UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REPORT ON FORM 10-K
(Mark One)
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1995 or
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from to .
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Commission file Number 0-6333
HYDRON TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
New York 13-1574215
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1001 Yamato Road, Boca Raton, Florida 33431
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 994-6191
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES /X/ NO / /
Indicate by checkmark if disclosure of delinquent filers pursuant to
Item 405 of Regulation SK is not contained herein and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10K or any other
amendment to this Form 10K. /X/
The aggregate market value of the voting stock held by nonaffiliates of
the Registrant was $58,741,683 based upon the closing price of $3.25 on March
26, 1996.
Number of shares of Common Stock outstanding as of March 15, 1996: 22,639,816.
Documents Incorporated by Reference: None.
Part I
Item 1. Business
General
Hydron Technologies, Inc. ("HyTech"), a New York corporation organized
on January 30, 1948, maintains its principal office at 1001 Yamato Road, Suite
403, Boca Raton, Florida 33431 and its telephone number is (407) 994-6191. On
July 30, 1993, its name was changed from Dento-Med Industries, Inc.
HyTech has the exclusive worldwide license to develop and market
products using Hydron(Registered) polymers, a scientifically-proven moisture
attracting ingredient, in the consumer and oral health care fields, and holds
U.S. and international patents on the only known means to suspend the Hydron
polymer in a stable emulsion that is cosmetically acceptable for use in
personal care/cosmetics products, creating a new moisturizing technology for
the cosmetics and pharmaceutical industries. HyTech has concentrated its
development activities to date, primarily on the application of these
biocompatible, hydrophilic polymers in various personal care/cosmetics
products for consumers and oral care products for dental professionals and
consumers. Because of their unique properties, management believes that
products which utilize Hydron polymers have the potential for wide acceptance
in consumer and professional health care markets.
During the fiscal year ended December 31, 1995 ("Fiscal 1995"),
substantially all sales of HyTech were made to QVC, Inc. ("QVC"), the world's
largest electronic retailer, which has the exclusive right to market certain of
HyTech's products in North America, South America and Central America. See
"Agreement with QVC."
Patented Technology
HyTech was granted U.S. Patent No. 4,883,659, dated November 28, 1989,
and U.S. Patent No. 5,039,516, dated August 13, 1991, which cover a stable
moisturizing emulsion containing an unusual emulsifying agent, as well as the
Hydron polymer and a unique combination of ingredients. According to the
patents, Hydron utilized in cosmetic emulsions creates a thin hydrophilic film
that is not tacky, gummy, greasy or oily; has good tactility and flexibility; is
not dissolved by sebaceous oils and does not emulsify skin's natural oils and
humectants; readily penetrates into skin pores and provides a velvety smooth
skin feel; is non-comedogenic (won't clog skin pores); and is resistant to
perspiration but allows air and moisture permeability (breathability). The film
is insoluble in water and resistant to rub-off, but can easily be removed with
soap and water and HyTech's botanical products. HyTech's management believes
that there are no competitive cosmetic products with this combination of
properties. Applications for the Hydron polymer and HyTech's patented technology
in the cosmetics and pharmaceutical industries include more effective and
prolonged delivery of moisturizing agents to the skin and hair; a more effective
delivery system for active ingredients in products such as sunscreens, that
allow use of a reduced amount of active ingredients without compromising product
efficacy; enhanced flavor and scent releasing components; and a delivery system
for topically applied over-the-counter medications, which may enhance the
penetration of active ingredients to the skin by holding them longer on the skin
in a moist environment.
Management believes that having patents for an emulsification process
adaptable to an array of consumer goods strengthens its ability to bring
Hydron-based products to the marketplace. In fiscal 1993, HyTech was granted a
European patent covering its Hydron emulsification process in Austria, Belgium,
France, Germany, Great Britain, Greece, Italy, Luxembourg, Netherlands, Spain,
Switzerland, Liechtenstein and Sweden. HyTech also holds patents on this
technology in the U.S., Australia and South Africa, and has patents pending in
Canada, Japan and Israel. Management believes that holding international patents
will facilitate HyTech's efforts to market its products and license its
technology to companies in other countries.
