<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1999
Registration Statement No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM N-2
/X/ REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/ / Pre-Effective Amendment No. _____________
/ / Post-Effective Amendment No. ____________
---------------------
UTEK CORPORATION
(Exact name of registrant as specified in its charter)
---------------------
202 South Wheeler Street
Plant City, Florida 33566
(Address of principal executive offices (Number, Street, City, State and Zip
Code)
(813) 754-4330
Registrant's telephone number, including area code
---------------------
Sam I. Reiber, Esq., General Counsel
601 E. Twiggs Street
Tampa, Florida 35602
(813) 223-7509
(Name, address and telephone number of agent for service)
---------------------
Copies to:
Jay M. Kaplowitz, Esq. Steven W. Schuster, Esq.
GERSTEN, SAVAGE & KAPLOWITZ, LLP MCLAUGHLIN & STERN, LLP
101 East 52nd Street, 9th floor 260 Madison Avenue
New York, New York 10022 New York, New York 10016
(212) 752-9700 (212) 448-1100
(212) 752-9713 (fax) (212) 448-0066 (fax)
---------------------
Approximate date of proposed sale to the public: As soon as practicable
after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered in connection with a dividend
reinvestment plan, check the following box: / /
---------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8 (a) of
the Securities Act of 1933, as amended (the "Securities Act") or until the
Registration Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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<PAGE>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
==============================================================================================================
Proposed
Proposed Maximum
Maximum Aggregate Amount of
Title of Each Class of Amount Being Offering Price Offering Registration
Securities Being Registered Registered Per Security(1) Price Fee
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<S> <C> <C> <C> <C>
Common Stock, par value $0.001....... 1,150,000(2) $ 6.00 $6,900,000 $ 1,821.60
- --------------------------------------------------------------------------------------------------------------
Underwriters' Warrants .............. 100,000 $ .0001 $ 10 (4)
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Common Stock Issuable on Exercise
of Underwriters' Warrants .......... 100,000(3) $ 7.20 $ 720,000 $ 190.08
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Total: .............................................................................. $ 2,011.68
==============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933, as
amended.
(2) Includes up to 150,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option. Does not include up to 90,000 shares
of Common Stock issuable upon exercise of warrants granted to Gersten,
Savage & Kaplowitz, LLP.
(3) Pursuant to Rule 416, this Registration Statement also covers an
indeterminable number of additional shares of Common Stock issuable as a
result of any future anti-dilution adjustments in accordance with the
terms of the Warrants.
(4) No fee due pursuant to Rule 457(g)
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item number and heading Location in prospectus
- ----------------------- ----------------------
<S> <C>
Part A
- ------
Item 1. Outside Front Cover Outside Front Cover Page
Item 2. Inside Front and Outside Back Cover Page Inside Front and Outside Back Cover Page
Item 3. Fee Table and Synopsis Fee Table; Prospectus Summary
Item 4. Financial Highlights Financial Highlights
Item 5. Plan of Distribution Underwriting
Item 6. Selling Shareholders Not applicable
Item 7. Use of Proceeds Use of Proceeds
Item 8. General Description of the Registrant Prospectus Summary; Risk Factors; Business
Item 9. Management Management
Item 10. Capital Stock, Long-Term Debt, and Other Description of Securities
Securities
Item 11. Defaults and Arrears on Senior Securities Not applicable
Item 12. Legal Proceedings Legal Proceedings
Item 13. Table of Contents of the Statement of Not applicable
Additional Information
Part B
- ------
Item 14. Cover Page Not applicable
Item 15. Table of Contents Not applicable
Item 16. General Information and History Business -- General Information and History
Item 17. Investment Objectives and Policies Investment Objectives and Policies
Item 18. Management Management
Item 19. Control Persons and Principal Holders of Control Persons and Principal Holders of
Securities Securities
Item 20. Investment Advisory and Other Services Investment Advisory and Other Services
Item 21. Brokerage Allocation and Other Practices Brokerage Allocation and Other Practices
Item 22. Tax Status Tax Status
Item 23. Financial Statements
</TABLE>
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED , 1999
1,000,000 Shares
UTEK CORPORATION
Common Stock
------------
UTEK Corporation is offering 1,000,000 shares of its common stock at $6.00
per share. This is our initial public offering and there currently is no public
market for our common stock.
We are an internally managed closed-end management investment company that
operates as a business development company under the Investment Company Act of
1940, as amended. Our investment objective is to achieve long term capital
appreciation of our assets. We seek to achieve our investment objective by
developing our portfolio companies through the identification, location,
development and acquisition of licenses to and marketing of new technologies
and then merging our portfolio companies with companies in related fields.
This prospectus sets forth concisely the information about our company
that a prospective investor ought to know before investing in our securities.
Please read this prospectus before investing in our securities and retain a
copy for your records.
Investors should be aware that shares of closed-end investment companies,
like our company, have a tendency to trade at a discount from their net asset
value. The initial public offering price is $6.00 per share, which was
determined based upon negotiations with the underwriter. Our common stock will
be listed on the Nasdaq SmallCap Market under the symbol [UTEX].
Investing in our common stock involves risks, including, but not limited
to, the risks associated with our portfolio companies, which are development
stage companies with little or no operating histories. See "Risk Factors"
beginning on page 6.
<TABLE>
<CAPTION>
Sales Load
------------------------------------
Underwriting
Price to Discounts and Nonaccountable Proceeds to
Public Commissions Expense Allowance UTEK
-------------- --------------- ------------------- --------------
<S> <C> <C> <C> <C>
Per Share ......... $6.00 $0.60 $0.18 $5.22
Total ............. $6,000,000 $600,000 $180,000 $5,220,000
</TABLE>
Delivery of the shares of common stock will be made on or about , .
We have granted the underwriter a 45-day option to purchase an additional
150,000 shares of common stock to cover over-allotments. The underwriter is
offering the shares on a firm commitment basis.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
May Davis Group, Inc.
The date of this prospectus is , .
<PAGE>
TABLE OF CONTENTS
Page
----
Where You Can Find More Information ............... ii
Fee Table ......................................... iii
Reports to Stockholders ........................... iii
Prospectus Summary ................................ 1
Financial Highlights .............................. 5
Risk Factors ...................................... 6
Dilution .......................................... 12
Dividends and Future Distributions ................ 13
Capitalization .................................... 13
Use of Proceeds ................................... 14
Selected Financial Data ........................... 15
Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
Page
----
Investment Objectives and Policies ................ 19
Management ........................................ 29
Control Persons and Principal Holders of
Securities ..................................... 33
Conflicts of Interest ............................. 33
Investment Advisory Services ...................... 33
Brokerage Allocation and Other Practices .......... 33
Federal Income Tax Matters ........................ 34
Description of Securities ......................... 34
Underwriting ...................................... 36
Legal Matters ..................................... 37
Experts ........................................... 37
Index to Financial Statements ..................... F-1
You should rely only on the information contained in this document or to
that which we have referred you. We have not authorized anyone to provide you
with information that is different. This document may only be used where it is
legal to sell these securities. The information in this document may only be
accurate on the date of this document.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a Registration Statement on Form N-2 regarding this offering
with the Securities and Exchange Commission. This prospectus, which is a part
of the registration statement, sets forth concisely the information about our
company that a prospective investor should know before investing, and this
prospectus should be read and retained for future reference. This prospectus
does not contain all of the information included in the registration statement,
and you should refer to the registration statement and its exhibits to read
that information. References in this prospectus to any of our contracts or
other documents are not necessarily complete, and you should refer to the
exhibits attached to the registration statement for copies of the actual
contract or document. You may read and copy the registration statement, the
related exhibits and the other materials we file with the Commission at the
Commission's public reference room at 450 Fifth Street N.W., Washington, D.C.
20549 and at the Commission's regional offices at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New
York, New York 10048. You can also request copies of those documents, upon
payment of a duplicating fee, by writing to the Commission. Please call the
Commission at 1-800-SEC-0330 for further information on the operation of the
public reference rooms. The Commission also maintains an Internet site that
contains reports, proxy and information statements and other information
regarding issuers that file with the Commission; the site's address is
www.sec.gov. You may also request a copy of these filings, at no cost, by
writing or telephoning us as follows: UTEK Corporation, 202 South Wheeler
Street, Plant City, Florida 33566, (813) 754-4330.
In connection with this offering, the underwriter may over-allot or effect
transactions which stabilize or maintain the market price of our common stock
offered hereby at levels above that which might otherwise prevail in the open
market. Such stabilizing, if commenced, may be discontinued at any time.
ii
<PAGE>
FEE TABLE
Shareholder Transaction Expenses
Sales load (as a percentage of offering price)
Underwriting discounts and commissions ......... 10.0%
Non-accountable expense allowance .............. 3.0%
Annual Expenses (as a percentage of net assets)
Other expenses
Salaries and wages ............................. 3.4%
Professional fees .............................. 3.0%
Sales and marketing ............................ 2.1%
General administrative ......................... 3.1%
Total annual expenses ................................ 11.6%
Other expenses are based upon estimated amounts for the current fiscal year, as
a percentage of net assets, including estimated net proceeds from the offering.
<TABLE>
<CAPTION>
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Example 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
You would pay the following expenses on a $1,000
investment assuming a 5% annual return ........... $255 $90 $76 $50
- -------------------------------------------------------------------------------------------------
</TABLE>
The purpose of the above table is to assist investors in understanding the
various costs and expenses that an investor in our company will bear directly
or indirectly.
The foregoing should not be considered a representation of past or future
expenses or rates of return. The actual expenses and rates of return may be
greater or lesser than those shown in the example.
REPORTS TO STOCKHOLDERS
We will furnish to our stockholders annual reports containing audited
financial statements and such other periodic reports as we determine to furnish
or as may be required by law.
iii
<PAGE>
PROSPECTUS SUMMARY
This summary highlights some of the information in this prospectus. It may
not contain all of the information that is important to you. To understand this
offering fully, you should read the entire prospectus carefully, including the
risk factors and the financial statements. Unless we tell you otherwise, the
information in this prospectus assumes that the underwriter will not exercise
its over-allotment option.
UTEK Corporation
General
We are a non-diversified, closed-end management investment company that
has elected to be treated as a special type of investment company known as a
business development company, or BDC. Our primary investment objective is to
achieve long-term capital appreciation of our assets. We intend to achieve this
objective through our investment model which consists of:
o making controlling investments in and forming development stage
companies, which we refer to as portfolio companies;
o developing our portfolio companies through the acquisition of new
technologies and, when appropriate, the funding of further research and
development;
o realizing value primarily through the sale of our portfolio companies to
companies in related industries in non-taxable transactions in which we
receive common stock of the acquiring company; and
o selling the common stock we receive in exchange for our portfolio
companies and investing the proceeds therefrom in additional portfolio
companies.
Investment Strategy
We form and make investments in our portfolio companies for the purpose of
assisting the portfolio companies in obtaining licenses to new technologies in
a variety of industries, including e-commerce, computer sciences environmental
engineering and healthcare, developed at universities and research
laboratories. We also seek acquisition partners that will purchase our
portfolio companies, and their technology rights, in stock for stock exchanges.
We may also make additional investments to fund continued research and
development of the acquired technologies.
We also provide our portfolio companies with significant managerial
assistance including having members of our management serve as directors and
executive officers of our portfolio companies. Our management has experience
identifying and acquiring licensing rights to technologies developed at
universities and research laboratories and selling those rights to other
entities for commercialization, a process referred to as technology transfer.
We also provide assistance to portfolio companies in connection with setting up
and funding sponsored research programs for the development of new
technologies. Our portfolio companies are formed with the objective of
completing a technology transfer.
As of the date of this prospectus we have controlling interests in the
following portfolio companies:
o Digital Personnel, Inc., which has exercised an option agreement with
Caltech/JPL and acquired a license for a patent pending technology for the
creation of photo-realistic, synthetic individuals for e-commerce
applications;
o Cancer Diagnostics, Inc., which has acquired the exclusive license to a
technology developed at the University of Maryland for screening of body
fluids for certain types of cancer and has established a two year
sponsored research program at the university to continue research on the
technology commencing in January 2000;
1
<PAGE>
o Zorax, Inc., which is seeking to acquire a license to a patent pending
technology for the separation of cystic parasite forms from drinking
water;
o Technology Development, Inc., which is seeking to acquire new computer
hardware and software technologies;
o Advanced Desalination Technologies, Inc., which is seeking to acquire a
water desalination technology;
o Doppler Technology International, Inc, which is seeking to acquire new
technologies for non-invasive analysis of body tissue; and
o Microsphere Technology, Inc., which is seeking to acquire licenses to
novel materials science technologies.
When we identify a new technology that we believe has commercial
potential, it is our practice to have a portfolio company enter into an
agreement with the developers to license the technology. We intend that
substantially all research and marketing will be conducted by our portfolio
companies. However, we do not intend to have a portfolio company invest
substantial sums in a new technology or a licensing arrangement until such time
as we or the portfolio company has identified a suitable purchaser and we have
entered into an agreement to sell the portfolio company to the purchaser. The
sales are structured such that we exchange all the shares we own of the
portfolio company for common stock or other securities of the purchaser in a
tax-free exchange. The following is a list of our portfolio companies sales to
date:
o In May 1998, we received 1,000,000 shares of common stock of Lexon, Inc.
in connection with the sale of Gentest, Inc. a portfolio company, to
Lexon. Lexon is a development stage public company whose shares are traded
on the over-the-counter bulletin board under the symbol LXXN.
o In June 1999, we received 791,957 shares of common stock of NuElectric,
Inc. in connection with the sale of our portfolio company, Clean Water
Technologies, Inc. to NuElectric. On November 12, 1999, we exchanged
300,000 shares of our NuElectric common stock for common stock in another
company. We own 491,957 of NuElectric common stock. NuElectric is a
development stage public company whose shares are traded on the
over-the-counter bulletin board under the symbol NRGE.
o In May 1999, we received 600,000 shares of common stock of Centrex, Inc.
in connection with the sale of our portfolio company, E. Coli Measurement
Systems, Inc., to Centrex. In September 1999, we received 984,000 shares
of common stock of Centrex in connection with the sale of another
portfolio company, Safe Water Technologies, Inc., to Centrex. Centrex is a
development stage private company and we own 1,584,000 shares of Centrex
common stock.
o In January 1999, we received 879,300 shares of common stock of Image
Analysis, Inc., an Oklahoma corporation in connection with the sale of our
portfolio company, Image Analysis Corporation, to Image Analysis, Inc.
Image Analysis, Inc. is a development stage private company and we own
879,300 shares of common stock of Image Analysis.
o In May 1999, we received 900,000 of common stock of Nucor Enterprises,
Inc., an Oklahoma corporation in connection with the sale of our portfolio
company, Advanced Reinforcing Technologies, Inc. to Nucor. Nucor is a
development stage private company and we own 900,000 shares of common
stock of Nucor.
Our objective is to hold the securities that we receive in exchange for
our portfolio companies until such time that we can sell the securities.
2
<PAGE>
We also provide consulting services relating to technology transfer to
university research departments and to public and private companies.
UTEK Corporation was incorporated under the laws of the State of Delaware
in July 1999. Our principal executive offices are located at 202 South Wheeler
Street, Plant City, Florida 33566, and our telephone number is (813) 754-4330.
Our website is located at www.utekcorp.com.
-----------------
Management Fees and Compensation
Clifford M. Gross, our Chairman, will receive $150,000 per year. The
compensation of our President, Uwe Reischl, will be $100,000 per year. In
addition, we granted stock options to certain of our officers and other
compensation for their management assistance in portfolio companies. See
"Management -- Executive Compensation."
3
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered ........................... 1,000,000 shares.
Public offering price .......................... $6.00 per share.
Common stock to be outstanding after this
offering ..................................... 3,782,226 shares. This does not include 100,000 shares
reserved for issuance upon exercise of the
underwriter's warrants and does not include 90,000
shares reserved for issuance upon exercise of warrants
issued to Gersten, Savage and Kaplowitz, LLP.
Risk factors ................................... Investing in our common stock involves a high degree
of risk including, but not limited to, the highly
speculative nature of our investments in our portfolio
companies and the illiquidity and lack of
diversification of our investments.
Use of Proceeds ................................ We intend to use the net proceeds of this offering for
o investments in portfolio companies and additional
investments for research and development of
licensed technologies; and
o general corporate purposes, including working
capital.
Proposed Nasdaq SmallCap Market symbol ......... [UTEX]
</TABLE>
4
<PAGE>
Financial Highlights
The following table sets forth per share income, capital changes and
certain other operating information for us. The financial and other data has
been derived from our audited financial statements for the year ended December
31, 1997 and 1998 and from our unaudited interim financial statements for the
nine months ended September 30, 1998 and 1999, all of which are included in
another section of this prospectus. The information below should be read in
conjunction with "Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements and the notes thereto, each of which is included in
another section of this prospectus.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
Year Ended December 31, -------------------------------
1997 1998 1998 1999
------------- -------------- -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
PER SHARE INFORMATION
Net asset value, beginning of period ............... $ -- $ 0.02 $ 0.02 $ 0.56
Net increase from operations (1) ................. -- 0.05 0.08 0.30
Net unrealized gain on investments
(after taxes) (1) ............................... -- 0.26 0.14 0.36
Net increase from stock transactions (1) ......... 0.02 0.23 0.23 0.45
---------- --------- --------- ----------
Net asset value, end of period ..................... $ 0.02 $ 0.56 $ 0.47 $ 1.67
========== ========= ========= ==========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period .......................... $ 31,708 $1,365,647 $1,140,923 $4,632,430
Ratio of expenses to average net assets ............ 32% 31% 15% 18%
Weighted average number of shares
outstanding during the period .................... 2,070,494 2,304,691 2,258,347 2,652,175
</TABLE>
- -------------
(1) Calculated based on weighted average number of shares outstanding during
the period.
5
<PAGE>
RISK FACTORS
An investment in our common stock is speculative and involves a high
degree of risk. In addition to the other information in this prospectus, you
should carefully consider the following risk factors before making an
investment decision.
Our investment model is speculative in nature and our history of investments
using the model is limited.
Our investment model is highly speculative since it involves making
investments in new development stage companies and having those companies
invest in new, untested technology. Furthermore, we have only been using our
investment model for a relatively short period of time and have little or no
historical information upon which to judge whether or not the model is
successful. We cannot assure you that our investment model will be successful
or that any of our investments will be successful.
Our portfolio companies are development stage companies dependent upon the
successful commercialization of new technologies. Each of our investments in
portfolio companies is subject to a high degree of risk and we may lose all of
our investment in a portfolio company if it is not successful.
We invest in development stage companies that our management believes can
benefit from our expertise in technology transfer. Development stage companies
are subject to all of the risks associated with new businesses. In addition,
our portfolio companies are also subject to the risks associated with research
and development of new technologies. These risks include the risk that new
technologies cannot be identified, developed or commercialized, may not work,
or are obsolete. Our portfolio companies must successfully acquire licenses to
new technologies, and in some cases further develop new technologies, and then
complete a merger transaction for our investments to be successful. We cannot
assure you that any of our investments in our portfolio companies will be
successful. Our portfolio companies will be competing with larger, established
companies, with greater access to, and resources for, further development of
these new technologies. In addition, for an investment to be successful, our
portfolio companies often must develop the technology and identify buyers who
are willing to acquire the technology, in exchange for their common stock or
other consideration. We cannot assure you that any of our portfolio companies
will be successful or that we will successfully sell our portfolio companies.
We may lose our entire investment in any or all of our portfolio companies.
Our portfolio companies depend upon the research and development activities of
universities, over which they have no control.
Our portfolio companies depend upon the research activities of
universities and government research facilities. Neither our company, nor our
portfolio companies, has any control over the research activities of
universities and research laboratories. Further, the licenses to technologies
that our portfolio companies obtain may be non-exclusive. In the event that we
make an investment in a portfolio company, and we are unable to locate a new
technology to be acquired by the portfolio company, we could lose our entire
investment.
Technologies acquired by our portfolio companies may become obsolete before we
can sell the portfolio companies.
Neither we nor our portfolio companies have any control over the pace of
technology development. There is a significant risk that a portfolio company
could acquire the rights to a technology that is currently or is subsequently
made obsolete by other technological developments. We cannot assure you that
any of our portfolio companies will successfully acquire, develop and transfer
any new technology.
The patents on the technologies that our portfolio companies license may
infringe upon the rights of others and patent applications that the
universities have submitted may not be granted.
Many of our portfolio companies rely upon patents to protect the
technologies that they license. If the patents on technologies that they
license are found to infringe upon the rights of others, or are held to be
invalid then the licenses to such technologies will have little or no value to
our portfolio companies. Our
6
<PAGE>
portfolio companies are dependent upon the universities or government research
facilities to file, secure and protect patents on licensed technologies. In the
event that a patent is challenged or violated, our portfolio companies may not
have the financial resources to protect a patent in court. In addition, if our
portfolio companies acquire licenses to technologies with patents pending, we
cannot assure you that such patents will be granted.
Technologies that have been developed with funding from the United States
Federal Government may have limits on their use which could affect the value of
the technology to a portfolio company.
Technologies developed with funds provided by the United States Federal
Government have restrictions regarding where they may be sold and have limits
on exclusivity. A portfolio company that acquires a technology developed with
federal funding may be limited as to where it can sell the technology. The
technology may only be allowed to be sold or manufactured within the United
States. In addition, under Section 23 of the United States Code, the Government
has the right to use technologies that they have funded regardless if the
technology has been licensed to a third party. Such regulations may limit the
marketability of a technology and therefore reduce the value of the technology
to our portfolio companies.
We may need to make additional investments in our portfolio companies to
provide them with capital to further develop technologies they license.
We may have to make additional investments in portfolio companies to
protect our initial investments. We retain the discretion to make any
additional investments as our management determines. The failure to make such
additional investments may jeopardize the continued viability of a portfolio
company and our initial (and subsequent) investments. Moreover, additional
investments may limit the number of companies in which we can make initial
investments. We have no established criteria in determining whether to make an
additional investment except that our management will exercise its business
judgment and apply criteria similar to those used when making the initial
investment. We cannot assure you that we will have sufficient funds to make any
necessary additional investments which could adversely affect our success and
result in the loss of a substantial portion or all of our investment in a
portfolio company.
The securities we receive from the sale of our companies are illiquid and we
may not be able to sell the portfolio company securities we hold for amounts
equal to their recorded value, if at all.
All of the securities we hold in these companies are not registered for
public sale, and therefore are subject to restrictions on resale. In addition,
our ability to sell these securities is also limited because in all cases to
date, our ownership interests in these companies are over 10%. As a greater
than 10% holder, we are considered to be an affiliate of these companies in
which we acquired stock and as a result, our ability to sell the securities we
hold will be limited under the Securities Act. We anticipate that all of our
investments in companies will continue to consist of "restricted" securities.
Even after the restrictions no longer apply, it may not be possible to sell the
shares at a profit or at all, due to marketplace factors beyond our control.
We are dependent on merger transactions, structured as tax-free exchanges to
sell our portfolio companies. A change in the IRS Code affecting tax-free
exchanges could reduce our ability to sell our portfolio companies.
We do not anticipate selling any of our portfolio companies, except in
connection with merger transactions. We anticipate that most, if not all, of
such merger transactions will be structured as tax free exchanges under Section
368 of the Internal Revenue Code. If Section 368 were to be amended so that we
were no longer able to structure our merger transactions as tax free exchanges,
we may not be able to sell our portfolio companies on commercially reasonable
terms. If we are unable to successfully sell a portfolio company in a merger
transaction, we may lose our investment.
We have been dependent on a small number of companies controlled by the same
investor group for the purchase of our portfolio companies. We have only
limited experience selling our portfolio companies and of the six merger
transactions that we have completed, five have been to companies controlled by
the same group of investors.
As of the date of this prospectus we have completed only six merger
transactions wherein we sold portfolio companies to other companies and five of
these sales have been made to companies that are
7
<PAGE>
controlled by the same investor group. As a result, we have only had benefit
and experience of negotiating such agreements with a small number of investors.
We cannot assure you that we will be able to successfully negotiate merger
transactions for the sales of our portfolio companies in the future.
We are exposed to significant asset concentration risk
To date, five out of the six consummated transactions have been with
"merger parties" controlled by a similar group of investors. The value of these
investments represents 66% of our total net assets as of September 30, 1999.
We are dependent upon our management's ability to identify acquirers for our
portfolio companies.
Our investment strategy is based upon selling our portfolio companies in
stock for stock exchanges to public companies that wish to acquire the
technologies owned by our portfolio companies but which themselves may be
neither operating nor established. We do not expect to sell any portfolio
company securities to the public. Therefore, if we fail to identify an acquirer
for a portfolio company, we do not expect that we will be able to sell the
portfolio company securities to the public. Therefore, our entire investment in
the portfolio company could be lost.
We are dependent upon and have little or no control over the efforts of
companies that acquire our portfolio companies to successfully commercialize
the technologies they acquire.
When we sell a portfolio company, we receive common stock from the
acquiring company based upon the mutually agreed upon values of the portfolio
company, its licensed technology and the acquiring company. We then intend to
sell the securities that we acquire at some time in the future. Therefore, our
ability to profit from an investment in a portfolio company is ultimately
dependent upon the price we receive for the shares of the acquiring company. In
most cases, the companies that acquire our portfolio companies will be
dependent upon successfully commercializing the technologies they acquire. We
do not have control over the companies that acquire our portfolio companies and
we do not intend to provide them with managerial assistance. These operating
companies may face intense competition, including competition from companies
with greater financial resources, more extensive research and development,
manufacturing, marketing and service capabilities and a greater number of
qualified and experienced managerial and technical personnel. They may face
additional risks of product and technological obsolescence and government
regulation over which we will have little or no control. They may need
additional financing which they are unable to secure and we are unable or
unwilling to provide or they may be subject to adverse developments unrelated
to the technologies they acquire. We cannot assure you that any of the
companies that acquire our portfolio companies will be successful or that we
will be able to sell the securities we receive at a profit or for sufficient
amounts to even recover our initial investment in the portfolio company.
The companies that merge with our portfolio companies are development stage
companies and, as a result, the value of the securities that we receive in such
merger transactions are subject to fluctuations.
Historically we have merged, and we intend to continue to merge, our
portfolio companies with companies in related fields that are development stage
companies. As a result, the securities that we receive when we merge a
portfolio company are subject to all of the risks associated with securities of
development stage companies. The values of these securities may be subject to
significant fluctuations. We cannot assure you that when we sell these
securities, we will receive the value ascribed to the securities either at the
time of acquisition or during subsequent valuation periods.
If we receive non-publicly traded securities in exchange for our portfolio
companies, we may be required to sell the securities we receive at a
substantial discount to their appraised value if no public market exists.
To date, we have completed six sales of portfolio companies. Of these
sales, two have been to public companies, and the remainder have been to
non-public companies. We are substantially dependent upon the ability of
non-public acquirers of our portfolio companies to implement a plan which would
facilitate a trading market for their securities or other strategy which would
allow for the potential sale of our ownership interest. In addition, to the
extent that we own more than 10% of an acquirer's shares, we may be deemed to
be an affiliate of the acquirer which would limit our ability to dispose of
securities we receive for our portfolio companies. Further, our ability to sell
the securities we receive for our portfolio companies may be limited by,
8
<PAGE>
and subject to, the lack of or limited nature of a trading market for the
securities and the volatility of the stock market as a whole. Such limitations
could prevent or delay any sale of our investments or significantly reduce the
amount of proceeds, if any, that might otherwise be realized therefrom.
We depend upon Clifford M. Gross and Uwe Reischl for our investment decisions
in portfolio companies.
We rely, and will continue to be substantially dependent upon, the
continued services of our management, principally our Chief Executive Officer
and Chairman of the Board, Clifford M. Gross, and our President Uwe Reischl.
Our management is responsible for the review of potential investments by and
the provision of advice to our portfolio companies regarding the acquisition of
technologies and additional research and development. We also depend upon our
management's key contacts with universities, to maintain our access to new
technologies, and their relationships with companies in the private sector in
order to effectuate the sale of our portfolio companies.
The values we place on our investments may not accurately reflect their future
value or the value that we will receive for them when we sell them
At September 30, 1999 and December 31, 1998, equity securities amounting
to $3,512,078 or 76% of net assets and $1,300,000 or 95% of net assets,
respectively, have been valued at fair value as estimated by an independent
valuation specialist. As a general matter, restricted securities and securities
without an active trading market are more difficult to accurately value than
unrestricted, publicly traded securities. We are required by the 1940 Act to
determine the value of our illiquid securities on a quarterly basis and make a
good faith determination that fair value has been ascribed to the
aforementioned investments. See "Valuation of Portfolio Securities" and our
financial statements. Generally, such investments are valued on a "going
concern" basis without giving effect to any disposition costs. If we were
required to sell any of such investments, there is no assurance that the fair
value, as determined by management, would be obtained. If we were unable to
obtain fair value for such investments, there would be an adverse effect on our
net asset value and on the price of our common stock.
Transactions with Affiliates; Potential Conflicts of Interest
The 1940 Act restricts transactions between us and any of our affiliates,
including our officers, directors or employees and principal stockholders. In
many cases, the 1940 Act prohibits transactions between such persons and
ourselves unless we first apply for and obtain an exemptive order from the SEC.
Delays and costs in obtaining necessary approvals may decrease or even
eliminate any profitability of such transactions or make it impracticable or
impossible to consummate such transactions. These affiliations could cause
circumstances which would require the Commission's approval in advance of
proposed transactions by us in portfolio companies.
Further, depending upon the extent of our management's influence and
control with respect to such portfolio companies, the selection of the
affiliates of management to perform such services may not be a disinterested
decision, and the terms and conditions for the performance of such services and
the amount and terms of such compensation may not be determined in arm's-length
negotiations. Additionally, while our management is obligated to use its best
efforts to provide us with a continuing and suitable investment program
consistent with our investment objectives and policies, subject to any
applicable legal restrictions, our management is not required to present to us
any particular investment opportunity which has come to our management's
attention, even if such opportunity is within our investment objectives and
policies.
We have a limited amount of funds available for investment in portfolio
companies and as a result, our investments will lack diversification.
Based on the amount of our existing available funds, together with the
funds being realized from this offering, it is unlikely that we will be able to
commit our funds to investments in, and the acquisition of, securities of a
large number of companies. We intend to continue to operate as a
non-diversified investment company within the meaning of the 1940 Act.
Prospective investors should understand that our current
9
<PAGE>
investments are not, and in the future may not be, substantially diversified.
We will not be able to achieve the same level of diversification as larger
entities engaged in similar venture capital activities. Therefore, our assets
may be subject to greater risk of loss than if they were more widely
diversified, because the failure of one or more of our limited number of
investments could have a material adverse effect on our financial condition.
We are subject to government regulations because of our status as a business
development company.
We have elected to be treated as a BDC under the Small Business Investment
Incentive Act of 1980, which modified the 1940 Act. Although the Incentive Act
relieves BDCs from compliance with many of the provisions of the 1940 Act, the
Incentive Act imposes on BDCs greater restrictions on permitted types of
investments. Moreover, the applicable provisions of the 1940 Act impose
numerous restrictions on our activities, including restrictions on the nature
of our investments and transactions with affiliates. We cannot assure you that
this legislation will be interpreted or administratively implemented in a
manner consistent with our objectives and manner of operations. If our election
to operate as a BDC is rejected, or if we otherwise fail to qualify as a BDC,
we would be subject to the substantially greater regulation under the 1940 Act.
Compliance with such regulations would significantly increase our costs of
doing business.
We have a limited operating history upon which you can assess our prospects and
we are subject to the risks associated with any new business.
As a result of our short history of operations, we have only consummated
transactions with a very small number of companies. Therefore, there is little
historical information regarding our operations upon which you can base your
investment decision. In addition, we are subject to all of the business risks
and uncertainties associated with any new business enterprise. We cannot assure
you that our investment objective will be attained.
Our management has limited experience operating a business and has had no
experience in managing and operating a business development company.
The members of our management have been engaged in the operation of our
business for a short period of time and so have limited experience. Some of our
directors and executive officers only have experience in science and research.
Furthermore, we commenced operations as a business development company in
October 1999 and so our directors and executive officers have only had
experience operating a business development company since October 1999.
Our management has broad discretion in investing the proceeds of this offering.
Except as set forth in "Use of Proceeds" and subject to our fundamental
policies, our management has broad discretion in the application of the
proceeds of this offering. We have not identified any particular use for the
net proceeds of this offering other than to make investments on the basis of
opportunities as they may arise. Accordingly, purchasers of our securities must
rely on the ability of management in making portfolio investments consistent
with our objectives. Investors will not have the opportunity to evaluate
personally the relevant economic, financial and other information which will be
utilized by management in deciding whether or not to make a particular
investment.
There are no significant barriers to entry to our business and we expect to
face significant competition as new competitors enter the market.
We expect that if our investment model proves to be successful, our
current competitors in the technology transfer market may duplicate our
strategy and new competitors may enter the market. We compete against other
technology transfer companies, some of which are much larger and have
significantly greater financial resources than we do. In addition, these
companies will be competing with our portfolio
10
<PAGE>
companies to acquire technologies from universities and government research
laboratories. We cannot assure you that we will be able to successfully compete
against these competitors in the acquisition of technology licenses, funding of
technology development or marketing of portfolio companies.
One of our current stockholders has significant influence over our management
and affairs and will continue to have significant control over us after the
completion of this offering.
Clifford M. Gross, our chief executive officer and chairman of the board
of directors beneficially owns approximately 70% of our common stock and upon
completion of this offering will beneficially own approximately 51% of our
common stock. Dr. Gross' ownership provides him with significant influence over
the outcome of matters submitted to a stockholder vote for approval, including
the election of our directors, and, as a result, our management and business
affairs.
Investors in this offering will experience immediate and substantial dilution
in the book value of their investment.
The public offering price at which our common stock is to be sold in this
offering is significantly higher than the net asset value per share of our
common stock. Assuming all of the shares of our common stock offered hereby are
sold, each share will experience immediate and substantial dilution. (See
"Dilution").
Your ownership interest and the value of the shares of our common stock
purchased in this offering may be diluted by the exercise of stock options and
warrants we have granted or may grant in the future.
We have adopted an employee stock option plan under which certain of our
employees have been granted options to purchase up to 150,000 shares of our
common stock. We have also reserved an additional 350,000 shares of our common
stock for issuance under our employee stock option plan to key employees,
consultants, or directors. In addition, we have granted warrants to purchase up
to 90,000 shares of common stock to Gersten, Savage & Kaplowitz, LLP. The
issuance and sale of these shares of common stock will dilute the ownership
interest of investors in this offering and may have an adverse effect on the
price of our common stock.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Information included in this prospectus may contain forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. This information may involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from future results, performance or
achievements expressed or implied by any forward- looking statements.
Forward-looking statements, which involve assumptions and describe our future
plans, strategies and expectations, are generally identifiable by use of the
words "may," "will," "should," "expect," "anticipate," "estimate," "believe,"
"intend" or "project" or the negative of these words or other variations on
these words or comparable terminology. This prospectus also contains
forward-looking statements regarding our portfolio companies, sales of our
portfolio companies and the acquisition and transfer of rights to new
technologies. These forward-looking statements are based on assumptions that
may be incorrect, and we cannot assure you that these projections included in
these forward-looking statements will come to pass. Our actual results could
differ materially from those expressed or implied by the forward-looking
statements as a result of various factors, including the risk factors described
above and elsewhere in this prospectus. We undertake no obligation to update
publicly any forward-looking statements for any reason, even if new information
becomes available or other events occur in the future.
11
<PAGE>
DILUTION
At September 30, 1999, we had a net asset value of $4,632,430 or $1.67 per
share. After giving effect to the sale of 1,000,000 shares of common stock
being offered, after deducting estimated underwriting discounts and expenses of
this offering, our adjusted net asset value at September 30, 1999 would have
been $9,377,430 or $2.48 per share, representing an immediate increase in net
asset value of $0.81 per share to the existing stockholders and an immediate
dilution of $3.52 or 59%, per share to new investors.
The following table illustrates the above information with respect to
dilution to new investors on a per share basis:
<TABLE>
<S> <C> <C>
Initial public offering price per share of common stock ......... $ 6.00
Net asset value per share before the offering ................... $ 1.67
Increase attributable to new investors .......................... 0.81
-------
Adjusted net asset value per share after the Offering ........... 2.48
-------
Dilution to new investors ....................................... $ 3.52
=======
</TABLE>
The following table sets forth, with respect to existing stockholders and
the investors in the offering, a comparison of the number of shares of common
stock purchased from our company, the percentage ownership of such shares, the
aggregate consideration paid, the percentage of total consideration paid and
the average price paid per share.
<TABLE>
<CAPTION>
Shares Owned Average
--------------------------- Total Consideration Price per
Number Percent Amount Percent Share
--------------- --------- --------------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Existing shareholders .............. 2,782,226 73.6% $2,163,832 26.5% $ .78
Investors in this offering ......... 1,000,000* 26.4% $6,000,000 73.5% $ 6.00
</TABLE>
- ------------
* These shares do not include the underwriter's over-allotment option.
12
<PAGE>
DIVIDENDS AND FUTURE DISTRIBUTIONS
We have never declared or paid any dividends to the holders of our common
stock and we do not anticipate paying dividends in the foreseeable future. We
currently intend to retain all earnings for use in connection with the
expansion of our business and for general corporate purposes. Our board of
directors will have sole discretion in determining whether to declare and pay
dividends in the future. The declaration of dividends will depend on our
profitability, financial condition, cash requirements, future prospects and
other factors deemed relevant by our board of directors. Our ability to pay
dividends in the future could be limited or prohibited by regulatory
requirements and the terms of financing agreements that we may enter into or by
the terms of any preferred stock that we may authorize and issue.
