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Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
July 19, 1996
Hydron Technologies, Inc.
(Exact name of Registrant as specified in its charter)
Commission File Number 0-6333
New York 13-1574215
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1001 Yamato Road, Suite 403, Boca Raton, Florida 33431
(Address of Principal Executive Offices)
(561) 994-6191
(Registrant's Telephone number, including area code)
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Item 5. Other Events.
On July 19, 1996 Hydron Technologies, Inc. ("HyTech") entered
into an amended license agreement effective as of May 31, 1996 (the
"Amendment") with QVC, Inc. ("QVC"), which amends the License
Agreement dated December 6, 1993 (the "License Agreement"). The
Amendment provides HyTech with certain retail marketing rights to its
Hydron brand product lines, (i.e., traditional department stores,
specialty stores, boutiques and beauty salons) and catalog sales, and
significantly higher minimum product purchase requirements for QVC in
order for QVC to maintain its exclusive rights to market Hydron brand
consumer products within North, South and Central America through
direct response television.
The Amendment permits QVC to maintain its exclusive rights if
QVC purchases certain escalating minimum quantities of product over a
two-year term ending May 31, 1998. In return for such increased
minimums, HyTech has decreased the prices at which it sells Hydron
brand consumer products to QVC. Products sold to QVC or its affiliates
for resale through infomercials are excluded from the calculation of
such minimum purchases levels. QVC has no obligation to purchase
Hydron brand consumer products except to maintain exclusivity under
the Amendment, which renews automatically for additional two-year
terms as long as the annual minimum purchase levels are met. No
assurances can be given that QVC will meet such escalating minimum
purchase levels in order to maintain its exclusive rights.
In conjunction with the execution and delivery of the
Amendment, QVC has paid HyTech $1.25 million in payment for the
exercise of warrants to purchase 500,000 shares of Common Stock, $.01
per share, ("Common Stock") of HyTech at $2.50 per share. Further,
HyTech has granted an additional warrant to QVC to purchase 500,000
shares of Common Stock at $2.75 per share for a five year period.
Further still, with the exception of the aforementioned warrant, QVC
has agreed to a standstill provision not to purchase additional shares
of Common Stock without the consent of HyTech.
Concurrent with the execution and delivery of the Amendment,
and as part of the overall transaction, HyTech has granted to DTR
Associates, a Massachusetts limited partnership ("DTR"), an option to
purchase 1.5 million shares of Common Stock at the purchase price of
$.01 per share (the "DTR Option"). As the result of such grant, HyTech
will incur a one-time non-cash charge against earnings of
approximately $3.4 million for the third quarter of 1996, which will
have no effect upon net shareholder's equity of HyTech. DTR had
previously introduced HyTech to QVC and was receiving a royalty
payment from QVC on net sales from direct response television. DTR has
agreed to terminate its right to receive such royalty payments in
return for the DTR Option. If the minimum purchase level for the first
renewal period was met under
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the License Agreement, DTR would have received approximately $5
million in royalty payments over the next two years.
Finally, HyTech through its wholly-owned subsidiary, Hydron
Direct, Inc. ("HDirect"), entered into an agreement with QDirect
Ventures, Inc., an affiliate of QVC Inc., to form a new joint venture
known as Hydromercial Partners (the "New Joint Venture"). The purpose
of the New Joint Venture is to promote and sell HyTech's
Hydron(Registered) polymer based skin care line by means of a full
length program commercial ("Infomercial").
Each of HDirect and QDirect has a one-half interest in the
profits and losses of the Joint Venture, which has an initial term of
two (2) years, subject to renewal on an annual basis thereafter upon
unanimous consent of all of the joint venture participants. As a part
of the overall transaction, DTR, an equal partner with HDirect and
QDirect in a predecessor joint venture (the "Predecessor Joint
Venture") which produced the Infomercial, withdraw from the
Predecessor Joint Venture.
Item 7. Financial Statements and Exhibits
The following exhibits are filed herewith:
4.1 Warrant Purchase Agreement dated as of May 31, 1996 between QVC
and HyTech
10.1 First Amendment to Licensing Agreement dated as of May 31, 1996
between QVC and HyTech
10.2 Letter Agreement between QDirect, Inc. And Hydron Direct, Inc.
dated May 31, 1996
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused and authorized this report
to be signed on its behalf by the undersigned.
Dated: July 25, 1996
Hydron Technologies, Inc.
By: /s/ Harvey Tauman
------------------------------
Harvey Tauman, President
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WARRANT PURCHASE AGREEMENT
This AGREEMENT is made as of this 31st day of May, 1996,
by and between QVC, Inc., a Delaware corporation (the
"Purchaser"), and Hydron Technologies, Inc., a New York
corporation (the "Company").
B A C K G R O U N D
A. On or about December 6, 1993, the Company and the
Purchaser entered into a certain Licensing Agreement
License Agreement") pursuant to which the Company granted to
the Purchaser certain rights, including without limitation,
the exclusive right to promote certain products manufactured
by or for the Company. .
B. As of the date hereof, the Company and the Purchaser
have agreed to amend the Product Agreement in certain
respects, as more fully described in the First Amendment to
Licensing Agreement dated as of May 31, 1996 by and between
the Company and the Purchaser (the "Amendment").
C. Pursuant to the Amendment, among other things, (i)
the Purchaser agreed to exercise the Series A Warrants (as
defined in the License Agreement) and the Series B Warrants
(as defined in the License Agreement) and (ii) the Company
and the Purchaser agreed to enter into this Warrant Purchase
Agreement.
NOW, THEREFORE, incorporating the foregoing and for good
and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, , and intending to be legally
bound hereby, the Company and the Purchaser agree as follows:
Section 1. Issuance of Securities at Closing.
1. Sale and Purchase of Warrants.
Subject to the terms and conditions of this Agreement,
at the Closing (as hereinafter defined) the Company shall
issue and sell to the Purchaser, and the Purchaser shall
purchase from the Company, in consideration of entering into
the Amendment and this Agreement and the sum of $20.00, (i)
Series C Common Stock Purchase Warrants in the form attached
hereto as Exhibit "A" (the " Series C Warrants") to purchase
<PAGE>
an aggregate amount of Five Hundred Thousand (500,000) shares
of the Company's common stock, par value $.01 per share
("Common Stock") issued pursuant to this Section 1.1 will be
dated the Closing Date.
Section 2. Exercise of Warrants.
2.1 Series C Warrants. The Series C Warrants shall be
exercisable at any time following the date of this Agreement.
Once exercisable, the Series C Warrants may be exercised at
any time until 5:00 p.m., New York City time, five (5) years
from the date thereof at an exercise price of Two and Three-
Quarters Dollars ($2.75) per share.
Section 3. Representations and Warranties. As a material
inducement to the Purchaser to enter into this Agreement and
to close hereunder, the Company makes the following
representations and warranties, which shall survive the
Closing and the delivery of the Series C Warrants:
3.1 SEC Reports. The Company's annual report on Form
10-K for its fiscal year ended December 31, 1995, as filed
with the Securities and Exchange Commission ("SEC") and all
subsequent filings made with the SEC by the Company to the
date hereof taken together (the "SEC Filings") are accurate
and complete in all material respects and do not contain any
untrue statement of a material fact or omit to state any
material fact necessary to make the statements herein, in
light of the circumstances under which they were made, not
misleading. True and correct copies of all of the foregoing
filings have been delivered to the Purchaser.
3.2 No Material Adverse Change. There has been no
material adverse change in the condition, financial or
otherwise, or the results of operation or the prospects of the
Company from that set forth in the SEC Filings referred to in
Section 3.1.