Consumer Products
HyTech has been engaged in the development of various consumer products
using Hydron polymers since 1966. During the past fiscal year, HyTech devoted
its resources primarily to the development of products in the personal
care/cosmetics field. These include a bath and shower body cleanser,
alpha-hydroxy body creme, shampoo and conditioner, styling and finishing spray,
styling gel, line reducing serum, lip moisturizer, eye makeup remover, blemish
cover creme, tinted facial moisturizer, facial cleansing gel, moisturizing bath
bar, body firming creme, body polishing gel, and after-bath spray. These
products, along with a hand and body moisturizer, daytime facial moisturizer,
overnight facial moisturizer, eye creme, facial cleanser, facial scrub, toner,
alpha-hydroxy gelee, clay masque, sunscreens with sun protection factors ("SPF")
of 15 and 30, and an SPF 8 self-tanning creme, either presently are being sold
to and marketed by QVC, or are intended to be sold to and marketed by QVC or
through other distribution channels during fiscal 1996.
HyTech is also exploring uses for the Hydron polymer and its patented
technology in color cosmetics, fragrances and health care products. During the
past fiscal year, HyTech utilized its patented Hydron polymer emulsion
technology as an enhanced drug delivery system in the development of various
topical, non-prescription medications, including a topical analgesic for minor
arthritis and sore muscle relief, an acne medication, and a treatment for skin
discoloration. These products are intended to be sold to and marketed by QVC or
through other distribution channels during fiscal 1996. Management believes that
this technology could also be licensed by HyTech to other consumer products
manufacturers or pharmaceutical companies to develop new products or improve the
effectiveness of existing products, and bring them under patent protection.
HyTech's consumer cosmetics/personal care lines cover a wide variety of
products. The following are all part of HyTech's Best Defense by
Hydron(Trademark) skin care collection, and available for marketing as of
December 31, 1995: Hydron(Registered) Best Defense All Over Moisturizer,
Hydron(Registered) Best Defense Facial Moisturizer, Hydron(Registered) Best
Defense Moisture Balance Restorative, Hydron(Registered) Best Defense Fragile
Eye Moisturizer, Hydron(Trademark) Best Defense Tri-Activating Skin Clarifier,
Hydron(Registered) Best Defense AHA Body Creme, Hydron(Trademark) Best Defense
Gentle Cleansing Creme, Hydron(Trademark) Best Defense Micro-Exfoliating
Creme, Hydron(Trademark) Best Defense Botanical Toner, and Hydron(Trademark)
Best Defense Five-Minute Revitalizing Masque. HyTech's Best Defense Under The
Sun(Trademark) collection includes Hydron(Trademark) Best Defense Sportscreen
in SPF 15 and SPF 30 formulas, and Hydron(Trademark) Best Defense Sunless
Tanning Creme.
Also available for marketing as of December 31, 1995 were the
following products in HyTech's new bath and shower line: Hydron(Trademark)
Botanical Volumizing Shampoo, Hydron(Trademark) Botanical Detangling
Conditioner, and Hydron(Trademark) Botanical Bath & Shower Cleanser.
All of these products contain the Hydron polymer, and all moisturizing
and sun care products are based on HyTech's patented emulsion technology.
The All Over Moisturizer creates a protective moisture cushion
on the skin, which provides long-lasting hydration and protection against
environmental irritants. It helps restore the skin's natural moisture
balance, leaves no greasy after-feel, and can be used to alleviate dry,
rough, flaking or irritated skin. During Fiscal 1995, it was marketed to
consumers by QVC in eight (8) fl. oz. pump bottles, boxed two and
one-quarter (2.25) fl. oz. tubes (in packages containing three (3) tubes
each), and two and two-tenths (2.2) fl. oz. tubes as part of the Best
Defense Travel Collection and Best Defense Bath & Body Collection.
The Facial Moisturizer was specifically formulated for daytime use, and
contains SPF 15 sunscreen protection against damage caused by ultraviolet rays.
It is oil-free, and can be used alone or under makeup with no greasy
shine-through. The Facial Moisturizer contains humectants to help restore the
skin's natural moisture balance, and antioxidant vitamins and enzymes that may
combat the long-term, cell-damaging effects of free radicals. During Fiscal
1995, the product was marketed to consumers by QVC in boxed, two (2) fl. oz.
glass pump bottles, and in one-half fl. oz. tubes as part of the Best Defense
Travel Collection and Best Defense Bath & Body Collection.
