date first
above written.
Veridien Corporation
By:
----------------------------
Andrew T. Libby, Jr.
Chief Operating Officer
<PAGE> 1
EXHIBIT 4.2
GENERAL
SECURITY AGREEMENT
BY AND BETWEEN
VERIDIEN CORPORATION
("Debtor")
AND
DUNVEGAN MORTGAGE CORPORATION
("Secured Party")
DATED THE 19TH DAY OF OCTOBER, 1995
<PAGE> 2
SECURITY AGREEMENT
VERIDIEN CORPORATION, a Delaware Corporation, (the "Debtor"), and
DUNVEGAN MORTGAGE CORPORATION, (the "Secured Party"), parties to that certain
Loan and Security Agreement dated of even date herewith (the "Loan Agreement"),
agree as follows:
SECTION 1. CREATION OF SECURITY INTEREST
Debtor hereby grants to Secured Party a security interest in the
Property described in Section 2 of this Agreement (the "Collateral") to secure
performance and payment of (i) that certain Master Promissory Note issued
pursuant to the Loan and Security Agreement dated of even date herewith, in the
maximum principal amount of $2,500,000.00 executed by Debtor payable to the
order of the Secured Party ("Note", whether one or more), bearing interest and
being payable in the manner provided therein; (ii) all renewals and extensions
of the Note; (iii) payment and performance of all obligations under the Loan
Agreement, this Agreement and any related instruments or agreements; and (iv)
all other obligations and indebtedness of Debtor to Secured Party of whatever
kind and whenever or however created or incurred (all of the foregoing described
in this Section 1 being the "Secured Indebtedness").
SECTION 2. COLLATERAL
In the regular course of business Debtor acquires (a) goods, which are
held for sale or lease or are furnished or to be furnished under contracts of
service, or which are supplies, raw materials, work in process or other
materials to Debtor, to be used, consumed or processed by Debtor and (b)
indebtedness or receivables arising upon the sale or lease of goods or rendition
of services by Debtor to others (called "Customers"). The collateral of this
Agreement is (i) all inventory of Debtor now owned or hereafter acquired, and
raw materials, work in progress or materials used or consumed in Debtor's
business, and all products thereof, whether in possession of the Debtor,
warehouseman, bailee or any other person ("Inventory"); (ii) all accounts,
contract rights, chattel paper, instruments, general intangibles and rights to
payment of every kind of Debtor ("Accounts"), now or at any time hereafter
arising; all interests of the Debtor in any goods, the sale or lease of which
shall have given or shall give rise to any of the foregoing, (iii) all
receivables and all guaranties of receivables and security therefore; and all
proceeds of all and any of the foregoing in whatever form received, whether cash
or non-cash; (iv) all of the right title and interest of Borrower in and with
respect to the goods services, or other property that gave rise to or secure any
of the Accounts and insurance policies and proceeds relating thereto, and all of
the rights of Borrower as an unpaid seller of goods or services, including,
without limitation, the rights of stoppage in transit, replevin, reclamation,
and resale; (v) all instruments, documents, securities, cash, and property; (vi)
all contracts, contract rights, promissory notes and all evidences of
indebtedness in favor of Borrower; (vii) all shares, stocks, warrants, bonds,
debentures, or other securities of all corporations now or hereafter owned by,
pledged or assigned to the Borrower, together with all renewals thereof,
subscriptions therefor, accretions thereto and all rights or claims in respect
thereof and all interests of Borrower in any other business ventures; (viii) all
furniture, fixtures, files, books records, equipment, laboratory equipment and
supplies, manufacturing equipment and supplies of the Borrower, and all
documents, contract rights, general intangibles and instruments relating to the
operation or management of the equipment, including, without limitation, any and
all maintenance contracts, permits, licenses, franchises and government
approvals, and all replacements and additions thereto; (ix) all products,
patents, copyrights and trademarks of Borrower; all intellectual property,
formulae, research data and regulatory approvals owned by Borrower or used by
Borrower in the conduct of its business together with all proceeds thereof, and
all rights or claims with respect to patent or trademark infringement, all as
listed in Exhibit "A" attached hereto; (x) all proceeds of each of the foregoing
2
<PAGE> 3
whether cash or otherwise owned by Borrower or in which Borrower has an
interest, all such items collective called "Collateral".
SECTION 3. PAYMENT OF OBLIGATIONS OF DEBTOR
3.1 Direct Obligations. Debtor shall pay to Secured Party any sum
or sums due or which may become due pursuant to the Note, or any extensions or
renewals thereof, or under the Loan Agreement, this Agreement or any documents
executed in connection therewith or as security therefor.
3.2 Expenses. Debtor shall pay to Secured Party on demand all
expenses and expenditures, including reasonable attorneys' fees and other legal
expenses incurred or paid by Secured Party in exercising or protecting its
interests, rights and remedies under the Loan Agreement and/or this Agreement,
plus interest thereon at the maximum non-usurious rate permitted by applicable
law with respect to Debtor.
3.3 Acceleration. Debtor shall pay immediately, without notice,
the entire unpaid Secured Indebtedness of Debtor to Secured Party whether
created or incurred pursuant to this Agreement or otherwise, upon Debtor's
default under Section 5 of this Agreement and acceleration of said Secured
indebtedness as provided for in this Agreement.
SECTION 4. DEBTOR'S REPRESENTATIONS, WARRANTIES AND AGREEMENTS
Debtor represents, warrants and agrees that:
4.1 Valid Accounts. Each Account will represent the valid and
legally enforceable indebtedness of a bona fide Customer arising from the sale
or lease of goods or rendition by Debtor of services and will be subject to no
setoffs, counterclaims or defenses except the standard reconciliation for
uncollectible accounts ("true-up" process); such goods or services will have
been delivered to or performed for, and accepted by, the Customer, and the
amount shown as to each Account on Debtor's books will be the true and
undisputed amount owing and unpaid thereon, payable in full at the time referred
to in the invoice, or if no time is specified within at least within ninety (90)
days from the date of the particular invoice, and Debtor has no knowledge of any
fact or circumstance that would impair the validity of enforceability of any
Account.
4.2 Title. Except for the security interests granted hereby,
absolute title to all collateral, free and clear of all liens, security
interests and encumbrances, is, or at the time of acquisition thereof will be,
vested in Debtor. All instruments, documents and chattel paper pertaining to the
Accounts will be valid and genuine and free from all liens, security interests
and encumbrances except for the security interests granted hereby.
4.3 Performance of Obligations. Debtor will duly perform and will
cause to be performed all obligations with respect to the goods, the sale or
lease of which gave rise to each Account.
4.4 Information. All information supplied and statements made by
Debtor or any guarantor in any financial, credit or accounting statement or
application for credit prior to, contemporaneously with or subsequent to the
execution of this Agreement are and shall be true, correct, complete, valid and
genuine.
4.5 Place of Business; Records. The chief place of business of
Debtor is the address shown on the signature page of this Agreement. Debtor will
immediately notify Secured Party in
3
<PAGE> 4
writing of any change in Debtor's chief place of business. Debtor will (1) keep
such books and records pertaining to the Collateral and all Customers and
Accounts, at such chief place of business, and at such office or offices of
Debtor as shall be approved in writing by Secured Party, (2) permit
representatives of Secured Party at any time to inspect the collateral and
inspect and make reasonable abstracts from the book and records of Debtor
pertaining to the Collateral, and (3) furnish to Secured Party such reasonable
information and reports regarding the Collateral as Secured Party may from time
to time require.
4.6 Notice to Customers. Upon Secured Party's request, Debtor will
give such notice in writing as Secured Party may require at any time to any or
all Customers indebted on all or any of the Accounts and, if Secured Party shall
so request, deliver to Secured Party copies of any and all such notices. After
the occurrence of an Event of Default, Secured Party, or his agents may (1)
transmit to any or, all Customers at any time or times such notice of Secured
Party's interest in any such Accounts as Secured Party may determine (but
Secured Party shall not be required to give any such notice and any failure to
give such notice by Secured Party shall in no affect Secured Party's rights and
interest hereunder or under any, Accounts), (2) request from Customers at any
time or times information concerning the amount owing under any or all Accounts,
(3) request from Customers that Accounts be paid directly to Secured Party or to
a post office box address over which Secured Party has control, or (4) enforce
payment and collect, by legal proceedings or otherwise, all Accounts.
4.7 Information to Secured Party Regarding Accounts and Inventory.
Debtor will transmit to Secured Party all information that it may have or
receive with respect to the Inventory or any Accounts or with respect to
Customers indebted on such Accounts which might in any way affect the value of
the Inventory or Accounts or Secured Party's rights or remedies with respect
thereto, including, but not limited to (1) rejection of goods or services by a
Customers, and (2) assertion of claims, counterclaims or setoffs by a Customer.
4.8 No Additional Security Interests or Liens. Debtor will not
pledge, mortgage or other wise encumber, or create or suffer a security interest
to exist in any of the Collateral to or in favor of any one other than Secured
Party.
4.9 Additional Documentation. Debtor will sign and execute alone
or with Secured Party assignments of accounts receivable, contracts and
insurance and pledges of shares as well as any Financing statement or other
document or procure any document, and pay all connected costs, necessary to
protect the security interests, rights and remedies created by, provided in or
emanating from this Agreement.
4.10 Protective Action. Debtor will, at its own expense, do, make,
procure, execute and deliver all acts, things, writing and assurances as Secured
Party may at any time request to protect, assure or enforce its interests,
rights and remedies created by, provided in or emanating from this Agreement.
4.11 No Leases or Encumbrances. Debtor will not lend, rent, lease
or otherwise dispose of the collateral or any interest therein except as
authorized in this Agreement or in writing by Secured Party, and Debtor shall
keep the Collateral, including the proceeds from any disposition thereof, free
from unpaid charges, including taxes, and from liens, encumbrances, and security
interests.
4.12 Collateral Locations. The Collateral shall remain in Debtor's
possession or control at the location indicated on the signature page of this
Agreement or at such other locations as Secured Party may approve in writing,
and shall not be removed except for temporary removal in the ordinary course of
Debtor's business, from those locations.
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<PAGE> 5
4.13 Insurance. Debtor will have and maintain or cause to be
maintained insurance at all times with respect to all Collateral against risks
of fire, theft and such other risks as Secured Party may require. Such insurance
policies shall contain such terms, be in a form, for a period and be written by
companies satisfactory to Secured Party. Such insurance policies shall also
contain a standard mortgagee's endorsement providing for payment of any loss to
Secured Party. All policies of insurance shall provide for a minimum of thirty
(30) days written cancellation notice to Secured Party. Debtor shall furnish
Secured Party with certificates or other evidence satisfactory to Secured Party
of compliance with the foregoing insurance provisions. Debtor hereby irrevocably
appoints Secured Party as attorney for Debtor in obtaining, adjusting, settling
and cancelling such insurance and endorsing any drafts drawn by insurers of the
Collateral, which power is coupled with an interest, provided, however, Secured
Party shall not be required to obtain, adjust, settle or cancel such insurance
or endorse such drafts and any failure to do so by Secured Party shall in no way
affect Secured Party's rights and interest hereunder or in any of the
collateral. In the event of loss and the payment of insurance proceeds, all
monies shall be payable to Secured Party for the accounts of the Secured Party
and the Debtor, as their interests may appear. At the option of Secured Party,
all monies so received, from less than an actual or constructive total loss
shall be applied (i) to the Note secured thereby, (ii) to repair of the damage
in respect of which the insurance loss was paid, or (iii) in reimbursements for
monies theretofore so applied by the Debtor with the consent of the Secured
Party. In the event of actual or constructive total loss of the Collateral, the
insurance process for such loss shall, unless otherwise agreed by Secured Party,
be applied as follows: (i) to the payment of the costs of collecting such
insurance, if any, (ii) to the payment of all indebtedness, principal, interest
and other sums owed by the Debtor to Secured Party secured hereby; and (iii) the
balance, if any to the Debtor.
4.1.4 Segregation of Returned Goods. Returned or repossessed goods
arising from or relating to any accounts included within the Collateral shall,
if requested by Secured Party, be held separate and apart from any other
property of Debtor. Debtor shall as often as requested by Secured Party, but no
less than weekly, even though no special request has been made, report to
Secured Party the appropriate identifying information with respect to any such
returned or repossessed goods relating to accounts included within the
Collateral.
4.15 Location of Inventor. Debtor will promptly notify Secured
Party in writing of any addition to, change in or discontinuance of its place(s)
of business as shown in this Agreement, places at which inventory is located as
shown herein, the location of its chief executive office and the location of its
office where it keeps its records as set forth herein. All Collateral will be
located at the place(s) of business shown on the signature page of this
Agreement or exhibits to this Agreement as modified by any written notice(s)
given pursuant hereto.
4.16 Accounts as Proceeds. All accounts that are proceeds of the
inventory included within the Collateral shall be subject to the security
interest granted hereby and all of the other terms and provisions hereof.
SECTION 5. EVENTS OF DEFAULT
As used herein, the term "Event of Default" shall have the same meaning
assigned to it by the Loan Agreement.
5
<PAGE> 6
SECTION 6. SECURED PARTY'S RIGHTS AND REMEDIES
6.1 Rights Exclusive of an Event of Default.
(a) This Agreement, Secured Party's rights hereunder or
the Secured Indebtedness may be assigned from time to time, and in any
such case the assignee shall be entitled to all of the rights,
privileges and remedies granted in this Agreement to Secured Party.
(b) Debtor hereby appoints the Secured Party its true and
lawful attorney for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instrument which
Secured Party may deem necessary or advisable to accomplish the
purposes hereof, which appointment as attorney-in-fact is irrevocable
and coupled with an interest. Without limiting the generality of the
foregoing, secured Party shall have the right after the occurrence of
an Event of Default to receive, collect and endorse all checks made
payable to Debtor or its order representing any proceeds in respect of
the Collateral or any part thereof and to give full discharge therefor.
Secured Party may, but is not obligated to, exercise at any time and
from time to time all or any of Debtor's rights including, but not
limited to, the following powers, with respect to all or any of the
Collateral:
(i) to demand, sue for, collect, receive and
give acquittance for any and all moneys due or to become due
upon or by virtue thereof;
(ii) to receive, take, endorse, assign and
deliver any and all checks, notes, drafts, documents and other
negotiable and non-negotiable instruments and chattel paper
taken or receive by Secured Party in connection therewith;
(iii) to settle, compromise, compound, prosecute
or defend any action or proceeding with respect thereto;
(iv) to sell, transfer, assign or otherwise deal
in or with the same or the proceeds of avails thereof or the
relative goods, as fully and effectually as if Secured Party
were the absolute owner thereof; and
(v) to extend the time of payment of any or all
thereof and to make any allowance and other adjustments with
reference thereto, including without limitation, arrangement
for payment in installments, other modifications of the
payment terms of, or release of;
provided, however, the exercise by Secured Party of or failure to so exercise
any such authority shall in no manner affect or discharge Debtor's liability to
Secured Party hereunder or under the Note or under any other instrument
evidencing or securing any of the Secured Indebtedness, and provided further
that Secured Party shall be under no obligation, responsibility or duty to
exercise any of the powers hereby conferred upon it and it shall be without
liability for any act or failure to act in connection with any of the
collateral. Secured Party shall not be required to take any steps necessary to
preserve the rights of the Collateral, except as required by law. Secured Party
shall at all times have the right to apply the proceeds of any of the Accounts
or other property in which Secured Party has been granted a security interest
herein towards payment of the Note and other Secured Indebtedness immediately
upon receipt or collection of such proceeds.
(c) Secured Party may execute, sign, endorse, transfer or deliver
in the name of Debtor notes, checks, drafts or other instruments for the payment
of money and receipts,
6
<PAGE> 7
certificates of origin, applications for certificates of title or any other
documents necessary to evidence, perfect or realize upon the security interest
and obligations created by this Agreement.
6.2 Rights in Event of Default.
(a) Upon the occurrence of an Event of Default, and at any time
thereafter, or in the event Secured Party deems itself insecure, Secured Party
may declare the Secured Indebtedness immediately due and payable and shall have
the rights and remedies of a secured party under the Uniform Commercial Code and
under other applicable laws of each state having jurisdiction over the
collateral or any part thereof, including without limitation thereto, the right
to sell, lease or otherwise dispose of any or all of the collateral and the
right to take possession of the Collateral, and for that purpose Secured Party
may enter upon any premises on which the Collateral or any part thereof may be
situated and remove the Collateral or books and records evidencing same, or may
require Debtor to assemble the Collateral and make it available to Secured Party
at a place to be designated by Secured Party which is reasonably convenient to
both parties. Unless the collateral is perishable or threatens to decline
speedily in value, or is of a type customarily sold on a recognized market,
Secured Party will send Debtor reasonable notice of the time and place of any
public sale thereof or of the time after which any private sale or other
disposition thereof is to be made. The requirement of sending reasonable notice
shall be met if such notice is mailed, postage prepaid, to Debtor at the address
designated in this Agreement at least ten (10) days before the time of the sale
or disposition. Expenses of retaking, holding, preparing for sale, selling or
the like shall include Secured Party's reasonable attorneys' fees and legal
expenses, plus interest thereon at the maximum non-usurious rate permitted by
applicable law with respect to Debtor. Debtor shall remain liable for any
deficiency.
Any amounts held, realized or received by Secured Party from any sale
or other disposition of the Collateral or any part thereof, and all amounts
received by Secured Party pursuant to collection of Accounts shall be applied by
Secured Party in the following order to:
(1) all costs, expenses and liabilities of Secured Party
(including attorneys' fees and expenses) incurred in connection with
the exercise of Secured Party's rights under this Agreement or
protecting its interest in the Collateral;
(2) the payment, in the following order (i) all interest
owing on the Note, (ii) all principal owing on the Note (whether or not
then due); (iii) all other Secured Indebtedness of Debtor to Secured
Party; and then
(3) any other amounts held, realized or received by
Secured Party pursuant to the provisions hereof may at the election of
Secured Party be applied by Secured Party in the foregoing manner, or
at the election of Secured Party may be paid to Debtor, its successors
or assigns, or as a court of competent jurisdiction may direct.
(b) Secured Party may remedy any default and may waive any default
without waiving the default remedied or without waiving any other prior or
subsequent default.
(c) The remedies of Secured Party hereunder are cumulative, and
the exercise of any one or more of the remedies provided for herein shall not be
construed as a waiver of any of the other remedies of Secured Party.
(d) SECURED PARTY MAY ENFORCE ITS RIGHTS UNDER THIS AGREEMENT
WITHOUT RESORT TO PRIOR JUDICIAL PROCESS OR JUDICIAL HEARING, AND DEBTOR
EXPRESSLY WAIVES, RENOUNCES AND KNOWINGLY RELINQUISHES ANY LEGAL RIGHT WHICH
MIGHT OTHERWISE REQUIRE SECURED PARTY TO ENFORCE ITS RIGHTS BY JUDICIAL PROCESS.
IN SO PROVIDING FOR A
7
<PAGE> 8
NON-JUDICIAL REMEDY, DEBTOR RECOGNIZES AND CONCEDES THAT SUCH A REMEDY IS
CONSISTENT WITH THE USAGE OF THE TRADE, IS RESPONSIVE TO COMMERCIAL NECESSITY
AND IS THE RESULT OF BARGAINING AT ARMS LENGTH. NOTHING IN THIS AGREEMENT IS
INTENDED TO PREVENT DEBTOR OR SECURED PARTY FROM RESORTING TO JUDICIAL PROCESS
AS EITHER PARTY'S OPTION.
(e) Debtor agrees that in performing any act under this Agreement
that time shall be of the essence and that Secured Party's acceptance of a
partial or delinquent payment or payments, or the failure of Secured Party to
exercise any right or remedy shall not be a waiver of any obligation of Debtor
or similar default subsequently occurring.
6.3 Debtor shall, at the request of the Secured Party, notify the
account debtors of the security interest of Secured Party in the accounts
receivable and direct payment therefore to Secured Party. Secured Party may,
upon the occurrence of any event of default, so notify any such account debtor
and may receive any proceeds to which Secured Party may be entitled under this
Agreement.
SECTION 7. ADDITIONAL AGREEMENTS
7.1 Parties. "Secured Party" and "Debtor" as used in this
instrument include the successors, representatives, receivers, trustees and
assigns of those parties.
7.2 Section Headings. The section headings appearing in this
instrument have been inserted for convenience only and shall be given no
substantive meaning or significance whatever in construing the terms and
provisions of this instrument.
7.3 Defined Terms. Terms used in this instrument which are defined
in the Uniform Commercial Code in effect in Delaware are used with the meanings
as therein defined.
7.4 Applicable Law; Place of Payment. The law governing this
secured transaction shall be that of the State of Delaware in force at the date
of this instrument, and all payments and obligations shall be made and performed
in Wilmington, Delaware, unless otherwise agreed.
7.5 Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable, and
the remaining provisions of this Agreement shall be in full force and effect.
8
<PAGE> 9
7.6 Secured Party shall have the right to syndicate, assign or
participate its interest herein, in whole or in part, to one or more parties
without limitation. In such event, the term "Secured Party" herein shall refer
to all such assignees or participants. Debtor agrees that any such assignment
may be made without notice and further agrees to cooperate fully with Secured
Party in the execution of any such assignment and further agrees to execute such
documents as Secured Party may from time to time require in connection with any
such assignment, participation or syndication.
EXECUTED on this 19th day of October , 1995.
Debtor: VERIDIEN CORPORATION
By:
-----------------------------------------
Title:
---------------------------------
Address: 800 Sarasota Quay
-------------------------------
Sarasota, Florida 34236
-------------------------------
-------------------------------
Secured Party: DUNVEGAN MORTGAGE CORPORATION
By:
-----------------------------------------
Title:
---------------------------------
Address: 222 Delaware Avenue
-------------------------------
P.O.Box 2306
-------------------------------
Wilmington, Delaware
-------------------------------
19899
-------------------------------
9
<PAGE> 10
EXHIBIT "A"
TO
GENERAL SECURITY AGREEMENT
By and Between
VERIDIEN CORPORATION
AND
DUNVEGAN MORTGAGE CORPORATION
LIST OF PATENTS, TRADEMARKS, ETC.
10
<PAGE> 11
EXHIBIT "A"
EXHIBIT NO. A DESCRIPTION
Patents, Trademarks, Copyrights
- ISSUED PATENTS
- PENDING PATENT APPLICATIONS
- REGISTERED TRADEMARKS
- PENDING TRADEMARK APPLICATIONS
<PAGE> 12
ISSUED PATENTS
<TABLE>
<CAPTION>
Title (Country) Issued Action Due Date
- --------------- ------ ------ --------
<S> <C> <C> <C>
DS I (U.S.A.) 09.08.92 Maintenance 09.08.92
Fee Due
DS I (AU) 01.22.93 Annuity Due 01.30.96
DS I (GB) 04.14.93 Annuity Due 01.30.96
CCS II (U.S.A.) 04.11.95 Maintenance 04.11.98
Fee Due
DS II (U.S.A.) 08.15.95 Maintenance 08.15.98
Fee Due
</TABLE>
<PAGE> 13
PENDING PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title (Country) Filed Action Date
- --------------- ----- ------ ----
<S> <C> <C> <C>
DS I (CA) 05.23.89 Awaiting
Issuance
DS I (JP) 07.26.91 Request For 01.30.97
Examination
DS II (LK) 09.11.93 Amendment 09.07.95
filed
DS II (MX) 02.08.94 Awaiting
Examiner's
Review
DS II (PCT) 02.14.94 Enter 01.16.96
Nat'l. Phase
DS II (NZ) 02.28.95 Awaiting
Examiner's
Review
CCS II (AU) 06.09.93 Annuity Due 06.09.96
CCS II (EPO) 06.09.93 Annuity Due 06.09.96
CCSS/AOCCS III (U.S.A.) 02.14.94 Amendment 08.16.95
Mailed
</TABLE>
<PAGE> 14
REGISTERED TRADEMARKS
<TABLE>
<CAPTION>
Title (Country) Registered Action Due Date
- --------------- ---------- ------ --------
<S> <C> <C> <C>
ON GUARD (U.S.A.) 02.26.91 8&15 02.26.96
Declaration
VIRAHOL (U.S.A.) 09.24.91 8&15 09.24.96
Declaration
POXALL-200 (U.S.A.) 02.02.93 8&15 02.02.98
Declaration
VIRAGEL (U.S.A.) 07.20.93 8&15 07.20.98
Declaration
VIRAHOL (MEX) 09.27.94 8&15 09.27.97
Declaration
VIRASONIC (U.S.A.) 11.15.94 8&15 11.15.99
Declaration
VIRASCRUB (U.S.A.) 01.31.95 8&15 01.31.00
Declaration
STERIHOL (U.S.A.) 02.28.95 8&15 02.28.00
VERIDIEN (U.S.A.) 09.05.95 8&15 09.05.00
Declaration
</TABLE>
<PAGE> 15
PENDING TRADEMARK APPLICATIONS
<TABLE>
<CAPTION>
Title (Country) Filed Action
- --------------- ----- ------
<S> <C> <C>
VIRAWASH (U.S.A.) 05.04.92 Approved
Awaiting
Registration
</TABLE>
<PAGE> 1
EXHIBIT 4.3
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this date by and between
Dunvegan Mortgage Corporation and Veridien Corporation, to wit:
1. DEFINITIONS. As used in this Agreement:
A. "Date of Agreement" is October 19, 1995.
B. "Borrowers" is Veridien Corporation, a Delaware corporation.
C. "Business Plan" is the detailed business plan of Borrower,
delivered to Lender in accordance with Section 8. A. (1) hereof, which shall be
prepared by and be the sole responsibility of Borrower, and shall be in form,
substance and all other respects satisfactory to Lender and shall include a
projected balance sheet, income and cash flow statements (both monthly and
cumulatively by month), a sales and marketing plan, an operations overview and
Borrower's forecast of its plans and intentions with respect to research,
development and Sterix technology for the periods presented. The Business Plan
shall contain all of the above data for each month during the period presented.
All references herein to compliance with the Business Plan shall be subject to
the provisions of Section 4. A. 2(iii) hereof and to Exhibit 4. A. 2)iii.
D. "Lender" is Dunvegan Mortgage Corporation, a Delaware
corporation, and its assigns.
E. "Common Stock" is the common stock, par value $.001 per
share of the Borrower and any class of capital stock of the Borrower now or
hereafter authorized having the right to share in disbursements either of
earnings or assets of the Borrower without limit as to amount or percentage.
F. "Customer" means a party indebted or obligated to Borrower or
a Party against which Borrower has a claim or a receivable.
G. "Collateral" means, the following, whether now owned, or
hereafter acquired and/or developed:
(1) All products, patents, copyrights and trademarks of
Borrower; all intellectual property, formulae, research data and regulatory
approvals owned by Borrower or used by Borrower in the conduct of its business;
(2) All receivables and all guaranties of receivables
and security therefor; all Inventory and all products thereof; and all proceeds
of all and any of the foregoing in whatever form received, whether cash or
non-cash;
(3) All of the right title and interest of Borrower in
and with respect to the goods, services, or other property that gave rise to or
secure any of the Receivables, Inventory, or other Collateral and insurance
policies and proceeds relating thereto, and all of the rights of Borrower as an
unpaid seller of goods or services, including, without limitation, the rights
of stoppage in transit, replevin, reclamation, and resale;
<PAGE> 2
(4) All instruments, documents, securities, cash, and
property and proceeds of any of the foregoing, owned by Borrower or in
which Borrower has an interest;
(5) An contracts, contract rights, promissory notes and
all evidences of indebtedness in favor of Borrower;
(6) All shares, stocks, warrants, bonds, debentures, or
other securities of all corporations now or hereafter owned by,
pledged or assigned to the Borrower, together with all renewals
thereof, subscriptions therefor, accretions thereto and all rights or
claims in respect thereof and all interests of Borrower in any other
business ventures.
(7) All furniture, fixtures, files, books, records,
equipment, laboratory equipment and supplies, manufacturing equipment
and supplies of the Borrower, and all documents, contract rights,
general intangibles and instruments relating to the operation or
management of the equipment, including, without limitation, any and
all maintenance contracts, permits, licenses, franchises and
government approvals, and all replacements and additions thereto.
(8) All proceeds of each of the foregoing whether cash
or otherwise.
H. "Loan Documents" is this Agreement and all other documents
and instruments executed in connection herewith (including without limitation,
all documents and instruments evidencing, securing, governing, guaranteeing
and/or pertaining to the indebtedness created or arising hereunder, the Warrant
Agreement and the Warrant Certificates).
I. "Receivables" means all accounts, contract rights,
instruments, documents, chattel paper, and general intangibles (including,
without limitation, choses in action, tax refunds, and insurance proceeds): all
other obligations or indebtedness owed to Borrower from whatever source
arising; all rights of Borrower to receive any payments in money or kind; and
all of the foregoing, whether now existing or hereafter created or acquired;
J. "Inventory" means all goods, merchandise, and other personal
property now owned or hereafter acquired by Borrower that are held for sale or
lease, or are furnished or to be furnished under any contract of service or are
raw materials, work in process, packaging, labels, supplies, or materials used
or consumed in Borrower's business, and all products thereof, and
substitutions, replacements, additions, or accessions thereto.
K. "Obligations" means any and all indebtedness, obligations and
liabilities of Borrower to Lender of every kind and description, direct or
indirect, secured or unsecured, joint or several, absolute or contingent, due
or to become due, whether for payment or performance, now existing or hereafter
arising, regardless of how the same arise or by what instrument, agreement, or
book account they may be evidenced, or whether evidenced by any instrument,
agreement, or book account, including, without limitation: all loans (including
any loan by renewal or extension); all indebtedness, all undertakings to take
or refrain from taking any action; and all interest, taxes, fees, charges,
expenses, and attorney's fees chargeable to Borrower or incurred by Lender
under this Agreement or in any other document or instrument delivered hereunder
or as a supplement hereto.
L. "Event of Default" means each and every event specified in
Section 9 of this Agreement.
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M. "Master Promissory Note,", "Promissory Note", or "Note" shall
mean the promissory note or notes issued pursuant to this Agreement.
N. "Warrant Agreement" or "Warrant Agreements" refers to the
agreement between Borrower and Lender relating to the issuance of Common Stock
purchase warrants to be delivered to the Lender hereunder.
O. "Warrant Certificate" or "Warrants" refers to the Common
Stock purchase warrants to be issued pursuant to the Warrant Agreements.
P. "Guarantor" or "Guarantors" shall refer to each wholly or
majority owned subsidiary of Borrower.
To the extent not defined in this Section 1, unless the
context otherwise requires, all other terms contained in this Agreement shall
have the meanings attributed to them by Article 9 of the Uniform Commercial
Code in force in the State of Delaware as of the date of the Agreement, to the
extent the same are used or defined therein.
2. Representations and Warranties.
As a material inducement to Lender to make loans to Borrower
hereunder, Borrower represents and warrants to Lender, and such representations
and warranties shall be continuing representations and warranties during the
term of this Agreement and so long thereafter as any Obligations shall remain
outstanding, as follows:
A. Borrower has been duly incorporated and organized and is
existing as a corporation in good standing under the laws of Delaware and is
duly qualified and in good standing as a foreign corporation in the State of
Florida and those other jurisdictions where the conduct of its business or the
ownership of its property requires qualification. Borrower has the power and
authority to own its properties and assets, to conduct its business, to enter
into and perform this Agreement, and any other document or instrument delivered
in connection herewith, and to incur the Obligations. Exhibit 2.A. is a list of
the subsidiaries of the Borrower and all corporations, limited liability
companies, partnerships, joint ventures, research partnerships or other
businesses in which Borrower has an interest. Except as set forth in Exhibit
2.A.1 attached hereto, Borrower has not made or received any material written
or oral proposals which are now pending relating to control of the Company or
to financing committments, other than the proposal with the Lender; is not
engaged in any contract negotiations or discussions, nor is otherwise engaged
or involved in any transaction at any stage involving the securities, assets or
business prospects of the Borrower with or from any third party.
B. Except as set forth in Exhibit 2.B. attached hereto, Borrower
utilizes no trade names in the conduct of its business, has not changed its
name, been the surviving entity in a merger, acquired any business, or changed
the location of its chief place of business or chief executive office or the
location of its records with respect to Receivables or the location of any of
the Inventory.
C. Borrower is not in default with respect to any agreement to
which it is a party or by which it is bound, except as disclosed herein. The
execution and performance of this Agreement and any other document or
instrument to be delivered hereunder or as a supplement hereto will not violate
any law or the terms of the incorporation document or bylaws of Borrower,
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<PAGE> 4
nor will it violate or result in a default or in the creation or imposition of
any lien or encumbrance upon any of the assets of Borrower (immediately, with
the passage of time, or with the giving of notice and the passage of time)
under any other contract, agreement, or instrument to which Borrower is a party
or by which Borrower is bound, nor will it result in the acceleration of any
obligation under any mortgage, lien, lease, franchise, license, permit,
agreement, instrument, order, arbitration award, judgment, or decree, or in the
termination of any license, franchise, lease, or permit, to which Borrower is a
party or by which it is bound; and it will not violate or conflict with any
other restriction of any kind or character to which Borrower is subject.
D. This Agreement and any document or instrument to be delivered
hereunder or as a supplement hereto and the transactions contemplated hereby or
thereby have been duly authorized and/or executed and delivered, as
appropriate, and constitute valid and legally binding obligations of Borrower
and are enforceable against Borrower in accordance with their respective terms.
E. There is no claim, loss, loss contingency, claim for
indemnity, litigation, or proceeding whether or not pending, threatened, or
imminent against or otherwise affecting Borrower that involves the possibility
of any judgment or liability not fully covered by insurance or that may result
in an adverse change in the business, properties, or condition, financial or
otherwise, of Borrower, except, Pennington v. Veridien Corporation, et. al.,
pending the United States District Court for the Middle District of Florida,
Tampa Division, which is addressed in the attachment to counsel's opinion
delivered pursuant to Section 3.D.(5). Attached hereto as Exhibit 2.E. is a
true and correct list of all claims, loss contingencies, litigation or
proceedings involving the Borrower or any of its subsidiaries as of the date
hereof. There exists no judgment, order, injunction or other restraint issued
or filed against the Borrower, its property or rights or which prohibits or
adversely affects this Agreement or the transactions contemplated hereby.
F. Except as set forth in Exhibit 2.F., Borrower is the owner of
its properties, free and clear of all security interests, encumbrances, or
liens, except liens that arise by operation of law with respect to obligations
of Borrower that are not yet due and payable. Borrower will defend its
properties against all claims and demands of all persons at any time claiming
an interest therein. Inventory is and shall at all times be of good and
merchantable quality, free from all defects.
G. Attached hereto as Exhibit 2.G. are the financial statements
of the Borrower. The financial statements furnished to Lender by Borrower
include the audited consolidated statements for the Borrower for the fiscal
year ended December 31, 1994 and the quarterly financial statements of the
Borrower for the fiscal quarters ending March 31, 1995 and June 30, 1995. Such
statements fairly present the financial condition of the Borrower included
therein as of the dates set forth therein. The quarterly financial statements
were prepared by the Borrower based upon the unaudited balance sheets of the
Borrower and dated as of March 31, 1995 and June 30, 1995 and were prepared in
accordance with Generally Accepted Accounting Principles ("GAAP"), with only
such adjustments which are normal, recurring, year end adjustments. As of the
date hereof, there are no contingent obligations, contingent liabilities, or
liabilities for taxes, long-term leases or unusual or forward long term
commitments which have not been listed in such financial statements or
otherwise disclosed in the Exhibits to this Agreement.
H. The address of the chief executive office and chief place of
business of Borrower is 800 Sarasota Quay, Sarasota, Florida 34236 and Borrower
has no other place of business except as listed on Exhibit 2.H. hereto. All
records pertaining to the Inventory and Receivables (including computer
records) and all Inventory (including return items thereof), all files reports,
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<PAGE> 5
documents and materials related to the Borrower's products, market development,
present or potential clients, and all financial records, files, filings and
records of any kind relating to the operations of the Borrower are kept at
Borrower's said address except as listed on Exhibit 2.H. hereto.
I. Borrower has filed all federal, state, and local tax returns
and other reports it is required to file, is not delinquent with respect to any
such filings or payments and has paid or made adequate provision for payment of
all such taxes, assessments, and other governmental charges.
J. No event has occurred and is continuing which constitutes a
Potential Event of Default or an Event of Default under the terms of this
Agreement or the Loan Documents other than as set forth in Exhibit 2.J. hereto.
K. Attached hereto as Exhibit 2.K. is a list of all material
contractual obligations of the Borrower, whether written or oral. Except as set
forth in said Exhibit 2.K. neither the Borrower nor any of its subsidiaries is
in default under any contractual obligation to which it is a party or by which
its property is bound.
L. Borrower has complied in all material respects with all
applicable statutes, regulations, ordinances, court decrees, or other
directives of the United States of America, and all states, counties,
municipalities, and agencies with respect to the manufacture and sale of its
goods, the rendition of its services, and/or the conduct of its business.
M. The capitalization of Borrower is as set forth in Exhibit
2.M. hereto. As of the date hereof all outstanding shares of each class of
shares issued by Borrower are duly authorized, fully paid and nonassessable.
Except as set forth in Exhibit 2.M. and as provided for herein, there are no
outstanding securities, warrants, options, agreements, rights or other
agreements of any nature that require Borrower to issue any securities of the
Borrower or its equivalent in cash or other property to any person or entity.
N. As of the date hereof, no class of security or security
holder has preemptive rights.
O. Attached hereto as Exhibit 2.0. is a list of all patents,
patent applications, trademarks, trademark applications, copyrights, copyright
applications, inventions and other intellectual properties of the Borrower.
Except as further set forth in said Exhibit 2.0., the Borrower owns or holds
valid licenses in all trademarks, copyrights, patents, patent rights and
licenses used in the conduct of Borrower's business as of the date hereof.
Except as set forth in said Exhibit, there has been no charge or threat of
charge of any infringement against the Borrower by any third party, nor has
Borrower infringed on any unexpired trademark, patent, patent registration,
copyright, copyright registration or other proprietary right of any third
party.
P. All permits, licenses, and other governmental authorizations
needed by Borrower to carry on its business as it exists or is contemplated
have been obtained and are in full force and effect and have not been modified
or amended, except for such permits, licenses and governmental authorizations
which are not material to the conduct of Borrower's business. No breach exists
with respect to any such permit, license or governmental authorization which
would have a material adverse effect on the business, financial condition
and/or operations of Borrower as they now exist or are contemplated to exist.
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<PAGE> 6
Q. Exhibit 2.Q hereto is a list of all environmental permits
obtained by Borrower or necessary for use in the operation of the business of
Borrower. Except as set forth in Exhibit 2.Q. attached hereto,
1) The Borrower has obtained all permits, licenses and
other authorizations which are required under the Environmental
Protection Act and Environmental Safety Laws and which are applicable
to the conduct of the Borrower's business (collectively, "Environmental
Permits");
2) The Borrower has complied in all respects and is in
compliance with the terms and conditions of the Environmental
Protection Act and all such Environmental Permits and has complied and
is in compliance with the Environmental Protection Act and
Environmental Safety Laws;
3) No notice, notification, demand, request for
information, citation, summons or order has been issued, no complaint
has been filed, no penalty has been assessed and no investigation is
pending or, to the Borrower's best knowledge, threatened by any person
with respect to any alleged failure to obtain any Environmental
Permits or any violation of any Environmental and Safety Laws, or with
respect to the generation, treatment, storage, recycling,
transportation, discharge or disposal, or any release or threatened
release of any hazardous materials;
4) No property or facility now owned or operated, or
previously owned or operated, by the Borrower has been or is presently
operated in a manner which requires permitting as a hazardous waste
treatment, storage or disposal facility for purposes of any
Environmental and Safety Law;
5) None of the following is present at any property or
facility now owned or operated, or previously owned or operated, by
the Borrower: (i.) poly-chlorinated biphenyls contained in electrical
or other equipment; or (ii.) asbestos containing insulation or
building materials;
6) There are no active or inactive underground storage
tanks present at any property or facility now or previously owned or
operated by the Borrower;
7) There has been no release of hazardous materials
into the environment at or from any property or facility now owned or
operated, or previously owned or operated, by the Borrower so as to
give rise to any present or future liability or obligation under any
Environmental and Safety Laws;
8) No liens have arisen under or pursuant to any
Environmental and Safety Law on any property or facility now owned or
operated, or previously owned or operated, by the Borrower, no
governmental actions have been taken or are in process which could
subject any such properties or facilities to such liens, and the
Borrower would not be required to place any notice or restriction
relating to the presence of hazardous materials in any deed to such
property or facility;
9) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses of any property or
facility now or previously owned or operated by the Borrower as of the
date hereof which have not been provided to Lender;
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<PAGE> 7
10) Without limiting the generality of the foregoing,
there are no other facts, events or conditions, relating to the past
or present operations, properties or facilities of the Borrower which
may give rise to any liability under any Environmental and Safety
Laws.
R. Exhibit 2.R. hereto is a list of all permits, licenses and
approvals from the Federal Drug Administration obtained by Borrower or
used by Borrower in the operation of its business. Except as set forth
in Exhibit 2.R.
1) The Borrower has obtained all permits, licenses and
other authorizations which are required under federal or state health
or drug laws and regulations which are necessary for and applicable to
the conduct of the Borrower's business as it is now conducted
(collectively, "FDA Permits");
2) The Borrower has complied in all respects and is in
compliance with the terms and conditions of all such FDA Permits and
has complied and is in compliance with all such laws and regulations;
3) No notice, notification, demand, request for
information, citation, summons or order has been issued, no complaint
has been filed, no penalty has been assessed and no investigation is
pending or, to the Borrower's best knowledge, threatened by any person
with respect to any alleged failure to obtain any FDA Permits or any
violation of any health or drug safety Laws;
S. Borrower is not entering into the arrangements contemplated
by this Agreement and the Loan Documents with actual intent to hinder,
delay or defraud either present or future creditors. On and as of the
closing date on a pro forma basis after giving effect to the
transactions contemplated by this Agreement and to all debts incurred
or to be created in connection herewith.
1) the present fair salable value of the assets of the
Borrower (on a going concern basis) will exceed the probable liability
of the Borrower on its debts (including its contingent liabilities);
2) the Borrower has not incurred, nor does it intend to
or believe that it will incur, debts, including any contingent
liabilities, beyond its ability to pay such debts as such debts mature
(taking into account the timing and amounts of cash to be received
from any source, and of amounts to be payable on or in respect of
debts), and the amount of cash available to Borrower, after taking
into account all other anticipated uses of funds, is anticipated to be
sufficient to pay all such amounts on or in respect of debts, when
such amounts are required to be paid; and
3) Borrower will have sufficient capital with which to
conduct its present and proposed business and the property of Borrower
does not constitute unreasonably small capital with which to conduct
its present or proposed business.
For purposes of this Section S. "debt" means any
liability on a (i) right to payment whether or not such a right is
reduced to judgment liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured,
or unsecured, or (ii) right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not
such a right to an equitable remedy is reduced to
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<PAGE> 8
judgment, fixed, contingent, matured, unmatured, disputed, undisputed,
secured or unsecured.
T. The Borrower has no pension, retirement, profit sharing or
other employee benefit plans.
U. No representation, warranty, or statement by Borrower
contained herein or in any certificate or other document furnished or to be
furnished by Borrower pursuant hereto contains or at the time of delivery shall
contain any untrue statement of fact, or omits, or shall omit at the time of
delivery, to state a fact necessary to make it not misleading.
V. No consent or approval of any person, no waiver of any lien
or other similar right, and no consent, license, approval, authorization, or
declaration of any governmental authority, bureau, or agency is or will be
required in connection with the execution, delivery, performance, or
enforcement, or validity or priority of this Agreement or any other agreement,
instrument, or document to be executed or delivered in connection herewith.
W. All of the issued and outstanding shares of the capital stock
of each subsidiary of the Borrower are validly issued, fully paid and
non-assessable and all of the issued and outstanding shares of stock of each
subsidiary of the Borrower are owned by the Borrower free and clear of all
mortgages, pledges, liens, security interests, conditional sales agreements,
charges, encumbrances and restrictions of every nature.
3. CLOSING AND CONDITIONS TO CLOSING.
A. The closing of this transaction shall be held at such time
and date as may be agreed upon by the Lender and the Borrower.
B. On the closing date the Borrower shall execute and deliver to
the Lender the Loan Documents as described in Exhibit 3.B. hereto.
C. If the Borrower shall fail to tender such documents to Lender
or the closing date or the conditions to closing which are specified herein
shall not have been fulfilled to the satisfaction of the Lender, Lender shall
at its sole option be relieved of all further obligations under this Agreement.
D. The obligations of the Lender hereunder are subject to the
fulfillment to the satisfaction of Lender prior to or at the time of the
closing and at the time of the advance of funds under Tranche No. 1 of the
following conditions:
1) The representations and warranties of the Borrower
contained in this Agreement and otherwise made in writing by the
Borrower pursuant to this Agreement shall, have been true when made
and shall be true at the time of the closing and at the time of the
advance of funds under Tranche No. 1 with the same effect as though
such representations and warranties had been made at such time, except
for changes resulting from the consummation of the transactions
contemplated by this Agreement or referred to herein.
2) The Borrower shall have performed and complied with
all agreements and conditions contained herein required to be
performed or complied with by it prior to
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<PAGE> 9
or at the time of the closing and at the time of the advance of funds
under Tranche No. 1, and at such time the Borrower shall not be in
default in the performance of or compliance with any of the provisions
of this Agreement.
3) The Borrower shall have delivered to the Lender a
certificate, dated the Closing Date, and at the time of the advance of
funds under Tranche No. 1, as the case may be, signed by the
President, certifying as to the fulfillment of the conditions
specified in Section D 1) and 2) hereof.
4) All legal proceedings in connection with the
transactions contemplated by this Agreement and all documents and
legal opinions incident thereto shall be satisfactory in all respects
to Lender, and Lender shall have received such counterpart originals
or certified or other copies of such documents as Lender may
reasonably request.
5) Under shall have received the following opinion (or
opinions, if necessary) of counsel to the Borrower dated as of the
closing date and satisfactory to Lender to the effect that:
a) The Borrower is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate
power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be
conducted.
b) The Borrower is duly licensed or qualified
to do business and in good standing as a foreign corporation
in Florida and all other jurisdictions in which the nature of
the activities conducted by it and/or the character of the
assets owned and leased by it makes such license or
qualification necessary.
c) The execution and delivery of this
Agreement and of the Loan Documents have been duly authorized
by all necessary corporate action on the part of the Borrower
(no action by the stockholders of the Borrower being required
by law, the Borrower's Certificate of Incorporation, the
bylaws of the Borrower or otherwise), have been duly
authorized and delivered by a duly authorized officer of the
Borrower and each constitutes a valid and binding agreement
of the Borrower, enforceable in accordance with its terms,
except to the extent that such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application then in
effect.
d) No consent or approval of any person, no
waiver of any lien or other similar right, and no consent,
license, approval, authorization, or declaration of any
governmental authority, bureau, or agency is or will be
required in connection with the execution, delivery,
performance, or enforcement, or validity or priority of this
Agreement or any other agreement, instrument, or document to
be executed or delivered in connection herewith, or if so
required have been obtained and are in full force and effect.
e) All of the issued and outstanding shares of
the capital stock of each subsidiary of the Borrower are
validly issued, fully paid and non-assessable and, to the
best of such counsel's knowledge, all of the issued and
outstanding
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<PAGE> 10
shares of stock of each subsidiary of the Borrower are owned
by the Borrower free and clear of all mortgages, pledges,
liens, security interests, conditionals sales agreements
charges, encumbrances and restrictions of every nature.
f) Borrower is the owner of the patents,
trademarks, copyrights and other intellectual property
claimed by the Borrower and necessary for the conduct of its
business. The operations of Borrower do not infringe on any
patents, patent applications, trademarks, trade names or
copyrights of others, nor do the trademarks currently
utilized by Borrower infringe on the trademarks of others,
and Borrower has not received any notice of infringement.
g) The transactions contemplated by this
Agreement, including the issuance of the Warrants, are exempt
from registration under the securities laws of the United
States and any state to which this transaction relates. The
Borrower is in compliance in all respects with the reporting
requirements of the Securities and Exchange Act of 1934, and
the execution of this Agreement and the performance of
transactions contemplated thereby will not violate or void
the conditions of any exemption relied upon by Borrower in
any previous offering of its securities.
h) The representations and warranties of the
Borrower contained in this Agreement or in any certificate or
document contemplated under this Agreement to be delivered
are true and correct and each of the covenants and agreements
contained in this Agreement or in any of the Loan Documents
to be performed by the Borrower and each of the conditions
contained in this Agreement or in any of the Loan Documents
to be fulfilled or complied with by the Borrower has been or
will be duly and timely performed, fulfilled or complied with
in all respects.
4. LOAN AND PAYMENT PROVISIONS.
A. Subject to the terms and conditions of this Agreement, Lender
shall in its sole discretion, lend to Borrower up to a total of $2,500,000,
which may be drawn as follows:
1) $20,000 Initial advance to fund Borrower's
requirements for the period October 20, 1995 to October 31, 1995.
2) $260,000 (Tranche 1) upon fulfilling the conditions
set forth in Section 3 hereof. The advance of funds under Tranche 1
shall follow the execution of this Agreement and the Loan Documents.
3) $150,000 (Tranche 2) upon satisfaction of the
following conditions:
i. Neither the Borrower nor any Guarantor
shall be in default of any of its obligations in any
agreement with the Lender, or of any other agreement to which
the Borrower or any Guarantor is a party, nor shall Borrower
or any Guarantor be in default or violation of any law, rule,
regulation, judgment, order, permits, or license to which its
business is subject;
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ii. There shall not have been any material
adverse change to the business or affairs, financial or
otherwise, of the Borrower or any Guarantor;
iii. The results of operations of the Borrower
have not deviated from the Business Plan in any respect, save
and except those variances permitted in Exhibit 4. A.2)iii.
iv. The shares of Common Stock initially
issuable upon exercise of the Warrants shall have been duly
authorized and reserved for issuance upon exercise of the
Warrants.
v. The Borrower shall have entered into the
following contracts with Paul Simmons upon terms satisfactory
to the Lender:
a) Employment Contract;
b) Repayment Agreement and applicable
promissory notes related thereto;
c) Reimbursement Agreement and
applicable promissory notes
related thereto;
The Borrower shall have complied with the conditions
precedent to Tranche 1, and Tranche 2 may be funded, subject
to the satisfaction to the foregoing conditions, no later
than the last day of the calendar month following the advance
made under Tranche 1.
4) $193,000 (Tranche 3)
5) $61,000 (Tranche 4);
6) $156,000 (Tranche 5);
7) $197,500 (Tranche 6);
8) $112,500 (Tranche 7);
9) $46,500 (Tranche 8);
10) Borrower shall make each such advance on the last
day of the month succeeding the prior advance, in each case
under the following conditions:
i. Neither the Borrower nor any Guarantor
shall be in default of any of its obligations in any
agreement with the Lender, or of any other agreement to which
the Borrower or any Guarantor is a party, nor shall Borrower
or any Guarantor be in default or violation of any law, rule,
regulation, judgment, order, permit, or license to which its
business is subject
ii. There shall not have been any material
adverse change to the business or affairs, financial or
otherwise, of the Borrower or any Guarantor;
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<PAGE> 12
iii. The results of operations of the Borrower
have not deviated from the Business Plan in any respect, save
and except those variances permitted in Exhibit 4. A.2)iii.
iv. Notwithstanding the foregoing, the total
amount of advances required to be made by Lender to Borrower
hereunder shall be reduced, dollar for dollar, by the
aggregate amount of the exercise price paid by Lender for the
exercise of the Warrants issued hereunder.
B. As a condition to each advance hereunder the Borrower will
provide the Lender with a drawdown certificate in form and substance
satisfactory to the Lender certified by an executive officer of the Borrower to
the effect that the Representations and Warranties of Borrower made in Section
2 hereof are true and correct as of the date of the advance and that the
Borrower has satisfied the conditions for the advance. The advances made
hereunder will be evidenced by a Master Promissory Note in the form attached
hereto as Exhibit 4.B. Individual advances and payments will be noted on a grid
attached thereto.
C. The Note will be due and payable sixty-one (61) months from
the date of the first advance and will bear interest at a fixed rate of ten
(10%) per annum, calculated and payable on the last days of June and December
of each year, in arrears, with the first payment of interest to be made on
December 31, 1995 for the immediately preceding period commencing the date of
the initial advance. At the option of the Borrower the amount to be paid on the
first payment date may be capitalized and compounded.
D. The Promissory Note may be prepaid, without bonus or penalty,
at any time upon thirty (30) days prior written notice.
E. Each of the conditions to Closing and to the making of
advances set forth in Sections 3 and 4 hereof shall be for the sole benefit of
Lender and Lender shall make the final, sole and exclusive determination as to
the fulfillment of any of said conditions by Borrower.
F. Lender reserves the right, in its sole discretion, to
accelerate the schedule of advances upon the request of Borrower and the
drawdown of any unadvanced portion of the Promissory Note. In such event
advances would be made in accordance with Section 4(A) hereof.
5. GRANT OF SECURITY INTEREST.
To secure the payment and performance of the Obligations, Borrower
hereby pledges, assigns, and transfers to Lender, and grants to Lender a
continuing security interest in and to, all of the Collateral.
6. ISSUANCE OF WARRANTS.
As a further inducement to the Lender to make the loans to the
Borrower specified herein, the Borrower shall, concurrently with the advance of
funds under Tranche 1, execute and deliver the Warrant Agreement and issue
certificates evidencing that the Lender is the owner of the Warrants. The
Warrants shall be issued in accordance with the Warrant Agreement subject to
the following terms and conditions:
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(i) The aggregate number of Warrants issued to Lender shall be
that number which, assuming exercise of all Warrants by Lender, would, at the
time of issue and at all times when such Warrants are outstanding, represent
51% of all of the outstanding Common Stock of the Borrower, on a fully diluted
basis, including the shares issuable upon exercise of the Warrants;
(ii) The aggregate exercise price of the Warrants shall be
$2,500,000. Subject to the aggregate exercise price the Lender may designate
different exercise prices for the Warrants.
(iii) The Lender will execute and deliver a separate Warrant
Agreement for each different exercise prices;
(iv) The Lender may tender Promissory Notes issued by the Borrower
herein in satisfaction of the exercise price of the Warrants;
(v) The Borrower shall grant registration rights with respect to
the Common Stock exercisable upon exercise of the Warrants;
(vi) The Warrants shall expire sixty-one (61) months from the date
of their issuance, except in the event of a default by Lender hereunder, in
which case 50% of the Warrants then outstanding, shall expire within one year
from the date of notice of such default;
(vii) In the event that the Borrower does not have sufficient
authorized capital to permit the issuance of sufficient shares of Common Stock
to permit Lender, upon exercise of the Warrants, to own 51% of the outstanding
Common Stock of Borrower, then, Borrower shall issue to Lender Stock
Appreciation Rights. The number, terms and other conditions of such Stock
Appreciation Rights shall be as set forth in Exhibit 6(vii) attached hereto.
7. NEGATIVE COVENANTS.
Borrower agrees that during the term of this Agreement and so long
thereafter as the Warrant and/or any Obligations remain outstanding, it will
not, without the prior written consent of Lender:
A. Enter into any merger of consolidation or effect any
reorganization or recapitalization.
B. Mortgage, pledge, grant, or permit to exist a security
interest in, or lien or encumbrance upon, any of its assets or property, real
or personal, tangible or intangible, now owned or hereafter acquired except:
(i) Liens in favor of Lender; and (ii) liens arising by operation of law with
respect to obligations of Borrower not yet due and payable.
C. Assume, endorse, guarantee, or otherwise become liable for or
upon the obligations of any person, partnership, corporation, or other entity
(other than endorsements for deposits in the ordinary course of business).
D. Incur, create, assume, or permit to exist any indebtedness or
liability for borrowed money or any other indebtedness except: (i)indebtedness
to Lender; and (ii)accounts payable incurred in the ordinary course of
business.
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E. Redeem, purchase, or retire any of the capital stock of
Borrower or declare or pay any dividends (including cash, stock dividends or
dividends of property or assets), or make any other payment or distribution
upon any of the capital stock of Borrower.
F. Make any investment in, or make any loan or advance to, or
declare or pay any bonus to, any person, partnership, or corporation, including
officers, stockholders, directors of Borrower, or any of their relatives.
G. Purchase or otherwise invest in or hold securities, non
operating real estate, or other non operating assets, except direct obligations
of the United States of America or certificates of deposit or equivalent
securities.
H. Enter into any sale-leaseback transaction, or sell, lease,
license, transfer, or otherwise dispose of all or any substantial portion of
its assets or the Collateral, except that Borrower may sell inventory and
surplus equipment in the ordinary course of business.
I. Directly or indirectly use or apply all or any portion of the
proceeds of any loans made hereunder to purchase or carry any "margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, or any regulations, interpretations, or rulings thereunder, as
amended.
J. Make or permit any substantial change in, or cease in whole
or in part, its present business, or engage in any other activities apart from
its present business and such business as is contemplated in the Business Plan.
K. Extend the time for payment of any Receivable or otherwise
modify, amend, or impair any of the terms of any Receivable.
L. Authorize, cause, or permit the issuance or execution of any
negotiable warehouse receipt or bill of lading representing any right, title,
or interest in and to any Inventory, unless same are forthwith turned over to
Lender so that Lender shall continue to have a perfected security interest in
such inventory.
M. Make any change for any reason whatsoever in the executive
management, majority ownership, or control of Borrower without the prior
written consent of Lender.
N. Issue or enter into any agreement for the issuance of any
class of stock, except as set forth in Exhibit 2.M. hereof.
O. Incur any obligation, enter into any contract or financial
arrangement including any obligation for management compensation or bonuses
which obligates the Borrower for an aggregate of $50,000 in any fiscal year or
which are not outlined in the approved business plan.
P. Enter into any transaction with an officer, director,
shareholder or other interested party of the Borrower, excluding Lender, which
has not been approved by a committee of disinterested directors of the Board of
Directors and which is not on terms as least as favorable as the Borrower might
obtain from unrelated third parties.
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<PAGE> 15
8. AFFIRMATIVE COVENANTS.
Borrower hereby covenants and agrees with Lender that it will, during
the term of this Agreement and so long thereafter as any Obligations remain
outstanding:
A. Furnish Lender:
(1) Attached hereto as Exhibit 8.A. is the Business Plan
of the Borrower, duly adopted by the Board of Directors of the
Borrower. Within sixty (60) days prior to the commencement of each
fiscal year, commencing with 1997 and for each fiscal year thereafter,
the Borrower shall prepare and the Board of Directors shall adopt and
deliver to Lender a Business Plan, including projected balance sheet,
income and cash flow statements, and a sales and marketing plan and
operating plan, which plans shall be the sole responsibility of
Borrower and shall be satisfactory in all respects to Lender. In
accordance with such business plans, Borrower shall maintain
(a) Total Liabilities to Total Net Worth in
ratios which will be as set forth in the Business Plan;
(b) Working Capital in an amount set forth in
the Business Plan;
(c) Working Capital ratio in a ratio set forth
in the Business Plan;
In addition, actual results for each fiscal
quarter and for the immediately preceding four fiscal
quarters will not deviate from the Business Plan for the
relevant periods.
(2) Within ninety (90) days after the last day of each
fiscal year of Borrower, a balance sheet and related statements of
income, retained earnings, and changes in financial position, each
prepared in reasonable detail and in accordance with generally
accepted accounting principles consistently applied certified by an
independent certified public accountant satisfactory to Lender;
(3) Within thirty (30) days after the end of each fiscal
quarter of each fiscal year of the Borrower, a balance sheet as at the
end of such quarter, statements of income and retained earnings and a
comparison of actual results to those set forth in the Business plan
for the period from the beginning of the fiscal year to the end of
such quarter, certified by an authorized financial or accounting
officer of Borrower;
(4) Within twenty (20) days after the end of each
calendar month, the following financial information prepared in
accordance with Generally Accepted Accounting Principles: (a) Balance
Sheet, (b) Income Statement, (c) Statement of Changes in financial
position; (d) an aged analysis of all outstanding Payables and
Receivables, (e) backorder listing (with conversion of orders to
shipments from previous month's back order listing), (f) budget
variance analysis (comparison of budget versus actual), (g)
information concerning quantities, costs and fair market value of
Inventory; and (h) calculations of equivalent gallons of product
shipped in that month; all of which are to be certified by an officer
of the Borrower and in form and substance satisfactory to Lender;
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<PAGE> 16
(5) Contemporaneously with their filing or delivery,
copies of all documents filed with the Securities and Exchange
Commission or other federal regulatory body, any stock exchange and
all documents, annual reports, proxy statements, press releases or
other information delivered to stockholders;
(6) Promptly, and in form satisfactory to Lender, such
other information as Lender may reasonably request from time to time.
B. Maintain casualty insurance coverage on its physical assets
and other insurance against other risks, including public liability and product
liability insurance in such amounts of such types as may reasonably be
requested by Lender from time to time, and in any event, as are ordinarily
carried by similar businesses. In the case of all policies insuring property in
which Lender shall have a security interest of any kind whatsoever, all, such
insurance policies shall provide that the proceeds thereof shall be payable to
Borrower and Lender, as their respective interest may appear. All said policies
or certificates thereof, including all endorsements thereof and those required
hereunder, shall be deposited with Lender; and such policies shall contain
provisions that no such insurance may be canceled or decreased without ten (10)
business days prior written notice to Lender. In the event of acquisition of
additional property, real or personal, or of incurrence of additional risks of
any nature, Borrower shall cause such insurance coverage to be increased or
amended in such a manner and to such extent as prudent business judgment would
dictate. If Borrower shall at any time or times hereafter fail to obtain and
maintain premium in whole or part relating to any such policies, Lender may,
but shall not be obligated to, obtain and/or cause to be maintained insurance
coverage with respect to the assets of Borrower, including, at Lender's option,
the coverage provided by all or any of the policies of Borrower and pay all or
any part of the premium thereunder, without waiving any Event of Default by
Borrower, and any sums to disbursed by Lender shall be additional Obligations
of Borrower to Lender payable on demand. Lender shall have the right to settle
and compromise any and all claims under any of the policies required to be
maintained by Borrower hereunder; to demand, receive, and receipt for all
monies payable thereunder; and to execute in the name of Borrower or Lender or
both any proof of loss, notice, or other instruments in connection with such
policies or any loss thereunder.
C. Permit Lender, through its authorized attorneys, accountants,
and representatives, to examine the Inventory and to inspect, examine and copy
the books, accounts, records, ledgers, and assets of every kind and description
of Borrower at all reasonable times.
D. Promptly notify Lender of any condition or event that
constitutes, or would constitute with the passage of time or giving of notice
or both, a default under this Agreement, and promptly inform Lender of any
events or changes in the business, properties, or condition, financial or
otherwise, of Borrower, that when individually or cumulatively viewed in light
of prior financial statements, and/or events, may result in a material adverse
change in the financial condition of Borrower.
E. Maintain in good standing its corporate existence in its
jurisdiction of incorporation and its status as a foreign corporation qualified
to do business in those jurisdictions where it is required to be qualified. In
addition, the Borrower will continue in its existing business and do all things
necessary to keep in full force and effect its corporate existence, rights and
franchises. The Borrower will conduct its business in an orderly and efficient
manner consistent with good business practices, and perform and comply with all
statutes, rules, regulations or ordinances imposed by any governmental unit on
the Borrower and its business and operations, including, without limitation,
those pertaining to compliance with federal and state
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securities law and environmental matters. The Borrower will maintain, or cause
to be maintained, in good repair, working order and condition all properties
and equipment used or useful in its business.
F. If Borrower shall now or hereafter maintain an employee
benefit plan covered by SS.4021 (a) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), relating plan termination insurance, it
shall: (a) furnish Lender a copy of each annual report, together with any
schedules or other attachments thereto, required to be filed with the Secretary
of Labor or any other governmental official pursuant to ERISA; (b) furnish
Lender a copy of any notice of a reportable event required to be furnished to
the Pension Benefit Guaranty Corporation ("PBGC") or other governmental agency;
(c) notify Lender of the institution of any proceedings by the PBGC under
SS.4042 of ERISA promptly after the filing of such reports or notices or
institution of such proceedings.
G. Notify Lender immediately if any Receivables arise out of
contracts with the United States or any department, agency, or instrumentality
thereof, and Borrower shall execute any instruments and take any steps to
perfect the assignment of the rights of Borrower to Lender as required under
the Federal Assignment of Claims Act or any similar act or regulation.
H. Notify Lender not less than thirty (30) days prior to (i) any
change of its name or use of any trade names or (ii) any change in the address
of the chief executive office and/or chief place of business of Borrower, the
location of any records pertaining to the Receivables and all books and records
of the Borrower, and the address where any Inventory is or may be stored.
I. Promptly notify Lender of any disputes that shall arise in
connection with a Receivable or if a Receivable is not paid when due, or if any
petition in bankruptcy or under any other insolvency act for the relief of
debtors with respect to a Customer is filed, or if a Customer makes an
assignment for the benefit of creditors, becomes insolvent, or ceases to carry
on its business, or if Borrower has notice of any facts or circumstances that
could reasonably be expected to have an adverse effect upon the ability of
Customer to pay the Receivable.
J. Upon the creation of a Receivable, or at such other intervals
as Lender may hereafter determine, Borrower shall provide Lender, at its
request, with confirmatory assignment schedules; copies of all invoices
relating to the Receivable; evidence of shipment or delivery of Inventory; and
such further information and/or schedules as Lender may reasonably require, all
in a form satisfactory to Lender.
K. Keep complete and accurate books and records with respect to
the business of the Borrower and the Collateral consistent with good business
practice including current stock, cost, and sales records of Inventory,
accurately itemizing and describing the kinds, types, and quantities of
Inventory, and the cost and selling price thereof; further, the Borrower will
keep complete and accurate books and records of customers, orders, order
patterns, pricing, marketing programs, research and proprietary information.
L. At any time and from time to time upon request of Lender,
execute and deliver to Lender, in form and substance satisfactory to Lender,
negotiable promissory notes for any or all of the Obligations and/or such
documents in respect of the Obligations or perfect or maintain perfected the
security interest of Lender in the Collateral or that may be necessary to
comply with the provisions of the law of the States of Florida and Delaware or
the law of any other jurisdiction in which Borrower may then be conducting
business or in which any of the Collateral may be located. Borrower shall not
be required to execute duplicate of existing promissory notes.