3.3 Validity and Authority. The Company is a
corporation duly organized, validly existing and in good
standing under the laws of New York and has all requisite
power and authority (corporate or otherwise) to own, operate
and lease its properties and to carry on its business as now
conducted and as proposed to be conducted during the term of
the Series C Warrants. The Company has full power and
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authority (corporate and otherwise) to execute, deliver and
perform its obligations under this Agreement and the Series C
Warrants, all of which have been duly authorized by all
necessary corporate action. This Agreement constitutes a
legal, valid and binding obligation on the part of the
Company, enforceable in accordance with its terms, subject to
the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally or court
decisions with respect thereto and the availability of
equitable remedies. The Series C Warrants will be the legal,
valid and binding obligations of the Company, enforceable in
accordance with their terms. The making and performance of
this Agreement by the Company does not violate any other
material agreement binding upon the Company, or any law, rule
or regulation or require the consent of any Person not
heretofore obtained, except as set forth in Section 4.5
hereof.
Section 4. Certain Covenants of the Company.
The Company covenants and agrees that so long as any of
the Warrants are outstanding:
4.1 Certain Reports and Communications. The Company
will send to the Purchaser and each Registered Holder of a
Warrant, true and correct copies of all filings hereafter made
with the SEC promptly after filing with the SEC. Any report,
notice or other communication sent by the Company to its
stockholders (or to any other class of security holders) shall
be sent simultaneously in the same manner to the Purchaser and
each Registered Holder of a Warrant. Promptly upon the
Company's obtaining knowledge of the occurrence of any default
hereunder or the occurrence of any event which, with the
giving of notice or the lapse of time or both, would
constitute such a default, the Company shall deliver to the
Purchaser and each Registered Holder of a Warrant a
certificate of an officer of the Company specifying the nature
thereof, the period of existence thereof and the action the
Company has taken or proposes to take with respect thereto.
4.2 Reservation of Shares. The Company will reserve
and keep reserved at all times sufficient shares of its Common
Stock for issuance upon exercise of Warrants and, upon such
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exercise, the Company shall promptly issue and deliver the
shares required to be delivered pursuant to the Warrant and
such shares, when issued and delivered, shall be validly
issued, fully paid and non-assessable.
4.3 Notice of Record Date. The Company will give to
the Purchaser and each Registered Holder of a Warrant not less
than fifteen (15) Business Days advance notice of the fixing
of a record date for the determination of stockholders
entitled to any notice, distribution or vote, or for any other
purpose. The Company will not declare or make any
distribution with respect to its Common Stock without fixing a
record date therefor.
4.4 Inspection. The Company will permit
representatives of any Registered Holder to visit its offices
and to examine all books of account, records, reports and
other papers of the Company, at all reasonable times and upon
reasonable prior notice, and to make copies of and take
extracts therefrom, and to discuss the affairs, finances and
accounts of the Company with the officers of the Company and,
in the presence of representatives of the Company, with the
Company's independent accountants (and by this provision the
Company hereby authorizes said accountants to discuss the
finances and accounts of the Company with such
representatives), and to visit and inspect the properties of
the Company at all reasonable times upon reasonable prior
notice, provided, such visits and inspections do not
materially interfere with the operations of the Company.
4.5 Compliance With Governmental Requirements. The
Company covenants that if any shares of Common Stock required
to be reserved for purposes of exercise of Warrants require
registration with or approval of any governmental authority
under any federal or state law, or any national securities
exchange or National Securities Association, before such
shares may be issued, the Company will cause such shares to be
duly registered or approved, as the case may be.
4.6 Payment of Taxes Upon Certificates for Shares
Issued Upon Exercise of Warrants. The issuance of
certificates for shares of Common Stock upon the exercise of
Warrants shall be made without charge to the exercising
Registered Holder for any tax in respect of the issuance of
such certificates (except for federal, state and local income
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taxes, if any), and such certificates shall be issued in the
respective names of, or in such names as may be directed by,
such Registered Holders; provided, however, that the Company
shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery
of any such certificate in a name other than that of the
Registered Holder of the Warrant.
Section 5. Registration, Transfer and Substitution of
Warrants.
5.1 Register; Ownership of Warrants. The Company will
keep at its principal office a register in which it will
provide for the registration of Warrants, and the registration
of transfers of Warrants. The Warrants shall be consecutively
numbered commencing with QVC-3 and shall be registered in a
Warrant register (the "Warrant Register"). The Company shall
be entitled to treat the Registered Holder of any Warrant on
the Warrant Register as the owner in fact thereof for all
purposes and shall not be bound to recognize any equitable or
other claim to, or interest in, such Warrant on the part of
any other person, and shall not be liable for any registration
or transfer of Warrants which are registered or are to be
registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a
fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with such
knowledge of such facts that its participation therein amounts
to bad faith. The Warrants shall be registered initially in
the name of the Registered Holder or its designees in such
denominations as the Registered Holder may request in writing
to the Company.
5.2 Replacement of Warrants. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any Warrant and, in the case of
any such loss, theft or destruction, upon delivery of an
indemnity bond in such reasonable amount as the Company may
determine (or, in the case of any Warrant held by the
Purchaser or by an Affiliate of the Purchaser, of an unsecured
indemnity agreement from the Purchaser or such other
Registered Holder reasonably satisfactory to the Company), or,
in the case of any such mutilation, upon the surrender of such
Warrant for cancellation at the principal office of the
Company, the Company, at its expense, will execute and
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deliver, in lieu thereof, a new Warrant of like tenor. Any
Warrant in lieu of which any such new Warrant has been so
executed and delivered by the Company shall not be deemed to
be an outstanding Warrant for any purpose of this Agreement.
Section 6. Restrictions on Transfer.
6.1 Investment Representation. The Purchaser
represents and warrants to the Company that it is taking the
securities to be issued hereunder for investment in its own
account or for the account of one or more entities controlled
by it and that it will not sell or transfer the securities in
violation of applicable securities laws.
6.2 Restrictive Legends. Except as otherwise permitted
by this Section 6, each Warrant issued pursuant to this
Agreement shall be stamped or otherwise imprinted with a
legend in substantially the following form:
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR
THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY BE OFFERED
OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 OR (ii) ANY
AVAILABLE RULE OR EXEMPTION FROM REGISTRATION UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES.
Except as otherwise permitted by this Section 6, each
certificate for Common Stock issued upon the exercise of any
Warrant shall be stamped or otherwise imprinted with a legend
in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OR
(ii) ANY AVAILABLE RULE OR EXEMPTION FROM REGISTRATION UNDER
SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES.
6.3 Termination of Restrictions. The restrictions
imposed by this Section 6 upon the transferability of
Restricted Securities shall cease and terminate as to any
particular Restricted Securities:
(a) when such securities shall have been effectively
registered under the Securities Act and disposed of in
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accordance with the registration statement covering such
Restricted Securities,
(b) when such securities have been sold in compliance
with Rule 144 or any comparable rule under the Securities Act,
(c) when, in the opinions of both counsel for the
Registered Holder thereof and counsel for the Company, such
restrictions are no longer required in order to insure
compliance with the Securities Act, or
(d) in the case of Common Stock, when such securities
have been beneficially owned, by a person who has not been an
affiliate of the Company for at least three months, for a
period of at least three years and the Company is required to
file reports in compliance with the Exchange Act and has filed
such reports, all as determined under Rule 144 or any
comparable rule under the Securities Act.
Whenever such restrictions shall terminate as to any
Restricted Securities, as soon as practicable thereafter and
in any event within five days after request therefor, the
Registered Holder thereof shall be entitled to receive from
Company, without expense (other than transfer taxes, if any),
new securities of like tenor not bearing the applicable legend
set forth in Section 6 hereof.
Section 7. Registration of Securities.
7.1 Scheduled Registration.
(a) The Company will cause to be prepared and filed
with the Commission on or before October 15, 1996, a
registration statement on Form S-3, if available, or on any
other applicable securities form if Form S-3 is not available,
under the Securities Act of 1933, as amended (the "Securities
Act"), registering the Common Stock underlying the Warrant
held by the Registered Holder and by the other Registered
Holders of Warrants and will use its best efforts to cause
such registration statement to become effective on or before
October 30, 1996.