The Moisture Balance Restorative is a non-greasy, ultra-rich emollient
designed to replenish dry and environmentally stressed skin with moisture,
natural oils and lipids overnight, when the skin is most receptive to repair. It
is designed to improve skin texture and boost its defenses against moisture
loss. Initial clinical studies conducted by an independent, national testing
laboratory on human test participants indicate that the product improves skin
softness and elasticity twenty-four percent (24%) overnight, eight (8) hours
after application. During Fiscal 1995, the product was marketed to consumers by
QVC in boxed, two (2) ounce glass jars, and in one-half fl. oz. tubes as part of
the Best Defense Travel Collection.
The Fragile Eye Moisturizer is designed to renourish and firm the
delicate area around the eye using various humectants, ceramides, antioxidant
vitamins and enzymes in a liposome base. Clinical studies conducted by an
independent, national testing laboratory on human test participants showed that
the product reduces the appearance of fine lines and wrinkles around the eye up
to fourteen percent (14%) one (1) hour after product use, and from twenty-five
percent (25%) to fifty percent (50%) following one (1) week of daily product
use. During Fiscal 1995, the product was marketed to consumers by QVC in boxed
one-half (0.5) fl. oz. glass jars.
The Tri-Activating Skin Clarifier contains a five percent (5%)
alpha-hydroxy triple fruit acid complex in a non-irritating liquid gelee. It is
designed to gently remove dull, dead cells on the skin's surface to reveal an
improved complexion. Clinical studies conducted by an independent, national
testing laboratory on human test participants showed that the pH-balanced
formula of buffered alpha-hydroxy acids and green tea extract improves skin
clarity by forty-six percent (46%), skin texture by forty percent (40%),
uniformity of pigmentation by twenty percent (20%), and reduces the appearance
of superficial fine dry lines by thirty-eight percent (38%) and telangiectasia
(the permanent dilation of small arteries and capillaries) by ten percent (10%).
During Fiscal 1995, the product was marketed to consumers by QVC in boxed, one
(1) oz. and one-half (0.5) fl. oz. glass bottles.
The AHA Body Creme contains a ten percent (10%) alpha-hydroxy triple
fruit acid complex designed to improve body skin texture, smoothness and clarity
by removing dull dead cells on the skin's surface to reveal fresh cells
underneath. It penetrates easily to rehydrate and recondition dry,
environmentally stressed skin, removes rough spots and flakiness, evens
skintone, and reduces the appearance of discoloration caused by such factors as
sun damage and stretch marks. The product was introduced to market by QVC in
September 1995, and was sold during Fiscal 1995 in boxed, five (5) oz. tubes,
and in one (1) oz. tubes as part of the Best Defense Bath & Body Collection.
The Gentle Cleansing Creme is formulated to deep clean without the use
of soaps or synthetic detergents, and removes dirt and makeup without drying the
skin like soaps and detergents can. Its non-foaming, pH-balanced formula
protects skin's essential oils and humectants. It is water-rinsable, and leaves
the face feeling fresh and soft, with no oily residue. During Fiscal 1995, the
product was marketed to consumers by QVC in boxed, six (6) oz. tubes, and in two
(2) oz. tubes as part of the Best Defense Travel Collection and Best Defense
Bath & Body Collection.
The Micro-Exfoliating Creme is a mild surface exfoliator that gently
rids skin of impurities and oily build-up that can cause breakouts. Its
micro-fine synthetic beads deep clean skin and massage away dry flakes. These
soft beads have a smoothing, polishing effect on the skin, and will not tear or
irritate the skin like some competitive products that use ground bits of seeds
and pits to exfoliate. Initial clinical studies conducted by an independent,
national testing laboratory on human test participants showed that the product
improved skin smoothness by sixty-six percent (66%). During Fiscal 1995, the
product was marketed to consumers by QVC in boxed, three and six-tenths (3.6)
oz. tubes.
The Botanical Toner is alcohol-free and non-drying to the skin. It
uses seven (7) herbal extracts as natural astringents to tone and refresh
the skin, and remove residual cleanser and lingering impurities. It leaves
the skin conditioned, and prepares it to receive the maximum benefits of
HyTech's moisturizing and alpha-hydroxy treatment products. During Fiscal
1995, the product was marketed to consumers by QVC in six (6) fl. oz.
bottles, and in two (2) fl. oz. bottles as part of the Best Defense Travel
Collection and Best Defense Bath & Body Collection.