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<PAGE> 18
M. As long as the Warrants are outstanding, the Board of
Directors of the Borrower shall:
1) invite two individuals designated by the holders of
the majority of the outstanding Warrants to attend and observe all
meetings of the Board of Directors of Borrower and any meetings of any
committee of the Board of Directors of the Borrower.
2) Upon the written request of the holders of a
majority of the then outstanding Warrants to elect up to two designees
of the Lender to fill vacancies on the Board of Directors, such
vacancies created by resignation or removal.
3) Provided the Lender has funded $1,750,000 in loan
advances and/or stock purchases through the exercise of warrants, upon
the written request of the holders of a majority of the then
outstanding Warrants to nominate the designees of Lender for election
as directors of the Borrower, recommend such nominees to the
stockholders for approval and, if otherwise than at an annual
stockholders meeting, provide an opportunity at a special meeting or
by written consent for the stockholders to vote upon such nominees
which shall upon the election of all thereof, constitute, after the
appointment a majority of the directors of Borrower, which may include
shareholder approval, if necessary, to increase the size of the Board
of Directors of Borrower.
N. Arrange for the purchase of directors' and officers'
liability insurance and other liability insurance satisfactory to the Lender.
O. Provide full cooperation with the Lender in any syndication,
assignment or participation in this Agreement should the Lender exercise its
right to assign its interest herein in whole or in part.
P. Immediately notify Lender by telephone or facsimile and
provide hard copies to Lender within two working days of any notices received
or issued which in any way relate to any agreement between the Borrower, any of
its subsidiaries, and Paul Simmons.
9. EVENTS OF DEFAULT
The occurrence or any one or more of the following events shall
constitute an Event of Default hereunder:
A. (i) If a default occurs in the payment of any installment of
principal in respect of any of the Obligations as and when due, whether at
stated maturity, by acceleration, by notice of prepayment, by operation of
Section 9 or otherwise; or (ii) failure to pay any interest on any of the
Obligations and such default continues for a period of five (5) days, except
where the Borrower is permitted to capitalize interest;
B. If a default occurs in the observance or performance of any
covenant or agreement of Borrower herein set forth or set forth in any
agreement, note, or other instrument heretofore, now, or hereafter executed by
Borrower in favor of Lender;
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C. If any representation, warranty, certificate, schedule, or
other information made or furnished by Borrower herein or pursuant hereto is or
shall be untrue or misleading in any material respect or is found to have
omitted to state any material fact;
D. If a default occurs in the performance of any material
obligation of Borrower to any third party which remains uncured for a period of
thirty (30) days;
E. If there is loss, theft, or destruction of or damage to, any
substantial portion of the property of Borrower for which there is either no
insurance coverage or for which, in the opinion of Lender, there is
insufficient insurance coverage, or the making of any levy, seizure, or
attachment upon the Collateral or upon any substantial portion of other
property of Borrower by any third party;
F. If Borrower becomes insolvent or if a creditors' committee is
appointed for the business of Borrower; or if Borrower makes an assignment for
the benefit of creditors, or is adjudicated bankrupt, or if a petition in
bankruptcy or for reorganization or to effect a plan of arrangement with
creditors is filed by or against Borrower; or if Borrower applies for or
permits the appointment of a receiver or trustee for any of its property or
assets, or if any such receiver or trustee is appointed for any of its property
or assets; or if any of the above actions or proceedings whatsoever are
commenced by or against Borrower or any guarantor of or any other party liable
for any of the Obligations and are not dismissed within thirty (30) days;
G. If a proceeding is filed or commenced by or against Borrower
or any guarantor of any of the Obligations for its dissolution or liquidation,
or if Borrower or any guarantor voluntarily or involuntarily dissolves or is
dissolved, terminates or its terminated and such proceeding is not dismissed
within thirty (30) days;
H. If Borrower or any guarantor of any of the Obligations is
permanently enjoined, restrained, or in any way prevented by court order from
conducting all or any material part of its business affairs; or
I. If there is a termination for any reason of any guaranty of,
or contract of surety for, the Obligations, or termination of any subordination
agreement for the benefit of Lender in connection with the transactions
contemplated by this Agreement.
J. If there is any money judgment, writ or warrant of
attachment, or similar process involving in any individual case or in the
aggregate at any time an amount in excess of $10,000 (not covered by insurance)
shall be entered or filed against Borrower or any of Borrower's assets by a
final, nonappealable order of a court of competent jurisdiction and shall
remain undischarged, unvacated, unbounded or unstayed for a period of thirty
(30) days;
K. If Borrower shall deviate from the Business Plan without the
consent or waiver of Lender;
J. If any material provision of this Agreement or any other Loan
Document shall cease to be a valid and binding obligation against the Borrower
or Borrower shall so state in writing.
If any Event of Default shall occur, then or at any time thereafter,
while such Event of Default shall continue, Lender may discontinue any further
advances hereunder. Thereafter, the subsequent cure of the Event of Default by
Borrower shall not require the Lender to
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make any further advances hereunder except at its sole option. In addition,
Lender may declare all Obligations to be due and payable, without notice,
protest, presentment, or demand, all of which are hereby expressly waived by
Borrower.
10. RIGHTS AND REMEDIES.
Lender shall have, by way of example and not of limitation, the rights
and remedies set forth in SS.10A (i) through (v) inclusive and 10C at all times
prior to and/or after the occurrence of an Event of Default and shall have all
of the rights and remedies enumerated herein after the occurrence of an Event
of Default;
A. Lender, and any officer or agent of Lender, is hereby
constituted and appointed as true and lawful attorney-in-fact of Borrower with
full power to (i) notify or require Borrower to notify any and all Customers
that the Collateral has been assigned to Lender and/or that Lender has a
security interest in the Collateral; (ii) endorse the name of Borrower upon any
notes, checks, acceptances, drafts, money orders, or other instruments of
payment (including payments made under any policy of insurance) that may come
into possession of Lender in full or part payment of any amount owing to
Lender; (iii) sign and endorse the name of Borrower upon any invoice, freight,
or express bill, bill of lading, storage or warehouse receipt, draft against a
Customer, assignment, verification or notice in connection with Receivables,
and any instrument or document relating thereto or to rights of Borrower
therein; (iv) notify the post office authorities to change the address for
delivery of mail of Borrower to an address designated by Lender and to receive,
open, and dispose of all mail addressed to Borrower; (v) send requests for
verifications of Collateral to Customers or account debtors; (vi) sell, assign,
sue for, collect, or compromise payment of all or any part of the Collateral in
the name of Borrower or in its own name, or make any other disposition of
Collateral, or any part thereof, which disposition may be for cash, credit, or
any combination thereof, and Lender may purchase all or any part of the
Collateral at public or, if permitted by law, private sale, and in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Obligations; granting to Lender, as the attorney-in-fact of
Borrower, full power of substitution and full power to do any and all things
necessary to be done in and about the premises fully and effectually as
Borrower might or could do but for this appointment, hereby ratifying all that
said attorney-in-fact shall lawfully do or cause to be done by virtue hereof.
Neither Lender nor its agents shall be liable for any acts or omissions or for
any error of judgment or mistake of fact or law in its capacity as such
attorney-in-fact. This power of attorney is coupled with an interest and shall
be irrevocable during the term of this Agreement and so long as any Obligations
shall remain outstanding.
B. Lender shall have the right to enter and/or remain upon the
premises of Borrower without any obligation to pay rent to Borrower or others,
or any other place or places where any of the Collateral is located and kept
and: (i) remove Collateral therefrom to the premises of Lender or any agent of
Lender, for such time as Lender may desire, in order to maintain, collect,
sell, and/or liquidate the Collateral or, (ii) use such premises, together with
material, supplies, books, and records of Borrower, to maintain possession
and/or the condition of the Collateral, and to prepare the Collateral for sale,
liquidation, or collection. Lender may require Borrower to assemble the
Collateral and make it available to Lender at a place to be designated by
Lender that is reasonably convenient to both parties.
C. Lender shall have a right, to set off, without notice to
Borrower, any and all deposits or other sums at any time or times credited by
or due from Lender to Borrower, whether in a special account or other account
or represented by a certificate of deposit (whether or not
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matured), which deposits and other sums shall at all times constitute
additional security for the Obligations and may be set off at any time against
all or any part of the Obligations on which Borrower is primary obligor whether
or not they are then due and whether other security held by Lender is deemed by
it to be adequate and, with respect to Obligations on which Borrower is a
secondary obligor, may be set off at or after maturity.
D. Lender shall have, in addition to any other rights and
remedies contained in this Agreement, and any other agreements, guarantees,
notes, instruments, and documents heretofore, now, or at any time or times
hereafter executed by Borrower and delivered to Lender, all of the rights and
remedies of a secured party under the Uniform Commercial Code in force in the
State of Florida and Delaware as of the Date of Agreement, all of which rights
and remedies shall be cumulative, and non-exclusive, to the extent permitted by
law.
E. Any notice required to be given by Lender of a sale or other
disposition or other intended action by Lender with respect to any of the
Collateral, or otherwise, made in accordance with the terms of this Agreement
at least five (5) days prior to such proposed actions, shall constitute fair
and reasonable notice to Borrower of any such action. The net proceeds realized
by Lender upon any such sale or other disposition, after deduction of the
expenses of retaking, holding, preparing for sale, selling, or the like and
reasonable attorneys' fees and any other expenses incurred by Lender, shall be
applied toward satisfaction of the Obligations hereunder. Lender shall account
to Borrower for any surplus realized upon such sale or other disposition and
Borrower shall remain liable for any deficiency. The commencement of any
action, legal or equitable, shall not affect the security interest of Lender in
the Collateral until the Obligations hereunder or any judgment therefor are
fully paid.
11. INDEMNITY FOR COSTS AND EXPENSES
A. The Borrower shall indemnify the Lender for any suits, claims
or any losses whatsoever sustained or incurred in connection with the
transactions contemplated herein. The Borrower will reimburse Lender for all of
Lender's costs (including, but not limited to, legal fees, accounting fees,
costs related to inspections, filing, stamp or other taxes or governmental
charges, travel expenses, etc.) in connection with all matters contemplated by
this Agreement (except costs related to due diligence), including, but not
limited to, the costs related to the facilities to be advanced hereunder or the
costs incurred in connection with the Warrants and all costs incurred in
connection with the registration of the common stock underlying the Warrants.
B. The Borrower will be responsible for all of its costs in
connection with the transactions contemplated by this Agreement.
C. The Borrower agrees to indemnify, defend and hold Lender
harmless from any claims, liabilities, costs, or suits arising directly or
indirectly from the obligations of Borrower in this Section 10.
12. TERM OF AGREEMENT.
The term of this Agreement shall commence on the Date of Agreement and
shall continue in full force and effect and be binding upon Borrower until all
Obligations shall have been fully paid and satisfied. So long as any
Obligations are outstanding Borrower shall continue to assign Receivables to
Lender and turn over all collections to Lender as provided herein in the Event
of
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Default, and Lender shall retain the security interest, lien, and rights
granted to it hereunder until all the Obligations are paid in full and
satisfied.
13. GENERAL PROVISIONS.
A. The failure of Lender at any time or times hereafter to
require strict performance by Borrower of any of the provisions, warranties,
terms, and conditions in this Agreement or in any other agreement, guaranty,
note, instalment, or document now or at any time or times hereafter executed by
Borrower and delivered to Lender shall not waive, affect, or diminish any right
of Lender at any time or times hereafter to demand strict performance thereof.
No rights of Lender hereunder shall be deemed to have been waived by any act or
knowledge of Lender, its agents, officers, or employees, unless such waiver is
contained in an instrument in writing signed by an officer of Lender. No waiver
by Lender of any of its rights shall operate as a waiver of any other of its
rights or any of its rights on a future occasion.
B. Any demand or notice required or permitted to be given
hereunder shall be deemed effective: (i) if delivered by facsimile
transmission: on the date, following the date of such transmission; (ii) if
delivered by mail: on the date which is three days following the date the
demand or notice was deposited in the United States mail, and sent by certified
mail, return receipt requested, postage prepaid, addressed to Lender at Lender
or to Borrower at the addresses shown below, to wit:
Borrower: Lender.
Veridien Corporation Dunvegan Mortgage Corporation
800 Sarasota Quay 222 Delaware
Sarasota, Florida 34236 P.O. Box 2306
Wilmington, Delaware 19899
or to such other address as may be provided in writing prior to the giving of
such notice by the party to be notified, on ten (10) days' prior written notice
to the other party, unless some other time period is specified herein.
C. This Agreement is intended to supersede all prior agreements
between the parties hereto and contains the entire understanding between the
parties hereto with respect to the transactions contemplated herein and such
understanding shall not be modified except in writing signed by or on behalf of
the parties hereto.
D. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law.
Should any portion of this Agreement be declared invalid for any reason in any
jurisdiction, such declaration shall have no effect upon the remaining portions
of this Agreement, and the entirety of this Agreement shall continue in full
force and effect in all other jurisdictions and said remaining portions of the
Agreement shall continue in full force and effect in the subject jurisdiction
as if this Agreement had been executed with the invalid portions thereof
deleted.
E. If Lender seeks to take possession of any or all of the
Collateral by court process, Borrower hereby irrevocably waives any bonds and
any surety or security relating thereto required by any statute, court rule, or
otherwise as an incident to such possession, and waives any demand for
possession prior to the commencement of any suit or action to recover with
respect thereto.
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<PAGE> 23
F. The provisions of this Agreement shall be binding upon and
shall inure to the benefit of the heirs, administrators, successors, and
assigns of Lender and Borrower; provided, however, Borrower may not assign any
of its rights or delegate any of its obligations hereunder without the prior
written consent of Lender.
G. This Agreement is and shall be deemed to be a contract
entered into and made pursuant to the laws of the State of Delaware and shall
in all respects be governed, construed, applied, and enforced in accordance
with the laws of said state; in the event that the Lender brings any action
hereunder in any court of record of Delaware or the United States of America,
Borrower consents and confers personal jurisdiction over the Borrower by such
court or courts and agrees that service or process may be made upon the
Borrower by mailing a copy of the summons to Borrower as provided in SS.13B, and
in any action hereunder Borrower waives the right to demand a trial by jury.
H. If, prior hereto and/or at any time or times hereafter,
Lender shall employ counsel in connection with the execution and consummation
of the transactions contemplated by this Agreement or to commence, defend, or
intervene, file a petition, complaint, answer, motion, or other pleadings, or
to take any other action in or with respect to any suit or proceeding
(bankruptcy or otherwise) relating to this Agreement, the Collateral, or any
other agreement, guaranty, note, instrument, or document heretofore, now or at
any time or times hereafter executed by Borrower and delivered to Lender, or to
protect, collect, lease, sell, take possession of, or liquidate any of the
Collateral, or to attempt to enforce or to enforce any security interest in any
of the Collateral, or to enforce any rights of Lender hereunder, whether before
or after the occurrence of any Event of Default, or to collect any of the
Obligations, then in any of such events, all of the reasonable attorneys' fees
arising from such services, and any expense, costs, and charges relating
thereto, shall be part of the Obligations, payable on demand and secured by the
Collateral.
I. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute but one and the same instrument.
J. Each reference herein to Lender shall be deemed to include
its successors and assigns, and each reference to Borrower and any pronouns
referring thereto as used herein shall be construed in the masculine, feminine,
neuter, singular, or plural, as the context may require, and shall be deemed to
include the legal representatives, successors, and assigns of Borrower, all of
whom shall be bound by the provisions hereof.
K. Lender shall have the right to syndicate, assign or
participate its interest herein, in whole or in part, to one or more parties
without limitation. In such event, the term "Lender" herein shall refer to all
such assignees or participants. Borrower agrees that any such assignment may be
made without notice and further agrees to cooperate fully with Lender in the
execution of any such assignment and further agrees to execute such documents
as Lender may from time to time require in connection with any such assignment,
participation or syndication. In the event of such syndication, however,
Borrower shall only be required to deliver notices and the other materials
required to deliver to Lender herein to the lead Lender.
L. The term "Borrower" as used herein shall, if this Agreement
is signed by more than one borrower, mean unless this Agreement otherwise
provides or unless the context otherwise requires, the "Borrower and each of
them" and each and every representation, promise,
23
<PAGE> 24
agreement, and undertaking shall be joint and several except that the granting
of the security interest, right of setoff, and lien, shall be by each Borrower
in its respective properties. If there is more than one borrower, any loan or
advance hereunder shall be deemed to be made at the request of and for the
benefit of each Borrower (since Borrowers are affiliates and/or their
respective businesses are closely integrated and interrelated).
M. The section headings herein are included for convenience only
and shall not be deemed to be a part of this Agreement.
Veridien Corporation
By:
--------------------------------
Chairman & Chief Executive
Office
By:
--------------------------------
Secretary
Dunvegan Mortgage Corporation
By:
--------------------------------
Authorized Agent
24
<PAGE> 25
List of Exhibits to Loan and Security Agreement*
Lender: Dunvegan Mortgage Corporation
Borrower: Veridien Corporation
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
2. A. Subsidiaries, Limited Liability Companies,
Partnerships and Joint Ventures
2.A. 1 List of Proposed Business Ventures
2.B. List of Trade Names, Business Combinations,
other business addresses, etc.
2.E. List of Claims
2.F. List of Properties Subject to Lien
2.G. Financial Statements of Borrower
2.H. Other Places of Business of Borrower and
Locations of Inventory
2.J. Events of Default
2.K. List of Material Contracts and Defaults in
Contractual Obligations
2.M. Capitalization of Borrower
2.O. Patents, Trademarks, Copyrights
2.Q. Environmental Non-Compliance
2.R. FDA permits, licenses, etc.
3.B. Loan Documents
1) Loan and Security Agreement
2) Master Promissory Note
3) General Security Agreement
4) Security Agreement Pledge
5) Guaranty
6) Security Agreement -- Rost
7) Security Agreement -- Marquit
8) Assignment of Tradenames
9) Assignment of Patents and Copyrights,
Licenses
10) Warrant Agreements
11) Warrant Certificates
12) Certificate of Borrower
13) Opinions of Counsel
14) Termination Statement -- Simmons
15) Financing Statements
4.A.2)iii. Permitted Deviations from Business Plan
4.B. Master Promissory Note
6(vii) Stock Appreciation Rights
8.A. Business Plan
</TABLE>
25
<PAGE> 26
STATE OF GEORGIA
COUNTY OF FULTON
NOTARY ACKNOWLEDGEMENT
Before the undersigned notary public appeared Mr. William Hicks, who stated
that he is the Secretary of Veridien Corporation, a Delaware Corporation, and
who executed in my presence in Atlanta, Georgia, on October ________, 1995, at
approximately _____ o'clock p.m. the following documents appended hereto:
1. Loan and Security Agreement;
2. Master Promissory Note
--------------------------
Notary Public
My commission Expires
[NOTARIAL SEAL]
26
<PAGE> 1
EXHIBIT 4.4
SECURITY AGREEMENT
PLEDGE
By and Between
VERIDIEN CORPORATION
"Debtor"
and
DUNVEGAN MORTGAGE CORPORATION
"Secured Party"
Dated the 19TH day of October, 1995
---------
1
<PAGE> 2
SECURITY AGREEMENT - PLEDGE
VERIDIEN CORPORATION, a Delaware corporation (the "Debtor"), and
DUNVEGAN MORTGAGE CORPORATION, a Delaware corporation (the "Secured Party"),
agree as follows:
Section 1. General Terms
1.1 Secured Obligations. Debtor hereby grants to Secured Party a
security interest in the property described in Section 1.2 of this Agreement
(the "Collateral") to secure the performance and payment of (i) that certain
master promissory note ("Note") in the aggregate maximum principal amount of
$2,500,000.00, plus accrued interest thereon, of even date herewith and
executed by Debtor herein and issued by Debtor pursuant to that certain Loan
and Security Agreement of even date herewith entered into by and between Debtor
and Secured Party (the "Loan Agreement"); (ii) all renewals and extensions of
the Note; (iii) any other obligations and indebtedness to Secured Party of
whatever kind and wherever or however created or incurred, (iv) this Agreement,
the Loan Agreement and all documents executed in connection therewith or as
security therefor (all of the foregoing described in this Section 1 being the
"Secured Indebtedness").
1.2 The Collateral. The Collateral of this Agreement is all of
the issued and outstanding capital stock of ROST, INC. and MARQUIT
MANUFACTURING SPECIALITIES ("Pledged Stock") of Debtor. "Collateral" as used in
this Agreement, includes the Pledged Stock, and, without limitation, any stock
rights, rights to subscribe, liquidating dividends, stock dividends, property,
cash distributions, dividends paid in stock, new securities, cash dividends or
other property which Debtor may hereafter become entitled to receive on account
of the collateral. The Collateral of this Agreement also includes the proceeds
of any and all property described above including goods and intangible personal
property.
1.3 Additional Obligations Secured. Debtor shall pay to Secured
Party any sum or sums due or which may become due pursuant to the terms of this
Agreement. Debtor shall pay to Secured Party on demand all expenses and
expenditures, including attorneys' fees and other legal expenses incurred or
paid by Secured Party in exercising or protecting its interest, rights, and
remedies under this Agreement, plus interest thereon at the maximum
non-usurious rate of interest permitted by applicable law with respect to
Debtor. Debtor shall pay immediately, without notice, the entire unpaid
indebtedness of Debtor to Secured Party, whether created or incurred pursuant
to this Agreement, the Loan Agreement, or otherwise, upon Debtor's default
under this Agreement.
Section 2. Representations and Warranties
Debtor represents, warrants and agrees that:
2.1 Information. All financial or credit statements and all other
information delivered or to be delivered to Secured Party by Debtor are true,
correct and complete.
2.2 Ownership of Collateral. Debtor represents that the
Collateral represents 100% of the issued and outstanding stock of both Rost,
Inc. and Marquit Manufacturing Specialities. Debtor is the legal and equitable
owner of the Collateral free and clear of all other liens, security interests,
charges and encumbrances of every kind and nature. The Collateral is duly
authorized, validly issued, fully paid and, non-assessable; the Debtor has
legal title to the Collateral and good right and lawful authority to pledge,
assign and deliver the Collateral in the manner hereby done or contemplated;
and no consent or approval of any governmental body or regulatory authority, or
2
<PAGE> 3
any securities exchange, is or will be necessary to the validity of the rights
created under this Agreement as to the collateral.
2.3 Defending the Collateral. Debtor will defend the Collateral
and its proceeds against the claims and demands of all third persons.
2.4 Secured Party's Duty. Secured Party's duty with reference to
the Collateral shall be solely to use reasonable care in the custody and
preservation of collateral in Secured Party's possession.
2.5 Waiver. Demand, notice, protest and all demands and notices
of any action taken by Secured Party under this Agreement or in connection with
any indebtedness of Debtor to Secured Party, are hereby waived, and any
indulgence of Secured Party, substitution for, exchange of or release of
Collateral, in whole or in part, or addition or release of any person liable on
the collateral is hereby assented and consented to by Debtor.
2.6 Non-liability of Secured Party. Secured Party shall not be
responsible in any way for any depreciation in the value of the Collateral, nor
shall any duty or responsibility whatsoever rest upon Secured Party to take
necessary steps to preserve rights against prior parties or to enforce
collection of the collateral by legal proceedings or otherwise, the sole duty
of Secured Party being to receive collections, remittances and payments on such
Collateral as and when made and received by Secured Party, and at Secured
Party's option, applying the amount or amounts so received, after deduction of
any collection costs incurred, as payment upon the indebtedness of Debtor to
Secured Party secured by the provisions of this Agreement, or holding same for
the account and order of Debtor.
2.7 Payment of Charges by Debtor. Debtor shall pay prior to
delinquency all taxes, charges, liens and assessments against the Collateral.
Upon Debtor's failure to pay, Secured Party at its option may pay any tax,
charge, lien or assessment and shall be the sole judge of the legality or
validity thereof and the amount necessary to discharge the same. Such payment
shall become part of the indebtedness secured by this Agreement and shall be
paid to Secured Party by Debtor immediately and without demand, with interest
thereon from the date of payment by Secured Party at the maximum non-usurious
rate of interest permitted by applicable law with respect to Debtor.
Section 3. Events of Default
As used herein the term "Event of Default" shall have the same meaning
which is assigned to it in the Loan Agreement.
Section 4. Rights Exclusive of Default
4.1 Assignment Permitted. This Agreement, Secured Party's rights
hereunder or the indebtedness hereby secured may be assigned from time to time,
and in any such case the Assignee shall be entitled to all of the rights,
privileges and remedies granted in this Agreement to Secured Party.
4.2 Agents; Delivering to Secured Party. Secured Party shall have
the right to appoint one or more agents for the purpose of retaining physical
possession of the certificates or instruments representing or evidencing the
Collateral. For the better perfection of the Secured Party's rights in and to
the Collateral and to facilitate implementation of such rights, Debtor shall,
insofar as possible, cause all the certificates, document and other instruments
evidencing,
3
<PAGE> 4
representing or otherwise comprising the Collateral, to be delivered directly
to the Secured Party, as the Secured Party shall from time to time direct,
immediately upon any of the same becoming part of the Collateral. Secured Party
is hereby authorized to execute on behalf of the Debtor, all documents
reasonably necessary to effect the delivery of the Collateral directly to
Secured Party. Secured Party may, at any time transfer the collateral to itself
or its nominees, receive income, including money thereon and hold the income as
collateral or apply the income to any of the indebtedness secured by this
Agreement, the manner and distribution of the application to be in the sole
discretion of Secured Party. Secured Party shall have the right at any time and
from time to time (whether before or after an Event of Default) to notify and
direct the issuer or obligor to make all payments, dividends and distributions
regarding the Collateral directly to Secured Party. Secured Party shall have
the authority to demand of the issuer or obligor and to receive and receipt for
any and all payments, dividends or other distribution payable in respect
thereof, regardless of the medium in which paid and whether they are ordinary
or extraordinary. Each issuer and obligor making payment of Secured Party
hereunder shall be fully Protected in relying on the written statement of
Secured Party that Secured Party then holds a security interest which entitles
Secured Party to receive such payment and receipt by Secured Party for such
payment shall be full acquittance therefor to the one making such payments.
4.3 Exercise of Voting and/or Consensual Rights; Cash Dividends.
(a) (i) The Debtor shall be entitled to exercise any and all
voting and/or consensual rights and powers relating or pertaining to
the Collateral or any party thereof for any purpose not inconsistent
with the terms of this Agreement, until (x) the occurrence of an Event
of Default shall have occurred and be continuing, and (y) written
notification to Debtor by the Secured Party that Secured Party intends
to exercise the rights granted to Debtor under this Section 4.3 (a)
(i).
(ii) Any and all cash dividends, other cash payments paid
on the Collateral, any and all stock and/or liquidating dividends,
distributions in property, or cash returns of capital or other
distributions made on or in respect of the Collateral, whether
resulting from a subdivision, combination or reclassification of the
capital stock or received in exchange for Collateral or any party
thereof or as a result of any merger, reorganization, consolidation,
acquisition or other exchange of assets, and any and all cash and
other property received in redemption of or in exchange for any
Collateral (either at maturity, upon call for redemption or
otherwise), shall be and become a part of the Collateral and, if
received by the Debtor, shall be held in trust for the benefit of the
Secured Party and shall forthwith be delivered to the Secured Party or
its designated agent to be, at Secured Party's sole option, either (x)
retained by the Secured Party as part of the Collateral or (y) applied
against the indebtedness secured hereby, regardless of whether such
indebtedness is then due and payable. Debtor agrees to execute any
additional documents, including the proper instruments of assignment
or stock power, with respect to Collateral delivered to Secured Party.
(b) (i) Upon the occurrence and during the continuance of
any Event of Default, and upon the giving of the notice referred to in
Section 4.3 (a) (i), all rights of the Debtor to exercise the voting
and/or consensual rights and powers which it is entitled to exercise
pursuant to Section 4.3 (a) (i) prior to such notice shall cease.
(ii) Upon the occurrence of an Event of Default and the
giving of notice referred to in Section 4.3 (a) (i), all such rights
referred to in Section 4.3 (a) (i) shall thereupon become vested in
the Secured Party, who shall have the sole and exclusive right and
authority to exercise such voting and/or consensual rights and powers.
4
<PAGE> 5
(c) For the foregoing purposes in this Section 4.3 Debtor hereby
names, constitutes and appoints the Secured Party as Debtor's proxy in the
Debtor's name, place and stead to vote any and all of the securities, as such
proxy may elect, for and in the name, place and stead of Debtor, as to all
matters coming before shareholders, such proxy to be irrevocable and being
coupled with an interest. The rights, powers and authority of said proxy shall
remain in full force and effect, and shall not be rescinded, revoked,
terminated, amended or otherwise modified until all the Secured Indebtedness
has been fully satisfied.
Section 5. Rights in the Event of Default
Upon the occurrence of an Event of Default and at any time thereafter,
(a) Secured Party may declare all obligations secured hereby
immediately due and payable.
(b) Secured Party shall have the rights and remedies provided in
the Delaware Business and Commerce Code in force at the date of execution of
this Agreement and under other applicable laws of each state having
jurisdiction over the Collateral of any part thereof.
(c) In addition to the rights and remedies referred to above,
Secured Party may, in its discretion, sell, assign and deliver all or any part
of the Collateral at any broker's board or at public or private sale without
notice or advertisement, and bid and become purchaser at any public sale or at
any Broker's Board.
(d) If notice to Debtor is required by the Delaware Business and
Commerce Code or other applicable law of public or private sale of Collateral,
Secured Party may fulfill said notice requirement by giving written notice to
Debtor ten (10) days prior to the date of public sale of the Collateral or
prior to the date after which private sale of the Collateral will be made, by
mailing such notice to Debtor at the address designated in this Agreement.
Secured Party may apply the proceeds of any disposition of Collateral available
for satisfaction the indebtedness secured hereby in any order of preference
which Secured Party, in its sole discretion, chooses.
(e) Secured Party may at any time demand, sue for, collect or
make any compromise or settlement with reference to the Collateral as secured
Party, in its sole discretion, chooses. Secured Party may delay exercising or
omit to exercise any right or remedy under this Agreement without waiving that
or any other past, present or future right or remedy, except in writing signed
by Secured Party.
(f) Secured Party may remedy any default and may waive any
default without waiving the default remedied or without waiving any other prior
or subsequent default.
(g) The remedies of Secured Party hereunder are cumulative, and
the exercise of any one or more of the remedies provided for herein shall not
be construed as a waiver of any of the other remedies of Secured Party.
(h) SECURED PARTY MAY ENFORCE ITS RIGHTS UNDER THIS AGREEMENT
WITHOUT RESORT TO PRIOR JUDICIAL PROCESS OR JUDICIAL HEARING, AND DEBTOR
EXPRESSLY WAIVES, RENOUNCES AND KNOWINGLY RELINQUISHES ANY LEGAL RIGHT WHICH
MIGHT OTHERWISE REQUIRE SECURED PARTY TO ENFORCE ITS RIGHTS BY JUDICIAL
PROCESS. IN SO PROVIDING FOR A NON-JUDICIAL REMEDY, DEBTOR RECOGNIZES AND
CONCEDES THAT SUCH A REMEDY IS CONSISTENT WITH THE USAGE OF THE TRADE, IS
RESPONSIVE TO COMMERCIAL NECESSITY AND IS THE RESULT OF BARGAINING AT ARMS
5
<PAGE> 6
LENGTH. NOTHING IN THIS AGREEMENT IS INTENDED TO PREVENT DEBTOR OR SECURED
PARTY FROM RESORTING TO JUDICIAL PROCESS AT EITHER PARTY'S OPTION.
(i) Debtor agrees that in performing any act under this Agreement
that time shall be of the essence and that Secured Party's acceptance of a
partial or delinquent payment or payments, or the failure of Secured Party to
exercise any right or remedy shall not be a waiver of any obligation of Debtor
or any right of Secured Party or constitute a waiver of any other similar
default subsequently occurring.
(j) Debtor hereby agrees to cooperate fully with Secured Party in
order to permit Secured Party to sell, whether at foreclosure or at other
private sale, the Collateral pledged hereunder, specifically, Debtor agrees to
comply fully with the security laws of the United States of America and
applicable state securities laws and to take such action as may be necessary to
permit Secured Party to sell or otherwise transfer the securities pledged
hereunder in compliance with such laws. Without limiting the foregoing, Debtor,
at its own expense, upon request of Secured Party, agrees to affect and obtain
such registration, filings, statements, rulings, consents and other matters as
Secured Party may request.
(k) Debtor hereby appoints the President or any Vice President of
Secured Party, its attorney-in-fact to complete, execute and file with the
United States Securities and Exchange commission one or more notices of
proposed sale of security pursuant to Rule 144 under the Securities Act of 1933
and/or any similar filings or notices with any applicable state agencies, and
said attorney-in-fact shall have the full power and authority to do, take and
perform every act necessary to be done in the exercise of that right as fully
as Debtor might or could do if personally present. This power shall be
irrevocable and deemed coupled with an interest. The rights pursuant of said
attorney-in-fact herein granted shall commence and be in full force and effect
from the date of this agreement and shall remain in full force and effect and
shall not be rescinded, revoked, terminated, amended or otherwise modified
until the Secured Indebtedness has been full satisfied.
(1) Because of applicable securities laws, including without
limitation, the Securities Act of 1933 and applicable state securities laws,
there may be legal restrictions or limitations affecting attempts of Secured
Party to dispose of the Collateral in enforcement of its rights and remedies
hereunder. Secured Party is hereby authorized by Debtor, but not obligated, in
the event of any default hereunder, to sell all or any part of the Collateral
at private sale, subject to investment letters or in any other manner which
will not require the Collateral or any part thereof, to be registered in
accordance with the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder, or any other applicable securities law or
regulation. Debtor specifically agrees that under these circumstances such a
sale is a commercially reasonable method of disposition of the Collateral.
Secured Party is also hereby authorized by Debtor, but not obligated, to take
such actions, give such notices, obtain such rulings and consents, and do such
other things as Secured Party may deem appropriate in the event of a sale or
disposition of any of the Collateral. Debtor acknowledges that Secured Party
may, in its reasonable discretion, approach a restricted number of potential
purchasers and that a sale under such circumstances may yield a lower price for
the Collateral or any part or parts thereof than would otherwise be obtainable
if the same were registered and sold in the open market. Debtor agrees that
such private sale shall constitute a commercially reasonable method of
disposing of the Collateral in view of the time, expense, and potential
liability to the parties of such transactions of registration of the Collateral
in accordance with applicable securities laws.
6
<PAGE> 7
Section 6. Miscellaneous
6.1 Pronouns. The pronouns used in this instrument are in the
masculine gender but shall be construed as feminine or neuter as occasions may
require.
6.2 Parties. "Secured Party" and "Debtor" as used in this
instrument include the successors, representatives, receivers, and assigns of
those parties.
6.3 Defined Terms. Terms used in this instrument which are
defined in the Uniform Commercial Code as adopted in Delaware are used with the
meanings as therein defined.
6.4 Applicable Law, Place of Payment. The law governing this
secured transaction shall be that of the State of Delaware in force at the date
of this instrument, and all payment and obligations hereunder shall be made and
performed in Wilmington, Delaware.
6.5 Notices. Any notice required or permitted to be given
pursuant to this Agreement shall be in writing and the same shall be given and
shall be deemed to have been served and given if delivered in person to the
address set forth in this Agreement for the party to whom the notice is given,
or placed in the United States mail, postage prepaid, by registered or
certified mail, addressed to the party at the address as follows and the date
of mailing shall be deemed to be the date of notice.
(a) If to "Debtor"
Veridien Corporation
800 Sarasota Quay
Sarasota, Florida 34236
(b) If to "Secured Party"
Dunvegan Mortgage Corporation
222 Delaware Avenue
P 0 Box 2306
Wilmington, Delaware 19899
6.6 Severability. In the event any of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such provision shall not affect the validity,
legality or enforceability of any other terms or provisions of this Agreement
and, to the extent permitted by applicable law, a valid, legal and enforceable
provision substantially similar to the invalid, illegal or unenforceable
provision shall be substituted in lieu thereof.
6.7 Waiver of Rights. In the event that Debtor is not the
Borrower or Maker as defined in the Note, Debtor waives any right to require
Secured Party to file suit against the Borrower or Maker or take any other
action against Borrower or Maker or Borrower's or Maker's property as a
prerequisite to Secured Party's taking any action or bringing any suit against
Debtor under this Security Agreement.
6.8 Joint and Several Liability. If this Security Agreement is
executed by more than one Debtor, the obligations of all such Debtor's shall be
joint and several.
6.9 Savings Clause. Notwithstanding any provision to the contrary
herein, or in any of the documents evidencing the secured Indebtedness, no such
provision shall require the payment or permit the collection of interest in
excess of the maximum permitted by applicable
7
<PAGE> 8
usury laws. If any such excessive interest is so provided for, then in such
event (i) the provisions of this paragraph shall govern and control, (ii)
neither the Debtor nor his heirs, legal representatives, successors or assigns
or any other party liable for the payment thereof, shall be obligated to pay
the amount of such interest to the extent that is in excess of the maximum
non-usurious interest rate permitted by applicable law, (iii) any such excess
interest that may have been collected shall be, at the option of the holder of
the instrument evidencing the Secured Indebtedness either applied as a credit
against the then unpaid principal amount thereof or refunded to the make
thereof, and (iv) the effective rate of interest shall be automatically reduced
to the maximum non-usurious interest rate permitted under the applicable usury
laws as now or hereafter construed by courts having Jurisdiction.
6.10 Secured Party shall have the right to syndicate, assign or
participate its interest herein, in whole or in part, to one or more parties
without limitation. In such event, the term Secured Party herein shall refer to
all such assignees or participants. Debtor agrees that any such assignment may
be made without notice and further agrees to cooperate fully with Secured Party
in the execution of any such assignment and further agrees to execute such
documents as Secured Party may from time to time require in connection with any
such assignment, participation or syndication.
EXECUTED on this the 19th day of October , 1995.
-------- ----------------
Debtor: VERIDIEN CORPORATION
a Delaware corporation
By:
-------------------------------
Title:
----------------------------
Secured Party: DUNVEGAN MORTGAGE CORPORATION
a Delaware corporation
By:
-------------------------------
Title:
----------------------------
[SIGNATURE PAGE TO SECURITY AGREEMENT - PLEDGE]
8
<PAGE> 1
EXHIBIT 4.5
VERIDIEN CORPORATION
AND
AMERICAN STOCK TRANSFER AND TRUST COMPANY
WARRANT AGREEMENT
REGARDING WARRANTS TO PURCHASE
COMMON STOCK
OF
VERIDIEN CORPORATION
SERIES 1
Dated as of October 19, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
RECITALS Page
<S> <C>
Section 1 Appointment of Warrant Agent 3
Section 2 Form of Warrant 3
Section 3 Countersignature and Registration 3
Section 4 Transfers and Exchanges 4
Section 5 Exercise of Warrants 4
Section 6 Mutilated or Missing Warrants 5
Section 7 Reservation of Shares of Common Stock 5
Section 8 Warrant Price 6
Section 9 Adjustments 6
Section 10 Fractional Interest 13
Section 11 Notices to Warrant Holders 13
Section 12 Registration Rights 14
Section 13 Indemnity 15
Section 14 Disposition of Proceeds on Exercise of Warrants 16
Section 15 Restrictions on Transfer 16
Section 16 Investment Representation 17
Section 17 Merger or Consolidation or Change of Name of Warrant Agent 17
Section 18 Duties of Warrant Agent 18
Section 19 Change of Warrant Agent 19
Section 20 Identity of Transfer Agent 20
Section 21 Notices 20
Section 22 Supplements and Amendments 20
Section 23 Successors 20
Section 24 Interpretation 20
Section 25 Benefits of This Agreement 20
Section 26 Counterparts 21
</TABLE>
EXHIBIT A (Forms of Warrants, Election to
Purchase and Assignment)
- ----------
This Table of Contents does not constitute a part of this Agreement or have any
bearing upon the interpretation of any of its terms and provisions.
<PAGE> 3
WARRANT AGREEMENT dated as of the 19TH day of October, 1995, by and
between VERIDIEN CORPORATION, a Delaware corporation (hereinafter called the
"Company") and AMERICAN STOCK TRANSFER AND TRUST COMPANY as warrant agent
(hereinafter called the "Warrant Agent").
WITNESSETH:
WHEREAS, the Company proposes to issue to Dunvegan Mortgage
Corporation, OR ITS ASSIGNS Warrants (the "Warrant") to purchase up to 5,479,175
shares of the Common Stock, $0.001 par value of the Company (the "Common Stock")
pursuant to the terms of that certain Loan and Security Agreement of even date
herewith between the Company and Dunvegan Mortgage Corporation:
WHEREAS, each Warrant entitles the holder thereof to purchase one (1)
share of Common Stock for a price of $0.499 per share (the "Warrant Price") up
to and including 5:00 p.m. E.S.T. on November 18, 2000, the Expiration Date as
defined herein (See Section 5).
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, registration, transfer, exchange and exercise of the Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. APPOINTMENT OF WARRANT AGENT
The Company hereby appoints the Warrant Agent to act as warrant agent
for the Company in accordance with the instructions hereinafter in this
Agreement set forth, and the Warrant Agent hereby accepts such appointment.
SECTION 2. FORM OF WARRANT
The Warrant Certificates shall be issued in registered form only and
the text of the Warrants and of the subscription form and assignment to be
printed on the reverse thereof shall be substantially as set forth in Exhibit
"A" attached hereto. The per share warrant price and the number of shares of
Common Stock issuable upon exercise of the Warrants are subject to adjustments
upon the occurrence of certain events, all as hereinafter provided. The Warrants
shall be executed on behalf of the Company by the manual or facsimile signature
of the present or any future Chairman and CEO, or President, or Vice President
of the Company, under its corporate seal, affixed or in facsimile, attested by
the manual or facsimile signature of the present or any future Secretary or
Assistant Secretary of the Company.
Warrants shall be dated as of the date of issuance by the Warrant Agent
either upon initial issuance or upon transfer or exchange.
SECTION 3. COUNTERSIGNATURE AND REGISTRATION
The Warrant Agent shall maintain books for the transfer and
registration of Warrants. Upon the initial issuance of the Warrants, the Warrant
Agent shall issue and register the Warrants in the names of the respective
holders thereof. The Warrants shall be countersigned manually or by facsimile by
the Warrant Agent (or by any successor to the Warrant Agent then acting as
warrant agent under this Agreement) and shall not be valid for any purpose
unless so countersigned. Warrants may be so countersigned, however, by the
Warrant Agent (or by its successor as warrant agent) and be delivered by the
Warrant Agent, notwithstanding that the
<PAGE> 4
persons whose manual or facsimile signatures appear thereon as proper officers
of the Company shall have ceased to be such officers at the time of such
countersignature or delivery.
SECTION 4. TRANSFERS AND EXCHANGES
The Warrant Agent shall maintain books for the transfer and
registration of the Warrant Certificates. The Warrant Certificates shall be
numbered and shall be registered in a warrant register (the "Warrant Register")
as they are issued. The Warrant Agent shall transfer, from time to time, any
outstanding Warrants upon the books to be maintained by the Warrant Agent for
the purpose, upon surrender thereof for transfer properly endorsed with the form
of assignment on the reverse of the certificate duly completed and signed, or
accompanied by appropriate instructions for transfer together with any
applicable transfer taxes or duties. Upon any such transfer, a new Warrant shall
be issued to the transferee and the surrendered Warrant shall be canceled by the
Warrant Agent. Warrants so canceled shall be delivered by the Warrant Agent to
the Company from time to time upon request. The Company and the Warrant Agent
shall be entitled to treat the registered holders as the owners, in fact, of the
Warrants (notwithstanding any notice to the contrary) for all purposes and shall
not be bound to recognize any equitable or other claim to or interest in such
Warrant Certificates on the part of any other person and shall not be liable for
any registration of transfer of Warrant Certificates which are registered or to
be registered in the name of a fiduciary or nominee of a fiduciary unless made
with the actual knowledge that a fiduciary or nominee is committing a breach of
trust in requesting such registration or transfer, or with knowledge of such
facts that its participation therein amounts to bad faith.
SECTION 5. EXERCISE OF WARRANTS
Subject to the provisions of this Agreement, each registered holder of
the Warrants shall have the right which may be exercised commencing upon the
date of the closing effecting the issuance of such Warrants, and which shall
terminate at 5:00 p.m. E.S.T. on November 18, 2000 (the Expiration Date") to
purchase from the Company (and the Company shall issue and sell to such
registered holder of Warrants) the number of fully paid and non-assessable
shares of Common Stock specified in such Warrants, upon surrender to the Company
at the office of the Warrant Agent in New York City, New York of such Warrants,
with the subscription form on the reverse thereof duly completed and signed and
upon payment to the Company of the Warrant Price in United States currency, as
defined in Section 8 hereof, determined in accordance with the provisions of
Section 9 of this Agreement, for the number of shares of Common Stock in respect
of which such Warrants are then exercised. Payment of such Warrant Price
together with any applicable transfer taxes or duties shall be made in cash or
by certified check or bank draft payable to the order of the Company. Subject to
the terms hereof, no adjustment shall be made for any cash dividends on any
Common Shares issuable upon exercise of a Warrant. Upon such surrender of
Warrants and payment of the Warrant Price as aforesaid, the Company shall issue
and cause to be delivered with all reasonable dispatch to or upon the written
order of the registered holder of such Warrants and in such name or names as
such registered holder may designate, a certificate or certificates for the
number of full shares of Common Stock so purchased upon the exercise of such
Warrants. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of record of such shares of Common Stock as of the date of the
surrender of such Warrants and payment of the Warrant Price as aforesaid;
provided, however, that if, at the date of surrender of such Warrants and
payment of such Warrant Price, the transfer books for the shares of Common Stock
or other class of stock purchasable upon the exercise of such Warrants shall be
closed, the certificates for the shares of Common Stock in respect to which such
Warrants are then exercised shall be issuable as of the next date on which such
books shall be opened, and until such date, the Company shall be under no duty
to deliver any certificate for such shares of Common Stock; provided, further,
however, that the transfer books aforesaid, unless otherwise required by law or
by applicable rule of any national securities exchange, shall not be closed at
any one time for a period longer than twenty (20) days. All shares of Common
<PAGE> 5
Stock issued upon exercise of the Warrant shall be validly issued as fully paid
and non-assessable. The rights of purchase represented by the Warrants shall be
exercisable, at the election of the registered holders thereof, either entirely
or from time to time for a portion or all the shares of Common Stock specified
therein and, in the event that any Warrant is exercised in respect of less than
all of the shares of Common Stock specified therein at any time prior to the
date of expiration of the Warrant, a new Warrant will be issued to such
registered holder for the remaining full number of shares of Common Stock
specified in the Warrant so surrendered, and the Warrant Agent is hereby
irrevocably authorized to countersign and to deliver by first-class mail within
ten (10) days of the exercise of the warrants, the required new Warrant pursuant
to the provisions of this Section and of Section 3 of this Agreement and the
Company, whenever requested by the Warrant Agent, will supply the Warrant Agent
with Warrants duly executed on behalf of the Company for such purposes. In no
event shall a fraction of a Warrant be issued or exercised. After the Expiration
Date, any unexercised Warrants will be void and all rights of registered holders
shall cease.
In lieu of cash the holder of any Warrants may tender as the exercise
price of such Warrants the promissory notes of the Company issued pursuant to
the Loan and Security Agreement of even date herewith.
Provided that the Company has issued all of the Warrants contemplated
in this Warrant Agreement, then in the event of a default by Dunvegan Mortgage
Corporation under the terms of the Loan and Security Agreement between Dunvegan
Mortgage Corporation and the Company, and the Company not being in default
thereunder, fifty (50%) of the Warrants then outstanding shall expire within one
year from the date of the notice of such default by the Company to Dunvegan.
SECTION 6. MUTILATED OR MISSING WARRANT
In case any of the Warrants shall be mutilated, lost, stolen or
destroyed, the Company may in its discretion issue and the Warrant Agent shall
countersign and deliver in exchange and substitution for and upon cancellation
of the mutilated Warrant, or in lieu of and substitution for the Warrant lost,
stolen or destroyed, a new Warrant of like tenor and representing an equivalent
right or interest, but only upon receipt of evidence satisfactory to the Company
and the warrant Agent of such loss, theft or destruction of such Warrant and
indemnity, if requested, also satisfactory to them. Applicants for such
substitute Warrants shall also comply with such other reasonable regulations and
pay such reasonable charges as the Company or the Warrant Agent may prescribe.
SECTION 7. RESERVATION OF SHARES OF COMMON STOCK
There have been reserved, and the Company shall at all times keep
reserved out of the authorized and unissued shares of Common Stock, a number of
shares of Common Stock sufficient to provide for the exercise of the rights of
purchase represented by the Warrants, and the Warrant Agent as transfer agent
for the Common Stock and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of any of the rights of
purchase aforesaid are hereby irrevocably authorized and directed at all times
to reserve such number of authorized and unissued shares of Common Stock as
shall be requisite for such purpose. The Company agrees that all shares of
Common Stock issued upon exercise of the Warrants shall be, at the time of
delivery of the certificates for such shares of Common Stock, validly issued and
outstanding as fully paid and non-assessable and eligible for inclusion on
NASDAQ, and/or listed on any national securities exchange upon which the other
shares of Common Stock are then listed on, and/or eligible for inclusion on
NASDAQ prior to the date that the Warrants shall be exercisable as provided in
Section 5 hereof.
<PAGE> 6
The Company will keep a copy of this Agreement on file with the Warrant
Agent as transfer agent for the Common Stock and with every subsequent transfer
agent for any shares of the Company's capital stock issuable upon the exercise
of the rights of purchase represented by the Warrants. The Warrant Agent is
hereby irrevocably authorized to requisition from time to time from such
Transfer Agent stock certificates required to honor outstanding Warrants. The
Company will supply such Transfer Agent with duly executed stock certificates
for such purpose and will itself provide or otherwise make available any cash
which may be issuable only if so provided in Section 11 of this Agreement. All
Warrants surrendered in the exercise of the rights thereby evidenced shall be
canceled by the Warrant Agent and shall thereafter be delivered to the Company,
and such canceled Warrants shall constitute sufficient evidence of the number of
shares of Common Stock which have been issued upon the exercise of such
Warrants. Promptly after the date of expiration of the Warrants, the Warrant
Agent shall certify to the Company the total aggregate amount of Warrants then
outstanding, and thereafter no shares of Common Stock shall be subject to
reservation in respect to such Warrants which shall have expired.
SECTION 8. WARRANT PRICE
The "Warrant Price" at which shares of Common Stock shall be
purchasable pursuant to the Warrants shall be $0.499 per share until 5:00 p.m.
E.S.T. on November 18, 2000 "Expiration Date", subject to the adjustments set
forth below.
SECTION 9. ADJUSTMENTS
Subject and pursuant to the provisions of this Section, the Warrant
Price and number of shares of Common Stock subject to these Warrants shall be
subject to adjustment from time to time only as set forth hereinafter:
A. Adjustment of Warrant Price and Number of Shares of Common Stock
Purchasable Upon Exercise
The Warrant Price and the number of Shares of Common Stock purchasable
upon exercise shall be subject to adjustment from time to time in the cases and
in the manner provided as follows:
1. If and whenever at any time after the date hereof and prior to
the Expiration Date the Company shall:
(a) issue shares of Common Stock or securities
exchangeable for or convertible into shares of Common Stock to all or
substantially all the holders of the shares of Common Stock as a stock
dividend (other than as a dividend paid in the ordinary course);
(b) make a distribution on its outstanding shares of
Common Stock payable in shares of Common Stock or securities
exchangeable for or convertible into shares of Common Stock (other than
as a dividend paid in the ordinary course);
(c) subdivide its outstanding shares of Common Stock into
a greater number of shares; or
(d) consolidate its outstanding shares of Common Stock
into a smaller number of shares;
each of such events in the above clauses (a), (b), (c) and (d) being called a
"Common Share Reorganization", then the Warrant Price shall be adjusted as of
the effective date or record date, as the case may be, at which the holders of
shares of Common Stock are determined for the
<PAGE> 7
purpose of the Common Share Reorganization by multiplying the Warrant Price in
effect immediately prior to such effective date or record date by a fraction,
(i) the numerator of which shall be the number of shares
of Common Stock outstanding on such effective date or record date
before giving effect to such Common Share Reorganization; and
(ii) the denominator of which shall be the number of
shares of Common Stock outstanding as of the effective date or record
date giving effect to such Common share Reorganization (including, in
the case where securities exchangeable for or convertible into shares
of Common Stock are distributed, the number of shares of Common Stock
that would have been outstanding had such securities been exchanged for
or converted into shares of Common Stock on such effective date or
record date).
2. If and whenever at any time after the date hereof and prior to
the Expiration Date the Company shall issue or sell any shares of Common Stock
(other than the issuance or sales referred to in Section 9.B) including shares
held in the Company's treasury and shares of Common Stock issued upon the
exercise of any options, rights or warrants to subscribe for shares of Common
Stock and shares of Common Stock issued upon the direct or indirect conversion
or exchange of securities for shares of Common Stock, for a consideration per
share less than the Current Market Price, as defined below, in effect
immediately prior to the issuance or sale of such shares, or without
consideration, such event being called a "Common Share Issuance", then the
Warrant Price shall be adjusted as of the effective date by multiplying the
Warrant Price in effect immediately prior to such effective date by a fraction,
(i) the numerator of which is an amount equal to the sum
of (X) the total number of shares of Common Stock outstanding
immediately prior to such issuance or sale, multiplied by the Current
Market Price in effect immediately prior to such issuance or sale, plus
(Y) the aggregate of the amount of all consideration, if any, received
by the Company upon such issuance or sale, and
(ii) the denominator of which is the Current Market Price
in effect immediately prior to such issuance or sale multiplied by the
total number of shares of Common Stock outstanding immediately after
such issuance or sale;
provided, however, that in no event shall the Warrant Price be adjusted pursuant
to this computation to an amount in excess of the Warrant Price in effect
immediately prior to such computation, except in the case of a combination of
outstanding shares of Common Stock as provided by Section 9.A(1)(d).
3. If and whenever at any time after the date hereof and prior to
the Expiration Date, the Company shall fix a record date for the issue of
rights, options or warrants to all or substantially all of the holders of shares
of Common Stock pursuant to which such holders are entitled, during a period
expiring not more than forty-five (45) days after the record date for such issue
(the "Rights Period"), to subscribe for or purchase shares of Common Stock or
securities exchangeable for or convertible into shares of Common Stock at a
price per share to the holder (or at an exchange or conversion price per share
during the Rights Period to the holder in the case of securities exchangeable
for or convertible into shares of Common Stock) of less than 95% of the Current
Market Price, as defined below, for the shares of Common Stock on such record
date (any of such events being called a "Rights Offering") then the Warrant
Price shall be adjusted effective immediately after the end of the Rights Period
to a price to be determined by multiplying the Warrant Price in effect
immediately prior to the record date of the Rights Period by a fraction:
(a) the numerator of which shall be the aggregate of:
<PAGE> 8
(i) the number of shares of Common Stock
outstanding as of the record date for the Rights Offering, and
(ii) a number determined by dividing (1) either
(A) the product of the shares of Common Stock issued or
subscribed during the Rights Period upon the exercise of the
rights, warrants, or options under the Rights Offering and the
price at which such shares of Common Stock are offered, or, as
the case may be, (B) the product of the exchange or conversion
price of such securities offered and the number of shares of
Common Stock for or into which the securities so offered
pursuant to the Rights Offering could have been exchanged or
converted during the Rights Period, by (2) the Current Market
Price of the shares of Common Stock as of the record date for
the Rights Offering; and
(b) the denominator of which shall be the number of
shares of Common Stock outstanding, or the number of shares of Common
Stock which would be outstanding if the convertible or exchangeable
securities were converted or exchanged into shares of Common Stock
during the Rights Period, in both cases after giving effect to the
Rights Offering and including the number of shares or Common Stock
actually issued or subscribed for during the Rights Period upon
exercise of the rights, warrants or options under the Rights Offering.
Any shares of Common Stock owned by or held for the account of the
Company or any subsidiary of the Company shall be deemed not to be outstanding
for the purpose of any such computation. Any Warrant holder who shall have
exercised his right to purchase shares of Common Stock during the period
beginning immediately after the record date for a Rights Offering and ending on
the last day of the Rights Period therefor shall, in addition to the shares of
Common Stock to which he is otherwise entitled upon such exercise in accordance
with Section 5 hereof, be entitled to that number of additional shares of Common
Stock equal to the result obtained when the difference, if any, between the
Warrant Price in effect immediately prior to the end of such Rights Offering and
the Warrant Price as adjusted for such Rights Offering pursuant to this
subsection is multiplied by the number of shares of Common Stock purchased upon
exercise of the Warrants held by such Warrant holder during such period, and the
resulting product is divided by the Warrant Price as adjusted for such Rights
Offering pursuant to this subsection (2); provided that the provisions of this
Section shall be not applicable to any fractional interest in a share of Common
Stock to which such Warrant holder might otherwise be entitled under the
foregoing provisions of this Section. Such additional shares of Common Stock
shall be deemed to have been issued to the Warrant holder immediately following
the end of the Rights Period and a certificate for such additional shares of
Common Stock shall be delivered to such Warrant holder within ten (10) business
days following the end of the Rights Period.
4. If and whenever at any time after the date hereof and prior to
the Expiration Date, the Company shall fix a record date for the issue or the
distribution to all or substantially all the holders of the shares of Common
Stock of (i) securities of the Company other than shares of Common Stock, (ii)
rights, options or warrants to acquire shares of Common Stock or securities
exchangeable for or convertible into shares of Common Stock, (iii) evidences of
indebtedness, or (iv) any property or other assets, and if such issuance or
distribution does not constitute a dividend paid in the ordinary course, a
Common Share Reorganization or a Rights Offering (any of such non-excluded
events being herein called a "Special Distribution), the Warrant Price shall be
adjusted effective immediately after such record date to a price determined by
multiplying the Warrant Price in effect on such record date by a fraction:
(a) the numerator of which shall be: (i) the product of
the number of shares of Common Stock outstanding on such record date
and the Current Market Price (as hereinafter defined) of the shares of
Common Stock on such record date; less (ii) the fair
<PAGE> 9
market value, as determined by action by the directors (whose
determination shall be conclusive) to the holders of the shares of
Common Stock of such securities or property or other assets so issued
or distributed in the Special Distribution; and
(b) the denominator of which shall be the product of the
number of shares of Common Stock outstanding on such record date and
the Current Market Price of the shares of Common Stock on such record
date.
Shares of Common Stock owned by or held for the account of the Company or any
subsidiary of the Company shall be deemed not to be outstanding for the purpose
of any such computation.
5. If and whenever at any time after the date hereof and prior to
the Expiration Date there shall be a reclassification of shares of Common Stock
at any time outstanding or change of the shares of Common Stock into other
shares or into other securities (other than a Common Share Reorganization), or a
consolidation, amalgamation, arrangement or merger of the Company with or into
another corporation or other entity, other than a consolidation, amalgamation,
arrangement or merger which does not result in any reclassification of the
outstanding shares of Common Stock or a change of the shares of Common Stock (or
other shares), or a transfer of the undertaking or assets of the Company as an
entirety or substantially as an entirety to another corporation or other entity
(any of such events being herein called a "Capital Reorganization"), any Warrant
holder who exercises his right to purchase shares of Common Stock pursuant to
Warrants then held after the effective date of such Capital Reorganization shall
be entitled to receive, and shall accept for the same aggregate consideration in
lieu of the number of shares of Common Stock to which such holder was
theretofore entitled upon such exercise the aggregate number of shares, other
securities or other property which such holder would have been entitled to
receive as a result of such Capital Reorganization if, on the effective date
thereof, the Warrant holder had been the registered holder of the number of
shares of Common Stock to which such holder was theretofore entitled upon
exercise.
6. If and whenever at any time after the date hereof and prior to
the Expiration Date:
(a) a Common Share Reorganization shall occur; or
(b) the Company shall fix a record date for the issue or
distribution to all or substantially all of the holders of the shares
of Common Stock or securities exchangeable for or convertible into
shares of Common Stock, or rights, options or warrants entitling the
holders thereof to subscribe for or purchase shares of Common Stock or
securities exchangeable for or convertible into shares of Common Stock;
and any such event results in an adjustment in the Warrant Price pursuant to the
provisions of this Section, the number of shares of Common Stock purchasable
pursuant to each Warrant shall be adjusted contemporaneously with the adjustment
in the Warrant Price by multiplying the number of shares of Common Stock
heretofore purchasable on the exercise thereof by a fraction, the numerator of
which shall be the Warrant Price in effect immediately prior to such adjustment
and the denominator of which shall be the Warrant Price resulting from such
adjustment.
B. Rules Regarding Calculation of Adjustment of Warrant Price and of
Shares of Common Stock Purchasable Upon Exercise
For the purposes of Section 9.A:
1. The adjustments provided for in Section 9.A are cumulative,
and shall, for the purpose of adjustments to the Warrant Price, be computed to
the nearest one-tenth of one cent and
<PAGE> 10
shall be made successively whenever an event referred to above shall occur,
subject to the following subsections of this Section 9.B.
2. No adjustment in the Warrant Price shall be required unless
such adjustment would result in a change of at least $.02 in the prevailing
Warrant Price; no adjustment shall be made in the number of shares of Common
Stock issuable upon exercise of a Warrant unless it would result in a change of
at least one-half of a share, provided, however, that any adjustment which,
except for the provisions of this Section would otherwise have been required to
be made shall be carried forward and taken into account in any subsequent
adjustment.
3. No adjustment in the Warrant Price or in the number of shares
of Common Stock purchasable upon exercise of Warrants shall be made in respect
of any event described in Section 9.A if Warrant holders are entitled to
participate in such events on the same terms mutatis mutandis as if Warrant
holders had exercised their rights prior to or on the effective date or record
date of such event.
4. No adjustment in the Warrant Price shall be made pursuant to
Section 9.A with respect of the issue from time to time of shares of Common
Stock issuable on exercise of the Warrants or in respect of the issue from time
to time of cash dividends paid in the ordinary course to holders of shares of
Common Stock who exercise an option or election to receive substantially
equivalent dividends in shares of Common Stock in lieu of receiving a cash
dividend, and any such issue shall be deemed not to be a Common Share
Reorganization.
5. No adjustment in the Warrant Price shall be made pursuant to
Section 9.A with respect to the issue from time to time of options, or shares of
Common Stock upon the exercise thereof, to officers, directors or employees of
the Company pursuant to the Company's Incentive Stock Option Plan.
6. No adjustment in the Warrant Price shall be made pursuant to
Section 9.A with respect to the issue or sale of shares of Common Stock upon the
exercise of options, rights or warrants, or upon the conversation or exchange of
convertible or exchangeable securities, in any case where (1) the Warrant Price
was adjusted at the time of issue of such options, rights or warrants, or
convertible or exchangeable securities, or (2) which are outstanding as of the
date hereof.
7. If a dispute shall at any time arise with respect to
adjustments provided for in Section 9.A, such dispute shall be conclusively
determined by the Company's auditors, or if they are unable or unwilling to act,
by such other firm or independent certified public accountants as may be
selected by the Company and each such determination shall be binding upon the
Company, the Warrant Agent and the Warrant holders; such auditors or accountants
shall be provided access to all necessary records of the Company. In the event
that any such determination is made, the Company shall deliver a certificate to
the Warrant Agent describing such determination.
8. If after the date of this Agreement the Company shall take any
action affecting the shares of Common Stock, other than action described in
Section 9.A, which in the opinion of the board of directors of the Company would
materially affect the rights of Warrant holders, the Warrant Price or the number
of shares of Common Stock purchasable upon exercise shall be adjusted in such
manner, if any, or at such time, by action by the directors, in their sole
discretion as they may determine to be equitable in the circumstances. Failure
of the taking of action by the directors so as to provide for an adjustment on
or prior to the effective date of any action by the Company affecting the shares
of Common Stock shall be conclusive evidence that the directors have determined
that it is equitable to make no adjustment in the circumstances.
<PAGE> 11
9. If the Company shall set a record date to determine the
holders of the shares of Common Stock entitled to receive any dividend,
distribution, subscription and/or purchase rights and shall, thereafter and
before the distribution to such holders of any such dividend, distribution,
subscription and/or purchase rights, abandon its plan to pay or deliver such
dividend, distribution, subscription and/or purchase rights, then no adjustment
in the Warrant Price or the number of shares of Common Stock purchasable upon
exercise of any Warrant shall be required by reason of the setting of such
record date.
10. "Current Market Price" of the shares of Common Stock at any
date means the price per share equal to the average closing price of the shares
of Common Stock on NASDAQ, or if the shares of Common Stock were not then listed
on NASDAQ, on such stock exchange on which the shares are listed as may be
selected by the Company for such purpose or, if not listed on any stock
exchange, the mid point between the bid and ask prices in the over-the-counter
market, during a period of thirty (30) consecutive trading days commencing not
later than forty-five (45) trading days before such date.
11. In the absence of a resolution of the directors fixing a
record date for a Special Distribution or Rights Offering, the Company shall be
deemed to have selected the date on which the Special Distribution or Rights
Offering is effected as a record date.
12. As a condition precedent to the taking of any action which
would require any adjustment in any of the subscription rights pursuant to any
of the Warrants, including the Warrant Price and the number or class of
securities which are to be received upon the exercise thereof, the Company shall
take any corporate action which may, in the opinion of counsel, be necessary in
order that the Company may validly and legally issue as fully paid and
non-assessable all the securities which the holders of such Warrants are
entitled to receive on the full exercise thereof in accordance with the
provisions thereof.
C. Postponement of Subscription
In any case in which this Section shall require that an adjustment
shall be effective immediately after a record date for an event referred to
herein, the Company may defer, until the occurrence of such an event:
(a) issuing to the holder of any Warrant exercised after
such record date and before the occurrence of such event, the
additional shares of Common Stock issuable upon such exercise by reason
of the adjustment required by such event; and
(b) delivering to such holder any distributions declared
with respect to such additional shares of Common Stock after such
exercise date and before such event;
provided, however, that the Company shall deliver to such holder an appropriate
instrument evidencing such holder's right, upon the occurrence of the event
giving rise to the adjustment, to an adjustment in the Warrant Price or the
number of shares of Common Stock purchasable on the exercise of any Warrant and
to such distribution declared with respect to any additional shares of Common
Stock purchasable on the exercise of any Warrant.