(b) Expenses. The Company will pay all Registration
Expenses in connection with the registration of Common Shares
made pursuant to this Section 7.1; provided, however, that in
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no event shall the Company be obligated to pay, in connection
with any registration under this Section 7.1, (A) any fees and
disbursements of counsel for Registered Holders of Registrable
Securities, or (B) any underwriters' discount or commission in
respect of such Registrable Securities, or (C) the cost of any
liability or similar insurance required by an underwriter, to
the extent that such costs are attributable solely to the
offering of such Registrable Securities, payment of which
shall, in each case, be the sole responsibility of the
Registered Holders of the Registrable Securities.
(c) Effective Registration Statement. A registration
pursuant to this Section 7.1 shall not be deemed to have been
effected (i) unless it has become effective, (ii) if after it
has become effective, such registration is interfered with by
any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any
reason other than a misrepresentation or an omission to act by
the Purchaser, or (iii) the conditions to closing specified in
the purchase agreement or underwriting agreement entered into
in connection with such registration are not satisfied, other
than by reason of some act, omission or misrepresentation by
the Purchaser.
7.2 Registration Procedures. In connection with the
registration pursuant to Section 7.1, the Company shall:
(i) prepare and file with the Commission such
amendments and supplements to such registration statement and
the prospectus used in conjunction therewith as may be
necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such
registration statement until the earlier of (a) such time as
all of such securities have been disposed by Purchaser or its
affiliate, or (b) five years after the registration statement
is declared effective;
(ii) furnish to each seller of Registrable
Securities covered by such registration statement such number
of conformed copies of such registration statement and of each
such amendment and supplement thereto (excluding exhibits
unless requested in writing by each such seller), such number
of copies of the prospectus contained in such registration
statement (including each preliminary prospectus) and any
other prospectus filed under Rule 424 under the Securities
Act, in conformity with the requirements of the Securities
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Act, and such other documents, as such seller or such
Registered Holder may reasonably request;
(iii) use its best efforts to register or qualify
all Registrable Securities and other securities covered by
such registration statement under such other securities or
blue sky laws of such jurisdictions as each seller thereof
shall reasonably request, to keep such registration or
qualification in effect for so long as such registration
statement remains in effect, and take any other action which
may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the
securities owned by such seller, except that the Company shall
not for any such purpose be required to (a) qualify generally
to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this
subdivision (iii) be obligated to be so qualified, (b) subject
itself to taxation in any such jurisdiction or (c) consent to
general service of process in any such jurisdiction;
(iv) use its best efforts to cause all Registrable
Securities covered by such registration statement to be
registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of
such Registrable Securities;
(v) furnish to each seller of Registrable
Securities a signed counterpart, addressed to such seller (and
the underwriters, if any), of
(A) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated the
date of the closing under the underwriting agreement),
reasonably satisfactory in form and substance to such seller and
such Registered Holder, and
(B) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, dated the date of the closing
under the underwriting agreement), signed by the independent
public accountants who have certified the Company's
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financial statements included in such registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein)
and, in the case of the accountants' letter, with respect to
events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to the underwriters in
underwritten public offerings of securities and, in the case of
the accountants' letter, such other financial matters as such
seller or such Registered Holder (or the underwriters, if any)
may reasonably request;
(vi) immediately notify each Registered Holder of
Registrable Securities covered by such registration statement,
at any time when a prospectus relating thereto is required to
be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such
registration statement, as then in effect, includes any untrue
statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the
circumstances under which they were made, and at the request
of any such seller or Registered Holder promptly prepare and
furnish to such seller and Registered Holder a reasonable
number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they
were made;
(vii) otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission,
and not file any amendment or supplement to such registration
statement or prospectus to which any such seller shall have
reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or of the rules or
regulations thereunder, having been furnished with a copy
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thereof at least two Business Days prior to the filing
thereof;
(viii) provide a transfer agent and registrar for
all Registrable Securities covered by such registration
statement not later than the effective date of such
registration statement; and
(ix) use its best efforts to list all Registrable
Securities covered by such registration statement on any
securities exchange or National Securities Association on
which any of the Registrable Securities are than listed. The
Company may require each seller of Registrable Securities as
to which any registration is being effected to furnish the
Company with such information and undertakings as it may
reasonably request regarding such seller and the distribution
of such securities as the Company may from time to time
reasonably request in writing.
Each Registered Holder of Registrable Securities agrees
by acquisition of such Registrable Securities (A) that upon
receipt of any notice from the Company of the happening of any
event of the kind described in subdivision (vi) of this
Section 7.2, such Registered Holder will forthwith discontinue
such Registered Holder's disposition of Registrable Securities
pursuant to the registration statement relating to such
Registrable Securities until such Registered Holder's receipt
of the copies of the supplemented or amended prospectus
contemplated by subdivision (vi) of this Section 7.2 and, if
so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file
copies, then in such Registered Holder's possession of the
prospectus relating to such Registrable Securities current at
the time of receipt of such notice and (B) that it will
immediately notify the Company, at any time when a prospectus
relating to the registration of such Registrable Securities is
required to be delivered under the Securities Act, of the
happening of any event as a result of which information
previously furnished by such Registered Holder to the Company
in writing for inclusion in such prospectus contains an untrue
statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the
circumstances under which they were made. In the event the
Company or any such Registered Holder shall give any such
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notice, the period referred to in subdivision (ii) of this
Section 7.2 shall be extended by a number of days equal to the
number of days during the period from and including the giving
of notice pursuant to subdivision (vi) of this Section 7.2 to
and including the date when each seller of any Registrable
Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus
contemplated by subdivision (vi) of this Section 7.2.
7.3 Preparation; Reasonable Investigation. In
connection with the preparation and filing of each
registration statement under the Securities Act, the Company
will give the Registered Holders of Registrable Securities
registered under such registration statement, their
underwriters, if any, and their respective counsel and
accountants, the opportunity to participate in the preparation
of such registration statement, each prospectus included
therein or filed with the Commission, and each amendment
thereof or supplement thereto, and will give each of them such
access to its books and records and such opportunities to
discuss the business of the Company with its officers and the
independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of
such Registered Holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the
meaning of the Securities Act.
7.4 Indemnification.
(a) Indemnification by the Company. In the event of
any registration of any Registrable Securities under the
Securities Act covered by the registration statement pursuant
to Section 7.1, the Company will, and hereby does, indemnify
and hold harmless the seller of any Registrable Securities
covered by any registration statement filed pursuant to
Section 7.1, its directors and officers, each other Person who
participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such
seller or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such seller or any
such director or officer or underwriter or controlling person
may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in
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respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in any registration statement under which such
securities were registered under the Securities Act, any
preliminary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and
the Company will reimburse such seller and each such director,
officer, underwriter or controlling person for any legal or
any other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim,
liability, action or proceeding, provided that the Company
shall not be liable in any such case to a particular seller to
the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out
of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed
by such seller, and, provided further that the Company shall
not be liable to any Person who participates as an underwriter
in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter within the
meaning of the Securities Act, in any such case to the extent
that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such
Person's failure to send or give a copy of the final
prospectus to the Person claiming an untrue statement or
alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was
corrected in such final prospectus. Such indemnity shall
remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such
director, officer, underwriter or controlling person and shall
survive the transfer of such securities by such seller.
(b) Notices of Claims, etc. Promptly after receipt by
an indemnified party of notice of the commencement of any
action or proceeding involving a claim referenced to in the
preceding subdivisions of this Section 7.4, such indemnified
party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the
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failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section
7.4, except that the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case
any action is brought against an indemnified party, unless in
such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may
exist in respect of such claim, the indemnifying party shall
be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel
reasonably satisfactory to such indemnified party to such
indemnified party shall not be liable to such indemnified
party for any legal or other expenses subsequently incurred by
the latter in connection with the defense other than
reasonable costs of investigation. No indemnifying party
shall consent to entry of any judgment or enter into any
settlement without the consent of the indemnified party which
does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or
litigation.