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1998
and as of September 30, 1999 on an actual basis and adjusted to give effect to
our sale of 1,000,000 shares of the common stock being offered. The pro forma
and as adjusted number of shares issued and outstanding presented in the
following table do not include the 100,000 shares reserved for issuance upon
exercise of the underwriter's warrants, and 90,000 shares reserved for issuance
upon exercise of warrants issued to Gersten Savage & Kaplowitz, LLP.
<TABLE>
<CAPTION>
December 31, September 30, September 30,
1998 1999 1999
-------------- --------------- --------------
(unaudited) (as adjusted)
(unaudited)
<S> <C> <C> <C>
Shareholders' equity
Common stock, $.01 par value, 19,000,000
shares authorized; 2,454,402 and 2,782,226
shares issued and outstanding at December 31,
1998 and September 30, 1999, respectively ......... $ 24,544 $ 27,822 $ 37,822
Preferred stock, $.01 par value, 1,000,000
shares authorized and none issued and
outstanding at December 31, 1998 and
September 30, 1999, respectively .................. -- -- --
Additional paid-in capital ......................... 629,262 2,136,010 6,871,010
Accumulated net operating income ................... 100,841 882,963 882,963
Net unrealized appreciation, net of deferred
income taxes ...................................... 611,000 1,585,635 1,585,635
Net assets ......................................... 1,365,647 4,632,430 9,377,430
Total liabilities and stockholders' equity ......... 1,805,795 5,308,967 10,053,967
</TABLE>
13
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from the sale of our common stock, after
deducting the estimated discounts, commissions and offering expenses payable by
us, will be approximately $4,745,000. We estimate that, if the underwriter
exercises in full its over-allotment option, the net proceeds from the sale of
our common stock, after similar deductions, will be approximately $5,528,000.
Based upon our projections, we intend to apply the estimated net proceeds,
assuming the underwriter does not exercise its over-allotment option, as
follows:
<TABLE>
<CAPTION>
Approximate Percentage of
Application of Proceeds Amount Net Proceeds
- -------------------------------------------------------------- ------------- --------------
<S> <C> <C>
Investments in portfolio companies ........................... $3,913,486 83%
Salaries and professional fees ............................... 582,000 12
General corporate purposes including working capital ......... 249,514 5
---------- ---
Total ..................................................... $4,745,000 100%
========== ===
</TABLE>
We reserve the right to reallocate proceeds to different uses if, in
management's view, the needs of the business so require.
We intend to invest approximately 83%, or $3,913,486 of the estimated net
proceeds in portfolio companies, either as initial or additional investments,
within the earlier of two years from the closing of this offering or two and
one-half years from the effective date of this prospectus. We believe that the
net proceeds of this offering will be sufficient to make approximately 10
initial investments. Our estimated use of the net proceeds for salaries and
professional fees are based upon our projected expenses for the 12 month period
following this offering. We intend to use the remaining net proceeds for
general corporate purposes including working capital.
In the event that the underwriter's over-allotment option is exercised,
the net proceeds therefrom will be used to make investments in portfolio
companies and for general corporate purposes including working capital.
Pending investment in portfolio companies, we intend to invest the net
proceeds of any offering of shares in time deposits, income-producing
securities with maturities of three months or less that are issued or
guaranteed by the federal government or an agency of the federal government,
high quality debt securities maturing in one year or less from the time of
investment or high quality money market funds. Our ability to achieve our
investment objective may be limited to the extent that the net proceeds of any
offering, pending full investment, are held in time deposits and other
short-term instruments.
14
<PAGE>
Selected Financial Data
The following table presents our summary consolidated financial and other
data and has been derived from our audited financial statements for the years
ended December 31, 1997 and 1998 and from our unaudited interim financial
statements for the nine months ended September 30, 1998 and 1999, all of which
are included in another section of this prospectus. The Balance Sheet Data at
September 30, 1999 is also presented as adjusted to reflect the sale of shares
of common stock offered hereby and the application of the net proceeds
therefrom. The information below should be read in conjunction with "Financial
Highlights," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our consolidated financial statements and the notes
to our consolidated financial statements, each of which is included in another
section of this prospectus.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31, September 30,
----------------------------- -------------------------------
1997 1998 1998 1999
------------- ------------- ------------- ---------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Income from operations ........................ $ -- $ 381,843 $ 382,543 $ 1,272,041
Expenses ...................................... 5,115 213,437 86,417 554,086
---------- ---------- ---------- -----------
Income (loss) before income taxes ............. (5,115) 168,406 296,126 717,955
Benefit (provision) for income taxes .......... -- (62,450) (109,507) 64,167
---------- ---------- ---------- -----------
Net income (loss) from operations ............. (5,115) 105,956 186,619 782,122
Net realized and unrealized gains ............. -- 611,000 305,613 974,635
---------- ---------- ---------- -----------
Net increase (decrease) in net assets ......... $ (5,115) $ 716,956 $ 492,232 $ 1,756,757
========== ========== ========== ===========
Per share net increase (decrease) in net
assets ....................................... $ (0.00) $ 0.31 $ 0.22 $ 0.66
Weighted average number of shares
used in per-share computations ............... 2,070,494 2,304,691 2,258,347 2,652,175
Unaudited pro forma information:
Net increase (decrease) in net assets
before pro forma effect of change in
Company's tax structure ...................... $ 716,956 $ 1,756,757
Pro forma effect of change in tax
structure .................................... -- (184,731)
---------- -----------
Pro forma increase in net assets .............. $ 716,956 $ 1,572,026
========== ===========
</TABLE>
As of
December 31, September 30,
1998 1999
-------------- --------------
(unaudited)
Balance Sheet Data:
Investments at market value ......... $ 1,300,000 $ 3,512,078
Cash and cash equivalents ........... 418,178 1,260,757
Total assets ........................ 1,805,795 5,308,967
Total liabilities ................... 440,148 676,537
Net assets .......................... 1,365,647 4,632,430
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial
statements and the notes thereto included elsewhere in this prospectus. This
prospectus contains forward-looking statements regarding the plans and
objectives of management for future operations. The forward-looking statements
included herein are based on current expectations and assumptions that involve
numerous risks and uncertainties. Although management believes that the
assumptions underlying the forward-looking statements are reasonable, any of
the assumptions could prove inaccurate and, therefore, there can be no
assurance that the forward-looking statements included herein will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by us or any other person that our
objectives and plans will be achieved.
General
Our primary investment objective is the achievement of long-term capital
appreciation of our assets by making investments in those companies that
identify emerging and established technologies and markets for those
technologies and which management believes offer significant potential
opportunities for growth. We believe that we will be able to achieve our
objective by concentrating on investments in companies which we believe are
likely to benefit from our management's expertise in technology transfer.
The income that we derive from our investments in our portfolio companies
consists of both cash and equity securities that we receive upon disposition of
our portfolio companies. The appraised dollar value of the equities that we
receive makes up a portion of our revenues. An independent appraiser assesses
the value of our investments in portfolio companies.
Our expenses include salaries and wages, professional fees, sales and
marketing costs as well as general and administrative costs. Sales and
marketing costs include advertising, travel and other expenses that vary with
revenues. General and administrative costs include rent, depreciation,
telecommunications and other overhead costs.
We used an equity-based method of compensating certain outside service
providers during 1998 and 1999. Those costs are reflected in the general and
administrative costs of the statement of operations. Some service agreements
were for periods in excess of one year and any remaining value is recorded as a
prepaid expense for the period
Results of Operations
Nine Months Ended September 30, 1998 (unaudited) Compared to Nine Months Ended
September 30, 1999 (unaudited)
Income from operations. Income from operations increased 233% to
$1,272,041 for the nine months ended September 30, 1999 from $382,543 for the
nine months ended September 30, 1998. This increase was due to the completion
of transactions with four companies in the first nine months of 1999 versus one
transaction during the year ended December 31, 1998. In each transaction we
received restricted shares in a tax-free exchange for a portfolio company. An
independent consultant valued the shares received in each transaction. In our
transactions with:
o Image Analysis, Inc., we received 879,300 shares of common stock of Image
Analysis, Inc. The shares were valued at time of sale at $0.25 per share;
o Nucor Enterprises, Inc., we received 900,000 shares of common stock of
Nucor, Inc. The shares were valued at time of sale at $0.14 per share;
o Centrex, Inc., we received 1,584,000 shares of common stock of Centrex,
Inc. The shares were at time of sale valued at $0.33, and
o NuElectric, Inc., we received 791,957 shares of common stock of
NuElectric. The shares were valued at time of sale at $0.29 per share.
16
<PAGE>
We also entered into several consulting agreements that generated revenues
of $137,107 in total for the nine month period ended September 30, 1999 as
compared to $55,000 for the nine months ended September 30, 1998.
Expenses. Total expenses increased 541% to $554,086 for the nine months
ended September 30, 1999 from $86,417 for the nine months ended September 30,
1998. Salaries and wages increased 895% to $120,265 for the nine months ended
September 30, 1999 from $12,087 for the nine months ended September 30, 1998.
Professional fees increased as well by 568% to $197,601 for the nine months
ended September 30, 1999 from $29,571 for the nine months ended September 30,
1998. Sales and marketing costs increased 396% to $103,128 from $20,808.
General and administrative expenses increased by 456% to 133,092 for the nine
months ended September 30, 1999 from $23,951 for the nine months ended
September 30, 1998. These increases were the result of not being fully
operational until May 1998.
Net Realized and Unrealized Gains and Income Taxes
Unrealized appreciation of investments increased 219% to $974,635 for the
nine months ended September 30, 1999 vs. $305,613 for the nine months ended
September 30, 1998. Increased appreciation relates to our investments in Lexon,
Inc., Image Analysis, Inc. and NuElectric, Inc.
Our effective tax rate was a benefit of 9% for the nine months ended
September 30, 1999 compared with a provision of 37% for the nine months ended
September 30, 1998. The benefit recorded in 1999 is primarily the result of the
tax losses generated by certain subsidiaries of UTEK LLC while the income
generated by UTEK LLC passed (UTEK LLC was formed on December 31, 1998) through
to its members.
Fiscal year ended December 31, 1998 compared to fiscal year ended December 31,
1997
Income from operations. Income from operations was $381,843 for the year
ended December 31, 1998. We did not have any income from operations for the
year ended December 31, 1997. The increase in income from operations was the
result of completing our first full year of operations in 1998. During 1998, we
completed one technology transfer transaction which generated income of
$320,000. In addition, we received a $55,000 consulting fee.
Expenses. Total expenses increased to $213,437 for the year ended December
31, 1998 from $5,115 for the year ended December 31, 1997. There were no
salaries and wages, professional fees, nor sales and marketing costs in 1997.
General and administrative costs increased 565% to $33,997 for the year ended
December 31, 1998 from $5,115 for the year ended December 31, 1997. In 1997
there were only general and adminstrative start up costs, and for 1998 the
business was not fully operational until May 1998. Some of the 1998 sales and
marketing costs were related to transactions that took place in 1999.
Net Realized and Unrealized Gains and Income Taxes
Our effective tax rate was 37% for the year ended December 31, 1998. We
did not record a benefit or provision for the year ended December 31, 1997
since we did not have any significant operations during that year.
Unrealized appreciation of investments amounted to $611,000 for the year
ended December 31, 1998. The appreciation relates to our investment in Lexon,
Inc. We did not hold any investments during 1997.
Liquidity and Capital Resources
As of September 30, 1999, we had cash and cash equivalents of $1,260,757.
Our primary source for liquidity and capital was issuance of common stock.
We completed three private placement transactions resulting in proceeds of over
$500,000 in 1998 and over $1,300,000 in 1999. On September 30, 1999 we had in
excess of $1,200,000 in cash and no debt. Based upon our anticipated capital
needs for operations, general corporate purposes, and future research and
development agreements with universities to complete technology transfer
transactions, management believes that the net proceeds received from this
offering will be sufficient to meet our funding requirements for the next
twelve months.
We believe that, upon consummation of this offering, we will have
sufficient capital to implement our current investment objectives. However, our
ability to meet our future investment objectives may be dependent upon our
ability to raise capital from time to time through the sale of equity
securities. There can
17
<PAGE>
be no assurance that we will be able to raise the anticipated funds, if any. We
currently have no material commitments for capital expenditures, except as set
forth herein under "Use of Proceeds" and to finance the working capital needs
of our principal portfolio companies.
Year 2000 Compliance
Our company and our portfolio companies may be adversely affected by the
"Year 2000" problem, which is due to the fact that many computer programs were
written using two digits rather than four to define the applicable year. As a
result of this problem, date-sensitive computer programs that use a two digit
dating system may recognize a date using "00" as the year 1900 rather than
2000. The impact of this problem is difficult to assess at this time, but this
problem could result in a system failure or miscalculation causing disruptions
of operations, including a temporary inability to process transactions, send
invoices, retain accurate data, or engage in normal business activities.
Based on our current evaluation of our computer software, all of which has
been purchased in the last 18 months, our management does not believe that our
operations will be significantly affected by the Year 2000 problem. However,
the Year 2000 problem could affect the operations of clients, vendors, and
others with whom we do business, thereby adversely affecting us as well. If
modifications or substitutions of software prove to be necessary and are not
made, or if others with whom we do business (including suppliers, contractors
and utility companies) suffer more significant Year 2000 problems, the Year
2000 problem could have an adverse effect upon our operations.
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BUSINESS
General Information and History
We are a non-diversified, closed-end management investment company that
intends to elect to be treated as a BDC under the 1940 Act.
We commenced operations in 1997 as UTEK Corporation ("UTEK Florida"),
which was incorporated under the laws of the State of Florida in August 1996.
UTEK Florida was engaged in the business of technology transfer. On December
31, 1998, we formed UTEK, LLC, a limited liability company organized under the
laws of the State of Florida. Subsequent thereto, the shareholders of UTEK
Florida exchanged their shares of common stock for membership units in UTEK,
LLC. In July 1999, we formed UTEK Corporation under the laws of the State of
Delaware and in October 1999, UTEK LLC was merged into UTEK Corporation.
INVESTMENT OBJECTIVES AND POLICIES
Objectives
Our primary investment objective is to achieve long-term capital
appreciation of our assets. We intend to achieve our objective by making equity
investments in new development stage companies which our management believes
offer significant potential opportunities for growth. As a BDC, we generally
may change our non-fundamental investment objectives and policies without
stockholder approval. We do not have a registered investment adviser and our
management, under the supervision of our board of directors, makes our
management decisions.
Since our election to operate as a BDC, we have concentrated our efforts
on making controlling equity investments in portfolio companies in private
transactions. Our investments consist of funding to be used to identify,
research and market new technologies and for the acquisition of licenses to
those new technologies and when appropriate the support of sponsored research
programs to further the development of licensed technology. In return for our
investments, we receive common stock in our portfolio companies. We also
provide these portfolio companies with significant managerial assistance by
having one or more members of our management serve as directors and officers of
our portfolio companies. After we have made an investment, we help our
portfolio companies in their business of researching, identifying and
developing new technologies and markets. We also assist them in acquiring the
licenses to new technologies developed at universities and government research
facilities. Our management provides portfolio companies with significant
assistance in locating and acquiring these technologies and markets for them.
We then find merger partners for our portfolio companies who will acquire the
portfolio company from us in exchange for common stock. Our investments are
concentrated in development stage companies that license and develop new
technologies for commercial applications. We do not contemplate permitting our
portfolio companies to expend significant sums on a new venture, which cannot
be recovered in due course, absent the execution letters of intent or
definitive merger agreements for the resale of the technology or the merger of
the portfolio company.
We intend to take advantage of our experience in the field of technology
transfer to maximize the return on our investments in portfolio companies.
Technology transfer refers to the process by which new technologies, developed
in universities, government research facilities, or similar research settings,
are acquired and licensed to companies for commercial development and use. Our
management and certain members of our board of directors have experience in
technology transfer. Our investments in our portfolio companies are structured
to allow us to take advantage of our management's expertise and to give us
control of the portfolio company. In addition, we intend to capitalize on
relationships that members of our management and board of directors have
developed with universities and government research laboratories.
Fundamental Policies
We do not have a policy regarding the issuance of senior securities and we
do not contemplate issuing such securities. However, if we determine that the
issuance of senior securities would be appropriate in the
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future, restrictions imposed by Section 61 of the 1940 Act require, among other
things, asset coverage in the amount of at least 200% of our net assets.
Further, we may issue more than one class of senior securities and warrants,
options or other profit sharing arrangements, subject to the provisions set
forth in Section 61. We will not sell securities short or on margin, write puts
or calls or purchase or sell commodities or commodity contracts. We also do not
contemplate purchasing or selling real estate mortgage loans. We may from time
to time sell some of our securities in exchange for real estate and we did, on
one occasion, exchange a portion of securities we received for a portfolio
company for common stock in a company whose only asset was real estate. We will
not underwrite the issuance of securities of other companies, and we do not
currently intend to borrow money. Where necessary, we may make loans to or
additional investments in portfolio companies to protect our initial investment
and we will continue to invest in restricted securities of portfolio companies.
We do not have a policy concerning concentration of investments in a particular
industry or group.
Our board of directors has adopted the following policies regarding
investments in portfolio companies:
o we will limit the amount of our total investment in any single portfolio
company to $500,000 or 10% of our net assets, whichever is less.
o we will not permit a portfolio company to commit significant amounts of
the funds we have invested towards payment to third parties for the
acquisition of the rights to a technology or the further development of
the technology, until we have an agreement in place to resell the
technology or to merge the portfolio company with an acquiring company or
at least an executed letter of intent; and
o in the future we will limit the number of new portfolio companies that we
will merge with private companies such that our total investments in our
portfolio companies that have merged with private companies does not
exceed 10% of our total net assets.
We contemplate that, based on existing federal law, all sales of our
portfolio companies will be structured as merger transactions where we will
receive common stock in the acquiror in exchange for all our shares in our
portfolio company.
Subject to any limitations imposed by the 1940 Act, our investment
objectives, fundamental policies and investment diversification status may
change at any time and from time to time without stockholder approval.
In addition to the fundamental policies listed above, we have agreed with
the underwriter, that for the 12 month period following this offering, we will
not, without the prior written consent of the underwriter:
o invest more than $500,000 of our net assets in any single portfolio
company;
o have a portfolio company commit our invested funds to acquire rights to a
technology until such time as we have identified and entered into a merger
agreement or technology sale agreement with a potential acquiror; or
o invest more than 10% of the proceeds of this offering in portfolio
companies which will merge with privately owned companies.
We anticipate that a substantial portion of our investment opportunities
will continue to be presented to us as a result of management's contact
contacts with universities, research laboratories and in private industry.
Our Investment Model
Our investments in portfolio companies generally follow a specific series
of steps which our management believes provide the greatest opportunity for
long term appreciation of our assets. Using our investment model, we intend to
acquire securities in portfolio companies and eventually exchange those
securities for securities in public companies that acquire our portfolio
companies. The following is a list of the steps that we take when we make an
investment in a portfolio company using our investment model:
1. Evaluate potential technology growth fields.
2. Form and make a controlling equity investment in the portfolio company.
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3. Assist the portfolio company in the identification and evaluation of new
technologies and markets that offer the portfolio company a significant
opportunity for growth.
4. When appropriate, advise and assist the portfolio company in negotiating
a sponsored research agreement to further develop the technology.
5. Identify and contact potential "merger partners" to merge with the
portfolio company.
6. Advise and assist the portfolio company in completing the technology
transfer with the research institution and acquiring the license to the
technology.
7. Complete the sale of the portfolio company to the "merger partners" and
receive compensation for the sale of all the stock we hold in the
portfolio company.
8. Sell any securities received in exchange for the portfolio company and
use the proceeds to make additional initial investments.
Investment Evaluation Process
New technology opportunities may come to our attention from many sources.
The primary source to date has been from our management's contacts with
universities and in the private sector. We believe that the ability of our
management to maintain and develop relationships with university and government
research centers is a key factor in our ability to identify new potential
investment opportunities.
Prior to a portfolio company committing funds to an investment
opportunity, we will assist the portfolio company by conducting research
regarding the prospects and risks of the potential investment. Our board of
directors' and management's experience is essential in evaluating new
technologies, products, markets, industry trends, financial requirements,
competition any operating record and quality of the entrepreneurial group
associated with a prospective investment. Although our management has
scientific and professional experience, they may have limited or no experience
in the specific areas of business in which potential merger candidates are
engaged.
Investments in Portfolio Companies
Our initial investments will be made in transactions which will normally
be negotiated directly by our management with the portfolio company or an
affiliate thereof. Our management will seek to structure the terms of the
investment so as to provide for the capital needs and success of the portfolio
company and at the same time to maximize our opportunity for long-term capital
appreciation. An important factor in successful investing is proper structuring
of the transaction in terms of price, type of security, restrictions on use of
funds, commitments or rights to provide additional financing, control and
involvement in the issuer's business and liquidity as well as a viable plan to
realize liquidity and capital appreciation on the investment.
We intend to limit our total cash investments in any individual portfolio
company to a maximum of $500,000. To date, our initial investments have been
less than that amount. By limiting the size of our total investment in any one
portfolio company, we hope to reduce and diversify our risks. In exchange for
our investment, we will receive such number of shares of common stock in the
portfolio company to give us a controlling interest. To date, all of our
portfolio company securities have been common stock and we anticipate that we
will continue to acquire common stock in portfolio companies. Use of the funds
that we provide to portfolio companies will be restricted to obtaining licenses
to new technologies and developing and marketing those technologies. Our
management's involvement with the portfolio companies will primarily be
directed towards helping them acquire technology licenses and, when
appropriate, establishing sponsored research programs to further develop the
technology. We then plan to achieve some form of liquidity for our portfolio
investments by selling our portfolio companies to public companies.
Identifying New Technologies
We have developed relationships with a number of research universities in
the United States. In order to allow us to have early access to new
technologies, we have entered into alliances, licensing or option agreements
with the following institutions:
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Agreement with the University of South Florida.
In January 1998, we entered into an agreement with the University of South
Florida pursuant to which we have agreed to review and evaluate the commercial
potential of certain new technologies developed at the university that are
presented to us. In return, we have the ability, if we deem it appropriate, to
enter into option agreements with the university providing our company with the
exclusive right to seek a licensee or other commercial opportunity for the
technology, provided mutually agreeable terms are reached, for a limited period
of time. We have reviewed and negotiated licenses on the following
technologies:
o a new diagnostic test for colon, testicular and ovarian
cancer,
o a new software technology for digitally coloring MRI's to facilitate
their reading and the rendering of diagnoses, and
o a new technique to identify cryptosporidium (a water-borne parasite)
in water.
The term of the agreement is for three years, however either party may
terminate the agreement on 60 days written notice.
Agreement with the University of Memphis.
In May 1998, we entered into an agreement with the University of Memphis
pursuant to which we have agreed to evaluate the commercial potential of select
technologies developed at the university that are presented to us for review.
The university has agreed that upon our request, it will file patents to
protect technologies that we wish to have protected. In addition, under the
agreement, the university may grant to us option agreements which will give us
the exclusive rights to license a particular technology, provided mutually
agreeable terms are reached, for a period of twelve months.
The term of the agreement is five years, but may be terminated by either
party on 60 days written notice.
Agreement with Johns Hopkins University.
In June 1999, we entered into an agreement with Johns Hopkins University
pursuant to which we have agreed to evaluate the commercial potential of
certain technologies developed at the university, that are presented to us for
review. The university has agreed that upon our request, it will file patents
to protect technologies that we wish to have protected. In addition, under the
agreement, the university may grant to us option agreements which will give us
the exclusive rights to license the technology, provided mutually agreeable
terms are reached, for a period of twelve months.
The term of the agreement is five years, but may be terminated by either
party on 60 days written notice.
Agreement with the University of Florida.
In October 1999, we entered into an agreement with the University of
Florida pursuant to which we have agreed to evaluate the commercial potential
of certain technologies developed at the university, that are presented to us
for evaluation. Under the agreement, the university may grant us option
agreements which will give us the exclusive rights to license the technology,
provided mutually agreeable terms are reached, for a period of twelve months.
The term of the agreement is five years, but may be terminated by either
party on 60 days written notice.
Agreement with Fraunhofer Institute of Germany for Interfacial Engineering and
Biotechnology IGB
In November 1999, we entered into a strategic alliance with Fraunhofer
pursuant to which we have agreed to review certain technologies developed at
Fraunhofer to gauge their potential for successful commercialization in the
United States. Pursuant to the agreement, Fraunhofer will grant to us a twelve
month, exclusive, royalty free license option for the technologies reviewed, if
we so request. We may then license these technologies, provided mutually
agreeable terms are reached.
The term of the agreement is five years, but may be terminated by either
party on 60 days written notice.
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Agreement with Virginia Tech Intellectual Properties.
In December 1999, we entered into an agreement with Virginia Tech
Intellectual Properties pursuant to which we have agreed to evaluate the
commercial potential of certain technologies developed at Virginia Tech
Intellectual Properties, that are presented to us for evaluation. Under the
agreement, Virginia Tech Intellectual Properties may grant us option agreements
which will give us the exclusive rights to license the technology, provided
mutually agreeable terms are reached, for a period of twelve months.
The term of the agreement is five years, but may be terminated by either
party on 30 days written notice.
Evaluation and Acquisition of Technology
With few exceptions, all technologies developed by university faculty are
the property of the universities we work with and are licensed by the
university's research foundations or similar organizations to our portfolio
companies for commercialization. To help facilitate the identification of and
access to new technology, we have created a Scientific Advisory Council to
review technologies developed at universities and government laboratories.
When we assist a new portfolio company to evaluate a new technology for a
portfolio company we review the technology to make sure that it meets three
criteria:
o The technology must represent a significant advance over existing
technologies;
o There must be an existing global market for the technology once it is
commercialized; and
o The technology must be socially responsible (i.e., not intended for
destructive or harmful purposes).
If, in our management's view, a technology meets these criteria, then they
will assist the portfolio company in commencing negotiations with the
technology developer to arrange for a license. Our management will review
license agreements and advise portfolio companies as to terms and requirements.
In addition, when we require assistance in evaluating a technology, our
management will have the technology reviewed by members of our Scientific
Advisory Council.
Our Scientific Advisory Council currently consists of the following members:
<TABLE>
<CAPTION>
Name Title Expertise
---- ----- ---------
<S> <C> <C>
Stuart Brooks, M.D. Professor, University of South Florida Lung disease/Allergies.
Chairman Scientific Advisory Council Respiratory Illness. Occupational
medicine.
Uwe Reischl, Ph.D., M.D. President, UTEK, Corporation Architectural engineering.
Executive Director Scientific Industrial health and safety.
Advisory Council Occupational medicine.
Dean Sheppard, M.D. Professor, University of California Molecular biology.
- San Francisco
O. Norman Nesheim, Ph.D. Professor, University of Florida Pesticide regulation and safety
management. Food and water
safety with pesticide use.
Russell Brantman, Ph.D. Consultant Mechanical engineering/Systems
Engineering. Vehicle safety
systems/Crash Simulations.
Charles Proctor, Ph.D., P.E. Research Associate Professor, Orthopedic implants and devices.
University of Florida
Brian B. Schwartz, Ph.D. Professor, Graduate School of the Physics and material science.
City University of New York
Albert J. Anthony, D.M.D. Retired Dentistry and dental equipment.
Alain M. Boudet, Ph.D. Professor, University of Paul Cell and molecular plant biology.
Sabatier
George Newkome, Ph.D. Vice President of Research, Molecular chemistry.
University of South Florida
</TABLE>
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<TABLE>
<CAPTION>
Name Title Expertise
---- ----- ---------
<S> <C> <C>
Gerald Krueger, Ph.D., CPE Principal Scientist/Ergonomist, Human performance
enhancement.
Col. U.S. Army (retired) Human systems design.
Jui-Sung Hung, M.D., F.A.C.C. Professor, China Medical College Cardiology.
Hospital
Yun-Fan Liaw, M.D. Professor, Chang Gung Medical Gastroenterology/Hepatology.
College
Tzann T. Fang, M.D. Physician, Midwestern Regional Medical oncology/internal
Medical Center medicine/hematology
</TABLE>
Identifying Acquisition Candidates
In order to realize a return on our investments in our portfolio
companies, we must sell our portfolio companies or the technology and
development rights they hold. Based on current tax law and industry conditions,
it is our policy to sell our portfolio companies to acquirers in merger
transactions where we receive shares in the acquiring company in a tax-free
exchange for all of our shares in our portfolio company. In this manner, all
rights to technologies held by our portfolio companies transfer to the acquirer
and the acquirer assumes all obligations under the license agreements. Most of
our merger transactions to date, have been with private companies whose common
stock is not publicly traded. We intend to engage in merger transactions
primarily with public companies whose common stock is listed for public trading
either on a national exchange or on the Nasdaq Stock Market.
Our management has primary responsibility for locating suitable merger
partners. However, we have formed a network of independent marketing
representatives with diverse backgrounds offering varied expertise for the
purpose of assisting us in locating promising prospects for mergers. These
representatives are located in Plant City and Tampa, Fla., New York, Boston,
Baltimore and Washington, D.C. as well as in Germany and Belgium. We have
entered into agreements with our independent marketing representatives. Most of
the agreements provide that a marketing representative will receive 10% of any
cash or stock we receive in connection with the sale of a portfolio company to
a company that the representative has introduced to us. In certain cases, we
have issued marketing representatives shares of our common stock as a flat fee
for their services.
Some recent transactions that we have completed include the following:
In May 1998, Gentest, Inc. a portfolio company, merged with Lexon, Inc.,
an Oklahoma corporation. In connection with the merger, we received 1,000,000
shares of Lexon common stock and Lexon acquired ownership of Gentest, Inc.
which had acquired the exclusive license to develop, manufacture and market a
blood test that will potentially allow for the early screening of colon cancer
and certain types of ovarian and testicular cancers. Lexon is developing this
blood test for general laboratory use. The prototype blood test kit requires
additional evaluation and testing and cannot be sold in the United States. The
blood test kit requires FDA approval before it can be sold in the United
States.
Lexon is a public company whose shares are traded on the over-the-counter
bulletin board under the symbol LXXN. We currently own 1,000,000 shares of
Lexon common stock which represents approximately 15% of the 6,802,013 shares
of Lexon issued and outstanding as of September 30, 1999.
In June 1999, our portfolio company Clean Water Technologies, Inc., merged
with NuElectric Inc., a Delaware corporation. NuElectric is in the business of
acquiring, developing and marketing new technologies for conserving energy and
protecting the environment. In connection with the merger, we received 791,957
shares of NuElectric common stock. As a result of the merger, NuElectric
acquired the exclusive license to a new technology for removing arsenic from
water. NuElectric is a public company whose shares are traded on the
over-the-counter bulletin board under the symbol NRGE.
We currently own 491,957 shares of NuElectric common stock, which
represents approximately 13% of the issued and outstanding common stock of
NuElectric.
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In May 1999 Centrex, Inc. acquired E. Coli Measurement Systems, Inc., one
of our portfolio companies, in a merger transaction. Centrex has acquired the
exclusive license to a new technology for the detection of E Coli bacteria in
food and water. In July 1999, E. Coli Measurement Systems, Inc. entered into a
licensing and sponsored research agreement with the University of California
regarding an E. coli detection technology. The technology was developed at the
Los Alamos National Laboratory and Centrex is providing funding to develop a
prototype system for the rapid detection of E Coli in food and water. Centrex
also holds an exclusive license to a new technology developed at the University
of South Florida for the automated detection of Cryptosporidium and Giardia in
water. Centrex is a privately held company. We own 1,584,000 shares of Centrex
common stock.
In January 1999, Image Analysis Corporation, a portfolio company merged
with Image Analysis, Inc., an Oklahoma corporation. As a result of the merger,
Image Analysis, Inc. holds the exclusive license, patented in the United
States, and other countries, to a new technology for producing color magnetic
resonance images, or MRI, from existing MRI scanners. Image Analysis, Inc. is
currently funding research and development of this new technology. The research
is being conducted at Brenau University in Georgia under the direction of Dr.
Keith Brown, the inventor of the technology. Image Analysis, Inc. is a
privately held company. We currently own 879,300 shares of common stock of
Image Analysis, Inc.
In May 1999, Advanced Reinforcing Technologies, Inc. a portfolio company
merged with Nucor, Inc., an Oklahoma corporation. Nucor is involved with the
development of new materials for rebuilding and enhancing the infrastructure of
roads and bridges. Pursuant to the merger, Nucor acquired the exclusive license
for a new carbon fiber composite rebar building technology developed at Cornell
University. In addition, Advanced Reinforcing Technologies established a
sponsored research program for further development of its technology. Nucor is
a privately held company. We own 900,000 shares of common stock of Nucor.
Investment Advisory Services
The value of the securities that we receive in exchange for our portfolio
companies is determined by an outside financial advisor. We have retained
Bolten Financial Consulting, Inc., 6605 Mid Place, Temple Terrace, Florida
33617 to provide us with valuations of the securities we receive in exchange
for portfolio companies, updated to each quarterly valuation date. We pay
Bolten a fee each time they value our investments. In 1999, we paid a total of
$25,166 for valuations.
Advisory Committees
In addition to our Scientific Advisory Council, we have assembled a
European Advisory Council for the purpose of developing business in Europe for
our company. It is our intention to expand both Councils, as and when
appropriate, to more completely represent our interests and needs in the near
future.
Our European Advisory Council consists of the following members:
Carl Nisser, LL.M., D.E.S. (Chairman European Advisory Council and one of our
directors). Mr. Nisser was educated at the universities of Uppsala, Strassbourg
and Coimbra. He is a member of the Swedish Bar Association, Former Assistant
Judge of the Appellate Court of Stockholm, Former Director of Corporate and
Legal Affairs for AB Volvo, Former Director of Corporate Affairs for Goodyear
International Corporation, VP of Intermatrix Group, Currently Principal of
Advokatfirman Nisser (Law firm with offices in Brussels and London). Mr. Nisser
is Chairman and CEO of Ecom Enterprises and is on the board of directors of
several companies in the United States and Europe. He has authored several
articles on legal and economic issues.
Bo Hjelt. Mr. Hjelt was educated at Indiana University, Geneva University
(HEC), and IMI Geneva (MBA). He is the Chairman of Corporate Development
International, which he founded in 1973. Mr. Hjelt is also the member of
several Boards of Directors, and serves on the Board of the International
Federation for Hydrocephalus and Spina Bifida.
Lord Chesham. Lord Chesham was educated at Eton College, Qualified Chartered
Accountant. He was the Former Finance Director Bowater Corporation of
Australia. He was appointed Deputy Chief Whip House of Lords, 1995-97.
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Professor Marcel Crochet, PhD. Professor Crochet was educated at the University
of Louvain and the University of California at Berkeley. He was appointed
Rector of the Catholic University of Louvain in 1995. Prior to this he served
as Chairman of the Department of Mechanical Engineering and Dean of Engineering
at the University of Louvain. Professor Crochet is the author of 140 scientific
publications in the field of fluid mechanics and is on the editorial board of
several scientific journals. Dr. Crochet has also served as the CEO of POLYFLOW
Corporation. He has received numerous international awards recognizing his work
in technology innovation.
Dr. Jonas Lonnroth. Dr. Lonnroth was educated at Davidson College, N.C. and at
the medical facility of the University of Uppsala, Sweden. He completed studies
in Russian and law, and is a specialist in ear, nose and throat surgery. Dr.
Lonnroth speaks eight languages, is an avid hi-tech multihull sailor with a
patent in compass technology, and has a keen interest in electronic
communication technologies
Lupold von Wedel. Mr. von Wedel was educated in Paris at the Institut des
Hautes Etudes Internationales and studied law at Freiburg University. He began
his business career with Hoechst AG as Regional Manager. In 1992, Mr. von Wedel
assisted the German Ministry of Finance in the conversion and restructuring of
East German industry. Currently Mr. von Wedel is Managing Director of Logika AG
a diversified services firm which provides senior management support to
industry.
Properties
Our executive offices are located at 202 South Wheeler Street, Plant City,
Florida, where we lease approximately 2,700 sq. feet of space with an annual
rent of $18,993. We have negotiated an extension of the term of the lease for
two additional years at the current rate. The extended lease will expire March
31, 2002. We anticipate that this space will be sufficient for the forseeable
future.
Portfolio Companies
As of the date of this prospectus, each of our investments in our
portfolio companies were for amounts less than 5% of our total assets. We have
controlling interests in each of our portfolio companies and members of our
management also serve as officers and directors of each portfolio company. In
addition to our investment, we provide portfolio companies with managerial
assistance in completing technology transfers. The following is a list of our
current portfolio companies with a brief description of their business:
Microsphere Technologies, Inc. is a development stage company that is
currently seeking to acquire licenses to new materials science technologies. We
own 100% of the issued and outstanding common stock of Microsphere
Technologies, Inc. Uwe Reischl is the sole director of Microsphere
Technologies.
Digital Personnel, Inc. is a development stage company that has acquired
the exclusive license to technology developed at the California Institute of
Technology for new software that is designed to produce human likenesses that
should be able to simulate conversation for e-commerce applications. These
"digital personnel" are realistic and, when and if refined, may be able to
speak text presented to them. NASA's Jet Propulsion Laboratory is the inventor
and proposed development partner for this technology. Significant additional
funding will be needed to bring this technology to market. The California
Institute of Technology will own 30% of Digital Personnel, Inc. common stock,
upon the completion of certain research milestones, and we will own 70%.