D. Notice of Adjustment of Warrant Price and Number of Shares of Common
Stock Purchasable Upon Exercise
1. At least twenty-one (21) days prior to the effective date or
record date, as the case may be, of any event which requires or is likely to
require adjustment in any provision of the subscription rights pursuant to any
of the Warrants, including the Warrant Price and the number of shares of Common
Stock which are purchasable upon exercise thereof, the Company shall:
<PAGE> 12
(a) file with the Warrant Agent a certificate of the
Company specifying the particulars of such event and, if determinable,
the required adjustment and the computation of such adjustment; and
(b) give notice to the Warrant holders of the particulars
of such event and, if determinable, the required adjustment.
2. In case any adjustment for which a notice in Section 9.D(1)
has been given is not then determinable, the Company shall promptly after such
adjustment is determinable:
(a) file with the Warrant Agent a computation of such
adjustment; and
(b) give notice to the Warrant holders of the adjustment.
E. Sum Payable on Exercise of Warrant to the Company to Remain Constant
On the effective date of any new Warrant Price the number of shares as
to which any Warrant may be exercised shall be increased or decreased so that
the total sum payable to the Company on the exercise of such Warrant shall
remain constant.
F. Form of Warrant
The form of Warrant need not be changed because of any change pursuant
to this Section, and Warrants issued after such change may state the same
Warrant Price and the same number of shares as is stated in the Warrants
initially issued pursuant to this Agreement. However, the Company may at any
time in its sole discretion (which shall be conclusive) make any change in the
form of Warrant that the Company may deem appropriate and that does not affect
the substance thereof, and any Warrant thereafter issued or countersigned,
whether in exchange or substitution for an outstanding Warrant or otherwise, may
be in the form as so changed.
G. Miscellaneous Provisions Relating to Adjustments in Respect of the
Warrants
Upon any adjustment of the Warrant Price, the Company may elect to
adjust the number of Warrants outstanding in lieu of any adjustment in the
number of shares issuable upon exercise of a Warrant as provided in this
Section. Each Warrant outstanding, following an adjustment pursuant to this
subsection (G), shall entitle the holder thereof to purchase one (1) share of
Common Stock at the Warrant Price, as adjusted pursuant to this Section. Upon
any adjustment of the number of Warrants outstanding pursuant to this subsection
(G), each Warrant outstanding immediately prior to such adjustment shall be
changed to the number of Warrants determined by dividing (i) the Warrant Price
in effect immediately prior to such adjustment by (ii) the Warrant Price in
effect immediately after such adjustment. Upon any election by the Company to
make an adjustment pursuant to this subsection (G), the Warrant Agent must be
notified in the manner set forth herein, and such notice must indicate the
record date for the adjustment and, if known, the amount of such adjustment.
Such record date may be the date on which the Warrant Price is adjusted or any
day thereafter, provided, however, to that the notice to the Warrant Agent must
be given at least ten (10) days prior to the record date for an adjustment
pursuant to this subsection (G). Upon any adjustment hereunder, the Company
shall promptly cause to be distributed to the registered holders of Warrants on
the record date (as determined in the manner set forth above) certificates
evidencing the additional Warrants to which such holders shall be entitled as a
result of such adjustment or, at the option of the Company, new certificates
evidencing all of the Warrants to which such holders shall be entitled following
such adjustment, provided, however, that the Company may require the surrender
and cancellation of the certificates evidencing the Warrants held by such
holders prior to such adjustment. Any new certificates issued shall be in the
form of the Warrant specified in Section 2 of this Agreement, subject to
modification as provided in this Section.
<PAGE> 13
SECTION 10. FRACTIONAL INTEREST
The Company shall not be required to issue fractions of a share of
Common Stock on the exercise of Warrants nor shall the Company be required to
purchase any such fractions.
SECTION 11. NOTICES TO WARRANT HOLDERS
A. Upon any adjustment of the Warrant Price and the number of
shares of securities or other property issuable upon exercise of a Warrant after
such adjustment, then and in each such case the Company shall give written
notice thereof to the Warrant Agent, which notice shall state the Warrant Price
resulting from such adjustment and the increase or decrease, if any, in the
number of shares purchasable at such price upon the exercise of a Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of the subject adjustments.
B. If at any time prior to the termination of the Warrants:
(i) the Company shall pay any dividends payable in stock
upon its Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock;
(ii) the Company shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any
class or other rights;
(iii) there shall be any Capital Reorganization or
Reclassification of the Capital Stock of the Company, or consolidation
or merger of the Company with, or sale of all or substantially all of
its assets to, another corporation; or
(iv) there shall be voluntary or involuntary dissolution,
liquidation, or winding up of the business affairs of the Company;
then, in any one or more of such cases, the Company shall give written notice
and publish the same in the manner set forth in Section 11 of the date on which
(i) the books of the Company shall close or a record shall be taken for such
dividend, distribution, or subscription rights, or (ii) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding up shall take place or commence, as the case may be. Such notice shall
also specify the date as of which the holders or Common Stock or record shall
participate in such dividend, distribution, or subscription rights or shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding up, as the case may be. Such notice
shall be given and published at least twenty (20) days prior to the record date
or the date on which the Company's transfer books are closed in respect thereof.
Failure to give or publish such notice, or any defect therein, shall not affect
the legality or validity of any of the matters set forth in this Section.
C. The Company may, in its discretion, cause copies of all
financial statements and reports, proxy or information statements and other
documents as it shall send to its stockholders to be sent by first-class mail,
postage prepaid, on the date of mailing to such stockholders, to each registered
holder of Warrants at his address appearing on the Warrant Register as of the
record date for the determination of the stockholders entitled to such
documents.
<PAGE> 14
SECTION 12. REGISTRATION RIGHTS
The Company agrees that:
A. (i) At any time during the first year following the date of
this Warrant; or (ii) At any time during the period commencing one year from the
date of this Warrant until the expiration date; or (iii) in the event of the
exercise of this Warrant, then at any time for a period of two years following
the date of such exercise, and provided that the Holder is not eligible to
utilize Rule 144 under the Act, if the holders of at least 50% of the then
outstanding Warrants, and/or Shares of Common Stock, if the Warrants have been
exercised, request that the Company file, under the Act, a post-effective
amendment to a prior registration statement, or if a post-effective amendment is
not available, a registration statement under the Act covering not less than 50%
of the shares issuable upon exercise of the Warrants and not previously sold, it
will:
i. promptly notify the Holder of this Warrant, each
Holder of shares issued pursuant to any Warrants, and each Holder of
any Warrant, that such registration statement will be filed and that
the shares which are then held, and/or may be acquired upon the
exercise of the Warrants, by the Holder and such Holders, will be
included in such post-effective amendment or registration statement at
such Holders' request;
ii. cause such post-effective amendment or registration
statement to cover all shares which it has been requested to include;
iii. use its best efforts to cause such post-effective
amendment or registration statement to become effective as soon as
practicable under the Act; and
iv. take all other action necessary under any federal or
state law or regulation of any governmental authority to permit all
shares which it has been so requested to include in such post-effective
amendment or registration statement to be sold or otherwise disposed
of, and will maintain such compliance with each such federal and state
law and regulation of any governmental authority for the period
necessary for the Holder and such holders to effect the proposed sale
or other disposition of the shares so registered. The Company shall be
required to effect a registration or qualification pursuant to this
Section on only one occasion.
B. Prior to the expiration of this Warrant or for a period of two
years following the exercise of this Warrant, provided Rule 144 under the Act is
not available to such Holder or Holders for the sale of the shares, the Company
shall advise the Holder, whether the Holder has exercised the Warrant and holds
Common Stock, or whether the Holder still holds the Warrant, by written notice
at least four weeks prior to filing any registration statement or post-effective
amendment thereto under the Act covering any securities of the Company (except a
registration statement on Form S-8), for its own account or for the account of
others, and will, upon the request of any Holder, include in such post-effective
amendment or registration statement, such information as may be required to
permit a public offering of the Common Stock issuable upon exercise of the
Warrants (the "Shares"). The Company shall supply prospectuses and such other
documents as the Holder may request in order to facilitate the public sale or
other disposition of the Shares, use its best efforts to register and qualify
the Shares for sale in such states as such Holder designates, and do any and all
other acts and things which may be necessary or desirable to enable such Holders
to consummate the public sale or other disposition of the Shares, and furnish
indemnification in the manner provided in Section 13 hereof. The Holder shall
furnish information and indemnification as set forth in Section 13, except that
the maximum amount which may be recovered from the Holder shall be limited to
the amount of proceeds received by the Holder from the sale of the Shares.
<PAGE> 15
C. The Company shall comply with the requirements of this section
at its own expense, excluding Underwriter's commissions, charges of Holder's
counsel and Underwriter's expense allowance attributable to the Holder's Shares,
which expenses shall be paid by the Holder. In no event, however, shall the
Company be required to file a post-effective amendment or a registration
statement more than once with respect to the same shares of Common Stock.
D. In the event the Company intends to file a new registration
statement with respect to an underwritten public offering, the Company shall
notify the underwriter of the exercise of registration rights by the Holder. The
underwriter, in its sole discretion, may elect to include the Shares in the
underwritten public offering, provided the Holder agrees to pay the
underwriter's discount and commissions and underwriter's expense allowance
attributable to the Holder's Shares and to indemnify the underwriter in
accordance with Section 13 hereof. In the event the underwriter elects not to
include the Holder's Shares in the underwritten public offering, then and only
in that event, the Company agrees to file a separate registration statement as
soon as practicable following the close of the underwritten public offering
covering the Holder's Shares.
SECTION 13. INDEMNITY
A. Whenever, pursuant to Section 12 a registration statement
relating to any Warrant issued hereunder or any shares issuable upon the
exercise of the Warrants issued hereunder is filed under the Act, amended or
supplemented, the Company will indemnify and hold harmless each holder of the
Shares covered by such registration statement, amendment or supplement, and each
person, if any, who controls (within the meaning of the Act) the Holder, and
each underwriter (within the meaning of the Act) of such securities and each
person, if any, who controls (within the meaning of the Act) any such
underwriter, against any losses, claims, damages or liabilities, joint or
several, to which the Holder, any such controlling person or any such
underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of any
material fact contained in any such registration statement or any preliminary
prospectus or final prospectus constituting a part thereof or any amendment or
supplement thereto; arise out of or are based upon the omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse the Holder and each such
controlling person and underwriter for any legal or other expenses reasonably
incurred by the Holder or such controlling person or underwriter in connection
with investigating or defending any such loss, claim damage, liability or
action; provided, however, that the Company mill not be liable in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, said preliminary
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished by such Holder or any other holder, for use
in the preparation of such documents.
B. The Holder will indemnify and hold harmless the Company, each
of its directors, each of its officers who have signed such registration
statement and such amendments and supplements thereto, each person, if any, who
controls the Company (within the meaning of the Act) against any losses, claims,
damages or liabilities to which the Company or any director, officer or
controlling person may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any such registration statement or any
preliminary prospectus or final prospectus constituting a part thereof or any
amendment or supplement thereto, or arise out of or are based upon the omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; and will reimburse the Company and
each such director, officer or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
<PAGE> 16
that the Holder will not be liable in any such case unless any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in said
registration statement, said preliminary prospectus or said amendment or
supplement in reliance upon and in conformity with written information furnished
by such Holder, for use in the preparation of such documents.
C. Promptly after receipt by an indemnified party under this
Section 13 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 13.
D. In any case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 13 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof, other than reasonable
costs of investigation.
SECTION 14. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANTS
A. The Warrant Agent shall account promptly to the Company with
respect to Warrants exercised and shall forward to the Company all monies
received by the Warrant Agent for the purchase of shares of Common Stock through
the exercise of such Warrants.
B. The Warrant Agent shall keep copies of this Agreement
available for inspection by holders of Warrants during normal business hours at
its offices at 40 Wall Street 46th Floor, New York City, New York 10005.
SECTION 15. RESTRICTIONS ON TRANSFER
The Warrant Certificates issued pursuant to this Agreement are freely
transferable provided that all Warrant Certificates issued hereunder are subject
to the investment representations contained in Section 16 hereof and the
restrictions in this Section 15. Any Holder of a Warrant Certificate issued
pursuant to this Agreement of Common Shares issued upon exercise of a Warrant
Certificate ("Restricted Securities") shall, prior to any transfer or
disposition or attempted transfer or disposition of any such Restricted
Securities, give written notice to the Company of such Holder's intention to
effect such transfer or disposition or attempted transfer or disposition of any
Restricted Securities, give written notice to the Company of such Holder's
intention to effect such transfer or disposition and shall deliver to the
Company an opinion of legal counsel, (reasonably suitable to the Company) that
the proposed transfer or disposition of the Restricted Securities may be
effected without registration thereof under the Securities Act of 1933, as
amended (the "1933 Act"), and without taking any similar action under any other
applicable securities laws, in which case such Holder shall be entitled to
transfer or dispose of the Restricted Securities in accordance with the terms of
the notice delivered by such Holder to the Company; provided, however, that such
transfer shall be permitted only if, prior thereto, the proposed transferee
enters into an agreement with the Company restricting the transfer of such
Restricted Securities in accordance with, and agreeing to assume the obligations
under and receive the benefits of the terms of this Warrant Agreement as
"Holder", unless, in the opinion of both counsel for the Holder and for the
Company, such agreement is not necessary. Each certificate evidencing the
Restricted Securities so transferred or disposed of (and each
<PAGE> 17
certificate evidencing any untransferred or non-disposed of Restricted
Securities) shall bear the appropriate restrictive legend set forth in Section
16 hereof unless in the opinion of both such counsel such legend is not
required.
SECTION 16. INVESTMENT REPRESENTATION
Any Holder, by his acceptance of a Warrant Certificate or Common Shares
obtained upon exercise of a Warrant Certificate, represents and warrants to the
Company that he is acquiring the Warrant Certificate and the Common Shares
purchased upon exercise of the Warrant Certificate by him for his own account
and not with a view to the distribution thereof within the meaning of the 1933
Act. Each such Holder must represent to the Company that he understands that he
must bear the economic risk of his investment in the Company for an indefinite
period of time because the Warrant Certificate and the Common Shares issuable
upon exercise of the Warrant Certificate have not been registered under the 1933
Act and therefore cannot be offered for sale or sold unless they are registered
under the 1933 Act or an exemption from such registration is available. Each
Warrant Certificate shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THIS WARRANT CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS. THIS WARRANT
CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION. THE TRANSFER OF THIS
WARRANT CERTIFICATE IS ALSO SUBJECT TO THE CONDITIONS SPECIFIED IN
SECTION 16 OF THE WARRANT AGREEMENT. NO TRANSFER OF THIS WARRANT
CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL THE CONDITIONS SPECIFIED
IN SECTION 16 OF THE WARRANT AGREEMENT HAVE BEEN FULFILLED."
The Common Shares issued upon exercise of any Warrant Certificate shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OR 1933 (THE "ACT") OR ANY STATE SECURITIES
LAWS. THESE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION."
SECTION 17. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT
Any corporation or company which may succeed to the business of the
Warrant Agent by any merger of consolidation or otherwise to which the Warrant
Agent shall be a party, or any corporation or company succeeding to the
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Warrant Agent under
the provisions of Section 15 of this Agreement. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement, any of the Warrants shall have been countersigned but not delivered,
any such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent and deliver such Warrants so countersigned; and in case
at that time any of the Warrants shall not have been countersigned, any
successor to the Warrant Agent may countersign such Warrants either in the name
of the predecessor Warrant Agent or in the name of the successor
<PAGE> 18
Warrant Agent; and in all such cases such Warrants shall have the full force
provided in the Warrants and in this Agreement.
In the event the name of the Warrant Agent shall be changed and at such
time any of the Warrants shall have been countersigned but not delivered, the
Warrant Agent may adopt the countersignature under its prior name and deliver
Warrants so countersigned, and in case at that time any of the Warrants shall
not have been countersigned, the Warrant Agent may countersign such Warrants
either in its prior name or in its changed name; and in all such cases such
Warrants shall have the full force provided in the Warrants and in this
Agreement.
SECTION 18. DUTIES OF WARRANT AGENT
The Warrant Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the Company
and the holders of Warrants, by their acceptance thereof, shall be bound.
A. The statements of fact and recitals contained herein and in
the Warrants shall be taken as statements of the Company, and the Warrant Agent
shall not assume responsibility for the correctness of any of the same except
such as describe the Warrant Agent or action taken or to be taken by it. The
Warrant Agent assumes no responsibility with respect to the distribution of the
Warrants except as herein expressly provided.
B. The Warrant Agent shall not be responsible for any failure of
the Company to comply with any of the covenants contained in this Agreement or
in the Warrants to be complied with by the Company.
C. The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder in
respect to any action taken, suffered or omitted by it hereunder in good faith
and in accordance with the opinion or the advice of such counsel.
D. The Warrant Agent shall incur no liability or responsibility
to the Company or to any holder of any Warrant for any action taken in reliance
on any notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument believed by it to be genuine and to have been signed and
sent or presented by the proper party or parties.
E. The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs and reasonable counsel fees, for anything done or omitted to be done by
the Warrant Agent in the execution of this Agreement except as a result of the
Warrant Agent's negligence, willful misconduct, or bad faith.
F. The Warrant Agent shall be under no obligation to institute
any action, suit or legal proceedings or to take any other action likely to
involve expenses unless the Company or one or more registered holders shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred, but this provision shall not affect the
power of the Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any security or indemnity. All rights of action
under this Agreement or under any of the Warrants may be enforced by the Warrant
Agent on its own behalf or on behalf of the holder, without the possession of
any of the Warrants or production thereof at any trial or other proceeding
relative thereto, and any such action, suit or proceeding instituted by the
Warrant Agent shall be brought in its name as Warrant Agent, and any recovery of
judgment shall
<PAGE> 19
be for the ratable benefit of the holders of the Warrants, as their respective
rights or interests may appear.
G. The Warrant Agent and any stockholder, director, officer,
partner or employee of the Warrant Agent may buy, sell or deal in any of the
Warrants or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
H. The Warrant Agent shall act hereunder solely as agent and not
in a ministerial capacity, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for anything which it
may do or refrain from doing in connection with this Agreement except for its
own negligence, willful misconduct or bad faith.
I. The Warrant Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Warrant Agent shall not be
answerable or accountable for any act, default neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting from such neglect
or misconduct, provided reasonable care had been exercised in the selection and
continued engagement thereof.
J. Any request, direction, election, order or demand of the
Company shall be sufficiently evidenced by an instrument signed in the name of
the Company by its President or Vice President or its Secretary or an Assistant
Secretary or its Treasurer or Assistant Treasurer (unless other evidence in
respect thereof be herein specifically prescribed); any resolution of the board
of directors may be evidenced to the Warrant Agent by a copy thereof certified
by the Secretary or an Assistant Secretary of the Company.
SECTION 19. CHANGE OF WARRANT AGENT
The Warrant Agent may resign and be discharged from its duties under
this Agreement by giving to the Company notice in writing, and to the holders of
the Warrants notice by mailing such notice to holders at their addresses
appearing on the Warrant Register, of such resignation, specifying a date when
such resignation shall take effect. The Warrant Agent may be removed by like
notice to the Warrant Agent from the Company and by like mailing of notice to
the holders of the Warrants. If the Warrant Agent shall resign or be removed or
shall otherwise become incapable of acting, the Company shall appoint a
successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after such removal or after it
has been notified in writing of such resignation or incapacity by the resigning
or incapacitated Warrant Agent or by the registered holder of a Warrant (who
shall, with such notice, submit his Warrant for inspection by the Company), then
the registered holder of any Warrant may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Any
successor warrant agent, whether appointed by the Company or by such a court,
shall be a bank or trust company, in good standing, incorporated under the laws
of the State of New York or any other state in the United States of America.
After appointment the successor warrant agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Warrant Agent without further act or deed; but the former Warrant Agent shall
deliver and transfer to the successor warrant agent all canceled Warrants,
records and property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for such purpose.
Failure to file or mail any notice provided for in this Section, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Warrant Agent or the appointment of the successor warrant agent,
as the case may be.
<PAGE> 20
SECTION 20. IDENTITY OF TRANSFER AGENT
Forthwith upon the appointment of any Transfer Agent for the shares of
Common Stock or any subsequent transfer agent for shares of Common Stock of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants, the Company will file with the Warrant Agent a
statement setting forth the name and address of such Transfer Agent.
SECTION 21. NOTICES
Any notice pursuant to this Agreement to be given or made by the
Warrant Agent or by the registered holder of any Warrant to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing by the Company
with the Warrant Agent) as follows:
Veridien Corporation
800 Sarasota Quay
Sarasota, Florida 34236
Attention: Chairman and CEO
Any notice pursuant to this Agreement to be given or made by the
Company or by the registered holder of any Warrant to or on the Warrant Agent
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing by the Warrant
Agent with the Company) as follows:
American Stock Transfer and Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
SECTION 22. SUPPLEMENTS AND AMENDMENTS
The Company and the Warrant Agent may from time to time supplement or
amend this Agreement without the approval of any holders of Warrants in order to
cure any ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Warrant Agent may deem necessary or desirable and
which shall not be inconsistent with the provisions of the Warrants and which
shall not adversely affect the interests of the holders of Warrants.
SECTION 23. SUCCESSORS
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrant Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
SECTION 24. INTERPRETATION
This Agreement and each Warrant issued hereunder shall be deemed to be
a contract made under the laws of the state of Delaware and for all purposes
shall be construed in accordance with the laws of said state.
SECTION 25. BENEFITS OF THIS AGREEMENT
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company, the Warrant Agent and the registered holders
of the Warrants any legal or
<PAGE> 21
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Warrant Agent and the
registered holders of the Warrants.
SECTION 26. COUNTERPARTS
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
VERIDIEN CORPORATION
By:
Title: Chief Executive Officer
AMERICAN STOCK TRANSFER AND TRUST COMPANY
By:
Title:
<PAGE> 1
EXHIBIT 4.6
VERIDIEN CORPORATION
AND
AMERICAN STOCK TRANSFER AND TRUST COMPANY
WARRANT AGREEMENT
REGARDING WARRANTS TO PURCHASE
COMMON STOCK
OF
VERIDIEN CORPORATION
SERIES 2
Dated as of October 19, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
RECITALS Page
<S> <C>
Section 1 Appointment of Warrant Agent 3
Section 2 Form of Warrant 3
Section 3 Countersignature and Registration 3
Section 4 Transfers and Exchanges 4
Section 5 Exercise of Warrants 4
Section 6 Mutilated or Missing Warrants 5
Section 7 Reservation of Shares of Common Stock 5
Section 8 Warrant Price 6
Section 9 Adjustments 6
Section 10 Fractional Interest 12
Section 11 Notices to Warrant Holders 13
Section 12 Registration Rights 13
Section 13 Indemnity 15
Section 14 Disposition of Proceeds on Exercise of Warrants 16
Section 15 Restrictions on Transfer 16
Section 16 Investment Representation 17
Section 17 Merger or Consolidation or Change of Name of Warrant Agent 18
Section 18 Duties of Warrant Agent 18
Section 19 Change of Warrant Agent 20
Section 20 Identity of Transfer Agent 20
Section 21 Notices 20
Section 22 Supplements and Amendments 21
Section 23 Successors 21
Section 24 Interpretation 21
Section 25 Benefits of This Agreement 21
Section 26 Counterparts 21
</TABLE>
EXHIBIT A (Forms of Warrants, Election to
Purchase and Assignment)
This Table of Contents does not constitute a part of this Agreement or have any
bearing upon the interpretation of any of its terms and provisions.
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SERIES 2 WARRANT AGREEMENT dated as of the 19TH day of October, 1995,
by and between VERIDIEN CORPORATION, a Delaware corporation (hereinafter called
the "Company") and AMERICAN STOCK TRANSFER AND TRUST COMPANY as warrant agent
(hereinafter called the "Warrant Agent").
WITNESSETH:
WHEREAS, the Company proposes to issue to Dunvegan Mortgage
Corporation, or its assigns, Warrants (the "Warrant" or the "Warrants") to
purchase up to 32,875,089 shares of the Common Stock, $0.001 par value of the
Company (the "Common Stock") pursuant to the terms of that certain Loan and
Security Agreement of even date herewith between the Company and Dunvegan
Mortgage Corporation:
WHEREAS, each Warrant entitles the holder thereof to purchase one (1)
share of Common Stock for a price of $0.001 per share (the "Warrant Price") up
to and including 5:00 p.m. E.S.T. on November 18, 2000, the "Expiration Date".
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, registration, transfer, exchange and exercise of the Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. APPOINTMENT OF WARRANT AGENT
The Company hereby appoints the Warrant Agent to act as warrant agent
for the Company in accordance with the instructions hereinafter in this
Agreement set forth, and the Warrant Agent hereby accepts such appointment.
SECTION 2. FORM OF WARRANT
The Warrant Certificates shall be issued in registered form only and
the text of the Warrants and of the subscription form and assignment to be
printed on the reverse thereof shall be substantially as set forth in Exhibit
"A" attached hereto. The per share warrant price and the number of shares of
Common Stock issuable upon exercise of the Warrants are subject to adjustments
upon the occurrence of certain events, all as hereinafter provided. The Warrants
shall be executed on behalf of the Company by the manual or facsimile signature
of the present or any future President or Vice President of the Company, under
its corporate seal, affixed or in facsimile, attested by the manual or facsimile
signature of the present or any future Secretary or Assistant Secretary of the
Company.
Warrants shall be dated as of the date of issuance by the Warrant Agent
either upon initial issuance or upon transfer or exchange.
SECTION 3. COUNTERSIGNATURE AND REGISTRATION
The Warrant Agent shall maintain books for the transfer and
registration of Warrants. Upon the initial issuance of the Warrants, the Warrant
Agent shall issue and register the Warrants in the names of the respective
holders thereof. The Warrants shall be countersigned manually or by facsimile by
the Warrant Agent (or by any successor to the Warrant Agent then acting as
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warrant agent under this Agreement) and shall not be valid for any purpose
unless so countersigned. Warrants may be so countersigned, however, by the
Warrant Agent (or by its successor as warrant agent) and be delivered by the
Warrant Agent, notwithstanding that the persons whose manual or facsimile
signatures appear thereon as proper officers of the Company shall have ceased to
be such officers at the time of such countersignature or delivery.
SECTION 4. TRANSFERS AND EXCHANGES
The Warrant Agent shall maintain books for the transfer and
registration of the Warrant Certificates. The Warrant Certificates shall be
numbered and shall be registered in a warrant register (the "Warrant Register")
as they are issued. The Warrant Agent shall transfer, from time to time, any
outstanding Warrants upon the books to be maintained by the Warrant Agent for
the purpose, upon surrender thereof for transfer properly endorsed with the form
of assignment on the reverse of the certificate duly completed and signed, or
accompanied by appropriate instructions for transfer together with any
applicable transfer taxes or duties. Upon any such transfer, a new Warrant shall
be issued to the transferee and the surrendered Warrant shall be canceled by the
Warrant Agent. Warrants so canceled shall be delivered by the Warrant Agent to
the Company from time to time upon request. The Company and the Warrant Agent
shall be entitled to treat the registered holders as the owners, in fact, of the
Warrants (notwithstanding any notice to the contrary) for all purposes and shall
not be bound to recognize any equitable or other claim to or interest in such
Warrant Certificates on the part of any other person and shall not be liable for
any registration of transfer of Warrant Certificates which are registered or to
be registered in the name of a fiduciary or nominee of a fiduciary unless made
with the actual knowledge that a fiduciary or nominee is committing a breach of
trust in requesting such registration or transfer, or with knowledge of such
facts that its participation therein amounts to bad faith.
SECTION 5. EXERCISE OF WARRANTS
Subject to the provisions of this Agreement, each registered holder of
the Warrants shall have the right which may be exercised commencing upon the
date of the closing effecting the issuance of such Warrants, and which shall
terminate at 5:00 p.m. E.S.T. on November 18, 2000 (the Expiration Date") to
purchase from the Company (and the Company shall issue and sell to such
registered holder of Warrants) the number of fully paid and non-assessable
shares of Common Stock specified in such Warrants, upon surrender to the Company
at the office of the Warrant Agent in New York City, New York of such Warrants,
with the subscription form on the reverse thereof duly completed and signed and
upon payment to the Company of the Warrant Price in United States currency, as
defined in Section 8 hereof, determined in accordance with the provisions of
Section 9 of this Agreement, for the number of shares of Common Stock in respect
of which such Warrants are then exercised. Payment of such Warrant Price
together with any applicable transfer taxes or duties shall be made in cash or
by certified check or bank draft payable to the order of the Company. Subject to
the terms hereof, no adjustment shall be made for any cash dividends on any
Common Shares issuable upon exercise of a Warrant. Upon such surrender of
Warrants and payment of the Warrant Price as aforesaid, the Company shall issue
and cause to be delivered with all reasonable dispatch to or upon the written
order of the registered holder of such Warrants and in such name or names as
such registered holder may designate, a certificate or certificates for the
number of full shares of Common Stock so purchased upon the exercise of such
Warrants. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of record of such shares of Common Stock as of the date of the
surrender of such Warrants and payment of the Warrant Price as aforesaid;
provided, however, that if, at the date of surrender of such Warrants and
payment of such Warrant Price, the transfer books for the
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shares of Common Stock or other class of stock purchasable upon the exercise of
such Warrants shall be closed, the certificates for the shares of Common Stock
in respect to which such Warrants are then exercised shall be issuable as of the
next date on which such books shall be opened, and until such date, the Company
shall be under no duty to deliver any certificate for such shares of Common
Stock; provided, further, however, that the transfer books aforesaid, unless
otherwise required by law or by applicable rule of any national securities
exchange, shall not be closed at any one time for a period longer than twenty
(20) days. All shares of Common Stock issued upon exercise of the Warrant shall
be validly issued as fully paid and non-assessable. The rights of purchase
represented by the Warrants shall be exercisable, at the election of the
registered holders thereof, either entirely or from time to time for a portion
or all the shares of Common Stock specified therein and, in the event that any
Warrant is exercised in respect of less than all of the shares of Common Stock
specified therein at any time prior to the date of expiration of the Warrant, a
new Warrant will be issued to such registered holder for the remaining full
number of shares of Common Stock specified in the Warrant so surrendered, and
the Warrant Agent is hereby irrevocably authorized to countersign and to deliver
by first-class mail within ten (10) days of the exercise of the warrants, the
required new Warrant pursuant to the provisions of this Section and of Section 3
of this Agreement and the Company, whenever requested by the Warrant Agent, will
supply the Warrant Agent with Warrants duly executed on behalf of the Company
for such purposes. In no event shall a fraction of a Warrant he issued or
exercised. After the Expiration Date, any unexercised Warrants will be void and
all rights of registered holders shall cease.
In lieu of cash the holder of any Warrants may tender as the exercise
price of such Warrants the promissory notes of the Company issued pursuant to
the Loan and Security Agreement of even date herewith.
Provided that the Company has issued all of the Warrants contemplated
in this Warrant Agreement, then in the event of a default by Dunvegan Mortgage
Corporation under the terms of the Loan and Security Agreement between Dunvegan
Mortgage Corporation and the Company, and the Company not being in default
thereunder, fifty (50%) of the Warrants then outstanding shall expire within one
year from the date of the notice of such default by the Company to Dunvegan.
SECTION 6. MUTILATED OR MISSING WARRANT
In case any of the Warrants shall be mutilated, lost, stolen or
destroyed, the Company may in its discretion issue and the Warrant Agent shall
countersign and deliver in exchange and substitution for and upon cancellation
of the mutilated Warrant, or in lieu of and substitution for the Warrant lost,
stolen or destroyed, a new Warrant of like tenor and representing an equivalent
right or interest, but only upon receipt of evidence satisfactory to the Company
and the warrant Agent of such loss, theft or destruction of such Warrant and
indemnity, if requested, also satisfactory to them. Applicants for such
substitute Warrants shall also comply with such other reasonable regulations and
pay such reasonable charges as the Company or the Warrant Agent may prescribe.
SECTION 7. RESERVATION OF SHARES OF COMMON STOCK
There have been reserved, and the Company shall at all times keep
reserved out of the authorized and unissued shares of Common Stock, a number of
shares of Common Stock sufficient to provide for the exercise of the rights of
purchase represented by the Warrants, and the Warrant Agent as transfer agent
for the Common Stock and every subsequent transfer agent
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for any shares of the Company's capital stock issuable upon the exercise of any
of the rights of purchase aforesaid are hereby irrevocably authorized and
directed at all times to reserve such number of authorized and unissued shares
of Common Stock as shall be requisite for such purpose. The Company agrees that
all shares of Common Stock issued upon exercise of the Warrants shall be, at the
time of delivery of the certificates for such shares of Common Stock, validly
issued and outstanding as fully paid and non-assessable and eligible for
inclusion on NASDAQ, and/or listed on any national securities exchange upon
which the other shares of Common Stock are then listed on, and/or eligible for
inclusion on NASDAQ prior to the date that the Warrants shall be exercisable as
provided in Section 5 hereof.
The Company will keep a copy of this Agreement on file with the Warrant
Agent as transfer agent for the Common Stock and with every subsequent transfer
agent for any shares of the Company's capital stock issuable upon the exercise
of the rights of purchase represented by the Warrants. The Warrant Agent is
hereby irrevocably authorized to requisition from time to time from such
Transfer Agent stock certificates required to honor outstanding Warrants. The
Company will supply such Transfer Agent with duly executed stock certificates
for such purpose and will itself provide or otherwise make available any cash
which may be issuable only if so provided in Section 11 of this Agreement. All
Warrants surrendered in the exercise of the rights thereby evidenced shall be
canceled by the Warrant Agent and shall thereafter be delivered to the Company,
and such canceled Warrants shall constitute sufficient evidence of the number of
shares of Common Stock which have been issued upon the exercise of such
Warrants. Promptly after the date of expiration of the Warrants, the Warrant
Agent shall certify to the Company the total aggregate amount of Warrants then
outstanding, and thereafter no shares of Common Stock shall be subject to
reservation in respect to such Warrants which shall have expired.
SECTION 8. WARRANT PRICE
The "Warrant Price" at which shares of Common Stock shall be
purchasable pursuant to the Warrants shall be $0.001 per share until 5:00 p.m.
E.S.T. on November 18, 2000 "Expiration Date", subject to the adjustments set
forth below.
SECTION 9. ADJUSTMENTS
Subject and pursuant to the provisions of this Section, the Warrant
Price and number of shares of Common Stock subject to these Warrants shall be
subject to adjustment from time to time only as set forth hereinafter:
A. Adjustment of Warrant Price and Number of Shares of Common Stock
Purchasable Upon Exercise
The Warrant Price and the number of Shares of Common Stock purchasable
upon exercise shall be subject to adjustment from time to time in the cases and
in the manner provided as follows:
1. If and whenever at any time after the date hereof and prior to
the Expiration Date the Company shall:
(a) issue shares of Common Stock or securities
exchangeable for or convertible into shares of Common Stock to all or
substantially all the holders of the shares of Common Stock as a stock
dividend (other than as a dividend paid in the ordinary course);
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(b) make a distribution on its outstanding shares of
Common Stock payable in shares of Common Stock or securities
exchangeable for or convertible into shares of Common Stock (other than
as a dividend paid in the ordinary course);
(c) subdivide its outstanding shares of Common Stock into
a greater number of shares; or
(d) consolidate its outstanding shares of Common Stock
into a smaller number of shares;
each of such events in the above clauses (a), (b), (c) and (d) being called a
"Common Share Reorganization", then the Warrant Price shall be adjusted as of
the effective date or record date, as the case may be, at which the holders of
shares of Common Stock are determined for the purpose of the Common Share
Reorganization by multiplying the Warrant Price in effect immediately prior to
such effective date or record date by a fraction,
(i) the numerator of which shall be the number of shares
of Common Stock outstanding on such effective date or record
date before giving effect to such Common Share Reorganization;
and
(ii) the denominator of which shall be the number of
shares of Common Stock outstanding as of the effective date or
record date giving effect to such Common share Reorganization
(including, in the case where securities exchangeable for or
convertible into shares of Common Stock are distributed, the
number of shares of Common Stock that would have been
outstanding had such securities been exchanged for or
converted into shares of Common Stock on such effective date
or record date).
2. If and whenever at any time after the date hereof and prior to
the Expiration Date the Company shall issue or sell any shares of Common Stock
(other than the issuance or sales referred to in Section 9.B) including shares
held in the Company's treasury and shares of Common Stock issued upon the
exercise of any options, rights or warrants to subscribe for shares of Common
Stock and shares of Common Stock issued upon the direct or indirect conversion
or exchange of securities for shares of Common Stock, for a consideration per
share less than the Current Market Price, as defined below, in effect
immediately prior to the issuance or sale of such shares, or without
consideration, such event being called a "Common Share Issuance", then the
Warrant Price shall be adjusted as of the effective date by multiplying the
Warrant Price in effect immediately prior to such effective date by a fraction,
(i) the numerator of which is an amount equal to the sum
of (X) the total number of shares of Common Stock outstanding
immediately prior to such issuance or sale, multiplied by the
Current Market Price in effect immediately prior to such
issuance or sale, plus (Y) the aggregate of the amount of all
consideration, if any, received by the Company upon such
issuance or sale, and
(ii) the denominator of which is the Current Market Price
in effect immediately prior to such issuance or sale
multiplied by the total number of shares of Common Stock
outstanding immediately after such issuance or sale;
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provided, however, that in no event shall the Warrant Price be adjusted pursuant
to this computation to an amount in excess of the Warrant Price in effect
immediately prior to such computation, except in the case of a combination of
outstanding shares of Common Stock as provided by Section 9.A(1)(d).
3. If and whenever at any time after the date hereof and prior to
the Expiration Date, the Company shall fix a record date for the issue of
rights, options or warrants to all or substantially all of the holders of shares
of Common Stock pursuant to which such holders are entitled, during a period
expiring not more than forty-five (45) days after the record date for such issue
(the "Rights Period"), to subscribe for or purchase shares of Common Stock or
securities exchangeable for or convertible into shares of Common Stock at a
price per share to the holder (or at an exchange or conversion price per share
during the Rights Period to the holder in the case of securities exchangeable
for or convertible into shares of Common Stock) of less than 95% of the Current
Market Price, as defined below, for the shares of Common Stock on such record
date (any of such events being called a "Rights Offering") then, in such event,
the Holders of Warrants on the effective date of such rights offering, shall be
entitled to receive, and shall accept for the same aggregate consideration,
rights to subscribe for or purchase shares of Common Stock or securities
exchangeable for or convertible into shares of Common Stock, which such holder
would have entitled to receive as a result of such rights offering, if, on the
effective date thereof, the Warrant holder had been the registered holder of the
number of shares of Common Stock to which such holder was theretofore entitled
upon exercise. Any Warrant holder who shall have exercised his right to purchase
shares of Common Stock during the period beginning immediately after the record
date for a Rights Offering and ending on the last day of the Rights Period
therefor shall be treated as if such holder were the registered holder of the
shares of Common Stock on the record date for such rights offering.
4. If and whenever at any time after the date hereof and prior to
the Expiration Date, the Company shall fix a record date for the issue or the
distribution to all or substantially all the holders of the shares of Common
Stock of (i) securities of the Company other than shares of Common Stock, (ii)
rights, options or warrants to acquire shares of Common Stock or securities
exchangeable for or convertible into shares of Common Stock, (iii) evidences of
indebtedness, or (iv) any property or other assets, and if such issuance or
distribution does not constitute a dividend paid in the ordinary course, a
Common Share Reorganization or a Rights Offering (any of such non-excluded
events being herein called a "Special Distribution), then in such event the
Warrant holder shall be entitled to receive, and shall accept for the same
aggregate consideration the securities, evidences of indebtedness or other
property which such holder would have been entitled to receive as a result of
such Special Distribution if, on the effective date thereof, the Warrant holder
had been the registered holder of the number of shares of Common Stock to which
such holder was theretofore entitled upon exercise.
5. If and whenever at any time after the date hereof and prior to
the Expiration Date there shall be a reclassification of shares of Common Stock
at any time outstanding or change of the shares of Common Stock into other
shares or into other securities (other than a Common Share Reorganization), or a
consolidation, amalgamation, arrangement or merger of the Company with or into
another corporation or other entity, other than a consolidation, amalgamation,
arrangement or merger which does not result in any reclassification of the
outstanding shares of Common Stock or a change of the shares of Common Stock (or
other shares), or a transfer of the undertaking or assets of the Company as an
entirety or substantially as an entirety to another corporation or other entity
(any of such events being herein called a "Capital Reorganization"), any Warrant
holder who exercises his right to purchase shares of Common Stock pursuant to
Warrants then held after the effective date of such Capital Reorganization shall
be entitled to
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receive, and shall accept for the same aggregate consideration in lieu of the
number of shares of Common Stock to which such holder was theretofore entitled
upon such exercise the aggregate number of shares, other securities or other
property which such holder would have been entitled to receive as a result of
such Capital Reorganization if, on the effective date thereof, the Warrant
holder had been the registered holder of the number of shares of Common Stock to
which such holder was theretofore entitled upon exercise.
6. If and whenever at any time after the date hereof and prior to
the Expiration Date:
(a) a Common Share Reorganization shall occur; or
(b) the Company shall fix a record date for the issue or
distribution to all or substantially all of the holders of the shares
of Common Stock or securities exchangeable for or convertible into
shares of Common Stock, or rights, options or warrants entitling the
holders thereof to subscribe for or purchase shares of Common Stock or
securities exchangeable for or convertible into shares of Common Stock;
and any such event results in an adjustment in the Warrant Price pursuant to the
provisions of this Section, the number of shares of Common Stock purchasable
pursuant to each Warrant shall be adjusted contemporaneously with the adjustment
in the Warrant Price by multiplying the number of shares of Common Stock
heretofore purchasable on the exercise thereof by a fraction, the numerator of
which shall be the Warrant Price in effect immediately prior to such adjustment,
and the denominator of which shall be the Warrant Price resulting from such
adjustment.
B. Rules Regarding Calculation of Adjustment of Warrant Price and of
Shares of Common Stock Purchasable Upon Exercise
For the purposes of Section 9.A:
1. The adjustments provided for in Section 9.A are cumulative,
and shall, for the purpose of adjustments to the Warrant Price, be computed to
the nearest one-tenth of one cent and shall be made successively whenever an
event referred to above shall occur, subject to the following subsections of
this Section 9.B.
2. No adjustment in the Warrant Price shall be required unless
such adjustment would result in a change of at least $.02 in the prevailing
Warrant Price; no adjustment shall be made in the number of shares of Common
Stock issuable upon exercise of a Warrant unless it would result in a change of
at least one-half of a share, provided, however, that any adjustment which,
except for the provisions of this Section would otherwise have been required to
be made shall be carried forward and taken into account in any subsequent
adjustment.
3. No adjustment in the Warrant Price or in the number of shares
of Common Stock purchasable upon exercise of Warrants shall be made in respect
of any event described in Section 9.A if Warrant holders are entitled to
participate in such events on the same terms mutatis mutandis as if Warrant
holders had exercised their rights prior to or on the effective date or record
date of such event.
4. No adjustment in the Warrant Price shall be made pursuant to
Section 9.A with respect of the issue from time to time of shares of Common
Stock issuable on exercise of the Warrants or in respect of the issue from time
to time of cash dividends paid in the ordinary course
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to holders of shares of Common Stock who exercise an option or election to
receive substantially equivalent dividends in shares of Common Stock in lieu of
receiving a cash dividend, and any such issue shall be deemed not to be a Common
Share Reorganization.
5. No adjustment in the Warrant Price shall be made pursuant to
Section 9.A with respect to the issue from time to time of options, or shares of
Common Stock upon the exercise thereof, to officers, directors or employees of
the Company pursuant to the Company's Incentive Stock Option Plan.
6. No adjustment in the Warrant Price shall be made pursuant to
Section 9.A with respect to the issue or sale of shares of Common Stock upon the
exercise of options, rights or warrants, or upon the conversation or exchange of
convertible or exchangeable securities, in any case where (1) the Warrant Price
was adjusted at the time of issue of such options, rights or warrants, or
convertible or exchangeable securities, or (2) which are outstanding as of the
date hereof.
7. If a dispute shall at any time arise with respect to
adjustments provided for in Section 9.A, such dispute shall be conclusively
determined by the Company's auditors, or if they are unable or unwilling to act,
by such other firm or independent certified public accountants as may be
selected by the Company and each such determination shall be binding upon the
Company, the Warrant Agent and the Warrant holders; such auditors or accountants
shall be provided access to all necessary records of the Company. In the event
that any such determination is made, the Company shall deliver a certificate to
the Warrant Agent describing such determination.
8. If after the date of this Agreement the Company shall take any
action affecting the shares of Common Stock, other than action described in
Section 9.A, which in the opinion of the board of directors of the Company would
materially affect the rights of Warrant holders, the Warrant Price or the number
of shares of Common Stock purchasable upon exercise shall be adjusted in such
manner, if any, or at such time, by action by the directors, in their sole
discretion as they may determine to be equitable in the circumstances. Failure
of the taking of action by the directors so as to provide for an adjustment on
or prior to the effective date of any action by the Company affecting the shares
of Common Stock shall be conclusive evidence that the directors have determined
that it is equitable to make no adjustment in the circumstances.
9. If the Company shall set a record date to determine the
holders of the shares of Common Stock entitled to receive any dividend,
distribution, subscription and/or purchase rights and shall, thereafter and
before the distribution to such holders of any such dividend, distribution,
subscription and/or purchase rights, abandon its plan to pay or deliver such
dividend, distribution, subscription and/or purchase rights, then no adjustment
in the Warrant Price or the number of shares of Common Stock purchasable upon
exercise of any Warrant shall be required by reason of the setting of such
record date.
10. "Current Market Price" of the shares of Common Stock at any
date means the price per share equal to the average closing price of the shares
of Common Stock on NASDAQ, or if the shares of Common Stock were not then listed
on NASDAQ, on such stock exchange on which the shares are listed as may be
selected by the Company for such purpose or, if not listed on any stock
exchange, the mid point between the bid and ask prices in the over-the-counter
market, during a period of thirty (30) consecutive trading days commencing not
later than forty-five (45) trading days before such date.
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11. In the absence of a resolution of the directors fixing a
record date for a Special Distribution or Rights offering, the Company shall be
deemed to have selected the date on which the Special Distribution or Rights
Offering is effected as a record date.
12. As a condition precedent to the taking of any action which
would require any adjustment in any of the subscription rights pursuant to any
of the Warrants, including the Warrant Price and the number or class of
securities which are to be received upon the exercise thereof, the Company shall
take any corporate action which may, in the opinion of counsel, be necessary in
order that the Company may validly and legally issue as fully paid and
non-assessable all the securities which the holders of such Warrants are
entitled to receive on the full exercise thereof in accordance with the
provisions thereof.
C. Postponement of Subscription
In any case in which this Section shall require that an adjustment
shall be effective immediately after a record date for an event referred to
herein, the Company may defer, until the occurrence of such an event:
(a) issuing to the, holder of any Warrant exercised after such
record date and before the occurrence of such event, the additional shares of
Common Stock issuable upon such exercise by reason of the adjustment required by
such event; and
(b) delivering to such holder any distributions declared with
respect to such additional shares of Common Stock after such exercise date and
before such event;
provided, however, that the Company shall deliver to such holder an appropriate
instrument evidencing such holder's right, upon the occurrence of the event
giving rise to the adjustment, to an adjustment in the Warrant Price or the
number of shares of Common Stock purchasable on the exercise of any Warrant and
to such distribution declared with respect to any additional shares of Common
Stock purchasable on the exercise of any Warrant.
D. Notice of Adjustment of Warrant Price and Number of Shares of Common
Stock Purchasable Upon Exercise
1. At least twenty-one (21) days prior to the effective date or
record date, as the case may be, of any event which requires or is likely to
require adjustment in any provision of the subscription rights pursuant to any
of the Warrants, including the Warrant Price and the number of shares of Common
Stock which are purchasable upon exercise thereof, the Company shall:
(a) file with the Warrant Agent a certificate of the
Company specifying the particulars of such event and, if determinable,
the required adjustment and the computation of such adjustment; and
(b) give notice to the Warrant holders of the particulars
of such event and, if determinable, the required adjustment.
2. In case any adjustment for which a notice in Section 9.D(1)
has been given is not then determinable, the Company shall promptly after such
adjustment is determinable:
(a) file with the Warrant Agent a computation of such
adjustment; and
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(b) give notice to the Warrant holders of the adjustment.
E. Sum Payable on Exercise of Warrant to the Company to Remain Constant
On the effective date of any new Warrant Price the number of shares as
to which any Warrant may be exercised shall be increased or decreased so that
the total sum payable to the Company on the exercise of such Warrant shall
remain constant.
F. Form of Warrant
The form of Warrant need not be changed because of any change pursuant
to this Section, and Warrants issued after such change may state the same
Warrant Price and the same number of shares as is stated in the Warrants
initially issued pursuant to this Agreement. However, the Company may at any
time in its sole discretion (which shall be conclusive) make any change in the
form of Warrant that the Company may deem appropriate and that does not affect
the substance thereof; and any Warrant thereafter issued or countersigned,
whether in exchange or substitution for an outstanding Warrant or otherwise, may
be in the form as so changed.
G. Miscellaneous Provisions Relating to Adjustments in Respect of the
Warrants
Upon any adjustment of the Warrant Price, the Company may elect to
adjust the number of Warrants outstanding in lieu of any adjustment in the
number of shares issuable upon exercise of a Warrant as provided in this
Section. Each Warrant outstanding, following an adjustment pursuant to this
subsection (G), shall entitle the holder thereof to purchase one (1) share of
Common Stock at the Warrant Price, as adjusted pursuant to this Section. Upon
any adjustment of the number of Warrants outstanding pursuant to this subsection
(G), each Warrant outstanding immediately prior to such adjustment shall be
changed to the number of Warrants determined by dividing (i) the Warrant Price
in effect immediately prior to such adjustment by (ii) the Warrant Price in
effect immediately after such adjustment. Upon any election by the Company to
make an adjustment pursuant to this subsection (G), the Warrant Agent must be
notified in the manner set forth herein, and such notice must indicate the
record date for the adjustment and, if known, the amount of such adjustment.
Such record date may be the date on which the Warrant Price is adjusted or any
day thereafter, provided, however, to that the notice to the Warrant Agent must
be given at least ten (10) days prior to the record date for an adjustment
pursuant to this subsection (G). Upon any adjustment hereunder, the Company
shall promptly cause to be distributed to the registered holders of Warrants on
the record date (as determined in the manner set forth above) certificates
evidencing the additional Warrants to which such holders shall be entitled as a
result of such adjustment or, at the option of the Company, new certificates
evidencing all of the Warrants to which such holders shall be entitled following
such adjustment, provided, however, that the Company may require the surrender
and cancellation of the certificates evidencing the Warrants held by such
holders prior to such adjustment. Any new certificates issued shall be in the
form of the Warrant specified in Section 2 of this Agreement, subject to
modification as provided in this Section.
SECTION 10. FRACTIONAL INTEREST
The Company shall not be required to issue fractions of a share of
Common Stock on the exercise of Warrants nor shall the Company be required to
purchase any such fractions.
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SECTION 11. NOTICES TO WARRANT HOLDERS
A. Upon any adjustment of the Warrant Price and the number of
shares of securities or other property issuable upon exercise of a Warrant after
such adjustment, then and in each such case the Company shall give written
notice thereof to the Warrant Agent, which notice shall state the Warrant Price
resulting from such adjustment and the increase or decrease, if any, in the
number of shares purchasable at such price upon the exercise of a Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of the subject adjustments.
B. If at any time prior to the termination of the Warrants:
(i) the Company shall pay any dividends payable in stock
upon its Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock;
(ii) the Company shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any
class or other rights;
(iii) there shall be any Capital Reorganization or
Reclassification of the Capital Stock of the Company, or consolidation
or merger of the Company with, or sale of all or substantially all of
its assets to, another corporation; or
(iv) there shall be voluntary or involuntary dissolution,
liquidation, or winding up of the business affairs of the Company;
then, in any one or more of such cases, the Company shall give written notice
and publish the same in the manner set forth in Section 11 of the date on which
(i) the books of the Company shall close or a record shall be taken for such
dividend, distribution, or subscription rights, or (ii) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding up shall take place or commence, as the case may be. Such notice shall
also specify the date as of which the holders or Common Stock or record shall
participate in such dividend, distribution, or subscription rights or shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding up, as the case may be. Such notice
shall be given and published at least twenty (20) days prior to the record date
or the date on which the Company's transfer books are closed in respect thereof.
Failure to give or publish such notice, or any defect therein, shall not affect
the legality or validity of any of the matters set forth in this Section.
C. The Company may, in its discretion, cause copies of all
financial statements and reports, proxy or information statements and other
documents as it shall send to its stockholders to be sent by first-class mail,
postage prepaid, on the date of mailing to such stockholders, to each registered
holder of Warrants at his address appearing on the Warrant Register as of the
record date for the determination of the stockholders entitled to such
documents.
SECTION 12. REGISTRATION RIGHTS
The Company agrees that:
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<PAGE> 14
A. (i) At any time during the first year following the date of
this Warrant; or (ii) At any time during the period commencing one year from the
date of this Warrant until the expiration date; or (iii) in the event of the
exercise of this Warrant, then at any time for a period of two years following
the date of such exercise, and provided that the Holder is not eligible to
utilize Rule 144 under the Act, if the holders of at least 50% of the then
outstanding Warrants, and/or shares of Common Stock, if the Warrants have been
exercised, request that the Company file, under the Act, a post-effective
amendment to a prior registration statement, or if a post-effective amendment is
not available, a registration statement under the Act covering not less than 50%
of the shares issuable upon exercise of the Warrants and not previously sold, it
will:
i. promptly notify the Holder of this Warrant, each
Holder of shares issued pursuant to any Warrants, and each Holder of
any Warrant, that such registration statement will be filed and that
the shares which are then held, and/or may be acquired upon the
exercise of the Warrants, by the Holder and such Holders, will be
included in such post-effective amendment or registration statement at
such Holders' request;
ii. cause such post-effective amendment or registration
statement to cover all shares which it has been requested to include;
iii. use its best efforts to cause such post-effective
amendment or registration statement to become effective as soon as
practicable under the Act; and
iv. take all other action necessary under any federal or
state law or regulation of any governmental authority to permit all
shares which it has been so requested to include in such post-effective
amendment or registration statement to be sold or otherwise disposed
of, and will maintain such compliance with each such federal and state
law and regulation of any governmental authority for the period
necessary for the Holder and such holders to effect the proposed sale
or other disposition of the shares so registered. The Company shall be
required to effect a registration or qualification pursuant to this
Section on only one occasion.
B. Prior to the expiration of this Warrant or for a period of two
years following the exercise of this Warrant, provided Rule 144 under the Act is
not available to such Holder or Holders for the sale of the shares, the Company
shall advise the Holder, whether the Holder has exercised the Warrant and holds
Common Stock, or whether the Holder still holds the Warrant, by written notice
at least four weeks prior to filing any registration statement or post-effective
amendment thereto under the Act covering any securities of the Company (except a
registration statement on Form S-8), for its own account or for the account of
others, and will, upon the request of any Holder, include in such post-effective
amendment or registration statement, such information as may be required to
permit a public offering of the Common Stock issuable upon exercise of the
Warrants (the "Shares"). The Company shall supply prospectuses and such other
documents as the Holder may request in order to facilitate the public sale or
other disposition of the Shares, use its best efforts to register and qualify
the Shares for sale in such states as such Holder designates, and do any and all
other acts and things which may be necessary or desirable to enable such Holders
to consummate the public sale or other disposition of the Shares, and furnish
indemnification in the manner provided in Section 13 hereof. The Holder shall
furnish information and indemnification as set forth in Section 13, except that
the maximum amount which may be recovered from the Holder shall be limited to
the amount of proceeds received by the Holder from the sale of the Shares.
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<PAGE> 15
C. The Company shall comply with the requirements of this section
at its own expense, excluding Underwriter's commissions, charges of Holder's
counsel and Underwriter's expense allowance attributable to the Holder's Shares,
which expenses shall be paid by the Holder. In no event, however, shall the
Company be required to file a post-effective amendment or a registration
statement more than once with respect to the same shares of Common Stock.
D. In the event the Company intends to file a new registration
statement with respect to an underwritten public offering, the Company shall
notify the underwriter of the exercise of registration rights by the Holder. The
underwriter, in its sole discretion, may elect to include the Shares in the
underwritten public offering, provided the Holder agrees to pay the
underwriter's discount and commissions and underwriter's expense allowance
attributable to the Holder's Shares and to indemnify the underwriter in
accordance with Section 13 hereof. In the event the underwriter elects not to
include the Holder's Shares in the underwritten public offering, then and only
in that event, the Company agrees to file a separate registration statement as
soon as practicable following the close of the underwritten public offering
covering the Holder's Shares.
SECTION 13. INDEMNITY
A. Whenever, pursuant to Section 12 a registration statement
relating to any Warrant issued hereunder or any shares issuable upon the
exercise of the Warrants issued hereunder is filed under the Act, amended or
supplemented, the Company will indemnify and hold harmless each holder of the
Shares covered by such registration statement, amendment or supplement, and each
person, if any, who controls (within the meaning of the Act) the Holder, and
each underwriter (within the meaning of the Act) of such securities and each
person, if any, who controls (within the meaning of the Act) any such
underwriter, against any losses, claims, damages or liabilities, joint or
several, to which the Holder, any such controlling person or any such
underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of any
material fact contained in any such registration statement or any preliminary
prospectus or final prospectus constituting a part thereof or any amendment or
supplement thereto; arise out of or are based upon the omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse the Holder and each such
controlling person and underwriter for any legal or other expenses reasonably
incurred by the Holder or such controlling person or underwriter in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, said preliminary
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished by such Holder or any other holder, for use
in the preparation of such documents.
B. The Holder will indemnify and hold harmless the Company, each
of its directors, each of its officers who have signed such registration
statement and such amendments and supplements thereto, each person, if any, who
controls the Company (within the meaning of the Act) against any losses, claims,
damages or liabilities to which the Company or any director, officer or
controlling person may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any such registration statement or any
preliminary prospectus or final prospectus constituting a part thereof or any
amendment or supplement thereto, or arise out of or are based upon the omission
to state
15
<PAGE> 16
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse the Company and each such
director, officer or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Holder will not be liable in any such case unless any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in said registration
statement, said preliminary prospectus or said amendment or supplement in
reliance upon and in conformity with written information furnished by such
Holder, for use in the preparation of such documents.
C. Promptly after receipt by an indemnified party under US
Section 13 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 13.
D. In any case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 13 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof, other than reasonable
costs of investigation.
SECTION 14. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANTS
A. The Warrant Agent shall account promptly to the Company with
respect to Warrants exercised and shall forward to the Company all monies
received by the Warrant Agent for the purchase of shares of Common Stock through
the exercise of such Warrants.
B. The Warrant Agent shall keep copies of this Agreement
available for inspection by holders of Warrants during normal business hours at
its offices at 40 Wall Street, 46th Floor, New York City, New York.
SECTION 15. RESTRICTIONS ON TRANSFER
The Warrant Certificates issued pursuant to this Agreement are freely
transferable provided that all Warrant Certificates issued hereunder are subject
to the investment representations contained in Section 16 hereof and the
restrictions in this Section 15. Any Holder of a Warrant Certificate issued
pursuant to this Agreement of Common Shares issued upon exercise of a Warrant
Certificate ("Restricted Securities") shall, prior to any transfer or
disposition or attempted transfer or disposition of any such Restricted
Securities, give written notice to the Company of such Holder's intention to
effect such transfer or disposition or attempted transfer or disposition of any
Restricted Securities, give written notice to the Company of such Holder's
intention to effect such transfer or disposition and shall deliver to the
Company an opinion of legal counsel, (reasonably suitable to the Company) that
the proposed transfer or disposition of the Restricted Securities may be
effected without registration thereof under the Securities Act of 1933, as
amended (the "1933 Act"), and without taking any similar action under
16
<PAGE> 17
any other applicable securities laws, in which case such Holder shall be
entitled to transfer or dispose of the Restricted Securities in accordance with
the terms of the notice delivered by such Holder to the Company; provided,
however, that such transfer shall be permitted only if, prior thereto, the
proposed transferee enters into an agreement with the Company restricting the
transfer of such Restricted Securities in accordance with, and agreeing to
assume the obligations under and receive the benefits of the terms of this
Warrant Agreement as "Holder", unless, in the opinion of both counsel for the
Holder and for the Company, such agreement is not necessary. Each certificate
evidencing the Restricted Securities so transferred or disposed of (and each
certificate evidencing any untransferred or non-disposed of Restricted
Securities) shall bear the appropriate restrictive legend set forth in Section
16 hereof unless in the opinion of both such counsel such legend is not
required.
SECTION 16. INVESTMENT REPRESENTATION
Any Holder, by his acceptance of a Warrant Certificate or Common Shares
obtained upon exercise of a Warrant Certificate, represents and warrants to the
Company that he is acquiring the Warrant Certificate and the Common Shares
purchased upon exercise of the Warrant Certificate by him for his own account
and not with a view to the distribution thereof within the meaning of the 1933
Act. Each such Holder must represent to the Company that he understands that he
must bear the economic risk of his investment in the Company for an indefinite
period of time because the Warrant Certificate and the Common Shares issuable
upon exercise of the Warrant Certificate have not been registered under the 1933
Act and therefore cannot be offered for sale or sold unless they are registered
under the 1933 Act or an exemption from such registration is available. Each
Warrant Certificate shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THIS WARRANT CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS. THIS WARRANT
CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION. THE TRANSFER OF THIS
WARRANT CERTIFICATE IS ALSO SUBJECT TO THE CONDITIONS SPECIFIED IN
SECTION 16 OF THE WARRANT AGREEMENT. NO TRANSFER OF THIS WARRANT
CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL THE CONDITIONS SPECIFIED
IN SECTION 16 OF THE WARRANT AGREEMENT HAVE BEEN FULFILLED."
The Common Shares issued upon exercise of any Warrant Certificate shall
be stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OR 1933 (THE "ACT") OR ANY STATE SECURITIES
LAWS. THESE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION."
17
<PAGE> 18
SECTION 17. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT
Any corporation or company which may succeed to the business of the
Warrant Agent by any merger of consolidation or otherwise to which the Warrant
Agent shall be a party, or any corporation or company succeeding to the
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Warrant Agent under
the provisions of Section 17 of this Agreement. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement, any of the Warrants shall have been countersigned but not delivered,
any such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent and deliver such Warrants so countersigned; and in case
at that time any of the Warrants shall not have been countersigned, any
successor to the Warrant Agent may countersign such Warrants either in the name
of the predecessor Warrant Agent or in the name of the successor Warrant Agent;
and in all such cases such Warrants shall have the full force provided in the
Warrants and in this Agreement.
In the event the name of the Warrant Agent shall be changed and at such
time any of the Warrants shall have been countersigned but not delivered, the
Warrant Agent may adopt the countersignature under its prior name and deliver
Warrants so countersigned, and in case at that time any of the Warrants shall
not have been countersigned, the Warrant Agent may countersign such Warrants
either in its prior name or in its changed name; and in all such cases such
Warrants shall have the full force provided in the Warrants and in this
Agreement.
SECTION 18. DUTIES OF WARRANT AGENT
The Warrant Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the Company
and the holders of Warrants, by their acceptance thereof, shall be bound.
A. The statements of fact and recitals contained herein and in
the Warrants shall be taken as statements of the Company, and the Warrant Agent
shall not assume responsibility for the correctness of any of the same except
such as describe the Warrant Agent or action taken or to be taken by it. The
Warrant Agent assumes no responsibility with respect to the distribution of the
Warrants except as herein expressly provided.
B. The Warrant Agent shall not be responsible for any failure of
the Company to comply with any of the covenants contained in this Agreement or
in the Warrants to be complied with by the Company.
C. The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder in
respect to any action taken, suffered or omitted by it hereunder in good faith
and in accordance with the opinion or the advice of such counsel.
D. The Warrant Agent shall incur no liability or responsibility
to the Company or to any holder of any Warrant for any action taken in reliance
on any notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument believed by it to be genuine and to have been signed and
sent or presented by the proper party or parties.
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<PAGE> 19
E. The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs and reasonable counsel fees, for anything done or omitted to be done by
the Warrant Agent in the execution of this Agreement except as a result of the
Warrant Agent's negligence, willful misconduct, or bad faith.
F. The Warrant Agent shall be under no obligation to institute
any action, suit or legal proceedings or to take any other action likely to
involve expenses unless the Company or one or more registered holders shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred, but this provision shall not affect the
power of the Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any security or indemnity. All rights of action
under this Agreement or under any of the Warrants may be enforced by the Warrant
Agent on its own behalf or on behalf of the holder, without the possession of
any of the Warrants or production thereof at any trial or other proceeding
relative thereto, and any such action, suit or proceeding instituted by the
Warrant Agent shall be brought in its name as Warrant Agent, and any recovery of
judgment shall be for the ratable benefit of the holders of the Warrants, as
their respective rights or interests may appear.
G. The Warrant Agent and any stockholder, director, officer,
partner or employee of the Warrant Agent may buy, sell or deal in any of the
Warrants or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
H. The Warrant Agent shall act hereunder solely as agent and not
in a ministerial capacity, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for anything which it
may do or refrain from doing in connection with this Agreement except for its
own negligence, willful misconduct or bad faith.
I. The Warrant Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Warrant Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from such
neglect or misconduct, provided reasonable care had been exercised in the
selection and continued engagement thereof.
J. Any request, direction, election, order or demand of the
Company shall be sufficiently evidenced by an instrument signed in the name of
the Company by its President or Vice President or its Secretary or an Assistant
Secretary or its Treasurer or Assistant Treasurer (unless other evidence in
respect thereof be herein specifically prescribed); any resolution of the board
of directors may be evidenced to the Warrant Agent by a copy thereof certified
by the Secretary or an Assistant Secretary of the Company.