(c) Other Indemnification. Indemnification similar to
that specified in the preceding subdivisions of this Section
7.4 (with appropriate modifications) shall be given by the
Company and each seller of Registrable Securities with respect
to any required registration or other qualification of
securities under any federal or state law or regulation of any
governmental authority, other than the Securities Act.
(d) Indemnification Payments. The indemnification
required by this Section 7.4 shall be made by periodic
payments of the amount thereof during the course of the
investigation or defense, as and when bills are due or
expense, loss, damage or liability is incurred.
7.5 Covenants Relating to Rule 144. The Company will
file all reports in compliance with the Exchange Act and will,
at its expense, forthwith upon the request of any Registered
Holder of Restricted Securities, deliver to such Registered
Holder a certificate, signed by the Company's principal
financial officer, stating (a) the Company's name, address and
telephone number (including area code), (b) the Company's
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Commission file number, (d) the number of shares of Common
Stock of the Company outstanding as shown by the most recent
report or statement published by the Company, and (e) whether
the Company has filed the reports required to be filed under
the Exchange Act for a period of at least 90 days prior to the
date of such certificate and in addition has filed the most
recent annual report required to be filed thereunder. If at
any such time the Company is not required to file reports in
compliance with either section 13 or section 15(d) of the
Exchange Act, the Company, at its expense, will forthwith upon
the written request of the Registered Holder of any Restricted
Securities, make available adequate current public information
with respect to the Company within the meaning of paragraph
(c)(2) of Rule 144 of the General Rules and Regulations
promulgated under the Securities Act.
Section 8. Closing.
8.1 Time and Place. The sale of the Warrants to the
Purchaser pursuant to Section 1 hereof (the "Closing") shall
take place simultaneously with the execution of the Amendment,
at the offices of the Purchaser or at such other time or place
as may be mutually agreed by the Company and the Purchaser.
8.2 Deliveries by the Company at Closing. At Closing
the Company will deliver or cause to be delivered to the
Purchaser the following:
(a) The Series C Warrants to purchase an aggregate of
250,000 shares of Common Stock of the Company and the Series D
Warrants to purchase an aggregate of 250,000 shares of Common
Stock of the Company, each in the form of a single Warrant
certificate (or such greater number of Warrant certificates as
the Purchaser may request) duly executed by the Company, dated
the date of Closing and registered in the name of the
Purchaser or its nominee.
(b) A certificate executed by the chief executive
officer or chief financial officer of the Company, dated the
date of the Closing and confirming (i) the truth and
correctness of all of the representations and warranties of
the Company contained herein as of the date of the Closing,
and (ii) that all covenants and agreements of the Company set
forth herein have been duly complied with.
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Section 9. Certain Definitions. As used herein, unless
the context otherwise requires, the following terms shall have
the following respective meanings:
Affiliate: A Person which directly or indirectly
controls, or is controlled by, or is under common control
with, another Person. Control shall be deemed to exist if any
Person shall, alone or with others, have possession, directly
or indirectly, of the power to direct the management or
policies of any other Person, and shall include any Registered
Holder of 25% or more of any stock or other interest in any
Person whether such holding is direct or indirect.
Business Day: a day which is not a Saturday or a
Sunday and is not a day on which banks in New York, New York
are authorized or obligated by law to remain closed.
Closing: the meaning specified in Section 8.1
hereof.
Closing Date: the date of Closing.
Commission: the Securities and Exchange Commission
or any other federal agency at the time administering the
Securities Act.
Common Stock: the meaning specified in Section 1.1
hereof.
Exchange Act: the Securities Exchange Act of 1934,
or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in
effect at the time.
Person: an individual, a partnership, an
association, a joint venture, a corporation, a business, a
trust, an unincorporated organization or a government or any
department, agency or subdivision thereof.
Registered Holder: includes holders of Warrants,
Shares or Registrable Securities.
Registrable Securities: (a) any shares of Common
Stock issued or issuable upon exercise of the Warrants, (b)
any securities issued or issuable with respect to any Common
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Stock referred to in subdivision (a) by way of stock dividend
or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable
Securities, once issued such securities shall cease to be
Registrable Securities when (i) a registration statement with
respect to the sale of such securities shall have been
disposed of in accordance with such registration statement,
(ii) they shall have been distributed to the public pursuant
to Rule 144 (or any successor provision) under the Securities
Act, or (iii) they shall have ceased to be outstanding.
Registration Expenses: all expenses incident to
the Company's performance of or compliance with Section 7,
including, without limitation, all registration, filing and
NASD fees, all fees and expenses of complying with securities
or blue sky laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses, the fees
and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any
special audits or "cold comfort" letters required by or
incident to such performance and compliance, premiums and
other costs of policies of insurance against liabilities
arising out of the public offering of the Registrable
Securities being registered.
Restricted Securities: any securities bearing the
applicable legend set forth in Section 6, and (b) unless the
context otherwise requires, any shares of Common Stock or
other securities issuable upon exercise of Warrants and which,
when so issued, will be evidenced by a certificate or
certificates bearing the applicable legend set forth in such
section.
Securities Act: the Securities Act of 1933, or any
similar Federal statue, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at
the time. Reference to a particular section of the Securities
Act of 1933 shall include a reference to the comparable
section, if any, of any such similar Federal statute.
Series C Warrants: the meaning specified in
Section 1.2 hereof.
Series D Warrants: the meaning specified in
Section 2.2 hereof.
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Warrants: Series C Warrants and Series D Warrants.
Section 10. Miscellaneous.
10.1 Indulgences, Etc. Neither the failure nor any
delay on the part of any party hereto to exercise any right,
remedy, power or privilege under this Agreement shall operate
as a waiver thereof, nor shall any single or partial exercise
of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy,
power or privilege, nor shall any waiver of any right, remedy,
power or privilege with respect to any occurrence by construed
as a waiver of such right, remedy, power or privilege with
respect to any other occurrence.
10.2 Controlling Law. This Agreement and all questions
relating to its validity, interpretation, performance and
enforcement (including, without limitation, provisions
concerning limitations of actions), shall be governed by and
construed in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to the choice of law provisions.
10.3 Notices. All notices, requests, demands and other
communications required or permitted under this Agreement
shall be in writing and shall be deemed to have been duly
given, made and received only when delivered (personally, by
courier service such as Federal Express, or by other
messenger) addressed as set forth below:
(a) If to the Purchaser:
QVC, Inc..
1365 Enterprise Drive
West Chester, PA 19380
Attention: Neal S. Grabell, Esq.
(b) If to the Company:
Hydron Technologies, Inc.
941 Clint Moore Road
Boca Raton, FL 33487
Attention: Mr. Harvey Tauman, President
Any party may alter the address to which
communications or copies are to be sent by giving notice of
such change of address in conformity with the provisions of
this paragraph for the giving of notice.
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10.4 Exhibits. All Exhibits attached hereto are hereby
incorporated by reference into, and made a part of, this
Agreement.
10.5 Binding Nature of Agreement; No Assignment. This
Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, personal
representatives, successors and assigns, except that no party
may assign or transfer its rights or obligations under this
Agreement without the prior written consent of the other
parties hereto. Notwithstanding the foregoing, the Purchaser
may assign its rights under this Agreement to one or more
Affiliates, provided that, same shall be in compliance with
applicable Federal and state securities laws, but no such
assignment shall relieve the Purchaser of its obligation to
pay the purchase price hereunder.
10.6 Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be
deemed to be an original as against any party whose signature
appears thereon, and all of which shall together constitute
one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or
taken together, shall bear the signatures of all the parties
reflected hereon as the signatories.