Clifford M. Gross is the sole director and president of Digital Personnel.
Cancer Diagnostics, Inc. is a development stage company that has acquired
a license from the University of Maryland to a technology for telomerase assays
of body fluids for cancer screening and assessment of disease stage and
prognosis. We own 100% of the outstanding common stock of Cancer Diagnostics.
Uwe Reischl is the sole director and president of Cancer Diagnostics.
Zorax, Inc. is a development stage company that is seeking to acquire the
license to a technology for the separation of cystic parasitic forms from
water. We own 100% of the common stock of Zorax, Inc. Uwe Reischl is the sole
director and president of Zorax.
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Technology Development, Inc. is a development stage company that is
seeking to acquire new computer modeling and related technologies. We own 100%
of the common stock of Technology Development, and Clifford Gross is the sole
director and president.
Advanced Desalination Technologies, Inc. is a development stage company
that is seeking to acquire a water desalination technology. We own 100% of the
common stock of Advanced Desalination and Uwe Reischl is the sole director and
president.
Doppler Technology International, Inc. is a development stage company that
is seeking to acquire new technologies for the non-invasive analysis of body
tissue. We own 100% of the common stock of Doppler Technology. Uwe Reischl is
the sole director and president.
Employees
As of September 1999, we had approximately 4 full-time employees and 27
part-time associates. Of these employees and associates, 3 were senior
executives. Our employees and associates are not represented by a labor union.
We consider relations with our employees and associates to be good.
Legal Proceedings
We are not currently a party to any legal proceedings.
DETERMINATION OF NET ASSET VALUE
We determine the net asset value per share of our common stock quarterly.
The net asset value per common share is equal to the value of our total assets
minus total liabilities and preferred stock divided by the total number of
common shares outstanding.
Both public and private equity securities that we receive from companies
are valued at their appraised values as determined by our independent
appraiser. With respect to private equity securities, each investment is valued
using industry valuation benchmarks, and then the value is assigned a discount
reflecting the illiquid nature of the investment as well as our minority,
non-control position. When an external event such as a purchase transaction,
public offering, or subsequent equity sale occurs, the pricing indicated by the
external event is used to corroborate our private equity valuation. Equity
securities in public companies that carry certain restrictions on sale are
generally valued at a discount from the public market value of the securities.
Restricted and unrestricted publicly traded stocks may also be valued at
discounts due to the size of our investment or market liquidity concerns.
Determination of fair value involves subjective judgments that cannot be
substantiated by auditing procedures. Accordingly, under current standards, the
accountants' opinion on our financial statements in our annual report refers to
the uncertainty with respect to the possible effect on the financial statements
of such valuation.
PORTFOLIO TRANSACTIONS
The capital stock we receive from portfolio companies is expected to be
acquired primarily in private transactions negotiated directly with the
portfolio company or with an affiliate thereof. Our management will continue to
be principally responsible for conducting negotiations with respect to our
investments.
In addition to securities of public companies which we recieve as a result
of mergers by our portfolio companies, we may invest a portion of our other
assets in the publicly traded securities of public companies. Such investments
and other investments which are not "qualifying assets" may not exceed 30% of
the value of our total assets at the time of any such investment.
Based on the amount of existing available funds together with the proceeds
from this offering, it is not likely that we will be able to acquire securities
in a large number of companies. As a result, our investments will not be
substantially diversified.
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<PAGE>
REGULATION
We have elected to be regulated as a business development company, or BDC,
under the Investment Company Act of 1940, which we refer to as the 1940 Act. A
BDC is a special type of closed-end, non-diversified investment company
registered under and regulated by the 1940 Act. The Small Business Investment
Incentive Act of 1980 ( which we refer to as the Incentive Act) modified the
provisions of the 1940 Act applicable to a BDC. After filing its election to be
treated as a BDC, a company may not withdraw its election without first
obtaining the approval of holders of a majority of its outstanding voting
securities (as defined under the 1940 Act). The following is a brief
description of certain provisions of the 1940 Act, as modified by the Incentive
Act, and is qualified in its entirety by reference to the full text of the 1940
Act, the Incentive Act and the rules thereunder.
Generally, to be eligible to elect BDC status, a company must engage in
the business of furnishing capital and significant managerial assistance to
companies which do not have ready access to capital through conventional
financial channels. Such portfolio companies are termed "eligible portfolio
companies." More specifically, in order to qualify as a BDC, a company must (i)
be a domestic company; (ii) have registered a class of its equity securities or
have filed a registration statement with the Commission pursuant to Section 12
of the Exchange Act; (iii) operate for the purpose of investing in the
securities of certain types of portfolio companies, namely, development stage
or emerging companies and businesses suffering or just recovering from
financial distress (see following paragraph); (iv) extend significant
managerial assistance generally to such portfolio companies; (v) have a
majority of directors who are not "interested persons" (as defined in the 1940
Act), and (vi) file (or, under certain circumstances, intend to file) a proper
notice of election with the Commission.
An eligible portfolio company is generally a U.S. company that is not an
investment company and that (i) does not have a class of securities registered
on an exchange or included in the Federal Reserve Board's over-the-counter
margin list; (ii) is actively controlled by a BDC and has an affiliate of a BDC
on its board of directors; or (iii) meets such other criteria as may be
established b the Commission. Control under the 1940 Act is presumed to exist
where a BDC beneficially owns more than 25% of the outstanding voting
securities of the portfolio company.
The 1940 Act prohibits or restricts companies subject to the 1940 Act from
investing in certain types of companies, such as brokerage firms, insurance
companies, investment banking firms and investment companies. Moreover, the
1940 Act limits the type of assets that BDCs may acquire to certain prescribed
qualifying assets and certain assets necessary for its operations (such as
office furniture, equipment and facilities) if, at the time of acquisition,
less than 70% of the value of the BDC's assets consists of qualifying assets.
Qualifying assets include: (i) privately acquired securities of companies that
were eligible portfolio companies at the time such BDC acquired their
securities; (ii) securities of bankrupt or insolvent companies; (iii)
securities of eligible portfolio companies controlled by a BDC; (iv) securities
received in exchange for or distributed in or with respect to any of the
foregoing, and (v) cash items, government securities and high-quality
short-term debt. The 1940 Act also places restrictions on the nature of the
transactions in which, and the persons from whom, securities can be purchased
in order for the securities to be considered qualifying assets. Such
restrictions include limiting purchases to transactions not involving a public
offering and acquiring securities directly from either the portfolio company or
their officers, directors or affiliates.
We are permitted by the 1940 Act, under specified conditions, to issue
multiple classes of senior debt and a single class of preferred stock if our
asset coverage, as defined in the 1940 Act, is at least 200% after the issuance
of the debt or the preferred stock (i.e., such senior securities may not be in
excess of 50% of our net assets). If the value of our net assets, as defined,
were to increase through the issuance of additional capital stock or otherwise,
we would be permitted under the 1940 Act to issue additional senior securities.
We have no senior securities outstanding and have no current intention of
issuing any senior securities although we may do so in the future.
We may sell our securities at a price that is below the net asset value
per share only (i) after a majority of our disinterested directors has
determined that such a sale would be in our best interests and our stockholders
and (ii) upon the approval by the holders of a majority of our outstanding
voting securities, including a majority of the voting securities held by
non-affiliated persons, of such a policy or practice within one year prior to
such sale. If the offering of the securities is underwritten, a majority of the
disinterested
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<PAGE>
directors must determine in good faith that the price of the securities being
sold is not less than a price which closely approximates the market value of
the securities, less any distribution discounts or commissions. As defined in
the 1940 Act, the phrase "majority of our outstanding voting securities" means
the vote of (i) 67% or more of our common stock present at a meeting, if the
holders of more than 50% of our outstanding common stock are present or
represented by proxy, or (ii) more than 50% of our outstanding common stock,
whichever is less.
Many of our transactions with our affiliates (as well as affiliates of
those affiliates) which were prohibited without the prior approval of the
Securities and Exchange Commission under the 1940 Act prior to its amendment by
the Incentive Act are now permissible upon the prior approval of a majority of
our disinterested directors and a majority of the directors having no financial
interest in the transactions. However, certain transactions involving certain
persons with whom we are associated, including our directors, officers, and
employees, may still require the prior approval of the Securities and Exchange
Commission. In general (i) any person who owns, controls or holds power to vote
more than 5% of our outstanding common stock; (ii) any director, executive
officer or general partner of that person; and (iii) any person who directly or
indirectly controls, is controlled by, or is under common control with, that
person, must obtain the prior approval of a majority of our disinterested
directors and, in some situations, the prior approval of the Securities and
Exchange Commission, before engaging in certain transactions involving us or
any company under our control. The 1940 Act generally does not restrict
transactions between a company and its portfolio companies.
While a BDC may change the nature of its business so as to cease being a
BDC or, under certain circumstances, to change its business purpose, it may do
so only if authorized by a majority vote (as defined in the 1940 Act) of its
outstanding voting securities; stockholder approval of changes in other
fundamental investment policies of a BDC is not required (in contrast to the
general 1940 Act requirement, which requires stockholder approval for a change
in any fundamental investment policy). We are entitled to change our
non-diversification status without stockholder approval. In addition, should we
lose our status as a BDC, we would become subject to more stringent regulation
under the 1940 Act if we did not become exempt from 1940 Act regulation.
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<PAGE>
MANAGEMENT
Executive Officers and Directors
Our board of directors supervises the management of our company. The
responsibilities of each director include, among other things, the oversight of
the investment process and oversight of our quarterly valuations of our assets
and our financing arrangements.
The following table contains certain information concerning our directors,
director nominees, officers and other key employees and their ages.
<TABLE>
<CAPTION>
Name Age Position
- ---- ---- --------
<S> <C> <C>
Clifford M. Gross ................ 42 Chief Executive Officer and Chairman of the Board
of Directors
Uwe Reischl ...................... 53 President
Carole R. Mason .................. 38 Chief Financial Officer
Sam Reiber ....................... 52 General Counsel and Director
Stuart M. Brooks ................. 63 Director of Scientific Advisory Board and Director
Kwabena Gyimah-Brempong .......... 50 Director
Arthur Chapnik ................... 60 Director
Carl Nisser ...................... 59 Director
</TABLE>
Directors and Executive Officers
Clifford M. Gross, Ph.D. has served as our Chief Executive Officer and
Chairman of the Board of Directors since 1997. Dr. Gross received his Ph.D.
from New York University in 1981, from 1982 to 1984 Dr. Gross served as the
Acting Director of the Graduate Program in Ergonomics and Biomechanics at New
York University. From 1984 to 1985 Dr. Gross served as the Chairman of the
Department of Biomechanics at New York Institute of Technology. In 1985, Dr.
Gross founded and served as CEO of the Biomechanics Corp. of America until
1995. From 1996 to 1997, Dr. Gross served as a research professor and Director
of the Center for Product Ergonomics at University of South Florida. Dr. Gross
holds eighteen patents and has produced numerous publications. His book,
entitled The Right Fit, published in October 1996, describes how companies can
increase market-share and profitability using a biomechanics technology
strategy. A portion of his laboratory was replicated in the Cooper Hewitt
National Museum of Design -- Smithsonian Institution in March 1997 as part of a
new exhibit on Henry Dryfuss and ergonomics.
Uwe Reischl, Ph.D., M.D. has served as our President since June 1999 and
had been our Executive Vice President since September 1998. Dr. Reischl
received a Masters degree in Architecture from the University of California at
Berkeley, he received a Ph.D. degree in Environmental Health Sciences from the
University of California at Berkeley, and both a second Ph.D. in Occupational
Medicine and an M.D. in General Medicine from the University of Ulm (Ulm,
Germany). Prior to joining UTEK, Dr. Reischl served as a Scientific Advisor at
the World Health Organization (WHO) Center at the University of Ulm. Dr.
Reischl was an Assistant Professor at the University of California, Director of
the Program in Industrial Health and Safety at Oakland University, and he was
an Associate Professor at the College of Public Health, University of South
Florida. Dr. Reischl has fifteen years experience in university teaching and
research.
Carole R. Mason, C.P.A., has served as our Chief Financial Officer,
Secretary & Treasurer since June 1999. From 1987 to the present, Ms. Mason was
a partner of Myers, Mason & Co. Ms. Mason has conducted a diversified
accounting practice in Tampa, Florida for 15 years. She received her Bachelor
of Science degree in accounting from the University of Tampa.
Sam Reiber, J.D., has served as our General Counsel since 1997 and has
been a Director since May 1998. Mr. Reiber was a founding partner of Linsky and
Reiber, a law firm located in Tampa, Florida. Mr.
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<PAGE>
Reiber has conducted a diversified practice of law in Tampa for 25 years. Mr.
Reiber's practice includes all types of real property, corporate matters,
litigation and estate planning. He received a Bachelor's degree in economics
from the University of Minnesota in 1969 and a Juris Doctorate from the William
Mitchell College of Law in 1974.
Stuart M. Brooks, M.D. has served as a director since 1998 and has been
the director of our Scientific Advisory Board since 1998. He is a Professor of
Medicine and Public Health and Director of the NIOSH Educational and Research
Center at USF.
Kwabena Gyimah-Brempong, Ph.D. has served as a director since May 1998.
Since May 1998, Dr. Gyimah-Brempong has also served as our Director of
University Partnerships, and as such is responsible for helping us to build
relationships with US universities. Since 1994, Dr. Gyimah-Brempong has been a
Professor of Economics at University of South Florida School of Business. Dr.
Gyimah-Brempong recently completed a comprehensive report on how US
universities market their technology.
Arthur Chapnik has served as a director since May 1998. Mr. Chapnik is
also the President of Harrison McJade & Co., Ltd., an apparel manufacturer. Mr.
Chapnik served as president of Samsung USA's women's apparel division from 1988
to 1990. Mr. Chapnik is Dr. Gross' father-in-law.
Carl Nisser, LL.M., D.E.S., has served as a director and chairman of our
European Advisory Counsel since May 1998. Mr. Nisser is a principal of
Advokatfirman Nisser, with offices in Brussels, London and New York. He has
served as Director of Corporate and Legal Affairs for both Volvo and Goodyear
International Corporation in the US, Europe and the Far East. Mr. Nisser also
serves in an of counsel capacity with our counsel, Gersten, Savage & Kaplowitz,
LLP. Mr. Nisser was educated at the universities of Uppsala, Strassbourg and
Coimbra. Mr. Nisser is chairman and CEO of E.com Enterprises, Inc. and a member
of several boards of directors. He is also an author of several articles on
legal and economic issues.
Committees of the Board
Our board of directors will establish, effective upon consummation of this
offering, an Audit Committee and a Compensation Committee. The functions of the
Audit Committee will be to annually recommend to the board of directors the
appointment of our independent public accountants, discuss and review the scope
and fees of the prospective annual audit, review the results thereof with the
independent public accountants, review and approve non-audit services of the
independent public accountants, review compliance with existing major
accounting and financial policies relative to the adequacy of our internal
accounting controls, review compliance with federal and state laws relating to
accounting practices and review and approve transactions, if any, with
affiliated parties.
The functions of the Compensation Committee will be to review and approve
annual salaries and bonuses for all officers, review, approve, and recommend to
the board of directors the terms and conditions of any employee benefit plans
or changes thereto, administer our stock option plan, and carry out the
responsibilities required by rules of the Securities and Exchange Commission.
Compensation of Directors
We have issued shares of our common stock to our directors as compensation
for acting in such capacity and we intend to grant our directors options to
purchase shares of our common stock in compensation for their services. We have
not paid any cash compensation to any of our directors. We are currently
reviewing our policy on compensation of outside directors and may pay outside
directors in the future.
Consulting Agreements with Directors
We have retained certain of our directors to serve as independent
contractors pursuant to consulting agreements under which these persons are
generally paid in shares, which vest over a two-year period, rather than
salaries. The directors with whom we have consulting relationships are listed
below:
Stuart Brooks, MD has been retained to serve as Director of the Scientific
Advisory Board. Pursuant to the agreement, we have issued to Dr. Brooks, in
consideration for his services, 5,000 shares of our common stock.
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<PAGE>
Arthur Chapnik has been retained to serve as Director of Public Relations.
Pursuant to the agreement, we have issued to Mr. Chapnik, in consideration for
his services, 5,000 shares of our common stock.
Kwabena Gyimah-Brempong, Ph.D. has been retained as Director of University
Partnerships. Pursuant to the agreement, we have issued to Dr. Gyimah-Brempong,
in consideration for his services, 5,000 shares of our common stock.
Carl Nisser, has been retained as Director of European Licensing. Pursuant
to the agreement, Mr. Nisser will represent us in Europe and in consideration
for his services, we issued to Mr. Nisser 10,000 shares of our common stock in
two equal installments, 5,000 shares in 1998 and 5,000 shares in 1999. In
addition, we paid Mr. Nisser in cash for legal services rendered to us as
director of our European Advisory Council.
Executive Compensation
The following table sets forth certain information regarding compensation
paid by us during each of the last three fiscal years to our Chief Executive
Officer and to each of our executive officers who earned in excess of $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
------------------- Other Annual
Name and Principal Position Year Salary Bonus Compensation
- ----------------------------- ------ ---------- ------- -------------
<S> <C> <C> <C> <C>
Clifford M. Gross, 1998 $12,000 -- $6,000
Chief Executive Officer 1997 -- -- --
</TABLE>
Employment Agreements
We have entered into five-year employment agreements, effective September
1, 1999, with Dr. Clifford M. Gross and Dr. Uwe Reischl. Drs. Gross and Reischl
have agreed to serve as our Chief Executive Officer and President,
respectively. Dr. Gross will receive an annual base salary of $150,000 and Dr.
Reischl will receive an annual base salary of $100,000. Upon completion of this
offering, we will grant to Drs. Gross and Reischl incentive stock options to
purchase up to 100,000 and 50,000 shares, of our common stock, respectively. In
addition, both Drs. Gross and Reischl will receive an automobile allowance.
Pursuant to their employment agreements with us, Dr. Gross and Dr. Reischl have
agreed to devote substantially all of their time and attention to the business
and affairs of our company. Each employment agreement contains a covenant not
to compete with us for a one-year period immediately following termination of
employment.
We have retained Carole Mason, CPA, to serve as our CFO. However, she will
not be employed full time, having other duties at Myers, Mason & Co., P.A.
Key Man Life Insurance
We have obtained "key man" life insurance policies in the amount of
$500,000 on the life of each of Clifford M. Gross, our Chief Executive Officer
and Uwe Reischl, our President.
Stock Option Plan
In September 1999, our stockholders adopted an employee stock option plan
(the "1999 Plan"). The purpose of the 1999 Plan is to enable us to compete
successfully in attracting, motivating and retaining employees with outstanding
abilities. The options are intended to be Incentive Stock Options within the
meaning of section 422 of the Internal Revenue Code of 1996, as amended, or the
corresponding provision of any subsequently enacted statute. Following the
consummation of this offering, the Compensation Committee will administer the
1999 Plan.
Under the 1999 Plan, we are authorized to issue options to purchase up to
500,000 shares of our common stock. All officers and other employees as well as
other persons who perform significant services for or on behalf of us are
eligible to participate in the 1999 Plan.
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<PAGE>
We may grant under the 1999 Plan both incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended, and
stock options that do not qualify for incentive treatment under the Code.
The exercise price of each incentive stock option under the plan will be
determined by the Compensation Committee, but will be not less than 100% of the
fair market value of the common stock on the date of grant (or 110% in the case
of an employee who at the time owns more than 10% of the total combined voting
power of all classes of capital stock). The non-qualified option exercise price
will be determined by the Compensation Committee, but will not be less than 85%
of the fair market value of the common stock on the date of grant.
In the discretion of the Compensation Committee and upon receipt of all
regulatory approvals, an option holder may be permitted to utilize a cashless
exercise as payment in whole or in part of the exercise price certificates for
shares of common stock (valued for this purpose at its fair market value on the
day of exercise) or other property.
An incentive stock option granted under the plan shall expire ten years
from the date it is granted. The Compensation Committee may provide in the
stock option agreement that the option subject thereto expires 30 days
following the termination of employment for any reason other than death or
disability or twelve months following a termination of employment for death or
disability; provided, however, that in no event shall any option granted under
the plan be exercised after the expiration date of such option set forth in the
applicable stock option agreement.
If the outstanding shares of common stock are changed into, or under the
plan exchanged for, cash or a different number or kind of our shares or
securities or another corporation through reorganization, merger,
recapitalization, stock split-up, reverse-stock split, stock dividend, stock
consolidation, stock combination, or similar transaction, an appropriate
adjustment will be made by the Compensation Committee in the number and kind of
shares as to which options may be granted. In the event of such change or
exchange, other than for shares or securities of another corporation or by
reason of reorganization, the Compensation Committee will also make a
corresponding adjustment in the number or kind of shares and the exercise price
per share allocated to unexercised options or portions thereof, of options
which have been granted prior to such change. Any such adjustment, however,
will be made without change in the total price applicable to the unexercised
portion of the option but with a corresponding adjustment in the price for each
share (except for any change in the aggregate price resulting from rounding off
of share quantities or prices).
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<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth certain information, as of the date hereof,
and as adjusted to give effect to the Offering and the transactions
contemplated thereby, with respect to the beneficial ownership of the Common
Stock by (i) each person known to the Company to beneficially own more than 5%
of the outstanding shares of Common Stock, (ii) each executive officer and
director of the Company and (iii) all executive officers and directors of the
Company as a group:
<TABLE>
<CAPTION>
Percentage
Number of Shares Beneficially Owned
of -------------------------
Name and Address of Common Stock Before After
Beneficial Owner(1) Beneficially Owned Offering Offering(4)
------------------- -------------------- ---------- ------------
<S> <C> <C> <C>
Clifford M. Gross .................. 1,937,254(2) 69.6 51.2
Carl Nisser ........................ 60,000 2.2 1.6
Uwe Reischl ........................ 43,000 1.6 1.1
Carole R. Mason .................... 22,000(3) 0.8 0.6
Stuart Brooks ...................... 12,500 0.4 0.3
Kwabena Gyimah-Brempong ............ 12,500 0.4 0.3
Arthur Chapnik ..................... 12,500 0.4 0.3
Sam Reiber ......................... 8,000 0.3 0.2
--------- ---- ----
All directors and executive officers
as a group consisting of (8)
persons ........................... 2,107,754 75.8 55.7
========= ==== ====
</TABLE>
- ------------
(1) Unless otherwise indicated, the address of each beneficial owner is c/o the
Company.
(2) The shares of common stock are held by Clifford M. Gross and his wife
jointly.
(3) The shares of common stock are held in the name of Myers, Mason & Co., P.A.
(4) The percentages of shares beneficially owned after the offering have been
calculated assuming that the underwriter has not exercised its
over-allotment option.
CONFLICTS OF INTEREST
Transactions with UTEK
Carl Nisser, one of our directors, is also associated with our counsel,
Gersten, Savage & Kaplowitz, LLP, with whom he serves in an of counsel
capacity. In addition, in connection with this offering, Mr. Nisser will
receive approximately 30% of the fees payable to Gersten, Savage & Kaplowitz,
LLP.
INVESTMENT ADVISORY SERVICES
We are internally managed by our officers under the supervision of our
board of directors. We therefore have no investment advisory, administrative or
similar agreements with any person or entity.
We serve as our own custodian in accordance with the provisions of the
Investment Company Act of 1940, as amended.
The transfer agent for our common stock is Continental Stock Transfer &
Trust Company, 2 Broadway, New York, New York 10004.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Since the Company generally acquires and disposes of its investments in
portfolio companies in privately negotiated transactions, it infrequently uses
brokers in the normal course of business.
When we sell the securities we receive in exchange for portfolio
companies, our management will arrange for the execution of such transactions
and the allocation of brokerage services and commissions. In
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<PAGE>
executing transactions in the securities we receive for portfolio companies,
our management will seek to obtain the most favorable execution, that is, the
best combination of net price and prompt reliable execution. In management's
opinion it is not possible to determine in advance that any particular broker
will actually be able to effect the most favorable execution because, in the
context of an often changing market, order execution involves judgments as to
the price, volume, trend and breadth of the market, possibility of a block
transaction, and the broker's activity in the security as well as its general
record for prompt, competent and reliable service in all aspects of order
processing, execution and settlement as well as anticipated commission rates.
A substantial portion of the securities which we receive in exchange for
our portfolio companies may be traded in the over-the-counter markets, and we
intend to deal directly with the dealers who make markets in the securities
involved, except in those circumstances where better prices and execution are
otherwise available. Under the 1940 Act, persons affiliated with our company
are prohibited from dealing with us as principal in the purchase and sale of
securities. Transactions in the over-the-counter markets usually involve
transactions with dealers acting as principal for their own account. We will
not deal with affiliated persons as principal; however, affiliated persons of
our company may serve as our broker in over-the-counter markets and other
transactions conducted on an agency basis in accordance with the 1940 Act,
except that if an affiliated person is a market maker in the securities of a
company then the affiliated person will not serve as our broker in the purchase
of such securities.
Our management has no obligation to deal with any broker or group of
brokers in the execution of transactions.
FEDERAL INCOME TAX MATTERS
For Federal and state income tax purposes, we are taxed at regular
corporate rates on ordinary income and recognized gains on distributions of
appreciated property. We are not entitled to the special tax treatment
available to most regulated investment companies because, among other reasons,
we do not distribute at least 90% of "investment company taxable income" as
required by the IRS Code for such treatment. Distributions of cash or property
by us to our stockholders, if any, will be taxable as dividends only to the
extent that we have current or accumulated earnings and profits. Distributions
in excess of current or accumulated earnings and profits will be treated first
as a return of capital to the extent of the holder's tax basis and then as gain
from the sale or exchange of property.
Each investor is urged to consult with his tax advisor concerning the
United States Federal, state and local, and foreign tax consequences of his
investment in our company.
DESCRIPTION OF SECURITIES
Our total authorized capital stock consists of 19,000,000 shares of common
stock, par value $0.01 per share, and 1,000,000 shares of preferred stock, par
value $0.01 per share. The following descriptions of capital stock are
qualified in all respects by reference to our Certificate of Incorporation and
by-laws, which were filed as exhibits to the Registration Statement of which
this prospectus is a part.
Common Stock
The holders of common stock elect all directors and are entitled to one
vote for each share held of record on all matters to be voted upon by
stockholders. As of the date of this prospectus, 2,782,226 shares of common
stock were issued and outstanding. Upon successful completion of this offering,
3,782,226 shares of common stock will be issued and outstanding. Subject to
preferences that may be applicable to any outstanding preferred stock, all
shares of common stock participate equally in dividends, when and as declared
by the Board of Directors and in net assets on liquidation. The shares of
common stock have no preference, conversion, exchange, preemptive or cumulative
voting rights.
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<PAGE>
Preferred Stock
Our Certificate of Incorporation authorizes the issuance of shares of
preferred stock in one or more series. Our Board of Directors has the
authority, without any vote or action by our stockholders, to create one or
more series of preferred stock up to the limit of our authorized but unissued
shares of preferred stock and to fix the number of shares constituting such
series and the designation of such series, the voting powers (if any) of the
shares of such series and the relative, participatory, option or other rights
(if any), and any qualifications, preferences, limitations or restrictions
thereof, including, without limitation, the dividend rate (and whether
dividends are cumulative), conversion rights, rights and terms of redemption
(including sinking fund provisions), and redemption price and liquidation
preferences, and any other rights, preferences and limitations pertaining to
such series which may be fixed by our Board of Directors pursuant to the
Delaware General Corporate Law. Upon completion of this offering, there will be
no shares of preferred stock outstanding.
Anti-Takeover Provisions Affecting Our Common Stock
Blank Check Preferred Stock
The existence of authorized but unissued preferred stock may enable our
Board of Directors to render more difficult or discourage an attempt to obtain
control of us by means of a merger, tender offer, proxy contest or otherwise.
For example, if in the due exercise of its fiduciary obligations, our Board of
Directors were to determine that a takeover proposal is not in our best
interests, our Board of Directors could cause us to issue shares of preferred
stock without stockholder approval in one or more private offerings or other
transactions that might dilute the voting or other rights of the proposed
acquirer or insurgent stockholder or stockholder group. In this regard, our
Certificate of Incorporation grants the Board of Directors broad power to
establish the rights and preferences of authorized and unissued preferred
stock. The issuance of shares of preferred stock pursuant to the Board of
Directors' authority described above could decrease the amount of earnings and
assets available for distribution to holders of our common stock and adversely
affect the rights of such holders, including voting rights in the event a
particular series of preferred stock is given a disproportionately large number
of votes per share, and may have the effect of delaying, deferring or
preventing a change in control of us that may be favored by certain
stockholders.
Outstanding Securities
The following table lists our authorized and outstanding securities as of
September 30, 1999:
<TABLE>
<CAPTION>
Amount held by UTEK
Title of class Amount authorized or for its own account Amount outstanding
- -------------- ------------------- ------------------------ -------------------
<S> <C> <C> <C>
common stock 19,000,000 shares -- 2,782,226
preferred stock 1,000,000 shares -- --
</TABLE>
The shares of our common stock outstanding as of September 30, 1999 were
issued in private transactions. On August 27, 1997, we issued a total of
1,950,000 shares, at a price of $.0146 per share, for net proceeds of $28,506.
On May 14, 1998, we completed a private placement transaction by issuing
207,068 shares at a price of $1.50 per share for aggregate net proceeds of
$310,602. On July 25, 1998, we completed another private placement transaction
and issued 96,400 shares at a price of $2.28 per share for aggregate net
proceeds of $219,831. On April 12, 1999, we completed a private placement
transaction whereby we issued 281,424 shares at a price of $4.64 per share for
aggregate net proceeds of $1,305,807. Stock issued for services includes:
Shares Value
--------- ----------
Year ended December 31, 1997 166,334 $ 8,317
Year ended December 31, 1998 34,600 86,550
Nine months ended September 30, 1999 46,400 204,219
Transfer Agent and Registrar
The transfer agent, registrar and warrant agent for our common stock is
Continental Stock Transfer & Trust Company, 2 Broadway, New York, New York
10004.
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<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, we have agreed to sell to the underwriters named
below, for whom May Davis Group, Inc. is acting as representative, the
following respective numbers of shares of common stock:
Number of Number of
Underwriters Shares Warrants
- ------------ ----------- ----------
May Davis Group .........
Total ................... 1,000,000 100,000
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriter a 45-day option to purchase up to
150,000 additional shares at the initial public offering price less the
underwriting discounts and commissions. The option may be exercised only to
cover any over-allotments of common stock.
The underwriter proposes to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The underwriter
and selling group members may allow a discount of $ per share on sales to
other broker/dealers. After the initial public offering, the public offering
price and concession and discount to broker/dealers may be changed by the
underwriter. Purchasers of our common stock pursuant to this offering must
provide payment for such securities by no later than .
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
Per Share Total
----------------------------------- ----------------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Underwriting Discounts and
Commissions paid by us ......... $ $ $ $
Expenses payable by us .......... $ $ $ $
</TABLE>
We will pay all of the total expenses of the offering, which we estimate
will be approximately $475,000. In addition we will pay to May Davis $180,000
for its expenses (excluding the sale of any over-allotment shares) of which we
have already paid $50,000.
We have agreed to indemnify the underwriter against certain liabilities,
including liabilities under the Securities Act.
We, our officers and directors and certain other stockholders have agreed
to a 24-month "lock up" with all the shares of common stock and certain other
securities beneficially owned, including securities that are convertible into
shares of common stock and securities that are exchangeable or exercisable for
shares of common stock.
We will grant to May Davis a three (3) year right of first refusal to have
May Davis sell securities under future public and private offerings of any
non-bank debt or equity securities of ours or our subsidiaries, by us and our
subsidiaries, except for issuances or sales to employees pursuant to our stock
option plan.
In addition, for a two year period we will not sell securities to raise
money below the then current market price without May Davis' consent.
We and May Davis will enter into a financial consulting agreement
providing for May Davis to act as management and financial consultant to us for
a three year period for a fee of $120,000 payable at the closing of this
offering.
We have granted May Davis for a period ending on , 2002 the right to
have May Davis' designee present at meetings of the Board of Directors and each
of its committees subject to our right to exclude such designee under certain
circumstances. The designee will be entitled to the same notices and
37
<PAGE>
communications sent by us as we give to our directors and will attend
directors' and committees' meetings, but will not be entitled to vote thereat.
Such designee will also be entitled to receive the same compensation payable to
directors as members of the Board of Directors and its committees and all
reasonable expenses in attending such meetings. As of the date of this
prospectus no designee has been selected.
In connection with this offering, we have agreed to sell to May Davis, for
nominal consideration, warrants to purchase up to an aggregate of 100,000
shares of common stock exercisable initially at $ per share of common stock
for a period of four years beginning one year from the date hereof. These
warrants contain antidilution provisions providing for adjustment of the
exercise price upon the occurrence of certain events, including (i) the
issuance of common stock, or securities exercisable or convertible into common
stock, at a price less than the exercise price and (ii) any recapitalization,
reclassification, stock dividend, stock split, stock combination or similar
transaction. In addition, the warrants grant to the holders rights, commencing
one year from the date of this prospectus, to have common stock be issued upon
exercise of the warrants registered under the Securities Act. These rights
include the right to require us to register these shares for a four year period
and the right to include these shares for a five year period in any
registration statement filed by us.
The underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, penalty bids and "passive" market making in
accordance with Regulation M under the Exchange Act.
o Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
o Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
o Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
o Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the shares of common stock originally sold by
such syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions.
o In "passive" market making, market makers of the common stock who are
underwriters or prospective underwriters may, subject to certain
limitations, make bids for or purchases of the common stock until the
time, if any, at which a stabilizing bid is made.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq SmallCap Market or otherwise and, if commenced, may be
discontinued at any time.
LEGAL MATTERS
The validity of the shares offered will be passed upon for UTEK
Corporation by Gersten, Savage & Kaplowitz, LLP, 101 East 52nd Street, New
York, New York 10022. Certain legal matters in connection with the offering
will be passed upon for the underwriters by McLaughlin & Stern, LLP, 260
Madison Avenue, New York, New York 10016.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1998 and for each of the two years in the
period ended December 31, 1998, as set forth in their report. We've included
our financial statements in the prospectus and elsewhere in the registration
statement in reliance on Ernst & Young LLP's report, given on their authority
as experts in accounting and auditing.
CUSTODIAN
We will act as a self-custodian of our portfolio securities in compliance
with applicable regulations under the 1940 Act.
38
<PAGE>
UTEK, LLC
Index to Consolidated Financial Statements and Schedules
Contents
Report of Independent Auditors ........................... F-2
Consolidated Balance Sheets .............................. F-3
Consolidated Statements of Operations .................... F-4
Consolidated Statements of Cash Flows .................... F-5
Consolidated Statements of Changes in Net Assets ......... F-6
Financial Highlights ..................................... F-7
Schedule of Investments .................................. F-8
Notes to Financial Statements ............................ F-10
F-1
<PAGE>
Report of Independent Auditors
Board of Directors and Shareholders
UTEK, LLC
We have audited the accompanying consolidated balance sheet of UTEK, LLC,
including the schedule of investments, as of December 31, 1998 and the related
consolidated statements of operations, cash flows, and changes in net assets,
and financial highlights for each of the two years in the period then ended.
These consolidated financial statements and financial highlights are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and the
financial highlights. Our procedures included the physical inspection of
securities owned as of December 31, 1998. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of UTEK, LLC at December 31, 1998, and the results of its operations,
its cash flows and changes in its net assets and financial highlights for each
of the two years in the period then ended in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Tampa, Florida
July 30, 1999, except for Note 8, as to which
the date is October 18, 1999
F-2
<PAGE>
UTEK, LLC
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30
1999
December 31 September 30 PRO FORMA
1998 1999 (Note 4)
--------------- -------------- ------------------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Investments in non-controlled affiliates (cost
$320,000 and $1,418,212 at December 31, 1998
and September 30, 1999, respectively) .............. $ 1,300,000 $ 3,512,078 $ 3,512,078
Cash and cash equivalents ........................... 418,178 1,260,757 1,260,757
Consulting fees receivable .......................... -- 132,000 132,000
Prepaid expenses and other assets ................... 22,760 325,732 325,732
Fixed assets, net ................................... 64,857 78,400 78,400
----------- ----------- ------------
TOTAL ASSETS .................................... 1,805,795 5,308,967 5,308,967
----------- ----------- ------------
LIABILITIES
Accrued expenses .................................... 8,698 10,131 10,131
Deferred revenue .................................... -- 159,893 159,893
Deferred income taxes ............................... 431,450 506,513 691,244(a)
----------- ----------- ------------
TOTAL LIABILITIES ............................... 440,148 676,537 861,268
----------- ----------- ------------
NET ASSETS ...................................... $ 1,365,647 $ 4,632,430 $ 4,447,699
=========== =========== ============
Composition of net assets
Common stock, $.01 par value, 19,000,000 shares
authorized; 2,454,402 and 2,782,226 shares
issued and outstanding at December 31, 1998 and
September 30, 1999, respectively ................... $ 24,544 $ 27,822 $ 27,822
Preferred stock, $.01 par value, 1,000,000 shares
authorized and none issued and outstanding at
December 31, 1998 and September 30, 1999,
respectfully ....................................... -- -- --
Additional paid-in capital .......................... 629,262 2,136,010 2,136,010
Accumulated income:
Accumulated net operating income ................... 100,841 882,963 882,391(a)
Net unrealized appreciation of investments, net of
deferred income taxes (Note 4) ................... 611,000 1,585,635 1,401,476(a)
----------- ----------- ------------
Net assets .......................................... $ 1,365,647 $ 4,632,430 $ 4,447,699
=========== =========== ============
Net asset value per share ........................... $ 0.56 $ 1.67 $ 1.60
=========== =========== ============
</TABLE>
- ------------
(a) Reflects the unaudited pro forma impact on the Company's financial position
had it been taxable as a "C Corporation" (see Note 4).