The Five-Minute Revitalizing Masque is a deep cleansing, whipped clay
masque that smooths on easily, and dries quickly to draw out impurities and
absorb excess oils. It contains a combination of super-fine white clays, and
cooling botanical extracts that help soothe, tone and refresh the skin. It can
be rinsed clear with warm water after five minutes, or left on longer as a
relaxing, at-home facial spa treatment. During Fiscal 1995, the product was
marketed to consumers by QVC in boxed, two and six-tenths (2.6) oz. jars, and
promoted with one (1) oz. tube samples.
The Sportscreen is a moisturizing sunscreen for active outdoor people,
in a choice of SPF 15 and SPF 30 protection against UVA and UVB rays. Its
sweatproof, PABA-free formula won't run in the eyes, absorbs fast, and leaves no
greasy afterfeel. It won't rinse off in water, and resists rub-off. HyTech's
patented moisturizing technology helps restore the skin's natural moisture
balance and prevent the tightness and peeling associated with sun exposure.
During Fiscal 1995, the product was marketed to consumers by QVC in boxed, three
(3) fl. oz. tubes (two tubes per package).
The Sunless Tanning Creme provides SPF 8 sun protection, and produces a
natural looking tan that lasts for days and develops in only two (2) to three
(3) hours, using no artificial dyes that rub off or wash away. Its oil-free,
non-greasy formula absorbs easily for uniform color results, and softens the
skin with HyTech's patented moisturizing technology. The product was introduced
to market by QVC in April 1995, and was sold during Fiscal 1995 in a boxed four
(4) oz. tube.
All of the above products are non-comedogenic, and are dermatologist
tested and approved for all skin types. In addition, the Fragile Eye Moisturizer
is ophthalmologist tested, and is safe for contact lens wearers.
The Botanical Volumizing Shampoo is formulated to clean gently and
completely, without stripping hair of moisture or weighing it down. Its light
conditioning complex helps protect hair against daily styling stress, improves
manageability, eliminates fly-away, and leaves hair soft, full and shining. A
Hydron polymer-based pro-vitamin B5 and wheat protein complex penetrates and
strengthens the hair shaft. Clinical studies conducted by an independent,
national testing laboratory indicate that this complex remains on the hair and
continues to work after rinsing. These studies also indicate that hair volume
increases twenty percent (20%) after washing with the Botanical Volumizing
Shampoo. This product, which is suitable for all hair types, was introduced to
market by QVC in March 1995, and was sold during Fiscal 1995 in eight and
two-tenths (8.2) fl. oz. bottles (two bottles per package), in single eight and
two-tenths (8.2) fl. oz. bottles as part of the Best Defense Bath & Body
Collection, and in two and two-tenths (2.2) fl. oz. bottles as part of the Best
Defense Travel Collection.
The Botanical Detangling Conditioner makes hair easy to comb, adds shine
and controls static. Its clean rinse formula won't accumulate and weigh hair
down, even with daily treatment. It protects and moisturizes fine, dry, and
over-styled or treated hair with a Hydron polymer-based complex of light natural
oils, botanical extracts and conditioning agents that leave hair silky and
manageable. The product was introduced to market by QVC in June 1995, and was
sold during Fiscal 1995 in eight and two-tenths (8.2) fl. oz. bottles (two
bottles per package), and was promoted in two and two-tenths (2.2) fl. oz.
bottle samples.
The Botanical Bath & Shower Cleanser is a foaming body wash that cleans
skin gently, without drying or irritating like soaps and detergent bubble bath
can. Cleansing agents derived from coconut oil and a vitamin enriched complex of
botanical ingredients leave skin fresh and clean, not filmy. A pH-balanced blend
of Hydron polymer-based moisturizing and conditioning agents creates a soft and
silky feel. The product was introduced by QVC in May 1995, and was sold during
Fiscal 1995 in eight and two-tenths (8.2) fl. oz. bottles (two bottles with
sponge per package), in single eight and two-tenths (8.2) fl. oz. bottles, and
in two and two-tenths (2.2) fl. oz. bottles as part of the Best Defense Bath &
Body Collection.
Also in the personal care field, HyTech has developed Hydron
polymer-based formulations for the following products: a denture freshening
spray called Comfordent(Registered), applied to the inside of dentures before
they are placed in the mouth; a new formulation denture adhesive, for which
HyTech has already received FDA Section 510(k) premarket notification
clearance; and a mouth rinse which preliminary studies have shown
substantially reduces the growth of plaque, without the inclusion of a
germicide ingredient.