10.7 Entire Agreement. This Agreement contains the
entire understanding among the parties hereto with respect to
the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, inducements or
conditions, express or implied, oral or written, except as
herein contained.
10.8 Amendments. This Agreement may not be modified or
amended other than as set forth in this Section 10.8. With
the written consent of the Registered Holders of not less than
a majority in aggregate principal amount of the Warrants at
the time outstanding (excluding for this purpose any Warrants
held by the Company or a subsidiary of the Company), the
Company and the Purchaser may from time to time amend or
modify this Agreement by an agreement in writing; provided,
however, that no such amendment shall (i) reduce the aforesaid
percentage of Warrants with respect to which the consent of
the Registered Holders thereof is required to enter into any
such amendment without the consent of the Registered Holders
of all Warrants then outstanding or (ii) adversely affect the
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Registered Holders of any Warrants then outstanding or the
rights of the Registered Holders of any Common Stock issued
upon the exercise of Warrants and at that time outstanding
without the consent of the Registered Holders of such Warrants
or Common Stock.
10.9 Paragraph Headings. The Section or paragraph
headings in this Agreement are for convenience only; they form
no part of this Agreement and shall not affect its
interpretation.
10.10 Gender, Etc. Words used herein, regardless of the
number and gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and
any other gender, masculine, feminine or neuter, as the
context requires.
10.11 Number of Days. In computing the number of days
for purposes of this Agreement, all days shall be counted,
including days which are not Business Days; provided, however,
that if the final day of any time period falls on a day which
is not a Business Day, then the final day shall be deemed to
be the next day which is a Business Day.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement the date and year first above written.
HYDRON TECHNOLOGIES, INC. QVC, INC.
By: By:
-------------------------- --------------------------
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FIRST AMENDMENT TO LICENSING AGREEMENT
THIS FIRST AMENDMENT ("Amendment") to Licensing Agreement is dated as of
the 31st day of May, 1996 by and between QVC, Inc. ("QVC") and Hydron
Technologies, Inc. ("HTI").
BACKGROUND
A. On or about December 6, 1993, QVC and HTI entered into a Licensing
Agreement dated as of December 6, 1993 (the "Agreement") and certain other
agreements and documents executed pursuant thereto (collectively the "Other 1993
Documents"). Unless otherwise defined herein, all capitalized terms used in this
Amendment shall have the meanings ascribed to them in the Agreement.
B. QVC and HTI have agreed to modify, in certain respects, their respective
rights and obligations described in the Agreement and the Other 1993 Documents,
to, among other things, allow QVC to Promote the Products in a manner consistent
with the manner in which it Promotes its proprietary brands, in accordance with
the terms and conditions of the Agreement, as modified by the Amendment.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, QVC and HTI agree as follows:
1. Amendments. The Agreement is hereby amended as follows:
(a) Paragraph 1 (a) is hereby amended and restated in its entirety as
follows:
1. (a) HTI grants to QVC, and QVC accepts, the following license,
rights and privileges
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(the License"): (a) the exclusive rights (both for itself and through
any Affiliate, provided that QVC remains obligated under, and each
affiliate agrees in writing to be bound by the terms of this
Agreement) in the Territory (as hereinafter defined) to Promote or
cause others to Promote the Consumer Products via all means and media
(except Prestige Retail Channels of Distribution (as hereinafter
defined and catalog sales) and (b) the exclusive right, in the
Territory, to use, publish, reproduce and broadcast the Copyrights and
the Trademarks via such means and media in conjunction with such
activities. For purposes of this Agreement, "Consumer Products" shall
mean all now existing or hereafter developed products utilizing Hydron
polymer technology which are or will be available to consumers, not
including prescription drugs, non-prescription drugs, medical devices,
and products specifically targeted to with benefits geared solely for
the health care field (e.g., hand lotion to prevent irritation or
allergic reaction with the use of latex gloves), ocular products, drug
delivery systems, and the products and fields set forth in the annexed
Exhibit "A". Nothing herein shall be construed to prohibit the
development, production, marketing, distribution and/or sale of
products containing Hydron polymers by HTI to: (a) the health care
field (i.e., hospitals, other institutional customers, and individual
health care providers such as doctors, dentists and nurses) and (b)
shareholders (whether of record or beneficial) of HTI, for personal
use and resale. Hereinafter, the Consumer Products shall sometimes be
referred to as the "Products" or "Merchandise". The "Territory" shall
mean North America, South America and Central America. "Prestige
Retail
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Channels of Distribution" shall mean traditional department (e.g.,
J.C. Penney) and specialty stores, specialty boutiques, and beauty
salons, but shall exclude all other channels of distribution,
including without limitation, discount stores, drug stores, warehouse
stores, superstores, and retail outlet stores. QVC and HTI acknowledge
and agree that Consumer Products integrating Hydron Polymer technology
shall only be Promoted under the "Hydron" trademark.
(b) Paragraph 3(a) is amended and restated in its entirety as follows:
3. (a)(i) The first renewal term of this Agreement shall commence upon
June 1, 1996 and end upon May 31, 1998 (the "First Renewal Term").
Unless earlier terminated pursuant to this paragraph 3(a), upon the
expiration of the First Renewal Term, this Agreement shall
automatically continually renew for additional two (2) year terms
(each, a "Renewal Term") unless: (i) during the applicable Renewal
Term, Net Purchases (as defined below) were less than the applicable
Minimum Amount (as defined below); (ii) HTI provides QVC with written
notice, no later than thirty (30) days following the last day any
Renewal Term, of HTI's intent to terminate the Agreement unless QVC
cures such deficiency; and (iii) QVC does not make additional
purchases such that Net Purchases through such date equal or exceed
the applicable Minimum Amount by the thirtieth (30th) day following
the receipt of such notice by QVC. The "Minimum Amount" shall mean
Thirty
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Million ($30,000,000) Dollars with respect to the First Renewal Term,
and, with respect to each Renewal Term thereafter, one hundred twenty
(120%) percent of the Minimum Amount applicable to the immediately
preceding two (2) year term. "Net Purchases" shall mean the aggregate
of all Purchase Orders for Products issued by QVC or any of its
affiliates (except Purchase Orders issued by the joint venture formed
by QDirect Ventures, Inc. and Hydron Direct, Inc. as of the date
hereof for the purpose of promoting the Products by means of a certain
infomercial) to HTI during the applicable period, exclusive of
credits, returns, allowances, taxes, freight, shipping and handling
charges, provided that such Purchase Orders are paid in accordance
with their terms.
(ii) Notwithstanding the foregoing, in the event that Net
Purchases during the first one year period of each Renewal Term of
this Agreement (each, an "Interim Period") do not equal or exceed
forty-two (42%) percent of the applicable Minimum Amount(the "Minimum
Interim Amount"), this Agreement shall terminate, provided that (i)
HTI provides QVC with written notice, no later than thirty (30) days
following thelast day of the Interim Period, of HTI's intent to
terminate the Agreement unless QVC cures such deficiency; and (ii) QVC
does not make additional purchases such that Net Purchases through
such date equal or exceed the applicable Minimum Interim Amount by the
thirtieth (30th) day following the receipt of such notice by QVC. HTI
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acknowledges and agrees that all purchase orders issued and
outstanding as of June 1, 1996 shall be included in calculating the
Minimum Amount applicable to the first Interim Period. Any Purchase
Order(s) issued for the purpose of curing any deficiency in the
applicable Minimum Amount shall be included in calculating Net
Purchases solely for the period in which such deficiency occurred.
(c) Paragraph 3 of the Agreement is hereby amended by the addition of the
following paragraphs:
(c) Upon the expiration or termination of this Agreement, QVC shall
have the right, but not the obligation, to purchase Consumer Products
from HTI, on a non-exclusive basis, solely for the purpose of
fulfilling anticipated back-end orders from QVC's customers, for a
period of two (2) years following the expiration or termination of
this Agreement.