See accompanying notes.
F-3
<PAGE>
UTEK, LLC
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31 September 30
1997 1998 1998 1999
----------- ----------- ------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Income from operations:
Sale of technology rights ............................ $ -- $ 320,000 $ 320,000 $1,098,213
Consulting fees ...................................... -- 55,000 55,000 137,107
Interest income, net ................................. -- 6,843 7,543 36,721
-------- --------- ---------- ----------
-- 381,843 382,543 1,272,041
-------- --------- ---------- ----------
Expenses:
Salaries and wages ................................... -- 29,854 12,087 120,265
Professional fees .................................... -- 73,037 29,571 197,601
Sales and marketing .................................. -- 76,549 20,808 103,128
General and administrative ........................... 5,115 33,997 23,951 133,092
-------- --------- ---------- ----------
5,115 213,437 86,417 554,086
-------- --------- ---------- ----------
Income (loss) before income taxes ..................... (5,115) 168,406 296,126 717,955
Benefit (provision) for income taxes (Note 4) ......... -- (62,450) (109,507) 64,167
-------- --------- ---------- ----------
Net income (loss) from operations .................. (5,115) 105,956 186,619 782,122
Net realized and unrealized gains:
Increase in unrealized appreciation of
investments, net of deferred income tax
expense of $369,000, $184,387 and $139,231,
respectively (Note 4) .............................. -- 611,000 305,613 974,635
-------- --------- ---------- ----------
Net increase (decrease) in net assets ................. $ (5,115) $ 716,956 $ 492,232 $1,756,757
======== ========= ========== ==========
Unaudited pro forma information:
Net increase (decrease) in net assets before pro
forma effect of change in Company's tax
structure ............................................ $ 716,956 $1,756,757
Pro forma effect of change in tax structure ........... -- (184,731)
--------- ----------
Pro forma increase in net assets ...................... $ 716,956 $1,572,026
========= ==========
</TABLE>
See accompanying notes.
F-4
<PAGE>
UTEK, LLC
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31 September 30
1997 1998 1998 1999
------------- ------------- ------------- ---------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Operating activities:
Net increase (decrease) in net assets from
operations ........................................ $ (5,115) $ 716,956 $ 492,232 $ 1,756,757
Adjustments to reconcile net (decrease)
increase in net assets to net cash (used in)
provided by operating activities:
(Increase) decrease in unrealized
appreciation of investments ..................... -- (980,000) (490,000) (1,113,866)
Deferred income taxes ............................. -- 431,450 293,894 75,064
Services received for common stock ................ 8,317 86,550 86,550 204,219
Depreciation and amortization ..................... 197 4,181 2,538 10,460
Changes in operating assets and liabilities:
Consulting fees receivable ...................... -- -- -- (132,000)
Prepaid expenses and other assets ............... (31,766) 8,809 (74,425) (302,972)
Accrued expenses ................................ -- 8,698 1,267 1,433
Deferred revenue ................................ -- -- -- 159,893
--------- ---------- ---------- ------------
Net cash (used in) provided by operating
activities ........................................ (28,367) 276,644 312,056 658,988
--------- ---------- ---------- ------------
Investing activities
Investment securities received for sale of
portfolio companies ............................... -- (320,000) (320,000) (1,098,213)
Purchases of fixed assets .......................... -- (69,038) (29,181) (24,003)
--------- ---------- ---------- ------------
Net cash used in investing activities .............. -- (389,038) (349,181) (1,122,216)
--------- ---------- ---------- ------------
Financing activities
Proceeds from issuances of common stock ............ 28,506 530,433 530,433 1,305,807
--------- ---------- ---------- ------------
Net cash provided by financing activities .......... 28,506 530,433 530,433 1,305,807
--------- ---------- ---------- ------------
Increase in cash and cash equivalents .............. 139 418,039 493,308 842,579
Cash and cash equivalents at beginning of
period ............................................ -- 139 139 418,178
--------- ---------- ---------- ------------
Cash and cash equivalents at end of period ......... $ 139 $ 418,178 $ 493,447 $ 1,260,757
========= ========== ========== ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
UTEK, LLC
Consolidated Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Nine Months Ended
September 30
Year Ended December 31 ----------------------------
1997 1998 1998 1999
------------- ------------ ------------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Changes in net assets from operations:
Net income (loss) from operations ......................... $ (5,115) $ 105,956 $ 186,619 $ 782,122
Change in net unrealized appreciation of
investments ............................................. -- 611,000 305,613 974,635
--------- ---------- ---------- ----------
Net increase (decrease) in net assets from
operations ................................................ (5,115) 716,956 492,232 1,756,757
Capital stock transactions:
Common stock issued for cash .............................. 28,506 530,433 530,433 1,305,807
Common stock issued for services .......................... 8,317 86,550 86,550 204,219
--------- ---------- ---------- ----------
Net increase in net assets from stock transactions ......... 36,823 616,983 616,983 1,510,026
--------- ---------- ---------- ----------
Net increase in net assets ................................. 31,708 1,333,939 1,109,215 3,266,783
Net assets at beginning of period .......................... -- 31,708 31,708 1,365,647
--------- ---------- ---------- ----------
Net assets at end of period ................................ $ 31,708 $1,365,647 $1,140,923 $4,632,430
========= ========== ========== ==========
</TABLE>
See accompanying notes.
F-6
<PAGE>
UTEK, LLC
Financial Highlights
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31 September 30
1997 1998 1998 1999
------------ -------------- -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
PER SHARE INFORMATION
Net asset value, beginning of period ..................... $ -- $ 0.02 $ 0.02 $ 0.56
Net increase from operations(1) ......................... -- 0.05 0.08 0.30
Net unrealized gain on investments (after taxes)(1) ..... -- 0.26 0.14 0.36
Net increase from stock transactions(1) ................. 0.02 0.23 0.23 0.45
---------- ---------- ---------- ----------
Net asset value, end of period ........................... $ 0.02 $ 0.56 $ 0.47 $ 1.67
========== ========== ========== =========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ................................ $ 31,708 $1,365,647 $1,140,923 $4,632,430
Ratio of expense to average net assets ................... 32% 31% 15% 18%
Weighted average number of shares outstanding during
the period .............................................. 2,070,494 2,304,691 2,258,347 2,652,175
</TABLE>
- ------------
1 Calculated based on weighted average number of shares outstanding during the
period.
See accompanying notes.
F-7
<PAGE>
UTEK, LLC
Schedule of Investments
December 31, 1998
<TABLE>
<CAPTION>
Date of Original
Shares Acquisition Cost Value
- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
1,000,000 5/98 Common Stock in non-controlled affiliate-95.2%
Lexon, Inc., publicly traded over the counter development
stage enterprise; developer of health care technology $ 320,000 $1,300,000
--------- ----------
TOTAL INVESTMENTS - 95.2% $ 320,000 1,300,000
=========
Cash and other assets, less liabilities - 4.8% 65,647
----------
Net Assets - 100% $1,365,647
==========
</TABLE>
Notes to Schedule of Investments:
o The above investment is non-income producing. Equity investments that have
not paid dividends within the last twelve months are considered non-income
producing.
o Original cost approximates tax basis of investment.
o Value of Lexon, Inc. is determined by appraisers (Notes 1 and 2).
o Lexon, Inc. shares are restricted as to disposition for a two year period
commencing on the date of acquisition.
o As a greater than 10% holder, the Company is considered to be an affiliate of
the above company and as a result, its ability to sell the securities will
be limited under the Securities Act.
See accompanying notes.
F-8
<PAGE>
UTEK, LLC
Schedule of Investments
September 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Date of Original
Shares Acquisition Cost Value
- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Common Stock in non-controlled affiliates 75.8%
1,000,000 5/98 Lexon, Inc., publicly traded over the counter development
stage enterprise - 36.1%, developer of health care
technology $ 320,000 $1,670,000
879,300 1/99 Image Analysis, Inc., privately held - 16.3%; medical and
hospital equipment developer 219,825 756,198
1,584,000 5/99 Centrex, Inc., privately held - 11.3%; developer of water
purification methodologies 522,720 522,720
900,000 5/99 Nucor Enterprises, Inc., privately held - 2.7%, developer of
construction materials 126,000 126,000
791,957 6/99 NuElectric, Inc., publicly traded over the counter - 9.4%
environmental services 229,667 437,160
---------- ----------
TOTAL INVESTMENTS - 75.8% $1,418,212 3,512,078
==========
Cash and other assets, less liabilities - 24.2% 1,120,352
----------
Net Assets at September 30, 1999 - 100% $4,632,430
==========
</TABLE>
Notes to Schedule of Investments:
o The above investments are non-income producing. Equity investments that have
not paid dividends within the last twelve months are considered non-income
producing.
o Original cost approximates tax basis of investments.
o Values of investments determined by appraisal (Notes 1 and 2).
o Lexon, Inc., Image Analysis, Inc., Centrex Inc., Nucor Enterprises, Inc. and
395,978 NuElectric, Inc. shares are restricted as to disposition for a two
year period commencing on the date of acquisition.
o The Company owns more than 10% of the outstanding common stock of each of the
above investments. As such, the Company is deemed to be an affiliate of the
above companies.
See accompanying notes.
F-9
<PAGE>
UTEK, LLC
Notes to Consolidated Financial Statements
(Information as of September 30, 1998 and 1999
and for the nine months then ended is unaudited)
1. Nature of Business and Significant Accounting Policies
The Company
We are a non-diversified, closed-end management investment company that
intends to elect to be treated as a Business Development Company ("BDC") under
the 1940 Act.
We commenced operations in 1997 as UTEK Corporation ("UTEK Florida"),
which was incorporated under the laws of the State of Florida in August 1996.
UTEK Florida was engaged in the business of technology transfer. On December
31, 1998, we formed UTEK, LLC, a limited liability company organized under the
laws of the State of Florida. Subsequent thereto, the shareholders of UTEK
Florida exchanged their shares of common stock for membership units in UTEK,
LLC. In July 1999, we formed UTEK Corporation under the laws of the State of
Delaware and in October 1999, UTEK LLC was merged into UTEK Corporation (see
Note 8).
The Company is a management investment company that intends to file a
notification of election to be treated as a "Business Development Company",
("BDC") under the Investment Company Act of 1940 (the Act). A BDC must be
primarily engaged in the business of furnishing capital and managerial
expertise to companies that do not have ready access to capital through
conventional financial channels. Such companies are termed "portfolio"
companies.
The Company invests in portfolio companies that management believes are
positioned to benefit from the acquisition of new technology. The Company's
investments in portfolio companies are used by the portfolio companies to
acquire the license rights to new technologies developed at universities and
/or government research facilities. The Company provides portfolio companies
with managerial assistance in technology transfer. Technology transfer is the
process by which technologies developed by universities or research
laboratories are licensed to companies for commercial use. The Company also may
make additional investments to fund continued research and development of the
acquired technologies.
The Company seeks "merger partners" for portfolio companies, whereby the
Company receives common stock in the merger partner in a non-taxable exchange
for shares of the portfolio company. The Company seeks merger partners that are
in the early stages of development. The merger partners normally have little or
no prior operating history.
Principles of Consolidation
The consolidated financial statements include the results of operations of
UTEK, LLC and its wholly owned subsidiary UTEK Holdings, Inc. All intercompany
transactions are eliminated in consolidation. Portfolio companies are
consolidated with the Company prior to the exchange of their shares with a
merger partner.
Interim Financial Information
The financial information as of September 30, 1998 and 1999 and for the
nine months then ended is unaudited, but includes all adjustments (consisting
only of normal recurring accruals) which, in the opinion of management are
necessary in order to make the financial statements not misleading at such
dates and for those periods. Operating results for the nine months ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the entire year.
F-10
<PAGE>
UTEK, LLC
Notes to Consolidated Financial Statements -- (Continued)
(Information as of September 30, 1998 and 1999
and for the nine months then ended is unaudited)
1. Nature of Business and Significant Accounting Policies -- (Continued)
Segment Disclosures
Management considers the Company as operating in only one segment,
transfer of new technologies through the sale of portfolio companies. The
Company has no assets or significant operations established outside the United
States.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Investments
Investments are stated at value. Securities traded on the over-the-counter
market are valued at the closing price on the valuation date. Illiquid
securities may be subject to a discount from the closing price. Restricted
securities and other securities for which prices are not readily available, or
for which market quotations are considered not to reflect fair value, are
valued by independent appraisers based on applicable quantitative and
qualitative factors. These factors may include, but are not limited to, type of
securities, nature of business, marketability, market price of unrestricted
securities of the same issue, (if any), comparative valuation of securities of
publicly-traded companies in the same or similar industries, current financial
conditions and operating results, sales and earnings growth, operating
revenues, competitive conditions and current and prospective conditions in the
overall stock market.
Cash and Cash Equivalents
The Company considers all highly liquid fixed income investments with
maturities of three months or less to be cash equivalents.
Income Taxes
The Company does not qualify as a Regulated Investment Company for income
tax purposes. Therefore, the Company is taxed as a regular corporation for
federal and state income tax purposes. The Company accounts for income taxes in
accordance with FASB Statement No. 109, "Accounting for Income Taxes". Deferred
tax liabilities are related principally to unrealized appreciation of
investments.
Revenue Recognition
The Company recognizes revenue from the sale of technology rights upon the
exchange of the shares of portfolio companies with unrelated merger partners.
The Company records revenue based on the value of the consideration received.
In most cases, the consideration received for the Rights is the common stock of
the purchaser. The common stock received is recorded as an investment at value.
Revenue derived from consulting services is recognized as earned, over the life
of the underlying consulting agreements. In some cases, the Company is paid a
fee for negotiating a successful technology transfer. In these instances,
revenue is recognized upon consummation of the transaction.
Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation.
Depreciation is recorded using the straight-line method over the estimated
useful lives of the respective assets (generally two to five years). Leasehold
improvements are amortized over the shorter of the estimated useful life of the
assets or lease term.
F-11
<PAGE>
UTEK, LLC
Notes to Consolidated Financial Statements -- (Continued)
(Information as of September 30, 1998 and 1999
and for the nine months then ended is unaudited)
1. Nature of Business and Significant Accounting Policies -- (Continued)
Deferred Revenue
Deferred revenue represents amounts received but not yet earned for
consulting services to be provided under contractual obligations.
Concentrations of Credit Risk
Cash and cash equivalents are financial instruments that potentially
subject the company to concentrations of credit risk. The estimated fair value
of financial instruments approximates the carrying value based on available
market information. The Company invests its excess available funds primarily in
U.S. Government backed securities. The Company's customers are typically
located in the United States.
Stock Split
All share and per share information presented herein, and in the Company's
consolidated financial statements, have been retroactively restated to reflect
a two-for-one stock split of the Company's Common Stock, par value $.01 per
share ("Common Stock"), which occurred on August 27, 1999. The stock split was
paid in the form of a stock dividend to holders of record on June 30, 1999.
Research and Development
Research and development costs consist of expenditures incurred during the
course of planned search and investigation aimed at discovery of new knowledge
that will be useful in developing new products or processes. The Company
expenses all research and development costs as they are incurred. As of
December 31, 1998 and September 30, 1999, the Company had incurred no such
costs.
2. Investments
Equity securities at December 31, 1998 and September 30, 1999 (95% and 76%
of net assets, respectively) were valued at fair value as estimated by
independent third party appraisers, hired by the Company, in the absence of
readily ascertainable fair values.
The values assigned to these securities are based upon available
information and do not reflect amounts that could be realized upon immediate
sale, nor amounts that ultimately may be realized. Accordingly, the fair values
included in the statement of investments may differ from the values that would
have been used had a ready market existed for these securities and such
differences could be significant.
3. Fixed Assets
Fixed assets consist of the following:
December 31 September 30
1998 1999
------------- -------------
(unaudited)
Computer Equipment .................... $ 37,084 $ 48,818
Furniture and Fixtures ................ 19,125 26,268
Leasehold improvements ................ 12,829 17,955
-------- ---------
69,038 93,041
Less accumulated depreciation ......... (4,181) (14,641)
-------- ---------
$ 64,857 $ 78,400
======== =========
F-12
<PAGE>
UTEK, LLC
Notes to Consolidated Financial Statements -- (Continued)
(Information as of September 30, 1998 and 1999
and for the nine months then ended is unaudited)
4. Income Taxes
The Company is taxable as a partnership under the provisions of Subchapter
K of the Internal Revenue Code. Under those provisions, the Company does not
pay corporate income taxes on its taxable income. Instead, the owners of the
Company are individually liable for income taxes on the Company's taxable
income. UTEK Holdings, as well as the Company's other subsidiaries (including
the portfolio companies prior to the exchange of their shares for the shares of
merger partners), are taxed as C corporations. The tax provisions for the years
ended December 31, 1997 and 1998 are determined based on the earnings of UTEK
Holdings.
The Company accounts for income taxes under Financial Accounting Standards
("FAS") No. 109, Accounting for Income Taxes. Deferred income tax assets and
liabilities are determined based upon differences between financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.
The components of the income tax provision (benefit) attributable to
continuing operations are as follows:
Year Ended Nine Months Ended
December 31 September 30
------------------ --------------------------
1997 1998 1998 1999
------ --------- ----------- ------------
(unaudited)
Current: $ -- $ -- $ -- $ --
Federal -- -- -- --
---- ------- -------- ---------
State -- -- -- --
Deferred: -- 53,322 98,943 (54,788)
Federal -- 9,128 10,564 (9,379)
---- ------- -------- ---------
State -- 62,450 109,507 (64,167)
---- ------- -------- ---------
$ -- $62,450 $109,507 $ (64,167)
==== ======= ======== =========
<PAGE>
A reconciliation of the differences between the effective income tax rate
and the statutory federal tax rate follows:
<TABLE>
<CAPTION>
December 31 September 30
1997 1998 1999
------------ ---------- -------------
(unaudited)
<S> <C> <C> <C>
Tax at U.S. statutory rate $ (1,739) $ 57,258 $ 244,105
State taxes, net of federal benefit (186) 6,210 (6,191)
Valuation allowance 1,925 (1,925) 0
LLC earnings taxable to members -- 0 (303,825)
Other -- 907 1,744
-------- -------- ----------
$ -- $ 62,450 $ (64,167)
======== ======== ==========
</TABLE>
Significant components of the Company's deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
December 31 September 30
1997 1998 1999
----------- ------------- -------------
(unaudited)
<S> <C> <C> <C>
Net operating loss carryforward $ 1,925 $ 57,740 $ 121,908
Less: Valuation Allowance (1,925)
Portfolio securities in non-controlled affiliates -- (489,190) (628,421)
-------- ---------- ----------
Net deferred tax asset (liability) $ -- $ (431,450) $ (506,513)
======== ========== ==========
</TABLE>
F-13
<PAGE>
UTEK, LLC
Notes to Consolidated Financial Statements -- (Continued)
(Information as of September 30, 1998 and 1999
and for the nine months then ended is unaudited)
4. Income Taxes -- (Continued)
SFAS No. 109 requires a valuation allowance to reduce the deferred tax
assets reported if, based on the weight of the evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
At December 31, 1997, the Company recorded a valuation allowance against net
deferred tax assets.
The unaudited pro forma tax provisions, presented as if the Company was
taxable as a corporate entity for all periods presented and calculated in
accordance with SFAS No. 109, are as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31 September 30
------------------- -----------------------
1997 1998 1998 1999
------ ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C>
Current income tax provision $ -- $ -- $ -- $ --
Deferred income tax provision -- 431,450 293,894 691,244
---- -------- -------- --------
$ -- $431,450 $293,894 $691,244
==== ======== ======== ========
</TABLE>
A pro forma reconciliation of the differences between the pro-forma
effective income tax rate and the pro-forma statutory federal tax rate follows:
<TABLE>
<CAPTION>
December 31 September 30
1997 1998 1999
------------ ----------- -------------
(unaudited)
<S> <C> <C> <C>
Tax at U.S. statutory rate $ (1,739) $390,458 $622,819
State taxes, net of federal benefit (186) 41,785 66,681
Valuation allowance 1,925 (1,925) --
Other -- 1,132 1,744
-------- -------- --------
$ -- $431,450 $691,244
======== ======== ========
</TABLE>
The aggregate cost of securities at December 31, 1998 and September 30,
1999 for federal income tax purposes was $320,000 and $1,418,212, respectively.
The aggregate gross and net unrealized appreciation for the year ended December
31, 1998 and the nine months ended September 30, 1999 is $980,000 and
$2,093,866, respectively.
<PAGE>
5. Stockholders' Equity
Transactions in common stock for the year ended December 31,1998 and for
the nine months ended September 30, 1999 (unaudited) were as follows:
<TABLE>
<CAPTION>
Additional
Common Stock Shares Par value paid-in capital
------------ ------------ ----------- ----------------
<S> <C> <C> <C>
Balance at January 1, 1997 -- $ -- $ --
Initial funding-August 27, 1997 1,950,000 19,500 9,006
Issued for services 166,334 1,664 6,653
--------- ------- ----------
Balance at December 31, 1997 2,116,334 21,164 15,659
Private placement -- May 14, 1998 207,068 2,070 308,532
Private placement -- July 25, 1998 96,400 964 218,867
--------- ------- ----------
303,468 3,034 527,399
Issued for services 34,600 346 86,204
--------- ------- ----------
Balance at December 31, 1998 2,454,402 24,544 629,262
Private placement--April 12, 1999 281,424 2,814 1,302,993
Issued for services 46,400 464 203,755
--------- ------- ----------
Balance at Sept. 30, 1999 (unaudited) 2,782,226 $27,822 $2,136,010
========= ======= ==========
</TABLE>
F-14
<PAGE>
UTEK, LLC
Notes to Consolidated Financial Statements -- (Continued)
(Information as of September 30, 1998 and 1999
and for the nine months then ended is unaudited)
6. Stock Compensation
Stock grants to employees and non-employees in exchange for services have
a vesting period of two years. The Company accounts for stock grants to
employees in exchange for services in accordance with APB
No 25, Accounting for Stock Issued to Employees. Stock grants to non-employees
in exchange for services are accounted for in accordance with FAS 123,
Accounting for Stock-Based Compensation. Expenses related to stock grants to
employees and non-employees during fiscal 1997 and 1998, and the nine months
ended September 30, 1998 and 1999, amounted to $4,900, $78,700, $17,338, and
$210,000, respectively.
7. Commitments and Contingencies
The Company's commitments are limited to an operating lease for the
corporate office. During fiscal 1997 and 1998, and the nine months ended
September 30, 1998 and 1999, rental expense related to this lease was $-0-,
$6,932, $3,656 and $11,869, respectively.
At December 31, 1998, future minimum payments under operating leases are
as follows:
1999 $18,993
2000 18,993
2001 18,993
2002 4,748
-------
Total $61,727
=======
8. Subsequent Events (Unaudited)
Proposed Public Offering of Common Stock
The Board of Directors of UTEK, LLC has authorized management of the
Company to file a registration statement with the Securities and Exchange
Commission for the initial public offering of the Company's Common Stock. The
Company contemplates using the proceeds from the proposed public offering to
finance its growth plans.
On October 18, 1999, in conjunction with the proposed public offering
discussed above, the Company modified its tax status to be taxed as a C
corporation. The Company intends to issue approximately 1,150,000 shares,
including the underwriter's over-allotment option. This amount excludes 100,000
shares reserved for issuance upon exercise of underwriter's warrants
exercisable over a period of four years, and also excludes 90,000 shares
reserved for issuance upon exercise of warrants issued to Gersten, Savage and
Kaplowitz, LLP.
Employment Agreements
Effective September 1, 1999, the Company entered into five-year employment
agreements with its CEO and President to provide annual base salary of $150,000
and $100,000, respectively for their services.
Additionally, upon completion of the above mentioned offering, the Company
will grant to its CEO and President incentive stock options to purchase up to
100,000 and 50,000 shares of its common stock, respectively.
Other
In September 1999, the Company's stockholders approved the establishment
of an employee stock option plan. Under the Plan, the Company is authorized to
grant options to purchase up to 500,000 shares of Common Stock.
As of October 18, 1999, the Company had established seven portfolio
companies with net assets of $133,000.
F-15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No underwriter, dealer, salesman or other person has been authorized to
give any information or to make any representations other than those contained
in this prospectus, and, if given or made, such information or representation
must not be relied upon as having been authorized by us. This prospectus does
not constitute an offer or solicitation to any person in any jurisdiction where
such offer or solicitation would be unlawful. Neither delivery of this
prospectus nor any common stock sale hereunder shall, under any circumstances,
create any implication that there has been no change in our affairs since the
date hereof.
-----------------------------------
TABLE OF CONTENTS
Page
-----
Prospectus Summary .....................................
The Offering ...........................................
Summary Combined Financial Information .................
Risk Factors ...........................................
Dilution ...............................................
Capitalization .........................................
Use of Proceeds ........................................
Dividend Policy ........................................
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ..........................................
Business ...............................................
Management .............................................
Principal Stockholders .................................
Certain Transactions ...................................
Description of Securities ..............................
Shares Eligible for Future Sale ........................
Underwriting ...........................................
Legal Opinions .........................................
Experts ................................................
Additional Information .................................
Indemnification of Securities Act Liabilities ..........
Financial Statements ................................... F-1
-----------------------------------
Until , 1999 (25 days after the date of this Prospectus), all dealers
effecting transactions in the Company's securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus with
respect to their unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,000,000
Shares
of Common Stock
UTEK CORPORATION
---------------------
PROSPECTUS
---------------------
MAY DAVIS GROUP
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) Financial Statements
See "Index to Financial Statements" on page F-1 of the prospectus
(2) Exhibits
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement*
3.1 Certificate of Incorporation, dated July 6, 1999, as filed and recorded with the Secretary of State
of the State of Delaware on July 13, 1999
3.2 Certificate of Amendment to Certificate of Incorporation, dated October 14, 1999, as filed and
recorded with the Secretary of State of the State of Delaware on October 15, 1999.
3.3 By-Laws of UTEK Corporation
4.1 Form of Underwriters' Warrant*
4.2 Certificate of Merger of UTEK Corporation and UTEK LLC, dated October 18, 1999,
as filed and recorded with the Secretary of State of the State of Delaware on October 25, 1999.
4.3 Specimen Common Stock Certificate*
5.1 Opinion of Gersten, Savage & Kaplowitz, LLP*
10.1 Form of Financial Consulting Agreement between UTEK Corporation and May Davis Group*
10.2 UTEK Corporation's 1999 Stock Option Plan
10.3 Employment Agreement with Clifford M. Gross
10.4 Employment Agreement with Uwe Reischl
10.5 Agreement dated January 30, 1998 between UTEK Corporation and the University of South
Florida
10.6 Master Agreement dated June 18, 1999 between UTEK Corporation and Johns Hopkins
University
10.7 Strategic Alliance dated November 3, 1999 between UTEK Corporation and Fraunhofer Institute
for Interfacial Engineering and Biotechnology IGB
10.8 Strategic Alliance dated October 18, 1999 between UTEK Corporation and University of Florida
10.9 Services Agreement dated May 18, 1998 between UTEK Corporation and the University of
Memphis.
10.10 Consulting Agreement between UTEK Corporation and NuElectric Corporation, dated
November 16, 1998.
10.11 Consulting Agreement between UTEK Corporation and Darby Group Companies, dated
May 3, 1999.
10.12 License Agreement dated July 13, 1999 between The Regents of the University of California
and E. Coli Measurement Systems, Inc.*
10.13 License Agreement dated January 1, 1999 between Clean Water Technologies, Inc. and the
University of South Florida Research Foundation, Inc.
10.14 Sponsored Research Agreement dated February 12, 1999 between Advanced Reinforcing
Technologies, Inc. and Cornell University*
10.15 License Agreement between Cornell Research Foundation, Inc. and Advanced Reinforcing
Technologies, Inc. dated March 1, 1999.*
10.16 License Agreement dated December 15, 1999 between the California Institute of Technology
and Digital Personnel, Inc.*
10.17 License Agreement dated September 1999 between Safe Water Technologies, Inc. and University
of South Florida Research Foundation, Inc.
10.18 Strategic Alliance dated December 13, 1999 between UTEK Corporation and Virginia Tech
Intellectual Properties, Inc.
23.1 Consent of Ernst & Young, independent auditors
23.2 Consent of Gersten, Savage & Kaplowitz, LLP (incorporated into Exhibit 5.1)*
24.1 Powers of Attorney (included on signature page)
</TABLE>
- ------------
* To be filed by amendment
ITEM 25. MARKETING ARRANGEMENTS
See the form of Underwriting Agreement filed as exhibit 1.1 hereto.
II-1
<PAGE>
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a statement of the estimated expenses to be paid by the
Company in connection with the issuance and distribution of the securities
being registered:
SEC Registration Fee .................................... $ 2,012
NASD Filing Fee ......................................... 1,262
Nasdaq Listing Fees* .................................... 6,250
Printing Engraving Expenses* ............................ 90,000
Legal Fees and Expenses* ................................ 175,000
Accounting Fees and Expenses* ........................... 150,000
Blue Sky Fees and Expenses* ............................. 35,000
Transfer Agent and Registrar Fees and Expenses* ......... 10,000
Miscellaneous* .......................................... 5,476
--------
Total ................................................ $475,000
- ------------
* estimate
ITEM 29. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
provides for the indemnification of officers and directors under certain
circumstances against expenses incurred in successfully defending against a
claim and authorizes Delaware corporations to indemnify their officers and
directors under certain circumstances against expenses and liabilities incurred
in legal proceedings involving such persons because of their being or having
been an officer or director.
Section 102(b) of the Delaware General Corporation Law permits a
corporation, by so providing in its Certificate of Incorporation, to eliminate
or limit a director's liability to the corporation and its stockholders for
monetary damages arising out of certain alleged breaches of their fiduciary
duty. Section 102(b)(7) provides that no such limitation of liability may
affect a director's liability with respect to any of the following: (i)
breaches of the director's duty of loyalty to the corporation or its
stockholders; (ii) acts or omissions not made in good faith or which involve
intentional misconduct of knowing violations of law; (iii) liability for
dividends paid or stock repurchased or redeemed in violation of the Delaware
General Corporation law; or (iv) any transaction from which the director
derived an improper personal benefit. Section 102(b)(7) does not authorize any
limitation on the ability of the company or its stockholders to obtain
injunctive relief, specific performance or other equitable relief against
directors.
Article Ten of the Registrant's Certificate of Incorporation provides that
the personal liability of the directors of the Registrant be eliminated to the
fullest extent permitted under Section 102(b) of the Delaware General
Corporation law.
Insofar as indemnification for liabilities under the Securities Act of
1933, as amended (the "Securities Act") may be permitted to directors, officers
or persons controlling the Registrant pursuant to the foregoing provisions, the
Registrant has been informed that in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Reference is made to the Underwriting Agreement, the proposed form of
which is filed as Exhibit 1.1, pursuant to which the underwriter agrees to
indemnify the directors and certain officers of the Registrant and certain
other persons against certain civil liabilities.
II-2
<PAGE>
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
Our accounts and records are and will be maintained at the address set
forth below:
UTEK Corporation
202 South Wheeler Street
Plant City, Florida 33566
ITEM 32. MANAGEMENT SERVICES
Except as described in the prospectus under "Management", we are not a
party to any management services transaction.
ITEM 33. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Act may be
available to directors, officers and controlling persons of the small business
issuer pursuant to any charter provision, By-law, contract arrangements,
statute, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the small business issuer in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the small business issuer
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned small business issuer hereby undertakes
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement: (i)To include
any Prospectus required by section 10(a)(3) of the Act; (ii)to reflect in
the Prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration statement; (iii)to
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the Offering of
such securities at that time shall be deemed to be the initial bona fide
Offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.
(4) For determining any liability under the Act, treat the information
omitted from the form of Prospectus filed as part of this registration
Statement in reliance upon Rule 430A and contained in a form of Prospectus
filed by the small business issuer under Rule 424(b)(1), or (4) or 497(h),
under the Act as part of this registration statement as of the time the
Commission declared it effective.
(5) For determining any liability under the Act, treat each
post-effective amendment that contains a form of Prospectus as a new
registration statement at that time as the initial bona fide Offering of
those securities.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Act, the Registrant certifies that it
has reasonable grounds to believe that it meets all of the requirement for
filing on Form N-2 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the State of
Florida on December 27, 1999.
UTEK Corporation
By: /s/ Clifford M. Gross
------------------------------------------
Clifford M. Gross
Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Act, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
We, the undersigned officers and directors of UTEK Corporation, hereby
severally constitute and appoint Clifford M. Gross, our true and lawful
attorney-in-fact and agent with full power of substitution for us and in our
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and all documents
relating thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do
and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Clifford M. Gross
----------------------- Chief Executive Officer and Chairman December 27, 1999
Clifford M. Gross
/s/ Uwe Reischl President December 27, 1999
-----------------------
Uwe Reischl
/s/ Carole R.Mason
----------------------- Chief Financial Officer December 29, 1999
Carole R. Mason
/s/ Sam Reiber
----------------------- General Counsel and Director December 28, 1999
Sam Reiber
/s/ Stuart M. Brooks
----------------------- Director of Scientific Advisory Board December 27, 1999
Stuart M. Brooks and Director
/s/ Kwabena Gyimah-Brempong Director December 29, 1999
---------------------------
Kwabena Gyimah-Brempong
/s/ Arthur Chapnik
----------------------- Director December 28, 1999
Arthur Chapnik
/s/ Carl Nisser
----------------------- Director December 27, 1999
Carl Nisser
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement*
3.1 Certificate of Incorporation, dated July 6, 1999, as filed and recorded with the Secretary of State of
the State of Delaware on July 13, 1999
3.2 Certificate of Amendment to Certificate of Incorporation, dated October 14, 1999, as filed and
recorded with the Secretary of State of the State of Delaware on October 15, 1999.
3.3 By-Laws of UTEK Corporation
4.1 Form of Underwriters' Warrant*
4.2 Certificate of Merger of UTEK Corporation and UTEK LLC, dated October 18, 1999, as filed and
recorded with the Secretary of State of the State of Delaware on October 25, 1999.
4.3 Specimen Common Stock Certificate*
5.1 Opinion of Gersten, Savage & Kaplowitz, LLP*
10.1 Form of Financial Consulting Agreement between UTEK Corporation and May Davis Group*
10.2 UTEK Corporation's 1999 Stock Option Plan
10.3 Employment Agreement with Clifford M. Gross
10.4 Employment Agreement with Uwe Reischl
10.5 Agreement dated January 30, 1998 between UTEK Corporation and the University of South Florida
10.6 Master Agreement dated June 18, 1999 between UTEK Corporation and Johns Hopkins University
10.7 Strategic Alliance dated November 3, 1999 between UTEK Corporation and Fraunhofer Institute for
Interfacial Engineering and Biotechnology IGB
10.8 Strategic Alliance dated October 18, 1999 between UTEK Corporation and University of Florida
10.9 Services Agreement dated May 18, 1998 between UTEK Corporation and the University of Memphis.
10.10 Consulting Agreement between UTEK Corporation and NuElectric Corporation, dated November 16,
1998.
10.11 Consulting Agreement between UTEK Corporation and Darby Group Companies, dated May 3, 1999.
10.12 License Agreement dated July 13, 1999 between The Regents of the University of California and E.
Coli Measurement Systems, Inc.*
10.13 License Agreement dated January 1, 1999 between Clean Water Technologies, Inc. and the University
of South Florida Research Foundation, Inc.
10.14 Sponsored Research Agreement dated February 12, 1999 between Advanced Reinforcing
Technologies, Inc. and Cornell University*
10.15 License Agreement between Cornell Research Foundation, Inc. and Advanced Reinforcing
Technologies, Inc. dated March 1, 1999.*
10.16 License Agreement dated December 5, 1999 between the California Institute of Technology and
Digital Personnel, Inc.*
10.17 License Agreement dated September , 1999 between Safe Water Technologies, Inc. and the
University of South Florida Research Foundations, Inc.
10.18 Strategic Alliance dated December 13, 1999 between UTEK Corporation and Virginia Tech
Intellectual Properties, Inc.
23.1 Consent of Ernst & Young, independent auditors
23.2 Consent of Gersten, Savage & Kaplowitz, LLP (incorporated into Exhibit 5.1)*
24.1 Powers of Attorney (included on signature page)
</TABLE>
- ------------
* To be filed by amendment
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
UTEK CORPORATION
ARTICLE 1. NAME
The name of this corporation is UTEK Corporation.
ARTICLE 2. REGISTERED OFFICE AND AGENT
The address of the registered office of the corporation is Corporation
Trust Center, 1209 Orange Street, City of Wilmington County of New Castle, in
the State of Delaware and the name of its initial registered agent at such
address is The Corporation Trust Company.