The market for these products is highly competitive, and there are a
substantial number of competitive manufacturers of these products that have
greater financial resources and marketing expertise than HyTech. Decisions on
whether to further develop these products for the commercial market will be
based on management's and independent consultants' evaluations of market
potential, costs, competitive benefits, regulatory approval and certain
manufacturing considerations, applicable to each product. Although HyTech's
licensing agreement with QVC provides the electronic retailer with a right of
first refusal to market its Hydron-based consumer products in the Western
Hemisphere, and while HyTech is pursuing conventional retail distribution
agreements for its products in territories not covered under the QVC agreement,
there can be no assurances that these products will be commercially marketed.
Professional Products
HyTech markets its Hydron Best Defense All Over Moisturizer on a limited
basis directly to health care professionals. Management believes that the
product's hydrophilic properties create a moisturizing film that helps protect
health care workers' hands against the irritation and minor allergic reactions
that often accompany prolonged use of latex gloves and frequent hand washing,
including dryness, itching and scaling. In Fiscal 1995, a clinical study was
conducted by a Pennsylvania college on health care workers who exhibited varying
degrees of irritation or sensitivity to latex gloves. The results of the study
indicated that 90% of the participants experienced some degree of relief from
symptoms of irritation, and 48% indicated that their symptoms were relieved
enough to wear latex gloves without a problem. The study concluded that the
product may be beneficial in preventing the progression of latex glove
sensitivity from its suspected origin in non-allergic dermatitis, to more severe
allergic contact dermatitis. The product is currently sold to health care
workers in eight (8) fl. oz. pump bottles and in boxed, two and one-quarter
(2.25) fl. oz. tubes (in packages containing three (3) tubes each).
HyTech has also developed, and currently manufactures and sells on a
limited basis, a group of products for dental professionals under the
Hydrocryl(Registered) brand name. These include Hydrocryl Denture Base
Material (Heat Cure), which is used in the manufacturing of dentures, as well
as Hydrocryl Dental Lab Cold Cure Reline and Repair Kit and Hydrocryl
Chairside Reline and Repair Kit, both of which are used in connection with
relining existing Hydrocryl or conventional acrylic dentures, necessitated by
the continual changes that occur in the tissue structure of the mouth.
Management believes that the hydrophilic or moisture attracting properties of
these Hydron polymer based products give them competitive advantages over
conventional, non-hydrophilic, acrylic dentures and denture repair kits.
HyTech does not presently have a sales force actively engaged in direct
marketing to health care professionals. The health care products market is
highly competitive, and several other companies have much greater capital
resources, and utilize well-established channels of distribution to market their
professional products.
Topical Drug Delivery System
Management believes that HyTech's patented Hydron emulsification system
enhances the effectiveness of over-the-counter medications applied to the skin.
The system deposits a uniform film on the skin's surface which possesses all the
attributes required of an effective pharmaceutical base material, and has a
number of advantages over other lotions. It is moisture-resistant and not
degraded by perspiration or sebaceous oils, but it is oxygen permeable. It
promotes hydration of the stratum corneum, which improves ready penetrability
into the skin's pores. It has a relatively low affinity for the drug associated
with the application, which promotes controlled release of the drug. It has good
tactility and flexibility, and is free from greasiness, brittleness, tackiness,
gumminess or oiliness, which makes it comfortable on the skin. It does not rub
off easily, and is resistant to inks, dyes, oils and other materials that the
treated skin may be in contact with.
During Fiscal 1995, HyTech conducted clinical studies through an
independent, national testing laboratory to help document the suitability and
efficacy of its Hydron polymer technology as a drug delivery mechanism. Based on
positive clinical results, management elected to begin development of
proprietary products utilizing HyTech's patented Hydron emulsification system as
a drug delivery vehicle for several over-the-counter ("OTC") pharmaceutical
agents. Management expects to introduce HyTech's first OTC products to market in
the fiscal year ending December 31, 1996 ("Fiscal 1996").
Agreement with QVC
In December 1993, HyTech entered into a license agreement with QVC (the
"QVC License Agreement"), whereby QVC was granted exclusive rights to market and
distribute HyTech's proprietary consumer products using Hydron polymers in North
America, South America and Central America, through a variety of retail
channels, including its electronic retail cable television network, other forms
of electronic retailing such as infomercials (program-length commercials) and
direct response television advertising, and conventional retail distribution.
The QVC License Agreement specifically excludes the marketing of HyTech's
professional products, use of HyTech's patented technology as a drug delivery
system and products specifically geared to the health care field.