(d) In the event that Tauman is terminated from his employment with
HTI, as a result of a material change in the control of HTI, Tauman
shall be excused from his obligations under thisparagraph 3, provided
that HTI provides a replacement spokesperson acceptable to QVC, in its
sole and absolute discretion, to make any remaining Appearances
required by the Agreement, as modified by this Amendment.
(d) Paragraph 4 of the Agreement is hereby amended by the addition of the
following paragraph:
(c) If requested by QVC, HTI shall cause Tauman to make, and Tauman
agrees to make, three (3) Appearances during the ninety (90) day
period following the expiration or termination of this Agreement.
(e) Paragraph 5 of the Agreement is hereby amended by the addition of the
following paragraphs:
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(c) HTI shall pay to QVC a royalty on HTI's Net Sales of Consumer
Products at the rate of five percent (5%) of HTI's first Two Million
Dollars ($2,000,000) of Net Sales, and ten (10%) percent with respect
to all Net Sales thereafter, in perpetuity. For purposes of this
paragraph 5, "Net Sales" shall mean gross dollars received from sales
of Consumer Products sold and shipped to customers for sale or resale
through any channel of distribution (other than pursuant to this
Agreement) in the Territory, less credits, returns, allowances, and
not including shipping and handling charges and sales, use and other
taxes. Such royalties shall be payable quarterly, in arrears, no later
than the 30th day following the last day of each fiscal quarter of
QVC. For the purpose of allowing QVC to verify any amounts due
pursuant to this Agreement, HTI agrees, upon QVC's written request, to
cause an independent certified public accountant acceptable to QVC, to
audit the books and records of HTI related to such amounts, once
annually, during the term of this Agreement, and to deliver to QVC, no
later than ninety (90) days following each such request, a detailed
report accompanied by supporting documents, reflecting the results of
such audit. QVC shall bear only the reasonable costs and expenses of
each such audit, except
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with respect to any audit(s) which reveals a discrepancy in favor of
HTI in excess of ten percent (10%) of the amount due to QVC with
respect to the applicable period, in which case, HTI shall be
responsible for the reasonable costs and expenses of such audit(s).
Any discrepancy revealed by such an audit shall be promptly cured. For
purposes of any such audit, QVC agrees that Earnst & Young is an
acceptable independent certified public accountant.
(d) Effective June 1, 1996, HTI shall modify the prices at which HTI
offers the Products for sale to QVC during the term of this Agreement
to the prices set forth on Schedule 1 attached to this Agreement and
incorporated herein by reference with respect to all Products
purchased by QVC on or after June 1, 1996. Unless otherwise agreed in
writing by QVC, the packaging for the Products shall remain
substantially the same as the packaging of Products currently offered
for sale by QVC. HTI shall offer new Consumer Products for sale to QVC
at prices consistent with those set forth on Schedule 1. HTI grants to
QVC the right to audit HTI's books and records related to such
matters, once annually, for the purpose of allowing QVC to verify the
foregoing, according to the terms set forth in paragraph 5(c) of this
Agreement. During the First Renewal Term and the one (1) year period
thereafter, the prices set forth on Schedule 1 shall only be increased
in the event that HTI provides QVC with evidence of an unusual,
dramatic increase in the direct cost of the raw materials required to
produce the Products. Nothing in this Agreement shall be construed to
obligate HTI to make further reductions in the sales
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price of Consumer Products to QVC or its Affiliates during the First
Renewal Term or the one (1) year period following the First Renewal
Term. Thereafter, HTI shall provide QVC with evidence of any variance
in the costs to HTI of the raw materials which comprise the Products
once annually during the term of this Agreement, and, provided such
evidence is reasonably satisfactory to QVC, the prices at which HTI
offers the Products for sale to QVC shall be adjusted prospectively to
reflect such variances.
(g) Paragraph 6(a) is hereby amended and restated in its entirety as
follows:
6. (a) During the term of this Agreement, unless otherwise
specifically set forth herein, with respect to the Territory (i)
neither HTI nor any affiliate shall develop, manufacture, distribute,
endorse, or Promote (A) any Consumer Product through any means or
media other than Prestige Retail Channels of Distribution and
catalogs, or (B) any product whatsoever by means of Direct Response
Television, except that HTI may Promote products other than Consumer
Products, by means of infomercials, and direct response commercial
spots, and traditional retail channels of distribution. (ii) neither
Tauman nor Fox shall endorse or Promote (A) any Consumer Product
through any means or media other than Prestige Retail Channels of
Distribution and catalogs, or (B) any product whatsoever by means of
Direct Response Television, except that Tauman and/or Fox may Promote
products other than Consumer Products by means of infomercials, direct
response commercial spots and traditional retail channels of
distribution. Notwithstanding the foregoing, HTI, Tauman and Fox
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acknowledge and agree that during the term of this Agreement and the
ninety (90) day period following the expiration or termination of this
Agreement, neither HTI, Tauman or Fox shall promote any products by
any means of direct response television programming except as
expressly set forth in this Agreement.
For purposes of this Agreement, "Direct Response Television" shall
mean televised programming (regardless of duration) through which a
consumer is requested to respond by mail, telephone or other
electronic means, to an individual or entity offering a product or
service for sale.
(h) Paragraph 6(b) is hereby amended and restated in its entirety as
follows:
6. (b) Upon the development by HTI, or any Affiliate, of any new
Consumer Product, HTI shall offer such product to QVC on an exclusive
basis, subject to the terms and conditions of this Agreement.
Following each such offer, QVC shall have sixty (60) days to make an
initial determination of whether it is interested in Promoting such
Product. HTI shall notify QVC, in writing, upon the expiration of each
such sixty (60) day period, and QVC shall have an additional thirty
(30) days, following the receipt of each such notice, to decide
whether to Promote such Product. In the event that QVC decides to
refrain from Promoting any such product, HTI may Promote such product
through any means or media other than Direct Response Television in
the Territory.
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(i) Paragraph 6(d) is hereby amended and restated in its entirety as
follows:
(d) HTI shall have the right, but not the obligation, during each one
(1) year period of this Agreement, to select one (1) Consumer Product
rejected by QVC (each, a "Wild Card Product"). QVC shall issue a
Purchase Order for each Wild Card Product, in an amount at least equal
to Ten Thousand Dollars ($10,000), no later than six (6) months
following the identification of such Wild Card Product.
2. Standstill. QVC hereby covenants and agrees with HTI that without the
prior written consent of HTI, which may in its absolute discretion be withheld,
it shall not:
(a) Except pursuant to the Second Warrant Purchase Agreement (as
defined in paragraph 3(a) below) it shall not: acquire, offer to acquire,
or agree to acquire, directly or indirectly, by purchase or otherwise,
beneficial ownership of any Voting Securities, or direct or indirect rights
or option to acquire any Voting Securities (including, without limitation,
non-Voting Securities convertible into or with appertaining rights to
acquire Voting Securities), of HTI; or
(b) make, or in any way participate, directly or indirectly, in any
Solicitation of Proxies to vote, or seek to advise or influence any person,
entity or Group with respect to the voting of, any Voting Securities of
HTI, or initiate or propose any stockholder proposal with respect to HTI
described in Rule 14a-8 promulgated under the Exchange Act; or
(c) form, join or in any way participate in, or in any manner provide
any form of assistance to, a Group with respect to any Voting Securities of
HTI; or
(d) otherwise act, alone or in concert with others, to seek to, or
assist or encourage any other person, entity or Group in seeking to control
or influence the management, board of directors or policies of HTI or
propose or effect any form of business combination with HTI or any of its
Affiliates or any restructuring, recapitalization or similar transaction
with respect to HTI or any of its Affiliates. Notwithstanding the
foregoing, nothing in this paragraph three (3) shall be interpreted from
precluding
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QVC from exercising its rights as a shareholder of the company or to
negotiate with HTI in QVC's capacity as a customer of HTI.