ARTICLE 3. PURPOSES
The purpose of this corporation (the "Corporation") is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE 4. SHARES
The total authorized stock of this corporation shall consist of
19,000,000 shares of common stock having a par value of 0.01 per share (the
"Common Stock') and 1,000,000 shares of preferred stock having a par value 0f
$.01 per share the (the "Preferred Stock"). Each share of Common Stock shall
entitle the holder to (1) one vote on all matters submitted to a vote of the
shareholders, (ii) to receive dividends when and if declared by the Board of
Directors from funds legally available therefore according to the number of
shares held, and (iii) upon liquidation, dissolution or winding up of the
Corporation, to share ratably in any assets available for distribution to
shareholders and payment of all obligations of the Corporation and after
provision has been made with respect to each class of stock, if any, having
preference over the Common Stock. The, shares of Preferred Stock may be issued
in one or more series, and each series shall be so designated to distinguish the
shares thereof from the shares of all other series. Authority is hereby
expressly granted to the Board of Directors to fix by resolution or resolution,
before the issuance of any shares of a particular series, the number and any of
the designations and the powers, preferences and rights, and the qualifications,
limitations or restrictions which are permitted by Delaware General Corporation
Law in respect of any series of Preferred Stock of the corporation.
ARTICLE 5. DIRECTORS
The number of Directors of this corporation shall be determined in the
manner provided by bylaws and may be increased or decreased. From time to time
in the manner provided therein. Written ballots are not required in the election
of Directors.
<PAGE>
ARTICLE 6. BYLAWS
The Board of Directors shall have the power to adopt, amend or repeal
the Bylaws of this corporation; provided however, the Board of Directors may not
repeal or amend any bylaw that the stockholders have expressly provided may not
be amended or repealed by the Board of Directors. The stockholders shall also
have the power to adopt, amend or repeal the Bylaws of this corporation.
ARTICLE 7. PREEMPTIVE RIGHTS
Preemptive rights shall not exist with respect to shares of stock or
securities convertible into shares of stock of this corporation.
ARTICLE 8. CUMULATIVE VOTING
The right to cumulate votes in the election of Directors shall not
exist with respect to the shares of stock of this corporation.
ARTICLE 9. AMENDMENTS TO CERTIFICATE OF INCORPORATION
This corporation reserves the right to amend or repeal by the
affirmative vote of the holders of a majority of the outstanding shares entitled
to vote, any of the provisions contained in this Certificate of incorporation.
The rights of the stockholders of this corporation are granted subject to this
reservations.
ARTICLE 10. LIMITATION OF DIRECTOR LIABILITY
To full extent that the Delaware General Corporation Law, as it exists
on the date hereof or may hereafter be amended permits the limitation or
elimination of the liability of directors, a director of the corporation shall
not be liable to corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, Any amendment to or repeal or this Article 10
shall not adversely affect any right or protection of a Director of the
corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
ARTICLE 11. ACTION BY STOCKHOLDERS WITHOUT MEETING
Only action properly brought before the stockholders by or at the
direction of the Board or Directors may be taken without meeting, without prior
notice and without a vote, if a written consent setting forth the action so
taken is stood by the holders of outstanding shares of capital stock entitled to
be voted with respect to the subject matter thereof 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 share entitled to vote thereon were present and voted.
<PAGE>
ARTICLE 12. SPECIAL MEETINGS OF STOCKHOLDERS
The Chairman of the Board of Directors, the Chief Execute Officer, &
President) or the Board of Directors may call special meetings of the
stockholders for any purpose. A special meeting of the stockholders shall be
held if the holders of not less than thirty percent (30%) of all the votes
entitled to be case on any issue proposed to be considered at such special
meeting have dated, signed and deliver to the Secretary one or more written
demands for such meetings, describing the purpose or purposes for which it is to
be held.
ARTICLE 13. BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
This corporation expressly elects not to be governed by section 203(a)
of Title 8 of the Delaware General Corporation Law.
I, THE UNDERSIGNED, being the sole incorporator herein named for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State 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 hereunder set my hand this ____day of _________, 1999.
- ------------------------------
SAM I. REIBER, INCORPORATOR
Linsky & Reiber
601 E. Twiggs Street, Suite 200
Tampa, Florida 33602
<PAGE>
Exhibit 3.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
UTEK CORPORATION
* * * * *
UTEK Corporation, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
FIRST: That by unanimous written consent of the Board of Directors of
UTEK Corporation, and written consent of its Shareholders, a resolution was duly
adopted amending the Certificate of Incorporation of said corporation, as
follows:
RESOLVED, that the Corporation's Certificate of Incorporation be
amended by deleting Article 3 of the certificate of incorporation in its
entirety and substituting in lieu thereof the following:
"ARTICLE 3. PURPOSES
The purpose of the Corporation is to (i) advise, counsel,
consult with, and otherwise to render significant managerial assistance
to, all types of business and corporate entities in their formation,
growth, development, financial planning, marketing, management,
practices, general operation, and related activities, and to supply all
manner of goods and services and to take all other action necessary to
the foregoing, and (ii) engage in any lawful act or activity for which
a corporation may be organized under the General Corporation Law of
Delaware."
SECOND: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
THIRD: That the capital of said corporation shall not be reduced under
or by reason of said amendment.
IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed by Clifford M. Gross, its Chief Executive Officer and attested to by Sam
I. Reiber, its Assistant Secretary, this 14th day of October, 1999.
By:__________________________________________
Clifford M. Gross, Chief Executive Officer
ATTEST:
By:__________________________________
Sam I. Reiber, Assistant Secretary
<PAGE>
Exhibit 3.3
BY-LAWS
OF
UTEK CORPORATION
ARTICLE I
OFFICES
1. The location of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle, and the name of its registered agent at
such address is Corporation Trust Company.
2. The Corporation shall in addition to its registered office in the
State of Delaware establish and maintain an office or offices at such place or
places as the Board of Directors may from time to time find necessary or
desirable.
ARTICLE II
CORPORATE SEAL
The corporate seal of the Corporation shall have inscribed thereon the
name of the Corporation and may be in such form as the Board of Directors may
determine. Such seal may be used by causing it or a facsimile thereof to be
impressed, affixed or otherwise reproduced.
ARTICLE III
MEETINGS OF STOCKHOLDERS
1. All meetings of the stockholders shall be held at the registered
office of the Corporation in the State of Delaware or at such other place as
shall be determined from time to time by the Board of Directors.
2. The annual meeting of stockholders shall be held on such day and at
such time as may be determined from time to time by resolution of the Board of
Directors, when they shall elect by plurality vote, a Board of Directors to hold
office until the annual meeting of stockholders held next after their election
and their
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<PAGE>
successors are respectively elected and qualified or until their earlier
resignation or removal. Any other proper business may be transacted at the
annual meeting.
3. The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business, except as otherwise expressly provided by statute, by the Certificate
of Incorporation or by these By-laws. If, however, such majority shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting (except as otherwise provided by statute). At such adjourned meeting
at which the requisite amount of voting stock shall be represented any business
may be transacted which might have been transacted at the meeting as originally
notified.
4. At all meetings of the stockholders each stockholder having the
right to vote shall be entitled to vote in person, or by proxy appointed by an
instrument in writing subscribed by such stockholder and bearing a date not more
than three years prior to said meeting, unless such instrument pro vides for a
longer period.
5. At each meeting of the stockholders each stockholder shall have one
vote for each share of capital stock having voting power, registered in his name
on the books of the Corporation at the record date fixed in accordance with
these By-law, or otherwise determined, with respect to such meeting. Except as
otherwise expressly provided by statute, by the Certificate of Incorporation or
by these By-laws, all matters coming before any meeting of the stockholders
shall be decided by the vote of a majority of the number of shares of stock
present in person or represented by proxy at such meeting and entitled to vote
thereat, a quorum being present.
6. Notice of each meeting of the stockholders shall be mailed to each
stockholder entitled to vote thereat not less than 10 nor more than 60 days
before the date of the meeting. Such notice shall state the place, date and hour
of the meeting and, in the case of a special meeting, the purposes for which the
meeting is called.
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<PAGE>
7. Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute, may be called by the President or by the
Board of Directors, and shall be called by the Secretary at the request in
writing of stockholders owning a majority of the amount of the entire capital
stock of the Corporation issued and outstanding and entitled to vote. Such
request by stockholders shall state the purpose or purposes of the proposed
meeting.
8. Business transacted at each special meeting shall be confined to the
purpose or purposes stated in the notice of such meeting.
9. The order of business at each meeting of stockholders shall be
determined by the presiding officer.
ARTICLE IV
DIRECTORS
1. The business and affairs of the Corporation shall be managed under
the direction of a Board of Directors, which may exercise all such powers and
authority for and on behalf of the Corporation as shall be permitted by law, the
Certificate of Incorporation or these By-laws. Each of the directors shall hold
office until the next annual meeting of stockholders and until his successor has
been elected and qualified or until his earlier resignation or removal.
2. The Board of Directors may hold their meetings within or outside of
the State of Delaware, at such place or places as it may from time to time
determine.
3. The number of directors comprising the Board of Directors shall be
such number as may be from time to time fixed by resolution of the Board of
Directors. In case of any increase, the Board shall have power to elect each
additional director to hold office until the next annual meeting of stockholders
and until his successor is elected and qualified or his earlier resignation or
removal. Any decrease in the number of directors shall take effect at the time
of such action by the Board only to the extent that vacancies then exist; to the
extent that such decrease exceeds the number of such vacancies, the decrease
shall not become effective, except as further vacancies may thereafter occur,
until the time of and in connection with the election of directors at the next
succeeding annual meeting of the stockholders.
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<PAGE>
4. If the office of any director becomes vacant, by reason of death,
resignation, disqualification or otherwise, a majority of the directors then in
office, although less than a quorum, may fill the vacancy by electing a
successor who shall hold office until the next annual meeting of stockholders
and until his successor is elected and qualified or his earlier resignation or
removal.
5. Any director may resign at any time by giving written notice of his
resignation to the Board of Directors. Any such resignation shall take effect
upon receipt thereof by the Board, or at such later date as may be specified
therein. Any such notice to the Board shall be addressed to it in care of the
Secretary.
ARTICLE V
COMMITTEES OF DIRECTORS
1. The Board may designate an Executive Committee and one or more other
committees, each such committee to consist of one or more directors of the
Corporation. The Executive Committee shall have and may exercise all the powers
and authority of the Board in the management of the business and affairs of the
Corporation (except as otherwise expressly limited by statute), including the
power and authority to declare dividends and to authorize the issuance of stock,
and may authorize the seal of the corporation to be affixed to all papers which
may require it. Each such committee shall have such of the powers and authority
of the Board as may be provided from time to time in resolutions adopted by a
majority of the whole Board.
2. The requirements with respect to the manner in which the Executive
Committee and each such other committee shall hold meetings and take actions
shall be set forth in the resolutions of the Board of Directors designating the
Executive Committee or such other committee.
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<PAGE>
ARTICLE VI
COMPENSATION OF DIRECTORS
The directors shall receive such compensation for their services as may
be authorized by resolution of the Board of Directors, which compensation may
include an annual fee and a fixed sum for expense of attendance at regular or
special meetings of the Board or any committee thereof. Nothing herein contained
shall be construed to preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
ARTICLE VII
MEETINGS OF DIRECTORS; ACTION WITHOUT A MEETING
1. Regular meetings of the Board of Directors may be held without
notice at such time and place, either within or without the State of Delaware,
as may be determined from time to time by resolution of the Board.
2. Special meetings of the Board of Directors shall be held whenever
called by the President of the Corporation or the Board of Directors on at least
24 hours' notice to each director. Except as may be otherwise specifically
provided by statute, by the Certificate of Incorporation or by these By-laws,
the purpose or purposes of any such special meeting need not be stated in such
notice, although the time and place of the meeting shall be stated.
3. At all meetings of the Board of Directors, the presence in person of
a majority of the total number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and, except as otherwise
provided by statute, by the Certificate of Incorporation or by these Bylaws, if
a quorum shall be present the act of a majority of the directors present shall
be the act of the Board.
4. Any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a meeting if
all the members of the Board or such committee, as the case may be, consent
thereto in writing and the writing or writings are filed with the minutes of
proceedings of the Board of committee. Any director may participate in a meeting
of the Board, or any committee designated by the Board, by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this sentence shall constitute presence in person at such meeting.
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<PAGE>
ARTICLE VIII
OFFICERS
1. The officers of the Corporation shall be chosen by the Board of
Directors and shall be a President, one or more Vice Presidents, a Secretary and
a Treasurer. The Board may also choose one or more Assistant Secretaries and
Assistant Treasurers, and such other officers as it shall deem necessary. Any
number of offices may be held by the same person.
2. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors, or in such manner as the Board may prescribe.
3. The officers of the Corporation shall hold office until their
successors are elected and qualified, or until their earlier resignation or
removal. Any officer may be at any time removed from office by the Board of
Directors, with or without cause. If the office of any officer becomes vacant
for any reason, the vacancy may be filled by the Board of Directors.
4. Any officer may resign at any time by giving written notice of his
resignation to the Board of Directors. Any such resignation shall take effect
upon receipt thereof by the Board or at such later date as may be specified
therein. Any such notice to the Board shall be addressed to it in care of the
Secretary.
ARTICLE IX
CHIEF EXECUTIVE OFFICER
Subject to the supervision and direction of the Board of Directors, the
Chief Executive Officer shall be responsible for managing the affairs of the
Corporation. He shall have supervision and direction of all of the other
officers of the Corporation and shall have the powers and duties usually and
customarily associated with the office of the President. He shall preside at
meetings of the stockholders and of the Board of Directors.
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<PAGE>
ARTICLE X
PRESIDENT
The President shall have such powers and duties as may be delegated to
them by the Chief Executive Officer.
ARTICLE XI
SECRETARY AND ASSISTANT SECRETARY
1. The Secretary shall attend all meetings of the Board of Directors
and of the stockholders, and shall record the minutes of all proceedings in a
book to be kept for that purpose. He shall perform like duties for the
committees of the Board when required.
2. The Secretary shall give, or cause to be given, notice of meetings
of the stockholders, of the Board of Directors and of the committees of the
Board. He shall keep in safe custody the seal of the Corporation, and when
authorized by the Chief Executive Officer, President, an Executive Vice
President or a Vice President, shall affix the same to any instrument requiring
it, and when so affixed it shall be attested by his signature or by the
signature of an Assistant Secretary. He shall have such other powers and duties
as may be delegated to him by the Chief Executive Officer or by the President.
3. The Assistant Secretary shall, in case of the absence of the
Secretary, perform the duties and exercise the powers of the Secretary, and
shall have such other powers and duties as may be delegated to them by the Chief
Executive Officer or by the President.
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<PAGE>
ARTICLE XII
TREASURER AND ASSISTANT TREASURER
1. The Treasurer shall have the custody of the corporate funds and
securities, and shall deposit or cause to be deposited under his direction all
moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors
or pursuant to authority granted by it. He shall render to the Chief Executive
Officer and to the President and the Board whenever they may require it an
account of all his transactions as Treasurer and of the financial condition of
the Corporation. He shall have such other powers and duties as may be delegated
to him by the Chief Executive Officer or by the President.
2. The Assistant Treasurer shall, in case of the absence of the
Treasurer, perform the duties and exercise the powers of the Treasurer, and
shall have such other powers and duties as may be delegated to them by the Chief
Executive Officer or by the President.
ARTICLE XIII
CERTIFICATES OF STOCK
The certificates of stock of the Corporation shall be numbered and
shall be entered in the books of the Corporation as they are issued. They shall
exhibit the holder's name and number of shares and shall be signed by the Chief
Executive Officer, President or an Executive Vice President or Vice President,
and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary.
ARTICLE XIV
CHECKS
All checks, drafts and other orders for the payment of money and all
promissory notes and other evidences of indebtedness of the Corporation shall be
signed by such officer or officers or such other person as may be designated by
the Board of Directors or pursuant to authority granted by it.
ARTICLE XV
FISCAL YEAR
The fiscal year of the Corporation shall be as determined from time to
time by resolution duly adopted by the Board of Directors.
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<PAGE>
ARTICLE XVI
NOTICES AND WAIVERS
1. Whenever by statute, by the Certificate of Incorporation or by these
By-laws it is provided that notice shall be given to any director or
stockholder, such provision shall not be construed to require personal notice,
but such notice may be given in writing, by mail, by depositing the same in the
United States mail, postage prepaid, directed to such stockholder or director at
his address as it appears on the records of the Corporation, and such notice
shall be deemed to be given at the time when the same shall be thus deposited.
Notice of regular or special meetings of the Board of Directors may also be
given to any director by telephone or by telex, telegraph or cable, and in the
latter event the notice shall be deemed to be given at the time such notice,
addressed to such director at the address hereinabove provided, is transmitted
by telex (with confirmed answerback), or delivered to and accepted by an
authorized telegraph or cable office.
2. Whenever by statute, by the Certificate of Incorporation or by these
By-laws a notice is required to be given, a written waiver thereof, signed by
the person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of any stockholder or director
at any meeting thereof shall constitute a waiver of notice of such meeting by
such stockholder or director, as the case may be, except as otherwise provided
by statute.
ARTICLE XVII
INDEMNIFICATION
All persons who the Corporation is empowered to indemnify pursuant to
the provisions of Section 145 of the General Corporation Law of the State of
Delaware (or any similar provision or provisions of applicable law at the time
in effect) shall be indemnified by the Corporation to the full extent permitted
thereby. The foregoing right of indemnification shall not be deemed to be
exclusive of any other such rights to which those seeking indemnification from
the Corporation may be entitled, including, but not limited to, any rights of
indemnification to which they may be entitled pursuant to any agreement,
insurance policy, other by-law or charter provision, vote of stockholders or
directors, or otherwise. No repeal or amendment of this Article XVIII shall
adversely affect any rights of any person pursuant to this Article XVIII which
existed at the time of such repeal or amendment with respect to acts or
omissions occurring prior to such repeal or amendment.
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<PAGE>
ARTICLE XVIII
ALTERATION OF BY-LAWS
The By-laws of the Corporation may be altered, amended or repealed, and
new By-laws may be adopted, by the stockholders or by the Board of Directors.
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<PAGE>
Exhibit 4.2
CERTIFICATE OF MERGER
OF
UTEK CORPORATION
AND
UTEK, LLC
It is hereby certified that:
1. The constituent business corporations participating in the
merger herein certified are:
(a) UTEK, LLC, which is incorporated under the laws of the
State of Florida ("UTEK Florida"); and
(b) UTEK Corporation, which is incorporated under the laws
of the State of Delaware ("UTEK Delaware").
2. An Agreement and Plan of Merger has been approved, adopted,
certified, executed and acknowledged by each of the aforesaid constituent
corporations in accordance with the provisions of subsection (c) of Section 264
of the Delaware General Corporation Law, to wit, by UTEK Florida in accordance
with the laws of the State of its incorporation and by UTEK Delaware in the same
manner as is provided in Section 251 of the General Corporation Law of the State
of Delaware.
3. The surviving corporation in the merger herein certified is
UTEK Delaware, which will continue its existence as said surviving corporation
under its present name upon the effective date of said merger pursuant to the
provisions of the laws of the State of Delaware.
4. The Certificate of Incorporation of UTEK Delaware, as now
in force and effect, shall continue to be the Certificate of Incorporation of
said surviving corporation until amended and changed pursuant to the provisions
of the General Corporation Law of the State of Delaware.
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<PAGE>
5. An executed copy of the Agreement and Plan of Merger
between the aforesaid constituent companies is on file at the principal place of
business of the aforesaid surviving corporation, the address of which is as
follows: UTEK Corporation, 202 South Wheeler Street, Plant City, Florida 33566.
6. A copy of the aforesaid Agreement and Plan of Merger will
be furnished by the aforesaid surviving corporation, on request, and without
cost, to any shareholder or member of each of the aforesaid constituent
companies.
7. The Agreement and Plan of Merger between the aforesaid
constituent companies provides that the merger herein certified shall be
effective on October 14, 1999.
Executed this 18th day of October, 1999.
UTEK CORPORATION, a Delaware corporation
By: _________________________
Clifford M. Gross
Chief Executive Officer
UTEK, LLC, a Florida limited liability corporation
By: _________________________
Clifford M. Gross
Managing Member
A-1
<PAGE>
Exhibit 10.2
UTEK CORPORATION
STOCK OPTION PLAN
July 12, 1999
<PAGE>
UTEK CORPORATION
EMPLOYEE STOCK OPTION PLAN
TABLE OF CONTENTS
PAGE
1. PURPOSE OF PLAN........................................ ............2
2. DEFINITIONS.........................................................2
3. LIMITS ON OPTIONS...................................................3
4. GRANTING OF OPTIONS.................................................4
5. TERMS OF STOCK OPTIONS..............................................4
6. EFFECT OF CHANGES IN CAPITALIZATION.................................6
7. DELIVERY AND PAYMENT FOR SHARES; REPLACEMENT OPTIONS................7
8. NO CONTINUATION OF EMPLOYMENT AND DISCLAIMER OF RIGHTS..............8
9. ADMINISTRATION......................................................9
10. NO OBLIGATION TO RESERVE OR RETAIN SHARES...........................9
11. AMENDMENT OF PLAN..................................................10
12. TERMINATION OF PLAN................................................10
13. EFFECTIVE DATE.....................................................10
<PAGE>
UTEK CORPORATION
EMPLOYEE STOCK OPTION PLAN
1. PURPOSE OF PLAN
The purpose of this Plan is to enable UTEK CORPORATION (the "Company")
and its Subsidiaries to compete successfully in attracting, motivating and
retaining Employees with outstanding abilities by making it possible for them to
purchase Shares on terms that will give them a direct and continuing interest in
the future success of the businesses of the Company and its Subsidiaries and
encourage them to remain in the employ of the Company or one or more of its
Subsidiaries. Each Option is intended to be an Incentive Stock Option, except to
the extent that (a) any such Option would exceed the limitations set forth in
Section 3.(c) hereof and (b) for Options specifically designated at the time of
grant as not being Incentive Stock Options.
2. DEFINITIONS
For purposes of the Plan, except where the context clearly indicates
otherwise, the following terms shall have the meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the United States Internal Revenue Code of
1986, as amended.
(c) "Committee" means the Committee described in Section 9
hereof.
(d) "Effective Date" means the later of (i) the effective date
of any registration statement with respect to the Shares under the Securities
Exchange Act of 1934, as amended, and (ii) the time the underwriting agreement
has been executed and delivered by all parties thereto, where the
"underwriting agreement" is that underwriting agreement referred to in the
prospectus included in such registration statement when it first became
effective. Such execution and delivery shall be definitively evidenced by any
certificate to such effect by any officer of the Company.
(e) "Employee" means a person who is regularly employed on a
salary basis by the Company or any Subsidiary, including an officer or
director of the Company or any Subsidiary who is also an employee of
the Company or a Subsidiary.
(f) "Fair Market Value" means, with respect to a Share, if the
Shares are then listed and traded on a registered national or regional
securities exchange, or quoted on The National Association of Securities
Dealers' Automated Quotation System (including The Nasdaq Small cap Market),
the average closing price of a Share on such exchange or quotation system for
the five trading days immediately preceding the date of grant of an Option,
or, if Fair Market Value is used herein in connection with any event other
than the grant of an Option, then such average closing price for the five
trading days immediately preceding the date of such event. If the Shares are
not traded on a registered securities exchange or quoted in such a quotation
system, the Committee shall determine the Fair Market Value of a Share.
<PAGE>
(g) "Incentive Stock Option" means an option granted under
this Plan and which is an incentive stock option within the meaning of section
422 of the Code, or the corresponding provision of any subsequently enacted
tax statute.
(h) "Option" means an option granted under this Plan, whether
or not such option is an Incentive Stock Option.
(i) "Optionee" means any person who has been granted an Option
which Option has not expired or been fully exercised or surrendered.
(j) "Plan" means the Company's Employee Stock Option Plan.
(k) "Rule 16b-3" means Rule 16b-3 promulgated pursuant to
Section 16(b) of the Securities Exchange Act of 1934, as amended, or any
successor rule.
(l) "Share" means one share of voting common stock, par value
$.01 per share, of the Company, and such other stock or securities that may be
substituted therefore pursuant to Section 6 hereof.
(m) "Subsidiary" means any corporation, limited liability
company, partnership or other entity of which a majority of the outstanding
voting stock or voting power is beneficially owned directly or indirectly by
the Corporation. For Incentive Stock Options, the term shall have the meaning
set forth in Section 424(f) of the Code.
3. LIMITS ON OPTIONS
(a) The total number of Shares with respect to which Options
may be granted under the Plan shall not exceed in the aggregate 500,000
Shares, subject to adjustment as provided in Section 6 hereof. If any Option
expires, terminates or is terminated for any reason prior to its exercise in
full, the Shares that were subject to the unexercised portion of such Option
shall be available for future grants under the Plan.
(b) No Incentive Stock Option shall be granted to any Employee
who at the time such option is granted, owns capital stock of the Company
possessing more than 10% of the total combined voting power or value of all
classes of capital stock of the Company or any Subsidiary, determined in
accordance with the provisions of Section 422(b)(6) and 424(d) of the Code,
unless the option price at the time such Incentive Stock Option is granted is
at least 110 percent (110%) of the Fair Market Value of the Shares subject to
the Incentive Stock Option and such Incentive Stock Option is not exercisable
by its terms after the expiration of five (5) years from the date of grant.
(c) An Incentive Stock Option shall be granted hereunder only
to the extent that the aggregate Fair Market Value (determined at the time the
Incentive Stock Option is granted) of the Shares with respect to which such
Incentive Stock Option and any other "incentive stock option" (within the
meaning of Section 422 of the Code) are exercisable for the first time by any
Optionee during any calendar year (under the Plan and all other plans of the
Optionee's employer corporation and its parent and subsidiary corporations
within the meaning of Section 422(d) of the Code) does not exceed $100,000.
This limitation shall be applied by taking Incentive Stock Options and any
such other "incentive stock options" into account in the order in which such
Incentive Stock Options and any such other "incentive stock options" were
granted.
<PAGE>
(d) No Optionee shall, in any calendar year, be granted
Options to purchase more than 100,000 Shares. Options granted to the Optionee
and cancelled during the same calendar year shall be counted against such
maximum number of Shares. In the event that the number of Options which may be
granted is adjusted as provided in the Plan, the above limit shall
automatically be adjusted in the same ratio.
4. GRANTING OF OPTIONS
The Committee is authorized to grant Options to selected Employees pursuant to
the Plan beginning on the Effective Date. Subject to the provisions of the
Plan, the Committee shall have exclusive authority to select the Employees to
whom Options will be awarded under the Plan, to determine the number of Shares
to be included in such Options, and to determine such other terms and
conditions of Options, including terms and conditions which may be necessary
to qualify Incentive Stock Options as "incentive stock options" under Section
422 of the Code. The date on which the Committee approves the grant of an
Option shall be considered the date on which such Option is granted, unless
the Committee provides for a specific date of grant which is subsequent to the
date of such approval.
5. TERMS OF STOCK OPTIONS
Subject to Section 3 hereof, the terms of Options granted under this Plan
shall be as follows:
(a) The exercise price of each Share subject to an Option
shall be fixed by the Committee. Notwithstanding the prior sentence,
the option exercise price of an Incentive Stock Option shall be fixed
by the Committee but shall in no event be less than 100% of the Fair
Market Value of the Shares subject to such Option.
(b) Options shall not be assignable or transferable by the
Optionee other than by will or by the laws of descent and distribution
except that the Optionee may, with the consent of the Committee,
transfer without consideration Options that do not constitute Incentive
Stock Options to the Optionee's spouse, children or grandchildren (or
to one or more trusts for the benefit of any such family members or to
one or more partnerships in which any such family members are the only
partners).
(c) Each Option shall expire and all rights thereunder shall
end at the expiration of such period (which shall not be more than ten
(10) years) after the date on which it was granted as shall be fixed by
the Committee, subject in all cases to earlier expiration as provided
in subsections (d) and (e) of this Section 5.
(d) During the life of an Optionee, an Option shall be
exercisable only by such Optionee (or Optionee's permitted assignee in
the case of Options that do not constitute Incentive Stock Options) and
only prior to the end of one (1) month after the termination of the
Optionee's employment with the Company or a Subsidiary, other than by
reason of the Optionee's death, permanent disability or retirement with
the consent of the Company or a Subsidiary as provided in subsection
(e) of this Section 5, but only if and to the extent the Option was
exercisable immediately prior to such termination, and subject to the
provisions of subsection (c) of this Section 5. If the Optionee's
employment is terminated for cause, or the Optionee terminates his
employment with the Company, all Options granted to date by the Company
to the Optionee (including any Options that have become exercisable)
<PAGE>
shall terminate immediately on the date of termination of employment.
Cause shall have the meaning set forth in any employment agreement then
in effect between the Optionee and the Company or any of its
Subsidiaries, or if the Optionee does not have any employment
agreement, cause shall mean (i) if the Optionee engages in conduct
which has caused, or is reasonably likely to cause, demonstrable and
serious injury to the Company, or (ii) if the Optionee is convicted of
a felony, as evidenced by a binding and final judgment, order or decree
of a court of competent jurisdiction, which, in the opinion of the
Board, substantially impairs the Optionee's ability to perform his or
her duties to the Company.
(e) If an Optionee: (i) dies while employed by the Company or
a Subsidiary or within the period when an Option could have otherwise
been exercised by the Optionee; (ii) terminates employment with, or has
his employment terminated by, the Company or a Subsidiary by reason of
the "permanent and total disability" (within the meaning of Section
22(e)(3) of the Code) of such Optionee; or (iii) terminates employment
with the Company or a Subsidiary as a result of such Optionee's
retirement, provided that the Company or such Subsidiary has consented
in writing to such Optionee's retirement, then, in each such case, such
Optionee, or the duly authorized representatives of such Optionee (or
Optionee's permitted assignee in the case of Options that do not
constitute Incentive Stock Options), shall have the right, at any time
within three (3) months after the death, disability or retirement of
the Optionee, as the case may be, and prior to the termination of the
Option pursuant to subsection (c) of this Section 5, to exercise any
Option to the extent such Option was exercisable by the Optionee
immediately prior to such Optionee's death, disability or retirement.
In the discretion of the Committee, the three-month period referenced
in the immediately preceding sentence may be extended for a period of
up to one year.
(f) Subject to the foregoing terms and to such additional
terms regarding the exercise of an Option as the Committee may fix at
the time of grant, an Option may be exercised in whole at one time or
in part from time to time.
(g) Options granted pursuant to the Plan shall be evidenced by
an agreement in writing setting forth the material terms and conditions
of the grant, including, but not limited to, the number of Shares
subject to options. Option agreements covering Options need not contain
similar provisions; provided, however, that all such option agreements
shall comply with the terms of the Plan.
(h) The Committee is authorized to modify, amend or waive any
conditions or other restrictions with respect to Options, including
conditions regarding the exercise of Options.
6. EFFECT OF CHANGES IN CAPITALIZATION
(a) If the number of outstanding Shares is increased or
decreased or changed into or exchanged for a different number or kind
of shares or other securities of the Company by reason of any
recapitalization, reclassification, stock split, combination of shares,
exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares effected,
in each case without receipt of consideration by the Company, a
proportionate and appropriate adjustment shall be made by the Committee
<PAGE>
in (i) the aggregate number of Shares subject to the Plan, (ii) the
maximum number of Shares for which Options may be granted to any
Employee during any calendar year, and (iii) the number and kind of
shares for which Options are outstanding, so that the proportionate
interest of the Optionee immediately following such event shall, to the
extent practicable, be the same as immediately prior to such event. Any
such adjustment in outstanding Options shall not change the aggregate
option price payable with respect to Shares subject to the unexercised
portion of the Options outstanding but shall include a corresponding
proportionate adjustment in the option price per Share.
(b) Subject to Section 6.(c) hereof, if the Company shall be
the surviving corporation in any reorganization, merger, share exchange
or consolidation of the Company with one or more other corporations or
other entities, any Option theretofore granted shall pertain to and
apply to the securities to which a holder of the number of Shares
subject to such Option would have been entitled immediately following
such reorganization, merger, share exchange or consolidation, with a
corresponding proportionate adjustment of the option price per Share so
that the aggregate option price thereafter shall be the same as the
aggregate option price of the Shares remaining subject to the Option
immediately prior to such reorganization, merger, share exchange or
consolidation.
(c) In the event of: (i) the adoption of a plan of
reorganization, merger, share exchange or consolidation of the Company
with one or more other corporations or other entities as a result of
which the holders of the Shares as a group would receive less than
fifty percent (50%) of the voting power of the capital stock or other
interests of the surviving or resulting corporation or entity; (ii) the
adoption of a plan of liquidation or the approval of the dissolution of
the Company; (iii) the approval by the Board of an agreement providing
for the sale or transfer (other than as a security for obligations of
the Company or any Subsidiary) of substantially all of the assets of
the Company; or (iv) the acquisition of more than twenty percent (20%)
of the outstanding Shares by any person within the meaning of Rule
13(d)(3) under the Securities Exchange Act of 1934, as amended, if such
acquisition is not preceded by a prior expression of approval by the
Board, then, in each such case any Option granted hereunder shall
become immediately exercisable in full, subject to any appropriate
adjustments in the number of Shares subject to such Option and the
option price, regardless of any provision contained in the Plan or any
stock option agreement with respect thereto limiting the exercisability
of the Option for any length of time. Notwithstanding the foregoing, if
a successor corporation or other entity as contemplated in clause (i)
or (iii) of the preceding sentence agrees to assume the outstanding
Options or to substitute substantially equivalent options, then the
outstanding Options issued hereunder shall not be immediately
exercisable, but shall remain exercisable in accordance with the terms
of the Plan and the applicable stock option agreements.
(d) Adjustments under this Section 6 relating to Shares or
securities of the Company shall be made by the Committee, whose
determination in that respect shall be final and conclusive. Options
subject to grant or previously granted under the Plan at the time of
any event described in this Section 6 shall be subject to only such
<PAGE>
adjustments as shall be necessary to maintain the proportionate
interest of the options and preserve, without exceeding, the value of
such options. No fractional Shares or units of other securities shall
be issued pursuant to any such adjustment, and any fractions resulting
from any such adjustment shall be eliminated in each case by rounding
upward to the nearest whole Share or unit.
(e) The grant of an Option pursuant to the Plan shall not
affect or limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge, consolidate, dissolve or
liquidate, or to sell or transfer all or any part of its business or
assets.
7. DELIVERY AND PAYMENT FOR SHARES; REPLACEMENT OPTIONS
(a) No Shares shall be delivered upon the exercise of an
Option until the option price for the Shares acquired has been paid in
full. No Shares shall be issued or transferred under the Plan unless
and until all legal requirements applicable to the issuance or transfer
of such Shares have been complied with to the satisfaction of the
Committee and adequate provision has been made by the Optionee for
satisfying any applicable federal, state or local income or other taxes
incurred by reason of the exercise of the Option. Any Shares issued by
the Company to an Optionee upon exercise of an Option may be made only
in strict compliance with and in accordance with applicable state and
federal securities laws.
(b) Payment of the option price for the Shares purchased
pursuant to the exercise of an Option and of any applicable withholding
taxes shall be made, as determined by the Committee and set forth in
the option agreement pertaining to such Option: (i) in cash or by check
payable to the order of the Company; (ii) through the tender to the
Company of Shares, which Shares shall be valued, for purposes of
determining the extent to which the option price has been paid thereby,
at their Fair Market Value on the date of exercise; or (iii) by a
combination of the methods described in (a) and (b) hereof; provided,
however, that the Committee may in its discretion impose and set forth
in the option agreement pertaining to an Option such limitations or
prohibitions on the use of Shares to exercise Options as it deems
appropriate. The Committee also may authorize payment in accordance
with a cashless exercise program under which, if so instructed by the
Optionee, Shares may be issued directly to the Optionee's broker upon
receipt of the option price in cash from the broker.
(c) To the extent that the payment of the exercise price for
the Shares purchased pursuant to the exercise of an Option is made with
Shares as provided in Section 7.(b) hereof, then, at the discretion of
the Committee, the Optionee may be granted a replacement Option under
the Plan to purchase a number of Shares equal to the number of Shares
tendered as permitted in Section 7.(b) hereof, with an exercise price
per Share equal to the Fair Market Value on the date of grant of such
replacement Option and with a term extending to the expiration date of
the original Option.
8. NO CONTINUATION OF EMPLOYMENT AND DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or option
agreement entered into pursuant to the Plan shall be construed to
<PAGE>
confer upon any individual the right to remain a director or in the
employ of either the Company or any Subsidiary, or to interfere in any
way with the right and authority of the Company or any Subsidiary
either to increase or decrease the compensation of any individual at
any time, or to terminate any employment or other relationship between
any individual and the Company or any Subsidiary. The Plan shall in no
way be interpreted to require the Company to transfer any amounts to a
third party trustee or otherwise hold any amounts in trust or escrow
for payment to any Optionee or beneficiary under the terms of the Plan.
An Optionee shall have none of the rights of a shareholder of the
Company until and to the extent all or some of the Shares covered by an
Option are fully paid and issued to such Optionee.