The QVC License Agreement expires two (2) years from April 1994, the
date QVC first aired the products for sale in a one (1) hour format, and is
automatically renewable for like terms if QVC purchases certain escalating
minimum quantities of product. As of the date of this report, QVC has met the
minimum purchase requirements in order to maintain such exclusive rights for the
initial two (2) year term of the contract. No obligation exists for QVC to
promote or purchase product, and no assurances can be given that QVC will meet
escalating minimum purchase levels for subsequent years in order to maintain
such exclusive rights. If QVC does not meet such minimum purchase levels, then
HyTech has the right to terminate the agreement and seek other marketing and
distribution arrangements for its products. The loss of QVC as a customer would
have a material, adverse impact upon the financial condition of HyTech. However,
management believes that as the result of the continued market penetration by
QVC the number of consumers using HyTech's products continues to grow. If QVC
were to cease acting as HyTech's exclusive marketing agent in the Western
Hemisphere, then HyTech would attempt to reach the existing base of Hydron
customers utilizing various alternative methods of marketing. No assurance can
be given that HyTech could successfully market its products utilizing any such
alternative methods.
In connection with the execution and delivery of the QVC License
Agreement, HyTech also entered into a Warrant Purchase Agreement whereby HyTech
issued two (2) warrants to QVC to purchase an aggregate of 500,000 shares of
HyTech's Common Stock at $2.50 per share. QVC was also granted anti-dilution and
registration rights for the shares of Common Stock issuable upon exercise of the
warrants.
Agreement with National Patent
Pursuant to the terms of an agreement with National Patent Development
Corporation ("National Patent"), HyTech has the exclusive worldwide rights to
market products using Hydron polymers in the oral health, personal
care/cosmetics and other consumer product fields, the areas in which HyTech has
been concentrating its research and development efforts. HyTech also has
exclusive worldwide rights to utilize Hydron polymers in its topical delivery
system for non-prescription drugs only. National Patent has the exclusive
worldwide rights to market prescription drugs and medical devices using Hydron
polymers. Furthermore, each company has the right to exploit products with
Hydron polymers not in the other's exclusive fields. Products which are not
developed by HyTech, could be developed by National Patent, and could benefit
HyTech through the payment of royalties.
The agreement requires HyTech to make royalty payments to National
Patent equal to five percent (5%) of net sales, and for National Patent to pay
HyTech a five percent (5%) royalty on net sales, of Hydron polymer products,
except with respect to certain excluded products. In the area of
non-prescription drugs using Hydron polymers as a drug delivery system, both
HyTech and National Patent have agreed to pay the other a royalty equal to five
percent (5%) of net sales and twenty-five percent (25%) of any license fees,
royalties or other similar payments received from third parties with regard to
such products developed. HyTech has not received any royalties from National
Patent, and has paid royalties of approximately $338,000 for net product sales
in Fiscal 1995 under this agreement.
Marketing
HyTech's personal care products are presently being marketed on an
exclusive basis in the United States by QVC, the world's largest electronic
retailer, pursuant to the QVC License Agreement. See "Agreement with QVC."
Certain products are also sold in Europe by a QVC affiliate. In the United
States, the QVC shopping channel is transmitted live on cable television,
twenty-four (24) hours a day, seven (7) days a week, to over fifty (50) million
homes. In addition, they reach several million international households through
joint ventures in the United Kingdom and Mexico.
Retail sales of Hydron products by QVC to consumers increased thirty
percent (30%) in Fiscal 1995, to $21 million from $16 million in Fiscal 1994.
Approximately 69% of retail sales in Fiscal 1995 occurred in connection with
on-air marketing of Hydron products by QVC. The balance occurred as back-end or
off-air sales, which is primarily a reorder business. Consumers may purchase
Hydron products at any time from QVC, which maintains an inventory of such
products. Back-end sales of Hydron products by QVC to consumers increased one
hundred and four percent (104%) in Fiscal 1995 over Fiscal 1994. Management
believes this is a strong indication of the growing acceptance of Hydron
products by consumers, and a willingness by consumers to expand their use of
Hydron products to include new products launched. To date in excess of 1,000,000
units of Hydron products have been purchased by approximately 250,000 retail
customers.
Ninety eight percent (98%) of HyTech's sales during the fiscal years
ended December 31, 1995 and 1994 were made to QVC and affiliated companies.