(e) The terms "Affiliate" and "Associate" shall mean any present or
future Affiliate or Associate within the meaning of Rule 12b-2 promulgated
under the exchange Act; the term "Common Stock" shall mean Company's Common
Stock, $.01 par value per share; the term "Group" means a Group within the
meaning of Section 13(d) of the Exchange Act; the term "Voting Securities"
shall mean Company's Common Stock, and any other securities of Company
entitling the holder to vote for the election of directors of the Company;
the term "Exchange Act" shall mean the Securities Exchange Act of 1934; and
the terms "Solicitation" and "Proxies" shall have the meanings used in the
proxy rules of the Securities and Exchange Commission under the Exchange
Act.
3. Execution of Other Documents. Prior to or concurrently with the
execution of this Amendment, QVC and HTI shall execute and deliver to QVC the
following agreements and documents, in form and substance satisfactory to QVC
and HTI:
(a) a Warrant Purchase Agreement dated as of May 31, 1996, pursuant to
which, among other things, HTI shall grant to QVC warrants to purchase
500,000 shares of HTI common stock, .01 par value, at an exercise price of
Two and Three Quarters Dollars ($2.75) per share (the "Second Warrant
Purchase Agreement");
(b) Joint Venture Agreement dated as of May 31, 1996, by and between
QDirect Ventures, Inc. ("QDirect") and Hydron Direct, Inc. ("HDI"), an
affiliate of HTI (the "New Joint Venture Agreement") pursuant to which
QDirect and HDirect shall agree to continue the activities contemplated by
that certain letter agreement dated January 17, 1995 by and among QDirect,
HDirect and DTR Associates;
(c) an amendment to that certain letter agreement dated December 2,
1993 by and between QVC and DTR (the "DTR Letter Agreement"), pursuant to
which, among other things, QVC's obligation to pay any commission to DTR on
QVC's Net Sales (as defined in the letter agreement) shall be nullified as
of May 31, 1996 (the "DTR Letter Agreement Amendment");
(d) a letter agreement dated as of the date hereof between QVC and HTI
memorializing certain agreements and understandings between QVC and HTI
(the
11
<PAGE>
"HTI Letter Agreement") (hereinafter, the Second Warrant Purchase
Agreement, the Joint Venture Agreement the DTR Letter Agreement Amendment
and the HTI Letter Agreement are collectively referred to as the "Other
Documents").
4. Ratification of Existing Agreements. Except as expressly modified by
this Amendment and the Other Documents, all agreements entered into between QVC
and HTI (and any affiliates of HTI) shall remain in full force and effect, and
QVC and HTI each hereby ratify their respective representations, warranties,
covenants, and other obligations thereunder.
5. Effectiveness. This Amendment shall become effective upon: (i) the
execution of this Amendment by a duly authorized representative of each of QVC
and HTI; (ii) the execution of each of the Other Documents by duly authorized
representatives of the parties to the Other Documents; and (iii) the exercise by
QVC of the Series A Warrants and the Series B Warrants.
6. Counterparts. This Amendment may be executed in counterparts, which,
taken together, shall constitute one and the same Amendment.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
have executed this Amendment as of the date first above written.
QVC, Inc. Hydron Technologies, Inc.
By: By:
-------------------------- --------------------------
Neal S. Grabell Harvey Tauman
Senior Vice President President
Acknowledged and agreed to:
- -----------------------------
Harvey Tauman
Date:
12
<PAGE>
May 31, 1996
Mr. Harvey Tauman
Hydron Technologies
1001 Yamato Road, Suite 403
Boca Raton, FL 33431
Re: Hydromercial Partners
Dear Harvey:
As you know, on or about January 17, 1995, QDirect
Ventures, Inc., Hydron Direct, Inc. ("HDirect") and DTR
Associates ("DTR") entered into a letter agreement pursuant to
which the parties formed a joint venture for the purposes of
producing and causing to be distributed an infomercial
featuring certain skin care products manufactured by or for
Hydron Technologies, Inc. ("HTI"), an affiliate of HDirect
(the "Products") (the "Joint Venture Agreement"). For
reference, a true and correct copy of the Joint Venture
Agreement is attached hereto as Exhibit "A".
As of the date hereof, DTR has withdrawn from the Joint
Venture and has been paid the amount due to DTR upon its
withdrawal in accordance with the terms of the Joint Venture
Agreement. By operation of law, the withdrawal of DTR from
the Joint Venture has dissolved the Joint Venture.
QDirect and HDirect desire to continue the distribution
of the thirty (30) minute infomercial produced by Shulberg
Media Works, during which the Products are offered for sale
(the "Infomercial"), and desire to, and hereby form a new
joint venture between QDirect and HDirect for that purpose
(the "New Joint Venture"). This letter will set forth the
respective rights and duties of QDirect and HDirect with
respect to the New Joint Venture. QDirect and HDirect are
sometimes collectively referred to as the "parties".
The purpose of the New Joint Venture is to promote and
sell the Products by means of the Infomercial. The Products
consist of a collection of Hydron polymer based skin care
products as shall be contained in a kit, which shall consist
of products from the existing product line, manufactured by or
for HTI). Notwithstanding the foregoing, "upsell" Products
need not be sold in a kit.
The term of the New Joint Venture shall begin on the
date of this Agreement and shall end two (2) years after such
date (the "Initial Term"). Upon the expiration of the Initial
Term, the New Joint Venture may be extended for successive one
(1) year terms, upon the unanimous written consent of the
<PAGE>
Mr. Harvey Tauman
May 31, 1996
Page 2
parties. The parties shall meet no less than thirty (30) days
prior to the end of the Initial Term, to discuss the potential
renewal of the term of the New Joint Venture.
The New Joint Venture shall be referred to as "New
Hydromercial Partners", and shall have its principal place of
business at 1365 Enterprise Drive, West Chester, PA 19380.
The New Joint Venture shall be a Pennsylvania general
partnership and shall be governed by Pennsylvania law.
QDirect covenants and agrees to file such documents (e.g.,
fictitious name certificate) and to perform such actions as
may be necessary to form the New Joint Venture in accordance
with Pennsylvania law. The Pennsylvania partnership code (the
"Partnership Code") is hereby incorporated herein by
reference.
All costs and expenses, and any profits and losses
associated with the New Joint Venture shall be evenly shared
by QDirect and HDirect. Each of QDirect and HDirect agree to
fund one-half of such costs and expenses. A budget (the
"Budget") setting forth the specific costs and expenses in
connection with the Infomercial, and additional costs and
expenses to be incurred by the New Joint Venture, shall be
approved by the parties and once unanimously approved by the
parties, shall be incorporated by reference into this
Agreement as an exhibit. The parties covenant and agree to
follow the Budget, which Budget may be amended from time to
time upon the unanimous consent of the parties, in carrying
out the business of the New Joint Venture. In the event that
QDirect (or any other party) advances funds on behalf of
another party, the appropriate portion of such funds shall be
promptly reimbursed upon request.