9. ADMINISTRATION
(a) Subject to the provisions of subsection (b) of this
Section 9, the Plan shall be administered by the Committee which shall
interpret the Plan and make all other determinations necessary or
advisable for its administration, including such rules and regulations
and procedures as it deems appropriate. The Committee shall consist of
not fewer than two members of the Board each of whom shall qualify (at
the time of appointment to the Committee and during all periods of
service on the Committee) in all respects as a "non-employee director"
as defined in Rule 16b-3 and as an "outside director" as defined in
Section 162(m) of the Code and regulations thereunder. The deduction
limits of Section 162(m) of the Code and the regulations thereunder do
not apply to the Company until such time, if any, as any class of the
Company's common equity securities is registered under Section 12 of
the Securities and Exchange Act of 1934, as amended, or the Company
otherwise meets the definition of a "publicly held corporation" under
Treasury Regulation 1.162-27(c) or any successor provision. Upon
becoming a publicly held corporation, the deduction limits of Section
162(m) of the Code and the regulations thereunder shall not apply to
compensation payable under this Plan until the expiration of the
reliance period described in Treasury Regulation 1.162-27(f) or any
successor regulation. Subject to the provisions of subsection (b) of
this Section 9, in the event of a disagreement as to the interpretation
of the Plan or any amendment hereto or any rule, regulation or
procedure hereunder or as to any right or obligation arising from or
related to the Plan, the decision of the Committee shall be final and
binding upon all persons in interest, including the Company, the
Optionee and the Company's shareholders.
(b) Notwithstanding any provision of the Plan to the contrary,
any determination or interpretation to be made by the Committee with
regard to any question arising under the Plan or any option agreement
entered into hereunder may be made by the Board (excluding any Optionee
whose Options or the grant to whom is at issue) and shall be final and
binding upon all persons in interest, including the Company, the
Optionee and the Company's shareholders.
(c) No member of the Committee or the Board shall be liable
for any action taken or decision made, or any failure to take any
action, in good faith with respect to the Plan or any Option granted or
option agreement entered into hereunder.
10. NO OBLIGATION TO RESERVE OR RETAIN SHARES
The Board adopted, as of the Effective Date, a resolution
initially reserving authorized but unissued Shares for the Plan. The
Company will be under no further obligation to reserve, or to retain in
its treasury, any particular number of Shares in connection with its
obligations hereunder.
<PAGE>
11. AMENDMENT OF PLAN
The Board, without further action by the shareholders, may amend this
Plan from time to time as it deems desirable and shall make any
amendments which may be required so that Options intended to be
Incentive Stock Options shall at all times continue to be Incentive
Stock Options for purpose of the Code; provided, however, that the
Board or Committee may condition any amendment or modification on the
approval of stockholders of the Company if such approval is necessary
or deemed advisable with respect to tax, securities or other applicable
laws, policies or regulations.
12. TERMINATION OF PLAN
This Plan shall terminate ten (10) years from the Effective Date. The
Board may, in its discretion, suspend or terminate the Plan at any time
prior to such date, but such termination or suspension shall not
adversely affect any right or obligation with respect to any
outstanding Option.
13. EFFECTIVE DATE
The Plan shall become effective on the Effective Date and Options
hereunder may be granted at any time on or after that date. If the
shareholders of the Company fail to approve the Plan prior to, or
within one year after, the Effective Date, any Incentive Stock Option
granted hereunder shall be automatically converted to non-qualified
stock options without any further act.
<PAGE>
Exhibit 10.3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made _________ 1999 by and between UTEK
Corporation, a Delaware corporation, having an office at 202 South Wheeler
Street, Plant City, Florida 33566 (hereinafter referred to as "Employer") and
Clifford M. Gross, Ph.D.,c/o Utek Corporation,(hereinafter referred an
individual "Employee"):
WHEREAS, Employer employs, and desires to continue to employ, Employee
as the Chief Executive Officer (CEO) of Employer, and
WHEREAS, Employee is willing to continue to be employed as the CEO in
the manner provided for herein, and to perform the duties of the Employer upon
the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein set forth it is agreed as follows;
1. Employment of Employee: Employer hereby employs Employee as
Chief Executive Officer.
2. Term.
a. Subject to Section 10 below and further subject to Section 2(b)
below, the term of this Agreement shall commence on the first day of September
1999 and expire five years from such date. Each 12 month period from the
commencement date forward during the term hereof shall be referred to as an
"Annual Period." During the term hereof, Employee shall devote substantially all
of his business time and efforts to Employer and its subsidiaries and
affiliates.
b. Subject to Section 10 below, unless the Board of Directors of this
Company (the "Board") of Employer shall determine to the contrary and shall so
notify Employee in writing on or before the end of any Annual Period or unless
the Employee notifies Employer in writing on or before the end of the final
Annual Period of his desire not to renew this Agreement, then at the end of each
Annual Period, the term of this Agreement shall be automatically extended for
one (1) additional Annual Period to be added at the end of the then current term
of this Agreement.
3. Duties The Employee shall perform those functions generally
performed by persons of such title and position, shall attend all meetings of
the stockholders and the Board, shall perform any and all related duties and
shall have any and all powers as may be prescribed by resolution of the Board,
and shall be available to confer
<PAGE>
and consult with and advise the officers and directors of Employer at such times
that may be required by Employer. Employee shall report directly and solely to
the Board.
4. Compensation
a. (i) Employee shall be paid a salary of $150,000. Employee
shall be paid periodically in accordance with the policies of the Employer
during the term of this Agreement, but not less than monthly. The basic
compensation provided in this Agreement shall be adjusted annually to reflect
the increase, if any, in the cost of living by adding to such basic salary an
amount obtained by multiplying the basic salary by the percentage by which the
level of the Consumer Price Index for al urban consumers for the United States,
as reported by the Bureau of Labor Statistics of the United States Department of
Labor has increased over its level as of the date of the commencement of this
Agreement. The adjustment shall take place on September 1, of each year and the
Employer shall begin paying the adjusted salary on September 15, of each year.
The Employee shall be paid such additional compensation from the Employer for
the services rendered under this Agreement as may be determined, from tim to
time, in the sole discretion of the Board of Directors.
b. (ii) Company shall grant to the employee 100,000 incentive
stock options (ISO's)to purchase UTEK shares at 110% of the IPO price. These
options will vest the sooner of either pro rata, quarterly, over 36 months or
upon the bid price of UTEK being > or = to $10 for 15 consecutive trading days.
c. (iii) A reasonable automobile allowance to cover the cost of
leasing, insuring and maintaining a vehicle for the duration of this employment
agreement.
d. (iv) In the event of a "Change of Control:
(A) A person (other than a person who is an officer or a
Director of Employer on the effective date hereof), including a "group" as
defined in Section 13(d)(3) of the securities Exchange Act of 1934, becomes, or
obtains the right to become, the beneficial owner of Employer securities having
30% or more of the combined voting power of then outstanding securities of the
Employer that may be cast for the election of directors of the Employer;
(B) At any time, the Board-nominated slate of candidates
for the Board is not elected;
(C) Employer consummates a merger in which it is not the
surviving entity;
(D) Substantially all of Employer's assets are sold; or
Employer's stockholders approve the dissolution or liquidation of Employer; then
(v) (A) Employee shall be eligible to receive a one-time
bonus, equal on an after-tax basis to two times his then current annual base
salary. To effectuate this provision, the bonus shall be "grossed-up"
<PAGE>
to include the amount necessary to reimburse Employee for his federal, state and
local income tax liability on the bonus and on the "gross-up" at the respective
effective marginal tax rates. In no event shall this bonus exceed three times
Employee's then current base salary. Said bonus shall be paid within thirty (30)
days of the Change of Control.
(B) All stock options, warrants and stock appreciation
rights ("Rights") granted by Employer to Employee under any plan or otherwise
prior to the effective date of the Change of Control, shall become vested,
accelerate and become immediately exercisable. In the event Employee owns or is
entitled to receive any unregistered securities of Employer, then Employer shall
use its best efforts to affect the registration of all such securities as soon
as practicable, but no later than 120 days after the effective date of the
registration statement; provided, however, that such period may be extended or
delayed by Employer for one period of up to 60 days if, upon the advice of
counsel at the time such registration ie required to be filed, or at the time
Employer is required to exercise its best efforts to cause such registration
statement to become effective, such delay is advisable and in the best interests
of Employer because of the existence of non-public material information, o to
allow Employer to complete any pending audit of its financial statements;
e. Employer shall include Employee in its health insurance program
available to Employer's executive officers and shall pay 100% of the premiums
for such program.
f. Employee shall have the right to participate in any other
employee benefit plans established by Employer.
5. Board of Directors. Employer agrees that so long as this Agreement
in effect, Employee will be nominated to the Board as part of management's slate
of Directors.
6. Expenses. Employee shall be reimbursed for all of his actual
out-of-pocket expenses incurred in the performance of his duties hereunder,
provided such expenses are acceptable to Employer, which approval shall not be
unreasonably withheld, for business related travel and entertainment expenses,
and that Employee shall submit to Employer reasonably detailed receipts with
respect thereto.
7. Vacation. Employee shall be entitled to receive four (4) weeks
paid vacation time after each year of employment upon dates agreed upon by
Employer. Upon separation of employment, for any reason, vacation time accrued
and not used shall be paid at the salary rate of Employee in effect at the time
of employment separation.
8. Secrecy. At no time shall Employee disclose to anyone any
confidential or secret information (not already constituting information
available to the public) concerning internal affairs or proprietary business
operations of Employer.
9. Covenant Not to Compete Subject to, and limited by, section
<PAGE>
11(b), Employee will not, at any time, anywhere in the world, during the term of
this Agreement, and for one (1) year thereafter, either directly or indirectly,
engage in, with or for any enterprise, institution, whether or not for profit,
business, or company, competitive with the business of Employer as such business
may be conducted on the date thereof, as a creditor, guarantor, or financial
backer, stockholder, director, officer, consultant, advisor, employee, member,
inventor, producer, director, or otherwise of or through any corporation,
partnership, association, sole proprietorship or other entity; provided, that an
investment by Employee, his spouse or his children is permitted if such
investment is not more than four percent (4%) of the total debt or equity
capital of any such competitive enterprise or business and further provided that
said competitive enterprise or business is a publicly held entity whose stock is
listed and traded on a national stock exchange or through the NASDAQ Stock
Market.
10. Termination.
a. Termination by Employer
(i) Employer may terminate this Agreement upon written
notice for Cause. For purposes hereof, "Cause" shall mean (A) engaging by the
Employee in conduct that constitutes activity in competition with Employer; (B)
the conviction of Employee for the commission of a felony; and/or (C) the
habitual abuse of alcohol or controlled substances. Notwithstanding anything to
the contrary in this Section 10(a)(i), Employer may not terminate Employee's
employment under this Agreement for Cause unless Employee shall have first
received notice from the Board advising Employee of the specific acts or
omissions alleged to constitute cause, and such acts or omissions continue after
Employee shall have had a reasonable opportunity (At least 10 days from the date
Employee receives the notice from the Board) to correct the acts or omissions so
complained of. In no event shall alleged incompetence of Employee in the
performance of Employees duties be deemed grounds for termination for Cause.
(ii) Employer may terminate Employee's employment under
this Agreement if, as a result of any physical or mental disability, Employee
shall fail or be unable to perform his duties under this Agreement for any
consecutive period of 90 days during any twelve-month period. If Employees
employment is terminated under this Section 10(a)(ii): (A) for the first six
months after termination, Employee shall be paid 100% of his full compensation
under Section 4(a) of this Agreement at the rate in affect on the date of
termination, and in each successive 12 month period thereafter Employee shall be
paid an amount equal to 67% of his compensation under Section 4(a) of this
agreement at the rate in effect on the date of termination and (B) Employee
shall continue to be entitled, insofar as is permitted under applicable
insurance policies or plans, to such general medical and employee benefit plans
(including profit sharing or pension plans) as Employee had been entitled to on
the date of termination. Any amounts payable by Employer to Employee under this
paragraph shall be reduced by the amount of any disability payments payable by
or pursuant to plans provided by Employer and actually paid to Employee.
<PAGE>
(iii) This agreement automatically shall terminate upon the
death of Employee, except that Employee's estate shall be entitled to receive
any amount accrued under Section 4(a) and any other amount to which Employee was
entitled of the time of his death.
b. Termination by Employee
Employee shall have the right to terminate his employment under
this Agreement upon 30 days' notice to Employer given within 90 days following
the occurrence of any of the following events (A) through (F):
(A) Employee is not elected or retained as CEO.
(B) Employer acts to materially reduce Employee's duties and
responsibilities hereunder. Employee's duties and responsibilities shall not be
deemed materially reduced for purposes hereof solely by virtue of the fact that
Employer is (or substantially all of its assets are) sold to, or is combined
with, another entity, provided that Employee shall continue to have the same
duties and responsibilities with respect to Employer's business, and Employee
shall report directly to the chief executive officer and/or board of directors
of the entity (or individual) that acquires Employer or its assets.
(C) A Material Reduction (as hereinafter defined) in Employees
rate of base compensation, or Employee's other benefits. "Material Reduction"
shall mean a ten percent (10%) differential;
(D) A failure by Employer to obtain the assumption of this
Agreement by any successor;
(E) A material breach of this Agreement by Employer, which is
not cured within thirty (30) days of written notice of such breach by Employer;
(F) A Change of Control,
c. If Employer shall terminate Employee's employment other than
due to his death or disability or for Cause (as defined in Section 10(a)(i) of
this Agreement), or if Employee shall terminate this Agreement under Section
10(b)(i), Employer's obligations under Section 4 shall be absolute and
unconditional and not subject to any offset or counterclaim and Employee shall
continue to be entitled to receive all amounts provided for by Section 4 and all
additional employee benefits under Section 4 regardless of the amount of
compensation he may earn with respect to any other employment he may obtain.
11. Consequences of Breach by Employment Termination.
a. If this Agreement is terminated pursuant to Section 1D(b)(i)
hereof, or if Employer shall terminate Employee's employment under this
Agreement in any way that is a breach of this Agreement by Employer, the
following shall apply:
(i) Employee shall receive as a bonus, and in
<PAGE>
addition to his salary continuation pursuant to Section 10 (b)(8)above, a cash
payment equal to the Employee's total base salary as of the date of termination
hereunder for the remainder of the term plus an additional amount to pay all
federal, state and local income taxes thereon on a grossed-up basis as
heretofore provided, payable within 30 days of the date of such termination.
(ii) Employee shall be entitled to payment of any previously
declared bonus and additional compensation as provided in Section 4(a) and (b)
above.
b. In the event of termination of Employees employment pursuant to
Section 10(b)(i) of this Agreement, the provisions of Section 9 shall not apply
to Employee.
12. Remedies
Employer recognizes that because of Employee's special talents,
stature and opportunities in the technology acquisition industry, and because of
the special creative nature of and compensation practices of said industry and
the material impact that individual projects can have on company's results of
operations, in the event of termination by Employer hereunder (except under
Section 10(a)(i) or (iii), or in the event of termination by Employee under
Section 10(b)(i) before the end of the agreed term, the Employer acknowledges
and agrees that the provisions of this Agreement regarding further payments of
base salary, bonuses and the exercisability of Rights Constitute fair and
reasonable provisions for the consequences of such termination, do not
constitute a penalty, and such payments and benefits shall not be limited or
reduced by amounts' Employee might earn or be able to earn from any other
employment or ventures during the remainder of the agreed term of this
Agreement.
13. Excise Tax. In the event that any payment or benefit received or to be
received by Employee in connection with a termination of his employment with
Employer would constitute a "parachute payment" within the meaning of Code
Section 28OG or any similar or successor provision to 28OG and/or would be
subject to any excise tax imposed by Code Section 4999 or any similar or
successor provision then Employer shall assume all liability for the payment of
any such tax and Employer shall immediately reimburse Employee on a "grossed-up"
basis for any income taxes attributable to Employee by reason of such Employer
payment and reimbursements.
14. Arbitration Any controversies between Employer and Employee involving
the construction or application of any of the terms, provisions or conditions of
this Agreement, save and except for any breaches arising out of Sections 8 and 9
hereof, shall on the written request of either party served on the other be
submitted to arbitration. Such arbitration shall comply with and be governed by
the rules of the American Arbitration Association. An arbitration demand must be
made within one (1) year of the date on which the party demanding arbitration
first had notice of the existence of the claim to be arbitrated, or the right to
arbitration along with such claim shall be considered to have
<PAGE>
been waived. An arbitrator shall be selected according to the procedures of the
American Arbitration Association. The cost of arbitration shall be born by the
losing party or in such proportions as the arbitrator shall decide. The
arbitrator shall have no authority to add to, subtract from or otherwise modify
the provisions of this Agreement, or to award punitive damages to either party.
15. Attorney's Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which he may be entitled.
16. Entire Agreement; Survival. This Agreement contains the entire
agreement between the parties with respect to the transactions contemplated
herein and supersedes, effective as of the date hereof any prior agreement or
understanding between Employer and Employee with respect to Employee's
employment by Employer. The unenforceability of any provision of this Agreement
shall not effect the enforceability of any other Provision. This Agreement may
not be amended except by an agreement in writing signed by the Employee and the
Employer, or any waiver, change, discharge or modification as sought. Waiver of
or failure to exercise any rights provided by this Agreement and in any respect
shall not be deemed a waiver of any further or future rights.
The provisions of Sections 4, 8, 9,10(a)(ii) 10(a)(iii), 10(c), 11,
12, 13, 14, 19, and 20 shall survive the termination of this Agreement.
17. Assignment. This Agreement shall not be assigned to other parties.
18. Governing Law. This Agreement and all the amendments hereof, and
waivers and consents with respect thereto shall be governed by the internal laws
of the State of Florida, without regard to the conflicts of laws principles
thereof.
19. Notice. All notices, responses, demands or other communications under
this Agreement shall be in writing and shall be deemed to have been given when
a. delivered by hand;
b. sent be telex or telefax, (with receipt confirmed), provided that
a copy Is mailed by registered or certified mail, return receipt requested; or
c. received by the addressee as sent be express delivery service
(receipt requested) in each case to the appropriate addresses, telex numbers and
telefax numbers as
<PAGE>
the party may designate to itself by notice to the other parties:
(i) If to the Employer:
UTEK Corporation
202 South Wheeler Street,
Plant City, Fl 33566
Telefax: 813-754-2383
Telephone: 813-754-4330
(ii) If to the Employee:
Dr. Clifford M. Gross
3214 Polo Place
Plant City, Fl 33567
Telefax 813-754-9515
Telephone 813-754-7388
20. Severability Should any part of this Agreement for any reason be
declared invalid by a court of competent jurisdiction, such decision shall not
affect the validity of any remaining portion, which remaining provisions shall
remain in full force and effect as if this Agreement had been executed with the
invalid portion thereof eliminated, and it is hereby declared the intention of
the parties that they would have executed the remaining portions of this
Agreement without including any such part, parts or portions which may, for any
reason, be hereafter declared invalid.
IN WITNESS WHEREOF, the undersigned have executed this agreement as of the
day and year first above written.
UTEK, Corporation
By;______________________ ___________________________
Clifford M. Gross, Ph.D. Uwe Reischl, Ph.D., M.D.
Employee President
<PAGE>
Exhibit 10.4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of __________ 1999 by and between UTEK
Corporation, a Delaware corporation, having an office at 202 South Wheeler
Street, Plant City, Florida 33566 (hereinafter referred to as "Employer") and
Uwe Reischl, MD, Ph.D.,c/o Utek Corporation,(hereinafter referred an individual
"Employee"):
WHEREAS, Employer employs, and desires to continue to employ, Dr.
Reischl as the President of Employer, and
WHEREAS, Employee is willing to continue to be employed as the
President in the manner provided for herein, and to perform the duties of the
Employer upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein set forth it is agreed as follows;
1. Employment of Employee: Employer hereby employs Employee as
President.
2. Term.
a. Subject to Section 10 below and further subject to Section 2(b)
below, the term of this Agreement shall commence on the first day of September
1999 and expire five years from such date. Each 12 month period from the
commencement date forward during the term hereof shall be referred to as an
"Annual Period." During the term hereof, Employee shall devote substantially all
of his business time and efforts to Employer and its subsidiaries and
affiliates.
b. Subject to Section 10 below, unless the Board of Directors of this
Company (the "Board") of Employer shall determine to the contrary and shall so
notify Employee in writing on or before the end of any Annual Period or unless
the Employee notifies Employer in writing on or before the end of the final
Annual Period of his desire not to renew this Agreement, then at the end of each
Annual Period, the term of this Agreement shall be automatically extended for
one (1) additional Annual Period to be added at the end of the then current term
of this Agreement.
3. Duties The Employee shall perform those functions generally
performed by persons of such title and position, shall perform any and all
related duties and shall have any and all powers as may be prescribed by
resolution of the Board, and shall be available to confer and consult with and
advise the officers and directors of Employer at such times that may be required
by Employer. Employee shall report directly and solely to the CEO.
<PAGE>
4. Compensation
a. (i) Employee shall be paid a salary of $100,000. Employee shall be
paid periodically in accordance with the policies of the Employer during the
term of this Agreement, but not less than monthly. Employee shall be paid
periodically in accordance with the policies of the Employer during the term of
this Agreement, but not less than monthly. The basic compensation provided in
this Agreement shall be adjusted annually to reflect the increase, if any, in
the cost of living by adding to such basic salary an amount obtained by
multiplying the basic salary by the percentage by which the level of the
Consumer Price Index for all urban consumers for the United States, as reported
by the Bureau of Labor Statistics of the United States Department of Labor has
increased over its level as of the date of the commencement of this Agreement.
The adjustment shall take place on September 1, of each year and the Employer
shall begin paying the adjusted salary on September 15, of each year. The
Employee shall be paid such additional compensation from the Employer for the
services rendered under this Agreement as may be determined, from time to time,
in the sole discretion of the Chief Executive Officer.
b. (ii) Company shall grant to the employee 50,000 incentive stock
options (ISO's)to purchase UTEK shares at 100% of the IPO price. These options
will vest the sooner of either pro rata, quarterly, over 36 months or upon the
bid price of UTEK being > or = to $10 for 15 consecutive trading days.
(iii) A $500 per month automobile allowance.
d. Employer shall include Employee in its health insurance program
available to Employer's executive officers and shall pay 100% of the premiums
for such program.
e. Employee shall have the right to participate in any other employee
benefit plans established by Employer.
5. Expenses. Employee shall be reimbursed for all of his actual
out-of-pocket expenses incurred in the performance of his duties hereunder,
provided such expenses are acceptable to Employer, which approval shall not be
unreasonably withheld, for business related travel and entertainment expenses,
and that Employee shall submit to Employer reasonably detailed receipts with
respect thereto.
6. Vacation Employee shall be entitled to receive three(3) weeks paid
vacation time after each year of employment upon dates agreed upon by Employer.
Upon separation of employment, for any reason, vacation time accrued and not
used shall be paid at the salary rate of Employee in effect at the time of
employment separation.
8. Secrecy At no time shall Employee disclose to anyone any
confidential or secret information (not already constituting information
available to the public) concerning internal affairs or proprietary business
operations of Employer.
<PAGE>
9. Covenant Not to Compete Subject to, and limited by, section 11(b),
Employee will not, at any time, anywhere in the world, during the term of this
Agreement, and for one (1) year thereafter, either directly or indirectly,
engage in, with or for any enterprise, institution, whether or not for profit,
business, or company, competitive with the business of Employer as such business
may be conducted on the date thereof, as a creditor, guarantor, or financial
backer, stockholder, director, officer, consultant, advisor, employee, member,
inventor, producer, director, or otherwise of or through any corporation,
partnership, association, sole proprietorship or other entity; provided, that an
investment by Employee, his spouse or his children is permitted if such
investment is not more than four percent (4%) of the total debt or equity
capital of any such competitive enterprise or business and further provided that
said competitive enterprise or business is a publicly held entity whose stock is
listed and traded on a national stock exchange or through the NASDAQ Stock
Market.
10. Termination.
a. Termination by Employer
(i) Employer may terminate this Agreement upon written notice for
Cause. For purposes hereof, "Cause" shall mean (A) engaging by the Employee in
conduct that constitutes activity in competition with Employer; (B) the
conviction of Employee for the commission of a felony; and/or (C) the habitual
abuse of alcohol or controlled substances. Notwithstanding anything to the
contrary in this Section 10(a)(i), Employer may not terminate Employee's
employment under this Agreement for Cause unless Employee shall have first
received notice from the Board advising Employee of the specific acts or
omissions alleged to constitute cause, and such acts or omissions continue after
Employee shall have had a reasonable opportunity (At least 10 days from the date
Employee receives the notice from the Board) to correct the acts or omissions so
complained of. In no event shall alleged incompetence of Employee in the
performance of Employees duties be deemed grounds for termination for Cause.
(ii) Employer may terminate Employee's employment under this
Agreement if, as a result of any physical or mental disability, Employee shall
fail or be unable to perform his duties under this Agreement for any consecutive
period of 90 days during any twelve-month period. If Employees employment is
terminated under this Section 10(a)(ii): (A) for the first six months after
termination, Employee shall be paid 100% of his full compensation under Section
4(a) of this Agreement at the rate in affect on the date of termination, and in
each successive 12 month period thereafter Employee shall be paid an amount
equal to 67% of his compensation under Section 4(a) of this agreement at the
rate in effect on the date of termination and (B) Employee shall continue to be
entitled, insofar as is permitted under applicable insurance policies or plans,
to such general medical and employee benefit plans (including profit sharing or
pension plans) as Employee had been entitled to on the date of termination. Any
amounts payable by Employer to Employee under this paragraph shall be reduced by
the amount of any disability payments payable by or pursuant to plans provided
by Employer and actually paid to Employee.
<PAGE>
(iii) This agreement automatically shall terminate upon the death of
Employee, except that Employee's estate shall be entitled to receive any amount
accrued under Section 4(a) and any other amount to which Employee was entitled
of the time of his death.
b. Termination by Employee
Employee shall have the right to terminate his employment under this
Agreement upon 30 days' notice to Employer given within 90 days following the
occurrence of any of the following events (A) through (E):
(A) Employee is not elected or retained as President.
(B) Employer acts to materially reduce Employee's duties and
responsibilities hereunder. Employee's duties and responsibilities shall not be
deemed materially reduced for purposes hereof solely by virtue of the fact that
Employer is (or substantially all of its assets are) sold to, or is combined
with, another entity, provided that Employee shall continue to have the same
duties and responsibilities with respect to Employer's business, and Employee
shall report directly to the chief executive officer and/or board of directors
of the entity (or individual) that acquires Employer or its assets.
(C) A Material Reduction (as hereinafter defined) in Employees rate
of base compensation, or Employee's other benefits. "Material Reduction" shall
mean a ten percent (10%) differential;
(D) A failure by Employer to obtain the assumption of this Agreement
by any successor;
(E) A material breach of this Agreement by Employer, which is not
cured within thirty (30) days of written notice of such breach by Employer;
(c) If Employer shall terminate Employee's employment other than due to
his death or disability or for Cause (as defined in Section 10(a)(i) of this
Agreement), or if Employee shall terminate this Agreement under Section
10(b)(i), Employer's obligations under Section 4 shall be absolute and
unconditional and not subject to any offset or counterclaim and Employee shall
continue to be entitled to receive all amounts provided for by Section 4 and all
additional employee benefits under Section 4 regardless of the amount of
compensation he may earn with respect to any other employment he may obtain
11. Consequences of Breach by Employment Termination.
a. If this Agreement is terminated pursuant to Section 1D(b)(i) hereof,
or if Employer shall terminate Employee's employment under this Agreement in any
way that is a breach of this Agreement by Employer, the following shall apply:
<PAGE>
(i) Employee shall receive as a bonus, and in addition to his salary
continuation pursuant to Section 10 (b)(8)above, a cash payment equal to the
Employee's total base salary as of the date of termination hereunder for the
remainder of the term plus an additional amount to pay all federal, state and
local income taxes thereon on a grossed-up basis as heretofore provided, payable
within 30 days of the date of such termination.
(ii) Employee shall be entitled to payment of any previously
declared bonus and additional compensation as provided in Section 4(a) and (b)
above.
b. In the event of termination of Employees employment pursuant to
Section 10(b)(i) of this Agreement, the provisions of Section 9 shall not apply
to Employee.
12. Remedies
Employer recognizes that because of Employee's special talents, stature
and opportunities in the technology acquisition industry, and because of the
special creative nature of and compensation practices of said industry and the
material impact that individual projects can have on company's results of
operations, in the event of termination by Employer hereunder (except under
Section 10(a)(i) or (iii), or in the event of termination by Employee under
Section 10(b)(i) before the end of the agreed term, the Employer acknowledges
and agrees that the provisions of this Agreement regarding further payments of
base salary, bonuses and the exercisability of Rights Constitute fair and
reasonable provisions for the consequences of such termination, do not
constitute a penalty, and such payments and benefits shall not be limited or
reduced by amounts' Employee might earn or be able to earn from any other
employment or ventures during the remainder of the agreed term of this
Agreement.
13. Excise Tax. In the event that any payment or benefit received or to
be received by Employee in connection with a termination of his employment with
Employer would constitute a "parachute payment" within the meaning of Code
Section 28OG or any similar or successor provision to 28OG and/or would be
subject to any excise tax imposed by Code Section 4999 or any similar or
successor provision then Employer shall assume all liability for the payment of
any such tax and Employer shall immediately reimburse Employee on a "grossed-up"
basis for any income taxes attributable to Employee by reason of such Employer
payment and reimbursements.
14. Arbitration Any controversies between Employer and Employee
involving the construction or application of any of the terms, provisions or
conditions of this Agreement, save and except for any breaches arising out of
Sections 8 and 9 hereof, shall on the written request of either party served on
the other be submitted to arbitration. Such arbitration shall comply with and be
governed by the rules of the American Arbitration Association. An arbitration
demand must be made within one (1) year of the date on which the party demanding
arbitration first had notice of the existence of the claim to be arbitrated, or
the right to arbitration along with such claim shall be considered to have been
waived. An arbitrator shall be selected according to the procedures of the
American Arbitration Association. The cost of arbitration shall be born by the
losing party or in such proportions as the arbitrator shall decide. The
arbitrator shall have no authority to add to, subtract from or otherwise modify
the provisions of this Agreement, or to award punitive damages to either party.
<PAGE>
15. Attorney's Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which he may be entitled.
16. Entire Agreement; Survival. This Agreement contains the entire
agreement between the parties with respect to the transactions contemplated
herein and supersedes, effective as of the date hereof any prior agreement or
understanding between Employer and Employee with respect to Employee's
employment by Employer. The unenforceability of any provision of this Agreement
shall not effect the enforceability of any other Provision. This Agreement may
not be amended except by an agreement in writing signed by the Employee and the
Employer, or any waiver, change, discharge or modification as sought. Waiver of
or failure to exercise any rights provided by this Agreement and in any respect
shall not be deemed a waiver of any further or future rights.
The provisions of Sections 4, 8, 9,10(a)(ii) 10(a)(iii), 10(c), 11, 12,
13, 14, 19, and 20 shall survive the termination of this Agreement.
17. Assignment This Agreement shall not be assigned to other parties.
18. Governing Law This Agreement and all the amendments hereof, and
waivers and consents with respect thereto shall be governed by the internal laws
of the State of Florida, without regard to the conflicts of laws principles
thereof. 19. Notice All notices, responses, demands or other communications
under this Agreement shall be in writing and shall be deemed to have been given
when
a. delivered by hand;
b. sent be telex or telefax, (with receipt confirmed), provided that a
copy Is mailed by registered or certified mail, return receipt requested; or
c. received by the addressee as sent be express delivery service
(receipt requested) in each case to the appropriate addresses, telex numbers and
telefax numbers as the party may designate to itself by notice to the other
parties:
(i) If to the Employer:
UTEK Corporation
202 South Wheeler Street,
Plant City, Fl 33566
Telefax: 813-754-2383
Telephone: 813-754-4330
(ii) If to the Employee:
Dr. Uwe Reischl
202 South Wheeler Street
Plant City, Fl 33566
Telefax: 813-754-2383
Telephone: 813-754-4330
20. Severability Should any part of this Agreement for any reason be
declared invalid by a court of competent jurisdiction, such decision shall not
affect the validity of any remaining portion, which remaining provisions shall
remain in full force and effect as if this Agreement had been executed with the
invalid portion thereof eliminated, and it is hereby declared the intention of
the parties that they would have executed the remaining portions of this
Agreement without including any such part, parts or portions which may, for any
reason, be hereafter declared invalid.
IN WITNESS WHEREOF, the undersigned have executed this agreement as of the day
and year first above written.
UTEK, Corporation
- ---------------------------- ---------------------------------
By; Clifford M. Gross, Ph.D. By; Uwe Reischl, Ph.D.,
M.D. CEO Employee
<PAGE>
Exhibit 10.5
AGREEMENT
THIS AGREEMENT is made and is effective this January __,1998, by and between
UTEK CORPORATION, having offices located at 3214 Polo Place, Plant City, Florida
33567 ("UTEK"), the University of South Florida, acting for and on behalf of the
Board of Regents, a public corporation of the State of Florida having offices at
4202 East Fowler Avenue, Tampa, FL 33620 ("USF") and USF Research Foundation,
lnc. a University direct-support organization under Florida law and a
not-for-profit corporation of the State of Florida, having offices located at
4202 East Fowler Ave, FAO 126, Tampa, FL 33620 ("USFRF").
WITNESSETH
WHEREAS, USF is the owner of intellectual property and technology ("Technology")
and, through its Division of Patents & Licensing in the USF Office of Research
("OoR") seeks to have such Technology brought to the marketplace, one goal of
which is to generate on-going royalties to enhance USF's research capabilities
and reward faculty whose patents are licensed.
WHEREAS, USFRF has been retained by USF to assist USF in meeting its foregoing
goal, and to provide other Technology-related and financial management
activities.
WHEREAS, UTEK seeks to bring university-based technology to public companies
that can rapidly bring new products to the marketplace.
NOW, THEREFORE, in consideration of the premises and mutual convenants herein
contained, the parties agree as follows:
Article 1 - Technology Option
1.1 Evaluation: From time to time OoR may request UTEK to review selected
Technology and to evaluate the potential of such selected Technology
for successful commercialization. After such evaluation, if UTEK and
OoR agree to have UTEK seek a licensee for or otherwise merchandise a
specific Technology, the parties will execute a copy of the option
agreement attached hereto as Exhibit A ("Option Agreement"), that
will specifically identify the appropriate Technology, field of use
and such other term descriptions as may be appropriate, to provide
UTEK an exclusive, royalty-free right for a specified period to seek
a licensee or other commercial opportunity for the Technology. OoR
will seek to obtain patent protection, if appropriate in the opinion
of OoR, for such optioned Technology.
1.2 License: UTEK will then use its best efforts to find a corporate
licensee or otherwise commercialize the Technology at terms
acceptable to OoR. If UTEK finds a OoR-acceptable licensee, OoR shall
negotiate toward an agreement with such licensee to commercialize the
Technology and, if successful, royalties for the Technology will be
paid directly by the licensee to USFRF. USF is without obligation to
UTEK in connection with the foregoing negotiations and license, and
the parties do not intend for UTEK to share in such royalties or
otherwise be compensated by USF or USFRF for its activities and the
opportunities to review and evaluate Technology. If UTEK is unable to
find a OoR-acceptable licensee or corporate partner for the
Technology by the end of the specified period, the option shall
expire unless extended by mutual agreement of the parties, and all
rights to the Technology shall revert back to USF.
Article 2 - Term and Termination
2.1 The term of this Agreement is for a period of three (3) years,
commencing on the date above.
2.2 Either party may terminate this Agreement at any time with sixty (60)
days written notice.
Article 3 - Confidential Information
3.1 During the term of this Agreement, neither party shall disclose to
anyone any confidential information ("Confidential Information") of
the other party. Confidential Information for the purposes of this
Agreement shall include proprietary and confidential information such
as, but not limited to, technology plans, research and development
plans, designs, models, software, product specifications, marketing
plans, patent applications, disclosures and new concepts.
Confidential Information shall not include any information that;
a) Is disclosed by one party ("Owner") to the other ("Recipient")
without restriction.
b) Becomes publicly available through no act of the Recipient.
c) Is rightfully received by either party from a third party having no
obligation to Owner.
<PAGE>
d) Is disseminated in publications
3.2.1 UTEK may disclose USF Confidential Information to its customers if
necessary for such customers to determine their interest in licensing
a specific Technology, provided that UTEK will first cause such
customer to execute a USF approved confidentiality and non-disclosure
agreement. A copy of this signed agreement will be provided to USF.
Article 4 - Notices
Any notice given pursuant to this Agreement shall be in writing and shall be
hand delivered; mailed by certified mail, return receipt requested; or sent by
overnight courier service as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
UTEK Corporation University of South Florida USF Research Foundation, Inc.
3214 Polo Place 4202 East Fowler Ave., ADM 25 USF Box 30445
Plant City, Florida Tampa, FL 33620 Tampa, FL 33620-3044
</TABLE>
Article 5 - Understandings and Amendments
This Agreement constitutes the final understanding and agreement between the
parties with respect to the subject matter hereof and supersedes all prior
negotiations, understandings and agreements between the parties, whether written
or oral. This Agreement may be amended, supplemented or changed only by an
agreement in writing, signed by both of the parties. If any term of this
Agreement is held by a court of competent jurisdiction to be invalid or
unenforceable, then this Agreement, including all of the remaining terms, will
remain in full force and effect as if such invalid or unenforceable term had
never been included.
Article 6 - Governing Law
This Agreement shall be governed by and be construed in accordance with the laws
of the state of Florida.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the
date first above written.
UTEK CORPORATION
- ----------------------------------
By: Clifford M. Gross, Ph.D., CEO
University of South Florida USF Research Foundation, Inc.