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<PAGE> 20
SECTION 19. CHANGE OF WARRANT AGENT
The Warrant Agent may resign and be discharged from its duties under
this Agreement by giving to the Company notice in writing, and to the holders of
the Warrants notice by mailing such notice to holders at their addresses
appearing on the Warrant Register, of such resignation, specifying a date when
such resignation shall take effect. The Warrant Agent may be removed by like
notice to the Warrant Agent from the Company and by like mailing of notice to
the holders of the Warrants. If the Warrant Agent shall resign or be removed or
shall otherwise become incapable of acting, the Company shall appoint a
successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after such removal or after it
has been notified in writing of such resignation or incapacity by the resigning
or incapacitated Warrant Agent or by the registered holder of a Warrant (who
shall, with such notice, submit his Warrant for inspection by the Company), then
the registered holder of any Warrant may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Any
successor warrant agent, whether appointed by the Company or by such a court,
shall be a bank or trust company, in good standing, incorporated under the laws
of the State of New York or any other state in the United States of America.
After appointment the successor warrant agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Warrant Agent without further act or deed; but the former Warrant Agent shall
deliver and transfer to the successor warrant agent all canceled Warrants,
records and property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for such purpose.
Failure to file or mail any notice provided for in this Section, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Warrant Agent or the appointment of the successor warrant agent,
as the case may be.
SECTION 20. IDENTITY OF TRANSFER AGENT
Forthwith upon the appointment of any Transfer Agent for the shares of
Common Stock or any subsequent transfer agent for shares of Common Stock of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants, the Company will file with the Warrant Agent a
statement setting forth the name and address of such Transfer Agent.
SECTION 21. NOTICES
Any notice pursuant to this Agreement to be given or made by the
Warrant Agent or by the registered holder of any Warrant to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing by the Company
with the Warrant Agent) as follows:
Veridien Corporation
800 Sarasota Quay
Sarasota, Florida 34236
Attention: Chairman and CEO
Any notice pursuant to this Agreement to be given or made by the
Company or by the registered holder of any Warrant to or on the Warrant Agent
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing by the Warrant
Agent with the Company) as follows:
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<PAGE> 21
American Stock Transfer and Trust Company
40 Wall Street, 46th Floor
New York City, New York 10005
SECTION 22. SUPPLEMENTS AND AMENDMENTS
The Company and the Warrant Agent may from time to time supplement or
amend this Agreement without the approval of any holders of Warrants in order to
cure any ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Warrant Agent may deem necessary or desirable and
which shall not be inconsistent with the provisions of the Warrants and which
shall not adversely affect the interests of the holders of Warrants.
SECTION 23. SUCCESSORS
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrant Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
SECTION 24. INTERPRETATION
This Agreement and each Warrant issued hereunder shall be deemed to be
a contract made under the laws of the state of Delaware and for all purposes
shall be construed in accordance with the laws of said state.
SECTION 25. BENEFITS OF THIS AGREEMENT
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company, the Warrant Agent and the registered holders
of the Warrants any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Warrant Agent and the registered holders of the Warrants.
SECTION 26. COUNTERPARTS
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
VERIDIEN CORPORATION
By:
Title: C.E.O.
AMERICAN STOCK TRANSFER AND TRUST COMPANY
By:
Title:
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EXHIBIT 4.7
THIS WARRANT CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT") OR ANY STATE SECURITIES LAWS. THIS WARRANT CERTIFICATE MAY NOT
BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO ANY EXEMPTION
FROM SUCH REGISTRATION. THE TRANSFER OF THIS WARRANT CERTIFICATE IS ALSO
SUBJECT TO THE CONDITIONS SPECIFIED HEREIN. NO TRANSFER OF THIS WARRANT
CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL THE CONDITIONS HAVE BEEN
FULFILLED.
Void after 5:00 PM, Eastern Time on November 18, 2000.
Series 1
Warrant to Purchase 1,878,545
shares of Common Stock, Subject
to Adjustment as Herein provided
December 12, 1995
VERIDIEN CORPORATION
WARRANT TO PURCHASE COMMON STOCK
THIS WARRANT CERTIFICATE IS ISSUED PURSUANT TO THE TERMS OF AND IS GOVERNED BY
THAT CERTAIN WARRANT AGREEMENT ("WARRANT AGREEMENT") DATED AS OF OCTOBER 19,
1995, REGARDING WARRANTS TO PURCHASE COMMON STOCK OF VERIDIEN CORPORATION
SERIES L, BY AND BETWEEN VERIDIEN CORPORATION AND AMERICAN STOCK TRANSFER AND
TRUST COMPANY. REFERENCE SHOULD BE MADE BY THE HOLDER FOR INFORMATION
CONCERNING TRANSFER, REGISTRATION RIGHTS, ADJUSTMENTS UPON THE HAPPENING OF
CERTAIN EVENTS AND FOR OTHER INFORMATION CONCERNING THE RIGHTS OF THE HOLDER OF
THIS WARRANT CERTIFICATE.
THIS IS TO CERTIFY THAT, for value received, DUNVEGAN MORTGAGE
CORPORATION (the "Holder") is entitled to purchase, at any time from October
19, 1995 to 5:00 PM EST on November 18, 2000, common shares ("Common Shares")
of Veridien Corporation (the "Corporation") equal to the number of warrants
specified above, at a price of $.499 per Common Share by surrendering this
Warrant Certificate to the Warrant Agent with a subscription form on the
reverse hereof properly completed and executed and a check, bank draft, money
order, or other consideration as specified in the Warrant Agreement payable to
the Corporation for the total purchase price of the Common Shares so subscribed
for and purchased.
The Holder may subscribe for and purchase less than the number of
Common Shares entitled to be subscribed for and purchased on surrender of this
Warrant Certificate. If the subscription does not exhaust the Warrants
represented by this Warrant Certificate, a Warrant Certificate representing the
unexercised Warrants will be issued to the Holder. No Warrant Certificates
representing fractional warrants will be issued.
<PAGE> 2
American Stock Transfer and Trust Company, 40 Wall Street, 46th Floor,
New York, N.Y. 10005, attention. Kevin Jennings ("Warrant Agent") has been
appointed the Warrant Agent to receive subscriptions for Common Shares and
payments from Holders.
This Warrant Certificate, the subscription form and a check, bank
draft, or money order shall be deemed to be so surrendered only upon personal
delivery thereof or, if sent by post or other means of transmission, upon
receipt thereof by the Warrant Agent at the office specified above. The
Corporation may also provide for other places at which this Warrant Certificate
may be surrendered for exchange or exercise.
Certificates representing Common Shares subscribed for and purchased
will be mailed to the persons specified in the subscription form at the
respective addresses specified therein or, if so specified in the subscription
form, delivered to such persons by the Warrant Agent where the applicable
Warrant Certificate was surrendered, when the transfer books of the Corporation
have been opened for five business days after the due surrender of such Warrant
Certificate and payment as aforesaid, including any applicable taxes.
This Warrant Certificate is freely transferable provided that this
Warrant Certificate is subject to the investment representations and the
restrictions contained herein. Any Holder of this Warrant Certificate or Common
Shares issued upon exercise of this Warrant ("Restricted Securities") shall,
prior to any transfer or disposition or attempted transfer or disposition of
any such Restricted Securities, give written notice to the Corporation of such
Holder's intention to effect such transfer or disposition and shall deliver to
the Corporation an opinion of legal counsel, (reasonably suitable to the
Corporation) that the proposed transfer or disposition of the Restricted
Securities may be effected without registration thereof under the Securities
Act of 1933, as amended (the "1933 Act") and without taking any similar action
under any other applicable securities laws, in which case such Holder shall be
entitled to transfer or dispose of the Restricted Securities in accordance with
the terms of the notice delivered by such Holder to the Corporation; provided,
however, that such transfer shall be permitted only if, prior thereto, the
proposed transferee enters into an agreement with the Corporation restricting
the transfer of such Restricted Securities in accordance with, and agreeing to
assume the obligations under and receive the benefits of the terms of this
Warrant Certificate as "Holder", unless, in the opinion of both counsel for the
Holder and for the Corporation, such agreement is not necessary. Each
certificate evidencing the Restricted Securities so transferred or disposed of
(and each certificate evidencing any untransferred or non-disposed of
Restricted Securities) shall bear the appropriate restrictive legend set forth
herein unless in the opinion of both such counsel such legend is not required.
The Holder by his acceptance hereof represents and warrants to the
Corporation that he is acquiring this Warrant Certificate and the Common Shares
to be purchased by him hereunder for his own account and not with a view to the
distribution thereof within the meaning of the 1933 Act. Each such Holder
represents that he Understands that he must bear the economic risk of his
investment in the Corporation for an indefinite period of time because this
Warrant certificate and the Common Shares have not been registered under the
1933 Act and therefore cannot be offered for sale or sold unless they are
registered under the 1933 Act or an exemption from such registration is
available. The Warrant Certificate shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"THIS WARRANT CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS. THIS WARRANT
CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION. THE TRANSFER OF
THIS WARRANT CERTIFICATE IS ALSO SUBJECT TO THE
<PAGE> 3
CONDITIONS SPECIFIED HEREIN. NO TRANSFER OF THIS WARRANT CERTIFICATE
SHALL BE VALID OR EFFECTIVE UNTIL THE CONDITIONS OF THIS AGREEMENT
HAVE BEEN FULFILLED."
The Common Shares shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE
SECURITIES LAWS. THESE SHARES MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION."
Subject to the foregoing this Warrant Certificate may be transferred
upon compliance with the reasonable requirements and charges of the Warrant
Agent by completing and executing the appropriate form on the reverse side
hereof and delivering the Warrant Certificate to the Warrant Agent.
This Warrant Certificate confers on the Holder certain registration
rights. For complete information regarding such rights, the Holder should refer
to the Warrant Agreement.
The number of Common Shares subject to exercise upon presentment of
this Warrant Certificate and the exercise price thereof may be Subject to
adjustment and possible acceleration of expiration upon the happening of
certain events. The Holder should refer to the Warrant Agreement for
information concerning such adjustments.
Except as specifically set forth in the Warrant Agreement, nothing
contained in this Warrant Certificate or in the Warrant Agreement shall be
construed as conferring upon the Holder any right or interest whatsoever as a
holder of Common Shares or as any other shareholder of the Corporation.
This Warrant Certificate is valid only if countersigned by the Warrant
Agent.
IN WITNESS WHEREOF VERIDIEN CORPORATION has caused this Warrant
Certificate to be signed by its Chief Executive Officer.
VERIDIEN CORPORATION
By:
-----------------------------
Chief Executive Officer
Countersigned by:
AMERICAN STOCK TRANSFER AND TRUST COMPANY
as Warrant Agent
By:
--------------------------
<PAGE> 4
SUBSCRIPTION FORM
THE UNDERSIGNED HOLDER HEREBY SUBSCRIBES FOR _____________________ COMMON
SHARES of Veridien Corporation at $0.499 per share (or such number of Common
Shares or other securities or property to which such subscription entitles the
undersigned in lieu thereof or in addition thereto) on the terms set out in the
said Certificate and encloses herewith full payment of the subscription price.
The undersigned hereby irrevocably directs that the Common Shares be delivered,
subject to the conditions set out on the front of this certificate. The
undersigned hereby irrevocably directs that the said Common Shares be
registered as follows:
Name In Full Address Number of Common Shares
Total:
------------
Please print full name in which the certificates are to be issued. If any of
the Common Shares are to be issued to a person or persons other than the
Warrantholder, the Warrantholder must pay to the Warrant Agent all requisite
taxes or other governmental charges, if any.
Dated this day of , >
------ ----------------- --------
- --------------------------------- ------------------------------
Witness Signature of Warrantholder
TO TRANSFER WARRANT CERTIFICATES
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN -
as joint tenants with right of survivorship and not as tenants in common
UNIF GIFT MIN ACT - __________ Custodian _____________under Uniform Gifts
(Cust) (Minor)
to Minors Act of _______________ FOR VALUE RECEIVED ___________________________,
(State)
HEREBY SELL, ASSIGN AND TRANSFER UNTO
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT NAME AND ADDRESS OF TRANSFEREE)
SOCIAL SECURITY NUMBER OF TRANSFEREE __________________________________________
____________________________________________________________________ WARRANTS
represented by the within Certificate, and do hereby irrevocably constitute and
appoint ________________ ATTORNEY to transfer the said Warrants on the Books of
the within named Corporation, with full power of substitution in the premises.
Dated:
----------------------------- ----------------------------------
Signature
----------------------------------
Name
----------------------------------
Address
- ----------------------------------- ----------------------------------
Signature Guaranteed Social Security Number
The signature of the assignment must correspond with the name as written upon
the face of this certificate in every particular without alteration or
enlargement or any change whatsoever, and must be guaranteed by a Canadian
Chartered Bank or Canadian Trust Company, a U. S. National Bank, or a member
firm of the American, New York, Pacific, Midwest, or Toronto Stock Exchange.
ADDRESS OF THE WARRANT AGENT
<PAGE> 5
THIS WARRANT CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT") OR ANY STATE SECURITIES LAWS. THIS WARRANT CERTIFICATE MAY NOT
BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO ANY EXEMPTION
FROM SUCH REGISTRATION. THE TRANSFER OF THIS WARRANT CERTIFICATE IS ALSO
SUBJECT TO THE CONDITIONS SPECIFIED HEREIN. NO TRANSFER OF THIS WARRANT
CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL THE CONDITIONS HAVE BEEN
FULFILLED.
Void after 5:00 PM, Eastern Time on November 18, 2000.
Series 2
Warrant to Purchase 11,271,280
shares of Common Stock, Subject
to Adjustment as Herein provided
December 12, 1995
VERIDIEN CORPORATION
WARRANT TO PURCHASE COMMON STOCK
THIS WARRANT CERTIFICATE AS ISSUED PURSUANT TO THE TERMS OF AND IS GOVERNED BY
THAT CERTAIN WARRANT AGREEMENT ("WARRANT AGREEMENT") DATED AS OF OCTOBER 19,
1995, REGARDING WARRANTS TO PURCHASE COMMON STOCK OF VERIDIEN CORPORATION
SERIES 1, BY AND BETWEEN VERIDIEN CORPORATION AND AMERICAN STOCK TRANSFER AND
TRUST COMPANY. REFERENCE SHOULD BE MADE BY THE HOLDER FOR INFORMATION
CONCERNING TRANSFER, REGISTRATION RIGHTS, ADJUSTMENTS UPON THE HAPPENING OF
CERTAIN EVENTS AND FOR OTHER INFORMATION CONCERNING THE RIGHTS OF THE HOLDER OF
THIS WARRANT CERTIFICATE.
THIS IS TO CERTIFY THAT, for value received, DUNVEGAN MORTGAGE
CORPORATION (the "Holder") is entitled to purchase, at any time from October
19, 1995 to 5:00 PM EST on November 18, 2000, common shares ("Common Shares")
of Veridien Corporation (the "Corporation") equal to the number of warrants
specified above, at a price of $.001 per Common Share by surrendering this
Warrant Certificate to the Warrant Agent with a subscription form on the
reverse hereof property completed and executed and a check, bank draft, money
order, or other consideration as specified in the Warrant Agreement payable to
the Corporation for the total purchase price of the Common Shares so subscribed
for and purchased.
The Holder may subscribe for and purchase less than the number of
Common Shares entitled to be subscribed for and purchased on surrender of this
Warrant Certificate. If the subscription does not exhaust the Warrants
represented by this Warrant Certificate a Warrant Certificate representing the
unexercised Warrants will be issued to the Holder. No Warrant Certificates
representing fractional warrants will be issued.
American Stock Transfer and Trust Company, 40 Wall Street, 46th Floor,
New York, N.Y. 10005, attention: Kevin Jennings ("Warrant Agent") has been
appointed the Warrant Agent to receive subscriptions for Common Shares and
payments from Holders.
This Warrant Certificate, the subscription form and a check, bank
draft, or money order shall be deemed to be so surrendered only upon personal
delivery thereof or, if sent by post or
<PAGE> 6
other means of transmission, upon receipt thereof by the Warrant Agent at the
office specified above. The Corporation may also provide for other places at
which this Warrant Certificate may be surrendered for exchange or exercise.
Certificates representing Common Shares subscribed for and purchased
will be mailed to the persons specified in the subscription form at the
respective addresses specified therein or, if so specified in the subscription
form, delivered to such persons by the Warrant Agent where the applicable
Warrant Certificate was surrendered, when the transfer books of the Corporation
have been opened for five business days after the due surrender of such Warrant
Certificate and payment as aforesaid, including any applicable taxes.
This Warrant Certificate is freely transferable provided that this
Warrant Certificate is subject to the investment representations and the
restrictions contained herein. Any Holder of this Warrant Certificate or Common
Shares issued upon exercise of this Warrant ("Restricted Securities") shall,
prior to any transfer or disposition or attempted transfer or disposition of
any such Restricted Securities, give written notice to the Corporation of such
Holder's intention to effect such transfer or disposition and shall deliver to
the Corporation an opinion of legal counsel, (reasonably suitable to the
Corporation) that the proposed transfer or disposition of the Restricted
Securities may be effected without registration thereof under the Securities
Act of 1933, as amended (the "1933 Act"), and without taking any similar action
under any other applicable securities laws, in which case such Holder shall be
entitled to transfer or dispose of the Restricted Securities in accordance with
the terms of the notice delivered by such Holder to the Corporation; provided,
however, that such transfer shall be permitted only if, prior thereto, the
proposed transferee enters into an agreement with the Corporation restricting
the transfer of such Restricted Securities in accordance with, and agreeing to
assume the obligations under and receive the benefits of the terms of this
Warrant Certificate as "Holder", unless, in the opinion of both counsel for the
Holder and for the Corporation, such agreement is not necessary. Each
certificate evidencing the Restricted Securities so transferred or disposed of
(and each certificate evidencing any untransferred or non-disposed of
Restricted Securities) shall bear the appropriate restrictive legend set forth
herein unless in the opinion of both such counsel such legend is not required.
The Holder by his acceptance hereof represents and warrants to the
Corporation that he is acquiring this Warrant Certificate and the Common Shares
to be purchased by him hereunder for his own account and not with a view to the
distribution thereof within the meaning of the 1933 Act. Each such Holder
represents that he understands that he must bear the economic risk of his
investment in the Corporation for an indefinite period of time because this
Warrant certificate and the Common Shares have not been registered under the
1933 Act and therefore cannot be offered for sale or sold unless they are
registered under the 1933 Act or an exemption from such registration is
available. The Warrant Certificate shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"THIS WARRANT CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS. THIS WARRANT
CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION. THE TRANSFER OF
THIS WARRANT CERTIFICATE IS ALSO SUBJECT TO THE CONDITIONS SPECIFIED
HEREIN. NO TRANSFER OF THIS WARRANT CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNTIL THE CONDITIONS OF THIS AGREEMENT HAVE BEEN FULFILLED."
The Common Shares shall be stamped or otherwise imprinted with a legend in
substantially the following form:
<PAGE> 7
"THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE
SECURITIES LAWS. THESE SHARES MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION."
Subject to the foregoing this Warrant Certificate may be transferred
upon compliance with the reasonable requirements and charges of the Warrant
Agent by completing and executing the appropriate form on the reverse side
hereof and delivering the Warrant Certificate to the Warrant Agent.
This Warrant Certificate confers on the Holder certain registration
rights. For complete information regarding such rights, the Holder should refer
to the Warrant Agreement.
The number of Common Shares subject to exercise upon presentment of
this Warrant Certificate and the exercise price thereof may be Subject to
adjustment and possible acceleration of expiration upon the happening of
certain events. The Holder should refer to the Warrant Agreement for
information concerning such adjustments.
Except as specifically set forth in the Warrant Agreement nothing
contained in this Warrant Certificate or in the Warrant Agreement shall be
construed as conferring upon the Holder any right or interest whatsoever as a
holder of Common Shares or as any other shareholder of the Corporation.
This Warrant Certificate is valid only if countersigned by the Warrant
Agent.
IN WITNESS WHEREOF VERIDIEN CORPORATION has caused this Warrant
Certificate to be signed by its Chief Executive Officer.
VERIDIEN CORPORATION
By:
-------------------------------
Chief Executive Officer
Countersigned by:
AMERICAN STOCK TRANSFER AND TRUST COMPANY
as Warrant Agent
By:
----------------------------------
<PAGE> 8
SUBSCRIPTION FORM
THE UNDERSIGNED HOLDER HEREBY SUBSCRIBES FOR ________________________ COMMON
SHARES of Veridien Corporation at $0.001 per share (or such number of Common
Shares or other securities or property to which such subscription entitles the
undersigned in lieu thereof or in addition thereto) on the terms set out in the
said Certificate and encloses herewith full payment of the subscription price.
The undersigned hereby irrevocably directs that the Common Shares be delivered,
subject to the conditions set out on the front of this certificate. The
undersigned hereby irrevocably directs that the said Common Shares be
registered as follows:
Name In Full Address Number of Common Shares
Total:
---------------
Please print full name in which the certificates are to be issued. If any of
the Common Shares are to be issued to a person or persons other than the
Warrantholder, the Warrantholder must pay to the Warrant Agent all requisite
taxes or other governmental charges, if any.
Dated this ______ day of _____________, __________ >
- --------------------------------- ----------------------------------
Witness Signature of Warrantholder
TO TRANSFER WARRANT CERTIFICATES
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN -
as joint tenants with right of survivorship and not as tenants in common
UNIF GIFT MIN ACT - ___________ Custodian _____________ under Uniform Gifts to
(Cust) (Minor)
Minors Act of _____________ FOR VALUE RECEIVED ____________________, HEREBY
(State)
SELL, ASSIGN AND TRANSFER UNTO
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT NAME AND ADDRESS OF TRANSFEREE)
SOCIAL SECURITY NUMBER OF TRANSFEREE __________________________________________
____________________________________________________________________ WARRANTS
represented by the within Certificate, and do hereby irrevocably constitute and
appoint _______________ ATTORNEY to transfer the said Warrants on the Books of
the within named Corporation, with full power of substitution in the premises.
Dated:
---------------------------- ----------------------------------
Signature
----------------------------------
Name
----------------------------------
Address
- ---------------------------------- ----------------------------------
Signature Guaranteed Social Security Number
The signature of the assignment must correspond with the name as written upon
the face of this certificate in every particular without alteration or
enlargement or any change whatsoever, and must be guaranteed by a Canadian
Chartered Bank or Canadian Trust Company, a U. S. National Bank, or a member
firm of the American, New York, Pacific, Midwest, or Toronto Stock Exchange.
ADDRESS OF THE WARRANT AGENT
<PAGE> 1
EXHIBIT 4.8
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE
STATE SECURITIES LAW, AND NEITHER MAY BE SOLD OR OTHERWISE TRANSFERRED UNTIL
(I)A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE STATE
SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) THE
COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
VERIDIEN CORPORATION
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, the holder of this Warrant or
its registered assigns (collectively referreed to as the "Holder"), is
entitled, subject to the terms and conditions hereinafter set forth, to
purchase from Veridien Corporation, a Delaware corporation, (the "Company")
370,370 shares of Common Stock, $.001 par value per share, (the "Common Stock")
at a cost per share of $0.1350 (the "Warrant Price").
Upon delivery of this Warrant and a notice of exercise duly executed,
together with payment by cashier's check or cleared bank funds, of the Warrant
Price for each share of Common Stock thereby purchased at the principal office
of the Company or at such other address as the Company may designate by notice
in writing to the registered holder hereof, the Holder shall be entitled to
receive a certificate or certificates for the shares of Common Stock so
purchased. All shares of Common Stock issued upon the exercise of this Warrant
will, upon issuance, be fully paid and non-assessable and free from all taxes,
liens, and charges imposed by the Company with respect thereto and subject to
any restrictions imposed by the Securities Act of 1933 or applicable state
securities law
This Warrant is subject to the following terms and conditions:
1. Exercise of Warrant. This Warrant may be exercised in whole
or in part during the period commencing June 10, 1998 and expiring June 10,
2003. In case of any partial exercise of this Warrant, the Company shall
execute and deliver a new Warrant of like tenor and date for the balance of the
shares of Common Stock purchasable hereunder.
2. Adjustment of Warrant Price and Number of Shares Purchasable
Hereunder. The Warrant Price and the number of shares purchasable hereunder
shall be subject to adjustment from time to time in accordance with the
following provisions:
(a) If the Company shall at any time subdivide, by means of a
forward stock split, stock dividend or otherwise the outstanding shares of its
Common Stock, then upon subdivision the Warrant Price in effect immediately
prior thereto shall be proportionately decreased, and upon combination or
consolidation, by means of a reverse stock split or otherwise, the Warrant
Price in effect immediately prior to such combination or consolidation shall be
proportionately increased, effective from and after the record date of such
subdivision or combination or consolidation, as the case may be (the "Adjusted
Warrant Price").
<PAGE> 2
2
Upon any adjustment in the Warrant Price per share pursuant to this
subparagraph (a), the registered holder of this Warrant shall thereafter be
entitled to purchase, at the Adjusted Warrant Price, the number of shares of
Common Stock, calculated to the nearest full share obtained by multiplying the
number of shares of Common Stock purchasable hereunder immediately prior to
such adjustment by the Warrant Price in effect immediately prior to such
adjustment, and then dividing the product thereof by the Adjusted Warrant
Price.
(b) In the event of the issuance of additional shares of Common
Stock of the Company as a dividend on the Common Stock, from and after the day
which is the record day for the determination of stockholders entitled to such
dividend, the registered holder of this Warrant shall (until another
adjustment) be entitled to purchase the number of shares of Common Stock,
calculated to the nearest full share, obtained by multiplying the number of
shares of Common Stock purchasable hereunder immediately prior to said record
date by the percentage which the number of shares constituting any such
dividend is of the total number of shares of Common Stock outstanding
immediately prior to said record date plus the number of shares of Common Stock
issuable upon conversion of the outstanding convertible securities or upon
exercise of any outstanding convertible securities or upon exercise of any
outstanding warrants, options, or rights (including those with respect to
convertible securities) and adding the result so obtained to the number of
shares of Common Stock purchasable hereunder immediately prior to said record
date.
(c) If at any time while this Debenture is outstanding there
shall be any reorganization or reclassification of the Common Stock of the
Company (other than a subdivision, combination or consolidation of shares
provided for in subparagraph (a) above), or any consolidation or merger of the
Company with another corporation, the Holder shall thereafter be entitled to
receive, during the term hereof and upon timely exercise of the Holder's
conversion rights hereunder, the number of shares of Common Stock or other
securities or property of the Company or of the successor corporation resulting
from such consolidation or merger, as the case may be, to which a holder of the
Common Stock of the Company, would have been entitled upon such reorganization,
reclassification, consolidation, or merger if this Warrant had been exercised
immediately prior to such reorganization, reclassification, consolidation, or
merger; and in any case appropriate adjustment (as determined by agreement of
the Holder and the Board of Directors of the Company) shall be made in the
application of the provisions herein set forth with respect to the rights and
interest thereafter of the Holder to the end that the provisions set forth
herein (including the adjustment of the Warrant Price and the number of shares
issuable upon the conversion of this Warrant) shall thereafter be applicable ,
as near as reasonably may be, in relation to any shares or other property
thereafter deliverable upon the conversion thereof.
(d) Upon any adjustment of the Warrant Price and any increase or
decrease in the number of shares of Common Stock purchasable upon the exercise
of this Warrant, then, and in each such case, the Company, within thirty days
after the Holder's request, shall give written notice thereof to the Holder at
the address of Holder as shown on the books of the Company, which notice shall
state the Warrant Price as adjusted, setting forth in reasonable detail the
method of calculation of each.
3. Reorganization, Reclassification, Consolidation, or Merger.
If at any time while this Warrant is outstanding there shall be any
reorganization or reclassification of the Common Stock of the Company (other
than a subdivision or combination of shares provided for in paragraph 2 above),
or any consolidation or merger of the Company with another corporation, the
<PAGE> 3
3
holder of this Warrant shall thereafter be entitled to receive, during the term
hereof and upon payment of the Warrant Price, the number of shares of Common
Stock or other securities or property of the Company or of the successor
corporation resulting from such consolidation or merger, as the case may be, to
which a holder of the Common Stock of the Company, deliverable upon the
exercise of this Warrant, would have been entitled upon such reorganization,
reclassification, consolidation, or merger if this Warrant had been exercised
immediately prior to such reorganization, reclassification, consolidation, or
merger; and in any case appropriate adjustment (as determined by agreement of
the registered holder and the Board of Directors of the Company) shall be made
in the application of the provisions herein set forth with respect to the
rights and interest thereafter of the holder of this Warrant so that the
provisions set forth herein (including the adjustment of the Warrant Price and
the number of shares issuable upon the exercise of this Warrant) shall
thereafter be applicable , as near as reasonably may be, in relation to any
shares or other property thereafter deliverable upon the exercise thereof.
4. Notice of Adjustments. Upon any adjustment of the Warrant
Price and any increase or decrease in the number of shares of Common Stock
purchasable upon the exercise of this Warrant, then, and in each such case, the
Company, within thirty days after a holder's request, shall give written notice
thereof to the registered holder of this Warrant at the address of such holder
as shown on the books of the Company, which notice shall state the Warrant
Price as adjusted and the increased or decreased number of shares purchasable
upon the exercise of this Warrant, setting forth in reasonable detail the
method of calculation of each.
5. Charges, Taxes and Expenses. The issuance of certificates for
shares of Common Stock upon any exercise of this Warrant shall be made without
charge to the Holder for any stock transfer, tax or other expense imposed by
the Company or its transfer agent in respect to the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of, or in such name or names as
may be directed by, the holder of this Warrant; provided, however, that in the
event that certificates for shares of Common Stock are to be issued in a name
other than the name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by an instrument of transfer in form satisfactory to the
Company, duly executed by the holder hereof in person or by an attorney duly
authorized in writing, and the holder shall pay all stock transfer taxes
payable upon issuance of such stock certificate.
6. Certain Obligations of the Company.The Company agrees that it
will not increase the par value of the shares of any Common Stock which are at
the time issuable upon exercise of this Warrant above the then prevailing
Warrant Price hereunder and that, before taking any action which would cause an
adjustment reducing the Warrant Price hereunder below the then par value, if
any, of the shares of any Common Stock issuable upon the exercise hereof, the
Company will take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and non-assessable shares of Common Stock at the Warrant Price as so
adjusted.
<PAGE> 4
4
7. Miscellaneous.
(a) The Company covenants that it will at all times reserve and
keep available, solely for the purpose of issue upon the exercise hereof, a
sufficient number of shares of Common Stock to permit the exercise hereof in
full.
(b) The terms of this Warrant shall be binding upon and shall
insure to the benefit of any successors or assigns of the Company and of the
Holder or its assigns.
(c) Except as otherwise provided herein, this Warrant and all
rights hereunder are transferable by the Holder in person or by duly authorized
attorney on the books of the Company.
(d) Notwithstanding any provision herein to the contrary, the
Holder may not sell, transfer, or otherwise assign this Warrant or the shares
of Common Stock issuable upon exercise hereof without the consent of the
Company, which consent may not be unreasonably withheld and which consent shall
not be withheld in any event if the Company is provided with an opinion of
counsel, satisfactory in form and substance to the Company, to the effect that
such sale, transfer, or assignment does not violate the Securities Act of 1933
or applicable state securities law.
To the extent that the Holder of the Warrants is an affiliate of the
Company, as such term is defined in Rule 501(b) or as such rule or any
amendment thereto is promulgated by the United States Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended, then the holder
of the Warrants or the shares of Common Stock issuable upon exercise thereof
shall agree to restrict the transferability of the Warrants and/or shares
flowing therefrom for a period not to exceed 12 months, if a request is made by
the Company that results from a request made by an underwriter of the Company
carrying out any public offering of the Company's Common Stock on behalf of the
Company.
This Warrant shall be interpreted in accordance with the laws of the
State of Florida. No provision of this Debenture shall be affected by the
invalidity of any other provision or provisions contained herein.
Time shall be of the essence of this Warrant and every part hereof.
This Warrant shall be binding upon the Company and its successors and
assigns and shall enure to the benefit of the Holder and its successors and
assigns.
Subsequent to execution of this Warrant, each party hereto shall take
such further action and execute and deliver such further documentation as may
be reasonably required to implement the purposes of this Debenture.
<PAGE> 5
5
IN WITNESS THEREOF, the Company has caused this Warrant to be signed
by its duly authorized officers and its corporate seal to be affixed hereto.
Date June 10, 1998 Veridien Corporation
By:
--------------------------------
Andrew T. Libby, Jr.
Chief Operating Officer
<PAGE> 1
EXHIBIT 10.1
FIFTH ADDENDUM TO LEASE
THIS FIFTH ADDENDUM TO LEASE is entered into as of this 26th Day of
June, 1997 by and between WESTERN HEMISPHERE SALES, INC., as Lessor, and
VERIDIEN CORPORATION, as Lessee.
RECITALS
WHEREAS, Lessor and Lessee have entered into a Lease Agreement (the
"Lease") dated June 19, 1992, relating to that certain office / warehouse space,
located at 11800 28th Street North, St. Petersburg, Florida (the "Leased
Premises"), and
WHEREAS, On September 2, 1993, Lessor and Lessee entered into that
certain Addendum to Lease, as amended; and
WHEREAS, on July 1, 1994, Lessor and Lessee entered into that certain
Second Addendum to Lease, as amended; and
WHEREAS, on August 1, 1995, Lessor and Lessee entered into that certain
Third Addendum to Lease, as amended; and
WHEREAS, on September 1, 1996, Lessor and Lessee entered into that
certain Fourth Addendum to Lease, as amended; and
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration the adequacy and receipt of which are acknowledged by
the parties hereto, Lessor and Lessee agree, notwithstanding anything in the
Lease, First, Second, Third or Fourth Addenda to the contrary, that the Lease is
further amended as follows:
I. The Lessor and Lessee agree to incorporate the following language as if
fully set forth in the Lease:
A. Leased Premises. The leased premises currently consist of 37,800
square feet of that certain building known as 11800 28th Street North, St.
Petersburg, Florida. Effective June 1, 1997, the leased premises shall be
expanded to include an additional 700 rentable square feet being otherwise
described on Exhibit "A" attached to this Fifth Addendum to Lease and
incorporated herein (the Additional Expansion space) so that the total rentable
square footage of the Leased Premises shall be 38,500.
B. Rent. The gross monthly base rent set forth in Schedule C "Option to
Renew" of the Third Addendum to Lease is hereby replaced by the following lease
payment schedule, plus sales and use tax, effective as of June 1, 1997, and on
the first day of each successive month thereafter. Lessee shall pay as monthly
rent, PLUS current year applicable sales and use tax, estimated building
insurance, real estate taxes, and common area maintenance fees for the new total
demised premises of 38,500 rentable square feet as follows:
<PAGE> 2
FIRST OPTION PERIOD: JUNE 1, 1997 THROUGH MAY 31, 2002
<TABLE>
<S> <C>
OPTION YEAR 1: Beginning June 1, 1997
Monthly Rent: $ 13,411.00
Estimated Building Insurance: $ 1,177.00
Estimated Real Estate Taxes: $ 2,029.00
Estimated C.A.M. Fees: $ 960.00
-------------
TOTAL MONTHLY RENT (EXCLUSIVE $ 17,577.00
OF SALES/USE TAX)
OPTION YEAR 2: Beginning June 1, 1998
Monthly Rent: $ 13,813.00
Estimated Building Insurance: $ 1,177.00
Estimated Real Estate Taxes: $ 2,029.00
Estimated C.A.M. Fees: $ 960.00
-------------
TOTAL MONTHLY RENT (EXCLUSIVE $ 17,979.00
OF SALES/USE TAX)
OPTION YEAR 3: Beginning June 1, 1999
Monthly Rent: $ 14,227.00
Estimated Building Insurance: $ 1,177.00
Estimated Real Estate Taxes: $ 2,029.00
Estimated C.A.M. Fees: $ 960.00
-------------
TOTAL MONTHLY RENT (EXCLUSIVE $ 18,393.00
OF SALES/USE TAX)
OPTION YEAR 4: Beginning June 1, 2000
Monthly Rent: $ 14,654.00
Estimated Building Insurance: $ 1,177.00
Estimated Real Estate Taxes: $ 2,029.00
Estimated C.A.M. Fees: $ 960.00
-------------
TOTAL MONTHLY RENT (EXCLUSIVE $ 18,820.00
OF SALES/USE TAX)
OPTION YEAR 5: Beginning June 1, 2001
Monthly Rent: $ 15,094.00
Estimated Building Insurance: $ 1,177.00
Estimated Real Estate Taxes: $ 2,029.00
Estimated C.A.M. Fees: $ 960.00
-------------
TOTAL MONTHLY RENT (EXCLUSIVE $ 19,260.00
OF SALES/USE TAX)
</TABLE>
SECOND OPTION PERIOD: JUNE 1, 2002 THROUGH MAY 31, 2007
Monthly rent will be negotiated between Lessee and Lessor in good faith
and agreed to prior to commencement of Second Option Period.
<PAGE> 3
C. The First sentence of Paragraph 7 of the Lease is hereby amended to
read as follows: "As additional rent hereunder, Lessee shall pay to Lessor,
monthly in advance, commencing June 1, 1997, its newly adjusted prorata share of
the leased premises of One Hundred percent (100%) of the building insurance,
real estate taxes, common area maintenance as noted in Paragraphs 4, 5, and 6 of
this Lease".
Except as provided herein, all other terms and conditions of the Lease
shall remain in full force and effect. In the event of a conflict between this
Addendum and the Lease, provisions of this Addendum shall govern.
Each of the signatories to this Fifth Addendum represent and warrant
that he / she all requisite authority to sign on behalf of, and legally bind,
the corporate entity for which he / she is signing.
IN WITNESS WHEREOF, the parties have executed this Fifth Addendum as of
the date above written.
WITNESSES: VERIDIEN CORPORATION
By:
- ----------------------------------- -------------------------------
Print Name Print Name
------------------------- ------------------------
- -----------------------------------
Print Name
------------------------- "LESSEE"
WESTERN HEMISPHERE SALES, INC.
By:
- ----------------------------------- -------------------------------
Print Name Richard M. Speer, President
-------------------------
- -----------------------------------
Print Name "LESSOR"
-------------------------
<PAGE> 4
FOURTH ADDENDUM TO LEASE
THIS FOURTH ADDENDUM TO LEASE is entered into as of this ______ day of
__________, 1996 by and between WESTERN HEMISPHERE SALES, INC., as Lessor, and
VERIDIEN CORPORATION, as Lessee.
WHEREAS, Lessor and Lessee have entered into a Lease Agreement (the
"Lease") June 19, 1992, relating to that certain rentable space of approximately
37,800 square feet, located at 11800 28th Street North, St. Petersburg, Florida
(the "Leased Premises"), and
NOW, THEREFORE, the parties hereby agree that the Lease shall be
amended as follows:
The Lessee and Lessor agree to the modification of Paragraph III of the
Third Addendum to Lease as follows:
Repayment of Delinquent Rent Through July 31, 1995. Lessee and Lessor
acknowledge that the Lessee remains in arrears for past-due rent in the amount
of Eighty-Nine Thousand Three Hundred Nine and 45/100 Dollars ($89,309.45)
through September 1, 1996 ("Delinquent Rent"). Lessee agrees to repay the
Delinquent Rent Pursuant to that certain second Renewal Promissory Note dated
August 31, 1996 (copy attached hereto) and per the following payment schedule:
<TABLE>
<CAPTION>
DUE DATE AMOUNT DUE DATE AMOUNT
- -------- ------ -------- ------
<S> <C> <C> <C>
September 1, 1996 $ 1,000.00 March 1, 1997 $ 5,000.00
October 1, 1996 $ 2,000.00 April 1, 1997 $ 5,000.00
November 1, 1996 $ 3,000.00 May 1, 1997 $ 5,000.00
December 1, 1996 $ 3,000.00 June 1, 1997 $ 5,000.00
January 1, 1997 $ 3,000.00 July 1, 1997 $ 5,000.00
February 1, 1997 $ 3,000.00 August 1, 1997 $ 6,000.00
September 1, 1997 Remaining Balance
</TABLE>
The payments stated above exceeding the Delinquent Rent shall be
applied in payment of the Second Renewal Promissory Note dated August 31, 1996,
first to accrued unpaid interest and then to outstanding principal.
Should Lessee be in default of any provision of its Lease, as defined
in Paragraph 17 of the Lease, Lessor reserves the right to declare the entire
remaining balance of the Delinquent Rent immediately due and payable in full.
Except as provided herein, all other terms and conditions of the Lease
and Addenda shall remain in full force and effect. In the event of a conflict
between this Addendum and the Lease, provisions of this Addendum shall govern.
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Fourth Addendum as
of the date above written.
WITNESSES: VERIDIEN CORPORATION
By:
- ----------------------------------- -------------------------------
(Print):
- ----------------------------------- ---------------------------
"LESSEE"
WESTERN HEMISPHERE SALES, INC.
By:
- ----------------------------------- -------------------------------
Richard M. Speer
- -----------------------------------
"LESSOR"
<PAGE> 6
THIRD ADDENDUM TO LEASE
THIS THIRD ADDENDUM TO LEASE (the "Third Addendum") is entered into as
of the 1st day of August, 1995, by and between WESTERN HEMISPHERE SALES, INC.
d/b/a PIONEER DATA PROCESSING, INC., as Lessor, and VERIDIEN CORPORATION, as
Lessee.
RECITALS
WHEREAS, Lessor and Lessee entered into that certain Industrial Park
Lease (the "Lease") dated June 19, 1992, relating to that certain rentable space
of approximately 37,800 square feet located at 11800 - 28th Street North, St.
Petersburg, Florida (the "Leased Premises"); and
WHEREAS, Lessor and Lessee amended the Lease by those certain Addenda
dated September 2, 1993 (the "First Addendum") and July 1, 1994 (the "Second
Addendum"), respectively; and
WHEREAS, Lessor and Lessee have agreed to waive any existing defaults
as between them under the Lease, and to further amend the Lease, and by this
Third Addendum desire to memorialize in writing the terms and conditions of said
further amendment;
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration the adequacy and receipt of which are acknowledged by
the parties hereto, Lessor and Lessee agree, notwithstanding anything in the
Lease, First Addendum or Second Addendum to the contrary, that the Lease is
further amended as follows:
I. The Lessor and Lessee agree to incorporate the following language as if
fully set forth in the Lease:
Option to Terminate Lease Agreement: Should Lessee exercise its Option
to Renew the Lease per Paragraph 4 of the Second Addendum, and as further
provided in this Third Addendum, the Lessee shall be deemed to have and reserve
the continuing option to terminate the Lease, as renewed, without penalty,
effective upon the anniversary date of each Lease year, provided the Lessor
receives not less than nine (9) months' written notice (i.e., notice of
termination shall be given within days 1 - 90 of the applicable Lease year)
prior to the effective Lease termination date. For purposes of clarification,
the outline attached as Schedule A is considered as the Lease termination
time-line.
II. Paragraph 30(a) of the Lease is deleted in its entirety, and the
following substituted in its place:
Option to Purchase: During the remaining term of this Lease and any
renewal term of this Lease, Provided Lessee is not then in default per Paragraph
17 of the Lease (subject to applicable notice of default and curative periods in
favor of Lessee), Lessee shall have the option to purchase the land and building
*It is understood by all parties that the Purchase Price shall NOT be less than
One Million Six Hundred Fifty Thousand Dollars ($1,650,000.00).
upon and within which the Leased Premises are situated (along with all fixtures
and chattels, and Lessor's right, title and interest in and to any leases of any
portion of the land and building) for the aggregate purchase price of: (a) One
Million Six Hundred Fifty Thousand and No/100 Dollars ($1,650,000.00), provided
the option is exercised on or before July 31, 1998; or (b) "fair market value"
at the time of exercise of the option, if the option is exercised after July 31,
1998. As to (b) above, if the parties cannot agree on said "fair market value",
the issue will be submitted to, and decided by, binding arbitration. This
<PAGE> 7
option shall be exercised by Lessee delivering to Lessor an earnest money
deposit in the amount of ten percent (10%) of the said purchase price along with
Lessee's written notice of intention to exercise Lessee's purchase option.
Lessor and Lessee agree that the closing of such sale shall take place within
sixty (60) days after Lessor's receipt of Lessee's written notice of the
exercise of said option. Conveyance of the property purchased shall be by
Warranty Deed and Bill of Sale with general warranties of title. Expenses of
closing and income and expenses associated with the property shall be pro-rated
and apportioned in accordance with local custom and practice.
III. The Lessee and Lessor agree to the inclusion of the following
Paragraph:
Repayment of Delinquent Rent Through July 31, 1995: Lessee and Lessor
acknowledge that Lessee is in arrears for certain rent and other charges payable
under the Lease in the aggregate amount of One Hundred Twenty Seven Thousand
Three Hundred Nine and 45/100 Dollars ($127,309.45) through July 31, 1995 (the
"Delinquent Rent"). Lessee agrees to repay the Delinquent Rent, with interest
accrued thereon at the rate of ten percent (10%) per annum from the date of this
Third Addendum until paid, pursuant to: (a) that certain Renewal Promissory Note
from Lessee to Lessor of even date herewith in the Principal amount of Seventy
Four Thousand Seven Hundred Three and 00/100 Dollars ($74,703.00); and (b)
remainder according to the following schedule:
<TABLE>
<CAPTION>
DUE DATE AMOUNT DUE DATE AMOUNT
- -------- ------ -------- ------
<S> <C> <C> <C>
October 1, 1995 $2,000.00 April 1, 1996 $5,000.00
November 1, 1995 $2,000.00 May 1, 1996 $5,000.00
December 1, 1995 $2,000.00 June 1, 1996 $5,000.00
January 1, 1996 $2,000.00 July 1, 1996 $5,000.00
February 1, 1996 $2,000.00 August 1, 1996 $5,000.00
March 1, 1996 $2,000.00 September 1, 1996 Remaining Balance.
</TABLE>
Should Lessee default under the Lease as defined in Paragraph 17 of the Lease,
Lessor reserves the right to declare the entire remaining balance of the
Delinquent Rent immediately due and payable in full. Any payments received by
Lessor relative to the Delinquent Rent shall be applied first to outstanding
interest and principal (in that order) under (b) above, the remainder of any
such payments to be applied in payment of the Renewal Promissory Note, first to
accrued unpaid interest and then to outstanding principal.
IV. Paragraph 2 of the Lease and Paragraph 4 of the Second Amendment are
deleted in their entirety, and the following substituted in their place:
Option to Renew: In the event the Lessee shall perform all of the
covenants of this Lease, including the prompt payment of the Delinquent Rent,
the Lessee shall have separate options to renew the Lease for two (2) additional
successive terms of five (5) years each, each successive renewal term upon the
same terms and conditions set forth in the Lease, as amended (and each subject
to the termination option described in this Third Addendum); provided, however,
that rental payments during said renewal terms shall be payable as more fully
set forth in Schedule C attached hereto and by reference made a part hereof.
Lessee shall be deemed to have automatically renewed this Lease unless Lessee
provides Lessor with written notice of its intention not to renew at least one
hundred fifty (150) days prior to the termination of the then existing original
or renewal term.
V. Paragraph 6 of the Second Addendum is deleted in its entirety, and the
following is substituted in its place:
<PAGE> 8
The Lessee's option to renew the Lease as provided herein, if exercised, shall
renew the Lease from the Lease expiration date of May 31, 1997 (or the
expiration of the first successive renewal term, as the case may be), and shall
apply to the entire Leased Premises including the Expansion Space. The first
renewal term shall commence June 1, 1997 and terminate May 31, 2002, and the
second renewal term shall commence June 1, 2002 and terminate May 31, 2007
(subject to the termination option as described in this Third Addendum).
VI. The Recitals contained hereinabove constitute a part of the matters
agreed to herein.
VII. Except as expressly provided herein, all other terms and conditions of
the Lease, as amended, shall remain in full force and effect. In the event of a
conflict between this Third Addendum and the Lease, the provisions of this Third
Addendum shall in all instances govern and control.
VIII. Each of the signatories to this Third Addendum represents and warrants
that he/she has all requisite authority to sign on behalf of, and legally bind,
the corporate entity for which he/she is signing.
IX. It shall be an express condition precedent to Lessee's obligations
hereunder and under the Renewal Promissory Note that Lessor shall promptly
dismiss with prejudice any pending lawsuit(s) to evict Lessee from the Premises
or otherwise for the collection of the Delinquent Rent or payment of any other
charge under the Lease, or to enforce the performance of any other obligation of
Lessee under the Lease; it being acknowledged by Lessor and Lessee that this
Third Addendum constitutes full settlement as between the parties as to the
subject matter of any such lawsuit(s), without admission of liability by either
party except as expressly set forth in the Lease. as amended, relative to the
Delinquent Rent or otherwise.
IN WITNESS WHEREOF, the parties have executed this Third Addendum as of
the date above written.
LESSEE
WITNESSES: VERIDIEN CORPORATION
By:
- ----------------------------------- -------------------------------
Print Name: Name:
------------------------------
Its:
- ----------------------------------- ------------------------------
Print Name:
LESSOR
PIONEER DATA PROCESSING
By:
- ----------------------------------- -------------------------------
Print Name: Name:
-----------------------------
- ----------------------------------- Its:
Print Name: ------------------------------
<PAGE> 9
RENEWAL
PROMISSORY NOTE
$74,703.00 St. Petersburg, Florida
August 1, 1995
FOR VALUE RECEIVED, the undersigned Veridien Corporation, a Delaware
corporation ("Maker"), promises to pay to the order of Western Hemisphere, Inc.,
a Florida corporation "Payee"), the sum of Seventy-Four Thousand Seven Hundred
Three and No/100 Dollars ($74,703.00), with interest at a rate of ten percent
(10%) per annum from the date of this Note. The Maker shall pay at the offices
of the Payee the outstanding principal balance of the Note, and all accrued
unpaid interest thereon at the aforesaid rate, in full on the maturity date
which shall be September 1, 1996.
The Maker does hereby reserve, and shall have, the privilege of
prepaying this Note, at any time, in whole or in part, with accrued interest on
the amount prepaid, but without premium or penalty.
The Maker does hereby waive notice of acceptance of this Note, notice
of the occurrence of any default under this Note or under any instrument
securing this Note and presentment, demand, notice of maturity, protest, notice
of dishonor, notice of nonpayment and notice of protest and all requirements
necessary to hold the Maker liable as a maker of this Note. In the event it
shall be necessary for the Payee to engage an attorney or bring suit for
collection of this Note, the Payee shall be entitled to recover reasonable
attorney's fees and costs, whether or not suit shall be brought, including fees
and costs on appeal, in addition to the sums due and to become due hereunder.
This Renewal Promissory Note is in renewal of that certain Promissory
Note and Security Agreement from Maker to Payee in the same principal amount,
dated January 21, 1995, the original of which Note is attached hereto. Payee
acknowledges by its acceptance of this Renewal Promissory Note that interest
accrued under the Promissory Note and Security Agreement renewed hereby is
forgiven in total and shall not be deemed payable in whole or in part by Maker.
No additional principal has been advanced under this Renewal Promissory Note.
VERIDIEN CORPORATION
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
<PAGE> 10
SCHEDULE "C"
OPTION TO RENEW
FIRST OPTION PERIOD: June 1, 1997 - May 31, 2002
<TABLE>
<S> <C>
OPTION YEAR 1:
Monthly Rent: $ 13,180.00
Estimated Building Insurance: 425.00
Estimated Real Estate Taxes: 2,500.00
Estimated C.A.M. Fees: 425.00
-------------
TOTAL MONTHLY RENT (EXCLUSIVE $ 16,530.00
OF SALES/USE TAX)
OPTION YEAR 2:
Monthly Rent: $ 13,570.00
Estimated Building Insurance: 425.00
Estimated Real Estate Taxes: 3,000.00
Estimated C.A.M. Fees: 425.00
-------------
TOTAL MONTHLY RENT (EXCLUSIVE $ 17,420.00
OF SALES/USE TAX)
OPTION YEAR 3:
Monthly Rent: $ 13,985.00
Estimated Building Insurance: 425.00
Estimated Real Estate Taxes: 3,000.00
Estimated C.A.M. Fees: 425.00
-------------
TOTAL MONTHLY RENT (EXCLUSIVE $ 17,835.00
OF SALES/USE TAX)
OPTION YEAR 4:
Monthly Rent: $ 14,405.00
Estimated Building Insurance: 425.00
Estimated Real Estate Taxes: 3,500.00
Estimated C.A.M. Fees: 425.00
-------------
TOTAL MONTHLY RENT (EXCLUSIVE $ 18,755.00
OF SALES/USE TAX)
OPTION YEAR 5:
Monthly Rent: $ 14,835.00
Estimated Building Insurance: 425.00
Estimated Real Estate Taxes: 3,500.00
Estimated C.A.M. Fees: 425.00
-------------
TOTAL MONTHLY RENT (EXCLUSIVE $ 19,185.00
OF SALES/USE TAX)
</TABLE>
SECOND OPTION PERIOD: June 1, 2002 - May 31, 2007.
Monthly Rent will be negotiated between Lessee and Lessor in good faith
and agreed to prior to commencement of Second Option Period; should an
agreement not be reached Tenants possession of the Premises shall not
be disturbed, and the dispute will be resolved by arbitration. Each
party shall be responsible for their costs.
<PAGE> 11
SCHEDULE A
LEGEND: T - TERMINATED
<TABLE>
<CAPTION>
LEASE LEASE LEASE LEASE LEASE LEASE LEASE LEASE
YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 YEAR 11 YEAR 12 YEAR 13
NOTIFICATION JUNE 1/97 JUNE 1/98 JUNE 1/99 JUNE 1/2000 JUNE 1/2001 JUNE 1/2002 JUNE 1/2003 JUNE 1/2004
TIME PERIOD MAY 31/98 MAY 31/99 MAY 31/2000 MAY 31/2001 MAY 31/2002 MAY 31/2003 MAY 31/2004 MAY 31/2005
- ----------- --------- --------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
June 1 thru N/A T T T T T T T
August 31, 1997
June 1 thru N/A N/A T T T T T T
August 31, 1998
June 1 thru N/A N/A N/A T T T T T
August 31, 1999
June 1 thru N/A N/A N/A N/A T T T T
August 31, 2000
June 1 thru N/A N/A N/A N/A N/A T T T
August 31, 2001
June 1 thru N/A N/A N/A N/A N/A N/A T T
August 31, 2002
June 1 thru N/A N/A N/A N/A N/A N/A N/A T
August 31, 2003
June 1 thru N/A N/A N/A N/A N/A N/A N/A N/A
August 31, 2004
June 1 thru N/A N/A N/A N/A N/A N/A N/A N/A
August 31, 2005
June 1 thru N/A N/A N/A N/A N/A N/A N/A N/A
August 31, 2006
<CAPTION>
LEASE LEASE
YEAR 14 YEAR 15
NOTIFICATION JUNE 1/2005 JUNE 1/2006
TIME PERIOD MAY 31/2006 MAY 31/2007
- ----------- ----------- -----------
<S> <C> <C>
June 1 thru T T
August 31, 1997
June 1 thru T T
August 31, 1998
June 1 thru T T
August 31, 1999
June 1 thru T T
August 31, 2000
June 1 thru T T
August 31, 2001
June 1 thru T T
August 31, 2002
June 1 thru T T
August 31, 2003
June 1 thru T T
August 31, 2004
June 1 thru N/A T
August 31, 2005
June 1 thru N/A N/A
August 31, 2006
</TABLE>
<PAGE> 12
SECOND ADDENDUM TO LEASE
THIS SECOND ADDENDUM TO LEASE is entered into as of this 1ST day of
JULY, 1994 by and between WESTERN HEMISPHERE SALES, INC. d/b/a PIONEER DATA
PROCESSING, INC., as Lessor, and VERIDIEN CORPORATION, as Lessee.
Contrary to the terms of the Lease, the following Paragraphs are hereby
amended:
WHEREAS, Lessor and Lessee have entered into a Lease Agreement (the
"Lease") June 19, 1992, relating to that certain rentable space of approximately
26,000 square feet, located at 11800 28th Street North, St. Petersburg, Florida
(the "Leased Premises"), and
WHEREAS, Lessee now desires to again lease additional space from Lessor
and Lessor desires to lease additional space to Lessee;
NOW, THEREFORE, the parties hereby agree that the Lease shall be
amended as follows:
1. The Lease is hereby amended by the addition of the following
paragraph to be inserted prior to Paragraph 1 of the Lease Agreement:
The Lessor, in further consideration of the rentals to be paid
and the covenants and agreements to be kept and performed by
the Lessee does hereby grant, demise and lease unto Lessee,
and the said Lessee does hereby hire and lease from the
Lessor, that certain industrial space having a rentable area
of approximately 11,800 square feet, and located at 11800 28th
Street North, St. Petersburg, Florida, being otherwise
described on Exhibit "A" attached to this Addendum to Lease
and incorporated herein (the "Expansion Space").
2. Paragraph 1 of the Lease is hereby amended by the addition of the
following at the end of said Paragraph 1 and prior to Paragraph 1(a):
The Commencement Date as to the Expansion Space shall be July 1,
1994.
3. The Gross monthly base rent set forth in Paragraphs 1 (d), (e), and
(f) is hereby replaced by the following lease payment schedule, plus sales and
use tax, effective as of the Expansion Commencement Date for the new total
demised premises of approximately 37,800 rentable square feet.
(d) YEAR 3: Beginning July 1, 1994, and on the first day of
each successive month thereafter up to and including June 1, 1995,
Lessee shall pay $12,060.00 as monthly rent, PLUS current year
applicable sales and use tax, estimated building insurance, real estate
taxes, and common area maintenance fees as follows:
<TABLE>
<S> <C>
Monthly Rent: $ 12,060.00
Estimated Building Insurance: $ 425.00
Estimated Real Estate Taxes: $ 1,500.00
Estimated C.A.M. Fees: $ 425.00
-----------
TOTAL MONTHLY RENT (EXCLUSIVE $ 14,410.00
OF SALES/USE TAX)
</TABLE>
(e) YEAR 4: On the first day of July 1, 1995 and on each successive
month thereafter up to and including June 1, 1996, Lessee shall pay
$12,423.00 as monthly rent, PLUS
<PAGE> 13
current year applicable sales and use tax, estimated building
insurance, real estate taxes, and common area maintenance fees as
follows:
<TABLE>
<S> <C>
Monthly Rent: $ 12,423.00
Estimated Building Insurance: $ 425.00
Estimated Real Estate Taxes: $ 2,000.00
Estimated C.A.M. Fees: $ 425.00
-----------
TOTAL MONTHLY RENT (EXCLUSIVE $ 15,273.00
OF SALES/USE TAX)
</TABLE>
(f) YEAR 5: On the first day of July 1, 1996 and on each
successive month thereafter up to and including May 1, 1997, Lessee
shall pay $12,795.00 as monthly rent, PLUS current year applicable
sales and use tax, estimated building insurance, real estate taxes, and
common area maintenance fees as follows:
<TABLE>
<S> <C>
Monthly Rent: $12,795.00
Estimated Building Insurance: $ 425.00
Estimated Real Estate Taxes: $ 2,500.00
Estimated C.A.M. Fees: $ 425,00
----------
TOTAL MONTHLY RENT (EXCLUSIVE $16,145.00
OF SALES/USE TAX)
</TABLE>
4. Paragraph 2 of the Lease Agreement is hereby amended as follows:
OPTION TO RENEW: In the event the Lessee shall perform all of
the covenants of this Lease, including the prompt payment of
the rent due hereunder, the Lessee shall have the option to
renew the same for one (1) additional term of five (5) years
upon the same terms and conditions set forth herein, provided,
however, the rental payments during said option periods shall
be payable as more fully set forth in Exhibit "A(a)" which is
attached hereto and by reference made a part hereof. Lessee
shall be deemed to have automatically renewed this Lease for
the additional five year term unless Lessee provides Lessor
with written notice of its intention not to renew at least 150
days prior to the termination of the original Lease Term.
5. The term "Lease Term" referenced in Paragraph 1 of the Lease
Agreement shall mean the term ending May 31, 1997 as to the entire Leased
Premises inclusive of the Expansion Space.
6. The Lessee's option to renew the Lease Term provided in Paragraph 2
of the Lease Agreement, if exercised, shall renew the Lease from the Lease
expiration date of May 31, 1997, and shall apply to the entire Leased Premises
including the Expansion Space. Said option Period shall commence June 1, 1997
and terminate May 31, 2002.
7. The first sentence of Paragraph 7 of the Lease is hereby amended to
read as follows: "As additional rent hereunder, Lessee shall pay to Lessor,
monthly in advance, its newly adjusted prorata share of the leased premises of
ninety-eight and four tenths percent (98.4%) of the building insurance, real
estate taxes, common area maintenance as noted in Paragraphs 4, 5, and 6 of this
Lease".
Except as provided herein, all other terms and conditions of the Lease shall
remain in full force and effect. In the event of a conflict between this
Addendum and the Lease, provisions of this Addendum shall govern.
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Second Addendum as
of the date above written.
WITNESSES: VERIDIEN CORPORATION
CHAIRMAN & CEO
- ----------------------------------- -------------------------------
- ----------------------------------- "LESSEE"
PIONEER DATA PROCESSING
- ----------------------------------- -------------------------------
- ----------------------------------- Richard M. Speer
"LESSOR"
<PAGE> 15
EXHIBIT "A(A)"
OPTION TO RENEW
EXTENSION TERM: June 1, 1997 - May 31, 2002
<TABLE>
<S> <C> <C>
OPTION YEAR 1:
Monthly Rent: $13,180.00
Estimated Building insurance: $ 425.00
Estimated Real Estate Taxes: $ 2,500.00
Estimated C.A.M. Fees: $ 425,00
----------
TOTAL MONTHLY RENT (EXCLUSIVE $16,530.00
OF SALES/USE TAX)
OPTION YEAR 2:
Monthly Rent: $13,570.00
Estimated Building Insurance: $ 425.00
Estimated Real Estate Taxes: $ 3,000.00
Estimated C.A.M. Fees: $ 425.00
----------
TOTAL MONTHLY RENT (EXCLUSIVE $17,420.00
OF SALES/USE TAX)
OPTION YEAR 3:
Monthly Rent: $13,985.00
Estimated Building Insurance: $ 425.00
Estimated Real Estate Taxes: $ 3,000.00
Estimated C.A.M. Fees: $ 425.00
----------
TOTAL MONTHLY RENT (EXCLUSIVE $17,835.00
OF SALES/USE TAX)
OPTION YEAR 4:
Monthly Rent: $14,405.00
Estimated Building Insurance: $ 425.00
Estimated Real Estate Taxes: $ 3,500.00
Estimated C.A.M. Fees: $ 425.00
----------
TOTAL MONTHLY RENT (EXCLUSIVE $18,755.00
OF SALES/USE TAX)
OPTION YEAR 5:
Monthly Rent: $14,835.00
Estimated Building Insurance: $ 425.00
Estimated Real Estate Taxes: $ 3,500.00
Estimated C.A.M. Fees: $ 425.00
----------
TOTAL MONTHLY RENT (EXCLUSIVE $19,185.00
OF SALES/USE TAX)
</TABLE>
<PAGE> 16
ADDENDUM TO LEASE
THIS ADDENDUM TO LEASE is entered into as of this 2nd day of September,
1993 by and between WESTERN HEMISPHERE SALES, INC. f/k/a PIONEER DATA
PROCESSING, INC., as Lessor, and VERIDIEN CORPORATION, as Lessee, to that
certain lease ("Lease") dated June 19, 1992.
Contrary to the terms of the Lease, the following is hereby amended
The Landlord hereby waives the requirement for Tenant to obtain
flood insurance as provided for in Paragraph 4 (c) of the lease
agreement.
Except as provided herein, all other terms and conditions of the Lease
shall remain in full force and effect. In the event of a conflict between this
Addendum and the Lease, provisions of this Addendum shall govern.
IN WITNESS WHEREOF, the parties have executed this Addendum as of the
date above written.
WITNESSES: VERIDIEN CORPORATION
- ---------------------------------- ------------------------------
- ---------------------------------- LESSEE
WESTERN HEMISPHERE SALES, INC.
- ---------------------------------- ------------------------------
Richard M. Speer
- ---------------------------------- LESSOR
<PAGE> 17
INDUSTRIAL PARK LEASE
THIS LEASE, made and entered into this 19th day of June, 1992, by and
between WESTERN HEMISPHERE SALES, INC., a Florida corporation f/k/a PIONEER DATA
PROCESSING, INC., a Florida corporation (hereinafter the "Lessor" or
"Landlord"), and VERIDIEN CORPORATION, a Delaware corporation (hereinafter the
"Lessee" or "Tenant"),
WITNESSETH, that, in consideration of the covenants herein contained on
the part of the said Lessee to be made and performed, the Lessor does hereby
lease to the said Lessee the following-described property located in Pinellas
County, Florida, the same being more particularly described as follows:
That certain warehouse space having an overall area of 26,000 square
feet, including approximately 8,000 square feet of office space, (hereinafter
the "Premises"), and which space has a street address of 11800 - 28th Street
North, St. Petersburg, FL. The building in which the Premises are located has an
overall area of approximately 38,500 square feet.
1. TERM: The term of this Lease shall be for an initial period of five
(5) years, commencing on the 15th day of June, 1992, and ending on the 31st day
of May, 1997, with deposits and rental payments to be made as follows:
(a) DEPOSIT: Upon execution of this Lease, Lessee will deposit
the sum of $14,521.88 which represents:
<TABLE>
<S> <C> <C>
$ 9,000.00 - SECURITY DEPOSIT
------------
$ n/a - last month's rent
------------
$ n/a - last month's estimated building insurance
------------
$ n/a - last month's estimated real estate taxes
------------
$ n/a - last month's estimated Common Area
------------ Maintenance ("C.A.M.")
$ n/a - sales tax
------------
$ 4,062.50 - 1/2 first month's rent
------------
$ 212.50 - 1/2 first month's estimated building insurance
------------
$ 750.00 - 1/2 first month's estimated real estate taxes
------------
$ 212.50 - 1/2 first month's estimated C.A.M.