QDirect shall manage the daily activities of the New
Joint Venture, including without limitation all day to day
activities with respect to the production and testing of the
Infomercial. QDirect shall not receive any remuneration for
acting as the managing partner, provided, however, that
QDirect may charge the New Joint Venture customary rates for
services performed by QDirect which have been approved by the
New Joint Venture, including without limitation product
fulfillment, returns processing, shipping and handling
charges, and tax, accounting and other similar administrative
expenses. The daily activities of the New Joint Venture shall
be managed in accordance with the Budget. QDirect shall have
the authority to hire third parties, including professional
advisers, as may be required by the activities of the New
Joint Venture, provided that such activities have been
provided for in the Budget, and QDirect has (i) first provided
<PAGE>
Mr. Harvey Tauman
May 31, 1996
Page 3
HDirect with written notice of its intention to hire any third
party and (ii) considered any comments made by HDirect, with
respect to such notice, following a raesonable opportunity for
comment. Subject to the provisions below, all decisions for
matters not arising in the ordinary course, shall be jointly
made by the parties, including without aggregate media
expenditures. QDirect shall maintain the books and records of
the New Joint Venture, including cash disbursements and
receipts, and the distribution of profits and losses. The
parties acknowledge that, during the Initial Term and any
renewal term, it is the intent of the New Joint Venture to
reinvest profits for the purpose of purchasing additional
media time for the Infomercial, provided, however, that in the
event that the New Joint Venture shall have a minimum of One
Million ($1,000,000) Dollars of cash on hand after such
distributions, the New Joint Venture shall make such quarterly
distributions as are necessary to cover the tax liabilities of
the parties. The fiscal year of the New Joint Venture shall
end on December 31. QDirect shall act as the tax matters
partner on behalf of the New Joint Venture and may hire such
professionals as are necessary to perform the appropriate
activities. Upon the request of QDirect, a bank account on
behalf of the New Joint Venture shall be opened, into which
the parties shall deposit their capital contributions. The
New Joint Venture shall maintain a vendor broad form product
liability insurance policy in the face amount of not less than
$1,000,000 naming each of the parties as an additional insured
on such policy throughout the term of this Agreement.
QDirect shall prepare and maintain the books and records
of the New Joint Venture in such manner as will reasonably
permit the parties' accountants to audit same and in
accordance with generally accepted accounting principles.
HDirect shall have the right, once per year, during regular
business hours, to audit the books of account and records of
the New Joint Venture and examine and make copies of all
documents and material relating to New Hydromercial Partners.
All such books of account, records and documents shall be kept
available by QDirect and/or New Hydromercial Partners for not
less than six (6) years after the end of the fiscal year to
which they relate.
HDirect agrees to cause HTI to provide all Products for
the Infomercial at prices equal to the sum of: (i) one hundred
and ten percent (110%) of HTI's direct cost of such Products
("Direct Cost") and (ii) five percent (5%) of Direct Cost
(the "Royalty Reimbursement"). The Direct Costs, as of the
date hereof, are set forth on Exhibit "B", attached hereto
and incorporated herein by reference. HDirect acknowledges
<PAGE>
Mr. Harvey Tauman
May 31, 1996
Page 4
and agrees that the books and records of the Joint Venture and
the New Joint Venture have been adjusted to reflect the costs
set forth on Exhibit "B", as of the date of this Agreement.
HDirect represents and warrants that the Direct Costs consist
only of the costs directly attributable to the Products.
From time to time, the parties shall meet to determine
what amount of additional capital to commit for additional
media purchases. In the event that the parties reach an
impasse with respect to any material matter related to
activities of the New Joint Venture, including but not limited
to the contribution of additional capital, for a period of
ninety day (90) days or more, then either party may offer to
buy out the interest in the New Joint Venture of the other
party at a price determined by the offering party, which price
shall not be less than an amount equal to the total production
costs incurred in connection with the Infomercial multiplied
by two (2). In the event that the other party refuses to sell
its interest in the New Joint Venture Agreement to the
offering party, then such party shall purchase the interest of
the offering party at a price equal to the price offered by
the offering party. Under such circumstances, all books and
records relating to the New Joint Venture shall be reconciled,
and each party shall promptly make any payments required by
such reconciliation. After the aforementioned payments are
made, the party unwilling to commit additional capital shall
withdraw from the New Joint Venture and the New Joint Venture
shall be deemed to be dissolved as a matter of law.
In the event that either party to this Agreement buys
out the interest of the other in the New Joint Venture, then
the purchaser of such interest shall have the right to cause
the distribution of the Infomercial only in its entirety, and
without any edits to the then-current format of the
Infomercial, unless it first obtains the prior written consent
the other party, which consent shall not be unreasonably
delayed or withheld In the event that Qdirect is the
purchaser, HTI shall negotiate in good faith with Qdirect the
pricing of Products.
All right, title and interest in and to the Infomercial,
including the copyright therein, shall belong to the New Joint
Venture. In addition to the grounds for dissolution as set
forth in the Partnership Code, any party may elect to
terminate this Agreement in the event that any other party
becomes insolvent, or fails to perform its obligations as set
forth herein, within ten (10) days written notice from any
party. In the event that following the dissolution of the
Joint Venture any party's capital account has a deficit, such
<PAGE>
Mr. Harvey Tauman
May 31, 1996
Page 5
party shall contribute sufficient capital necessary to restore
the balance to zero, provided that the parties had approved
such expenditures that resulted in the necessity for increased
capital contributions.
To the full extent permitted by law, the New Joint
Venture shall indemnify any party or person who is threatened
to be named or is named a defendant or respondent in a
proceeding because such party was serving at the request of or
in the capacity of a party to the New Joint Venture, unless
such person or party was grossly negligent or acted in bad
faith; provided, however, that no party shall be entitled to
indemnification with respect to any material violation by such
party of the terms and conditions of this Agreement.
This Agreement is in addition to the Agreement dated
December 6, 1993 between HTI and QVC, as amended by a First
Amendment dated the date hereof (the "License Agreement"),
which remains in full force and effect. Payment terms for
purchases of Products by the New Joint Venture shall be thirty
(30) days from the later of the receipt of the Products by the
New Joint Venture or the receipt of an invoice. All Products
shall be shipped F.O.B. HTI's warehouse. Other than as set
forth in the License Agreement, and the other documents
executed pursuant thereto, this Agreement supersedes all prior
communications between the parties, whether oral or written,
and constitutes the entire understanding of the parties with
respect to the subject matter contained in this Agreement.
The parties acknowledge and agree that the letter agreement
dated December 2, 1993 between QVC and DTR is void and of no
effect.
No party shall sell, assign, pledge, or otherwise
encumber or dispose of its interest in New Hydromercial
Partners or any part thereof, including any beneficial
interest therein (any such assignment, pledge, encumbrance or
disposition is hereinafter called a "Transfer"), and any
attempt to effect a Transfer shall be in all respects null and
void.
Products purchased by the New Joint Venture shall be the
sole property of the New Joint Venture, and HTI shall not
accept any returns of Products other than as a result of
defects or other noncompliance with the applicable purchase
order. Other than as set forth above, any and all returns of
Product from consumers shall be the sole responsibility of the
New Joint Venture, and the parties specifically understand and
agree that there will be no recourse to HTI in respect of any
and all of such returns.
<PAGE>
Mr. Harvey Tauman
May 31, 1996
Page 6
If any term or condition of this Agreement or the
application thereof shall be illegal, invalid or
unenforceable, all other provisions hereof shall continue in
full force and effect as if the illegal, invalid or
unenforceable provision was not a part hereof. This Agreement
may not be amended, altered or modified unless in writing,
signed by the parties.
Any notices sent pursuant to this Agreement shall be
sent via fax and certified mail, return receipt requested, or
via a reputable overnight carrier, to the other parties at the
addresses indicated on the first page of this Agreement.
The parties consent to the exclusive jurisdiction of the
state courts of the Commonwealth of Pennsylvania, Chester
County, and the United States Courts for the Eastern District
of Pennsylvania in all matters arising out of this Agreement.
The parties irrevocably consent to service of process by
certified mail, return receipt requested, to the addresses set
forth on the first page hereof.
Please indicate your acceptance of the above terms and
conditions by executing this letter where indicated below, and
returning a copy to me.
Very truly yours,
Neal S. Grabell
Senior Vice President
and Secretary
QDirect Ventures, Inc.
ACKNOWLEDGED & AGREED:
HYDRON DIRECT, INC.
By:
-----------------------
Harvey Tauman
President