- ---------------------------------- ----------------------------------
By:
<PAGE>
Exhibit 10.6
STRATEGIC ALLIANCE
This Strategic Alliance is Made and effective this __________________, by and
between UTEK CORPORATION, offices located at 202 South Wheeler Street, Plant
City, Florida 33566 and Johns Hopkins University offices located at 708 N. Wyman
Park Center, Baltimore, Maryland 21218. Now, therefore, both parties agree as
follows:
1. Johns Hopkins University seeks to develop an off-balance sheet vehicle to
bring its intellectual property and technology to the marketplace. The goal
of which is to generate on-going royalties to enhance The Johns Hopkins
University research capabilities and reward faculty whose patents are
licensed, in addition to developing sponsored research activities.
2. UTEK CORPORATION (UTEK) has the mission to build a bridge between
university-based technology and public companies that can rapidly bring new
products to the marketplace.
3. UTEK will review JOHNS HOPKINS UNIVERSITY specified existing technologies and
new disclosures to gauge their potential for successful commercialization. If
a specific technology seems promising to UTEK (and JOHNS HOPKINS UNIVERSITY
agreed), JOHNS HOPKINS UNIVERSITY will apply for a patent (if it does not
already have one), with JOHNS HOPKINS UNIVERSITY as the assignee. UTEK will
receive a 12-month exclusive, royalty-free license option for the technology
for some or all fields of use. UTEK would then use its best efforts to find a
corporate licensee or otherwise commercialize the technology at terms
acceptable to JOHNS HOPKINS UNIVERSITY. If UTEK finds a JOHNS HOPKINS
UNIVERSITY acceptable licensee, royalties for the technology will be paid
directly by the licensee to JOHNS HOPKINS UNIVERSITY. If UTEK is unable to
find a JOHNS HOPKINS UNIVERSITY acceptable licensee or corporate partner for
the technology by the end of this 12- month period, then all option rights to
the technology will revert back to JOHNS HOPKINS UNIVERSITY, unless both
parties agree to extend. The defined Exclusive Option Agreement is contained
in Exhibit A. When JOHNS HOPKINS UNIVERSITY desires to have UTEK merchandise
a specific technology and UTEK agrees, both parties will execute a copy of
the Exclusive Option Agreement with the appropriate technology, field-of-use
and term descriptions.
4. The term of this strategic alliance is for a period of five years, commencing
on the date above.
5. Either party may terminate this Agreement at any time with sixty days written
notice.
6. During the term of this Agreement, both parties shall not disclose to anyone
any confidential information. "Confidential Information" for the purposes of
this Agreement shall include proprietary and confidential information such
as, but not limited to, technology plans, research and development plans,
designs, models, software, product specifications, Marketing plans, patent
applications, disclosures and new concepts.
Confidential information shall not include any information that:
A. Is disclosed without restriction.
B. Becomes publicly available through no act of the recipient.
C. Is rightfully received by either party from a third party.
D. Is disseminated in publications.
If UTEK customers need to review JOHNS HOPKINS UNIVERSITY confidential
information to determine their interest in licensing a specific property, UTEK
will have the customer execute a JOHNS HOPKINS UNIVERSITY approved
confidentiality and non-disclosure agreement. A copy of this signed agreement
will be provided to JOHNS HOPKINS UNIVERSITY.
7. This Agreement shall be governed by and be construed in accordance with the
laws of the state of Maryland.
8. This Agreement constitutes the final understanding and agreement between the
parties with respect to the subject matter hereof and supersedes all prior
negotiations, understandings and agreements between the parties, whether
written or oral. This Agreement may be amended, supplemented or changed, only
by an Agreement in writing, signed by both of the parties.
9. Any notice to be given or otherwise given pursuant to this Agreement shall be
in writing and shall be hand delivered, mailed by certified mail, return
receipt requested or sent by overnight courier service as follows:
UTEK CORPORATION
202 South Wheeler Street, Plant City, Florida 33566
JOHNS HOPKINS UNIVERSITY
708 N. Wyman Park Center, Baltimore, Maryland 21218
<PAGE>
10. If any term of this Agreement is held by a court of competent jurisdiction
to be invalid or unenforceable, then this Agreement, including all of the
remaining terms, will remain in full force and effect as if such invalid or
unenforceable term had never been included.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the
date first above written.
UTEK CORPORATION JOHNS HOPKINS UNIVERSITY
- --------------------------------- -----------------------------------
By: Clifford M. Gross, Ph.D., CEO By: Nina M.Siegler, CFA-Director
Office of Technology Transfer
Exhibit A
Exclusive Option Agreement
This Exclusive Option Agreement is made and effective this ________________, by
and between UTEK CORPORATION (UTEK), offices located at 202 South Wheeler
Street, Plant City, Florida 33566 and JOHNS HOPKINS UNIVERSITY offices located
at 708 N. Wyman Park Center, Baltimore, Maryland 21218. Now, therefore, both
parties agree as follows:
1. JOHNS HOPKINS UNIVERSITY hereby grants to UTEK an exclusive option to
license on an exclusive basis the following technology:
Technology Description
Title:
Patent #: Date Applied for:
Date Awarded:
Patent Application #: Date Applied for:
Inventors:
Copyright: [yes or no] If yes than provide description:
Date Applied for:
Field of Use: All [yes or no] If no then describe limited fields of use:
Territory: World-wide [yes or no] If no then describe limited territory:
2. The term for this exclusive option is 12 months unless extended by agreement
of both parties in writing.
3. During the term of this option, UTEK will use its best efforts to
merchandise the above-described technology at terms acceptable to JOHNS
HOPKINS UNIVERSITY. JOHNS HOPKINS UNIVERSITY may accept or reject, at its'
discretion, any offer presented by UTEK for the licensing of this
technology.
4. During the term of this option, JOHNS HOPKINS UNIVERSITY will use its best
efforts to provide UTEK with the information it requires to market the
above-described technology.
5. This Agreement shall be governed by and be construed in accordance with the
laws of the state of Maryland 21218.
6. This Agreement constitutes the final understanding and agreement between the
parties with respect to the subject matter hereof and supersedes all prior
negotiations, understandings and agreements between the parties, whether
written or oral. This Agreement may be amended, supplemented or changed,
only by an Agreement in writing, signed by both of the parties.
7. Any notice to be given or otherwise given pursuant to this Agreement shall
be in writing and shall be hand delivered, mailed by certified mail, return
receipt requested or sent by overnight courier service as follows:
<PAGE>
UTEK CORPORATION
202 South Wheeler Street, Plant City, Florida 33566
JOHNS HOPKINS UNIVERSITY
708 N. Wyman Park Center, Baltimore, Maryland 21218
8. If any term of this Agreement is held by a court of competent jurisdiction to
be invalid or unenforceable, then this Agreement, including all of the remaining
terms, will remain in full force and effect as if such invalid or unenforceable
term had never been included.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the
date first above written.
UTEK CORPORATION JOHNS HOPKINS UNIVERSITY
- --------------------------------- ------------------------------------
By: Clifford M. Gross, Ph.D., CEO By: Nina M. Siegler, CFA-Director
Office of Technology Transfer
<PAGE>
Exhibit 10.7
Strategic Alliance
This Strategic Alliance is made and effective 3rd of November 1999, by and
between UTEK Corporation ("UTEK"), offices located at 202 South Wheeler Street,
Plant City, Florida 33566 and Fraunhofer Institute for Interfacial Engineering
and Biotechnology 1GB ("Fraunhofer"), located at Nobelstrasse 12, DE-70569
Stuttgart, Germany. Now, therefore, both parties agree as follows:
1. Fraunhofer seeks to develop an off-balance sheet vehicle to bring its
intellectual property and technology to the marketplace Fraunhofer's goal
is to generate on-going royalties to enhance the Institute's research
capabilities and reward faculty whose patents are licensed, in addition to
developing sponsored research activities.
2. UTEK has the mission to build a bridge between university-based technology
and publicly quoted companies that can rapidly bring new products to the
marketplace.
3. UTEK will review Fraunhofer specified existing technologies and new
disclosures to gauge their potential for successful commercialization. In
the U.S., if a specific technology seems promising to UTEK (and Frau
nhofer agreed), Fraunhofer or the inventor will apply for a patent (if it
does not already have one), with Fraunhofer as the assignee. UTEK will
receive a 12-month exclusive, royalty-free license option for the
technology for some or all fields of use. UTEK would then use its best
efforts to find a corporate licensee or otherwise commercialize the
technology at terms acceptable to Frau nhofer. If UTEK finds a Fraunhofer
acceptable licensee, royalties for the technology will be paid directly by
the licensee to Fraunhofer. If UTEK is unable to find a Fraunhofer
acceptable licensee or corporate partner for the technology by the end of
this 12-month period, then all option rights to the technology will revert
back to Fraunhofer, unless both parties agree to extend. The defined
Exclusive Option Agreement is contained in Exhibit A. When Fraunhofer
desires to have UTEK merchandise a specific technology and UTEK agrees,
both parties will execute a copy of the Exclusive Option Agreement with
the appropriate technology, field-of-use and term descriptions.
4. The term of this strategic alliance is for a period of five years,
commencing on the date above.
5. Either party may terminate this Agreement at any time with sixty days
written notice.
6. Not only during the term of this Agreement, but also for the future,
neither party strictly shall disclose to anyone any confidential
information obtained from the other party. "Confidential Information" for
the purposes of this Agreement shall include proprietary and confidential
information such as, but not limited to, technology plans, research and
development plans, designs, models, software, product specifications,
Marketing plans patent applications, disclosures and new concepts.
Confidential information shall not include any information that:
A. Is disclosed without restriction.
B. Becomes publicly available through no act of the recipient.
C. Is rightfully received by either party from a third party.
D. Is disseminated in publications.
<PAGE>
If UTEK customers need to review Fraunhofer confidential information to
determine their interest in licensing a specific property, UTEK will have the
customer execute a Fraunhofer approved confidentiality and non-disclosure
agreement. A copy of this signed agreement will be provided to Fraunhofer.
7. This Strategic Alliance shall be construed and interpreted and the rights
of the parties hereto shall be determined in accordance with the laws of
the State of Florida. In the event that any part, term or provision of
this Agreement shall be held to be illegal, void or in conflict with any
law of a federal, state or local government entity having jurisdiction
over this agreement, the validity of the remaining portions or provisions
hereof shall not be affected or rendered invalid thereby.
The parties will try to settle any dispute in connection with this
Strategic Alliance on an amicable basis. If negotiations between UTEK and
FRAUNHOFER fail, all disputes will be finally settled under the rules of
Conciliation and Arbitration of the International Chamber of Commerce
(ICC) by the arbitrators appointed in accordance with the said rules. The
place of arbitration is Zurich, Switzerland.
8. This Agreement constitutes the final understanding and agreement between
the parties with respect to the subject matter hereof and supersedes all
prior negotiations, understandings and agreements between the parties,
whether written or oral. This Agreement may be amended, supplemented or
changed, only by an Agreement in writing, signed by both of the parties.
9. Any notice to be given or otherwise given pursuant to this Agreement shall
be in writing and shall be hand delivered, mailed by certified mail,
return receipt requested or sent by overnight courier service as follows:
UTEK Corporation
202 South Wheeler Street, Plant City, Florida 33566
Fraunhofer Institute for Interfacial Engineering and Biotechnology 1GB
Nobelstrasse 12
DE-70569 Stuttgart, Germany
10. Any and all costs and expenses incurred by either party arising out of the
collaboration anticipated by this Agreement shall be borne by that party.
A deviation of this Agreement can be agreed upon in a separate Amendment.
FRAUNHOFER will not be involved in any liabilities to pay caused by deeds
or acts of UTEK and vice versa. Commissions acquired by UTEK from a third
party or other sources of income will be unaffected by that matter.
11. If any term of this Agreement is held by a court of competent jurisdiction
to be invalid or unenforceable, then this Agreement including all of the
remaining terms, will remain in full force and effect as if such invalid
or unenforceable term had never been included.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the
date first above written.
Fraunhofer Institute for Interfacial UTEK Corporation
Engineering and Biotechnology IGB
- ----------------------------- -----------------------------
By: Prof. Dr. Herwig Brunner By. Carl Nisser
<PAGE>
Exhibit 10.8
STRATEGIC ALLIANCE
This Strategic Alliance is made and effective this __________________, by and
between UTEK CORPORATION, offices located at 202 South Wheeler Street, Plant
City, Florida 33566 and UNIVERSITY OF FLORIDA offices located at 1938 W.
University Avenue, Gainesville, FL 32603. Now, therefore, both parties agree as
follows:
1. UNIVERSITY OF FLORIDA seeks to develop an off-balance sheet vehicle to
bring its intellectual property and technology to the marketplace. The goal
of which is to generate on-going royalties to enhance its research
capabilities and reward faculty whose patents are licensed, in addition to
developing sponsored research activities.
2. UTEK CORPORATION (UTEK) has the mission to build a bridge between
university-based technology and public companies that can rapidly bring new
products to the marketplace.
3. UTEK would review UNIVERSITY OF FLORIDA specified existing technologies
and new disclosures to gauge their potential for successful
commercialization. If a specific technology seemed promising to UTEK (and
UNIVERSITY OF FLORIDA agreed), UNIVERSITY OF FLORIDA would apply for a patent
(if it does not already have one), with UNIVERSITY OF FLORIDA as the
assignee. UTEK would receive a 12-month exclusive, royalty-free license
option for the technology for some or all fields of use. UTEK would then use
its best efforts to find a corporate licensee or otherwise commercialize the
technology at terms acceptable to UNIVERSITY OF FLORIDA. If UTEK finds a
UNIVERSITY OF FLORIDA acceptable licensee, royalties for the technology would
be paid directly by the licensee to UNIVERSITY OF FLORIDA. If UTEK is unable
to find a UNIVERSITY OF FLORIDA acceptable licensee or corporate partner for
the technology by the end of this 12-month period, then all option rights to
the technology would revert back to UNIVERSITY OF FLORIDA, unless both
parties agreed to extend. The defined Exclusive Option Agreement is contained
in Exhibit A. When UNIVERSITY OF FLORIDA desires to have UTEK merchandise a
specific technology and UTEK agrees, both parties will execute a copy of the
Exclusive Option Agreement with the appropriate technology, field-of-use and
term descriptions.
4. The term of this strategic alliance is for a period of five years, commencing
on the date above.
5. Either party may terminate this Agreement at any time with sixty days written
notice.
6. During the term of this Agreement, both parties shall not disclose to anyone
any confidential information. "Confidential Information" for the purposes of
this Agreement shall include proprietary and confidential information such as,
but not limited to, technology plans, research and development plans, designs,
models, software, product specifications, marketing plans, patent applications,
disclosures and new concepts.
Confidential information shall not include any information that:
A. Is disclosed without restriction.
B. Becomes publicly available through no act of the recipient.
C. Is rightfully received by either party from a third party.
D. Is disseminated in publications.
If UTEK customers need to review UNIVERSITY OF FLORIDA confidential information
to determine their interest in licensing a specific property, UTEK will have the
customer execute an UNIVERSITY OF FLORIDA approved confidentiality and
non-disclosure agreement. A copy of this signed agreement will be provided to
UNIVERSITY OF FLORIDA.
7. This Agreement shall be governed by and be construed in accordance with the
laws of the state of Florida.
8. This Agreement constitutes the final understanding and agreement between the
parties with respect to the subject matter hereof and supersedes all prior
negotiations, understandings and agreements between the parties, whether written
or oral. This Agreement may be amended, supplemented or changed, only by
<PAGE>
an Agreement in writing, signed by both of the parties.
9. Any notice to be given or otherwise given pursuant to this Agreement shall be
in writing and shall be hand delivered, mailed by certified mail, return receipt
requested or sent by overnight courier service as follows:
UTEK CORPORATION
202 South Wheeler Street, Plant City, Florida 33566
UNIVERSITY OF FLORIDA
1938 W. University Avenue, Gainesville, FL 32603
10. If any term of this Agreement is held by a court of competent jurisdiction
to be invalid or unenforceable, then this Agreement, including all of the
remaining terms, will remain in full force and effect as if such invalid or
unenforceable term had never been included.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the
date first above written.
UTEK CORPORATION UNIVERSITY OF FLORIDA
- ---------------------------
- ---------------------------------------------------
By: Clifford M. Gross, Ph.D., CEO By:
Exhibit A
Exclusive Option Agreement
This Exclusive Option Agreement is made and effective this ________________, by
and between UTEK CORPORATION (UTEK), offices located at 202 South Wheeler
Street, Plant City, Florida 33566 and UNIVERSITY OF FLORIDA offices located at
1938 W. University Avenue, Gainesville, FL 32603. Now, therefore, both parties
agree as follows:
1. UNIVERSITY OF FLORIDA hereby grants to UTEK an exclusive option to license
on an exclusive basis the following technology:
<TABLE>
<CAPTION>
<S> <C> <C>
Technology Description
- ----------------------
Title:
Patent #: Date Applied for: Date Awarded:
Patent Application #: Date Applied for:
Inventors:
Copyright: [yes or no ] If yes than provide description:
Date Applied for:
Field of Use: All [yes or no ] If no then describe limited fields of use:
Territory: World-wide [yes or no ] If no then describe limited territory:
</TABLE>
<PAGE>
2. The term for this exclusive option is 12 months unless extended by agreement
of both parties in writing.
3. During the term of this option, UTEK will use its best efforts to
merchandise the above-described technology at terms acceptable to UNIVERSITY
OF FLORIDA. UNIVERSITY OF FLORIDA may accept or reject, at its' discretion,
any offer presented by UTEK for the licensing of this technology.
4. During the term of this option, UNIVERSITY OF FLORIDA will use its best
efforts to provide UTEK with the information it requires to market the
above-described technology.
5. This Agreement shall be governed by and be construed in accordance with the
laws of the state of Florida.
6. This Agreement constitutes the final understanding and agreement between the
parties with respect to the subject matter hereof and supersedes all prior
negotiations, understandings and agreements between the parties, whether
written or oral. This Agreement may be amended, supplemented or changed, only
by an Agreement in writing, signed by both of the parties.
7. Any notice to be given or otherwise given pursuant to this Agreement shall
be in writing and shall be hand delivered, mailed by certified mail, return
receipt requested or sent by overnight courier service as follows:
UTEK CORPORATION
202 South Wheeler Street, Plant City, Florida 33566
UNIVERSITY OF FLORIDA
1938 W. University Avenue, Gainesville, FL 32603
8. If any term of this Agreement is held by a court of competent jurisdiction to
be invalid or unenforceable, then this Agreement, including all of the remaining
terms, will remain in full force and effect as if such invalid or unenforceable
term had never been included.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the
date first above written.
UTEK CORPORATION UNIVERSITY OF FLORIDA
- ---------------------------
- --------------------------------------------------------------
By: Clifford M. Gross, Ph.D., CEO By:
<PAGE>
Exhibit 10.9
Services Agreement
THIS SERVICES AGREEMENT (hereinafter, "Agreement") made this _____ day of May,
1998 ("Effective Date"), by and between The University of Memphis, a public
university within the Tennessee Board of Regents System (hereinafter,
"University"), and UTEK Corporation, a Florida corporation with offices located
at 3214 Polo Place, Plant City, Florida 33567 (hereinafter, "UTEK").
WHEREAS, University seeks to commercially develop specific
intellectual property and technology developed, invented and/or discovered at
the University; and
WHEREAS, UTEK offers to build a bridge between University-based
technology/intellectual property and public/private companies that have the
ability to rapidly bring new products incorporating University's
technology/intellectual property to the marketplace.
W I T N E S S E T H:
NOW THEREFORE, in consideration of the mutual promises herein contained, the
parties have agreed and do hereby enter into this Agreement according to the
provisions set out herein:
1. University may specify in writing intellectual property and/or
technology for UTEK to review and/or assess for commercialization potential
(such specified intellectual property hereinafter, "Technology").
2. If University specifies Technology in writing to UTEK, UTEK agrees to
review such Technology, including any information, materials or disclosures
related thereto, to gauge the potential for successful commercialization of
Technology. With respect to all information, materials, or disclosures by
University to UTEK of Technology and/or disclosures otherwise made pursuant to
this Agreement, UTEK agrees to be bound by and to comply' with the terms of
Exhibit A, "Non-Disclosure Agreement," which is attached hereto and incorporated
herein by' reference.
If UTEK notifies University in writing that a specific Technology has
commercial potential and that UTEK desires to obtain an exclusive license for
such Technology (hereinafter, "Elected Technology"), University agrees to
consider further protection of such Technology, including, but not limited to,
registration of copyright and/or filing of a patent application(s), including
without limitation, filings in either domestic or foreign territories, all
divisions, continuations, continuations-in-part, reissues, and reexaminations or
extensions thereof. If University elects to offer a 12-month, exclusive,
royalty-free license option to UTEK for an Elected Technology for any or all
fields of use, the parties agree with respect to each Elected Technology to
execute a mutually acceptable Exclusive Option Agreement, a copy of which is
attached hereto as Exhibit B and incorporated herein by reference.
<PAGE>
UTEK agrees to use its best efforts to find a corporate licensee
and/or otherwise commercialize Elected Technology on behalf of, for the benefit
of, and at terms acceptable to University pursuant to the terms of any Exclusive
Option Agreement between the parties. If UTEK is able to locate a license
acceptable to University, the parties acknowledge and agree that all royalties
for the Elected Technology shall be paid directly by the licensee to
University'. If UTEK is unable to locate a licensee or any licensee is
unacceptable to University for any reason within the 12-month period and the
parties do not extend this agreement by mutual written agreement, the parties
acknowledge and agree that all rights granted to TEK shall lapse and that
University shall thereafter be free to license, distribute, sell or otherwise
use or dispose of Elected Technology in any manner that University sees fit. The
parties further acknowledge that during the 12-month period, University shall
retain ultimate authority over accepting potential licensees of and making other
decisions related, either directly or indirectly, to an Elected Technology
entirely within University's business discretion.
UTEK acknowledges and agrees that during the 12-month license
hereunder and any written, mutually agreed extension thereof, that it shall not
receive any compensation from University for the services provided hereunder.
3. This Agreement shall commence on the Effective Date and shall continue
for five (5) years.
4. Either party may terminate this Agreement upon sixty (60) day's written
notice to the other party.
5. During the term of this Agreement, neither party shall disclose any
Confidential Information. "Confidential Information" for the purposes of this
Agreement shall include proprietary and confidential information such as, but
not limited to, technology plans, research and development plans, designs,
models, software, product specifications, marketing plans, patent applications,
disclosures and new concepts that, are marked "Confidential" if in writing, or
are confirmed in writing and marked "Confidential" by the disclosing party
within thirty (30) day's if disclosed orally or visually; provided that
Confidential Information shall not include any information that:
(a) is already known to or independently developed by the recipient or
its agents or employees prior to (i) disclosure or (ii) the date of
execution of this Agreement, whichever is earlier;
(b) is disclosed without restriction or disclosure is authorized in
writing by the disclosing party;
(c) becomes publicly available through no fault or action of the
recipient;
(d) is disclosed to recipient by a third party and recipient is not bound
by a non-disclosure agreement with such third party; or
(e) is disclosed pursuant to the laws of the State of Tennessee,
including the Tennessee Open Records Act, Tenn. Code Ann. ss.
10-7-501 et seq., federal law, subpoena or court order.
<PAGE>
UTEK acknowledges and agrees that it shall not provide information or
materials related to any Elected Technology to third parties until such third
party has executed Exhibit C, entitled "Non-Disclosure Agreement", which is
attached hereto and incorporated herein by reference. UTEK acknowledges and
agrees that in the event that it breaches its obligation to require any
potential licensee to first execute Exhibit C before reviewing any information
related to an Elected Technology, University shall be entitled to reasonable
attorneys fees, any and all damages incurred by University as a result of such
breach. UTEK further agrees that disclosure of Confidential Information to third
parties and/or unauthorized disclosure of Confidential Information might result
in significant and irreparable harm to University, and that University shall be
entitled to obtain preliminary and permanent injunctive relief against UTEK in
addition to any other relief available at law or in equity.
6. This Agreement shall be governed, construed and enforced in accordance
with the laws of the State of Tennessee as the site for performance of this
Agreement without regard to its conflict of laws. UTEK shall comply with all
applicable federal, state and local laws, and regulations in performing with his
duties under this Agreement.
7. This Agreement constitutes the final understanding and agreement
between the parties with respect to the subject matter hereof and supersedes all
prior negotiations, understandings and agreements between the parties whether
written or oral. Neither party was induced to enter into this Agreement by any
statements or representations not contained in this Agreement. Neither party
shall have any authority, and neither party shall represent that it has
authority, to assume or create any obligation, express or implied, on behalf of
the other party, except as provided in this Agreement. Each party is an
independent contractor, and this Agreement shall not be construed as creating a
partnership, joint venture or employment relationship between the parties or as
creating any other form of legal association that would impose liability on one
party for the act or failure to act of the other party. UTEK, being an
independent contractor and not an employee of this University, agrees to carry
adequate public liability and other appropriate forms of insurance, to pay all
taxes incident thereto. This Agreement may be amended, supplemented or revised
only by a written agreement signed by both parties hereto.
8. Any notice required or permitted by this Agreement shall be in writing
and shall be hand-delivered, mailed by certified mail, return receipt requested,
or sent by overnight courier to the respective party at the following address:
UTEK Corporation The University of Memphis
3214 Polo Place c/o Vice Provost for Research
Plant City', Florida 33567 308 Administration Building
Memphis, Tennessee 38152
9. If any term of this Agreement is held by a court of competent
jurisdiction to be invalid or unenforceable, then this Agreement, including all
of the remaining terms, will remain in full force and effect as if such invalid
or unenforceable term had never been included.
<PAGE>
10. UTEK warrants that no payment has been or will be made, either
directly or indirectly, to any officer or employee of the state of Tennessee as
wages, compensation, or gifts in exchange for acting as officer, agent,
employee, subcontractor, or consultant to UTEK in connection with any work
contemplated or performed relative to this Agreement.
11. The parties agree to comply with the Titles VI and VII of the Civil
Rights Act of 1964, Title IX of the Education Amendments of 1972, Section 504 of
the Rehabilitation Act of 1973, Executive Order 11,246, the Americans with
Disabilities Act of 1990 and the related regulations to each. Each party assures
that it will not discriminate against any individual including, but not limited
to, employees or applicants for employment and/or students because of race,
religion, creed, color, sex, age, disability, veteran status or national origin.
The parties also agree to take affirmative action to ensure that applicants are
employed and that employees are treated during their employment without regard
to their race, religion, creed, color, sex, disability or national origin. Such
action shall include, but not be limited to, the following: employment,
upgrading, demotion or transfer, recruitment or recruitment advertising, layoff
or termination, rates of pay or other forms of compensation, and selection
available to employees and applicants for employment.
12. If either party fails to fulfill in timely and proper manner its
obligations under this Agreement, or if either party shall violate any of the
terms of this Agreement, the other party shall have the right to immediately
terminate this Agreement. Notwithstanding the above, neither party shall not be
relieved of liability to the other party for damages sustained by virtue of such
party's breach of this Agreement by that party.
13. Neither party shall assign this Agreement or enter into sub-contracts
for any of the work described herein without obtaining the prior written
approval of the other party.
14. Any and all claims against the State of Tennessee, its officers,
agents, and employees in performing any responsibility specifically required
under the terms of this Agreement shall be submitted to the Board of Claims or
the Claims Commission of the State of Tennessee. Damages recoverable against the
State of Tennessee shall be limited to claims paid by the Board of Claims or the
Claims Commission pursuant to Tennessee law.
15. Whenever the consent or approval of a party under this Agreement is
required, the consent or approval, if required to be obtained from the
University, must be given by the University's Vice Provost for Research. UTEK's
use of University's name in advertising, publicity, or other promotional
activities is expressly prohibited unless required by law or UTEK first obtains
University's written consent, provided that UTEK may indicate to its customers
and/or potential customers that it has an existing agreement with University so
long as such agreement remains in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate counterpart original by their duly authorized representatives.
UTEK CORPORATION THE UNIVERSITY OF MEMPHIS
BY: ____________________________ BY:____________________________
Clifford Gross, President V. Lane Rawlins, President
---------------------------- ----------------------------
Date Date
<PAGE>
UTEK's Non-Disclosure Obligations
I. DEFINITIONS
As used herein, the following terms shall have the following meanings:
"Confidential Information" shall mean any and all business or technical
information related to Invention, including no without limitation patents,
knowledge, know-how, practices, process, trade secrets, trademarks, copyrights
or other information and/or materials disclosed to UTEK by University and/or its
agents and employees, either orally, in writing or in other tangible or
intangible forms, that are related in anyway to Invention.
"Invention" shall mean any information, including without limitation
intellectual property or technology otherwise developed by University and its
agents or employees, or to which the University has received the exclusive
license rights thereto.
II. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION BY UTEK
With regard to any Confidential Information disclosed by University to UTEK,
UTEK agrees to the following:
1. UTEK acknowledges that such disclosure by University does not grant or
convey to the UTEK any right or license to use or distribute any
Confidential Information or to distribute, make, sell, or otherwise use
Invention, whether patentable or not, unless otherwise granted to UTEK in
a separate written agreement by the University.
2. UTEK shall not disclose any information and/or materials related to
Invention, including Confidential Information, to any third party, or take
any action that would result in the disclosure of any such information
and/or materials related to Invention to any third party unless such third
party executes in advance of disclosure the attached Exhibit C. UTEK may
disclose and/or use non-Confidential Information in marketing or other
activities in accordance with this Agreement.
3. UTEK shall limit dissemination of Confidential Information only to those
employees and agents (i) who require access to evaluate Invention on
behalf of UTEK, (ii) who execute a non-disclosure agreement containing the
non-disclosure obligations as set forth herein to protect such
Confidential Information, and (iii) for whom UTEK agrees to be fully
responsible, including the actions of such employees and agents and any
and all uses by such employees and/or agents of Confidential Information
or Invention.
4. UTEK agrees to return any and all Confidential Information or materials
related thereto upon the earlier of (i) the completion of UTEK's
evaluation; or (ii) termination or expiration of the Agreement between the
parties.
5. UTEK agrees that the standard of care to be applied in the performance of
the obligations set forth above shall be the standard of care applied by
the UTEK in treating its own Confidential Information and/or other
confidential information of like importance received by UTEK in the course
of its business, but at a minimum UTEK shall exercise reasonable care to
prevent unauthorized copying, use, publication, or disclosure.
This Section II is severable from all other provisions of the Agreement between
the parties and shall stand on its own and remain in full force and effect as if
it is an agreement unto itself supported by valid consideration, receipt and
sufficiency of which is hereby acknowledged by the parties. The term of the
provisions of this Section II shall survive termination or expiration of this
Agreement or any determination that this Agreement or any portion hereof is
void, voidable, invalid, or unenforceable. In the event that UTEK breaches any
obligations under the Agreement, UTEK agrees that University shall be entitled
to reasonable attorney's fees, any' and all costs necessary for prosecution of
such action and any damages that University may incur as a result of such
breach. UTEK further agrees that disclosure of Confidential Information by UTEK
to third parties and/or unauthorized use of Confidential Information or
Invention by UTEK might result in significant and irreparable harm to University
and that University shall be entitled to obtain preliminary and permanent
injunctive relief in addition to any other relief available at law or in equity.
<PAGE>
Exhibit 10.10
Consulting Agreement
This Consulting Agreement is made and effective this ________________,1999, by
and between UTEK CORPORATION, offices located at 202 South Wheeler Street, Plant
City, Florida 33566 ("Consultant") and NuElectric Corporation, 624 East Tarpon
Avenue, Tarpon Springs, Florida 34689.
Now, therefore, Consultant and Client agree as follows:
1. Engagement:
Client hereby engages Consultant, and Consultant accepts engagement, to provide
the Client the following services:
A. Conceptualize product and or service enhancement strategies that could
potentially benefit the Client utilizing new intellectual property or
technology.
B. Review and identify existing University, Government Laboratory and corporate
technologies available for license or purchase to enhance the Clients business.
C. Provide the Client with a description of each specific technology it finds
that could potentially be of value to the Client.
D. Refine Client's technology search based upon feedback from the Client.
E. Consultant will negotiate with technology sources to acquire licensees for
specific technologies. Upon approval from the Client regarding royalties and
costs for each specific technology, Consultant will seek to acquire the
technologies for the Client. Client is not required to acquire any technology
from the Consultant unless it chooses to do so.
2. Term:
Consultant shall provide services to the Client pursuant to this Agreement for a
term commencing on 11-16-98 and ending on 11-15-99, unless otherwise extended by
mutual agreement.
3. Time:
Consultant's daily schedule and hours worked under this Agreement on a given day
shall be subject to Consultant's discretion. Client relies upon Consultant to
devote its best efforts to fulfill the spirit and purpose of this Agreement.
4. Payment:
Client shall pay Consultant a mutually agreeable price, in the form of equity or
cash or a combination thereof, in exchange for the acquisition of Consultant's
subsidiary containing Client approved technology assets. This payment is
contingent on Consultant finding and acquiring technology that is approved by
the Client with regard to substance and price, prior to its acquisition by the
Consultant. If the Consultant does not find any technology deemed suitable by
the Client, the Client is not obligated to pay any equity or monies to the
Consultant.
<PAGE>
5. Confidentiality:
During the term of this Agreement, and thereafter for a period of two (2) years,
Consultant and Client shall not, without the prior written consent of the other,
disclose to anyone any confidential information. "Confidential Information" for
the purposes of this Agreement shall include proprietary and confidential
information such as, but not limited to, technology plans, research and
development plans, patent applications, reports, designs, models, software,
product specifications, marketing plans, and new concepts.
Confidential information shall not include any information that:
A. Is disclosed by either the Client or the Consultant without restriction.
B. Becomes publicly available through no act of the Client or the Consultant.
C. Is rightfully received by the Client or the Consultant from a third party.
D. Is required by the Client or the Consultant to be disseminated for the
purposes of this agreement.
6. Warranty:
Consultant does not provide or imply any warranty as to the commercial viability
of any Client acquired technology. Consultant does not provide any
representation, warranty or any other type of assurance as to the potential that
Client acquired technology may infringe any existing technology. These
assurances are left up to the Client's own due diligence.
7. Utilization of Consultant's Findings:
In the event that the Client does not wish to acquire technology identified by
the Consultant under the terms of this Agreement, Client will not seek to
acquire Consultant identified technology directly from its sources during the
term of this Agreement, and thereafter for a period of two (2) years.
8. Independent Contractor:
Consultant is and throughout this Agreement an Independent Contractor and not an
employee, partner or agent of the Client.
9. Termination:
This Agreement may be terminated by either party with 30 days written notice.
10. Controlling Law:
This Agreement shall be governed by and be construed in accordance with the laws
of the State of Florida.
11. Headings:
The headings in this Agreement are inserted for convenience only and shall not
be used to define, limit or describe the scope of this Agreement or any of the
obligations herein.
12. Final Agreement:
This Agreement constitutes the final understanding and agreement between the
parties with respect to the subject matter hereof and supersedes all prior
negotiations, understandings and
<PAGE>
agreements between the parties, whether written or oral. This Agreement may be
amended, supplemented or changed, only by an Agreement in writing, signed by
both parties.
13. Notices:
Any notice to be given or otherwise given pursuant to this Agreement shall be in
writing and shall be hand delivered, mailed by certified mail, return receipt
requested, or sent by overnight courier service as follows:
If to Consultant:
UTEK CORPORATION
202 South Wheeler Street, Plant City, Florida 33566
If to Client:
NuElectric Corporation
624 East Tarpon Avenue, Tarpon Springs, Florida 34689
14. Severability:
If any term of this Agreement is held by a court of competent jurisdiction to be
invalid or unenforceable, then this Agreement, including all of the remaining
terms, will remain in full force and effect as if such invalid or unenforceable
term had never been included.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the
date first above written.
UTEK CORPORATION (Consultant) NUELECTRIC CORPORATION
(Client)
- --------------------------------- -------------------------------
By: Clifford M. Gross, Ph.D., CEO By: Laurie C. Scala, President
<PAGE>
Exhibit 10.11
Consulting Agreement
This Consulting Agreement is made and effective this ________________,1999, by
and between UTEK CORPORATION, offices located at 202 South Wheeler Street, Plant
City, New York 33566 ("Consultant") and Darby Group Companies, Inc., 865 Merrick
Avenue, Westbury, New York 11590.
Now, therefore, Consultant and Client agree as follows:
1. Engagement:
Client hereby engages Consultant, and Consultant accepts engagement, to provide
the Client the following services:
A. Conceptualize product and or service enhancement strategies that could
potentially benefit the Client utilizing new intellectual property or
technology.
B. Review and identify existing University, Government Laboratory and corporate
technologies available for license or purchase to enhance the Clients
business.
C. Provide the Client with a description of each specific technology it finds
that could potentially be of value to the Client.
D. Refine Client's technology search based upon feedback from the Client.
E. Consultant will negotiate with technology sources to acquire licensees for
specific technologies. Upon approval from the Client regarding royalties and
costs for each specific technology, Consultant will seek to acquire the
technologies for the Client. Client is not required to acquire any
technology from the Consultant unless it chooses to do so.
2. Term:
Consultant shall provide services to the Client pursuant to this Agreement for a
term commencing on 11-16-98 and ending on 11-15-99, unless otherwise extended by
mutual agreement.
3. Time:
Consultant's daily schedule and hours worked under this Agreement on a given day
shall be subject to Consultant's discretion. Client relies upon Consultant to
devote its best efforts to fulfill the spirit and purpose of this Agreement.