------------
$ 284.38 - sales tax
------------
$ 14,521.88 - TOTAL
------------
</TABLE>
Lessor is not obligated to apply the security deposit or advance rent
on rents or other charges in arrears or on damages for the Lessee's
failure to perform the Lease. However, the Lessor may so apply the
security at its option and its right to possession of the Premises for
nonpayment of rent or for any other reason shall not in any event be
affected by reason of the fact that it holds this security. The advance
rent may be applied to damage to the Premises. If no damage has
occurred or the security deposit is used, the advance rent shall be
applied to the last month's rent. The security deposit, if not applied
toward payment of arrearages or damages as herein provided, is to be
returned to the Lessee when the Lease is terminated, within thirty (30)
days after the Lessee has vacated the Premises and delivered possession
to the Lessor. If Lessor repossesses the Premises because of the
Lessee's default or breach, it may apply the deposit on all damages
suffered to the date of the repossession and may retain the remainder
to apply to such damages as may be suffered thereafter by reason of the
default or breach.
<PAGE> 18
(b) YEAR 1: On the first day of July, 1992, and on the first
day of each successive month thereafter up to and including May 1,
1993, Lessee shall pay $11,043.75, which represents:
<TABLE>
<S> <C> <C>
$ 8,125.00 - monthly rent
-----------
$ 425.00 - estimated building insurance
-----------
$ 1,500.00 - estimated real estate taxes
-----------
$ 425.00 - estimated C.A.M.
-----------
$ 568.75 - sales tax
-----------
$ 11,043.75 - TOTAL MONTHLY PAYMENT
-----------
</TABLE>
(c) YEAR 2: On the first day of June, 1993, and on the first
day of each successive month thereafter up to and including May 1,
1994, Lessee shall pay $8,370.00 as monthly rent, plus sales tax and
estimated building insurance, real estate taxes, and C.A.M.
(d) YEAR 3. On the first day of June, 1994, and on the first
day of each successive month thereafter up to and including May 1,
1995, Lessee shall pay $8,620.00 as monthly rent, plus sales tax and
estimated building insurance, real estate taxes and C.A.M.
(e) YEAR 4. On the first day of June, 1995, and on the first
day of each successive month thereafter up to and including May 1,
1996, Lessee shall pay $8,880.00 as monthly rent, plus sales tax and
estimated building insurance, real estate taxes and C.A.M.
(f) YEAR 5. On the first day of June, 1996, and on the first
day of each successive month thereafter up to and including May 1,
1997, Lessee shall pay $9,145.00 as monthly rent, plus sales tax and
estimated building insurance, real estate taxes, and C.A.M.
(g) LATE FEES: The monthly rental payments shall be paid each
month on the date set forth above, without demand, to Lessor at the
address set forth in this Lease or at such other address as Lessor may
designate in writing. In the event any rental payment is delinquent for
a period of ten (10) days, then in that event, Lessee shall be liable
for and agrees to pay a delinquent charge in an amount equal to five
(5%) of each such delinquent payment.
2. OPTION TO RENEW: In the event the Lessee shall perform all of the
covenants of this Lease, including the prompt payment of the rental due
hereunder, the Lessee shall have the option to renew the same for one (1)
additional term of five (5) Years upon the same terms and conditions set forth
therein, provided, however, the rental payments during said option periods shall
be payable as more fully set forth in Exhibit "A" which is attached hereto and
by reference made a part hereof. Lessee shall be deemed to have automatically
renewed this Lease for the additional five-year term unless Lessee provides
Lessor with written notice of its intention not to renew at least one hundred
fifty (150) days prior to the termination of the original Lease Term.
3. UTILITIES: Lessee will, at its own expense, pay and discharge all
costs and charges for electricity, gas, water, sewer and garbage collection,
telephone, and all other utilities furnished in connection with or for the use
of said Premises, or any part thereof, including the making of deposits with the
proper authorities or persons in order to secure such services. At the time of
the commencement of the term of this Lease, if any of the aforesaid services are
being furnished to the Leased Premises from accounts that are in the name of the
Lessor, Lessee agrees to immediately change such service accounts with the
proper authorities or persons into the name of the Lessee. In the event that
Lessee fails to change such accounts into the Lessee's name within five (5) days
after the commencement of the term of this Lease, Lessor shall have the right
without any notification to Lessee to immediately notify the proper
<PAGE> 19
authorities or persons to terminate the furnishing of such services to the
Leased Premises without incurring any liability to Lessee on account of such
termination.
Lessee shall, at Lessee's cost and expense, be responsible for all
necessary pest extermination.
Lessee shall also be responsible for all equipment and/or data
contained in said equipment.
4. INSURANCE: Lessee shall, during the full term of this Lease, and at
its own expense, carry public liability insurance for the protection of the
Lessor and the Lessee in the limits commonly known as $2,000,000 single limit
and $1,000,000.00 per person and will provide Lessor with evidence of said
insurance. Lessee shall provide Lessor with copies or original insurance
policies within ten (10) days after the Commencement Date of the Lease, and
within ten (10) days after January 1 of each year, or promptly upon request of
Lessor at any time. Lessor shall be an additional paid insured and loss payee on
such policies, and Lessor shall be entitled to receive a 30-day written notice
prior to cancellation of any such policies.
The Lessor shall pay for and maintain, during the term, the following
policies of insurance covering the Leased Premises:
(a) Broad Form Comprehensive General Liability Insurance. Including,
but not limited to, coverage for Personal Injuries with limits of not
less than $2,000,000 combined single limit for death, personal injury
and property damage, per occurrence.
(b) All Risk Property Insurance. Upon all building improvements and
alterations, including, but not limited to, fire and extended
coverage, vandalism, malicious mischief and sprinkler leakage in the
amount of one hundred (100%) percent of full replacement cost.
(c) Flood Insurance. If applicable, Lessor will purchase flood
insurance coverage for the property if the property is in an insurance
flood zone in an amount per the market value of the building.
(d) Renter/Business Interruption Insurance. Lessor shall also
provide renter/business interruption insurance for the Property.
Lessee agrees to reimburse Lessor for the cost of Lessee's pro rata
share of said insurance, which cost shall constitute additional rental
hereunder, and shall be payable in the manner set forth in Paragraph 7
of this Lease.
Lessor shall provide Lessee with evidence of said insurance and provide
copies or original insurance policies within ten (10) days after the
Commencement Date of the Lease, and within ten (10) days after January
1 of each year, or promptly upon request of Lessee at any time. Lessee
reserves the right to investigate comparative insurance policies from
companies of equal or greater rating for said insurance and present to
Lessor. If alternative policies of equal or better coverage are found
to be more economical than those currently in effect than Lessor must
either implement those policies or reimburse Lessee for any savings
that Lessee would realize.
5. TAXES: Lessee agrees to pay its pro rata share of all real estate
and personal property taxes assessed against the demised Premises during the
term of this Lease, which taxes shall constitute additional rental hereunder and
shall be payable by Lessee to Lessor in the manner set forth in Paragraph 7 of
this Lease.
<PAGE> 20
6. MAINTENANCE: Lessor shall maintain the roof, structural load bearing
walls and slab on the Leased Premises, as well as the common areas of the
building. The Lessor's expenses incurred in the maintenance of the common areas
of the building shall be known as "Common Area Maintenance" or "C.A.M.", and
shall include, but not be limited to reasonable management expenses, janitorial
and landscaping services, and such other reasonable costs and expenses as may be
paid by Lessor in connection with the upkeep, maintenance, repair or management
of the Premises or the building.
Lessee shall maintain and repair, at Lessee's expense, all other
portions of the Premises including, but not limited to plumbing, lighting, air
conditioning, and plate glass. Lessee shall, at the termination of the Lease, by
lapse of time or otherwise, surrender up Leased Premises in good order and
condition, reasonable use and ordinary wear and tear excepted. Lessee may remove
any tenant improvements installed by Tenant at the termination of the Lease
provided Lessee pays the cost of removal and repairs of any and all damage or
injury to the Leased Premises resulting from such removal.
Lessee shall have a period of fourteen (14) days (hereinafter referred
to as the "Inspection Period") after the Lease begins to inspect the
air-conditioning, heating, plumbing, and electrical systems for the building. If
such inspection reveals that any repairs are necessary, said repairs shall be
completed at Lessor's expense. Upon the termination of this Inspection Period,
Lessee shall be responsible for all maintenance repair as described in this
Paragraph.
7. ADDITIONAL RENTAL: As additional rental hereunder, Lessee shall pay
to Lessor, monthly in advance, sixty-seven and one-half percent (67.5%) of the
building insurance, real estate taxes, and Common Area Maintenance as noted in
Paragraphs 4, 5, and 6 of this Lease. Prior to the commencement of each calendar
year of the Lease term, or as soon thereafter as practicable, Lessor shall give
Lessee written notice of its estimate of the amounts payable under this
paragraph for the ensuing year of the Lease term on the date each monthly rental
payment is due as provided in Paragraph 1 of this Lease. Lessee shall pay to
Lessor 1/12th of such estimated amounts, provided, if such notice is not given
on or before the January rental payment of each year of said Lease term, Lessee
shall continue to pay on the basis of the prior year's estimate until the month
after such notice is given. If at any time or times it appears to Lessor that
the amounts payable under this paragraph for the ensuing year will vary from its
estimate by more than ten (10%) percent, Lessor may, by written notice to
Lessee, revise its estimate for such year, and subsequent payments by Lessee
shall be based upon such revised estimates. Within ninety (90) days after the
close of each year of the Lease term, or as soon after such ninety (90) day
period as practicable, Lessor shall deliver to Lessee a statement of amounts
payable under this paragraph for such year. If such statement shows an amount
owing by Lessee that is less than the estimated payments for such year
previously made by Lessee, the excess payment shall be applied to the payments
due for the following year. If such statement shows an amount owing by Lessee
that is more than the estimated payments for such year previously made by
Lessee, Lessee shall pay the deficiency to Lessor within thirty (30) days after
delivery of the statement.
The estimated additional rental amounts to be paid in 1992 were
calculated as follows: the portion attributable to building insurance was
estimated based on the actual 1991 building insurance bill which is divided by
12 months; the portion attributable to taxes was based on the total amount
billed for 1991 (the April amount) which is also divided by 12 months; the
portion attributable to C.A.M. was based on total C.A.M. expenses for 1991, plus
any anticipated or known increases for 1992, which is also divided by 12 months.
In the event the commencement date and expiration date of the terms of
this Lease fall on days other than January 1 and December 31, respectively, for
the first and last calendar years of the term of this Lease, Lessee's pro-rata
share of the amounts payable under this paragraph, shall he calculated on a per
diem basis for the actual number of days of the Lease term falling in the
applicable calendar year.
<PAGE> 21
8. QUIET POSSESSION: Lessor covenants, promises and agrees with the
Lessee, that the Lessee, on paying the said rent above hereby reserved, and
observing, performing and keeping all and singular the covenants and agreements
herein contained, shall and may lawfully, peacefully and quietly have, hold,
use, occupy and enjoy said Premises hereby leased.
9. USE: Lessee shall use and occupy the Leased Premises during the
term of this Lease only for the purpose of the manufacturing and distribution of
medical products, operating research and development laboratories for said
products, including microbiology, chemical, quality control, and prototype, and
for the maintenance of executive offices, and no other purpose whatsoever
without Lessor's prior written consent, which consent shall not be unreasonably
withheld. Lessee will not use or permit to be used the Premises hereby leased
for any unlawful or improper purpose or in any manner which would constitute a
nuisance or in any way injure the reputation or value of the demised Premises.
Lessee will at all times comply with all laws or ordinances of any and all duly
constituted governmental or municipal authorities, and of any and all of their
departments and bureaus applicable to Lessee's use of said Premises, and all
lawful rules and regulations promulgated by said authorities and bureaus in
connection with Lessee's use of the Premises herein demised. Lessee shall comply
with all other laws, ordinances, etc., related to the Premises. However, nothing
contained in this paragraph shall be construed to require Lessor or Lessee to
make any structural repairs or alterations to the demised Premises.
10. LIENS: The Lessee shall have no authority to incur, create or
permit, and shall not incur, create, permit or suffer, any lien for labor or
materials or services to attach to the interest or estate of either the Lessor
or the Lessee in the Leased Premises or other real estate of which the Leased
Premises or other real estate of which the Leased Premises for a part, and
neither the Lessee, nor anyone claiming by, through or under the Lessee, shall
have any right to file or place any labor or material lien of any kind or
character whatsoever or any mechanics lien or other lien of any kind, upon the
Leased Premises or other real estate of which the Leased Premises form a part,
so as to encumber or affect the title of the Lessor, and all persons contracting
with the Lessee directly or indirectly, or with any person who in turn is
contracting with the Lessee, for the erection, construction, installation,
alteration or repair of the Leased Premises or any improvements therein or
thereon, including fixtures and equipment, and all materialmen, contractors,
mechanics, laborers, architects, engineers, and others are hereby charged with
notice that as and from the date of this instrument, they and each of them must
look to the Lessee only to secure the payment of any bills or charges or claims
for work done, or materials furnished, or services rendered or performed during
the term hereby demised.
A Memorandum of Lease shall be recorded in the Public Records in order
to avoid attachment of any lien caused by actions of Lessee to attach to the
Property owned by Lessor.
11. ASSIGNMENT AND SUBLETTING: Lessee will not assign this Lease
without the written consent of the Lessor, and the Lessor agrees that such
consent will not be unreasonably withheld or delayed. In the event that the
Lessor does consent to such assignment or subletting, it is understood and
agreed that such will in no way relieve the Lessee of its obligation to pay the
rents as provided herein during the term of this Lease. In the event Lessee
sublets the Property for rental amounts in excess of Lessee's current rental
payments, fifty percent (50%) of any excess rents collected pursuant to the
sub-lease shall promptly be paid to Lessor.
12. INSPECTION: Lessee will permit the Lessor to enter upon said
Premises upon reasonable notice during the usual business hours for the purpose
of making inspections or repairs, or for the purposes of obeying any laws or
orders of any duly constituted governmental or municipal authorities, and/or for
the purpose of exhibiting the Leased Premises to prospective tenants or
purchasers within the four (4) months of the expiration of the Lease, provided
Lessor does not unreasonably or unnecessarily
<PAGE> 22
interfere with the operation of Lessee's business. In making such inspections or
repairs, Lessor shall observe all reasonable security regulations of Lessee and
shall hold in confidence any information concerning business or products of
Lessee which they, or any of them, may discover while present on said Premises.
13. HAZARD DAMAGE: The parties hereto agree, if by virtue of fire,
storm, or any cause other than negligent or deliberate act of the Lessee, the
Leased Premises becomes partly or wholly untenantable, then and in that event,
the rent shall abate in proportion to the amount of untenantability of said
Premises for so long as they are untenantable. In the event the Leased Premises
are not totally destroyed, the Lessor agrees to rebuild the Premises with all
possible dispatch and deliver the same to the Lessee within a period of one
hundred eighty (180) days after the event causing the destruction. In the event
the Leased Premises are totally destroyed, then Lessee or Lessor shall have the
option to terminate this Lease within a period of thirty (30) days after the
same destruction. In the event this Lease is not thus terminated, the Lessor
agrees to rebuild the Premises with all possible dispatch and deliver the same
to the Lessee within a period of not more than two hundred forty (240) days
after an event causing total destruction. However, in no event shall Lessor be
obligated to do any rebuilding if the remaining term of this Lease shall have
less than one (1) year to run following the expected completion of such
rebuilding, unless Lessee exercised its option to renew the Lease for two
additional five (5) year terms.
14. ALTERATIONS: Except as otherwise provided in this paragraph, Lessee
will not make any improvements, installations, alterations or additions in or to
the Leased Premises without the written consent of Lessor, which consent shall
not be unreasonably withheld. If Lessor consents to such improvements,
alterations, or additions, any such improvements shall be installed at Lessee's
expense in accordance with plans approved by Lessor and only by such contractors
reasonable acceptable to Lessor. Lessee also agrees that all work will be done
in a workmanlike manner, with all applicable permits being obtained and shall
conform to all applicable codes. Lessee also agrees to have the work performed
at such reasonable times and in such reasonable manner as Lessor may designate.
15. SUBORDINATION: Lessee agrees to execute and deliver an instrument
subordinating the Lease to the lien of any mortgage within ten (10) days after
receiving a written request from Lessor. Provided, however, in the instrument
the mortgagee must agree that, so long as Lessee is not in default under the
provisions of this Lease: (a) this Lease shall remain in full force and effect,
(b) the possession of the Premises by Lessee shall not be disturbed, and (c) in
the event of a foreclosure or other suit instituted pursuant to the mortgage,
the suit shall not affect the rights of Lessee under this Lease, but any
purchaser of the Premises as a result of such suit shall take the Premises
subject to this Lease and shall be bound by all of its terms. In the event of a
foreclosure of any mortgage encumbering the Leased Premises, Lessee agrees to
attorn to the mortgagee or its successors in interest and recognize such party
as Lessor under this Lease, provided Lessee receives in return a nondisturbance
agreement from the foreclosing mortgagee or its successor in interest as set
forth immediately above. Any mortgage placed on the Leased Premises by the
Lessor will not cover the equipment, furniture or furnishings owned by the
Lessee.
16. TENANT ESTOPPEL LETTERS: Lessee shall, within ten (10) days after
receiving a written request from Lessor, make a Tenant Estoppel Letter and/or
statement in writing certifying:
(a) That the term of this Lease has commenced, setting forth the
date of such commencement;
(b) That this Lease is unmodified and in full force and effect
or, if there have been modifications, that the Lease is in full force
and effect as modified, stating the modification,
<PAGE> 23
(c) whether or not there are then existing any known offsets
or defenses against the enforcement of any of Lessee's covenants
hereunder (and if so, specifying them);
(d) The dates to which rent and other amounts have been paid in
advance, if any;
(e) Whether or not Lessee has acquired any interest in the
Premises except for its interest under this Lease; and
(f) Whether or not Lessee has executed a leasehold mortgage or
otherwise made any transfer or assignment of any part of the leasehold
estate.
Such statements shall be given as often as Lessor may
reasonably request them and may be relied upon by any prospective
purchaser of the fee simple interest in the Premises or by any
Mortgagee or its assignee.
17. DEFAULT PROVISIONS:
A. The happening of any one or more of the following events
shall, at the option of Lessor, constitute a breach of this Lease on
the part of the Lessee and Lessor shall have such remedies as are
herein provided.
(1) If Lessee defaults in the payment of any rents
payable to Lessor hereunder and fails to pay same within ten
(10) days of such default; or
(2) If Lessee fails to provide Lessor with insurance
policies on any one of the following: (i) within ten (10) days
after the Commencement Date; or (ii) within ten (10) days
after January 1 of each year; or (iii) within ten (10) days
after Landlord's request for copies of such policy; or
(3) If Lessee fails to provide Lessor with such
Tenant Estoppel Letters as described in Paragraph 16 of this
Lease within ten (10) days after written request of Lessor.
(4) If Lessee petitions or applies to any tribunal
for the appointment of a trustee or receiver of Lessee or
commences any proceedings relating to Lessee under any
bankruptcy, reorganization, arrangements, insolvency,
readjustment, dissolution, liquidation law of any jurisdiction
whether or not hereinafter in effect; or
(5) If any such petition or application is filed or
any proceedings are commenced against Lessee and Lessee, by
any act, indicates its approval thereof, consents thereto or
acquiesces therein, or an order is entered appointing such
trustee or receiver, or adjudicating Lessee bankrupt or
insolvent, or approving the petition in any such proceedings,
and such order remains in effect for more than ninety (90)
days; or
(6) If Lessee fails to fully and promptly perform any
act, term or provisions required of it in the performance of
this Lease. If a default is claimed under this subparagraph,
written notice specifically specifying the nature of such
claimed default shall be mailed to Lessee and Lessee shall
have fifteen (15) days to cure said default or such longer
time as may reasonably be necessary due to the nature of said
default.
B. Upon the happening of any of the above events of default,
Lessor may, at
<PAGE> 24
Lessor's option:
(1) Terminate and end this Lease and re-enter upon
the Leased Premises and at Lessor's options, all of Lessee's
rights, title, and interest under this Lease shall end and
Lessee shall become a tenant at sufferance; or
(2) Elect to declare the entire rent for the balance
of the term, or any part thereof, during which Lessee may
remain in possession due and payable forthwith, and may
proceed to collect the same by distress or otherwise, and
thereupon said term shall terminate at the option of Lessor
except that, to the extent rents have been collected in such
fashion, Lessee shall be entitled to remain in possession to
the exhaustion of the period covered by the rentals so
collected; or
(3) Take possession of the Premises and rent the same
for the account of Lessee.
The exercise of any of the above options shall not be
deemed to be the exclusive remedy of Lessor. In addition
thereto, Lessor shall have the right of any of the provisions
of the laws of the State of Florida governing default by
Lessee, and, in any event of default by Lessee, Lessor shall
take all reasonable action to mitigate damages.
C. Lessee agrees to pay a reasonable attorneys' fee and all
costs if it becomes necessary for Lessor to employ an attorney to
collect any of the rent agreed to be paid or to enforce performance of
any of the provisions of this Lease, provided Lessor is successful, or
to obtain possession of the Leased Premises or otherwise to exercise
any option or enforce any right given to Lessor upon default by Lessee
on any term, condition, stipulation or obligation of the Lease.
D. Should Lessor default in the terms and covenants herein
contained and should Lessee be required to secure the services of an
attorney and should such default be proven, then Lessor agrees to pay a
reasonable attorneys' fee to Lessee.
18. NOTICES: The rent payable under the terms of this Lease and any
notices to the Lessor shall be mailed to:
Western Hemisphere Sales, Inc.
f/k/a Pioneer Data Processing, Inc.
1803 U.S. Highway 19 North
Holiday, FL 34691
or such other addresses as the Lessor may designate in writing.
Notices to the Lessee shall be mailed to:
Paul L. Simmons
11800 - 28th Street North
St. Petersburg, FL 33716
or such other addresses as the Lessee may designate in writing.
19. ABANDONMENT: If Lessee shall abandon or surrender the Leased
Premises, or be
<PAGE> 25
dispossessed by process of law or otherwise, any personal property belonging to
Lessee and left on the Leased Premises for a period of fifteen (15) days after
such abandonment or surrender shall be deemed to be abandoned, at the option of
Lessor.
20. GENDER USAGE: The use of any gender herein shall be deemed to be or
include the other genders and the use of the singular herein shall be deemed to
be or include the plural (and vice versa), wherever appropriate.
21. SUCCESSORS: This Lease shall be binding heirs, personal
representatives, successors and assigns of parties hereto.
22. RADON DISCLOSURE: Radon is a naturally occurring radioactive gas
that, when it has be accumulated in a building in sufficient quantities, may
present health risks to person who are exposed to it over time. Levels of radon
that exceed federal and state guidelines have been found in buildings in
Florida. Additional information regarding radon and radon testing may be
obtained from your county public health unit.
23. GOVERNMENT COMPLIANCE: Lessee shall keep and maintain the Leased
Premises in compliance with, and shall not cause or permit the Leased Premises
to be in violation of any federal, state or local laws, ordinances or
regulations relating to industrial hygiene or to the environmental conditions
on, under or about the Leased Premises including, but not limited to, soil and
ground water conditions. Lessee shall not use, generate, manufacture, store or
dispose of on, under or about the Leased Premises or transport to or from the
Leased Premises any radioactive materials, hazardous wastes, toxic substances
defined as or included in the definition of "hazardous substances", "hazardous
wastes", "hazardous materials", or "toxic substances" under any applicable
federal or state laws or regulations, but specifically excluding any substances
used by Lessee in the ordinary course of its business in accordance with
applicable federal and state laws and regulations (collectively referred to
herein as "Hazardous Materials").
Lessee shall be solely responsible for, and shall indemnify and hold
harmless Lessor, its successors and assigns, from and against, any loss, damage,
cost, expense or liability directly or indirectly arising out of or attributable
to the use, generation, storage, release, threatened release, discharge,
disposal, or presence of Hazardous Materials on, under or about the Leased
Premises, including without limitation: (a) All foreseeable consequential
damages; (b) The costs of any required or necessary repair, cleanup or
detoxification of the Leased Premises, and the preparation and implementation of
any closure, remedial or other required plans; and (c) All reasonable costs and
expenses incurred by Lessor in connection with clauses (a) and (b) of this
paragraph, including, but not limited to, reasonable attorney's fees.
Within thirty (30) days after the beginning of this Lease Term, Lessor
shall obtain a Phase I Environmental Audit for the Premises. The results of this
Audit shall be provided to Lessee, and the costs for said audit shall be split
evenly between Lessee and Lessor with Lessee's share not to exceed ONE THOUSAND
FIVE HUNDRED AND NO/100 DOLLARS ($1,500.00) or fifty percent (50%) of the cost,
whichever is lower.
24. CONTAMINATION: Lessee will have no liability relative to any soil
contamination if any is attributable to activities of prior tenants.
25. SIGNAGE: Lessee shall not be permitted to install, construct,
inscribe, paint, affix or display any sign, advertisement, or logo visible from
the exterior of the Leased Premises in any common area without Lessor's prior
written consent. The exact size, design, configuration and placement of all
<PAGE> 26
signs, advertisements and logos shall be subject to the reasonable approval of
Lessor, the approval of the City of St. Petersburg, and any other applicable
governmental authorities. Under no circumstances may any sign, advertisement, or
logo violate any ordinance, rule or regulation of any governmental authority.
Lessee hereby agrees to seek and obtain any and all governmental approvals,
permits or licenses necessary for the lawful operation and placement of any
signs, advertisements, or logos approved by Lessor. All costs of installation,
construction, erection, illumination (where appropriate), maintenance, repair
and removal of any of the above referenced items shall be the obligation of the
Lessee. Before erecting or placing any signs, advertisements, or logos or
beginning any construction pursuant to preparation for the erection or placement
thereof, Lessee shall submit to Lessor, for Lessor's review and approval,
detailed plans and specifications for all work to be performed. After obtaining
Lessor's approval of said plans and specifications, the signs, advertisements,
or logos are to be constructed pursuant to the plans and specifications without
any deviation therefrom whatsoever. Upon vacating the Leased Premises, Lessee
shall remove all signs, advertisements or logos and repair all damage caused by
such removal. Lessee's obligation to observe or perform this covenant shall
survive the expiration or termination of this Lease. Lessee hereby agrees to
indemnify and hold Lessor harmless from and against any and all loss, cost,
damage, claims, suits, actions for any damage or injury to any person or
property caused by the installation, construction, erection, maintenance, repair
or removal of any of said signs, advertisements, or logos.
26. CONDEMNATION: If any substantial portion of the Leased Premises
shall be taken by eminent domain, Lessee shall have the right to terminate this
Lease as of the date of taking by giving written notice of such termination to
the Lessor within fifteen (15) days following the date of such taking, and in
the event of such termination, rent shall cease as of the date of such
termination and any rent paid beyond that date shall be refunded to the Lessee.
Whether or not the Lessee shall exercise such right, the Lessor and Lessee shall
have and retain their respective rights to compensation from the condemning
authority in connection with and following a taking by eminent domain. If Lessee
does not terminate this Lease following a substantial taking by eminent domain
or if the portion of the Leased Premises taken is not substantial, the rent
payable under this Lease for the remainder of the term shall be reduced as of
the date of taking in the proportion that the area of the part taken bears to
the total area of the Leased Premises just prior to such taking. Substantial, as
used herein, shall refer to the ability of Lessee to carry on its normal
business.
27. HOLD HARMLESS: Lessee agrees that all property belonging to or in
the name of, custody or control of the Lessee or any occupant of the Leased
Premises which is in or on the Leased Premises shall be there at the risk of the
Lessee or such occupant only, and Lessor shall not be liable for any injury
thereto or loss or destruction thereof, excepting injury or loss resulting from
breach of the terms of this Lease by Lessor. Lessee further agrees that Lessor
shall not be liable to the Lessee or any person for any injury, loss or damage
to property or to any person on the Leased Premises or on the common areas
appurtenant thereto, excepting injury or loss resulting from breach of the terms
of this Lease by Lessor. Lessor shall not be responsible for or liable to Lessee
for any loss or damage that may be occasioned by or through the acts or
omissions of persons occupying adjoining Premises or any part of the Premises
adjacent to or connected with the Leased Premises or any part of the Leased
Premises shown on the Site Plan or for any loss or damage resulting to Lessee or
its property from burst, stopped or leaking water, gas, sewer or steam pipes or
for any damage or loss of property within the Leased Premises from any causes
whatsoever, including theft, excepting injury or loss resulting from breach of
the terms of this Lease by Lessor.
Lessee hereby indemnifies Lessor for any injury to persons or loss or
damage to Property on or about Lessee's premises.
28. NO WAIVER: No assent, express or implied, by the Lessor to any
breach of any of the
<PAGE> 27
Lessee's covenants or agreements shall be deemed a waiver of any succeeding
breach of the same covenant or agreement. No delay or omission on the part of
Lessor in exercising any right or remedy shall operate as a waiver thereof or
the exercise of any other right or remedy.
29. MISCELLANEOUS IMPROVEMENTS: Lessor agrees, at Lessor's expense, to
repair roof leak located on the northeast corner of building.
30. SPECIAL CONDITIONS:
(a) Option to Purchase: During the fifteen (15) months of this
Lease, Lessee shall have the option to purchase the Property for the
purchase price (cash price) of ONE MILLION FOUR HUNDRED FIFTY THOUSAND
AND N0/100 DOLLARS ($1,450,000.00). This option can only be exercised
by Lessee by delivering an earnest money deposit to Lessor in the
amount of ten percent (10%) of the purchase price along with a written
offer to purchase at the above price. Lessor and Lessee agree that the
closing of such sale shall take place within ninety (90) days after
Lessee's exercise of said option.
(b) Right to Expand: During the first year (Year 1) of this
Lease, Lessee shall also be entitled to the right of first refusal to
expand into the contiguous space (approximately 12,500 square feet)
currently occupied by KEMCO, at the same rental rate currently paid by
KEMCO with three percent (3%) annual increases. Such right of first
refusal must be exercised within fourteen (14) days after Lessee
receives notice of Lessor's receipt of an acceptable offer to lease
such space.
(c) Lessor agrees, at Lessor's expense, to paint the exterior
of the entire building (color to be mutually agreed upon by Lessor and
Lessee) within sixty (60) days after the Commencement Date of the
Lease.
31. ENTIRE AGREEMENT: This Lease contains all of the agreements,
covenants and conditions between the parties hereto with respect to the subject
matter hereof and may not be altered or modified orally or in any other manner,
except by an agreement in writing signed by all of the parties hereto, or by
their respective successors in interest. The covenants and agreements herein
contained shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, personal representatives, successors and
assigns. This Lease constitutes a Florida contract and shall be construed
according to the laws of that state. The parties agree that the venue for any
litigation arising hereunder shall be in a Pinellas County Court of competent
jurisdiction.
<PAGE> 28
IN WITNESS WHEREOF, the parties have caused these presents to be
executed as of the day and year first above written.
WESTERN HEMISPHERE SALES, INC.
f/k/a PIONEER DATA PROCESSING,
INC., a Florida corporation
WITNESSES:
By:
- --------------------------------- -----------------------------
Title:
- --------------------------------- --------------------------
Date:
---------------------------
"LESSOR"
VERIDIEN CORPORATION, a Delaware
corporation
WITNESSES:
By:
- --------------------------------- -----------------------------
Title:
- --------------------------------- --------------------------
Date:
---------------------------
"LESSEE"
<PAGE> 29
EXHIBIT "A"
OPTION TO RENEW
EXTENSION TERM: June 1, 1997 - May 31, 2002
<TABLE>
<S> <C>
OPTION YEAR 1:
Monthly rent plus plus sales tax, real estate taxes, building insurance,
and C.A.M.'s. beginning 6/1/97: $ 9,420.00
OPTION YEAR 2:
Monthly rent plus plus sales tax, real estate taxes, building insurance,
and C.A.M.'s. beginning 6/1/98: $ 9,700.00
OPTION YEAR 3:
Monthly rent plus plus sales tax, real estate taxes, building insurance,
and C.A.M.'s. beginning 6/1/99: $ 9,995.00
OPTION YEAR 4:
Monthly rent plus plus sales tax, real estate taxes, building insurance,
and C.A.M.'s. beginning 6/1/2000: $10,295.00
OPTION YEAR 5:
Monthly rent plus plus sales tax, real estate taxes, building insurance,
and C.A.M.'s. beginning 6/1/2001: $10,600.00
</TABLE>
<PAGE> 1
EXHIBIT 10.2
CANADIAN LICENSING AGREEMENT OUTLINE
Principals: Licensor: Veridien Corporation
Licensee: Backcourt Industries Inc.
a Canadian Federally incorporated
Company ("CANCO")
Terms: The Licensing Agreement shall have an initial term of five
(5) years and thereafter renewed annually providing CANCO
is in good standing under the terms of the agreement.
Fees: In return for exclusive Canadian rights to manufacture or
have manufactured, distribute and sell in Canada (including
Quebec) products using Veridien's Virahol patented formula
and Veridien's other infection control related products and
use of the Viraguard / Virahol registered trade mark and
other applied Trademarks (collectively "Veridien Products"),
Veridien would earn a licensing fee based upon 10% of the
Net Sales realized from these Veridien Products in Canada
(as more particularly set out below). Net Sales shall be
defined as amounts received by CANCO from the sale of
Veridien Products less transport and costs of insurance
during transportation and less any amounts paid to or
credited to or on behalf of any customer ("Credit"). Said
Credit would include, return of goods, return of damaged
goods, trade listings, promotion allowances, co-op
allowances and slotting allowances.
CANCO shall make an initial license fee payment of
$345,000.00 CAN. upon Veridien's execution of the licensing
agreement. Such amount shall be applied as a prepayment for
licence fees payable hereunder. Thereafter additional
licence fees of 10% of Veridien Product Net Sales in excess
of $3,450,000.00 is payable. VERIDIEN and CANCO have the
right of offset for any monies due and owing.
The sales period for determination of the licensing fee will
be February 28, 1998 to June 30, 1999 and thereafter 12
month periods commencing July 1st, 1999, however the
licensing fee will be determined and payable semi-annually
with semi-annual adjustments if necessary.
Exclusivity: In order for CANCO to maintain its Canadian exclusivity
rights, Veridien must receive minimum annual licence fees or
payments in lieu thereof ("Exclusive Minimums") as set out
below:
<PAGE> 2
Year 1 $ 250,000 CAN. (being that period February 28, 1998
through to June 30, 1999).
Year 2 500,000
Year 3 750,000
Year 4 875,000
Year 5 1,000,000
Thereafter each successive year under the agreement the
Exclusive Minimums will increase by 10%.
Should Veridien not receive the Exclusive Minimums for any
year as stipulated herein within 30 days following said
yearly period, CANCO will forfeit its exclusive rights in
Canada (including Quebec) commencing the yearly period
following the year in which Exclusive Minimums have not been
met. However, thereafter CANCO will be entitled to continue
to operate under the terms of the licence agreement on a
non-exclusive rights basis.
Further, should the Exclusive Minimums, in any yearly period
not at least equal $250,000.00, Veridien may terminate the
non-exclusive rights hereunder upon six months notice.
Sublicense Rights: CANCO will have the right to grant a sublicense of its
rights in Canada (including Quebec) obtained under the
licensing agreement to third parties subject to Veridien's
approval with said approval not to be unreasonably withheld.
Miscellaneous: CANCO confirms that it has / will spend not less than
$250,000. in addition to initial licence fee in proceeding
with Licensee's business opportunity hereunder.
CANCO and Veridien hereby agree to execute such further
documentation on customary terms as may be necessary to
formalize the terms of this agreement as set out herein
including, without limitation:
(a) providing for reasonable inspection of manufacturing
processes, use of trademarks and packaging by Veridien and
audit of sales volumes;
(b) exclusion from exclusivity for current Nutrition For Life
Inc. distribution system through existing network marketing
program;
<PAGE> 3
Each party shall bear their respective legal costs.
AGREED TO AND ACCEPTED BY:
BACKCOURT INDUSTRIES INC. VERIDIEN CORPORATION
Per: Per:
- ---------------------------------- ------------------------------------
Date Date:
------------------------------ -------------------------------
<PAGE> 1
EXHIBIT 10.3
AGREEMENT
VERIDIEN CORPORATION
&
HORIZON PHARMACEUTICAL INC.
A. SUBLEASE - 11800 28TH STREET NORTH, ST. PETERSBURG, FLORIDA
Term: 2 years commencing August 1, 1998 (or such earlier
date as agreed)
Space: - 5 offices on the upper level (furnished)
- shared use of the upper level boardroom
- shared manufacturing/warehouse space
[specifics of the integration of Horizon's
manufacturing into the warehouse space to be
determined]
- shared staff kitchen & washroom facilities
Base Rent: Initially $ 7,500.00 per month plus
2% of Horizon's Sales of $4,000,000; where
Sales are defined as sale of product at 100%
plus service fees for contract fill services
at 10% actual fees and where for low margin
business (ie. business with less than 10%
margin - "Margin") the incremental
calculation shall be the lessor of 2% of 20%
of Horizon's Margin.
In addition to Base Rent, Horizon will pay 50% of all
utilities for the property. Utilities charged to
Horizon will be adjusted to account for Horizon's use
of the property, causing the utility charges for the
property to increase over current levels. Base Rent
and percentage of utilities will be adjusted for
additional space as requested/required by Horizon.
Maximum Base Rent plus utilities paid by Horizon
shall not exceed the total Veridien pays in rent (&
other payments to the landlord), direct expenses and
utilities for the property.
Other: - right to signage on the building (comparable to
Veridien's current signage) / subject to city
approval
- any leasehold improvements are for Horizon's
account (including relocating Veridien's existing
sample room if Horizon wishes to use this area)
- Horizon will provide office cleaning services for
the whole building
B. RELATED SERVICES
i) Lab Services - rates to be negotiated for Horizon's business
(excluding Veridien Contract fill related lab services which
shall be for Veridien's own account)
ii) Reception Services - 50% sharing costs of receptionist
services (costs to modify/upgrade phone system are for
Horizon's account)
<PAGE> 2
-2-
(cont)
iii) Accounting/Administrative services - to be discussed if
Horizon is interest in same
C. CONTRACT FILL
Horizon will provide contract fill services for Veridien for the price
of:
First $ 1,000,000 = Cost of Goods Sold* plus 10%
above first $ 1,000,000 = Cost of Goods Sold* plus 10%
* where Cost of Goods Sold is defined as raw materials and direct labor
/ at Veridien's request COGS shall be set from time to time between the
parties / Horizon will use their best efforts to obtain the best
possible prices for raw materials / any of Veridien's inventory used by
Horizon to build Veridien's products will be purchased from Veridien at
cost.
In the event Veridien does not provide Horizon with the ability to
produce the majority of its contact fill business, then Veridien
commits to provide either '[a]' or '[b]' below, or a pro-rated
combination thereof.
[a] a minimum of $ 1.5 million in contract fill business
for its products (or other products) over the 2 years of this
agreement
[b] Veridien will direct business netting Horizon a
minimum of $ 150,000 in revenue to Horizon
Veridien will be treated as Horizon's primary client (specifically in
regards to their responsiveness to Veridien's orders), if Horizon is
Veridien's primary contract filler.
Terms will be net 30 days.
Horizon will maintain reasonable levels of inventory of Veridien
product. Such levels will be agreed between the parties from time to
time. Veridien guarantees to purchase from Horizon any inventory of
Veridien products that they have built at Veridien's request.
Horizon will utilize GMP in the production of Veridien's products and
conform to EPA and FDA manufacturing standards (as applicable). Horizon
will use Veridien's existing manufacturing equipment and will maintain
same in a good working state of repair. Horizon and Veridien will
negotiate rent for Veridien's equipment should Horizon determine any
additional usage for same (ie. other contract fill business).
Veridien will provide its own lab services for Quality Control of
products produced for Veridien.
D. OTHER POSSIBLE JOINT VENTURES
i) other contract fill joint ventures
ii) sale of Veridien's product line through Horizon's existing
customer base
iii) jointly purchasing the building (11800 28th Street North, St.
Petersburg)
iv) sale of Horizon's product line through Veridien's existing
customer base
<PAGE> 3
-3-
(cont)
v) Veridien and Horizon will work together to attempt to utilize
the barter credits that Veridien has on account to reduce the
costs of raw materials.
The Parties agree that they shall execute all necessary documents and take all
necessary actions required to carry out and effectuate the terms of this
Agreement.
AGREED AND ACCEPTED.
VERIDIEN CORPORATION
- ---------------------------- Per:
Witness
- ---------------------------- ----------------------------
(Please Print Name)
Date:
- ---------------------------- -----------------------
Witness
- ----------------------------
(Please Print Name)
AGREED AND ACCEPTED.
HORIZON PHARMACEUTICAL INC.
- ----------------------------
Witness Per:
- ---------------------------- ----------------------------
(Please Print Name)
Date:
- ---------------------------- -----------------------
Witness
- ----------------------------
(Please Print Name)
<PAGE> 1
EXHIBIT 10.4
The United States of America
No. 1657969
CERTIFICATE OF REGISTRATION
This is to certify that the records of the Patent and Trademark Office
show that and an application was filed in said Office for registration of the
Mark shown herein, a copy of said Mark and pertinent data from the Application
being annexed hereto and made a part hereof,
And there having been due compliance with the requirements of the law
and with the regulations prescribed by the Commissioner of Patents and
Trademarks,
Upon examination, it appeared that the applicant was entitled to have
said Mark registered under the Trademark Act of 1946, as amended, and the said
Mark has been duly registered this day in the Patent and Trademark Office on the
PRINCIPAL REGISTER
to the registrant named herein.
This registration shall remain in force for TEN years unless sooner
terminated as provided by law.
{seal}
In Testimony Whereof I have hereunto
set my hand and caused to the seal
of the Patent and Trademark Office
to be affixed this twenty-fourth day
of September 1991.
------------------------------------------
Commissioner of Patents and Trademarks
<PAGE> 2
INT. CL.: 5
PRIOR U.S. CLS.: 6 AND 52
REG. NO. 1,657,969
UNITED STATES PATENT AND TRADEMARK OFFICE Registered Sep. 24, 1991
- --------------------------------------------------------------------------------
TRADEMARK
PRINCIPAL REGISTER
VIRAHOL
<TABLE>
<CAPTION>
<S> <C>
ROST, INC. (FLORIDA CORPORATION) CONTAMINATED BODY FLUIDS BETWEEN PEOPLE
SUITE 175 IN CLASS 5 (U.S. CLS. 6 AND 52).
9417 PRINCESS PALM AVENUE FIRST USE 7-20-1988; IN COMMERCE
TAMPA, FL 33619 8-5-1988.
FOR: DISINFECTANT CLEANSER FOR USE IN SER. NO. 74-010,927, FILED 12-14-1989.
MEDICAL AND RESTAURANT FACILITIES AND OTHER
PUBLIC FACILITIES TO REDUCE OR INHIBIT THE
TRANSFER OF KRISTEN S. BYERS, EXAMINING ATTORNEY
</TABLE>
<PAGE> 1
EXHIBIT 10.5
THE UNITED STATES OF AMERICA
CERTIFICATE OF REGISTRATION PRINCIPAL REGISTER
The Mark shown in this certificate has been registered in the United
States Patent and Trademark Office to the named registrant.
The records of the United States Patent and Trademark Office show that
an application for registration of the Mark shown in this Certificate was filed
in the Office, that the application was examined and determined to be in
compliance with the requirements of the law and with the regulations prescribed
by the Commissioner of Patents and Trademarks, and that the Applicant is
entitled to registration of the Mark under the Trademark Act of 1946, as
Amended.
A copy of the Mark and pertinent data from the application are a part
of this certificate.
This registration shall remain in force for TEN (10) years, unless
terminated earlier as provided by law, and subject to compliance with the
provisions of Section 8 of the Trademark Act of 1946, as Amended.
[SEAL] ------------------------------------------
Commissioner of Patents and Trademarks
<PAGE> 2
INT. CL.:5
PRIOR U.S. CLS.: 6, 18, 44, 46, 51, AND 52
REG. NO. 2,186,559
UNITED STATES PATENT AND TRADEMARK OFFICE REGISTERED SEP. 1, 1998
- ------------------------------------------------------------------------------
TRADEMARK
PRINCIPAL REGISTER
VIRAGUARD
<TABLE>
<S> <C>
ROST, INC. (FLORIDA CORPORATION) FOR: ALL PURPOSE ANTI-VIRAL SURFACE
11800 28TH STREET NORTH DISINFECTANT, IN CLASS 5 (U.S. CLS. 6, 18, 44,
ST. PETERSBURG, FL 33716 46, 51 AND 52).
FIRST USE 7-29-1997; IN COMMERCE 11-18-1997.
SN 75-184,761, FILED 10-21-1996.
BARNEY CHARLON, EXAMINING ATTORNEY
</TABLE>
<PAGE> 1
EXHIBIT 10.6
THE UNTIED STATES OF AMERICA
No. 1783204
CERTIFICATE OF REGISTRATION
This is to certify that the records of the Patent and Trademark
Office show that an application was filed in said Office for registration of the
Mark shown herein, a copy of said Mark and pertinent data from the Application
being annexed hereto and made a part hereof,
And there having been due compliance with the requirements of the law
and with the regulations prescribed by the Commissioner of Patents and
Trademarks,
Upon examination, it appeared that the applicant was entitled to have
said Mark registered under the Trademark Act of 1946, as amended, and the said
Mark has been duly registered this day in the Patent and Trademark Office on the
PRINCIPAL REGISTER
to the registrant named herein.
This registration shall remain in force for TEN years unless sooner
terminated as provided by law.
In Testimony Whereof I have hereunto set
my hand and caused the seal of the Patent
and Trademark Office to be affixed this
twentieth day of July 1993.
------------------------------------------
Michael K. Kirk
Acting Commissioner of Patents and Trademarks
<PAGE> 2
INT. CL.:5
PRIOR U.S. CLS.: 6 AND 18
REG. NO. 1,783,204
UNITED STATES PATENT AND TRADEMARK OFFICE Registered July 20, 1993
- --------------------------------------------------------------------------------
TRADEMARK
PRINCIPAL REGISTER
VIRAGEL
ROST, INCORPORATED (FLORIDA FIRST USE 3-0-1992; IN COMMERCE 7-0-1992.
CORPORATION)
2802 LESLIE ROAD SN 74-232,909, FILED 12-23-1991.
TAMPA, FL 33619
ALICE SUE CARRUTHERS, EXAMINING ATTORNEY
FOR: DISINFECTING HAND SCRUB, IN
CLASS 5 (U.S. CLS. 6 AND 18).
<PAGE> 1
EXHIBIT 10.7
THE UNITED STATES OF AMERICA
CERTIFICATE OF REGISTRATION
PRINCIPAL REGISTER
The Mark shown in this certificate has been registered in the United
States Patent and Trademark Office to the named registrant.
The records of the United States Patent and Trademark Office show
that an application for registration of the Mark shown in this Certificate was
filed in the Office, that the application was examined and determined to be in
compliance with the requirements of the law and with the regulations prescribed
by the Commissioner of Patents and Trademarks, and that the Applicant is
entitled to registration of the Mark under the Trademark Act of 1946, as
Amended.
A copy of the Mark and pertinent data from the application are a part
of this certificate.
This registration shall remain in force for TEN (10) years, unless
terminated earlier as provided by law, and subject to compliance with the
provisions of Section 8 of the Trademark Act of 1946, as Amended.
{seal}
PATENT AND TRADEMARK OFFICE
UNITED STATES OF AMERICA
----------------------------------------
Commissioner of Patents and Trademarks
<PAGE> 2
INT. CL.: 3
PRIOR U.S. CLS.: 1, 4, 6, 50, 51, AND 52
REG. NO. 2,127,866
UNITED STATES PATENT AND TRADEMARK OFFICE Registered Jan. 6, 1998
- --------------------------------------------------------------------------------
TRADEMARK
PRINCIPAL REGISTER
VIRA-CD 7
ROST, INC. (FLORIDA CORPORATION) FIRST USE 7-1-1996; IN COMMERCE
11800 28TH STREET NORTH 2-24-1997.
ST. PETERSBURG, FL 33716
FOR: ALL PURPOSE SURFACE DETER- SN 75-178,396, FILED 10-8-1996.
GENT / CLEANER / DISINFECTANT FOR
HARD SURFACES, IN CLASS 3 (U.S. CLS. 1, 4,
6, 50, 51 AND 52).
KAREN KUHLKE, EXAMINING ATTORNEY
<PAGE> 1
EXHIBIT 10.8
COMMONWEALTH OF AUSTRALIA - LETTERHEAD
No.
667930
LETTERS PATENT
Patents Act 1990
STANDARD PATENT
I, Bruce Ian Murray, Commissioner of Patents, grant a Standard Patent with the
following particulars:
Names and Addresses of Patentees:
Paul L. Simmons, No. 203 6250 Kipps Colony Court Gulfport FL 33707 United
States Of America
Ted Turner, 1810 Nebraska Avenue SE St-Petersburg FL 33703 United States Of
America
Names of Actual Inventors: Paul L. Simmons and Ted Turner
Title of Invention: Nonaqueous cold sterilant.
Application Number: 44061/93
Term of Letters Patent: Twenty years commencing on 9 June 1993
Priority Details:
Number Date Country
901592 19 June 1992 UNITED STATES OF AMERICA
Dated this 30 day of July 1996
/s/ B.I. MURRAY
COMMISSIONER OF PATENTS
<PAGE> 1
EXHIBIT 10.9
COMMONWEALTH OF AUSTRALIA - LETTERHEAD
No.
628932
Letters patent
Patents Act 1990
STANDARD PATENT
I, Andrew Addison Bain, Commissioner of Patents, grant a Standard Patent with
the following particulars:
Name and Address of Patentee:
Paul L. Simmons, 501 West One Key Capri Boulevard Treasure Island FL 33706
United States Of America
Name of Actual Inventor: Paul L. Simmons
Title of Invention: Biodegradable disinfectant
Application Number: 50453/90
Term of Letters Patent: Sixteen years commencing on 30 January 1990
Priority Details:
Number Date Country
304312 31 January 1989 UNITED STATES OF AMERICA
Dated this 22 day of January 1993
----------------------------------------
A. A. BAIN
Commissioner of Patents
<PAGE> 2
(12) PATENT ABRIDGMENT (11) Document No. AU-B-50453/90
(19) AUSTRALIAN PATENT OFFICE (10) Acceptance No. 628932
(54) Title
BIODEGRADABLE DISINFECTANT
International Patent Classification(s)
(51)5 A61L 002/18
(21) Application No.: 50453/90 (22) Application Date: 30.01.90
(87) PCT Publication Number: W090/08559
(30) Priority Date
(31) Number (32) Date (33) Country
304312 31.01.89 US UNITED STATES OF AMERICA
(43) Publication Date: 24.08.90
(44) Publication Date of Accepted Application: 24.09.92
(71) Applicant(s)
PAUL L. SIMMONS
(72) Inventor(s)
PAUL L. SIMMONS
(74) Attorney or Agent
GRIFFITH HACK & CO, GPO Box 1285K, MELBOURNE VIC 3001
(57) Claim
1. A non-toxic, non-corrosive, biodegradable disinfectant and antiseptic
for use against various pathogenic organisms, said disinfectant and
antiseptic being a homogenous composition comprising isopropyl
alcohol and about 8 to 12 percent by weight of propylene glycol,
performing interactively, in proportion by weight such that said
propylene glycol reduces the surface glaze formed by said isopropyl
alcohol and surface tension formed by water or water-based body
fluids enabling said disinfectant and antiseptic to rapidly contact
the pathogenic organisms and act equally effective on a patient or
inanimate surface without deleterious effect.
<PAGE> 3
OPI Date 24/08/90 APPLN. ID 50453/90
PCT AOJP Date 27/09/90 PCT Number PCT/US90/00402
INTERNATIONAL APPLICATION PUBLISHED UNDER THE PATENT COOPERATION TREATY (PCT)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(51) International Patent Classification(5): (11) International Publication Number: WO 90/08559
A61L9/14 A1
(43) International Publication Date: 9 August 1990
(09.08.90)
(21) International Application Number: PCT/US90/00402 Published
With intentional search report.
(22) International Filing Date: 30 January 1990 (30.01.90)
(30) Priority data:
304,312 31 January 1989 (31.01.89) US
628932
</TABLE>
(71)(72) Applicant and Inventor: SIMMONS, Paul, L. [US/US];
501 West, One Key Capri Boulevard, Treasure Island,
FL 33706 (US).
(74) Agent: FISHER, Arthur, W., III; Suite 500, 6304 Benjamin Road, Tampa,
FL 33634 (US).
(81) Designated States: AT (European patent), AU, BE
(European patent), BG, CH (European patent), DE
(European patent), DK (European patent), ES (Euro-
pean patent), FR (European patent), GB, GB (Euro-
pean patent), HU, IT (European patent), JP, KP, KR,
LU (European patent), NL (European patent), RO, SE
(European patent), SU.
(54) Title: BIODEGRADABLE DISINFECTANT
(57) Abstract
A non-toxic, non-corrosive, biodegradable disinfectant and antiseptic
for use against various pathogenic organisms comprising a homogeneous
composition of interactive constituents including anhydrous alcohol, propylene
glycol, maskant and inert ingredients wherein the propylene glycol reduces the
surface glaze formed by the anhydrous alcohol and surface tension formed by
water or water-based fluids enabling the disinfectant to rapidly contact the
pathogenic organisms.
<PAGE> 4
PCT/US90/00402
Description
Biodegradable Disinfectant
Technical Field
A non-toxic, non-corrosive, biodegradable disinfectant effective
against various pathogenic organisms.
Background Art
Rapid increases in the spread of deadly communicable diseases such as
AIDS virus (HIV) have dramatically escalated public awareness for the need of an
effective protective means.
The need for such protective means applies equally to contaminated
surfaces such as those found in public restrooms, telephones, tables and other
surfaces contacted by the public as well as for topical application directly on
a patient's skin.
A common means for such surface protection is typified by a
disposable paper cover for a toilet. Such disposable paper covers often do not
contain a germicide and are not always available or easily used.
Various spray germicides for sanitizing such surfaces is typified by
in U.S. Pat. No. 3,445,564. In addition, the use of a dye in a bactericidal
solution as disclosed in U.S. 2,449,274 is employed to provide a visual
indication of the effectiveness of such sprays.
U.S. 4,678,658 shows disinfecting compounds effective as germicides
reducing surface tension to more effective distribute the germicide spray on the
surface. However, the spray is corrosive and environmentally unsafe.
U.S. 3,821,413 teaches a disinfectant consisting of propylene glycol
to stabilize the composition and retard evaporation. This disinfectant is toxic,
corrosive and non-biodegradable.
U.S. 3,966,902 disclosed various polymer complex carriers such as
propylene glycol for use with an active ingredient such as a disinfectant or
fragrance.
U.S. 4,690,779 refers to the use of propylene glycol in combination
with alcohol and fragrances. This composition is both toxic and
non-biodegradable.
U.S. 4,209,506 teaches a composition suitable for use in aerosol
sprays including an anhydrous alcohol and fragrance or perfume. This composition
is corrosive, non-biodegradable and non-evaporative.
Additional examples of the prior art are found in U.S. 580,213, U.S.
4,282,179, U.S. 4,265,899, U.S. 4,283,421, U.S. 4,364,515, U.S. 4,550,105, U.S.
4,105,431, U.S. 4,243,403, U.S. 4,278,206, U.S. 4,322,475, U.S. 4,436,732, U.S.
4,597,887, U.S. 4,252,694, U.S. 4,279,762, U.S. 4,325,201, U.S. 4,540,505 and
U.S. 4,675,397.
<PAGE> 5
2
Examination of the prior art fails to teach or suggest an effective
surface active disinfectant for application on contaminated surfaces or a
patient's skin through a spray or liquid application.
Disclosure of Invention
The present invention relates to a non-toxic, non-corrosive,
biodegradable disinfectant for topical application on a patient's skin or to
surfaces to kill various pathogenic organisms.
The non-toxic, non-corrosive, biodegradable disinfectant comprises a
composition of interactive constituents including isopropyl alcohol, propylene
glycol and inert ingredients combined in specific relative proportions by weight
such that the non-toxic, non-corrosive, biodegradable disinfectant may be used
safely to disinfect a patient's skin through topically application or to
disinfect various surfaces with equal disinfecting effectiveness. The
interactive composition comprises isopropyl alcohol 70%, propylene glycol 10%,
fragrance 1% and inert ingredients 19% by weight.
The isopropyl alcohol provides the primary disinfecting or killing
effect on the pathogenic organisms. The propylene glycol lowers the flash point
of the disinfectant and soothes the skin. The propylene glycol also slows the
rate of evaporation, reduces or eliminates the intersurface glazing effect of
anhydrous alcohol and homogenizes the interactive ingredients.
The critical balance of interactive ingredients chemically reduces
the tensile strength of the surface liquids on the patient's skin or other
surface permitting the disinfecting effect to act directly on the pathogenic
organisms.
The invention accordingly comprises the features of construction,
combination of elements, and arrangement of parts which will be exemplified in
the construction hereinafter set forth, and the scope of the invention will be
indicated in the claims.
Best Mode for Carrying Out the Invention
Various compositions and devices have been developed to disinfect
various pathogenic organisms. Catholic application is limited by the chemical
and biological effect of such compositions or limitations on various surfaces,
delivery means and patients.
The present invention relates to a non-toxic, non-corrosive,
biodegradable disinfectant and antiseptic for topical application on a patient's
skin or on hard surfaces such as restrooms or tables against various pathogenic
organisms such as bacteria including staphylococcus aureus, pseudomonas
aeruginosa and salmonella coleraesuis and viruses, including HIV-I, HIV-II and
herpes simplex type 2 as well as fungi, mold and mildew through numerous
delivery means.
The non-toxic, non-corrosive, biodegradable disinfectant of the
subject invention comprises an interactive composition of isopropyl alcohol,
propylene glycol and inert ingredients combined in specific relative proportions
by weight such that the disinfectant may be used topically to disinfect a
patient's skin or to disinfect various public surfaces through direct
application with equal effectiveness.
This unique disinfectant is effective against various pathogenic
organisms common to the general environment without deleterious non-toxic effect
on patients or damage to surfaces or
<PAGE> 6
3
dispensing devices as exemplified herein. The optimum proportional relationship
of the ingredients by weight is substantially or about isopropyl alcohol 70%,
propylene glycol 10%, fragrance 1% and inert ingredients 19%.
The isopropyl alcohol is effective in a range of 65 to 75 percent.
The effective range of propylene glycol is between 8 to 12 percent by
weight. This proportion is critical to the universal use of the instant
disinfectant. During development of the instant invention numerous
concentrations were tested. The optimum proportions provide a disinfectant
effective against numerous pathogenic organisms without harming or destroying
the dispensing means, disinfected surface or patient.
The optimum percentage of propylene glycol raises the boiling point
of the disinfectant slowing the rate of evaporation. As a solvent the propylene
glycol prevents the tendency of isopropyl to form a glaze on the target surface
that masks the pathogenic organisms. Since the propylene glycol breaks the
surface tension of water and water-based body fluids this enables the
disinfectant to act on the virus or organism more rapidly. The effectiveness is
reduced to a one minute kill time, rather than ten minutes as in most other
disinfectants. In addition the proplene glycol serves as an emulsifier to assure
that the fragrance and alcohol remain homogenized during storage and use.
Further the propylene glycol reduces the harmful effects of alcohol
if swallowed or sprayed into the eyes or on mucus membranes as well as soothing
the skin upon contact. Since the propylene glycol reduces toxicity to human
cells the need to dilute the disinfectant has been eliminated. Propylene glycol
also acts as a secondary disinfectant useful to disinfect air. In the preferred
percentage used tests indicate that the propylene glycol increases the overall
effectiveness against most viruses, mold and mildew.
Since the disinfectant was developed for use on a wide variety of
surfaces and dispensed from a number of dispensing modes or means of dispersant
materials the measure of chemical resistance is important to provide universal
use and application. As shown by the following chemical resistance chart the
present invention compares favorably to propylene glycol and isopropyl alcohol.
<TABLE>
<CAPTION>
Material Propylene Isopropyl Disinfectant
Glycol Alcohol
------ -------
<S> <C> <C> <C>
CPVC C1 A2 B2
Epoxy C A B
Polypropylene B2 A2 A2
PVC C1 B1 A1
Cycolac* B - B
Phenolic A A A
Nylon - B1 B1
</TABLE>
<PAGE> 7
4
<TABLE>
<CAPTION>
Material Propylene Isopropyl Disinfectant
Glycol Alcohol
------ -------
<S> <C> <C> <C>
Noryl* - A1 A1
Delrin* (Acetal) B A A
Ryton* to 200(degree)F - - -
Kynar (PVDF) - - -
Teflon* A A2 A2
Stainless Steel 316 B A A
Stainless Steel 304 B A A
Carpenter* 20 A A A
Stainless steel 440 - - -
Titanium A A A
Cast Bronze A A A
Cast Iron A C B
Aluminum B B B
Hastelloy C B B B
Carbon/ceramic A A A
Ceramagnet A - - -
Viton* A A A
Buna N* A B A
Neoprene* C B B
Nitrile* A B A
Natural rubber - A A
Hypalon* - A A
EPDM - A A
Kel-F* - - -
</TABLE>
<PAGE> 8
5
<TABLE>
<CAPTION>
Material Propylene Isopropyl Disinfectant
Glycol Alcohol
------ -------
<S> <C> <C> <C>
Tygon* - - -
Silicone - A A
Ceramic A A A
Carbon/graphite - A A
* indicates trademark
</TABLE>
The following legend is provided to interpret the foregoing chart.
Ratings-chemical effect Explanation of footnotes
- ----------------------- ------------------------
A-No effect-Excellent 1 Satisfactory to 72(degree)F
B-Minor effect-Good 2 Satisfactory to 120(degree)F
C-Moderate effect-Fair 3 Satisfactory for 0-rings
D-Severe effect-Not recommended
An examination of this chart and the comparative results clearly
demonstrates that the optimum combination of interactive ingredients of the
instant invention provides a disinfective effective against an expansive range
of materials found in a wide variety environments through various delivery means
such as aerosol, pump, spray or swab.
The non-toxic, biodegradable aspect of the disinfectant permits
disposal without polluting ground water.
It will thus be seen that the objects set forth above, among those
made apparent from the preceding description are efficiently attained and since
certain changes may be made in the above construction without departing from the
scope of the invention, it is intended that all matter contained in the above
description or shown in the accompanying drawing shall be interpreted as
illustrative and not in a limiting sense.
It is also to be understood that the following claims are intended to
cover all of the generic and specific features of the invention herein
described, and all statements of the scope of the invention which, as a matter
of language, might be said to fall therebetween.
THE CLAIMS DEFINING THE INVENTION ARE AS FOLLOWS:
1. A non-toxic, non-corrosive, biodegradable disinfectant and antiseptic
for use against various pathogenic organisms, said disinfectant and
antiseptic being a homogenous composition comprising isopropyl
alcohol and about 8 to 12 percent by weight of propylene glycol,
performing interactively, in proportion by weight such that said
propylene glycol reduces the surface glaze formed by said isopropyl
alcohol and surface
<PAGE> 9
6
tension formed by water or water-based body fluids enabling
said disinfectant and antiseptic to rapidly contact the pathogenic
organisms and act equally effective on a patient or inanimate surface
without deleterious effect.
2. The non-toxic, non-corrosive, biodegradable disinfectant and
antiseptic for use against various pathogenic organisms of Claim 1
includes about 65 percent to 75 percent isopropyl alcohol by weight.
3. The non-toxic, non-corrosive, biodegradable disinfectant and
antiseptic for use against various pathogenic organisms of Claim 2
includes about 19 percent inert ingredients by weight.
4. The non-toxic, non-corrosive, biodegradable disinfectant and
antiseptic for use against various pathogenic organisms of Claim 3
includes about 1 percent fragrance by weight.
5. The non-toxic, non-corrosive, biodegradable disinfectant and
antiseptic for use against various pathogenic organisms of Claim 1
includes about 70 Percent isopropyl alcohol by weight.
6. The non-toxic, non-corrosive, biodegradable disinfectant and
antiseptic for use against various pathogenic organisms of Claim 5
includes about 10 percent propylene glycol by weight.
7. The non-toxic, non-corrosive, biodegradable disinfectant and
antiseptic for use against various pathogenic organisms of Claim 6
includes about 19 percent inert ingredients by weight.
8. The non-toxic, non-corrosive, biodegradable disinfectant and
antiseptic for use against various pathogenic organisms of Claim 7
includes about 1 percent fragrance by weight.
9. The non-toxic, non-corrosive, biodegradable disinfectant and
antiseptic for use against various pathogenic organisms of Claim 1
includes substantially 70 percent anhydrous alcohol by weight and
substantially 10 percent propylene glycol by weight.
10. A non-toxic, non-corrosive, biodegradable disinfectant and antiseptic
for use against various pathogenic organisms of Claim 9 includes
about 19 percent inert ingredients by weight.
11. A non-toxic, non-corrosive, biodegradable disinfectant and antiseptic
for use against various pathogenic organisms of Claim 10 includes
about 1 percent fragrance by weight.
DATED THIS 14TH DAY OF MAY 1992
Paul L. Simmons
By its Patent Attorneys:
GRIFFITH HACK & CO
Fellows Institute of Patent
Attorneys of Australia.
<PAGE> 1
EXHIBIT 10.10
Biodegradable Disinfectant, Canadian Patent No. 1,337,329.
<PAGE> 2
CANADIAN INTELLECTUAL PROPERTY OFFICE LETTERHEAD
The Commissioner of Patents has received a petition for the grant of a patent
for an invention. The requirements of the Patent Act have been complied with.
The title and a description of the invention are contained in the
specification, a copy of which forms an integral part of this document.
The present patent grants to its owner and to the legal representatives of its
owner, for a term which expires seventeen years from the date on which the
patent is granted and issued in Canada, the exclusive right, privilege and
liberty of making, constructing, using and vending to others to be used the
invention, subject to adjudication before any court of competent jurisdiction,
and subject to the payment of maintenance fees.
1337329
1995/10/17
Commissioner of Patents
-------------------------------
<PAGE> 3
CANADIAN INTELLECTUAL PROPERTY OFFICE LETTERHEAD
(11) (C) 1,337,329
(21) 600,449
(22) 1989/05/23
(45) 1995/10/17
(52) 167-24.3
(51) Int.Cl.5 AO1N 31/02
(19) (CA) CANADIAN PATENT (12)
(54) Biodegradable Disinfectant
(72) Simmons, Paul L., U.S.A.
(73) Same as inventor
(30) (US) U.S.A. 07/304,312 1989/01/31
(57) 4 Claims
NO DRAWING
<PAGE> 4
BACKGROUND OF THE INVENTION
Field of the Invention
A non-toxic, non-corrosive biodegradable disinfectant effective
against various pathogenic organisms.
Description of the Prior Art
Rapid increases in the spread of deadly communicable diseases such an
AIDS virus (HIV) have dramatically escalated public awareness for the need of
an effective protective means.
The need for such protective means applies equally to contaminated
surfaces such as those found in public restrooms, telephones, tables and other
surfaces contacted by the public as well as for topical application directly on
a patient's skin.
A common means for such surface protection is typified by a disposable
paper cover for a toilet. Such disposable paper covers often do not contain a
germicide and are not always available or easily used.
Various spray germicides for sanitizing such surfaces is typified by
in U.S. Pat. No. 3,445,564 issued May 20, 1969. In addition, the use of a dye
in a bacteracidal solution as disclosed in U.S. 2,449,274 issued September 14,
1948 is employed to provide a visual indication of the effectiveness of such
sprays.
U.S. 4,678,658 issued July 7, 1987 shows disinfecting compounds
effective as germicides reducing surface tension to more effectively distribute
the germicide spray on the surface. However, the spray is corrosive and
environmentally unsafe.
U.S. 3,821,413 issued June 28, 1974 teaches a disinfectant consisting
of propylene glycol to stabilize the composition and retard evaporation. This
disinfectant is toxic, corrosive and non-biodegradable.
U.S. 3,966,902 issued June 29, 1976 disclosed various polymer complex
carriers such as propylene glycol for use with an active ingredient such as a
disinfectant or fragrance.
U.S. 4,690,779 issued September 1, 1987 refers to the use of propylene
glycol in combination with alcohol and
fragrances. This composition is both toxic and non-biodegradable.
U.S. 4,209,506 issued January 24, 1980 teaches a composition suitable
for use in aerosol sprays including an anhydrous alcohol and fragrance or
perfume. This is corrosive, non-biodegradable and non-evaporative.
Additional examples of the prior art are found in U.S. 580,213 issued
April 6, 1897, U.S. 4,282,179 issued August 4, 1981, U.S. 4,265,899 issued May
5, 1981, U.S. 4,283,421 issued August 11, 1981, U.S. 4,364,515 issued December
21, 1982, U.S. 4,550,105 issued October 29, 1985, U.S. 4,105,431 issued August
8, 1978, U.S. 4,243,403 issued January 6, 1981, U.S. 4,278,206 issued July 14,
1981, U.S. 4,322,475 issued March 30, 1982, U.S. 4,436,732 issued March 13,
1964, U.S. 4,597,887 issued July 1, 1986, U.S. 4,252,694 issued February 24,
1981,
2
<PAGE> 5
U.S. 4,279,762 issued July 21, 1981, U.S. 4,325,201 issued April 20,
1982, U.S. 4,540,505 issued September 10, 1985 and U.S. 4,675,397 issued June
23, 1987.
Examination of the prior art fails to teach or suggest an effective
surface active disinfectant for application on contaminated surfaces or a
patient's skin through a spray or liquid application.
SUMMARY OF INVENTION
The present invention relates to a non-toxic, non-corrosive,
biodegradable disinfectant for topical application on a patient's skin or to
surfaces to kill various pathogenic organisms.
The non-toxic, non-corrosive, biodegradable disinfectant comprises a
composition of interactive constituents including anhydrous alcohol, propylene
glycol and inert ingredients combined in specific relative proportions by
weight such that the non-toxic, non-corrosive, biodegradable disinfectant may
be used safely to disinfect a patient's skin through topically application or
to disinfect various surfaces with equal disinfecting effectiveness. The
interactive composition comprises anhydrous alcohol 70%, propylene glycol 10%,
fragrance 1% and inert ingredients 19% by weight.
The anhydrous alcohol provides the primary disinfecting or killing
effect on the pathogenic organisms. The propylene glycol lowers the flash point
of the disinfectant and soothes the skin. The propylene glycol also slows the
rate of evaporation, reduces or eliminates the intersurface glazing effect of
anhydrous alcohol and homogenizes the interactive ingredients.
The critical balance of interactive ingredients chemically reduces the
tensile strength of the surface liquids on the patient's skin or other surface
permitting the disinfecting effect to act directly on the pathogenic organisms.
The invention accordingly comprises the features of construction,
combination of elements, and arrangement of parts which will be exemplified in
the construction hereinafter set forth, and the scope of the invention will be
indicated in the claims.
DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT
Various compositions and devices have been developed to disinfect
various pathogenic organisms. Catholic application is limited by the chemical
and biological effect of such compositions or limitations an various surfaces,
delivery means and patients.
The present invention relates to a non-toxic, non-corrosive,
biodegradable disinfectant and antiseptic for topical application on a
patient's skin or on hard surfaces such as restrooms or tables against various
pathogenic organisms such as bacteria including staphylococcus aureus,
pseudomonas aeruginosa and salmonella coleraesuis and viruses, including HIV-I,
HIV-II and herpes simplex type 2 as well as fungi, mold and mildew through
numerous delivery means.
The non-toxic, non-corrosive, biodegradable disinfectant of the
subject invention comprises an interactive composition of anhydrous alcohol,
propylene glycol and inert ingredients combined in specific relative
proportions by weight such that the disinfectant may be
3
<PAGE> 6
used topically to disinfect a patient's skin or to disinfect various public
surfaces through direct application with equal effectiveness.
This unique disinfectant is effective against various pathogenic
organisms common to the general environment without deleterious non-toxic
effect on patients or damage to surfaces or dispensing devices as exemplified
herein. The optimum proportional relationship of the ingredients by weight is
anhydrous alcohol 70%, propylene glycol 10%, fragrance 1% and inert ingredients
19%.
The anhydrous alcohol is effective in a 65 to 75 percent range.
Since the disinfectant was developed for use on a wide variety of
surfaces and dispensed from a number of dispensing modes or means of dispersant
materials the measure of chemical resistance is important to provide universal
use and application. As shown by the following chemical resistance chart the
present invention compares favorably to propylene glycol and isopropyl alcohol.
Material Propylene Isopropyl Disinfectant
- -------- Glycol Alcohol ------------
--------- -------
CPVC Cl A2 B2
Epoxy C A B
Polypropylene B2 A2 A2
PVC Cl B1 A1
Cycolac* B - B
Phenolic A A A
Nylon - B1 B1
Noryl* - A1 A1
Delrin *(Acetal) B A A
Ryton*to 200(Degrees)F - - -
Kynar (PVDF) - - -
Teflon* A A2 A2
Stainless Steel 316 B A A
Stainless Steel 304 B A A
Carpenter*20 A A A
* indicates trademark
4
<PAGE> 7
Material Propylene Isopropyl Disinfectant
- -------- Glycol Alcohol ------------
--------- -------
Stainless steel (440) - - -
Titanium A A A
Cast Bronze A A A
Cast Iron A C B
Aluminum B B B
Hastelloy C B B B
Carbon/ceramic A A A
Ceramagnet A - - -
Viton* A A A
Buna N* A B A
Neoprene* C B B
Nitrile* A B A
Natural rubber - A A
Hypalon* - A A
EPDM - A A
Kel-F* - - -
Tygon* - - -
Silicone - A A
Ceramic A A A
Carbon/graphite - A A
*indicates trademark
5
<PAGE> 8
The following legend is provided to interpret the foregoing chart.
Ratings-chemical effect Explanation of
- ----------------------- footnotes
--------------
A-No effect-Excellent 1 Satisfactory to 72(Degrees)F
B-Minor effect-Good 2 Satisfactory to 120(Degrees)F
C-Moderate effect-Fair 3 satisfactory for O-rings
D-Severe effect-Not recommended
An examination of this chart and the comparative results clearly
demonstrates that the optimum combination of interactive ingredients of the
instant invention provides a disinfective effective against an expansive range
of materials found in a wide variety environments through various delivery
means such as aerosol, pump, Spray or swab.
The non-toxic, biodegradable aspect of the disinfectant permits
disposal without polluting ground water.
It will thus be seen that the objects set forth above, among those
made apparent from the preceding description are efficiently attained and since
certain changes may be made in the above construction without departing from
the scope of the invention, it is intended that all matter contained in the
above description or shown in the accompanying drawing shall be interpreted as
illustrative and not in a limiting sense.
It is also to be understood that the following claims are intended to
cover all of the generic and specific features of the invention herein
described, and all statements of the scope of the invention which, as a matter
of language, might be said to fall therebetween.
Now that the invention has been described.
WHAT IS CLAIMED IS:
1. A non-toxic, non-corrosive, biodegradable disinfectant and
antiseptic for use against various pathogenic organisms, said disinfectant and
antiseptic consisting essentially of about 65 to 75% by weight isopropyl
alcohol and about 8 to 12% by weight propylene glycol, mixed homogeneously and
performing interactively in a proportion by weight such that sold propylene
glycol reduces the surface glaze formed by said isopropyl alcohol and surface
tension formed by water of water-based body fluids enabling said disinfectant
to rapidly contact the pathogenic organisms and act equally effective on a
patient or inanimate surface without deleterious effect.
2. A non-toxic, non-corrosive, biodegradable disinfectant and antiseptic
according to Claim 1, said isopropyl alcohol being present in an amount of
about 70% by weight.
6
<PAGE> 9
3. A non-toxic, non-corrosive, biodegradable disinfectant and antiseptic
according to Claim 2, at least about 19% by weight of said disinfectant and
antiseptic being inert ingredients.
4. A non-toxic, non-corrosive, biodegradable disinfectant and antiseptic
according to Claim 1 or 2, wherein said propylene glycol is present in an
amount of about 10% by weight.
7
<PAGE> 1
EXHIBIT 10.11
INSTITUTO MEXICANO DE LA PROPIEDAD INDUSTRIAL
LETTERHEAD
TITULO DE PATENTE DE INVENCION NUMERO: 185884
-----------------------
TITULAR(ES): ROST INC.
DOMICILIO(S): 3542 MORRIS STREET, ST. PETERSBURG, FLORIDA 33713, E.U.A.
DENOMINACION: GERMICIDA BIODEGRADABLE HIPOCOMPATIBLE, NO TOXICO.
CLASIF.INT(5): A61L2/18
INVENTOR(ES): PAUL L. SIMMONS
SOLICITUD
FECHA DE
NUMERO: 9401009 PRESENTACION: 8 DE FEBRERO DE 1994 HORA: 14:22
PRIORIDAD
PAIS: US FECHA: 16 DE JUGLIO DE 1993 NUMERO: 092,556
ESTA PATENTE CONCEDE A SU TITULAR EL DERECHO EXCLUSIVO DE EXPLOTACION
DEL INVENTO RECLAMADO EN EL CAPITULO REIVINDICATORIO Y TIENE UNA VIGENCIA DE
VEINTE ANOS IMPRORROGABLES CONTADOS A PARTIR DE LA FECHA DE PRESENTACION DE LA
SOLICITUD.
FECHA DE EXPEDICION
9 DE SEPTIEMBRE DE 1997
EL DIRECTOR GENERAL
-----------------------------
LIC. JORGE AMIGO CASTANEDA
<PAGE> 1
EXHIBIT 10.12
THE PATENT OFFICE SYMBOL
(12) UK PATENT (19) GB (11) 2 294 639 (13) B
(54) Title of Invention
Non-Toxic hypocompatible biodegradable germicide
(51) INT CL6; A61K 9/12, AO1N 25/00 31/02
(21) Application No (72) Inventor(s)
9600476.7 PAUL L. SIMMONS
(22) Date of filing (73) Proprietor(s)
15.07.1994 PAUL L. SIMMONS
6223 PASADENA POINT BOULEVARD
(30) Priority Data GULFPORT
FLORIDA 33707
(31) 08092556 UNITED STATES OF AMERICA
(32) 16.07.1993 (74) Agent and/or
Address for Service
(33) US GILL JENNINGS & EVERY
BROADGATE HOUSE
(86) International Application Data 7 ELDON STREET
PCT/US94/07805 LONDON
EN 15.07.1994 EC2M 7LH
UNITED KINGDOM
(87) International Publication Data
W095/02393
EN 26.01.1995
(43) Application published
08.05.1996
(45) Patent published
14.01.1998
(52) Domestic classification
(Edition P)
A5B BJA B170 B40Y B402
B823 B825
A5E EBB ET E202 E248 E274
E275 E300 E311 E318 E321
U1S S1210 S1275 S1289
S2410
(CONTINUED ON NEXT PAGE)
<PAGE> 2
GB 2 294 639 B - CONTINUATION
(56) Documents cited
GB2245171 A
EP0547727 A2
WO94/00157 A1
US4511486 A
(58) Field of search
As for published application
2294639 A viz:
U.S.: 424/76.8, 514/975,
422/28
updated as appropriate
<PAGE> 3
DESCRIPTION
NON-TOXIC HYPOCOMPATIBLE BIODEGRADEABLE GERMICIDE COPENDING APPLICATION(S)
TECHNICAL FIELD
A non-toxic hypocompatible biodegradable germicide effective against a
wide range of pathogenic organisms.
BACKGROUND ART
Modern health care facilities are confronted with complex medical
problems, whether in a practitioner's office, clinic or large hospital. Such
facilities must care for persons with life-threatening diseases while protecting
other patients in the same facility from becoming infected. Thus, controlling
viral and microbial contamination is a critically important task facing health
care facilities today. In the past, the health care industry believed that
sanitation and disinfection applied primarily only to emergency rooms and
operating rooms or suites. However, today health care provides an awareness that
chemical sanitation and disinfection is necessary in virtually every area of the
modern treatment facility. This awareness has been heightened by the rapid
increases in the spread of deadly communicable diseases such as the AIDS virus
(HIV), hepatitis and tuberculosis, which the need for such protective means
applies equally to contaminated surfaces not only to health care facilities but
to such environs as public restrooms, telephones, tables and other surfaces
contacted by the public as well as for topical application directly on a
patient's skin. Various spray germicides for sanitizing such surfaces is
typified by in U.S. 3,445,564. U.S. 3,445,1564 is directed to a method,
compositions and articles for sanitizing public or communal facilities prior to
individual use. The method consists of applying a thin layer of a rapidly drying
liquid germicidal composition to a surface such as a toilet seat. The rapidly
drying germicidal compositions consist essentially of a lower aliphatic alcohol
and at least about 5 percent of a volatizing agent therefor, such as acetone.
Isopropyl alcohol has excellent germicidal activity and is sufficiently volatile
to give a satisfactory drying rate when blended with suitable proportions of a
volatilizing agent. Inasmuch as the lower aliphatic alcohols are not
sufficiently volatile to afford usefully short drying times for practical
purposes in the method and articles of the Kirschner invention it was necessary
to include a volatilizing agent in the germicidal composition. The proportion of
volatizing agent to lower aliphatic alcohol in the rapidly drying germicidal
compositions employed in the invention may vary widely depending upon a number
of factors, which include among others, the volatility of the alcohol employed,
the volatility of the volatilizing agent, the desired drying rate of the
germicidal composition, the amount of germicidal agent applied to the surface to
be treated and the method of application of the germicide, not to mention the
prevailing conditions of temperature and although the isopropyl alcohol-acetone
composition of U.S. 3,445,564 has germicidal activity against bacteria, fungi
and other lower organisms, additional antibacterial, antifungal or other active
ingredients may be incorporated to enhance the overall germicidal effectiveness.
Suitable germicidal additives include the well known antibacterial quaternary
ammonium compound. In essence, U.S. 3,445,564 teaches the use of isopropyl
alcohol to kill a limited number of germs on a dry toilet seat with the addition
of acetone to volatize an already highly volatile chemical to rapidly dry the
toilet seat for use within 30 seconds. The use of a dye in a bactericidal
solution as disclosed in U.S. 2,449,274 is employed to provide a visual
indication of the effectiveness of such sprays. U.S. 4,678,658 shows an aerosol
spray for use in disinfecting a surface for personal use such as a
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public restroom facility or telephone. The composition and delivery of the
compositions provides for the placement of a spray of disinfectant which
includes a dye that disappears as the spray effects the germicidal activity of
the disinfectant. The composition is also rapidly drying, so that the dye
disappears as well as the disinfecting composition leaving the surface dry.
However, the spray is corrosive and environmentally unsafe. U.S. 3,821,413
discloses a formulation of materials which permits an effective, uniform rate of
evaporation of glycols from an air circulator device to reduce airborne bacteria
in the surrounding atmosphere. It was observed that the relative amounts and
identities of the components of the invention are critical to the attainment of
the desired continuous evaporation of glycols over a prolonged period of time.
The composition of U.S. 3,821,413 is a single phase liquid composition
especially adapted for volatilization at a substantially uniform rate from the
air circulator device. Generally speaking, the composition includes three
essential components (1) a glycol, (2) an organic polar coupling compound for
maintaining the homogeneity prevents the glycol from separating from the mixture
during evaporation of the mixture into the atmosphere and (3) an organic,
relatively non-polar compound for forming hydrophobic micelles with the glycol
molecules in the resulting mixture for reducing the affinity of the glycol to
atmospheric moisture and thereby increasing the rate at which the glycol may be
evaporated into the atmosphere. The composition contains the glycol germicide.
If desired, other suitable germicides or antiseptic agents can be added
provided, however, that the glycol concentration of the composition does not
fall below 5 percent by weight of the total mixture. Such germicides include
quaternary ammonium compounds, phenols, bisphenols, salicylanilides,
carbanilides, formaldehyde and chloride. The required glycol evaporation rate
for attaining the desired air sanitizing performance depends on the satisfactory
stability and uniform nature of the liquid composition during evaporation from
the mixture. Accordingly, the compositions of the invention include from about 2
percent to about 40 percent by weight of an organic polar coupling compound for
maintaining the homogeneity of the mixture to prevent the glycol from separating
from the mixture during the evaporation process. The affinity of glycols to
attract atmospheric moisture significantly reduces their volatility and impairs
their evaporation rate. Accordingly, the compositions of the invention include
from about 5 percent to about 80 percent by weight of an organic, relatively
non-polar compound for forming hydrophobic micelles surrounding the glycol
molecules in the mixture for reducing the affinity of the glycol to atmospheric
moisture and thereby increase the rate of evaporation of the glycol. Without
this micelle formation, it was found that the glycol or mixture of glycols in
the mixture cannot evaporate appreciably in an air circulator device containing
a wick immersed in the liquid composition. U.S. 3,806,593 is directed to an acne
treatment medication applied to the skin for preventing the formation of acne or
decreasing already established acne. An important factor for the occurrence of
ache is the presence of bacteria in the sebaceous glands in the skin. It is
known that the bacteria in the sebaceous glands form esterases which hydrolyze
the sebum fats to alcohols and free fatty acids. The medicinal acne-preventing
or acne-diminishing composition of U.S. 3,806,593 is based on the bacterial
esterase activity in the sebaceous glands which together with the water already
present in the skin can hydrolyze an ester having a good penetration capacity
into the sebaceous glands to form one and preferably two antibacterially active
components, viz. an acid and an alcohol, which are harmless to the skin. The
active compound in the composition is one or more esters chosen from the group
consisting of ethyl lactate, isopropyl lactate and/or glycerol mono or
dilactate. The esters hydrolyze in the sebaceous glands due to the esterases
present in the glands to form the corresponding acids and alcohols. Lactic acid
and the lower alcohols and also glycerol to a certain extent exert a good
antibacterial activity when formed in situ in the sebaceous glands. The esters
are lipophilic and can thus penetrate into the said glands. Even if a beneficial
action can be achieved by application of the ester or esters per se it has been
found to be suitable to apply the ester in the form of a solution in ethyl
alcohol or isopropyl alcohol. The alcohol prevents hydrolysis of the ester
already in the composition. The
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alcohol moves the hydrolysis equilibrium towards ester formation. The alcohol
can also facilitate the penetration of the ester into the skin. As is well-known
alcohol in high concentrations may cause a drying-out of the skin. To counteract
this effect, the composition may include a moisture-retaining agent such as a
lower, suitably water-free polyol, viz. propylene glycol or glycerol. The
content of propylene glycol or glycerol in the composition according to the
invention may be up to 25 percent, suitably not more than 10 percent by weight
and preferably 1-5 percent. High levels of polyol tend to make the composition
smeary upon application on the skin and should thus be avoided. The preferred
composition according to the invention consists of about 15 percent by weight of
ethyl lactate, about 2 percent by weight of propylene glycol, the remainder
being ethyl alcohol. In summary, U.S. 3,806,593 relates to acne medication
comprising esters that hydrolize in the sebaceous glands in combination with an
alcohol to prevent hydrolysis of the esters as well facilitate the penetration
of the ester into the skin, and propylene glycol or glycerol to prevent drying
of the skin. The preferred ratio of the constituents is 15 percent to 83 percent
to 2 percent respectively. U.S. 4,664,909 discloses a stable, fast drying
pituitous powder deodorant suspension in an alcohol media containing a minimal
amount of water and a critical amount of the essential hydroxyethyl cellulose as
the suspending agent. The fast drying pituitous suspension of particulate
material in an aqueous alcohol media contains hydroxyethyl cellulose at levels
above its normal solubility limit by polyhydric alcohol. More specifically, U.S.
4,664,909 relates to stable pituitous suspensions of particulate material,
preferably about 1-20 percent, uniformly suspended in alcohol/aqueous media
containing a high alcohol content and a lower water content. The alcohol media
may be a lower monohydric alcohol selected from the group consisting of
methanol, ethanol, isopropanol and mixtures thereof. The use of polyhydric
alcohols such as propylene glycol, butylene glycol and polyols thereof, and
glycerin decreases the critical water level required in the hydroxyethyl
cellulose-containing alcohol media. It has been unexpectedly found that powders
can be suspended in alcoholic/aqueous media containing a high alcohol content
and a lower water content by using the water soluble polymer hydroxyethyl
cellulose at critical levels above its ethanol solubility range which may be
broadened by specified polyhydric alcohols. This polymer is unique in its
property to form stable suspensions. Specifically, polyhydric alcohols can be
partially substituted for the monohydric alcohol, not to exceed the monohydric
alcohol content. The monohydric alcohol content, such as ethanol, must exceed
the upper solubility level for the water soluble polymer hydroxyethyl cellulose
in ethanol or other lower alkanol. The reported upper solubility level of this
water soluble polymer in ethanol is 70 percent. Below this level and within
normal soluble use ranges, a uniformly viscous liquid is obtained which pours
evenly. Although, it appears aesthetically desirable, it will not support
suspended powder and segregation occurs. However, at ethanol concentrations
above its solubility range, the polymer becomes less soluble and forms the
desired pititious type liquid. If ethanol is further increased resulting in very
low water levels the polymer will precipitate out and its suspending properties
are again lost. Accordingly, a 70:30 ratio of ethanol-water is optimum. However,
it was found that this problem can be eliminated by the sufficient addition of a
polyhydric alcohol such as glycerine, propylene glycol, butylene glycol and
polyglycols thereto. Accordingly, it has been found that the monohydric alcohol
constitutes about 55-85 percent; and the water content may be as low as 5
percent if at least 10 percent polyhydric alcohol is also present in the
suspension. The combined water and polyhydric
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alcohol content is at least 15 percent and may be up to about 25 percent. Thus,
it is apparent that the proportions of monohydric alcohol, water and polyhydric
alcohol are interdependent. In summary, U.S. 4,664,909 teaches a fast-drying
deodorant comprising a critical amount of hydroxyethyl cellose as the deodorant
to encapsulate or isolate bacteria to prevent growth of the bacteria, suspended
in a solution of monohydric alcohol to provide the fast drying characteristics
and polyhydric alcohol to improve the overall soluability of the solution to
allow the use of increased levels of monohydric alcohol. The relative
proportions of the monohydric alcohol, water and polyhydric alcohol are driven
or determined by the desired solubility and therefore are interdependent. U.S.
3,966,902 disclosed various polymer complex carriers such as propylene glycol
for use with an active ingredient such as a disinfectant or fragrance. U.S.
4,690,779 refers to the use of propylene glycol in combination with alcohol and
fragrances. This composition is both toxic and non-biodegradable. U.S. 4,209,500
teaches a composition suitable for use in aerosol sprays including an anhydrous
alcohol and fragrance or perfume. This composition is corrosive,
non-biodegradable and non-evaporative. Additional examples of the prior art are
found in U.S. 580,213, U.S. 4,282,179, U.S. 4,265,899, U.S. 4,283,421, U.S.
4,364,515, U.S. 4,550,105, U.S. 4,105,431, U.S. 4,243,403, U.S. 4,278,206, U.S.
4,322,475, U.S. 4,436,732, U.S. 4,597,887, U.S. 4,252,694, U.S. 4,279,762, U.S.
4,325,201, U.S. 4,540,505 and U.S. 4,675,397. Examination of the prior art
reveals that most existing disinfectants are either toxic or non-biodegradable
or both. Toxic chemicals that are not biodegradable contaminate the environment,
the soil and the water supply. Recent federal, state and local regulations are
designed to reduce or eliminate such environmental contamination resulting from
the use of such disinfectants. In recognition of the dangers of existing
disinfectants, health facilities are required to notify employees that toxic
chemicals are in use and inform them of the possible hazards that result or
could result as a consequence of misuse or spills. Such notices must also be
given to the community at other laws and regulations require users to document
the use of toxic chemicals and require that the excess, waste and residue be
collected and properly stored. These materials must be collected by licensed and
approved toxic waste companies, taken to authorized disposal sites and legally
destroyed. The cost of disposing of such toxic material is often more expensive
than the initial purchase price. Simply stated, the prior art fails to teach or
suggest an effective non-toxic biodegradable surface active
disinfectant/antiseptic for application on contaminated surfaces or for safe use
on a patient's skin. Disinfectants today should be non-toxic as well as
biodegradable, capable of killing or inactivating pathogenic organisms. Further,
such disinfectants should be chemically compatible with the numerous different
surfaces found in modern healthcare facilities. As described more fully
hereinafter the instant invention is directed to an environmentally safe
germicide capable of killing anaerobic and aerobic bacteria, viruses including
the HIV virus, mildew, mold and fungus. The principal active anti-microbial,
anti-viral ingredients of the instant invention are selected from a group of
monohydric alcohols and polyhydric alcohols. In the past such alcohols have had
limited use outside the laboratory due to various undesirable characteristics of
alcohol. For example, it has been universally accepted that alcohol has very
limited application as a widely used disinfectant because alcohol is unable to
penetrate protein rich material, evaporates quickly, has limited stability and
shelf life, has a pungent odor, tends to form a glaze on hard surfaces possibly
hiding or covering visible contamination and dries the skin. The instant
invention has involved an extensive development program involving the unexpected
formulation of certain chemicals to reduce or inhibit those undesirable features
of alcohol and to make alcohol safe and effective
for use outside the laboratory.
DISCLOSURE OF THE INVENTION
The present invention relates to a non-toxic hypocompatible
biodegradable germicide for topical application on a patient's skin or to
inanimate surfaces to kill a wide range of pathogenic organisms. The
biodegradable germicide comprises a composition including a monohydric alcohol
from the group consisting of isopropyl, methyl, ethyl, n-propyl, n-butyl,
tert-butyl alcohol or allyl alcohol and/or mixtures thereof and a polyhydric
alcohol from the group consisting of propylene glycol; 1,3 propanediol; 1,2
butanediol, PEG 400; glycerol or 1,4 butanediol and/or mixtures thereof in
proportion by weight such that the polyhydric alcohol reduces the surface glaze
formed by the monohydric alcohol and surface tension formed by water or
water-based
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body fluids enabling the germicide to kill the pathogenic organisms and act
equally effective on a patient or inanimate surface without deleterious effect
to either. The monohydric alcohol provides the primary disinfecting or killing
effect on the pathogenic organisms; while, the polyhydric alcohol lowers the
flash point of the composition and soothes the skin. The polyhydric alcohol also
slows the rate of evaporation, reduces or eliminates the intersurface glazing
effect of monohydric alcohol and homogenizes the interactive ingredients. The
relative proportions by weight of interactive ingredients chemically reduces the
tensile strength of the surface liquids on the patient's skin or other surface
permitting the germicidal effect to act directly on the pathogenic organisms.
The non-toxic hypocompatible biodegradable germicide in liquid form may be
dispensed in various delivery systems including spray, foam, pour and squirt for
a aerosol or non-aerosol product. Alternate systems may include a towelette or
an absorbent wipe containing the product in an airtight enveloping material such
as sealed foil or other wrapping material could be used for a single
application. The invention accordingly comprises the features of construction,
combination of elements, and arrangement of parts which will be exemplified in
the construction hereinafter set forth, and the scope of the invention will be
indicated in the claims.
Numerous germicidal compositions and delivery devices have been
developed to kill various pathogenic organisms. The wide range of application or
use is limited by the chemical and biological effect of such compositions on the
various surfaces, delivery means and patients exposed to such germicidal
compositions. The present invention relates to a non-toxic hypocompatible
biodegradable germicide for topical application on a patient's skin or on hard
surfaces such as restrooms or tables effective against a wide range of target
pathogenic organisms such as Bacteria including staphylococcus aureus,
pseudomonas aeruginosa and salmonella choleraesuis, HIV-I, HIV-II, tuberculosis,
polio, herpes simplex type 2, as well as fungi (trichophyton mentagrophytus),
mold and mildew through alternate delivery means. The germicide comprises a
non-toxic hypocompatible biodegradable composition of selected monohydric
alcohols selected polyhydric alcohols and water combined in relative proportions
by weight such that the composition may be used topically to cleanse a patient's
skin or to disinfect various public surfaces through direct application with
equal effectiveness without deleterious effect to either. The monohydric alcohol
is selected from the group consisting of isopropyl, methyl, ethyl, n-propyl,
n-butyl, tert-butyl or allyl or mixtures thereof and the polyhydric alcohol is
selected from the group consisting of propylene glycol; 1,3 propanediol; 1,2
butanediol, PEG 400; glycerol or 1,4 butanediol or mixtures thereof.
As used herein, the term non-toxic refers to the requirements of the LD
50 Oral Toxicity Test; that is, non-toxic, non-poison, to rate at 50 times the
lethal dose. As used herein, the term biodegradable refers to a composition
which degrades in the presence of 25 percent organic material within 90 days at
23(degree)C (69 degrees F) (Standard Temperature) with a moisture content of 100
parts per million. As used herein, the term challenge refers to a test colony or
specimens of 106 specified pathogenic organisms. As used herein, the term
azeotropic means a constant boiling liquid admixture of two or more substances,
whose admixture behaves as a single substance, in that the vapor, produced by
partial evaporation or distillation of the liquid has the same composition as
the liquid, i.e., the admixture distills without substantial composition change.
Constant boiling compositions, which are characterized as azeotropic, exhibit
either a maximum or minimum boiling point, as compared with that of the
nonazeotropic mixtures of the same substances. As used herein, the term organic
means the presence of less than about 10 percent by weight of free water within
a solution. As used herein, the term aqueous means the presence of more than
about 10 percent by weight of free water within a solution. The specific
monohydric alcohols and polyhydric alcohols and relative ratios thereof optimize
the particular
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characteristics of solubility, specific gravity, conductivity, pH, flash point,
boiling point and evaporation essential to the effective use of the instant
germicide against the bioburden as defined herein on pathogens as described
herein with a nontoxic effect as defined herein on patients, and with a
hypocompatible effect as defined herein on the surfaces described herein.
Specifically, the presence of the polyhydric alcohol raises the boiling point of
the germicide slowing the rate of evaporation of the germicide. As a solvent,
the polyhydric alcohol prevents the tendency of monohydric alcohol to form a
glaze on the target surface that masks the pathogenic organisms and breaks the
barrier formed by surface tension of water and water-based body fluids enabling
the germicide to act on the pathogens more rapidly. In addition, the polyhydric
alcohol serves as an emulsifier to assure that the composition remains
homogenized during storage and use. Further, the polyhydric alcohol reduces the
harmful effects of monohydric alcohol if swallowed or sprayed into the eyes or
on mucus membranes as well as soothing the skin upon contact. Since the
polyhydric alcohol reduces toxicity to human cells the need to dilute the
germicide has been eliminated. Polyhydric alcohol also acts as a secondary
disinfectant useful to disinfect air. In the preferred percentage used, tests
indicate that the polyhydric alcohol increases the overall effectiveness of the
germicide against most viruses, mold and mildew. Since the germicide was
developed for use on a wide variety of surfaces and dispensed from a number of
dispensing modes or means of dispersant materials the measure of chemical
resistance is important to permit broad use and application. To be effective,
the germicide must be hypocompatable with CPVC, Epoxy, Polypropylene, PVC,
Cyolac (ABS), Phenolic, Nylon, Noryl (RTM), Delrin (RTM) (Acetal), Ryton (RTM)
to 200%F, Kynar (RTM), Teflon (RTM), Stainless Steel 316, Stainless Steel 304,
Carpenter 20, Stainless steel (440), Titanium, Cast Bronze, Cast Iron, Aluminum,
Hastelloy C (RTM), Carbon/ceramic, Ceramagnet A, Viton (RTM), Buna N. (RTM),
Neoprene, Nitrile, Natural rubber, Hypalon (RTM), EPDM, Kel-F, Tygon (RTM),
Silicone, Ceramic and Carbon/graphite. As used herein, the term hypocompatible
shall mean no material degradation efforts associated with surfaces to include,
for example, discoloration, corrosion, cracking, crazing and embrittlement.
Comparative results of the germicide with the individual constituents have
demonstrated that the combination of interactive ingredients provides a
germicide effective against an expansive range of materials found in a wide
variety environments through various delivery means such as aerosol, pump, spray
or swab without degradation of the materials. In order to accomplish the design
criteria of a non-toxic, hypocompatible, biodegradable germicide effective
against the wide range of pathogenic organisms described herein, the composition
should have a pH of between about 7 and 5, virtually evaporate before about 6
and 20 minutes to have an effective kill time of about 8 to 12 minutes and
prevent surface residue, and should preferably have a specific gravity of about
0.85, viscosity below 4 and relatively no conductivity. The effective
proportional relationship of the ingredients by weight for the monohydric
alcohol as described herein is between about 65 percent to about 75 percent, for
the polyhydric alcohol as described herein is between about 4 percent and about
16 percent and for the water is between about 9 percent to about 20 percent.
The preferred proportional relationship of the active ingredients by
weight is about 70 percent for the monohydric alcohol and between about 8
percent to about 12 percent for the polyhydric alcohol and between about 14
percent to about 18 percent water. The preferable amount of polyhydric alcohol
is 6 to 14 percent by weight. Less than 4 percent of polyhydric alcohol by
weight does not provide adequate kill and exhibits an excessive alkaline pH;
while, more than 16 percent of polyhydric alcohol by weight leaves a residue to
attract and harbor pathogens. However, the composition is most effective with
about 10 percent polyhydric alcohol, about 70 percent monohydric alcohol, and
about 16 percent water all by weight. The solution comprises a binary azeotropic
composition formed by the chemical bonding between the monohydric alcohol and
water in correct proportion to lengthen shelf life, reduce evaporation and
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rust, and enhance efficacy. Specifically, because the azeotrope is stable,
the composition will maintain the efficacy for long periods of time. The
azeotropic bond between the monohydric alcohol and water causes the combination
to evaporate together thus maintaining substantially the same relative
concentration of monohydric alcohol and water to retain sufficient potency to
kill the target organisms. Moreover, because the water is bonded to the
monohydric alcohol, the ability to oxidize metal (rust) is greatly reduced.
Thus, after registering significant amounts of evaporation in laboratory tests,
presumed loss of efficacy would be expected. Because of the azeotrope however,
even after a 33 percent weight loss, the concentration of monohydric alcohol was
still at 66 percent. Therefore, most of the evaporation was from the free water
plus some of the azeotropic monohydric alcohol. Regardless of extended shelf
life, exposure to air in an ultrasound, or carelessness with regard to keeping
containers tightly sealed, the required concentration of monohydric alcohol
essential to achieve accepted and required testing protocols will be maintained.
In the total concentrations used in the solution about 70 percent monohydric
alcohol requires about 10 percent water to be azeotropic. To provide the ability
to kill the hydrophobic organisms, additional amount of water up to 10 percent
or an amount equal to the azeotropic equilibrium may be added without
degradation of the monohydric alcohol/water azeotrope. The addition of between 2
percent and 4 percent by weight of a surfactant such as sodium dodecyl sulfate,
octyl phenoxy polyethoxyethanol, triethanol amine lauryl sulfate and mixtures
thereof permits the use of the composition as a surface disinfectant capable of
dislodging and absorbing as much as twenty five percent organic matter from an
inanimate surface. The addition of between about 1 percent and 2 percent by
weight of a sporicide such as an N(hydroxymethyl) acetamide derivative permits
the use of the composition as a sterilant capable of killing bacillus subtilis
and clostridium sporogenes. By adding a resin such as Carbonol 940 brand carboxy
polymethylene by BF Goodrich (RTM) from about 0.1 percent to 2.0 percent by
weight to increase viscosity, the composition may be used as a commercial or
industrial disinfecting lubricant.
CLAIMS
1. A non-toxic, hypocompatible, biodegradable germicide effective for contact
and killing of a challenge of pathogenic organisms comprising Staphylococcus
aureus, Pseudomonas aeruginosa, Salmonella choleraesuis, HIV-I, HIV-II,
tuberculosis, polio, herpes simplex type 2, Trichophyton mentagrophytes or mold,
said germicide comprising:
(i) a disinfectant amount of 65% to 75% by weight of at least one
monohydric alcohol selected from the group consisting of
isopropyl, methyl, ethyl, n-propyl, n-butyl, tert-butyl, allyl
alcohols and mixtures thereof;
(ii) a surface glaze reducing amount of 4% to 16% by weight of at
least one polyhydric alcohol, selected from the group consisting
of propylene glycol, 1,3-propanediol, 1,2-butanediol, PEG 400,
glycerol, 1,4-butanediol, and mixtures thereof;
(iii) from at least 9% to 20% by weight water in an organic azeotropic
combination with the monohydric alcohol;
wherein components (i), (ii) and (iii) are mixed homogeneously with a pH
of 5 to 7 and in proportions effective to interact in a manner to
reduce surface glaze formed on pathogenic organisms to be
disinfected and reduce the surface tension of water or
water-based body fluids containing the pathogenic organisms found
on a surface
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to be disinfected, such that the pathogenic organisms of said
challenge can be contacted and killed before evaporation of said
monohydric alcohol.
2. A germicide according to claim 1, comprising about 70% by weight monohydric
alcohol.
3. A germicide according to claim 1 or claim 2, comprising 8 to 12% by weight
polyhydric alcohol.
4. A germicide according to any preceding claim, comprising about 10% by weight
of said polyhydric alcohol.
5. A germicide according to any preceding claim, comprising at least about 16%
by weight water.
6. A germicide according to claim 5, comprising about 16% by weight water.
7. A germicide according to any preceding claim, effective against a challenge
of Staphylococcus aureus, Pseudomonas aeruginosa, Salmonella choleraesuis,
HIV-I, HIV-II, tuberculosis, polio, herpes simplex type 2, Trichophyton
mentagrophytes, mold or mildew.
8. A germicide according to claim 7, having an effective kill time for said
challenge of from about 8 to 12 minutes.
<PAGE> 1
EXHIBIT 10.13
CERTIFICATE OF GRANT PATENT
[seal]
THE PATENT OFFICE
In accordance with Section 24(2) of the Patents Act, 1977, it is hereby
certified that a patent having the specification No 2245171 has been granted to
Paul L Simmons, in respect of an invention disclosed in an application for that
patent having a date of filing of 30 January 1990 being an invention for
"Biodegradable disinfectant".
Dated this Fourteenth day of April 1993
---------------------------------
Paul L Simmons P.R.S. HARTNACK
c/o R G C Jenkins & Co Comptroller-General of Patents,
26 Caxton Street Designs and Trade Marks.
LONDON UNITED KINGDOM PATENT OFFICE
SW1H ORJ
THE ATTENTION OF THE PROPRIETOR(S) IS DRAWN TO THE IMPORTANT NOTES OVERLEAF
<PAGE> 2
IMPORTANT NOTES FOR PROPRIETORS OF UNITED KINGDOM PATENTS
1. DURATION OF PATENT & PAYMENT OF RENEWAL FEES
(i) A patent takes effect on the date shown at the foot of the
certificate overleaf. Subject to the payment of renewal fees,
it can be kept in force until the end of a period of 20 years
from the date of filing the patent application.
(ii) To maintain the patent in force, it is necessary for the
proprietor or someone on his behalf to pay a prescribed annual
renewal fee. Payment may be made on, or during the three month
period before, the fourth or subsequent anniversary of the
date of filing the application and should be accompanied by
Patents Form 12/77.
(iii) The proprietor is responsible for ensuring that effective
renewal arrangements are set up and maintained and that fees
are paid on time. He should not await any communication from
Patent Office before paying the fee: an official reminder sent
to the last recorded address for service within six weeks
after the anniversary is intended to alert the proprietor to
possible failure of his renewal arrangements.
(iv) If the form with the fee is not lodged in the Patent Office on
or before the anniversary of the filing date of the patent,
the fee cannot be accepted unless application for an extension
of time to a maximum of 6 months is made and paid for on
Patents Form 12/77. If no renewal fee is received and no
extension of time is requested the patent will cease. No
reduction of extension fees is made in the case of a parent
endorsed "Licences of Right". When paying a renewal or
extension fee it is advisable first to check the current scale
of charges as, these may change from time to time.
2. PROCEDURE FOR PAYMENT OF FEES
Patents Forms, together with the fees and fee sheet (F.S. 1 ) should he
delivered to the Patent Office in Cardiff Road. Newport either by hand or post
those sent by post should be addressed to "The Cashier, The Patent Office,
Cardiff Road, Newport, Gwent NP9 IRH". Alternatively, they may be delivered by
hand to "The Patent Office, 25 Southampton Buildings, London, WC2A 1 AY".
Blank Patents Forms and fee sheets (FS. 1) can be obtained by post from the
Clerk of Stationery. The patent Office, Unit 6 Nine Mile Point, Cwmfelinfach.
Newport, Gwent, NP1 7HZ or may be collected from the above Newport or London
address.
3. REGISTRATION OF OWNERSHIP AS EVIDENCE OF ENTITLEMENT
Any person who claims to have acquired the property in a patent by virtue of any
transaction instrument or event shall be entitled as against any other person
who claims to have acquired that property by virtue of an earlier transaction,
if application is made to the comptroller for registration in the register of
patents (see Sections 32 and 33 of the Patents Act 1977). Details of how to make
such application may be obtained from the Patent Office.
<PAGE> 3
THE PATENT OFFICE SYMBOL
<TABLE>
<S> <C>
(12) UK PATENT (19) GB (11) 2 245 171 (13) B
--------------------------------------------
(54) Title of Invention
Biodegradable disinfectant
(51) INT CL(5); A01N25/00
(21) Application No (72) Inventor(s)
9113078.1 PAUL L. SIMMONS
(22) Date of filing (73) Proprietor(s)
30.01.1990 PAUL L. SIMMONS
501 WEST
(30) Priority Data ONE KEY CAPRI BOULEVARD
TREASURE ISLAND
(31) 304312 FLORIDA 33706
UNITED STATES OF AMERICA
(32) 31.01.1989
(74) Agent and/or
(33) US Address for Service
R G C JENKINS & CO
(86) International Application Data 26 CAXTON STREET
PCT/US90/00402 LONDON
EN 30.01.1990 SW1H 0RJ
UNITED KINGDOM
(87) International Publication Data
W090/08559
EN 09.08.1990
(43) Application published
02.01.1992
(45) Patent published
14.04.1993
(52) Domestic classification
(Edition L) A5E ET E311 E318 E321 E326
A5B B40Y B402 B823 U1S S1210 S1289 S2410
(56) Documents cited
US4690779 A
US4678658 A
US 4336270 A
US4072742 A
US3821413 A
US3445564 A
</TABLE>
(continued on next page)
<PAGE> 4
GB 2 245 171 B - CONTINUATION
(58) Field of search
As for published application
2245171 A viz:
US Classification 424/45, 47,
76.1, 76.2, 76.8
updated as appropriate
<PAGE> 5
Description
Biodegradable Disinfectant
Technical Field
A non-toxic, non-corrosive, biodegradable disinfectant effective
against various pathogenic organisms.
Background Art
Rapid increases in the spread of deadly communicable diseases such as
AIDS virus (HIV) have dramatically escalated public awareness for the need of an
effective protective means.
The need for such protective means applies equally to contaminated
surfaces such as those found in public restrooms, telephones, tables and other
surfaces contacted by the public as well as for topical application directly on
a patient's skin.
A common means for such surface protection is typified by a disposable
paper cover for a toilet. Such disposable paper covers often do not contain a
germicide and are not always available or easily used.
Various spray germicides for sanitizing such surfaces is typified in
U.S. Pat. No. 3,445,564. In addition, the use of a dye in a bacteracidal
solution as disclosed in U.S. 2,449,274 is employed to provide a visual
indication of the effectiveness of such sprays.
U.S. Pat. No. 4,678,658 shows disinfecting compounds effective as
germicides reducing surface tension to more effective distribute the germicide
spray on the surface. However, the spray is corrosive and environmentally
unsafe.
U.S. 3,821,413 teaches a disinfectant consisting of propylene glycol to
stabilize the composition and retard evaporation. This disinfectant is toxic,
corrosive and non-biodegradable.
U.S. 3,966,902 disclosed various polymer complex carriers such
as propylene glycol for use with an active ingredient such as a disinfectant or
fragrance.
U.S. 4,690,779 refers to the use of polyethylene glycol in
combination with alcohol and fragrances. This composition is both toxic and
non-biodegradable.
U.S. 4,209,506 teaches a composition suitable for use in
aerosol sprays including an anhydrous alcohol and fragrance or perfume. This
composition is corrosive, non-biodegradable and non-evaporative.
Additional examples of the prior art are found in U.S.
580,213, U.S. 4,282,179, U.S. 4,265,899, U.S. 4,283,421, U.S. 4,364,515, U.S.
4,550,105, U.S. 4,105,431, U.S. 4,243,403, U.S. 4,278,206, U.S. 4,322,475, U.S.
4,436,732, U.S. 4,597,887, U.S. 4,252,694, U.S. 4,279,762, U.S. 4,325,201, U.S.
4,540,505 and U.S. 4,675,397.
Examination of the prior art fails to teach or suggest an effective
surface active disinfectant for application on contaminated surfaces or a
patient's skin through a spray for liquid application.
Disclosure of Invention
The present invention relates to a non-toxic, non-corrosive, biodegradable
disinfectant and antiseptic for use against various pathogenic organisms, said
disinfectant and antiseptic being a homogenous composition comprising isopropyl
alcohol and 8 to 12 percent by weight of propylene glycol, performing
interactively, in proportion by weight such that said propylene glycol reduces
the surface glaze formed by said isopropyl alcohol and surface tension formed by
water or water-
<PAGE> 6
based body fluids enabling said disinfectant and antiseptic to rapidly contact
the pathogenic organisms and act equally effectively on a patient or inanimate
surface without deleterious affect.
In the preferred embodiments, the disinfectant and antiseptic for
topical application to a patient's skin or to the surface to kill the various
pathogenic organisms, and the isopropyl alcohol and propylene glycol and inert
ingredients combined in specific relative proportions by weight such that the
non-toxic, non-corrosive, biodegradable disinfectant may be used safely to
disinfect a patient's skin through topically application or to disinfect various
surfaces with equal disinfecting effectiveness. A preferred interactive
composition comprises about isopropyl alcohol 70%, propylene glycol 10%,
fragrance or maskant 1% and other inert ingredients 19% by weight.
The isopropyl alcohol provides the primary disinfecting or killing
effect on the pathogenic organisms. The propylene glycol lowers the flash point
of the disinfectant and soothes the skin. The propylene glycol also slows the
rate of evaporation, reduces or eliminates the intersurface glazing effect of
isopropyl alcohol and homogenizes the interactive ingredients.
The critical balance of interactive ingredients chemically reduces the
tensile strength of the surface liquids on the patient's skin or other surface
permitting the disinfecting effect to act directly on the pathogenic organisms.
<PAGE> 7
Best Mode for Carrying Out the Invention
Various compositions and devices have been developed to disinfect
various pathogenic organisms. Catholic application is limited by the chemical
and biological effect of such compositions or limitations on various surfaces,
delivery means and patients.
The present invention relates to a non-toxic, non-corrosive,
biodegradable disinfectant and antiseptic for topical application on a patient's
skin or on hard surfaces such as restrooms or tables against various pathogenic
organisms such as bacteria including Staphylococcus aureus, Pseudomonas
aeruginosa and Salmonella coleraesuis and viruses, including HIV-I, HIV-II and
herpes simplex type 2 as well as fungi, mold and mildew through numerous
delivery means.
The non-toxic, non-corrosive, biodegradable disinfectant of the subject
invention comprises an interactive composition of isopropyl alcohol, propylene
glycol and inert ingredients combined in specific relative proportions by weight
such that the disinfectant may be used topically to disinfect a patient's skin
or to disinfect various public surfaces through direct application with equal
effectiveness.
This unique disinfectant is effective against various pathogenic
organisms common to the general environment without deleterious non-toxic effect
on patients or damage to surfaces or dispensing devices as exemplified herein.
The optimum proportional relationship of the ingredients by weight is isopropyl
alcohol substantially 70%, propylene glycol substantially 10%, fragrance
substantially 1% and inert ingredients substantially 19%.
The isopropyl alcohol is effective in a range of 65 to 75 percent by
weight.
The effective range of propylene glycol is between 8 to 12 percent by
weight. This proportion is critical to the universal use of the instant
disinfectant. During development of the instant invention numerous
concentrations were tested. The optimum proportions provide a disinfectant
effective against numerous pathogenic organisms without harming or destroying
the dispensing means, disinfected surface or patient.
The optimum percentage of propylene glycol raises the boiling point of
the disinfectant slowing the rate of evaporation. As a solvent the propylene
glycol prevents the tendency of isopropanol to form a glaze on the target
surface that masks the pathogenic organisms.
Since the propylene glycol breaks the surface tension of water and
water-based body fluids, this enables the disinfectant to act on the virus or
organism more rapidly. The effectiveness is reduced to a one minute kill time
for the HIV virus. In addition the proplene glycol serves as an emulsifier to
assure that the fragrance and alcohol remain homogenized during storage and use.
Further the propylene glycol reduces the harmful effects of alcohol if
swallowed or sprayed into the eyes or on mucus membranes as well as soothing the
skin upon contact. Since the propylene glycol reduces toxicity to human cells
the need to dilute the disinfectant has been eliminated. Propylene glycol also
acts as a secondary disinfectant useful to disinfect air. In the preferred
percentage used tests indicate that the propylene glycol increases the overall
effectiveness against most viruses, mold and mildew.
Since the disinfectant was developed for use on a wide variety of
surfaces and dispensed from a number of dispensing modes or means of dispersant
materials the measure of chemical resistance is important to provide universal
use and application. As shown by the following chemical resistance chart the
present invention compares favorably to propylene glycol and isopropyl alcohol.
<TABLE>
<CAPTION>
Propylene Isopropyl
Material Glycol Alcohol Disinfectant
- -------- --------- --------- ------------
<S> <C> <C> <C>
CPVC C1 A2 B2
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
Propylene Isopropyl
Material Glycol Alcohol Disinfectant
- -------- --------- --------- ------------
<S> <C> <C> <C>
Epoxy C A B
Polypropylene B2 A2 A2
PVC C1 B1 A1
Cyolac (ABS) B - B
Phenolic A A A
Nylon - B1 B1
Noryl - A1 A1
Delrin (Acetal) B A A
Ryton to 200(degrees)F - - -
Kynar (PVDF) - - -
Teflon A A2 A2
Stainless Steel 316 B A A
Stainless Steel 304 B A A
Carpenter 20 A A A
Stainless Steel (440) - - -
Titanium A A A
Cast Bronze A A A
Cast Iron A C B
Aluminium B B B
Hastelloy C. B B B
Carbon/Ceramic A A A
Ceramagnet A - - -
Viton A A A
Buna N. A B A
Neoprene C B B
Nitrile A B A
Natural Rubber - A A
Hypalon - A A
EPDM - A A
Kel-F - - -
Tygon - - -
Silicone - A A
Ceramic A A A
Carbon/Graphite - A A
- --------------------------------------------------------------------------------
</TABLE>
*indicate trademark
+indicates specification formulation
The following legend is provided to interpret the foregoing chart.
Ratings-chemical effect Explanation of footnotes
- ----------------------- ------------------------
A-No effect-Excellent (1) Satisfactory to 72(degrees)F.
B-Minor effect-Good (2) Satisfactory to 120(degrees)F.
C-Moderate effect-Fair (3) Satisfactory for 0-rings
D-Severe effect-Not recommended
<PAGE> 9
An examination of this chart and the comparative results clearly
demonstrates that the optimum combination of interactive ingredients of the
instant invention provides a disinfective effective against an expansive range
of materials found in a wide variety environments through various delivery means
such as aerosol, pump spray or swab.
The non-toxic, biodegradable aspect of the disinfectant permits
disposal without polluting ground water.
It will thus be seen that the objects set forth above, among those
made apparent from the preceding description are efficiently attained and since
certain changes may be made in the above construction without departing from the
scope of the invention, it is intended that all matter contained in the above
description or shown in the accompanying drawing shall be interpreted as
illustrative and not in a limiting sense.
It is also to be understood that the following claims are intended to
cover all of the generic and specific features of the invention herein
described, and all statements of the scope of the invention which, as a matter
of language, might be said to fall therebetween.
CLAIMS:
1. A non-toxic, non-corrosive, biodegradable disinfectant and antiseptic for
use against various pathogenic organisms, said disinfectant and antiseptic being
a homogenous composition comprising isopropyl alcohol and about 8 to 12 percent
by weight of propylene glycol, performing interactively, in a proportion by
weight such that said propylene glycol reduces the surface glaze formed by said
isopropyl alcohol and surface tension formed by water of water-based body fluids
enabling said disinfectant and antiseptic to rapidly contact the pathogenic
organisms and act equally effective on a patient or inanimate surface without
deleterious effect.
2. The non-toxic, non-corrosive, biodegradable disinfectant and antiseptic for
use against various pathogenic organisms of claim 1, includes 65 percent to 75
percent isopropyl alcohol by weight.
3. The non-toxic, non-corrosive, biodegradable disinfectant and antiseptic for
use against various pathogenic organisms of claim 2 includes substantially 19
percent inert ingredients by weight.
4. The non-toxic, non-corrosive, biodegradable disinfectant and antiseptic for
use against various pathogenic organisms of claim 3 includes substantially 1
percent fragrance by weight in addition to the 19 percent inert ingredients.
5. The non-toxic, non-corrosive, biodegradable disinfectant and antiseptic
antiseptic for use against various pathogenic organisms of claim 1 includes
substantially 70 percent isopropyl alcohol by weight.
6. The non-toxic, non-corrosive, biodegradable disinfectant and antiseptic for
use against various pathogenic organisms of claim 5 includes substantially 10
percent propylene glycol by weight.
<PAGE> 10
7. The non-toxic, non-corrosive, biodegradable disinfectant and antiseptic for
use against various pathogenic organisms of claim 6 includes substantially 19
percent inert ingredients by weight.
8. The non-toxic, non-corrosive, biodegradable disinfectant and antiseptic for
use against various pathogenic organisms of claim 7 includes substantially 1
percent fragrance by weight in addition to the 19 percent inert ingredients.
9. The non-toxic, non-corrosive, biodegradable disinfectant and antiseptic for
use against various pathogenic organisms of claim 1 includes substantially 70
percent isopropyl alcohol by weight and substantially 10 percent propylene
glycol by weight.
10. A non-toxic, non-corrosive, biodegradable disinfectant and antiseptic for
use against various pathogenic organisms of claim 9 includes substantially 19
percent inert ingredients by weight.
11. A non-toxic, non-corrosive, biodegradable disinfectant and antiseptic for
use against various pathogenic organisms of Claim 10 includes substantially 1
percent fragrance by weight in addition to the 19 percent inert ingredients.
12. A non-toxic, non-corrosive, biodegradable disinfectant as claimed in
claim 1 and substantially as hereinbefore described.
<PAGE> 1
EXHIBIT 10.14
THE UNITED STATES OF AMERICA
Commissioner of Patents and Trademarks
Has received an application
for a patent for a new and
useful invention. The title
and description of the
invention are enclosed. The
requirements of law have
been complied with, and it
has been determined that a
patent on the invention
shall be granted under the
law.
Therefore, this
UNITED STATES PATENT
Grants to the person or
persons having title to
this patent the right to
exclude others from making,
using or selling the
invention throughout the
United States of America
for the term of seventeen
years from the date of this
patent, subject to the
payment of maintenance fees
as provided by law.
--------------------------------------
Commissioner of Patents and Trademarks
--------------------------------------
Attest
<PAGE> 2
UNITED STATES PATENT [19]
Simmons et al.
- -------------------------------------------------------------
[54] NONAQUEOUS COLD STERILANT
[76] Inventors:
Paul L. Simmons, 6250 Kipps Colony
Ct. #203, Gulfport, Pinellas County,
Fla. 33707; Ted Turner, 1810
Nebraska Ave. SE., St. Petersburg,
Fla 33703
[21] Appl. No.: 901,592
[22] Filed: Jun. 19, 1992
Related U.S. Application Data
[63] Continuation-in-part of Ser. No. 642,709, Jan. 17, 1991, Pat.
No. 5,145,663, which is a continuation of Ser. No. 304,312, Jan. 31,
1989, abandoned.
[51] Int. CL(6).........................A61L 2/18; A61L 9/14;
A61K 031/045; A61K 009/12
[52] U.S. Cl..................................424/47; 424/45;
424/76.8; 514/975; 422/28
[58] Field of Search.....................424/47, 76.8; 422/7,
422/28
[11] Patent Number: 5,405,602
[45] Date of Patent: Apr. 11, 1995
- -------------------------------------------------------------
[56] References Cited
U.S. PATENT DOCUMENTS
3,282,775 11/1966 Stonehill 422/36
3,821,413 06/1974 Hellyer, Jr. 514/738
3,968,250 07/1976 Boucher 514/705
4,511,486 04/1985 Shah 424/45
Primary Examiner - Edward J. Webman
Attorney, Agent, or Firm - A. W. Fisher, III
[57] ABSTRACT
A hypocompatible biodegradable nonaqueous cold chemical sterilant capable of
killing a challenge of a wide range of target organisms including bacterial
spores within ten minutes comprising a composition of interactive constituents
including a monohydric alcohol, a polyhydric alcohol, a saturated dialdehyde and
a cationic surface active agent in proportion by weight to reduce the surface
tension of the bacterial spore wall, penetrate the bacterial spore wall and kill
the nuclei of the bacterial spores and other target organisms without the need
of removing residue.
6 Claims, No Drawings
<PAGE> 3
5,405,602
1
NONAQUEOUS COLD STERILANT
This application is a continuation-in-part application of application
Ser. No. 642,709, filed Jan. 17, 1991, now U.S. Pat. No. 5,145,663 that is a
continuation application Ser. No. 304,312, filed Jan. 31, 1989, now abandoned.
BACKGROUND OF THE INVENTION
1. Field of the Invention
A hypocompatible biodegradable non-aqueous cold sterilant effective
against a wide range of pathogenic organisms including bacterial spores.
2. Description of the Prior Art
Sterilants are used in many areas, such as in the sterilization of
laboratory, surgical, dental and other equipment. It is customary in hospital
practice to sterilize instruments overnight, using chemical sterilizing agents
or other sterilizing methods.
The most common methods of sterilization involve either the use of
pressurized steam, dry heat or ethylene oxide. However, some of these methods
are cumbersome, tedious and time-consuming, often damage the sterilized material
and require expensive equipment and skilled technicians.
Moreover, steam sterilization is impracticable for many plastic devices
and delicate instruments which are sensitive to elevated temperatures.
Many chemical sterilization methods have been developed as substitutes
for steam sterilization. Unfortunately most have shortcomings. Phenols and
formaldehyde compositions have considerable sporicidal activity but have
objectionable odors and extreme toxicity. Ethanol, isopropyl alcohol and the
quaternary ammonium compounds have been used, and though less odorous and toxic,
lack the activity of the phenols and formaldehyde compositions.
Compositions comprising saturated dialdehydes with alkalinating agents
have also been used. Though such compounds are satisfactory as chemical
sterilization agents their sporicidal activity is limited to certain pH ranges,
require up to ten (10) hours to work, and have certain limits on stability.
<PAGE> 4
5,405,602
2
U.S. Pat. No. 3,282,775 shows a sporicidal composition including
saturated dialdehydes containing from 2 to 6 carbon atoms and a cationic surface
active agent. More specifically, these compounds include malonaldehyde,
succinaldehyde, oxaldehyde (glyoxal), adipaldehyde and preferably,
glutaraldehyde. The quantity of saturated dialdehyde used may vary from about
0.1 percent to about 2 percent depending upon which particular dialdehyde is
selected. Moreover, one may safely depart from this concentration without
seriously detracting from its effectiveness. For example, if desired, the final
concentration of dialdehyde may be increased up to as much as 10 percent or
decreased as low as 0.05 percent. However, amounts in excess of 2 percent are
unnecessary, extremely toxic and wasteful. In actual practice a range of from
0.1 percent to about 2 percent is preferred. The compounds may be diluted either
with water or lower alkanols such as methanol, ethanol, isopropanol and the
like, or with combinations to form aqueous-alcohol solutions. The pH of the
final solution may be either on the acid side or the alkaline side and may be
varied over a wide range of from about 4.0 to about 9.0 though it is preferred
to have the pH in the range of from about 5.0 to 8.0.
U.S. Pat. No. 4,040,977 describes a preservative and disinfecting
composition for aqueous emulsions, suspensions and solutions which are obtained
by reaction in water of a haloacetamide or thiocyanoacetamide or mixture
thereof; an alcohol or mixture of alcohols; and formaldehyde.
U.S. Pat. No. 3,697,222 describes a sterilization process achieved by
contacting a contaminated object with an aqueous acid glutaraldehyde solution at
temperatures above about 45 degrees C. The sterilizing action may be enhanced by
ultrasonic energy. Sterilization also may be achieved using ultrasonic energy
and aqueous alkaline glutaraldehyde solution.
U.S. Pat. No. 4,093,744 teaches a means for killing spores on
instruments and the like utilizing the combination of glutaraldehyde and a
detergent selected from the group consisting of nonionic, anionic and ampholytic
surface active agents. The sporicidal kill activity of glutaraldehyde is
enhanced by the detergents.
<PAGE> 5
5,405,602
3
U.S. Pat. No. 4,048,336 relates to a means for killing spores on
instruments and the like utilizing the combination of 18 glutaraldehyde and a
monoaldehyde, such as, for example, formaldehyde. The sporicidal kill activity
of the composition is more rapid than previously possible and more effective
than the use of either glutaraldehyde or monoaldehyde alone. Unfortunately, this
composition is far more toxic than without glutaraldehyde.
U.S. Pat. No. 4,208,404 shows an aqueous solution of glutaraldehyde of
acid pH value with dissolved quantities of certain highly ionized salts to kill
dormant spores at room temperature.
U.S. Pat. No. 4,294,797 describes a composition to sterilize medical
instruments comprising an alcohol-aldehyde active substance combination in a
proportion of 5 to 15 percent by weight. The preferred alcohol is isopropanol
and the preferred aldehyde is formaldehyde or a succinic acid dialdehyde complex
and the preferred ratio of alcohol to aldehyde is 1:1.
U.S. Pat. No. 2,889,243 shows a chemical composition having antiviral
activity comprising hydroxpyruvaldehyde ether.
U.S. Pat. No. 4,173,653 teaches an Oxydiacetaldehyde is used as an
active antimicrobial agent in an aqueous solution for disinfecting or
sterilizing. The activity against bacteria or spores can be improved by adding
alkalinating agents or alcohols such as isopropanol, or by raising pH or by
raising the temperature.
U.S. Pat. No. 4,923,899 describes an aqueous composition for killing
bacteria, spores, fungi and viruses on nonabsorbent surfaces comprising at least
one quaternary ammonium salt, at least one aliphatic dialdehyde having from two
to six carbon atoms, and at least one aliphatic hydroxyl compound having from
one to eight atoms. Optionally, a chelating agent and an inorganic nitrite salt
may be employed. This sterilant kills bacteria, spores, fungi and viruses over a
pH range from about pH 4 to about pH 9.
U.S. Pat. No. 3,968,250 describes a method for disinfecting or
sterilizing medical, surgical, dental instruments or other objects in liquid
phase with
<PAGE> 6
5,405,602
4
improved sporicidal compositions by combining nonionic and anionic surfactants
with aqueous or alcoholic glutaraldehyde solutions. The method can be used also
with ultrasonic irradiation over a wide frequency range of from 10 to 850 kHz.
U.S. Pat. No. 3,968,248 and U.S. Pat. No. 3,912,450 teach similar
methods.
U.S. Pat. No. 4,103,001 shows a room temperature aqueous sterilizing
composition comprising from 0.75 percent by weight of glutaraldehyde and from
4-15 percent by weight of phenol and a metal phenate, preferably sodium phenate.
Optionally present are 1-5 percent by weight of sodium tetraborate, 2-10 percent
by weight of a humectant such as glycerol, di-ethylene glycol or propylene
glycol and a surfactant. A preferred pH range is pH 7.0-7.4.
U.S. Pat. No. 4,004,024 describes a method for controlling bacteria,
fungi and spores which comprises applying thereto a bacterially, fungicidally
and sporicidally effective amount of a furan selected from
2-(R(1)O)-5-(R(20)O)-2,5-dihydrofuran and 2-(R(1)O)-5-(R(2)O)- tetrahydrofuran
or mixtures thereof; a process for preparing a
2,5-bis(-R(1)O)-2.5-tetrahydrofuran and 2.5-bis (R(1)O)-tetrahydrofuran and
2.5-bis(benzyloxy)-tetrahydrofuran.