4. Payment:
Client shall pay Consultant a mutually agreeable price, in the form of equity or
cash or a combination thereof, in exchange for the acquisition of Consultant's
subsidiary containing Client approved technology assets. This payment is
contingent on Consultant finding and acquiring technology that is approved by
the Client with regard to substance and price, prior to its acquisition by the
Consultant. If the Consultant does not find any technology deemed suitable by
the Client, the Client is not obligated to pay any equity or monies to the
Consultant.
<PAGE>
5. Confidentiality:
During the term of this Agreement, and thereafter for a period of two (2) years,
Consultant and Client shall not, without the prior written consent of the other,
disclose to anyone any confidential information. "Confidential Information" for
the purposes of this Agreement shall include proprietary and confidential
information such as, but not limited to, technology plans, research and
development plans, patent applications, reports, designs, models, software,
product specifications, marketing plans, and new concepts.
Confidential information shall not include any information that:
A. Is disclosed by either the Client or the Consultant without restriction.
B. Becomes publicly available through no act of the Client or the Consultant.
C. Is rightfully received by the Client or the Consultant from a third party.
D. Is required by the Client or the Consultant to be disseminated for the
purposes of this agreement.
6. Warranty:
Consultant does not provide or imply any warranty as to the commercial viability
of any Client acquired technology. Consultant does not provide any
representation, warranty or any other type of assurance as to the potential that
Client acquired technology may infringe any existing technology. These
assurances are left up to the Client's own due diligence.
7. Utilization of Consultant's Findings:
In the event that the Client does not wish to acquire technology identified by
the Consultant under the terms of this Agreement, Client will not seek to
acquire Consultant identified technology directly from its sources during the
term of this Agreement, and thereafter for a period of two (2) years.
8. Independent Contractor:
Consultant is and throughout this Agreement an Independent Contractor and not an
employee, partner or agent of the Client.
9. Termination:
This Agreement may be terminated by either party with 30 days written notice.
10. Controlling Law:
This Agreement shall be governed by and be construed in accordance with the laws
of the State of New York.
11. Headings:
The headings in this Agreement are inserted for convenience only and shall not
be used to define, limit or describe the scope of this Agreement or any of the
obligations herein.
12. Final Agreement:
This Agreement constitutes the final understanding and agreement between the
parties with respect to the subject matter hereof and supersedes all prior
negotiations, understandings and agreements between the parties, whether written
or oral. This Agreement may be amended, supplemented or changed, only by an
Agreement in writing, signed by both parties.
<PAGE>
13. Notices:
Any notice to be given or otherwise given pursuant to this Agreement shall be in
writing and shall be hand delivered, mailed by certified mail, return receipt
requested, or sent by overnight courier service as follows:
If to Consultant:
UTEK CORPORATION
202 South Wheeler Street, Plant City, New York 33566
If to Client:
Darby Group Companies, Inc.
865 Merrick Avenue, Westbury, New York 11590
14. Severability:
If any term of this Agreement is held by a court of competent jurisdiction to be
invalid or unenforceable, then this Agreement, including all of the remaining
terms, will remain in full force and effect as if such invalid or unenforceable
term had never been included.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the
date first above written.
UTEK CORPORATION (Consultant) DARBY GROUP COMPANIES,
INC. (Client)
- --------------------------------- -----------------------------
By: Clifford M. Gross, Ph.D., CEO By: Mr. Gary Rosenberg
<PAGE>
License Agreement
THIS AGREEMENT, effective the _______ day of SEPTEMBER 1998, is between Clean
Water Technologies, Inc., a Florida corporation, ("CWT"), located at 202 South
Wheeler Street, Plant City Florida, and the University of South Florida Research
Foundation, Inc., a University of South Florida (USF) direct-support not for
profit organization under Florida law ("USFRF").
Introduction
WHEREAS, CWT will be actively involved in the merchandising of technologies for
purifying water.
WHEREAS, USF developed the following technology:
Method for removing arsenic species from a aqueous liquid using modified zeolite
minerals. US patent applications 60/036,704 and 90/016,126. Inventor Dr. Dagmar
Bonnin. A copy of the patent application is contained in Appendix A.
WHEREAS, USFRF is the exclusive licensor of USF Technology and is willing to
grant CWT an exclusive license to use USF Technology and other USF research
results derived pursuant to this Agreement, on the terms and conditions therein;
and
WHEREAS, USFRF believes it is in public interest to grant CWT license set forth
below.
NOW THEREFORE, in consideration of the premises and mutual covenants set forth
herein, and intending to be legally bound, the parties agree as follows:
I. Definitions
A. "USF Patent Rights" shall mean the USF Patent Applications listed
above and any successor application, domestic or foreign resulting
therefrom, any US or foreign patents issuing therefrom.
B. "USF Technology" shall mean method for removing arsenic species
from a aqueous liquid using modified zeolite minerals. For this
technology, USF Technology shall include patent rights and know-how
related directly thereto.
C. "Licensed Product" shall mean any CWT product, system and/or
process in which USF Technology is used.
D. To "Commercially Exploit" or "Commercial Exploitation" of a
Licensed Product, shall mean to provide the Licensed Product to a
customer, in exchange for valuable consideration.
E. "Revenue for a Licensed Product shall mean consideration due or
paid to CWT for CWT's providing of a Licensed Product to a
customer.
F. "Territory" shall mean Worldwide.
<PAGE>
II. Grant
Subject to USFRF's retained rights and covenants set forth in Section
VIII Below, CWT is granted the exclusive right and license to
Commercially Exploit Licensed Products in the Territory.
III. Best Efforts
CWT shall use its best efforts to develop and Commercially Exploit
Licensed Products in the Territory.
IV. License Fees and Running Royalties
CWT agrees to pay license fees, and running royalties (all payable to
USFRF) as follows:
A. For the arsenic removal technology (Dr. Dagmar Bonnin's
technology) initial license fee of Seven Hundred Thousand
Common Shares of CWT (700,000) to be delivered within (30)
days after full execution of this License. This represents 7%
of the authorized shares of CWT.
B. Running Royalties equal to:
Two Percent (2%) of the Revenue resulting from Commercial
Exploitation for Licensed Products dealing with arsenic
removal technology.
C. CWT shall pay to USF a minimum royalty payments the following:
For the arsenic removal technology; Zero (0) dollars for the
first twenty four (24) months; Five thousand ($5,000.00)
dollars at the end of year three (3); Six thousand ($6,000.00)
dollars at the end of year four (4); Seventy-two hundred
($7,200.00) dollars at the end of year five (5);
Eight thousand six hundred forty ($8,640.00) dollars at the
end of year six (6); And ten thousand three hundred sixty
eight ($10,368.00) at the end of year seven (7); and same sum
for each successive year thereafter during the term of this
Agreement.
V. Patent Prosecution
The filing, prosecution and maintenance of all USF Patent Rights shall
be at the sole discretion of USF, provided that at CWT's request and
sole expense, USFRF will arrange for USF to seek, obtain and maintain
the USF Patent Rights and requested other protection, in the territory,
to the extent that USF is lawfully entitled to do so all of which shall
be incorporated in USF Patent Rights. Should CWT elect not to seek,
obtain or maintain a part of USF Patent Rights, all rights to such part
shall revert to USFRF, and CWT shall have no further interest therein.
VI. Assignability
This Agreement may be assigned to any person or entity without USFRF's
advance notice, and thereafter may be assigned to any person or entity
only with advanced written approval from USFRF; provided that USFRF
will not reasonably withhold such approval in a timely manner, and
further provided that any such assignee agrees to comply with all of
the terms and conditions hereunder.
<PAGE>
VII. Sublicensing
CWT's rights and obligations under this Agreement may be sublicensed
without USFRF's advance written permission, provided CWT is in
compliance with all of its obligations under this Agreement.
USFRF will permit CWT to sublicense its rights to Commercially Exploit
Licensed Products, provided that CWT pay royalties to USFRF as if CWT
Had Commercially Exploited Licensed Products sold by it sublicenses
which may have been granted by CWT. All sub-licensees shall agree to
comply with all of the terms and conditions of this Agreement. CWT
shall provide USFRF with a copy of each executed sublicense within
fifteen (15) days of its execution.
VIII. USFRF Retained Rights and Covenants
USFRF retains for itself and for USF the right to do all things granted
to CWT under Section II, and USFRF covenants that USFRF will not
license others to Commercially Exploit USF Technology licensed to CWT
under this Agreement, and will not itself so Commercially Exploit,
unless
(A) authorized by this Agreement, or
(B) CWT becomes insolvent, or
(C) anyone files a lien against this Agreement, or
(D) CWT takes any action, or fails to take any action, the result
of which gives a third party the right to acquire a security
interest in this Agreement and/or USF Patent Rights, or
(E) CWT files for bankruptcy or a receiver is appointed, or
(F) CWT ceases to carry on its business, with the exception of
merger, reorganization, acquisition, or similar restructuring.
(G) CWT materially breaches this Agreement in a manner which
causes the Agreement to terminate or gives USFRF the right to
terminate under Section XII.
IX. Product Liability/Insurance
CWT shall, at all times during the term of this Agreement and
thereafter, be solely responsible for, and defend, hold harmless and
indemnify State of Florida, Board of Regents, USF, USFRF, their
trustees, officers, employees, agents and other representatives,
against any claims and expenses, including legal expenses and
reasonable attorney's fees, arising out of the death of or injury to
any person or property based upon products and/or services produced,
provided or developed for, or by CWT, or commercially exploited by CWT
pursuant to its rights under this Agreement. CWT shall obtain and carry
in full force and effect product liability insurance, in amounts
customary in the relevant industry in which CWT commercially exploits
licensed products which shall protect USF, USFRF, their trustees, the
Board of Regents, officers, employees, and agents and the State of
Florida and other representatives in regard to the foregoing events at
such time as CWT begins to supply licensed products to the marketplace.
<PAGE>
X. Record Keeping
A. CWT shall keep full, true and accurate books of account
containing all particulars that may be necessary for the
purpose of showing the amounts payable to USFRF hereunder.
Said books of account shall be kept at CWT's principal place
of business. Said books and the supporting data shall be open
at all reasonable times, with reasonable advanced notice, for
five (5) years following the end of the calendar year to which
they pertain, to the inspection of USFRF or its agents for the
purpose of verifying CWT's royalty statement or compliance in
other respects with Agreement.
B. CWT within ninety (90) days after each six (6) months, shall
deliver to USFRF true and accurate reports, giving such
particulars of the business conducted by CWT during the six
(6) months as shall be pertinent to royalty accounting
hereunder. These shall include at least the following:
(i) the number of Licensed Products provided by CWT to
its customers, if any,
(ii) the Revenue derived by CWT from it Commercial
Exploitation of Licensed Products, if any, and
(iii) the royalties due pursuant to Section IV
With each such report submitted, CWT shall pay the royalties
and any other consideration due and payable under this
Agreement. If no royalties, fees or other consideration shall
be due, CWT shall so report.
C. On or before the ninetieth (90th) day following the close of
CWT's Fiscal year, CWT shall provide USFRF with CWT's
financial Statements for the preceding fiscal year including,
at a minimum, a Balance sheet and an Operating Statement.
D. The payments for royalties, fees or other consideration set
forth in This Agreement shall, if overdue, bear interest until
payment at the monthly rate of one percent (1%). The payment
of such interest shall not foreclose USFRF from exercising any
other rights either may have as a consequence of the lateness
of any payment.
E. CWT hereby agrees that it shall not sell, transfer, export or
re-export any Licensed Products or related information in any
form, or any direct products of such information, except in
compliance with all applicable laws, including the export laws
of any U.S. government agency and any regulations thereunder,
and will not sell, transfer, export or re-export any such
Licensed Products or information to any persons or any
entities with regard to which there exist grounds to suspect
or believe that they are violating such laws. CWT shall be
solely responsible for obtaining all licenses, permits or
authorizations required from the U.S. and any other government
for any such export or re-export.
XI. Non Use of Names
CWT shall not use the names of the USF or USFRF, nor any adaptation of
either, in any advertising, promotional or sales literature without
prior written consent obtained from USF and/or USFRF in each case,
except that CWT may sate that it is licensed under one or more of the
patents and/or applications comprising the USF Patent Rights.
<PAGE>
XII. Term and Termination
A. Unless sooner terminated as provided herein, the royalty
Obligations of this Agreement will expire with respect to a
given Licensed Product the longer of twenty (20) years from
the date of the execution of this Agreement or the expiration
of the last to expire patent which covers the licensed
intellectual property in the Territory. Notwithstanding the
foregoing, the parties hereto agree that the royalty
provisions of Paragraph IV.B. and IV C., are not solely
dependent upon Patent Rights, and CWT's obligations to pay
royalties under paragraph IV.C.(I) hereinabove shall continue
unabated regardless of any of the foregoing expirations.
B. In the event either party files for bankruptcy or a receiver
is appointed, this Agreement may immediately thereafter be
terminated at the option of the other party.
C. Should CWT fail to pay the royalties, fees and/or other
consideration Due and payable hereunder, USFRF shall have the
right to terminate this Agreement on forty-five (45) days
written notice. Upon the expiration of the forty-five (45) day
period, if CWT shall not have paid all such royalties and
interest thereon, USFRF shall have the right to terminate this
Agreement. Upon any material breach or default of Agreement by
CWT, other than those occurrences set out hereinabove which
shall always take precedence in that order over any material
breach or default referred to in this Section, USFRF shall
have the right to terminate this Agreement and the rights,
privileges and license granted hereunder upon forty-five (45)
days' written notice to CWT. Such termination shall become
effective unless CWT shall have cured any such breach or
default prior to the expiration of forty-five (45) days from
the date CWT receives notice of the breach or default.
D. Upon termination of this Agreement for any reason, nothing
herein Shall be construed to release either party from any
obligation that matured prior to the effective date of such
termination. CWT may, however, after the effective date of
such termination, complete Commercial Exploitation of Licensed
Products for which CWT has received consideration at the time
of such termination and sell the same, provided that CWT shall
pay to USFRF the royalties or other consideration thereon as
required under the provisions of Section IV of this Agreement,
and shall submit the reports required under Section X
regarding the Commercial Exploitation of the Licensed
Products.
E. Upon termination of this Agreement for any reason, all
intellectual Property rights licensed hereunder, including
without limitation, all USF Patent Rights and all USF
Technology shall revert to USF and USFRF, and CWT shall have
no further right to or continuing Interest. In addition, any
sublicenses hereunder shall terminate, unless accepted by
USFRF.
F. CWT, its successors or assigns, shall have the option to
terminate This license agreement upon thirty (30) days written
notice and in That event, CWT shall cease using USF Technology
and return same to USF. In this event, it is understood that
all future Monetary obligations under this Agreement shall be
void and any Monies paid to date to USFRF shall be
non-refundable to CWT, or its Assigns.
<PAGE>
XIII. Payments Notices and Other Communications
Any payment, notice or other communication made to any party pursuant
to this Agreement shall be sufficiently made or given on the date of
mailing if sent to such party by certified first class mail or air
courier, postage prepaid, addressed to it at its address below, or at
such other address as it shall have designated by written notice given
to the other party.
In the case of USF:
Director, Patents & Licensing
4202 East Fowler Avenue FAO 126
Tampa, Florida 33620-7900
In the case of USFRF:
USF Research Foundation, Inc.
Post Office Box 30045
Tampa, Florida 33620-3044
In the case of CWT:
Clean Water Technologies, Inc.
202 South Wheeler Street
Plant City, Florida 33566
XIV. Infringement
CWT understands that USFRF makes no representative and provides no
assurances that Commercial Exploitation of Licensed Products under this
Agreement does not and will not in the future, infringe or otherwise
violate the rights of others.
XI. Miscellaneous Provisions
A. Each party represents and warrants that it has the authority
to enter Into this Agreement and that the execution, delivery
and performance of this Agreement does not conflict with any
agreement, or understanding, either written or oral, to which
it is a party or to which it is otherwise bound.
B. This Agreement shall be construed, governed, interpreted and
Applied in accordance with the laws of the State of Florida,
U.S.A.
C. The parties hereto acknowledge that this Agreement sets forth
the Entire agreement and understanding of the parties, hereto
as to the subject matter hereof, and shall not be subject to
any change or modification except by the execution of a
written instrument subscribed to by the parties hereto.
D. If any term, covenant or condition of this Agreement or the
Application thereof to any party or circumstance shall, to
any extent be held to be invalid or unenforceable,
<PAGE>
(i) the remainder of this Agreement, or the application
of such term, covenant or condition to the parties or
circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected
thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the
fullest extent permitted by law; and
(ii) the parties hereto covenant and agree to renegotiate
any such term, covenant or application thereof in
good faith in order to provide a reasonably
acceptable alternative to the term, covenant or
condition of this Agreement or the application
thereof that is invalid or unenforceable, it being
the intent of the parties that the basic purpose of
this Agreement are to be effectuated.
E. In the event any provision of this Agreement is inconsistent
with USF Rules and Policy in effect as of March 1, 1998, USF
Rules And Policy shall control.
F. CWT agrees to use in connection with Licensed Products used
And/or provided in the United States all applicable United
States Patent numbers and/or copyright notices requested by
USFRF. All Licensed Products used and/or provided in other
countries shall be marked in such a manner as to conform with
the patent, copyright and other laws and practice of the
country.
G. The failure of any party to assert a right hereunder or to
insist upon Compliance with any term or condition of this
Agreement shall not constitute a waiver of that right or
excuse a similar subsequent failure to perform any such term
or condition by the other party.
H. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, USF
AND USFRF MAKE NO REPRESENTATION AND EXTEND NO WARRANTIES OF
ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED
TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, NON-INFRINGEMENT, AND VALIDITY OF USF PATENT RIGHTS.
I. It is understood and agreed that USF is a third party
beneficiary of this Agreement.
J. This Agreement shall not be effective until such time that
USFRF Has received the up-front fee of Seven Hundred Thousand
(700,000) Shares of CWT. If these shares are not received
within thirty days (30) from the execution of this Agreement,
then this Agreement shall become null and void and the parties
shall be released from its terms and obligations.
K. This Agreement, together with any amendments hereto, shall
inure to the benefits of CWT, its successors and/or assigns.
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals and duly
executed this Agreement the day and year set forth below.
UNIVERSITY OF SOUTH FLORIDA
RESEARCH FOUNDATION, INC.
BY:____________________________ WITNESS:___________________________
Name
Title_____________________
Date______________________
Clean Water Technologies, Inc.
BY:_____________________________ WITNESS:___________________________
Name
Title______________________
Date_______________________
<PAGE>
LICENSE AGREEMENT
THIS AGREEMENT, effective the _______ day of SEPTEMBER 1999, is between Safe
Water Technologies, Inc., a Florida corporation, ("SWT"), located at 202 South
Wheeler Street, Plant City Florida, and the University of South Florida Research
Foundation, Inc., a corporation not for profit under Chapter 617 Florida
Statutes, and a direct support organization of the University of South Florida
(USF) pursuant to section 240.299 Florida Statutes (USFRF).
Introduction
WHEREAS, SWT will be actively involved in the merchandising of technologies for
purifying water.
WHEREAS, USF developed the following technology:
A method and apparatus for the detection and classification of microorganisms in
water (USF Reference Garcia-Rubio 94B27). A description of the technology is
attached in Exhibit A.
WHEREAS, USFRF is the exclusive licensor of USF Technology and is willing to
grant SWT an exclusive license to use USF Technology and other USF research
results derived pursuant to this Agreement, on the terms and conditions therein;
and
WHEREAS, USFRF believes it is in public interest to grant SWT license set forth
below.
NOW THEREFORE, in consideration of the premises and mutual covenants set forth
herein, and intending to be legally bound, the parties agree as follows:
I. Definitions
A. "USF Patent Rights" shall mean the USF Patent Application listed
above and any successor application, domestic or foreign resulting
therefrom, and any US or foreign patents issuing therefrom.
B. "USF Technology" shall mean a method and apparatus for the
detection and classification of microorganisms in water (USF
Reference Garcia-Rubio 94B27). For this technology, USF Technology
shall include patent rights and know-how related directly thereto.
C. "Licensed Product" shall mean any SWT product, system and/or
process in which USF Technology is used.
D. To "Commercially Exploit" or "Commercial Exploitation" of a
Licensed Product, shall mean to provide the Licensed Product to a
customer, in exchange for valuable consideration.
E. "Revenue" for a Licensed Product shall mean consideration due or
paid to SWT for SWT's providing of a Licensed Product to a
customer.
F. "Territory" shall mean Worldwide.
<PAGE>
II. Grant
Subject to USFRF's retained rights and covenants set forth in Section
VIII below, SWT is granted the exclusive right and license to
Commercially Exploit Licensed Products in the Territory.
III. Best Efforts
SWT shall use its best efforts to develop and Commercially Exploit
Licensed Products in the Territory.
IV. License Fees and Running Royalties
SWT agrees to pay license fees, and running royalties (all payable to
USFRF) as follows:
A. For this technology for the detection and classification of
microorganisms in water (Dr. Garcia-Rubio's technology)
initial license fee of two million Common Shares of SWT
(2,000,000) to be delivered within (30) days after full
execution of this License.
This represents 20% of the authorized shares of SWT.
B. Running Royalties equal to:
Two Percent (2%) of the Revenue resulting from Commercial
Exploitation for Licensed Products utilizing this technology
V. Patent Prosecution
The filing, prosecution and maintenance of all USF Patent Rights shall
be at the sole discretion of USF, provided that at SWT's request and
sole expense, USFRF will arrange for USF to seek, obtain and maintain
the USF Patent Rights and requested other protection, in the territory,
to the extent that USF is lawfully entitled to do so, all of which
shall be incorporated in USF Patent Rights. Should SWT elect not to
seek, obtain or maintain a part of USF Patent Rights, all rights to
such part shall revert to USFRF, and SWT shall have no further interest
therein.
VI. Assignability
This Agreement may be assigned to any person or entity without USFRF's
advance notice, and thereafter may be assigned to any person or entity
only with advanced written approval from USFRF; provided that USFRF
will not reasonably withhold such approval in a timely manner, and
further provided that any such assignee agrees to comply with all of
the terms and conditions hereunder.
VII. Sublicensing
SWT's rights and obligations under this Agreement may be sublicensed
without USFRF's advance written permission, provided SWT is in
compliance with all of its obligations under this Agreement.
<PAGE>
USFRF will permit SWT to sublicense its rights to Commercially Exploit
Licensed Products, provided that SWT pay royalties to USFRF as if SWT
had Commercially Exploited Licensed Products sold by it's sublicensees
which may have been granted sublicenses by SWT. All sub-licensees shall
agree to comply with all of the terms and conditions of this Agreement.
SWT shall provide USFRF with a copy of each executed sublicense within
fifteen (15) days of its execution.
VIII. USFRF Retained Rights and Covenants
USFRF retains for itself and for USF the right to do all things granted
to SWT under Section II, and USFRF covenants that USFRF will not
license others to Commercially Exploit USF Technology licensed to SWT
under this Agreement, and will not itself so Commercially Exploit,
unless
(A) authorized by this Agreement, or
(B) SWT becomes insolvent, or
(C) anyone files a lien against this Agreement, or
(D) SWT takes any action, or fails to take any action, the result
of which gives a third party the right to acquire a security
interest in this Agreement and/or USF Patent Rights, or
(E) SWT files for bankruptcy or a receiver is appointed, or
(F) SWT ceases to carry on its business, with the exception of
merger, reorganization, acquisition, or similar restructuring.
(G) SWT materially breaches this Agreement in a manner which
causes the Agreement to terminate or gives USFRF the right to
terminate under Section XII.
IX. Product Liability/Insurance
SWT shall, at all times during the term of this Agreement and
thereafter, be solely responsible for, and defend, hold harmless and
indemnify the State of Florida, Board of Regents, USF, USFRF, their
trustees, officers, employees, agents and other representatives,
against any claims and expenses, including legal expenses and
reasonable attorney's fees, arising out of the death of or injury to
any person or property based upon products and/or services produced,
provided or developed for, or by SWT, or commercially exploited by SWT
pursuant to its rights under this Agreement. SWT shall obtain and carry
in full force and effect product liability insurance, in amounts
customary in the relevant industry in which SWT commercially exploits
licensed products which shall protect USF, USFRF, their trustees, the
Board of Regents, officers, employees, and agents and the State of
Florida and other representatives in regard to the foregoing events at
such time as SWT begins to supply licensed products to the marketplace.
<PAGE>
X. Record Keeping
A. SWT shall keep full, true and accurate books of account
containing all particulars that may be necessary for the
purpose of showing the amounts payable to USFRF hereunder.
Said books of account shall be kept at SWT's principal place
of business. Said books and the supporting data shall be open
at all reasonable times, with reasonable advanced notice, for
five (5) years following the end of the calendar year to which
they pertain, to the inspection of USFRF or its agents for the
purpose of verifying SWT's royalty statement or compliance in
other respects with Agreement.
B. SWT within ninety (90) days after each six (6) months, shall
deliver to USFRF true and accurate reports, giving such
particulars of the business conducted by SWT during the six
(6) months as shall be pertinent to royalty accounting
hereunder. These shall include at least the following:
(i) the number of Licensed Products provided by SWT to its
customers, if any,
(ii) the Revenue derived by SWT from it Commercial
Exploitation of Licensed Products, if any, and
(iii) the royalties due pursuant to Section IV
With each such report submitted, SWT shall pay the royalties
and any other consideration due and payable under this
Agreement. If no royalties, fees or other consideration shall
be due, SWT shall so report.
C. On or before the ninetieth (90th) day following the close of
SWT's Fiscal year, SWT shall provide USFRF with SWT's
financial Statements for the preceding fiscal year including,
at a minimum, a Balance sheet and an Operating Statement.
D. The payments for royalties, fees or other consideration set
forth in This Agreement shall, if overdue, bear interest until
payment at the monthly rate of one percent (1%). The payment
of such interest shall not foreclose USFRF from exercising any
other rights either may have as a consequence of the lateness
of any payment.
E. SWT hereby agrees that it shall not sell, transfer, export or
re-export any Licensed Products or related information in any
form, or any direct products of such information, except in
compliance with all applicable laws, including the export laws
of any U.S. government agency and any regulations thereunder,
and will not sell, transfer, export or re-export any such
Licensed Products or information to any persons or any
entities with regard to which there exist grounds to suspect
or believe that they are violating such laws. SWT shall be
solely responsible for obtaining all licenses, permits or
authorizations required from the U.S. and any other government
for any such export or re-export.
XI. Non Use of Names
SWT shall not use the names of the USF or USFRF, nor any adaptation of
either, in any advertising, promotional or sales literature without
prior written consent obtained from USF and/or USFRF in each case,
except that SWT may sate that it is licensed under one or more of the
patents and/or applications comprising the USF Patent Rights.
XII. Term and Termination
A. Unless sooner terminated as provided herein, the royalty
Obligations of this Agreement will expire with respect to a
given Licensed Product the longer of twenty (20) years from
the date of the execution of this Agreement or the expiration
of the last to expire patent which covers the licensed
intellectual property in the Territory. Notwithstanding the
foregoing, the parties hereto agree that the royalty
provisions of Paragraph IV.B. and IV C., are not solely
dependent upon Patent Rights, and SWT's obligations to pay
royalties under paragraph IV.C. hereinabove shall continue
unabated regardless of any of the foregoing expirations.
<PAGE>
B. In the event either party files for bankruptcy or a receiver
is appointed, this Agreement may immediately thereafter be
terminated at the option of the other party.
C. Should SWT fail to pay the royalties, fees and/or other
consideration Due and payable hereunder, USFRF shall have the
right to terminate this Agreement on forty-five (45) days
written notice. Upon the expiration of the forty-five (45) day
period, if SWT shall not have paid all such royalties and
interest thereon, USFRF shall have the right to terminate this
Agreement. Upon any material breach or default of Agreement by
SWT, other than those occurrences set out hereinabove which
shall always take precedence in that order over any material
breach or default referred to in this Section, USFRF shall
have the right to terminate this Agreement and the rights,
privileges and license granted hereunder upon forty-five (45)
days' written notice to SWT. Such termination shall become
effective unless SWT shall have cured any such breach or
default prior to the expiration of forty-five (45) days from
the date SWT receives notice of the breach or default.
D. Upon termination of this Agreement for any reason, nothing
herein Shall be construed to release either party from any
obligation that matured prior to the effective date of such
termination. SWT may, however, after the effective date of
such termination, complete Commercial Exploitation of Licensed
Products for which SWT has received consideration at the time
of such termination and sell the same, provided that SWT shall
pay to USFRF the royalties or other consideration thereon as
required under the provisions of Section IV of this Agreement,
and shall submit the reports required under Section X
regarding the Commercial Exploitation of the Licensed
Products.
E. Upon termination of this Agreement for any reason, all
intellectual Property rights licensed hereunder, including
without limitation, all USF Patent Rights and all USF
Technology shall revert to USF and USFRF, and SWT shall have
no further right to or continuing Interest. In addition, any
sublicenses hereunder shall terminate, unless accepted by
USFRF.
F. SWT, its successors or assigns, shall have the option to
terminate This license agreement upon thirty (30) days written
notice and in That event, SWT shall cease using USF Technology
and return same to USF. In this event, it is understood that
all future monetary obligations under this Agreement shall be
void and any monies paid to date to USFRF shall be
non-refundable to SWT, or its Assigns.
<PAGE>
XIII. Payments Notices and Other Communications
Any payment, notice or other communication made to any party pursuant
to this Agreement shall be sufficiently made or given on the date of
mailing if sent to such party by certified first class mail or air
courier, postage prepaid, addressed to it at its address below, or at
such other address as it shall have designated by written notice given
to the other party.
In the case of USF:
Director, Patents & Licensing
4202 East Fowler Avenue FAO 126
Tampa, Florida 33620-7900
In the case of USFRF:
USF Research Foundation, Inc.
Post Office Box 30045
Tampa, Florida 33620-3044
In the case of SWT:
Safe Water Technologies, Inc.
202 South Wheeler Street
Plant City, Florida 33566
XIV. Infringement
SWT understands that USFRF makes no representative and provides no
assurances that Commercial Exploitation of Licensed Products under this
Agreement does not and will not in the future, infringe or otherwise
violate the rights of others.
XI. Miscellaneous Provisions
A. Each party represents and warrants that it has the authority
to enter Into this Agreement and that the execution, delivery
and performance of this Agreement does not conflict with any
agreement, or understanding, either written or oral, to which
it is a party or to which it is otherwise bound.
B. This Agreement shall be construed, governed, interpreted and
Applied in accordance with the laws of the State of Florida,
U.S.A.
C. The parties hereto acknowledge that this Agreement sets forth
the Entire agreement and understanding of the parties, hereto
as to the subject matter hereof, and shall not be subject to
any change or modification except by the execution of a
written instrument subscribed to by the parties hereto.
D. If any term, covenant or condition of this Agreement or the
Application thereof to any party or circumstance shall, to any
extent be held to be invalid or unenforceable,
(i) the remainder of this Agreement, or the application
of such term, covenant or condition to the parties or
circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected
thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the
fullest extent permitted by law; and
<PAGE>
(ii) the parties hereto covenant and agree to renegotiate
any such term, covenant or application thereof in
good faith in order to provide a reasonably
acceptable alternative to the term, covenant or
condition of this Agreement or the application
thereof that is invalid or unenforceable, it being
the intent of the parties that the basic purpose of
this Agreement are to be effectuated.
E. In the event any provision of this Agreement is inconsistent
with USF Rules and Policy in effect as of September 1, 1999
USF Rules and Policy shall control.
F. SWT agrees to use in connection with Licensed Products used
And/or provided in the United States all applicable United
States Patent numbers and/or copyright notices requested by
USFRF. All Licensed Products used and/or provided in other
countries shall be marked in such a manner as to conform with
the patent, copyright and other laws and practice of the
country.
G. The failure of any party to assert a right hereunder or to
insist upon Compliance with any term or condition of this
Agreement shall not constitute a waiver of that right or
excuse a similar subsequent failure to perform any such term
or condition by the other party.
H. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, USF AND USFRF MAKE NO REPRESENTATION AND EXTEND NO
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING
BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE, NON-INFRINGEMENT, AND VALIDITY OF USF
PATENT RIGHTS.
I. It is understood and agreed that USF is a third party
beneficiary of this Agreement.
J. This Agreement shall not be effective until such time that
USFRF Has received the up-front fee of two million (2,000,000)
Shares of SWT. If these shares are not received within thirty
days (30) from the execution of this Agreement, then this
Agreement shall become null and void and the parties shall be
released from its terms and obligations.
K. This Agreement, together with any amendments hereto, shall
inure to the benefits of SWT, its successors and/or assigns.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals and duly
executed this Agreement the day and year set forth below.
UNIVERSITY OF SOUTH FLORIDA
RESEARCH FOUNDATION, INC.
BY:________________________________________ WITNESS:______________________
Name: __________________________________
Title: _________________________________
Date: __________________________________
Safe Water Technologies, Inc.
BY: _______________________________________ WITNESS:______________________
Dr. Uwe Reischl, M.D., Ph.D.
President
Exhibit A
Description of technology to be licensed
<PAGE>
This Strategic Alliance is made and effective this 12/13/99 by and between
UTEK CORPORATION (UTEK), offices located at 202 South Wheeler Street, Plant
City, Florida 33566 and Virginia Tech Intellectual Properties, Inc. (VTIP),
located at 1872 Pratt Drive, Suite 1625, Blacksburg, Virginia 24060. Now,
therefore, both parties agree as follows:
1. VTIP seeks to develop an off-balance sheet vehicle to bring its intellectual
property and technology to the marketplace. The goal of which is to generate
on-going royalties to enhance The University's research capabilities and reward
faculty whose patents are licensed, in addition to developing sponsored research
activities.
2. UTEK CORPORATION (UTEK) has the mission to build a bridge between
university-based technology and public companies that can rapidly bring new
products to the marketplace.
3. UTEK will review VTIP specified existing technologies and new disclosures to
gauge their potential for successful commercialization. If a specific technology
seems promising to UTEK (and the university agrees), the university will apply
for a patent (if it does not already have one), with VTIP as the assignee. If
UTEK converts the Option to a license agreement, UTEK will pay actual past and
future costs incurred by VTIP in preparing, filing, prosecuting and maintaining
all United States and foreign patents and patent applications on optioned
technology. UTEK will receive a 12-month exclusive, royalty-free license option
for the technology for some or all fields of use. UTEK would then use its best
efforts to find a corporate licensee or otherwise commercialize the technology
at terms acceptable to VTIP. If UTEK finds a VTIP acceptable licensee, royalties
for the technology will be paid directly by the licensee to VTIP. If UTEK is
unable to find a VTIP acceptable licensee or corporate partner for the
technology by the end of this 12- month period, then all option rights to the
technology will revert back to VTIP, unless both parties agree to extend. The
defined Exclusive Option Agreement is contained in Exhibit A. When the
University desires to have UTEK merchandise a specific technology and UTEK
agrees, both parties will execute a copy of the Exclusive Option Agreement with
the appropriate technology, field-of-use and term descriptions.
4. The term of this strategic alliance is for a period of five years, commencing
on the date above.
5. Either party may terminate this Agreement at any time with thirty days
written notice.
6. During the term of this Agreement, parties shall not disclose to anyone any
of the other party's confidential information. "Confidential Information" for
the purposes of this Agreement shall include proprietary and confidential
information such as, but not limited to, technology plans, research and
development plans, designs, models, software, product specifications, Marketing
plans, patent applications, disclosures and new concepts. Confidential
information will be clearly identified.
Confidential information shall not include any information that:
A. Is disclosed without restriction.
B. Becomes publicly available through no act of the recipient.
C. Is rightfully received by either party from a third party.
D. Is disseminated in publications.
If UTEK customers need to review VTIP confidential information to determine
their interest in licensing a specific property, UTEK will have the customer
execute a university approved confidentiality and non-disclosure agreement. A
copy of this signed agreement will be provided to the university.
7. This Agreement shall be governed by and be construed in accordance with the
laws of the Commonwealth of Virginia.
8. This Agreement constitutes the final understanding and agreement between the
parties with respect to the subject matter hereof and supersedes all prior
negotiations, understandings and agreements between the parties, whether written
or oral. This Agreement may be amended, supplemented or changed, only by
<PAGE>
an Agreement in writing, signed by both of the parties.
9. Any notice to be given or otherwise given pursuant to this Agreement shall be
in writing and shall be hand delivered, mailed by certified mail, return receipt
requested or sent by overnight courier service as follows:
UTEK CORPORATION
202 South Wheeler Street
Plant City, Florida 33566
VIRGINIA TECH INTELLECTUAL PROPERTIES, INC.
1872 Pratt Drive, Suite 1625
Blacksburg, Virginia 24060
10. If any term of this Agreement is held by a court of competent jurisdiction
to be invalid or unenforceable, then this Agreement, including all of the
remaining terms, will remain in full force and effect as if such invalid or
unenforceable term had never been included.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the
date first above written.
UTEK CORPORATION VIRGINIA TECH TELLECTUAL PROPERTIES, INC.
- --------------------------------- -------------------------------------------
By: Uwe Reischl, Ph.D., M.D., By: Dr. Leonard Peters, President
President
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated July 30, 1999, except for Note 8, as to which the
date is October 18, 1999 in the Registration Statement (Form N-2) and related
Prospectus of UTEK Corporation for the registration of 1,000,000 shares of its
common stock.
/s/ Ernst & Young LLP
Tampa, Florida
December 22, 1999