U.S. Pat. No. 4,436,754 describes a disinfecting and sterilizing
composition comprising an aqueous solution containing a 2 to 6 carbon atom
dialdehyde and may also contain formaldehyde and a diol or monosubstituted diol
of the formula RO(CH(2)YCH(2)O)nCH(2)CH(2)OH; where R is H or CH(3) and n is an
integer from 1 to about 22 with a wide range of pH from pH 2 to pH 9.
U.S. Pat. No. 4,937,072 a sporicide having a defined period of
sporicidal activity comprising three components including a peroxide or peroxide
generating material, a peroxidase and a salt of iodine which serves as a donor
molecule, storing the three components in a nonreacting state to maintain the
sporocide in an inactive state and admixing the three components in an aqueous
based carrier to cause a catalyzed reaction by said peroxidase for generating
free radicals and/or by-products from the iodide salt (donor molecule) and
contacting the surface or object
<PAGE> 7
5,405,602
5
to be sterilized with the activated mixture. The concentration level of the
three components can be selected such that an active sporocidal state is
maintained for any desired period of time.
U.S. Pat. No. 4,122,192 describes a solid composition for producing a
disinfectant or sterilant comprising a disinfecting or sterilizing amount of
saturated dialdehyde having from 2 to 6 carbon atoms absorbed on an inorganic or
organic particulate carrier material and, in some cases, an alkalinating agent.
U.S. Pat. No. 3,983,252 describes a disinfectant composition comprising
a dialdehyde and an alkali metal salt of a hydrocarbon carboxylic acid in
aqueous solution and, optionally, an alcohol and/or a diol and/or a triol, and
are as potent as, but substantially more stable than, known dialdehyde
containing disinfectant compositions.
U.S. Pat. No. 3,653,499 describes a germicidal, sporicidal and
detergent composition which prevents coagulated blood from adhering to
instruments during sterilization and used to decontaminate surgical items, such
as needles and sponges comprising paraformaldehyde having an average molecular
weight of about 360 free from polymer chains over a molecular weight of 3,000,
alkali metal tripolyphosphate and a water soluble buffer, such as sodium
carbonate, to give a final aqueous solution having a pH between about 10 and 11.
If the materials are substantially anhydrous, the constituents can be mixed
together in a powder and stored in a container hermetically sealed against the
entrance of moisture. If the constituents or any of them are not substantially
anhydrous, the composition must be in a two-part package separately sealed in
waterproof pouches, one containing the paraformaldehyde and the other the
polyphosphate and buffer.
U.S. Pat. No. 4,978,530 describes a process for sanitizing,
disinfecting and killing spores involving providing a tangible object made from
polymeric material impregnated with an aqueous glutaraldehyde solution packaged
in an air-tight enclosure, removing the impregnated tangible object from the
enclosure and applying the impregnated tangible object to the surface to be
sterilized and/or sanitized and disinfected so as to expose spores, bacteria,
virus and other microorganisms present on
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the surface to the action of the glutaraldehyde solution. A sanitary attachment
for a receiver or mouthpiece of a telephone made from plastic material
incorporating a glutaraldehyde solution. A fabric made from cellulosic or
plastic material having sporicidal and/or sanitizing and disinfectant activity
as a result of being impregnated with a glutaraldehyde solution. A method for
sanitizing and disinfecting and/or rendering fabric sporicidal involves
impregnating a fabric with an aqueous glutaraldehyde solution prior to packaging
the fabric in an air-impervious container until ready for use.
Various spray germicides for sanitizing such surfaces is typified by
U.S. Pat. No. 3,445,564. U.S. Pat. No. 3,445,564 is directed to a method,
compositions and articles for sanitizing public or communal facilities prior to
individual use. The method consists of applying a thin layer of a rapidly drying
liquid germicidal composition to a surface such as a toilet seat. The rapidly
drying germicidal compositions consist essentially of a lower aliphatic alcohol
and at least about 5 percent of a volatizing agent such as acetone. Isopropyl
alcohol has excellent germicidal activity and is sufficiently volatile to give a
satisfactory drying rate when blended with suitable proportions of a volatizing
agent. Inasmuch as the lower aliphatic alcohols are not sufficiently volatile to
afford usefully short drying times for practical purposes in the method and
articles of the Kirschner invention it was necessary to include a volatizing
agent in the germicidal composition. The proportion of volatizing agent to lower
aliphatic alcohol in the rapidly drying germicidal compositions employed in the
invention may vary widely depending upon a number of factors, which include
among others, the volatility of the alcohol employed, the volatility of the
volatilizing agent, the desired drying rate of the germicidal composition, the
amount of germicidal agent applied to the surface to be treated and the method
of application of the germicide, not to mention the prevailing conditions of
temperature and relative humidity under which the product is to be employed.
Although the isopropyl alcohol-acetone composition of U.S. Pat. No.
3,445,564 has germicidal activity against bacteria, fungi and other lower
organisms, additional antibacterial, antifungal or other active ingredients may
be incorporated to enhance the overall germicidal effectiveness. Suitable
germicidal additives include the well known
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antibacterial quaternary ammonium compound. In essence, U.S. Pat. No. 3,445,564
teaches the use of isopropyl alcohol to kill a limited number of germs on a dry
toilet seat with the addition of acetone to volatize an already highly volatile
chemical to rapidly dry the toilet seat for use within 30 seconds.
The use of a dye in a bactericidal solution as disclosed in U.S. Pat.
No. 2,449,274 is employed to provide a visual indication of the effectiveness of
such sprays.
U.S. Pat. No. 4,678,658 shows an aerosol spray for use in disinfecting
a surface for personal use such as a public restroom facility or telephone. The
composition and delivery of the compositions provides for the placement of a
spray of disinfectant which includes a dye that disappears as the spray effects
the germicidal activity of the disinfectant. The composition is also rapidly
drying, so that the dye disappears as well as the disinfecting composition
leaving the surface dry. However, the spray is corrosive and environmentally
unsafe.
U.S. Pat. No. 3,821,413 discloses a formulation of materials which
permits an effective, uniform rate of evaporation of glycols from an air
circulator device to reduce airborne bacteria in the surrounding atmosphere. It
was observed that the relative amounts and identities of the components of the
invention are critical to the attainment of the desired continuous evaporation
of glycols over a prolonged period of time.
The composition of U.S. Pat. No. 3,821,413 is a single phase liquid
composition especially adapted for volatilization at a substantially uniform
rate from the air circulator device. Generally speaking, the composition
includes three essential components (1) a glycol, (2) an organic polar coupling
compound for maintaining the homogeneity prevents the glycol from separating
from the mixture during evaporation of the mixture into the atmosphere and (3)
an organic, relatively non-polar compound for forming hydrophobic micelles with
the glycol molecules in the resulting mixture for reducing the affinity of the
glycol to atmospheric moisture and thereby increasing the rate at which the
glycol may be evaporated into the atmosphere.
The composition contains the glycol germicide. If desired, other
suitable germicides or
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antiseptic agents can be added provided, however, that the glycol concentration
of the composition does not fall below 5 percent by weight of the total mixture.
Such germicides include quaternary ammonium compounds, phenols, bisphenols,
salicylanilides, carbanilides, formaldehyde and chloride.
The required glycol evaporation rate for attaining the desired air
sanitizing performance depends on the satisfactory stability and uniform nature
of the liquid composition during evaporation from the mixture. Accordingly, the
compositions of the invention include from about 2 percent to about 40 percent
by weight of an organic polar coupling compound for maintaining the homogeneity
of the mixture to prevent the glycol from separating from the mixture during the
evaporation process.
The affinity of glycols to attract atmospheric moisture significantly
reduces their volatility and impairs their evaporation rate. Accordingly, the
compositions of the invention include from about 5 percent to about 80 percent
by weight of an organic, relatively non-polar compound for forming hydrophobic
micelles surrounding the glycol molecules in the mixture for reducing the
affinity of the glycol to atmospheric moisture and thereby increase the rate of
evaporation of the glycol. Without this micelle formation, it was found that the
glycol or mixture of glycols in the mixture cannot evaporate appreciably in an
air circulator device containing a wick immersed in the liquid composition.
U.S. Pat. No. 3,806,593 is directed to an acne treatment medication
applied to the skin for preventing the formation of acne or decreasing already
established ache. An important factor for the occurrence of ache is the presence
of bacteria in the sebaceous glands in the skin. It is known that the bacteria
in the sebaceous glands form esterases which hydrolyze the sebum fats to
alcohols and free fatty acids.
The medicinal ache-preventing or ache-diminishing composition of U.S.
Pat. No. 3,806,593 is based on the bacterial esterase activity in the sebaceous
glands which together with the water already present in the skin can hydrolyze
an ester having a good penetration capacity into the sebaceous glands to form
one and preferably two antibacterially
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active components, viz. an acid and an alcohol, which are harmless to the skin.
The active compound in the composition is one or more esters chosen from the
group consisting of ethyl lactate, isopropyl lactate and/or glycerol mono or
dilactate. The esters hydrolyze in the sebaceous glands due to the esterases
present in the glands to form the corresponding acids and alcohols. Lactic acid
and the lower alcohols and also glycerol to a certain extent exert a good
antibacterial activity when formed in situ in the sebaceous glands. The esters
are lipophilic and can thus penetrate into the said glands. Even if a beneficial
action can be achieved by application of the ester or esters per se, it, has
been found to be suitable to apply the ester in the form of a solution in ethyl
alcohol or isopropyl alcohol. The alcohol prevents hydrolysis of the ester
already in the composition, the alcohol moves the hydrolysis equilibrium towards
ester formation. The alcohol can also facilitate the penetration of the ester
into the skin.
As is well-known alcohol in high concentrations may cause a drying-out
of the skin. To counteract this effect, the composition may include a
moisture-retaining agent such as a lower, suitably water-free polyol, viz.
propylene glycol or glycerol. The content of propylene glycol or glycerol in the
composition according to the invention may be up to 25 percent, suitably not
more than 10 percent by weight and preferably 1-5 percent. High levels of polyol
tend to make the composition smeary upon application on the skin and should thus
be avoided.
The preferred composition according to the invention consists of about
15 percent by weight of ethyl lactate, about 2 percent by weight of propylene
glycol, the remainder being ethyl alcohol.
In summary, U.S. Pat. No. 3,806,593 relates to acne medication
comprising esters that hydrolize in the sebaceous glands in combination with an
alcohol to prevent hydrolysis of the esters as well as to facilitate the
penetration of the ester into the skin, and propylene glycol or glycerol to
prevent drying of the skin. The preferred ratio of the constituents is 15
percent to 83 percent to 2 percent respectively.
U.S. Pat. No. 4,664,909 discloses a stable, fast drying pituitous
powder deodorant suspension in an alcohol media containing a minimal amount of
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water and a critical amount of the essential hydroxyethyl cellulose as the
suspending agent.
The fast drying pituitous suspension of particulate material in an
aqueous alcohol media contains hydroxyethyl cellulose at levels above its normal
solubility limit by the polyhydric alcohol.
More specifically, U.S. Pat. No. 4,664,909 relates to stable pituitous
suspensions of particulate material, preferably about 1-20 percent, uniformly
suspended in alcohol/aqueous media containing a high alcohol content and a lower
water content. The alcohol media may be a lower monohydric alcohol selected from
the group consisting of methanol, ethanol, isopropanol and mixtures thereof. The
use of polyhydric alcohols such as propylene glycol, butylene glycol and polyols
thereof, and glycerin decreases the critical water level required in the
hydroxyethyl cellulose-containing alcohol media.
It has been unexpectedly found that powders can be suspended in
alcoholic/aqueous media containing a high alcohol content and a lower water
content by using the water soluble polymer hydroxyethyl cellulose at critical
levels above its ethanol solubility range which may be broadened by specified
polyhydric alcohols. This polymer is unique in its property to form stable
suspensions.
Specifically, polyhydric alcohols can be partially substituted for the
monohydric alcohol, not to exceed the monohydric alcohol content. The monohydric
alcohol content, such as ethanol, must exceed the upper solubility level for the
water soluble polymer hydroxyethyl cellulose in ethanol or other lower alkanol.
The reported upper solubility level of this water soluble polymer in ethanol is
70 percent. Below this level and within normal soluble use ranges, a uniformly
viscous liquid is obtained which pours evenly. Although, it appears
aesthetically desirable, it will not support suspended powder and segregation
occurs. However, at ethanol concentrations above its solubility range, the
polymer becomes less soluble and forms the desired pititious type liquid. If
ethanol is further increased resulting in very low water levels the polymer will
precipitate out and its suspending properties are again lost. Accordingly, a
70:30 ratio of ethanol-water is optimum. However, it was found that this problem
can be eliminated by the sufficient addition of a
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polyhydric alcohol such as glycerin, propylene glycol, butylene glycol and
polyglycols thereto.
Accordingly, it has been found that the monohydric alcohol constitutes
about 55-85 percent; and the water content may be as low as 5 percent if at
least 10 percent polyhydric alcohol is also present in the suspension. The
combined water and polyhydric alcohol content is at least 15 percent and may be
up to about 25 percent. Thus, it is apparent that the proportions of monohydric
alcohol, water and polyhydric alcohol are interdependent.
In summary, U.S. Pat. No. 4,664,909 teaches a fast-drying deodorant
comprising a critical amount of hydroxyethyl cellose as the deodorant to
encapsulate or isolate bacteria to prevent growth of the bacteria, suspended in
a solution of monohydric alcohol to provide the fast drying characteristics and
polyhydric alcohol to improve the overall solubility of the solution to allow
the use of increased levels of monohydric alcohol. The relative proportions of
the monohydric alcohol, water and polyhydric alcohol are driven or determined by
the desired solubility and therefore are interdependent.
U.S. Pat. No. 3,966,902 disclosed various polymer complex carriers such
as propylene glycol for use with an active ingredient such as a disinfectant or
fragrance.
U.S. Pat. No. 4,690,779 refers to the use of propylene glycol in
combination with alcohol and fragrances. This composition is both toxic and
non-biodegradable.
U.S. Pat. No. 4,209,500 teaches a composition suitable for use in
aerosol sprays including an anhydrous alcohol and fragrance or perfume. This
composition is corrosive, non-biodegradable and non-evaporative.
U.S. Pat. No. 4,689,168 describes a hard surface cleaning composition
suitable for glass, chrome, plastic, enamel and other hard surfaces. The
composition is applied to the hard surface as an emulsion of an aqueous phase
and an oil phase. The bubbling action is caused by the evaporation of volatile
constituents from the film or layer of applied compositions, as well as the
desire for the aqueous and oil phase components to reform. The bubbling action,
characterized by small bubbles of volatile
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components erupting from the surface of the composition film aids in lifting
soil from the hard surface. As an apparent consequence, the rate of cleaning is
accelerated. The composition comprises a polar organic solvent or mixture of
solvents, a nonvolatile surfactant, a volatile surfactant such asn an acetylenic
alcohol or diol, a volatile organosiloxane oligomer and water.
U.S. Pat. No. 4,983,317 teaches a liquid composition for cleaning a
wide variety of hard surfaces, particularly metallic, plastic, tile, porcelain,
glass and mirrored surfaces comprising a polyacrylic acid or a polyacrylate
resin builder in combination with a hydrotrope which is an alkali metal salt of
a C21 dicarboxylic acid. The organic solvent may be selected from the group
consisting of alkylene and polyalkylene glycols of from 2 to 6 carbon atoms and
lower alkyl ethers of alkylene and polyalkylene glycols of from 3 to 8 carbon
atoms, the alkyl ether having from 1 to 4 carbon atoms. A lower aliphatic
alcohol of from 2 to 4 carbon atoms may also be included in the composition to
adjust evaporation rate of the composition.
U.S. Pat. No. 5,064,635 describes a mixture of one or more surfactants
(detergents) with the pH sensitive dye. The surfactant can be diluted with water
to give the desired cleaning strength. The surfactant can be an anionic,
nonionic, amphoteric or mixtures of the three types. Typical anionic surfactants
used are petroleum sulfonates, such as sodium dodecylbenzene sulfonate, alcohol
sulfates such as sodium lauryl sulfate and ethoxylated higher fatty alcohol
sulfates such as sodium lauryl ether sulfate. Typical nonionic surfactants are
primary alcohol ethoxylates, secondary alcohol ethoxylates, alkyl phenol
ethoxylates and alkanolamides. The amphoteric surfactants include a number of
types of carboxylates derived from fatty imidazolines such as sodium
dicarboxyethylcoco phosphoethyl imidazoline or fatty proprionates such as
cocoamphoproprionate or cocoamphodipropionate. The composition of a basic
cleaner includes the surfactant or mixture of surfactants at about 0.1 percent
to about 20.0 percentage by weight. This range of surfactant is for usage in a
nondiluted product for household use. Thymolphthalein in the range of about 0.01
percent to about 1 percent by weight will give a broad range of blue color when
varying intensity using an alkali system to adjust the pH of the composition.
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U.S. Pat. No. 4,965,063 and U.S. Pat. No. 5,057,303 teach compositions
similar to U.S. Pat. No. 5,064,635.
U.S. Pat. No. 4,329,334 shows a homogeneous liquid anionic-amphoteric
based antimicrobial conditioning shampoo which includes about 0.5 to 2.5 percent
of the antimicrobial agent, 1-imidazolyl-1-(4-chlorophenoxy)-3,
3-dimethylbutan-2, one, solubilized in an aqueous solution of critical amounts
of a mixture of the following specific ingredients: about 10-40 percent by
weight of an anionic sulfate or sulfonate surface active agent; about 0.1-7.5
percent by weight of an amphoteric surfactant selected from the group consisting
of cocobetaine, cocosulfobetaine, cocoamidopropylbetaine,
cocoamidopropylsulfobetaine or combinations thereof; a nonionic surface active
agent selected from the group consisting of a tertiary amine oxide, a
polyoxyethylene hexitan mono-higher fatty acid ester and mixtures thereof; and
about 0.5-2 percent by weight of a lower aliphatic monohydric or polyhydric
alcohol or mixtures thereof in certain critical amounts to avoid precipitation
of the antimicrobial agent.
U.S. Pat. No. 3,654,165 teaches a cleaner-sanitizer for use on
telephone instruments including a fast-acting, penetrative, quick-drying
bacteriocidal detergent solution which leaves a safe, active residue of selected
proportions of sodium lauryl sulfate, dimethyl sulfone, isopropanol and iodine
in solution.
U.S. Pat. No. 4,793,988 describes a composition for disinfecting a
surface, such as a public restroom facility or telephone. The composition and
delivery of the composition provides for the placement of a thin layer of
disinfectant including a dye. The dye disappears as the thin layer effects the
germicidal activity of the disinfectant. A sample of the germicidal composition
was prepared with 400 mg of sodium dodecyl sulfate (SDS), 400 mg of octyl
phenoxy polyethoxyethanol marketed as Triton X-100 and 100 mg of blue dye
thymophthalein. This composition was tested for germicide effectiveness against
Herpes simplex virus type 2, Neisseria gonorrhoeae, Staphylococcus aureus,
Escherichia coli 011K58, Shingela sonnei, Salmonella typhimurium and Candida
albicans.
U.S. Pat. No. 4,975,217 describes germicidal compositions for direct
application to
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human skin including an organic acid, e.g., malic acid, and an anionic
surfactant, e.g., a sodium alpha-olefin sulfonate, as active ingredients, and
can optionally include an alcohol, e.g., specially denatured ethyl alcohol, as
an additional active ingredient. When formulated as soaps and lotions, the
compositions have been found to produce more than a 2.0 log reduction in
bacteria applied to skin. Organic acids and anionic surfactants, e.g., malic
acid and a sodium alpha-olefin sulfonate surfactant, are used as active
ingredients in germicidal products which are applied directly to the skin, such
as hand-washing soaps, skin-care lotions, soapy-lotions, or wipes containing
these materials. Optionally, the products can include an alcohol, such as,
specially denatured ethyl alcohol, ethyl alcohol and isopropyl alcohol as an
additional active ingredient. These formulations, in addition to killing
viruses, also effectively kill bacteria and yeasts. In particular, the
formulations have been found to kill a variety of microorganisms in both in
vitro experiments performed in test tubes and, even more importantly, in in vivo
experiments performed on human hands. Moreover, notwithstanding their germicidal
activity, the formulations have been found to be non-irritating to human skin.
U.S. Pat. No. 4,046,706 shows a composition for cleaning contact lenses
comprising a poly(oxyethylene)-poly(oxypropylene) block copolymer having a
molecular weight between 1900 and 15,500, a water solubility in excess of about
10 gms per 100 nl, a cloud point in 1 percent aqueous solutions above about 30
degrees C., and a foam height in excess of 30 mm; a microbial growth inhibitor;
ethyl or isopropyl alcohol; an amphoteric surfactant and water.
U.S. Pat. No. 3,578,499 teaches a powder composition containing a
gelling agent, a neutral diluent, a wetting agent and a dye or coloring
additive. The powder gelling composition when added to water forms a gel. Acid
or alkaline materials are added for cleaning, biocidal agents for sanitizing or
other materials to produce a desired effect. The significant advantage of this
method is the increased residence time and hence contact time between agents in
the gel and the surface to be acted on. A third component included in the
gelling composition is a wetting agent exemplified by a linear alkyl benzene
sulfonate type material wherein the alkyl group may include from about 12 to 14
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carbon atoms. The wetting agent should be desirably characterized as a anionic
agent although it is recognized that nonionic surfactants may also be employed.
One wetting agent found useful herein is the commercially available sulfonate of
dodecylbenzene.
U.S. Pat. No. 2,333,124 describes a method for sterilizing air laden
with bacteria or other pathogenic organisms comprising contacting the air with a
mixture of glycols in vapor form in proportions to provide about 1 gram of such
glycols in vapor form to not more than about 5 to 7 million cubic centimeters of
air.
U.S. Pat. No. 2,857,315 shows a stable anti-perspirant stick having a
base comprising a sodium stearate-propylene glycol soap gel having an active
anti-perspirant agent sodium zirconium lactate. The sodium stearate-propylene
glycol soap gel may contain alcohol in an amount not substantially greater than
the propylene glycol by weight.
Additional examples of the prior art are found in U.S. Pat. No.
580,213; U.S. Pat. No. 3,282,776; U.S. Pat. No. 4,201,764; U.S. Pat. No.
4,282,179; U.S. Pat. No. 4,265,899; U.S. Pat. No. 4,283,421; U.S. Pat. No.
4,364,515; U.S. Pat. No. 4,550,105, U.S. Pat. No. 4,105,431; U.S. Pat. No.
4,243,403; U.S. Pat. No. 4,278,206; U.S. Pat. No. 4,322,475; U.S. Pat. No.
4,436,732; U.S. Pat. No. 4,464,293; U.S. Pat. No. 4,597,887, U.S. Pat. No.
4,252,694; U.S. Pat. No. 4,279,762; U.S. Pat. No. 4,325,201; U.S. Pat. No.
4,540,505; U.S. Pat. No. 4,675,397 and U.S. Pat. No. 4,915,934.
Examination of the prior art reveals most existing compositions
available are either toxic or non-biodegradable or both. Toxic chemicals that
are not biodegradable contaminate our environment, the soil and the water
supply.
In recognition of the dangers of existing disinfectants, health
facilities are required to notify employees that toxic chemicals are in use and
advise them of the possible hazards that result or could result as a consequence
of misuse or a spills. Such notices must also be given to the community at
large.
Other laws and regulations require users to document the use of toxic
chemicals and require that the excess, the waste, or the residue be collected
and properly stored. These materials must be collected
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by licensed and approved toxic waste companies, taken to an authorized disposal
site and legally destroyed. The cost of disposing of such toxic material is
often more expensive than the initial purchase price.
Sterilants today should be non-toxic or low in toxicity and
biodegradable and capable of killing bacterial spores quickly and effectively.
Further, such disinfectants and sterilants should be chemically compatible with
the numerous aparatus and instruments found in modern healthcare facilities.
As described more fully hereinafter the instant invention is directed
to an environmentally safe composition capable of killing anaerobic and aerobic
bacteria, viruses including the HIV virus, mildew, mold, fungus and bacterial
spores. The principal complementary sporicidal ingredients of the invention are
selected from a group of monohydric alcohols, a group of polyhydric alcohols, a
group of saturated dialdehydes and a group of cationic surface active agents.
In the past such alcohols have had limited use outside the laboratory
due to various undesirable characteristics of alcohol. For example, it has been
universally accepted that alcohol has very limited application as a widely used
disinfectant because alcohol is unable to penetrate protein rich material,
evaporates quickly, has limited stability and shelf life, has a pungent odor and
tends to form a glaze on hard surfaces possibly hiding or covering visible
contamination.
The instant invention has evolved from an extensive development program
involving the unexpected formulation of certain chemicals to reduce or inhibit
those undesirable features of alcohol and to make alcohol safe and effective for
use outside the laboratory.
SUMMARY OF THE INVENTION
The present invention relates to a hypocompatible biodegradable
nonaqueous cold chemical sterilant for use in manual bucket systems as well as
automated sterilizer systems to kill a wide range of pathogenic organisms
including bacterial spores.
The cold chemical sterilant comprises a composition including a
monohydric alcohol, a
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polyhydric alcohol, a saturated dialdehyde and a cationic surface active agent.
The monohydric alcohol is selected from the group consisting of
isopropyl, methyl, ethyl, n-propyl, n-butyl, tert-butyl alcohol and allyl
alcohol and mixtures thereof. The polyhydric alcohol is selected from the group
consisting of propylene glycol; 1,3 propanediol; 1,2 butanediol, polyethylene
glycol with molecular weight of less than 800; glycerol and 1,4 butanediol and
mixtures thereof.
The saturated dialdehyde is selected from the group consisting of
malonaldehyde, succinaldehyde, oxaldehyde (glyoxal), adipaldehyde and
glutaraldehyde. The cationic surface active agent is selected from the group
consisting of cetylpyridinium chloride, methylbenzethonium chloride,
dodecylamine, hexadecylamine, hexadecylamine hydrochloride, dodecyl aniline,
oleyl methylamine ethylene diethylamine methyl sulfate, oleyl benzylamino
ethylene diethylamine hydrochloride, sulfate of lauryl pyridinium, octadecyl
methylene pyridinium acetate, methyl sulfate of dimethyloctadecyl sulfonium,
betaine of diethyl aminoacetic acid, cetylpyridinium bromide,
dodecyltrimethylammonium bromide, hexadecyltrimethylammonium bromide,
tetradecyltrimethylammonium bromide, benzalkonium chloride, benzethonium
chloride, benzyldimethyldodecylammonium bromide, benzyldimethyl-
hexadecylammonium chloride, benzyldimethyltetradecylammonium
chloride, benzyltrimethylammonium methoxide, cetyldimethylethylammonium bromide,
decamethonium bromide, dimethyldioctadecylammonium bromide, methylbenzethonium
chloride, methyl mixed trialkylammonium chloride, methyltrioctylammonium
chloride, 4-picoline dodecyl sulfate, n,n,n'poloxyethylene
(10)-n-tallow-1,3-diamino propane and octadecyl chloromethyl ether.
The relative proportions by weight of each of the four constituents
compliment each other to reduce the surface tension of the bacterial spore wall,
penetrate the bacterial spore wall and kill the nuclei of the bacterial spores
and other target organisms without the need of removing residue.
The hypocompatible biodegradable nonaqueous cold chemical sterilant in
liquid form
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may be used in manual bucket systems or automatic sterilizer systems. Alternate
systems may include a towelette or an absorbent wipe containing the product in
an airtight enveloping material such as sealed foil or other wrapping material
could be used for a single application.
The invention accordingly comprises the features of construction,
combination of elements, and arrangement of parts which will be exemplified in
the construction hereinafter set forth, and the scope of the invention will be
indicated in the claims.
DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT
Various sterilizing compositions and delivery devices have been
developed to kill various pathogenic organisms including bacterial spores. The
wide range of application or use is limited by the chemical and biological
effect of such compositions on the various surfaces and delivery means exposed
to such compositions.
The present invention relates to a hypocompatible organic or nonaqueous
cold chemical sterilant for application on medical instruments, and other
devices which is effective against a wide range of target organisms including
bacterial spores.
The cold chemical sterilant comprises a hypocompatible biodegradable
nonaqueous or organic composition including a monohydric alcohol, polyhydric
alcohol, saturated dialdehyde and a cationic surface active agent combined in
relative proportions by weight to sterilize medical and dental instruments and
other devices such as scopes and dental handpieces. The application of the cold
chemical sterilant is capable of killing a challenge of the pathogenic or target
organisms discussed herein within ten minutes and without leaving an
unacceptable residue.
The monohydric alcohol is selected from the group consisting of
isopropyl, methyl, ethyl, n-propyl, n-butyl, tert-butyl and allyl and mixtures
thereof. The preferred monohydric alcohol is isopropyl.
The polyhydric alcohol is selected from the group consisting of
propylene glycol; 1,3 propanediol; 1,2 butanediol, polyethylene glycol,
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glycerol and 1,4 butanediol and mixtures thereof. The preferred polyhydric
alcohol is polyethylene glycol with a molecular weight of 400 or less. The
polyethylene glycols suitable for use are well known and commercially available.
Polyethylene glycols, which are designated by a number that represents the
average molecular weight, range from clear viscous liquids at room temperature,
PEGs 200, 300, 400 and 600, to soft solids PEGs, 1000 and 1450, to waxy solids
available in the form of flakes or powders, PEGs 3350, 8000 and 14000.
The saturated dialdehyde is selected from the group consisting of
malonaldehyde, succinaldehyde, oxaldehyde (glyoxal), adipaldehyde and
preferably, glutaraldehyde.
The cationic surface active agent is selected from the group consisting
of methylbenzethonium, dodecylamine, hexadecylamine, hexadecylamine
hydrochloride, dodecyl aniline, oleyl methylamine ethylene diethylamine methyl
sulfate, oleyl benzylamino ethylene diethyamine hydrochloride, sulfate of lauryl
pyridinium, octadecyl methylene pyridinium acetate, methyl sulfate of
dimethyloctadecyl sulfonium, betaine compound of diethyl aminoacetic acid,
octadecyl chloromethyl ether, cetylpyridinium bromide, dodecyltrimethylammonium
bromide, hexadecyltrimethylammonium bromide, tetradecyltrimethylammonium
bromide, benzalkonium chloride, benzethonium chloride,
benzyldimethyldodecylammonium bromide, benzyldimethylhexadecylammonium chloride,
benzyldimethyltetradecylammonium chloride, benzyltrimethylammonium methoxide,
cetyldimethylethylammonium bromide, decamethonium bromide,
dimethyldioctadecylammonium bromide, methylbenzethonium chloride, methyl mixed
trialkylammonium chloride, methyltrioctylammonium chloride, 4-picoline dodecyl
sulfate, n,n,n'poloxyethylene (10)-n-tallow-1,3-diamino propane and preferably
cetylpyridinium chloride.
As used herein, target organisms refers to pathogenic organisms
including Staphylococcus areus, Pseudomonas aeruginosa and Salmonella
coleraesuis and viruses including HIV, tuberculosis, polio and herpes simplex 2
as well as the fungus Trichophyton mentagrophytus, mold, mildew and
<PAGE> 22
5,405,602
20
bacterial spores including Bacillus subtilis, and Colostridium sporogenes.
As used herein, the term non-toxic refers to the acute dermal, acute
inhalation and acute oral dosage as defined in 40 Code of Federal Regulations,
Section 152.3.
As used herein, the term biodegradable refers to decomposition in the
presence of 25 percent organic material within 90 days at 69 degrees F.
(Standard Temperature) with moisture content of 100 parts per million.
As used herein, the term challenge refers to a test colony or specimen
of 106 specified target pathogenic organisms.
As used herein, the term hypocompatible shall mean no significant or
debilitating degradation effects to materials and surfaces exposed to the
composition including for example, discoloration, corrosion, cracking, and
embrittlement.
The specific monohydric alcohols, polyhydric alcohols, glutaraldehyde
and cationic surface active agent and relative ratios complement and interact
synergistically to create the desired solubility, specific gravity,
conductivity, pH, flash point, boiling point and evaporation required for the
effective use of the cold chemical sterilant against the challenge as defined
herein on pathogens as described herein with a nontoxic effect as defined herein
and with a hypocompatible effect as defined herein on the surfaces described
herein.
Further, the polyhydric alcohol reduces the harmful effects of
composition if swallowed or sprayed into the eyes or on mucus membranes as well
as soothing the skin upon contact. Since the polyhydric alcohol reduces toxicity
to human cells the need to dilute the cold sterilant has been eliminated. Tests
indicate that the polyhydric alcohol increases the overall effectiveness of the
composition against most viruses, mold and mildew and bacterial spores.
Since the cold chemical sterilant was developed for use on a wide
variety of instruments and devices the measure of chemical resistance is
important to permit broad use and application. To be effective, the cold
sterilant must be hypocompatable with CPVC, Epoxy, Polypropylene, PVC, Cyolac
<PAGE> 23
5,405,602
21
(ABS), Phenolic, Nylon, Noryl, Delrin (Acetal), Ryton to 200% F, Kynar, Teflon,
Stainless Steel 316, Stainless Steel 304, Carpenter 20, Stainless steel (440),
Titanium, Cast Bronze, Cast Iron, Aluminum, Hastelloy C, Carbon/ceramic,
Ceramagnet A, Viton, Buna N., Neoprene, Nitrile, Natural rubber, Hypalon, EPDM,
Kel-F, Tygon, Silicone, Ceramic and Carbon/graphite.
Comparative results of the cold chemical sterilant with the individual
constituents have demonstrated that the combination of interactive ingredients
provides a cold chemical sterilant compatible with an expansive range of
materials found in a wide variety environments.
In order to accomplish the design criteria of a hypocompatible
biodegradable nonaqueous cold chemical sterilant effective against the wide
range of pathogenic target organisms described herein, the composition should
have a pH of between about 6.0 and 7.5 or essentially neutral, have an effective
kill time of about 8 to 12 minutes and leave no toxic residue, a specific
gravity of about 0.85, viscosity below 4 and relatively no conductivity.
Standard Association of Official Analitical Chemists (A.O.A.C.) tests
of the instant invention have been conducted against the target organisms
described herein including Bacillus subtilis, Clostridium sporogenes. The cold
sterilant has killed the target organisms within ten minutes.
The effective proportional relationship of the ingredients by weight
for the monohydric alcohol is between about 65 percent to 75 percent, for the
polyhydric alcohol is between about 4 percent and 16 percent and for both the
saturated dialdehyde and cationic surface active agents is between 0.1 to 2.0
percent.
The preferred proportional relationship of the ingredients by weight is
about 70 percent for the monohydric alcohol, between about 8 to 12 percent for
the polyhydric alcohol, and between about 0.5 to 1.0 percent for both the
saturated dialdehyde and cationic surface active agent. As a result there is no
dermal toxicity. In addition, since there is no electrolitic activity there is
no significant positive interaction between the composition and the instruments.
<PAGE> 24
5,405,602
22
It will thus be seen that the objects set forth above, among those made
apparent from the preceding description are efficiently attained and since
certain changes may be made in the above construction without departing from the
scope of the invention, it is intended that all matter contained in the above
description or shown in the accompanying drawing shall be interpreted as
illustrative and not in a limiting sense.
It is also to be understood that the following claims are intended to
cover all of the generic and specific features of the invention herein
described, and all statements of the scope of the invention which, as a matter
of language, might be said to fall therebetween.
Now that the invention has been described,
1. A hypocompatible nonaqueous cold chemical sterilant for use on
medical and dental instrument devices to kill a challenge of target organisms
effective against bacteria including Staphylococcus aureus, Pseudomonas
aeruginosa, Salmonella chloerasuis and spores, viruses including HIV-I, HIV-II
and herpes simplex 2. tuberculosis, polio and the fungus Trichophyton
mentagrophytus, mold, mildew and spores, said cold chemical sterilant comprising
about 65 percent to about 75 percent by weight of a monohydric alcohol selected
from the group consisting of isopropyl, methyl, ethyl, n-propyl, n-butyl,
tert-butyl and allyl and mixtures thereof, about 4 percent to about 16 percent
by weight of a polyhydric alcohol selected from the group consisting of
propylene glycol; 1,3 propanediol; 1,2 butanediol, polyethylene glycol; glycerol
and 1,4 butanediol and mixtures thereof, less than 2.0 percent by weight of a
dialdehyde selected from the group consisting of malonaldehyde, succinaldehyde,
oxaldehyde (glyoxal), adipaldehyde and glutaraldehyde and about 0.1 percent to
about 2.0 percent by weight of a cationic surface active agent in proportion by
weight to denature the proteins to corrupt and penetrate the bacterial spore
wall to kill the endospores and other microorganisms wherein the pH of said cold
chemical sterilant is between about 6.0 to about 7.5.
2. The hypocompatible biodegradable nonaqueous cold chemical sterilant
of claim 1 wherein the molecular weight of polyethylene glycol is 400 or less.
<PAGE> 25
5,405,602
23
3. The hypocompatible nonaqueous cold chemical sterilant of claim 1
wherein said monohydric alcohol is about 70 percent by weight, said polyhydric
alcohol is between about 8 to about 12 percent weight, and said dialdehyde and
said cationic surface active agent are each less than 1.0 percent by weight.
4. The hypocompatible nonaqueous cold chemical sterilant of claim 1
wherein the pH of said hypocompatible biodegradable nonaqueous cold chemical
sterilant is about 7.0.
<PAGE> 26
5,405,602
24
5. The hypocompatible nonaqueous cold chemical sterilant of claim 1
wherein said dialdehyde is glutaraldehyde less than 1.0 percent by weight and
said cationic surface active agent is cetylpyridinium chloride less than 1.0
percent by weight.
6. The hypocompatible nonaqueous cold chemical sterilant of claim 1
wherein said monohydric alcohol is isopropyl alcohol about 70 percent by weight
and said polyhydric alcohol is propylene glycol or polyephylene glycol between
about 8 and about 12 percent by weight.
********
<PAGE> 1
EXHIBIT 10.15
THE UNITED STATES OF AMERICA
The Commissioner of Patents and
Trademarks
Has received an application for a patent for
a new and useful invention. The title and
description of the invention are enclosed.
The requirements of law have been complied
with, and it has been determined that a
patent on the invention shall be granted
under the law.
Therefore, this
UNITED STATES PATENT
Grants to the person or persons having title
to this patent the right to exclude others
from making, using or selling the invention
throughout the United States of America for
the term of seventeen years from the date of
this patent, subject to the payment of
maintenance fees as provided by law.
---------------------------------------------
Acting Commissioner of Patents and Trademarks
---------------------------------------------
Attest
<PAGE> 2
UNITED STATES PATENT [19]
Simmons
- --------------------------------------------------
[54] BIODEGRADABLE DISINFECTANT
CONTAINING ANHYDROUS ALCOHOL
AND PROPYLENE GLYCOL
[76] Inventor: Paul L. Simmons, 17819
Simmons Rd., Lutz, Fla.
33549
[21] Appl. No.: 642,709
[22] Filed: Jan. 17, 1991
Related U.S. Application Date
[63] Continuation of Ser. No. 304,312,
Jan. 31, 1989, abandoned.
[51] Int. Cl.(5)............A61L 2/18; A61L 9/14;
A61K 31/045; A61K 9/12
[52] U.S. Cl. ..................424/47; 424/45;
424/76.8; 514/975; 422/28
[58] Field of Search........424/76.2, 76.8, 45,
424/47, 76.1
[56] References Cited
U.S. PATENT DOCUMENTS
580,213 4/1897 Hakansson...........112/27
3,445,564 5/1969 Kirschner...........424/45
[11] Patent Number: 5,145,663
[45] Date of Patent: Sep. 8, 1992
- -------------------------------------------------------
3,806,593 4/1974 Swanbock et al...........424/401
3,821,413 6/1974 Hellyer, Jr.............424/76.2
4,072,742 2/1978 Bouillon et al............424/47
4,336,270 6/1982 Muntwyler...............424/47 X
4,511,486 4/1985 Shah......................424/45
4,664,909 5/1987 Marachner.................424/69
4,678,658 7/1987 Casey et al...............424/43
4,690,779 9/1987 Baker et al..............252/546
Primary Examiner - Thurman K. Page
Assistant Examiner - E.J. Webman
Attorney, Agent, or Firm - Arthur W. Fisher, III
[57] ABSTRACT
A non-toxic, non-corrosive, biodegradable disinfectant for use against various
pathogenic organisms comprising a homogeneous composition of interactive
constituents including anhydrous alcohol, in particular, isopropyl alcohol,
propylene glycol, maskant and inert ingredients wherein the propylene glycol
reduces the surface glaze formed by the anhydrous alcohol and surface tension
formed by water or water-based body fluids enabling the disinfectant to rapidly
contact the pathogenic organisms.
7 Claims, No Drawings
<PAGE> 3
5,145,663
1
BIODEGRADABLE DISINFECTANT CONTAINING ANHYDROUS ALCOHOL AND PROPYLENE GLYCOL
CO-PENDING APPLICATION
This application is a continuation application of pending application
Ser. No. 304,312, filed Jan. 31, 1989 now abandoned.
BACKGROUND OF THE INVENTION
1. Field of the Invention
A non-toxic, non-corrosive, biodegradable disinfectant effective
against various pathogenic organisms.
2. Description of the Prior Art
Rapid increases in the spread of deadly communicable diseases such as
AIDS virus (HIV) have dramatically escalated public awareness for the need of an
effective protective means.
The need for such protective means applies equally to contaminated
surfaces such as those found in public restrooms, telephones, tables and other
surfaces contacted by the public as well as for topical application directly on
a patient's skin.
A common means for such surface protection is typified by a disposable
paper cover for a toilet. Such disposable paper covers often do not contain a
germicide and are not always available or easily used.
Various spray germicides for sanitizing such surfaces is typified by
U.S. Pat. No. 3,445,564. In addition, the use of a dye in a bactericidal
solution as disclosed in U.S. Pat. No. 2,449,274 is employed to provide a visual
indication of the effectiveness of such sprays.
U.S. Pat. No. 4,678,658 shows disinfecting compounds effective as
germicides reducing surface tension to more effectively distribute the germicide
spray on the surface. However, the spray is corrosive and environmentally
unsafe.
U.S. Pat. No. 3,821,413 teaches a disinfectant consisting of propylene
glycol to stabilize the composition and retard evaporation. This disinfectant is
toxic, corrosive and non-biodegradable.
<PAGE> 4
5,145,663
2
U.S. Pat. No. 3,966,902 disclosed various polymer complex carriers such
as propylene glycol for use with an active ingredient such as a disinfectant or
fragrance.
U.S. Pat. No. 4,690,779 refers to the use of propylene glycol in
combination with alcohol and fragrances. This composition is both toxic and
non-biodegradable.
U.S. Pat. No. 4,209,500 teaches a composition suitable for use in
aerosol sprays including an anhydrous alcohol and fragrance or perfume. This
composition is corrosive, non-biodegradable and non-evaporative.
Additional examples of the prior art are found in U.S. Pat. No.
580,213, U.S. Pat. No. 4,282,179, U.S. Pat. No. 4,265,899, U.S. Pat. No.
4,283,421, U.S. Pat. No. 4,364,515, U.S. Pat. No. 4,550,105, U.S. Pat. No.
4,105,431, U.S. Pat. No. 4,243,403, U.S. Pat. No. 4,278,206, U.S. Pat. No.
4,322,475, U.S. Pat. No. 4,436,732, U.S. Pat. No. 4,597,887, U.S. Pat. No.
4,252,694, U.S. Pat. No. 4,279,762, U.S. Pat. No. 4,325,201, U.S. Pat. No.
4,540,505 and U.S. Pat. No. 4,675,397.
Examination of the prior art fails to teach or suggest an effective
surface active disinfectant for application on contaminated surfaces or a
patient's skin through a spray or liquid application.
SUMMARY OF THE INVENTION
The presents invention relates to a non-toxic, non-corrosive,
biodegradable disinfectant for topical application on a patient's skin or to
surfaces to kill various pathogenic organisms.
The non-toxic, non-corrosive, biodegradable disinfectant comprises a
composition of interactive constituents including anhydrous alcohol, propylene
glycol and inert ingredients combined in specific relative proportions by weight
such that the non-toxic, non-corrosive, biodegradable disinfectant may be used
safely to disinfect a patient's skin through topically application or to
disinfect various surfaces with equal disinfecting effectiveness. The
interactive composition comprises anhydrous alcohol 70%, propylene glycol 10%,
fragrance 1% and inert ingredients 19% by weight.
The anhydrous alcohol provides the primary disinfecting or killing
effect on the pathogenic organisms. The propylene glycol
<PAGE> 5
5,145,663
3
lowers the flash point of the disinfectant and soothes the skin. The propylene
glycol also slows the rate of evaporation, reduces or eliminates the
intersurface glazing effect of anhydrous alcohol and homogenizes the interactive
ingredients.
The critical balance of interactive ingredients chemically reduces the
tensile strength of the surface liquids on the patient's skin or other surface
permitting the disinfecting effect to act directly on the pathogenic organisms.
The invention accordingly comprises the features of construction,
combination of elements, and arrangement of parts which will be exemplified in
the construction hereinafter set forth, and the scope of the invention will be
indicated in the claims.
DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT
Various compositions and devices have been developed to disinfect
various pathogenic organisms. Catholic application is limited by the chemical
and biological effect of such compositions or limitations on various surfaces,
delivery means and patients.
The present invention relates to a non-toxic, non-corrosive,
biodegradable disinfectant and antiseptic for topical application on a patient's
skin or on hard surfaces such as restrooms or tables against various pathogenic
organisms such as bacteria including Staphylococcus aureus, Pseudomonas
aeruginosa and Salmonella coleraesuis and viruses, including HIV-I, HIV-II and
herpes simplex type 2 as well as fungi, mold and mildew through numerous
delivery means.
The non-toxic, non-corrosive, biodegradable disinfectant of the subject
invention comprises an interactive composition of anhydrous alcohol, propylene
glycol and inert ingredients combined in specific relative proportions by weight
such that the disinfectant may be used topically to disinfect a patient's skin
or to disinfect various public surfaces through direct application with equal
effectiveness.
This unique disinfectant is effective against various pathogenic
organisms common to the general environment without deleterious non-toxic effect
on patients or damage to
<PAGE> 6
5,145,663
4
surfaces or dispensing devices as exemplified herein. The optimum proportional
relationship of the ingredients by weight is anhydrous alcohol 70%, propylene
glycol 10%, fragrance 1% and inert ingredients 19%.
The anhydrous alcohol is effective in 65 to 75 percent range.
The effective range of propylene glycol is between 8 to 12 percent by
weight. This proportion is critical to the universal use of the instant
disinfectant. During development of the instant invention numerous
concentrations were tested. The optimum proportions provide a disinfectant
effective against numerous pathogenic organisms without harming or destroying
the dispensing means, disinfected surface or patient.
The optimum percentage of propylene glycol raises the boiling point of
the disinfectant slowing the rate of evaporation. As a solvent the propylene
glycol prevents the tendency of isopropanol to form a glaze on the target
surface that masks the pathogenic organisms and breaks the barrier formed by
surface tension of water and water-based body fluids enabling the disinfectant
to act on the virus or organism more rapidly. The effectiveness is reduced to a
one minute kill label claim, rather than ten minutes as in most other
disinfectants. In addition the propylene glycol serves as an emulsifier to
assure that the fragrance and alcohol remain homogenized during storage and use.
Further the propylene glycol reduces the harmful effects of alcohol if
swallowed or sprayed into the eye or on mucus membranes as well as soothing the
skin upon contact. Since the propylene glycol reduces toxicity to human cells
the need to dilute the disinfectant has been eliminated. Propylene glycol also
acts as a secondary disinfectant useful to disinfect air. In the preferred
percentage used tests indicate that the propylene glycol increases the overall
effectiveness against most viruses, mold and mildew.
Since the disinfectant was developed for use on a wide variety of
surfaces and dispensed from a number of dispensing modes or means of dispersant
materials the measure of chemical resistance is important to provide universal
use and application. As shown by the following chemical resistance chart the
present
<PAGE> 7
5,145,663
5
invention compares favorably to propylene glycol and isopropyl alcohol.
<TABLE>
<CAPTION>
- -----------------------------------------------------
Propylene Isopropyl
Material Glycol Alcohol Disinfectant
- -----------------------------------------------------
<S> <C> <C> <C>
CPVC C1 A2 B2
Epoxy C A B
Polypropylene B2 A2 A2
PVC C1 B1 A1
Cyolac (ABS) B - B
Phenolic A A A
Nylon - B1 B1
Noryl - A1 A1
Delrin (Acetal) B A A
Ryton to 200(0)F - - -
Kynar (PVDF) - - -
Teflon A A2 A2
Stainless Steel B A A
316
Stainless Steel B A A
304
Carpenter 20 A A A
Stainless Steel - - -
(440)
Titanium A A A
Cast Bronze A A A
Cast Iron A C B
Aluminium B B B
Hastelloy C. B B B
Carbon/Ceramic A A A
Ceramagnet A - - -
Viton A A A
Buna N. A B A
Neoprene C B B
Nitrile A B A
Natural Rubber - A A
Hypalon - A A
EPDM - A A
Kel-F - - -
Tygon - - -
Silicone - A A
Ceramic A A A
Carbon/Graphite - A A
- ---------------------------------------------
</TABLE>
The following legend is provided to interpret the foregoing chart.
<TABLE>
<CAPTION>
- ----------------------------------------------------
Explanation of
Ratings-chemical effect footnotes
- ----------------------------------------------------
<S> <C>
A-No effect-Excellent (1) Satisfactory to
72(0)F.
B-Minor effect-Good (2) Satisfactory to
120(0)F.
C-Moderate effect-Fair (3) Satisfactory for
0-rings
D-Severe effect-Not recommended
- ----------------------------------------------------
</TABLE>
An examination of this chart and the comparative results clearly
demonstrates that the optimum combination of interactive ingredients of the
instant invention provides a disinfective effective against an expansive range
of materials
<PAGE> 8
5,145,663
6
found in a wide variety environments through various delivery means such as
aerosol, pump spray or swab.
The non-toxic, biodegradable aspect of the disinfectant permits
disposal without polluting ground water.
It will thus be seen that the objects set forth above, among those made
apparent from the preceding description are efficiently attained and since
certain changes may be made in the above construction without departing from the
scope of the invention, it is intended that all matter contained in the above
description or shown in the accompanying drawing shall be interpreted as
illustrative and not in a limiting sense.
It is also to be understood that the following claims are intended to
cover all of the generic and specific features of the invention herein
described, and all statements of the scope of the invention which, as a matter
of language, might be said to fall therebetween.
Now that the invention has been described, What is claimed is:
1. A non-toxic, non-corrosive, biodegradable disinfectant and
antiseptic for use against various pathogenic organisms, said disinfectant and
antiseptic consisting essentially of about 65 to 75% by weight isopropyl alcohol
and about 8 to 12% by weight propylene glycol, mixed homogeneously and
performing interactively in a proportion by weight such that said propylene
glycol reduces the surface glaze formed by said isopropyl alcohol and surface
tension formed by water of water-based body fluids enabling said disinfectant to
rapidly contact the pathogenic organisms and act equally effective on a patient
or inanimate surface without deleterious effect.
2. A non-toxic, non-corrosive, biodegradable disinfectant and
antiseptic according to claim 1, said isopropyl alcohol being present in an
amount of about 70 percent by weight.
3. A non-toxic, non-corrosive, biodegradable disinfectant and
antiseptic according to claim 2, at least about 19 percent by weight of said
disinfectant and antiseptic being inert ingredients.
4. A non-toxic, non-corrosive, biodegradable disinfectant and
antiseptic according to claim 1, wherein said propylene
<PAGE> 9
5,145,663
7
glycol is present in an amount of about 10 percent by weight.
5. A non-toxic, non-corrosive, biodegradable disinfectant and
antiseptic according to claim 4, and isopropyl alcohol being present in an
amount of about 70 percent by weight.
6. A non-toxic, non-corrosive, biodegradable disinfectant and
antiseptic
<PAGE> 10
5,145,663
8
according to claim 5, at least about 19 percent by weight of said disinfectant
and antiseptic being inert ingredients.
7. A non-toxic, non-corrosive, biodegradable disinfectant and
antiseptic according to claim 1, at least about 19 percent by weight of said
disinfectant and antiseptic being inert ingredients.
* * * * * * * * * *
<PAGE> 1
EXHIBIT 10.16
THE UNITED STATES OF AMERICA
<TABLE>
<S> <C> <C>
[11] Patent Number: 5,441,723
[45] Date of Patent: Aug. 15, 1995
</TABLE>
The Commissioner of Patents and Trademarks
Has received an application for a patent for a new and useful invention. The
title and description of the invention are enclosed. The requirements of law
have been complied with, and it has been determined that a patent on the
invention shall be granted under the law.
Therefore, this
United States Patent
Grants to the person or persons having title to this patent the right to exclude
others from making, using or selling the invention throughout the United States
of America for the term of seventeen years from the date of this patent, subject
to the payment of maintenance fees as provided by law.
- -----------------------------------------------------
Commissioner of Patents and Trademarks
Attest
SIMMONS
[54] NON-TOXIC HYPOCOMPATIBLE
BIODEGRADABLE GERMICIDE
[75] Inventor: PAUL L. SIMMONS, Gulfport, Fla.
<PAGE> 2
UNITED STATES PATENT [19] SIMMONS
[54] NON-TOXIC HYPOCOMPATIBLE
BIODEGRADABLE GERMICIDE
[75] Inventor: PAUL L. SIMMONS, Gulfport, Fla.
[73] Assignee: ROST, INCORPORATED, St. Petersburg, Fla.
[21] Appl. No.: 92,556
[22] Filed: JUL. 16, 1993
RELATED U.S. APPLICATION DATA
[63] Continuation-in-part of Ser. No. 846,249, Feb. 24, 1992 abandoned,
which is a continuation-in-part of Ser. No. 642,709, Jan. 17, 1991, Pat. No.
5,145,663, which is a continuation of Ser. No. 304,312, Jan. 31, 1989,
abandoned.
<TABLE>
<S> <C> <C>
[51] INT. CL.(6).................................A61L 2/18; A61L 9/14;
A61K 31/045; A61K 9/12
[52] U.S. CL.....................................424/47;424/45
424/76.80; 514/975; 422/28
[58] FIELD OF SEARCH.............................424/47, 45, 76.8, 76.2,
424/76.1; 422/28; 514/975
[56] REFERENCES CITED
</TABLE>
U.S. PATENT DOCUMENTS
<TABLE>
<S> <C> <C>
4,511,486 4/1985 Shah.....................................424/45
[11] Patent Number: 5,441,723
[45] Date of Patent: Aug. 15, 1995
</TABLE>
OTHER PUBLICATIONS
Webster's New World Dictionary, 3rd College Ed. pp. 860, 873.
Primary Examiner - Edward J. Webman
Attorney, Agent or Firm - Arthur W. Fisher, III
[57] ABSTRACT
A non-toxic hypocompatible biodegradable germicide effective against a wide
range of pathogenic organisms comprising a composition including a monohydric
alcohol from the group consisting of isopropyl, methyl, ethyl, n-propyl,
n-butyl, tert-butyl or allyl or mixtures thereof and a polyhydric alcohol from
the group consisting of propylene glycol; 1,3 propanediol; 1,2 butanediol, PEG
400; glycerol or 1,4 butanediol or mixtures thereof in proportion by weight such
that the polyhydric alcohol reduces the surface glaze formed by the monohydric
alcohol and surface tension formed by water or water-based body fluids enabling
the disinfectant/antiseptic to kill the pathogenic organisms and act equally
effective on a patient or inanimate surface without deleterious effect to
either.
8 CLAIMS, NO DRAWINGS
<PAGE> 3
5,441,723
1
NON-TOXIC HYPOCOMPATIBLE
BIODEGRADABLE GERMICIDE
This application is a continuation-in-part application of pending
application Ser. No. 846,249 filed Feb. 24, 1992, abandoned; that is a
continuation-in-part application of application Ser. No. 642,709, filed Jan. 17,
1991 and issued as U.S. Pat. No. 5,145,663 on Sep. 8, 1992; that is a
continuation application Ser. No. 304,312 filed Jan. 31, 1989, now abandoned.
BACKGROUND OF THE INVENTION
1. Field of the Invention
A non-toxic hypocompatible biodegradable germicide effective against a
wide range of pathogenic organisms.
2. Description of the Prior Art
Modern health care facilities are confronted with complex medical
problems, whether in a practioner's office, clinic or large hospital. Such
facilities must care for persons with life-threatening diseases while protecting
other patients in the same facility from becoming infected. Thus, controlling
viral and microbial contamination is a critically important task facing health
care facilities today.
In the past, the health care industry believed that sanitation and
disinfection applied primarily only to emergency rooms and operating rooms or
suites. However, today health care provides an awareness that chemical
sanitation and disinfection is necessary in virtually every area of the modern
treatment facility.
This awareness has been heightened by the rapid increases in the spread
of deadly communicable diseases such as the AIDS virus (HIV), hepatitis and
tuberculosis, which has dramatically increased public awareness for the need of
an effective protective means.
The need for such protective means applies equally to contaminated
surfaces not only to health care facilities but to such environs as public
restrooms, telephones, tables and other surfaces contacted by the public as well
as for topical application directly on a patient's skin.
Various spray germicides for sanitizing such surfaces is typified by in
U.S. Pat. No. 3,445,564. U.S. Pat. No. 3,445,564 is directed to a method,
compositions and articles for sanitizing public or communal facilities prior to
individual use. The method consists of applying a thin layer of a rapidly drying
liquid germicidal composition to a surface such as a toilet seat. The rapidly
drying germicidal
<PAGE> 4
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2
compositions consist essentially of a lower aliphatic alcohol and at least about
5 percent of a volatizing agent therefor, such as acetone. Isopropyl alcohol has
excellent germicidal activity and is sufficiently volatile to give a
satisfactory drying rate when blended with suitable proportions of a
volatilizing agent. Inasmuch as the lower aliphatic alcohols are not
sufficiently volatile to afford usefully short drying times for practical
purposes in the method and articles of the Kirschner invention it was necessary
to include a volatilizing agent in the germicidal composition.
The proportion of volatizing agent to lower aliphatic alcohol in the
rapidly drying germicidal compositions employed in the invention may vary widely
depending upon a number of factors, which include among others, the volatility
of the alcohol employed, the volatility of the volatilizing agent, the desired
drying rate of the germicidal composition, the amount of germicidal agent
applied to the surface to be treated and the method of application of the
germicide, not to mention the prevailing conditions of temperature and relative
humidity under which the product is to be employed.
Although the isopropyl alcohol-acetone composition of U.S. Pat. No.
3,445,564 has germicidal activity against bacteria, fungi and other lower
organisms, additional antibacterial, antifungal or other active ingredients may
be incorporated to enhance the overall germicidal effectiveness. Suitable
germicidal additives include the well known antibacterial quaternary ammonium
compound. In essence, U.S. Pat. No. 3,445,564 teaches the use of isopropyl
alcohol to kill a limited number of germs on a dry toilet seat with the addition
of acetone to volatize an already highly volatile chemical to rapidly dry the
toilet seat for use within 30 seconds.
The use of a dye in a bactericidal solution as disclosed in U.S. Pat.
No. 2,449,274 is employed to provide a visual indication of the effectiveness of
such sprays.
U.S. Pat. No. 4,678,658 shows an aerosol spray for use in disinfecting
a surface for personal use such as a public restroom facility or telephone. The
composition and delivery of the compositions provides for the placement of a
spray of disinfectant which includes a dye that disappears as the spray effects
the germicidal activity of the disinfectant. The composition is also rapidly
drying, so that the dye disappears as well as the disinfecting composition
leaving the surface dry. However, the spray is corrosive and environmentally
unsafe.
U.S. Pat. No. 3,821,413 discloses a formulation of materials which
permits an effective,
<PAGE> 5
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3
uniform rate of evaporation of glycols from an air circulator device to reduce
airborne bacteria in the surrounding atmosphere. It was observed that the
relative amounts and identities of the components of the invention are critical
to the attainment of the desired continuous evaporation of glycols over a
prolonged period of time.
The composition of U.S. Pat. No. 3,821,413 is a single phase liquid
composition especially adapted for volatilization at a substantially uniform
rate from the air circulator device. Generally speaking, the composition
includes three essential components (1) a glycol, (2) an organic polar coupling
compound for maintaining the homogeneity prevents the glycol from separating
from the mixture during evaporation of the mixture into the atmosphere and (3)
an organic, relatively non-polar compound for forming hydrophobic micelles with
the glycol molecules in the resulting mixture for reducing the affinity of the
glycol to atmospheric moisture and thereby increasing the rate at which the
glycol may be evaporated into the atmosphere.
The composition contains the glycol germicide. If desired, other
suitable germicides or antiseptic agents can be added provided, however, that
the glycol concentration of the composition does not fall below 5 percent by
weight of the total mixture. Such germicides include quaternary ammonium
compounds, phanols, bisphenols, salicylanilides,carbanilides, formaldehyde and
chloride.
The required glycol evaporation rate for attaining the desired air
sanitizing performance depends on the satisfactory stability and uniform nature
of the liquid composition during evaporation from the mixture. Accordingly, the
compositions of the invention include from about 2 percent to about 40 percent
by weight of an organic polar coupling compound for maintaining the homogeneity
of the mixture to prevent the glycol from separating from the mixture during the
evaporation process.
The affinity of glycols to attract atmospheric moisture significantly
reduces their volatility and impairs their evaporation rate. Accordingly, the
compositions of the invention include from about 5 percent to about 80 percent
by weight of an organic, relatively non-polar compound for forming hydrophobic
micelles surrounding the glycol molecules in the mixture for reducing the
affinity of the glycol to atmospheric moisture and thereby increase the rate of
evaporation of the glycol. Without this micelle formation, it was found that the
glycol or mixture of glycols in the mixture cannot evaporate appreciably in an
air circulator device
<PAGE> 6
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4
containing a wick immersed in the liquid composition.
U.S. Pat. No. 3,806,593 is directed to an acne treatment medication
applied to the skin for preventing the formation of acne or decreasing already
established acne. An important factor for the occurrence of ache is the presence
of bacteria in the sebaceous glands in the skin. It is known that the bacteria
in the sebaceous glands form esterases which hydrolyze the sebum fats to
alcohols and free fatty acids.
The medicinal acne-preventing or acne-diminishing composition of U.S.
Pat. No. 3,806,593 is based on the bacterial esterase activity in the sebaceous
glands which together with the water already present in the skin can hydrolyze
an ester having a good penetration capacity into the sebaceous glands to form
one and preferably two antibacterially active components, viz. an acid and an
alcohol, which are harmless to the skin. The active compound in the composition
is one or more esters chosen from the group consisting of ethyl lactate,
isopropyl lactate and/or glycerol mono or dilactate. The esters hydrolyze in the
sebaceous glands due to the esterases present in the glands to form the
corresponding acids and alcohols. Lactic acid and the lower alcohols and also
glycerol to a certain extent exert a good antibacterial activity when formed in
situ in the sebaceous glands. The esters are lipophilic and can thus penetrate
into the said glands. Even if a beneficial action can be achieved by application
of the ester or esters per se it has been found to be suitable to apply the
ester in the form of a solution in ethyl alcohol or isopropyl alcohol. The
alcohol prevents hydrolysis of the ester already in the composition. The alcohol
moves the hydrolysis equilibrium towards ester formation. The alcohol can also
facilitate the penetration of the ester into the skin.
As is well-known alcohol in high concentrations may cause a drying-out
of the skin. To counteract this effect, the composition may include a
moisture-retaining agent such as a lower, suitably water-free polyol, viz.
propylene glycol or glycerol. The content of propylene glycol or glycerol in the
composition according to the invention may be up to 25 percent, suitably not
more than 10 percent by weight and preferably 1-5 percent. High levels of polyol
tend to make the composition smeary upon application on the skin and should thus
be avoided.
The preferred composition according to the invention consists of about
15 percent by weight of ethyl lactate, about 2 percent by weight of propylene
glycol, the remainder being ethyl alcohol.
<PAGE> 7
5,441,723
5
In summary, U.S. Pat. No. 3,806,593 relates to acne medication
comprising esters that hydrolize in the sebaceous glands in combination with an
alcohol to prevent hydrolysis of the esters as well facilitate the penetration
of the ester into the skin, and propylene glycol or glycerol to prevent drying
of the skin. The preferred ratio of the constituents is 15 percent to 83 percent
to 2 percent respectively.
U.S. Pat. No. 4,664,909 discloses a stable, fast drying pituitous
powder deodorant suspension in an alcohol media containing a minimal amount of
water and a critical amount of the essential hydroxyethyl cellulose as the
suspending agent.
The fast drying pituitous suspension of particulate material in an
aqueous alcohol media contains hydroxyethyl cellulose at levels above its normal
solubility limit by polyhydric alcohol.
More specifically, U.S. Pat. No. 4,664,909 relates to stable pituitous
suspensions of particulate material, preferably about 1-20 percent, uniformly
suspended in alcohol/aqueous media containing a high alcohol content and a lower
water content. The alcohol media may be a lower monohydric alcohol selected from
the group consisting of methanol, ethanol, isopropanol and mixtures thereof. The
use of polyhydric alcohols such as propylene glycol, butylene glycol and polyols
thereof, and glycerin decreases the critical water level required in the
hydroxyethyl cellulose-containing alcohol media.
It has been unexpectedly found that powders can be suspended in
alcoholic/aqueous media containing a high alcohol content and a lower water
content by using the water soluble polymer hydroxyethyl cellulose at critical
levels above its ethanol solubility range which may be broadened by specified
polyhydric alcohols. This polymer is unique in its property to form stable
suspensions.
Specifically, polyhydric alcohols can be partially substituted for the
monohydric alcohol, not to exceed the monohydric alcohol content. The monohydric
alcohol content, such as ethanol, must exceed the upper solubility level for the
water soluble polymer hydroxyethyl cellulose in ethanol or other lower alkanol.
The reported upper solubility level of this water soluble polymer in ethanol is
70 percent. Below this level and within normal soluble use ranges, a uniformly
viscous liquid is obtained which pours evenly. Although, it appears
aesthetically desirable, it will not support suspended powder and segregation
occurs. However, at ethanol concentrations above its solubility range, the
polymer becomes less soluble and forms the desired pititious type liquid. If
ethanol is further increased resulting in very low water levels the polymer will
precipitate
<PAGE> 8
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6
out and its suspending properties are again lost. Accordingly, a 70:30 ratio of
ethanol-water is optimum. However, it was found that this problem can be
eliminated by the sufficient addition of a polyhydric alcohol such as glycerine,
propylene glycol, butylene glycol and polyglycols thereto.
Accordingly, it has been found that the monohydric alcohol constitutes
about 55-85 percent; and the water content may be as low as 5 percent if at
least 10 percent polyhydric alcohol is also present in the suspension. The
combined water and polyhydric alcohol content is at least 15 percent and may be
up to about 25 percent. Thus, it is apparent that the proportions of monohydric
alcohol, water and polyhydric alcohol are interdependent.
In summary, U.S. Pat. No. 4,664,909 teaches a fast-drying deodorant
comprising a critical amount of hydroxyethyl cellose as the deodorant to
encapsulate or isolate bacteria to prevent growth of the bacteria, suspended in
a solution of monohydric alcohol to provide the fast drying characteristics and
polyhydric alcohol to improve the overall soluability of the solution to allow
the use of increased levels of monohydric alcohol. The relative proportions of
the monohydric alcohol, water and polyhydric alcohol are driven or determined by
the desired solubility and therefore are interdependent.
U.S. Pat. No. 3,966,902 disclosed various polymer complex carriers such
as propylene glycol for use with an active ingredient such as a disinfectant or
fragrance.
U.S. Pat. No. 4,690,779 refers to the use of propylene glycol in
combination with alcohol and fragrances. This composition is both toxic and
non-biodegradable.
U.S. Pat. No. 4,209,500 teaches a composition suitable for use in
aerosol sprays including an anhydrous alcohol and fragrance or perfume. This
composition is corrosive, non-biodegradable and non-evaporative.
Additional examples of the prior art are found in U.S. Pat. No.
580,213, 4,282,179, 4,265,899, 4,283,421, 4,364,515, 4,550,105, 4,105,431,
4,243,403, 4,278,206, 4,322,475, 4,436,732, 4,597,887, 4,252,694, 4,279,762,
4,325,201, 4,540,505 and 4,675,397.
Examination of the prior art reveals that most existing disinfectants
are either toxic or non-biodegradable or both. Toxic chemicals that are not
biodegradable contaminate the environment, the soil and the water supply. Recent
federal, state and local regulations are designed to reduce or eliminate such
environmental contamination resulting from the use of such disinfectants.
<PAGE> 9
5,441,723
7
In recognition of the dangers of existing disinfectants, health
facilities are required to notify employees that toxic chemicals are in use and
inform them of the possible hazards that result or could result as a consequence
of misuse or spills. Such notices must also be given to the community at large.
Other laws and regulations require users to document the use of toxic
chemicals and require that the excess, waste and residue be collected and
properly stored. These materials must be collected by licensed and approved
toxic waste companies, taken to authorized disposal sites and legally destroyed.
The cost of disposing of such toxic material is often more expensive than the
initial purchase price.
Simply stated, the prior art fails to teach or suggest an effective
non-toxic biodegradable surface active disinfectant/antiseptic for application
on contaminated surfaces or for safe use on a patient's skin.
Disinfectants today should be non-toxic as well as biodegradable,
capable of killing or inactivating pathogenic organisms. Further, such
disinfectants should be chemically compatible with the numerous different
surfaces found in modern healthcare facilities.
As described more fully hereinafter the instant invention is directed
to an environmentally safe germicide capable of killing anaerobic and aerobic
bacteria, viruses including the HIV virus, mildew, mold and fungus. The
principal active anti-microbial, anti-viral ingredients of the instant invention
are selected from a group of monohydric alcohols and polyhydric alcohols.
In the past such alcohols have had limited use outside the laboratory
due to various undesirable characteristics of alcohol. For example, it has been
universally accepted that alcohol has very limited application as a widely used
disinfectant because alcohol is unable to penetrate protein rich material,
evaporates quickly, has limited stability and shelf life, has a pungent odor,
tends to form a glaze on hard surfaces possibly hiding or covering visible
contamination and dries the skin.
The instant invention has involved an extensive development program
involving the unexpected formulation of certain chemicals to reduce or inhibit
those undesirable features of alcohol and to make alcohol safe and effective for
use outside the laboratory.
<PAGE> 10
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8
SUMMARY OF THE INVENTION
The present invention relates to a non-toxic hypocompatible
biodegradable germicide for topical application on a patient's skin or to
inanimate surfaces to kill a wide range of pathogenic organisms.
The biodegradable germicide comprises a composition including a
monohydric alcohol from the group consisting of isopropyl, methyl, ethyl,
n-propyl, n-butyl, tert-butyl alcohol or allyl alcohol and/or mixtures thereof
and a polyhydric alcohol from the group consisting of propylene glycol; 1,3
propanediol; 1,2 butanediol, PEG 400; glycerol or 1,4 butanediol and/or mixtures
thereof in proportion by weight such that the polyhydric alcohol reduces the
surface glaze formed by the monohydric alcohol and surface tension formed by
water or water-based body fluids enabling the germicide to kill the pathogenic
organisms and act equally effective on a patient or inanimate surface without
deleterious effect to either.
The monohydric alcohol provides the primary disinfecting or killing
effect on the pathogenic organisms; while, the polyhydric alcohol lowers the
flash point of the composition and soothes the skin. The polyhydric alcohol also
slows the rate of evaporation, reduces or eliminates the intersurface glazing
effect of monohydric alcohol and homogenizes the interactive ingredients.
The relative proportions by weight of interactive ingredients
chemically reduces the tensile strength of the surface liquids on the patient's
skin or other surface permitting the germicidal effect to act directly on the
pathogenic organisms.
The non-toxic hypocompatible biodegradable germicide in liquid form may
be dispensed in various delivery systems including spray, foam, pour and squirt
for a aerosol or non-aerosol product. Alternate systems may include a towelette
or an absorbent wipe containing the product in an airtight enveloping material
such as sealed foil or other wrapping material could be used for a single
application.
The invention accordingly comprises the features of construction,
combination of elements, and arrangement of parts which will be exemplified in
the construction hereinafter set forth, and the scope of the invention will be
indicated in the claims.
DETAILED DESCRIPTION OF THE
PREFERRED EMBODIMENT
Numerous germicidal compositions and delivery devices have been
developed to kill various pathogenic organisms. The wide range of application
<PAGE> 11
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9
or use is limited by the chemical and biological effect of such compositions on
the various surfaces, delivery means and patients exposed to such germicidal
compositions.
The present invention relates to a non-toxic hypocompatible
biodegradable germicide for topical application on a patient's skin or on hard
surfaces such as restrooms or tables effective against a wide range of target
pathogenic organisms such as bacteria including Staphylococcus aureus,
Pseudomonas aeruginosa and Salmonella choleraesuis, HIV I, HIV-II, Tuberculosis,
polio, Herpes simplex type 2, as well as fungi Trichophyton mentagrophytus, mold
and mildew through alternate delivery means.
The germicide comprises a non-toxic hypocompatible biodegradable
composition of selected monohydric alcohols, selected polyhydric alcohols and
water combined in relative proportions by weight such that the composition may
be used topically to cleanse a patient's skin or to disinfect various public
surfaces through direct application with equal effectiveness without deleterious
effect to either.
The monohydric alcohol is selected from the group consisting of
isopropyl, methyl, ethyl, n-propyl, n-butyl, tert-butyl or allyl or mixtures
thereof and the polyhydric alcohol is selected from the group consisting of
propylene glycol; 1,3 propanediol; 1,2 butanediol, PEG 400; glycerol or 1,4
butanediol or mixtures thereof.
As used herein, the term non-toxic refers to the requirements of the LD
50 Oral Toxicity Test; that is, non-toxic, non-poison, to rate at 50 times the
lethal dose.
As used herein, the term biodegradable refers to decomposition in the
presence of 25 percent organic material within 90 days at 69 degrees F.
(Standard Temperature) with moisture content of 100 parts per million.
As used herein, the term challenge refers to a test colony or specimens
of 106 specified pathogenic organisms.
As used herein, the term azeotropic means a constant boiling liquid
admixture of two or more substances, whose admixture behaves as a single
substance, in that the vapor, produced by partial evaporation or distillation of
the liquid has the same composition as the liquid, i.e., the admixture distills
without substantial composition change. Constant boiling compositions, which are
characterized as azeotropic, exhibit either a maximum or minimum boiling point,
as compared with that of the nonazeotropic mixtures of the same substances.
<PAGE> 12
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10
As used herein, the term organic means the presence of less than about
10 percent by weight of free water within a solution.
As used herein, the term aqueous means the presence of more than about
10 percent by weight of free water within a solution.
The specific monohydric alcohols and polyhydric alcohols and relative
ratios thereof optimize the particular characteristics of solubility, specific
gravity, conductivity, pH, flash point, boiling point and evaporation essential
to the effective use of the instant germicide against the bioburden as defined
herein on pathogens as described herein with a nontoxic effect as defined herein
on patients, and with a hypocompatible effect as defined herein on the surfaces
described herein.
Specifically, the presence of the polyhydric alcohol raises the boiling
point of the germicide slowing the rate of evaporation of the germicide. As a
solvent, the polyhydric alcohol prevents the tendency of monohydric alcohol to
form a glaze on the target surface that masks the pathogenic organisms and
breaks the barrier formed by surface tension of water and water-based body
fluids enabling the germicide to act on the pathogens more rapidly. In addition,
the polyhydric alcohol serves as an emulsifier to assure that the composition
remains homogenized during storage and use.
Further, the polyhydric alcohol reduces the harmful effects of
monohydric alcohol if swallowed or sprayed into the eyes or on mucus membranes
as well as soothing the skin upon contact. Since the polyhydric alcohol reduces
toxicity to human cells the need to dilute the germicide has been eliminated.
Polyhydric alcohol also acts as a secondary disinfectant useful to disinfect
air. In the preferred percentage used, tests indicate that the polyhydric
alcohol increases the overall effectiveness of the germicide against most
viruses, mold and mildew.
Since the germicide was developed for use on a wide variety of surfaces
and dispensed from a number of dispensing modes or means of dispersant materials
the measure of chemical resistance is important to permit broad use and
application. To be effective, the germicide must be hypocompatable with CPVC,
Epoxy, Polypropylene, PVC, Cyolac (ABS), Phenolic, Nylon, Noryl, Delrin
(Acetal), Ryton to 200%F, Kynar, Teflon, Stainless Steel 316, Stainless Steel
304, Carpenter 20, Stainless steel (440), Titanium, Cast Bronze, Cast Iron,
Aluminum, Hastelloy C, Carbon/ceramic, Ceramagnet A, Viton, Buna N., Neoprene,
Nitrile, Natural rubber, Hypalon, EPDM, Kel-F, Tygon, Silicone, Ceramic and
Carbon/graphite.
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11
As used herein, the term hypocompatible shall mean no material
degradation efforts associated with surfaces to include, for example,
discoloration, corrosion, cracking, crazing and embrittlement.
Comparative results of the germicide with the individual constituents
have demonstrated that the combination of interactive ingredients provides a
germicide effective against an expansive range of materials found in a wide
variety environments through various delivery means such as aerosol, pump, spray
or swab without degradation of the materials.
In order to accomplish the design criteria of a non-toxic,
hypocompatible, biodegradable germicide effective against the wide range of
pathogenic organisms described herein, the composition should have a pH of
between about 7 and 5, virtually evaporate before about 6 and 20 minutes to have
an effective kill time of about 8 to 12 minutes and prevent surface residue, a
specific gravity of about 0.85, viscosity below 4 and relatively no
conductivity.
The effective proportional relationship of the ingredients by weight
for the monohydric alcohol as described herein is between about 65 percent to
about 75 percent, for the polyhydric alcohol as described herein is between
about 4 percent and about 16 percent and for the water is between about 9
percent to about 18 percent.
The preferred proportional relationship of the active ingredients by
weight is about 70 percent for the monohydric alcohol and between about 8
percent to about 12 percent for the polyhydric alcohol and between about 14
percent to about 18 percent water. The preferable amount of polyhydric alcohol
is 6 to 14 percent by weight. Less than 4 percent of polyhydric alcohol by
weight does not provide adequate kill and exhibits an excessive alkaline pH;
while, more than 16 percent of polyhydric alcohol by weight leaves a residue to
attract and harbor pathogens. However, the composition is most effective with
about 10 percent polyhydric alcohol, about 70 percent monohydric alcohol, and
about 16 percent water all by weight.
The solution comprises a binary azeotropic composition formed by the
chemical bonding between the monohydric alcohol and water in correct proportion
to lengthen shelf life, reduce evaporation and rust, and enhance efficacy.
Specifically, because the azeotrope is stable, the composition will maintain the
efficacy for long periods of time. The azeotropic bond between the monohydric
alcohol and water causes the combination to evaporate together thus maintaining
substantially the same relative
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12
concentration of monohydric alcohol and water to retain sufficient potency to
kill the target organisms. Moreover, because the water is bonded to the
monohydric alcohol, the ability to oxidize metal (rust) is greatly reduced.
Thus, after registering significant amounts of evaporation in laboratory tests,
presumed loss of efficacy would be expected. Because of the azeotrope however,
even after a 33 percent weight loss, the concentration of monohydric alcohol was
still at 66 percent. Therefore, most of the evaporation was from the free water
plus some of the azeotropic monohydric alcohol. Regardless of extended shelf
life, exposure to air in an ultrasound, or carelessness with regard to keeping
containers tightly sealed, the required concentration of monohydric alcohol
essential to achieve accepted and required testing protocols will be maintained.
In the total concentrations used in the solution about 70 percent
monohydric alcohol requires about 10 percent water to be azeotropic. An
additional amount of water up to 10 percent may be added to the composition for
a total of 20 percent of water by weight without destroying the azeotropic
conditions of the monohydric alcohol or diminishing the disinfectant capability
of the composition against hydrophobic organisms.
The addition of between about 2 percent and 4 percent by weight of a
surfactant such as sodium dodecyl sulfate, octyl phenoxy polyethoxyethanol,
triethanol amine lauryl sulfate and mixtures thereof permits the use of the
composition as a surface disinfectant capable of dislodging and absorbing as
much as twenty five percent organic matter from an inanimate surface.
The addition of between about 1 percent and 2 percent by weight of a
sporicide such as an N(hydroxymethyl) acetamide derivative permits the use of
the composition as a sterilant capable of killing Bacillus subtilis and
Clostridium sparogenes.
By adding a resin such as Carbopol 940 brand carboxy polymethylene by
BF Goodrich from about 0.1 percent to 2.0 percent by weight to increase
viscosity, the composition may be used as a commercial or industrial
disinfecting lubricant.
It will thus be seen that the objects set forth above, among those made
apparent from the preceding description are efficiently attained and since
certain changes may be made in the above construction without departing from the
scope of the invention, it is intended that all matter contained in the above
description shall be interpreted as illustrative and not in a limiting sense.
It is also to be understood that the following claims are intended to
cover all of the generic and
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13
specific features of the invention herein described, and all statements of the
scope of the invention which, as a matter of language, might be said to fall
therebetween.
Now that the invention has been described, What is claimed is:
1. A non-toxic, hypocompatible, biodegradable germicide effective for
contact and killing of a challenge of pathogenic organisms comprising
Staphylococcus aureus, Pseudomonas aeruginosa, Salmonella choleraesuis, HIV I,
HIV-II, tuberculosis, polio, herpes simplex type 2, Trichophyton mentagrophytes
or mold, said germicide comprising;
(i) a disinfecting amount of at least about 65% to about 75% by weight
of at least one monohydric alcohol selected from the group
consisting of isopropyl, methyl, ethyl, n-propyl, n-butyl,
tert-butyl, allyl alcohols and mixtures thereof;
(ii) a surface glaze reducing amount of from about 4% to about 16% by
weight of at least one polyhydric alcohol, selected from the group
consisting of isopropyl, methyl, ethyl, n-propyl, n-butyl,
tert-butyl, allyl alcohols, and mixtures thereof;
(iii) from at least about 9% to about 20% by weight water in an organic
azeotropic combination with the monohydric alcohol; and
wherein components (i), (ii) and (iii) are mixed homogeneously with a pH
of from about 5
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14
to about 7 and in proportions effective to interact in a manner to
reduce surface glaze formed on pathogenic organisms to be disinfected
and reduce the surface tension of water or water-based body fluids
containing the pathogenic organisms found on a surface to be
disinfected, such that the pathogenic organisms of said challenge can
be contacted and killed before evaporation of said monohydric alcohol.
2. A germicide according to claim 1, comprising about 70 percent by weight
monohydric alcohol.
3. A germicide according to claim 2, comprising about 8 to 12 percent by
weight polyhydric alcohol.
4. A germicide according to claim 3, comprising about 10 percent by weight
of said polyhydric alcohol.
5. A germicide according to claim 4, comprising about 16 percent by weight
water.
6. A germicide according to claim 1, comprising at least about 16 percent
by weight water.
7. A germicide according to claim 1, effective against a 106 challenge of
Staphylococcus aureus, Pseudomonas aeruginosa, Salmonella choleraesuis, HIV-I,
HIV-II, tuberculosis, polio, herpes simplex type 2, Trichophyton metagrophytes,
mold or mildew.
8. A germicide according to claim 7, having an effective kill time for
said challenge of from about 8 to 12 minutes.
***********
<PAGE> 1
EXHIBIT 10.17
THE UNITED STATES OF AMERICA
The Commissioner of Patents and
Trademarks
Has received an application for a
patent for a new and useful
invention. The title and description
of the invention are enclosed. The
requirements of law have been
complied with, and it has been
determined that a patent on the
invention shall be granted under the
law.
Therefore, this
UNITED STATES PATENT
Grants to the person(s) or persons
having title to this patent the
right to exclude others from making,
using offering for sale, or selling
the invention throughout the United
States of America for the term set
forth below, subject to the payment
of maintenance fees as provided by
law.
If this application was filed prior
to June 8, 1995, the term of this
patent is the longer of seventeen
years from the date of grant of this
patent or twenty years from the
earliest effective U.S. filing date
of the application, subject to any
statutory extension.
If this application was filed on or
after June 8, 1998, the term of this
patent is twenty years from the U.S.
filing date, subject to any
statutory extension. If the
application contains a specific
reference to an earlier filed
application or applications under 35
U.S.C. 120, 121 or 365(c), the term
of the patent is twenty years from
the date on which the earliest
application was filed, subject to
any statutory extension.
Commissioner of Patents and
Trademarks
<PAGE> 2
<TABLE>
<S> <C> <C> <C>
UNITED STATES PATENT [19] [11] PATENT NUMBER: 5,637,307
SIMMONS , ET AL. [45] DATE OF PATENT: JUNE 10,
1997
</TABLE>
[54] METHOD OF IMMERSION STERILIZATION AND ORGANIC COLD CHEMICAL STERILANT
[76] PAUL L. SIMMONS, 6250 Kipps Colony Ct., No. 203, Gulfport, FL
33707); IMMEKUS;
Inventors: ROBERT L. (106 E. Ct., No. 203, Gulfport, Fla 33707;
ROBERT L. IMMEKUS, 106 E. Hanna
Ave., Tampa, Fla. 33604
[21] Appl.195,365
No.:
[22] Filed: FEB. 14, 1994
Related U.S. Application Data
[63] Continuation-in-part of Ser. No. 901,592, Jun. 19, 1992, Pat. No.
5,405,602, which is a continuation-in-part of Ser. No. 642,709, Jan. 17,
1991, Pat. No. 5,145,663, which is a continuation of Ser. No. 304,312,
Jan. 31, 1989, abandoned.
[51] INT CL.6...............A61L 2/18; A61L 2/02
A61K 9/08
[52] U.S. CL................424/405; 422/20; 422/28
[58] FIELD OF SEARCH...............424/47,405; 422/20
422/28
[56] REFERENCES CITED
U.S. PATENT DOCUMENTS
3,282,775 11/1966 Stonehill ..............424/36
4,511,486 4/1985 Shah ...................424/45
Primary Examiner - Edward J. Webman
Attorney, Agent or Firm - A. W. Fisher, III
[57] ABSTRACT
A method of immersion sterilization of medical and dental instruments and an
organic cold chemical sterilant capable of killing a challenge of target
microorganisms including bacterial spores wherein the method of immersion
sterilization comprises the steps of immersion of the instruments in a first
organic solution to solubilize the protein of the microorganisms, immersion
in an aqueous solution to unprotonate the solubilized proteins and exposing
the bioburden on the instruments to ultrasonic agitation to remove organic
material from the instruments and immersion in a second organic solution to
cross-link the binding sites of the unprotonated proteins thereby denaturing
the proteins to corrupt and penetrate the bacterial walls to kill the
endospores and other microorganisms; and wherein the organic cold chemical
sterilant comprises a monohydric alcohol, a polyhydric alcohol, a
dialdehyde, a surface active agent and water in proportion by weight to
denature the proteins to corrupt and penetrate the bacterial and conidial
walls to kill the endospores and other microorganisms.
8 CLAIMS, NO DRAWINGS
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METHOD OF IMMERSION STERILIZATION AND ORGANIC COLD CHEMICAL
STERILANT
This application is a continuation-in-part application of application
Ser. No. 901,592 filed Jun. 19, 1992, now U.S. Pat. No. 5,405,602, that is a
continuation-in-part application of application Ser. No. 642,709, filed Jan. 17,
1991, now U.S. Pat. No. 5,145,663, that is a continuation application Ser. No.
304,312 filed Jan. 31, 1989, now abandoned.
BACKGROUND OF THE INVENTION
1. Field of the Invention
A method of immersion sterilization of medical and dental instruments
and an organic cold chemical sterilant capable of killing a challenge of target
microorganisms including bacterial spores.
2. Description of the Prior Art
Sterilants are used in many areas, such as in the sterilization of
laboratory, surgical, dental and other equipment. Since these chemical
sterilizing agents or other chemical sterilizing methods commonly take six to
ten (6-10) hours to be effective, it is customary in hospital practice to
chemically sterilize instruments overnight.
Methods of sterilization involving either the use of pressurized steam,
dry heat or ethylene oxide are common. However, some of these methods are
cumbersome, tedious and time-consuming employing potential carcinogens, often
damage the sterilized material and require expensive equipment and skilled
technicians.
Moreover, steam or heat sterilization is impracticable for many plastic
devices and delicate instruments which are sensitive to elevated temperatures.
Many chemical sterilization methods have been developed as substitutes
for steam or heat sterilization. Unfortunately most have shortcomings. Phenols,
ketones and formaldehyde compositions have considerable sporicidal activity but
have objectionable odors and extreme toxicity. Ethanol, isopropyl alcohol and
the quaternary ammonium compounds have been used, and though less odorous and
toxic, lack the activity or efficacy of the phenols and formaldehyde
compositions.
Compositions comprising saturated dialdehydes with alkalinating agents
have also been used. Though such compounds are satisfactory as chemical
sterilization agents their sporicidal activity is limited to certain pH
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ranges, require up to ten (10) hours to effectively kill the pathogens, and have
certain limits on stability.
U.S. Pat. No. 3,282,775 shows a sporicidal composition including
saturated dialdehydes preferably glutaraldehyde from 0.1 percent to 2.0 percent
containing from 2 to 6 carbon atoms and a cationic surface active agent. The
compounds may be diluted either with water or lower alkanols such as methanol,
ethanol, isopropanol and the like, or with combinations to form aqueous-alcohol
solutions in a 30 percent to 60 percent ratio. The deleterious effects of lower
alkanols on rubber, plastics and cements as well as corrosion are recognized.
The addition of anti-corrosion agents are therefore suggested.
U.S. Pat. No. 4,040,977 describes a preservative and disinfecting
composition for queous emulsions, suspensions and solutions which are obtained
by reaction in water of a haloacetamide or thiocyanoacetamide or mixture
thereof; an alcohol or mixture of alcohols; and formaldehyde.
U.S. Pat. No. 3,697,222 describes a sterilization process achieved by
contacting a contaminated object with an aqueous acid glutaraldehyde solution at
temperatures above about 45 degrees C. The high temperature precludes the use of
alcohol due to the dangers of explosion and rapid evaporation and increase the
irritating effect of the vapor. The sterilizing action may be promoted by
ultrasonic energy.
U.S. Pat. No. 4,093,744 teaches a means for killing spores on
instruments and the like utilizing the combination of glutaraldehyde and a
detergent selected from the group consisting of nonionic, anionic and ampholytic
surface active agents preferably in an aqueous solution.
U.S. Pat. No. 4,048,336 relates to a means for killing spores on
instruments and the like utilizing the combination of glutaraldehyde and a
monoaldehyde such as formaldehyde.
U.S. Pat. No. 4,208,404 shows an aqueous solution of glutaraldehyde of
acid pH value with dissolved quantities of certain highly ionized salts to kill
dormant spores at room temperature.
U.S. Pat. No. 3,016,328 teaches a dialdehyde alcoholic sporicidal
composition including of about 0.01 percent to about 1.0 percent saturated
dialdehyde, about 60 percent to about 70 percent lower alkanol and an
alkalinating agent.
U.S. Pat. No. 4,294,797 describes a composition to sterilize medical
instruments comprising an alcohol-aldehyde active substance combination in a
proportion of 5 to 15 percent by weight. The preferred alcohol is isopropanol
and the preferred aldehyde is formaldehyde or a succinic acid dialdehyde complex
and the preferred ratio of alcohol to aldehyde is one to one.
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U.S. Pat. No. 2,889,243 shows a chemical composition having antiviral
activity comprising hydroxpyruvaldehyde ether as the active ingredient together
with water and a surface active agent.
U.S. Pat. No. 4,173,653 teaches an oxydiacetaldehyde as an active
antimicrobial agent in an aqueous solution for disinfecting or sterilizing. The
activity against bacteria or spores can be improved by adding alkalinating
agents or alcohols or propylene glycol or by raising pH or temperature.
U.S. Pat. No. 4,923,899 describes an aqueous composition for killing
bacteria, spores, fungi and viruses on nonabsorbent surfaces comprising at least
one quaternary ammonium salt, at least one aliphatic dialdehyde having from two
to six carbon atoms, and at least one aliphatic hydroxyl compound having from
one to eight atoms. Optionally, a chelating agent and an inorganic nitrite salt
may be employed.
U.S. Pat. No. 3,968,250 describes a method for disinfecting or
sterilizing medical, surgical, dental instruments or other objects in liquid
phase by combining nonionic and anionic surfactants with aqueous alcoholic
glutaraldehyde solutions. The method can be used also with ultrasonic
irradiation over a wide frequency range of from 10 to 850 kHz. The test examples
show that the composition is ineffective with ultrasonic agitation or heat
unless the concentration of glutaraldehyde is relatively high. The use of heat
also limits the percentage of alcohol that can be used leaving the percentage of
water relatively high. The example of the alcohol/water composition consists of
60 percent isopropyl alcohol and 37.8 percent water. Moreover, the effectiveness
of cationic agents is denegrated. U.S. Pat. Nos. 3,968,248 and 3,912,450 teach
similar methods.
U.S. Pat. No. 4,103,001 claims a room temperature aqueous sterilizing
composition comprising from 0.75 percent by weight of glutaraldehyde and from
4-15 percent by weight of phenol and a metal phenate, preferably sodium phenate.
Optionally present are 1-5 percent by weight of sodium tetraborate, 2-10 percent
by weight of a humectant such as glycerol, di-ethylene glycol or propylene
glycol and a surfactant.
U.S. Pat. No. 4,511,486 discloses a foamable aqueous liquid denture
cleanser and deodorant comprising a surfactant, humectant, water and ethanol or
isopropanol with a preferred ration percentage by weight of about 1, 6.5, 29, 1
and 61 respectively.
U.S. Pat. No. 4,923,899 teaches an aqueous sterilant composition wherein
the preferred embodiment consists of cloride/bromide/nitrate (21%), isopropyl
alcohol (14%), propylene glycol (12%) and water (balance %). The use of
glutaraldehyde (2.6%-3.2%) is also disclosed.
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Various spray germicides for sanitizing such surfaces is typified by
U.S. Pat. No. 3,445,564. U.S. Pat. No. 3,445,564 is directed to a method,
compositions and articles for sanitizing public or communal facilities prior to
individual use. The method consists of applying a thin layer of a rapidly drying
liquid germicidal composition to a surface such as a toilet seat. The rapidly
drying germicidal compositions consist essentially of a lower aliphatic alcohol
and at least about 5 percent of a volatizing agent such as acetone. Isopropyl
alcohol has excellent germicidal activity and is sufficiently volatile to give a
satisfactory drying rate when blended with suitable proportions of a volatizing
agent. Although the isopropyl alcohol-acetone composition of U.S. Pat. No.
3,445,564 has germicidal activity against bacteria, fungi and other lower
organisms, additional antibacterial, antifungal or other active ingredients may
be incorporated to enhance the overall germicidal effectiveness. Suitable
germicidal additives include the well known antibacterial quaternary ammonium
compound. In essence, U.S. Pat. No. 3,445,564 teaches the use of isopropyl
alcohol to kill a limited number of germs on a dry toilet seat with the addition
of acetone to volatize an already highly volatile chemical to rapidly dry the
toilet seat for use within 30 seconds.
U.S. Pat. No. 4,678,658 shows an aerosol spray for use in disinfecting a
surface for personal use such as a public restroom facility or telephone. The
composition and delivery of the compositions provides for the placement of a
spray of disinfectant which includes a dye that disappears as the spray effects
the germicidal activity of the disinfectant. The composition is also rapidly
drying, so that the dye disappears as well as the disinfecting composition
leaving the surface dry. However, the spray is corrosive and environmentally
unsafe.
U.S. Pat. No. 3,821,413 discloses a formulation of materials which
permits an effective, uniform rate of evaporation of glycols from an air
circulator device to reduce airborne bacteria in the surrounding atmosphere. It
was observed that the relative amounts and identities of the components of the
formulation are critical to the attainment of the desired continuous evaporation
of glycols over a prolonged period of time.
The composition of U.S. Pat. No. 3,821,413 is a single phase liquid
composition especially adapted for volatilization at a substantially uniform
rate from the air circulator device. Generally speaking, the composition
includes three essential components (1) a glycol, (2) an organic polar coupling
compound for maintaining the homogeneity prevents the glycol from separating
from the mixture during evaporation of the mixture into the
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atmosphere and (3) an organic, relatively non-polar compound for forming
hydrophobic micelles with the glycol molecules in the resulting mixture for
reducing the affinity of the glycol to atmospheric moisture and thereby
increasing the rate at which the glycol may be evaporated into the atmosphere.
The affinity of glycols to attract atmospheric moisture significantly
reduces their volatility and impairs their evaporation rate. Accordingly, the
compositions of the invention include from about 5 percent to about 80 percent
by weight of an organic, relatively non-polar compound for forming hydrophobic
micelles surrounding the glycol molecules in the mixture for reducing the
affinity of the glycol to atmospheric moisture and thereby increase the rate of
evaporation of the glycol. Without this micelle formation, it was found that the
glycol or mixture of glycols in the mixture cannot evaporate appreciably in an
air circulator device containing a wick immersed in the liquid composition.
U.S. Pat. No. 3,806,593 is directed to an acne treatment medication
applied to the skin for preventing the formation of acne or decreasing already
established acne comprising esters that hydrolize in the sebaceous glands in
combination with an alcohol to prevent hydrolysis of the esters as well as to
facilitate the penetration of the ester into the skin, and propylene glycol or
glycerol to prevent drying of the skin. The preferred ratio of the constituents
is 15 percent to 83 percent to 2 percent respectively.
U.S. Pat. No. 4,664,909 discloses a stable, fast drying pituitous powder
deodorant suspension in an alcohol media containing a minimal amount of water
and a critical amount of the essential hydroxyethyl cellulose as the suspending
agent. The fast drying pituitous suspension of particulate material in an
aqueous alcohol media contains hydroxyethyl cellulose at levels above its normal
solubility limit by the polyhydric alcohol. The monohydric alcohol constitutes
about 55-85 percent; and the water content may be as low as 5 percent if at
least 10 percent polyhydric alcohol is also present in the suspension. The
combined water and polyhydric alcohol content is at least 15 percent and may be
up to about 25 percent. Thus, it is apparent that the proportions of monohydric
alcohol, water and polyhydric alcohol are interdependent.
In summary, U.S. Pat. No. 4,664,909 teaches a fast-drying deodorant
comprising a critical amount of hydroxyethyl cellose as the deodorant to
encapsulate or isolate bacteria to prevent growth of the bacteria, suspended in
a solution of monohydric alcohol to provide the fast drying characteristics and
polyhydric alcohol to improve the overall solubility of the solution to allow
the use of increased levels of monohydric
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alcohol. The relative proportions of the monohydric alcohol, water and
polyhydric alcohol are driven or determined by the desired solubility and
therefore are interdependent.
U.S. Pat. No. 3,966,902 disclosed various polymer complex carriers such
as propylene glycol for use with an active ingredient such as a disinfectant or
fragrance.
U.S. Pat. No. 4,690,779 refers to the use of propylene glycol in
combination with alcohol and fragrances. This composition is both toxic and
non-biodegradable.
U.S. Pat. No. 4,209,500 teaches a composition suitable for use in
aerosol sprays including an anhydrous alcohol and fragrance or perfume. This
composition is corrosive, non-biodegradable and non-evaporative.
U.S. Pat. No. 4,689,168 describes a hard surface cleaning composition
suitable for glass, chrome, plastic, enamel and other hard surfaces. The
composition is applied to the hard surface as an emulsion of an aqueous phase
and an oil phase. The bubbling action is caused by the evaporation of volatile
constituents from the film or layer of applied compositions, as well as the
desire for the aqueous and oil phase components to reform. The bubbling action,
characterized by small bubbles of volatile components erupting from the surface
of the composition film aids in lifting soil from the hard surface. As an
apparent consequence, the rate of cleaning is accelerated. The composition
comprises a polar organic solvent or mixture of solvents, a nonvolatile
surfactant, a volatile surfactant such as an acetylenic alcohol or diol, a
volatile organosiloxane oligomer and water.
U.S. Pat. No. 5,064,635 describes a mixture of one or more surfactants
(detergents) with the pH sensitive dye. The surfactant can be diluted with water
to give the desired cleaning strength.
U.S. Pat. No. 4,965,063 and 5,057,303 teach compositions similar to that
described in U.S. Pat. No. 5,064,635.
U.S. Pat. No. 4,329,334 shows a homogeneous liquid anionic-amphoteric
based antimicrobial conditioning shampoo which includes about 0.5 to 2.5 percent
of the antimicrobial agent, 1-imidazolyl-1-(4-chlorophenoxy)-3,
3-dimethylbutan-2, one, solubilized in an aqueous solution of critical amounts
of a mixture of the following specific ingredients: about 10-40 percent by
weight of an anionic sulfate or sulfonate surface active agent; about 0.1-7.5
percent by weight of an amphoteric surfactant and about 0.5-2 percent by weight
of a lower aliphatic monohydric or polyhydric alcohol or mixtures thereof in
certain critical amounts to avoid precipitation of the antimicrobial agent.
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U.S. Pat. No. 3,654,165 teaches a cleaner-sanitizer for use on telephone
instruments including a fast-acting, penetrative, quick-drying bacteriocidal
detergent solution which leaves a safe, active residue of selected proportions
of sodium lauryl sulfate, dimethyl sulfone, isopropanol and iodine in solution.
U.S. Pat. No. 4,793,988 describes a composition for disinfecting a
surface, such as a public restroom facility or telephone. The composition and
delivery of the composition provides for the placement of a thin layer of
disinfectant including a dye. The dye disappears as the thin layer effects the
germicidal activity of the disinfectant. A sample of the germicidal composition
was prepared with 400 mg of sodium dodecyl sulfate (SDS), 400 mg of octyl
phenoxy polyethoxyethanol marketed as Triton X-100 and 100 mg of blue dye
thymophthalein.
U.S. Pat. No. 4,975,217 describes germicidal compositions for direct
application to human skin including an organic acid, and an anionic surfactant,
as active ingredients, and can optionally include an alcohol, as an additional
active ingredient. When formulated as soaps and lotions, the compositions have
been found to produce more than a 2.0 log reduction in bacteria applied to skin.
Organic acids and anionic surfactants are used as active ingredients in
germicidal products which are applied directly to the skin, such as hand-washing
soaps, skin-care lotions, soapy-lotions, or wipes containing these materials.
U.S. Pat. No. 4,046,706 shows a composition for cleaning contact lenses
comprising a poly(oxyethylene)-poly(oxypropylene) block copolymer, a water
solubility in excess of about 10 gms per 100 ml, a cloud point in 1 percent
aqueous solutions above about 30 degrees C, and a foam height in excess of 30
mm; a microbial growth inhibitor; ethyl or isopropyl alcohol; an amphoteric
surfactant and water.
U.S. Pat. No. 3,578,499 teaches a powder composition containing a
gelling agent, a neutral diluent, a wetting agent and a dye or coloring
additive. The powder gelling composition when added to water forms a gel. Acid
or alkaline materials are added for cleaning, biocidal agents for sanitizing or
other materials to produce a desired effect. The significant advantage of this
method is the increased residence time and hence contact time between agents in
the gel and the surface to be acted on. A third component included in the
gelling composition is a wetting agent exemplified by a linear alkyl benzene
sulfonate type material. The wetting agent should be desirably characterized as
a anionic agent although it is recognized that nonionic surfactants may also be
employed.
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U.S. Pat. No. 2,333,124 describes a method for sterilizing air laden
with bacteria or other pathogenic organisms comprising contacting the air with a
mixture of glycols in vapor form in proportions to provide about 1 gram of such
glycols in vapor form to not more than about 5 to 7 million cubic centimeters of
air.
U.S. Pat. No. 2,857,315 shows a stable anti-perspirant stick having a
base comprising a sodium stearate-propylene glycol soap gel having an active
anti-perspirant agent sodium zirconium lactate. The sodium stearate-propylene
glycol soap gel may contain alcohol in an amount not substantially greater than
the propylene glycol by weight.
Additional examples of the prior art are found in U.S. Pat. Nos.
580,213; 3,282,776; 3,653,499; 3,983,252; 4,004,024; 4,201,764; 4,282,179;
4,265,899; 4,283,421; 4,364,515; 4,436,754; 4,550,105, 4,105,431; 4,122,192;
4,243,403; 4,278,206; 4,322,475; 4,436,732; 4,464,293; 4,597,887, 4,252,694;
4,279,762; 4,325,201; 4,540,505; 4,675,397; 4,937,072; 4,978,530; 4,983,317 and
4,915,934.
Generally these cold chemical sterilants are aqueous (water-based)
solutions which contain between 2.0%-4.0% glutaraldehyde designed for one-step,
"bucket" sterilization. Glutaraldehyde is a highly unstable, synthetic
dialdehyde. It is the two aldehyde groups (one at each end of the molecule) that
create or act as the sporicidal mechanism. In use, glutaraldehyde cycles or
passes through a five-phase structure equilibrium, of which the dialdehyde
structure is only one phase which is sporicidally active phase. As observed,
only 12% of glutaraldehyde is in the dialdehyde phase at any one time because of
the structural equilibrium. Therefore, if a conventional sterilant's label claim
specifies 2.0% glutaraldehyde, there is actually only 0.24% of the active
dialdehyde in the solution.
Another major limitation of these conventional sterilants is that the
sterilants must be manufactured with an acid pH because acidic glutaraldehyde is
relatively stable and can provide the desired three (3) year shelf-life.
Moreover, glutaraldehyde is slow to kill spores. In order to render such
compositions effective in a real time environment, the pH must be altered to
alkaline. The conventional sterilants accomplish this by supplying an activator.
The activator does nothing except adjust the glutaraldehyde concentrate or
change the solution pH from acidic to alkaline in an effort to enhance the spore
kill. However, upon activation the glutaraldehyde gradually polymerizates to
render the solution ineffective in 28 days (according to label claims). After
activation, conventional glutaraldehyde sterilants require 10-12
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hours of direct contact at room temperature to kill bacterial spores.
A principal reason why aqueous, alkaline glutaraldehyde solutions take
10-12 hours to work is because during acceptable sterilization time not enough
amino groups are cross-linked (or "fixed" like enbalming fluid works) to
effectively kill the spores. This problem is greatly aggravated, however, by the
spore's ability to shed that part of the wall being cross-linked. That action by
the spore would, for all practical purposes, force the sterilant to restart the
entire process with the amino groups on the newly exposed spore wall.
Examination of the prior art reveals most existing compositions
available are either toxic or non-biodegradable or both. Toxic chemicals that
are not biodegradable contaminate our environment, the soil and the water
supply.
In recognition of the dangers of existing disinfectants and sterilants,
health facilities are required to notify employees that toxic chemicals are in
use, provide special safety equipment and advise them of the possible hazards
that result or could result as a consequence of misuse or a spills. Such notices
must also be given to the community at large.
Other laws and regulations require users to document the use of toxic
chemicals and require that the excess, the waste, and the residue be collected
and properly stored. 4 These materials must be collected by licensed and
approved toxic waste companies, taken to an authorized disposal site and legally
destroyed. The cost of disposing of such toxic material is often more expensive
than the initial purchase price.
Sterilants today should be non-toxic or low in toxicity and
biodegradable and capable of killing bacterial spores quickly and effectively.
Further, such disinfectants and sterilants should be chemically compatible with
the numerous apparatus and instruments found in modern healthcare facilities.
As described more fully hereinafter the instant invention is directed to
an environmentally safe composition capable of killing anaerobic and aerobic
bacteria, tubercle bacillus, viruses including the HIV virus, mildew, mold,
fungus and bacterial spores. The principal complementary sporicidal ingredients
of the invention are selected from a group of monohydric alcohols, a group of
polyhydric alcohols, a group of saturated dialdehydes, a group of cationic
surface active agents and water.
In the past such alcohols have had limited use outside the laboratory
due to various undesirable characteristics of alcohol. For example, it has been
universally accepted that alcohol has very limited application as a wipe
disinfectant because alcohol is
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unable to penetrate protein rich material, evaporates quickly, is very stable
with infinite shelf life while sealed and has a pungent odor.
The instant invention has evolved from an extensive development program
involving the unexpected formulation of certain chemicals to reduce or inhibit
those undesirable features of alcohol and to make alcohol safe and effective for
use outside the laboratory.
SUMMARY OF THE INVENTION
The present invention relates to a method of immersion sterilization of
medical and dental instruments using a manual bucket system or automated
sterilization system and an organic cold chemical sterilant capable of killing a
challenge of target microorganisms including bacterial spores.
The unique unexpected results of the present invention can best be
understood when natural defenses of bacterial spores are examined. In
particular, electron microscopy research has shown that a bacterial spore wall
is not the dormant, inert shell as once thought. To the contrary, the spore wall
is actually a defense mechanism that can shed layers, create barrier material
between wall and the nucleus and exhibit motor capabilities. Moreover, there are
both structural and functional proteins in the spore including protonated and
unprotonated amino groups. In an alkaline, aqueous solution, the outer amino
groups on the surface of the spore wall can lose one hydrogen atom (NH3-> NH2)
to change from protonated to unprotonated. This phenomenum is important because
only the unprotonated (NH2) amino groups act as the reactive sites for
dialdehyde molecules to cross-link hydrogen atoms with those amino groups.
The method of immersion sterilization comprises the steps of immersion
of the instruments in a first organic solution to reduce bioburden and kill
non-spore microorganisms, to solubilize the proteins, and to initiate the
cross-linking of unprotonated proteins; immersion of the instruments in an
aqueous solution to unprotonate the solubilized proteins and exposing the
aqueous solution to an ultrasonic agitation to remove organic material from the
instruments; and immersion of the instruments in a second organic solution to
complete solubilization of the proteins and cross-linking of unprotonated
proteins thereby denaturing the proteins to corrupt and penetrate the bacterial
walls to kill the endospores and other microorganisms.
By creating a reverse micelle environment, this invention provides an
environment favorable to rapidly kill a challenge of the target microorganisms
previously unobserved. A reverse micellar system is a dispersion of
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spherical droplets of water surrounded and stabilized by a surfactant layer.
Each surfactant molecule is composed of a nonpolar tail and a polar headgroup.
In a reverse micellar structure, the hydrophobic tails are fully exposed to the
organic phase while hydrophilic groups surround water molecules. Some enzymic
proteins remain active inside reverse micelies.
The first organic solution includes a monohydric alcohol to kill the
non-spore blood borne pathogens in the initial or decontamination step. In
addition, a cationic surfactant or surface active agent forms reverse micelles
to initiate solubilization of proteins. In addition, a saturated dialdehyde in
the first organic solution begins to cross-link unprotonated proteins. In
addition a polyhydric alcohol is present to prevent the saturated aldehyde from
self polymerizing.
After the initial step of decontamination of the instruments of the
non-spore blood borne pathogenic organisms, the instruments are cleaned by
immersion in the aqueous solution that may include an effective amount of a
surface active agent. Ultrasonic cleaning having the requisite characteristics
or parameters of time, frequency and power level is employed to effectively
remove any remaining organic material adhering to the instruments. Normal
micelles form in the aqueous solution to allow the solubilized proteins to
become unprotonated (NH3->NH2). By losing one hydrogen atom, a reaction site is
created favorable for cross-linking in the final step with the second organic
solution.
The second organic solution comprises an organic cold chemical sterilant
including a composition of interactive constituents having a monohydric alcohol,
a polyhydric alcohol, a saturated dialdehyde, a cationic surface active agent
and water.
The second organic solution or organic cold chemical sterilant forms
reverse micelles to continue the solubilizing of proteins as the saturated
dialdehyde cross-links the unprotonated proteins thereby denaturing the proteins
to corrupt and penetrate the bacterial walls to kill the endospores and other
microorganisms. In addition, the monohydric alcohol acts to kill the non-spore
microorganisms to reduce the bioburden on which the saturated dialdehydes must
act. The presence of the polyhydric alcohol stabilizes the saturated dialdehyde
exponentially increasing the shelf life of the organic cold chemical sterilant
from days to months.
Furthermore, the second organic solution may comprise a binary
azeotropic composition formed by the chemical bonding between the monohydric
alcohol and water in correct proportion to lengthen shelf life, reduce
evaporation and the tendency to rust, and enhance efficacy. Specifically,
because the azeotrope is stable, the composition will maintain the efficacy for
long
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periods of time. The azeotropic bond between the monohydric alcohol and water
causes the combination to evaporate together thus maintaining substantially the
same relative concentration of monohydric alcohol and water to retain sufficient
potency to kill the target microorganisms. Moreover, because the water is bonded
to the monohydric alcohol, the ability to oxidize metal (rust) is greatly
reduced. Regardless of extended shelf life, exposure to air in an ultrasound, or
carelessness with regard to keeping containers tightly sealed, the concentration
of monohydric alcohol necessary for passing the government testing protocols
will be maintained.
The invention accordingly comprises the features of construction,
combination of elements, and arrangement of parts which will be exemplified in
the construction hereinafter set forth, and the scope of the invention will be
indicated in the claims.
DETAILED DESCRIPTION OF THE
PREFERRED EMBODIMENT
Various sterilizing compositions and delivery systems have been
developed to kill a wide range of microorganisms including bacterial spores. The
application or use of such sterilizing compositions or sterilants is generally
limited by the chemical and biological effect of such compositions on the
surfaces and delivery means exposed to such compositions.
The present invention relates to a method of immersion sterilization of
medical and dental instruments using a manual bucket system or automated
sterilization system and an organic cold chemical sterilant capable of killing a
challenge of target microorganisms including bacterial spores.
As described more fully hereinafter, the method of immersion
sterilization comprises the steps of immersion of the instruments in a first
organic solution to solubilize the proteins, immersion in an aqueous solution to
unprotonate the solubilized proteins and exposing the instruments to ultrasonic
agitation to remove organic material therefrom, and immersion in a second
organic solution to cross-link the unprotonated proteins thereby denaturing the
proteins to corrupt and penetrate the bacterial walls to kill the endospores and
other microorganisms.
The first organic solution or disinfectant comprises a composition
including a monohydric alcohol, polyhydric alcohol optionally, a dialdehyde, a
cationic sufactant and water combined in relative proportions by weight to
disinfect or decontaminate medical and dental instruments and other devices such
as scopes and dental handpieces. The application of the
<PAGE> 15
5,637,307
13
disinfectant is capable of killing a challenge of the target of microorganisms
discussed herein.
The aqueous solution comprises a composition including a surface active
agent and water.
The organic cold chemical sterilant or second organic solution comprises
a composition including a monohydric alcohol, polyhydric alcohol, dialdehyde,
cationic surfactant and water combined in relative proportions by weight to
sterilize medical and dental instruments and other devices such as scopes and
dental handpieces. The organic cold chemical sterilant is capable of killing a
challenge of target microorganisms discussed herein within ten minutes.
The monohydric alcohols are selected from the group consisting of
isopropyl, methyl, ethyl, n-propyl, n-butyl, tert-butyl and allyl and mixtures
thereof. The preferred monohydric alcohol is isopropyl.
The polyhydric alcohols are selected from the group consisting of
propylene glycol; 1,3 propanediol; 1,2 butanediol, polyethylene glycol,
glycerol, 1,4 butanediol, diethylene glycol and triethylene glycol and mixtures
thereof. The preferred polyhydric alcohol is polyethylene glycol with a
molecular weight of 400 or less. Polyethylene glycols, which are designated by a
number that represents the average molecular weight, range from clear viscous
liquids at room temperature, PEGs 200, 300, 400 and 600, to soft solids PEGs,
1000 and 1450, to waxy solids available in the form of flakes or powders, PEGs
3350, 8000 and 14000.
The dialdehydes are selected from the group consisting of malonaldehyde,
succinaldehyde, oxaldehyde (glyoxal), adipaldehyde and preferably,
glutaraldehyde.
The surface active agents are selected from the group consisting of
methylbenzethonium chloride, dodecylamine, hexadecylamine, hexadecylamine
hydrochloride, dodecyl aniline, oleyl methylamine ethylene diethylamine methyl
sulfate, oleyl benzylamino ethylene diethyamine hydrochloride, sulfate of lauryl
pyridinium, octadecyl methylene pyridinium acetate, methyl sulfate of
dimethyloctadecyl sulfonium, betaine compound of diethyl aminoacetic acid,
octadecyl chloromethyl ether, cetylpyridinium bromide, dodecyltrimethylammonium
bromide, hexadecyltrimethylammonium bromide, tetradecyltrimethylammonium
bromide, benzalkonium chloride, benzethonium chloride,
benzyldimethyldodecylammonium bromide, benzyldimethylhexadecylammonium chloride,
benzyldimethyltetradecylammonium chloride, benzyltrimethylammonium methoxide,
cetyldimethylethylammonium bromide, decamethonium bromide,
dimethyldioctadecylammonium bromide,
<PAGE> 16
5,637,307
14
methylbenzethonium chloride, methyl mixed trialkylammonium chloride,
methyltrioctylammonium chloride, 4-picoline dodecyl sulfate,
n,n,n'poloxyethylene (10)-n-tallow-1,3-diamino propane and preferably
cetylpyridinium chloride.
As used herein, the term target pathogenic organisms refers to
Bacteria--spores (Bacillus subtilis and Clostridium sporogenies), Tubercle
Bacillus (mycobacterium bovis) and vegetative cells (Pseudomonas aeruginosa,
Salmonella chloraesius and Staphylococcus aureus); Fungi--(Trichophyton
mentagrophytes); and Virus--nonlipid and small (Polio virus) and lipid and
medium size (Herpes simplex 2 and HIV).
As used herein, the term non-toxic refers to the acute dermal, acute
inhalation and acute oral dosage as defined in Sub Part 2, Appendix A to 29 Code
of Federal Regulations 1910.1200.
As used herein, the term biodegradable refers to decomposition in the
presence of 25 percent organic material within 90 days at 69 degrees F (Standard
Temperature) with moisture content of 100 parts per million.
As used herein, the term challenge refers to a test colony or specimen
of 106 specified target pathogenic organisms.
As used herein, the term hypocompatible means no significant or
debilitating degradation effects to the materials and surfaces listed below when
exposed to the composition for an extended period including for example,
discoloration, corrosion, cracking, and embrittlement. The materials and
surfaces tested exhibiting no detectable change. including: Buna-N, Neoprene,
natural rubber, upholstery material, white styrene, counter top laminate,
natural polypropylene, natural Teflon, natural HDPE, brushed aluminum, bright
aluminum, clear Lexan, natural ABS, natural nylon, assorted dental instruments,
Tygon tubing, nylon reinforced vinyl tubing, epoxy coated steel and painted
steel. In addition, the following instruments were tested with the organic cold
chemical sterilant with no observable damage to instruments, the finish or
functions including locking cotton pliers, aspirating syringe, universal
forceps, Perio probe, mirror head, root tip pick and hemostat.
As used herein, the term azeotropic means a constant boiling liquid
admixture of two or more substances, whose admixture behaves as a single
substance, in that the vapor, produced by partial evaporation or distillation of
the liquid has the same composition as the liquid, i.e., the admixture distills
without substantial composition change. Constant boiling compositions, which are
characterized as
<PAGE> 17
5,637,307
15
azeotropic, exhibit either a maximum or minimum boiling point, as compared with
that of the nonazeotropic mixtures of the same substances.
As used herein, the term organic means the presence of less than about
10 percent by weight of free water within a solution containing carbon base
molecules.
As used herein, the term aqueous means the presence of more than about
10 percent by weight of free water within a solution.
The specific monohydric alcohols, polyhydric alcohols, dialdehyde and
surface active agent and relative ratios together with the water component
complement and interact synergistically to create the desired solubility,
specific gravity, conductivity, pH, flash point, boiling point and evaporation
required for the effective use of the organic cold chemical sterilant against
the challenge as defined herein on microorganisms as described herein and with a
hypocompatible effect as defined herein on the surfaces described herein.
Further, the polyhydric alcohol reduces the harmful effects of
composition if swallowed or sprayed into the eyes or on mucus membranes as well
as soothing the skin upon contact. Tests indicate that the polyhydric alcohol
increases the overall effectiveness of the composition against most viruses,
mold and mildew and bacterial spores.
Since the organic cold chemical sterilant was developed for use on a
wide variety of instruments and devices the measure of chemical resistance is
important to permit broad use and application. To be effective, the organic cold
chemical sterilant must be hypocompatable.
The method of the present invention comprises: decontaminating the
instruments by immersion in the first organic solution including a monohydric
alcohol and polyhydric alcohol to kill the non-spore blood borne pathogens, a
cationic surfactant to form reverse micelles to initiate solubilization of the
proteins of the spore walls and a dialdehyde to begin cross-linking unprotonated
amino groups on the spore walls; cleaning the instruments by immersion in an
aqueous solution and applying ultrasonic sound having the requisite
characteristics or parameters of time, frequency and power level to the
instruments to effectively remove remaining organic material adhering to the
instruments; and immersion of the instruments in the second organic solution or
organic cold chemical sterilant including the cationic surfactant to form
reverse micelles to continue the solubilizing of the proteinaceous spore wall as
the saturated dialdehyde continues cross-linking the unprotonated proteins
thereby denaturing the proteins to corrupt and penetrate the bacterial and
conidial walls to
<PAGE> 18
5,637,307
16
kill the endospores and other microorganisms. The aqueous solution may contain
an effective amount of cationic surfactant to form normal micelles.
Comparative results of the organic cold chemical sterilant with the
individual constituents have demonstrated that the combination of interactive
ingredients provides a cold chemical sterilant compatible with an expansive
range of materials found in a wide variety of environments.
In order to accomplish the design criteria of a hypocompatible organic
cold chemical sterilant effective against the wide range of target
microorganisms described herein, the composition should have a pH of between
about 6.0 and 7.5 or essentially neutral, have an effective kill time of about 8
to 12 minutes and minimize toxic residue.
Standard Association of Official Analytical Chemists (A.O.A.C.) tests of
the instant method have been conducted against the target microorganisms
described herein including spores of Bacillus subtilis, Clostridium sporogenes.
The organic cold chemical sterilant has killed the target microorganisms within
ten minutes.
The effective proportional relationship of the ingredients by weight of
the first organic solution or disinfectant for the monohydric alcohol is between
about 65 percent to about 75 percent, for the polyhydric alcohol is between
about 4 percent and about 16 percent and for the cationic surface active agent
is between about 0.1 to about 2.0 percent, and for the water is between about 9
percent and about 20 percent. The disinfectant may also include by weight a
saturated dialdehyde between about 0.1 to about 2.0 percent.
The preferred proportional relationship of the ingredients by weight of
the disinfectant is about 70 percent for the monohydric alcohol, between about 8
to about 12 percent for the polyhydric alcohol, and between about 0.5 to about
1.0 percent for the cationic surface active agent and between about 16 to about
20 percent for the water. The disinfectant may further include by weight a
saturated dialdehyde between about 0.5 to about 1.0 percent. As a result there
is reduced dermal toxicity. In addition, since there is minuscule electrolytic
activity there is no significant positive interaction between the composition
and the instruments.
The effective proportional relationship of the ingredients by weight of
the organic cold chemical sterilant for the monohydric alcohol is between about
65 percent to about 75 percent, for the polyhydric alcohol is between about 4
percent and about 16 percent and for both the saturated dialdehyde and the
cationic surface active agent is between about 0.1 to about 2.0 percent,
<PAGE> 19
5,637,307
17
and for the water is between about 9 percent and about 20 percent.
The preferred proportional relationship of the ingredients by weight is
about 70 percent for the monohydric alcohol, between about 8 to about 12 percent
for the polyhydric alcohol, and between about 0.5 to about 1.0 percent for both
the saturated dialdehyde and cationic surface active agent and between about 14
to about 18 percent for the water.
The first and second organic solution each comprises a binary azeotropic
composition formed by the chemical bonding between the monohydric alcohol and
water in correct proportion to lengthen shelf life, reduce evaporation and the
tendency to rust, and enhance efficacy. Specifically, because the azeotrope is
stable, the composition will maintain the efficacy for long periods of time. The
azeotropic bond between the monohydric alcohol and water causes the combination
to evaporate together thus maintaining substantially the same relative
concentration of monohydric alcohol and water to retain sufficient potency to
kill the target organisms. Moreover, because the water is bonded to the
monohydric alcohol, the ability to rust metal is greatly reduced. Thus, after
registering significant amounts of evaporation in laboratory tests, presumed
loss of efficacy would be expected. Because of the azeotrope however, even after
a 33 percent weight loss, the concentration of monohydric alcohol was still at
66 percent. Therefore, most of the evaporation was from the free water with a
portion of the azeotropic monohydric alcohol. Regardless of extended shelf life,
exposure to air in an ultrasound, or carelessness with regard to keeping
containers tightly sealed, the required concentration of monohydric alcohol
essential to achieve accepted and required testing protocols will be maintained.
In the total concentrations used in the solutions about 70 percent
monohydric alcohol requires about 10 percent water to be azeotropic. To provide
the ability to kill the hydrophobic organisms, additional amounts of water up to
about 10 percent or an amount equal to the azeotropic equilibrium for an upper
limit of 20 percent water by weight may be added without degradation of the
monohydric alcohol/water azeotrope.
It will thus be seen that the objects set forth above, among those made
apparent from the preceding description are efficiently attained and since
certain changes may be made in the above construction without departing from the
scope of the invention, it is intended that all matter contained in the above
description or shown in the accompanying drawing shall be interpreted as
illustrative and not in a limiting sense.
<PAGE> 20
5,637,307
18
It is also to be understood that the following claims are intended to
cover all of the generic and specific features of the invention herein
described, and all statements of the scope of the invention which, as a matter
of language, might be said to fall therebetween.
Now that the invention has been described, What is claimed is:
1. A method of immersion sterilization of medical and dental instruments to kill
a challenge of target microorganisms including bacterial spores, said method of
immersion sterilization comprises the steps of immersion of the instruments in a
first organic solution comprising about 65 percent to about 75 percent by weight
of a monohydric alcohol selected from the group consisting of isopropyl, methyl,
ethyl, n-propyl, n-butyl and allyl and mixtures thereof, about 4 percent to
about 16 percent by weight of a polyhydric alcohol selected from the group
consisting of propylene glycol; 1,3 propanediol; 1,2 butanediol, polyethylene
glycol; glycerol and 1,4 butanediol and mixtures thereof, and about 0.1 percent
to about 2.0 percent by weight of a cationic surfactant to solubilize the
protein of the microorganisms, immersion in an aqueous solution and applying
ultrasonic sound having the parameters of time, frequency and power to
effectively remove organic material from the instruments and immersion in an
organic cold chemical sterilant comprising about 65 percent to about 75 percent
by weight of a monohydric alcohol selected from the group consisting of
isopropyl, methyl, ethyl, n-propyl, n-butyl, tert-butyl and allyl and mixtures
thereof and about 4 percent to about 16 percent by weight of a polyhydric
alcohol selected from the group consisting of propylene glycol; 1.3 propanediol;
1.2 butanediol, polyethylene glycol; glycerol and 1.4 butanediol and mixtures
thereof, about 0.1 percent to about 2.0 percent by weight of a dialdehyde
selected from the group consisting of malonaldehyde, succinaldehyde, oxaldehyde
(glyoxal), adipaldehyde and glutaraldehyde and about 0.1 percent to about 2.0
percent by weight of a cationic surfactant to cross-link at the binding sites of
unprotonated proteins thereby denaturing the proteins to corrupt and penetrate
the bacterial and conidium walls to kill the endospores and other microorganisms
wherein the pH of said organic cold chemical sterilant is between about 6.0 to
about 7.5.
2. The method of immersion of sterilization of medical and dental instruments of
claim 1 wherein the preferred proportional relationship of the ingredients by
weight of said first organic solution is about 70 percent for the monohydric
alcohol and between about 0.5 to about 1.0 percent for the cationic surfactant.
3. The method of immersion sterilization of medical and dental instruments of
claim 1 wherein said organic cold chemical sterilant further includes between
about 14 percent to about 18 percent by weight of water.
4. The method of immersion sterilization of medical and dental instruments of
claim 1 wherein said first organic solution further includes about 9 percent to
about 20 percent of water by weight.
5. The method of immersion sterilization of medical and dental instruments of
claim 1 wherein said first organic solution further includes about 0.1 to about
2.0 percent by weight a saturated dialdehyde.
6. The method of immersion sterilization of medical and dental instruments of
claim 5 wherein the preferred amount by weight of said saturated dialdehyde is
between about 0.5 to about 1.0 percent.
7. The method of immersion sterilization of medical and dental instruments of
claim 5 wherein the preferred proportional relationship of the ingredients by
weight of said organic cold chemical sterilant is about 70 percent for the
monohydric alcohol, between about 8 to about 12 percent for the polyhydric
alcohol, and between about 0.5 to about 1.0 percent for both the saturated
dialdehyde and cationic surfactant.
8. The method of immersion sterilization of medical and dental instruments of
claim 1 wherein said aqueous solution further includes an effective amount of a
cationic surfactant to unprotonate the solubilized proteins.
<PAGE> 1
EXHIBIT 10.18
INTELLECTUAL PROPERTY OFFICE OF
NEW ZEALAND - LETTERHEAD
THE PATENTS ACT 1953
PATENT RENEWAL CERTIFICATE
Letters Patent No: 269419
Non-toxic hypocompatible biodegradable germicide
in the name of
PAUL L. SIMMONS
has been renewed to 15 July 2001
Payment of $170.00 was made by:
James & Wells
29 Clarence Street
Hamilton
NZ
Paid on 6 July 1998
Neville Harris
Commissioner of Patents
14 July 1998
<PAGE> 2
Patent Form A
No. 269419
LETTERS PATENT
ELIZABETH THE SECOND, by the Grace of God Queen of New Zealand and Her Other
Realms and Territories, Head of the Commonwealth, Defender of the Faith; To all
to whom these presents shall come, Greeting:
WHEREAS pursuant to the Patents Act 1953 an application has been made for a
patent of an invention for NON-TOXIC HYPOCOMPATIBLE BIODEGRADABLE GERMICIDE
(more particularly described in the complete specification relating to the
application)
AND WHEREAS
PAUL L. SIMMONS, a United States citizen of 6223, Pasadena Point Boulevard,
Gulfport, FL 33707, United States of America
(hereinafter together with his or their successors and assigns or any of them
called "the patentee") is entitled to be registered as the proprietor of the
patent hereinafter granted:
NOW, THEREFORE, We by these letters patent give and grant to the patentee our
special licence, full power, sole privilege and authority, that the patentee by
himself, his agents, or licensees and no others, may subject to the provisions
of any statute or regulation for the time being in force make, use, exercise and
vend the said invention within New Zealand and its dependencies during a term of
twenty years from the date hereunder written and that the patentee shall have
and enjoy the whole profit and advantage from time to time accruing by reason of
the said invention during the said term:
AND WE strictly command all our subjects whomsoever within New Zealand and its
dependencies that they do not at any time during said term either directly or
indirectly make use of or put into practice the said invention, nor in any way
imitate the said invention without the consent, licence, or agreement of
patentee in writing under his hand, on pain of incurring such penalties as are
prescribed by law and of being answerable to the patentee according to law for
his damages thereby occasioned:
PROVIDED ALWAYS:
(1) That these letters patent shall determine and become void if the
patentee does not from time to time pay the renewal fees
prescribed by law in respect for the patent:
(2) That these letters patent are revocable on any of the grounds
prescribed by the Patents Act 1953 as grounds for revoking
letters patent:
(3) That nothing in these letters patent shall prevent the granting
of licences in the manner in which and for the considerations on
which they may by law be granted:
(4) That these letters patent shall be construed in the most
beneficial sense for the advantage of the patentee.
IN WITNESS whereof We have caused these letters patent to be signed and sealed
as of the 15th day of July 1994
Commissioner of Patents
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF VERIDIEN CORPORATION
A) Rost, Inc. - incorporated in Florida
B) Medical Development, Inc. - incorporated in Delaware
C) Marquit Manufacturing Specialties, Inc. - incorporated in Delaware
The above-named subsidiaries conduct business solely under the above-mentioned
names.
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1998 AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF VERIDIEN CORPORATION AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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60,154
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