Management anticipates that QVC will continue to represent the greatest
percentage of sales as the network more fully exploits its license and obtains
deeper market penetration. The loss of QVC as a customer would have a material,
adverse impact upon the financial condition of HyTech. However, management
believes that as the result of the continued market penetration by QVC the
number of consumers using HyTech's products continues to grow. If QVC were to
cease acting as HyTech's exclusive marketing agent in the Western Hemisphere,
then HyTech would attempt to reach the existing base of Hydron customers
utilizing various methods of marketing. No assurance can be given that HyTech
could successfully market its products utilizing any such alternative methods.
In Fiscal 1995, HyTech expanded its Best Defense by Hydron skin care
line, marketed on the QVC network, with the addition of a Sunless Tanning Creme
and an AHA (Alpha-Hydroxy Acid) Body Creme. Also, in response to customers'
requests, HyTech offered a new packaging configuration of its All Over
Moisturizer in tubes.
In addition, HyTech re-packaged eight of its skin care products into a
single collection to encourage wider consumer usage. Management believes that
this slightly lower margin item generally expands potential re-order business,
leading to increased sales of the individual products at higher margins. In
fact, since its introduction by QVC in June 1995, this item has represented
HyTech's largest revenue producer. In February 1996, QVC launched a continuity
program which allows customers to receive the eight-product collection
automatically every sixty (60) days, without having to re-order or pay
subsequent shipping and handling charges.
HyTech's product mix also grew in Fiscal 1995 to include hair care and
bath and body items, which sell at a lower cost and somewhat lower margin than
its skin care products. During Fiscal 1995, QVC launched a Hydron polymer-based
shampoo, conditioner, and bath and shower cleanser. HyTech also packaged seven
primarily travel-sized units of its skin, hair and bath care products in a Bath
& Body Collection to encourage consumer sampling of new line items.
HyTech began marketing its first skin care product on QVC in May 1993.
During Fiscal 1994, QVC launched ten (10) additional products in the skin care
line, along with a Travel Collection of five travel-sized Hydron skin care
products. Five of these products debuted on QVC during HyTech's first one-hour
program, called "Hydron Care," during which QVC's sales of Hydron skin care
products to viewers were approximately $800,000, setting a new network one-hour
record for retail sales of cosmetic products.
Beginning in April 1994, "Hydron Care" hours became part of QVC's
regularly scheduled programming. During the second half of Fiscal 1995, QVC
began airing regularly scheduled programming generally every eight (8) weeks.
Such programming, including "Hydron Care" hours, had previously aired primarily
monthly. As a result, the aggregate number of on-air hours declined from sixteen
(16) in the first six (6) months of Fiscal 1995 to twelve (12) in the last six
(6) months of Fiscal 1995. The decrease in sales in Fiscal 1995 is in part due
to the decrease in on-air broadcast time. However, retail sales of Hydron
products by QVC to consumers per minute of air time, actually increased from
$7,518 to $7,915.
Typically, three (3) "Hydron Care" hours are broadcast during a month in
which Hydron programming is scheduled, in addition to several shorter program
segments. The hour-long programs generally feature most currently available
products, which are sold individually and packaged together in various
combinations. Shorter program segments are generally used for special promotions
or to highlight new products. All QVC programming is live. Each program
typically features on interview between a QVC host and HyTech's President and
Chairman, Harvey Tauman. On-air participants often include cosmetic chemist
Charles Fox, who developed the Hydron skin care products, QVC models, who
demonstrate the products, and QVC viewers who have purchased the products, and
call during the program to discuss their experiences.
Management is actively pursuing opportunities to increase on-air
programming on QVC in fiscal 1996, focusing primarily on new program formats,
line extensions that may warrant additional programming, and special promotions.
In Fiscal 1995, special one-day promotions of Hydron products conducted by QVC
in February and July generated $2.4 million and $2.2 million in retail sales to
consumers during two 24-hour periods, respectively.
In Fiscal 1996, management expects to launch as many as ten (10)
additional products in its skin care line on QVC. HyTech also plans to expand
its botanical hair care and bath and body lines significantly, adding as many as
five (5) products to each line. Also, in December 1995, QVC added Hydron
products to its on-line shopping site, available on the Microsoft Network.
On January 21, 1995 HyTech, through its wholly-owned subsidiary, Hydron
Direct, Inc. ("HDirect"), entered into an agreement with QDirect Ventures, Inc.,
a subsidiary of QVC, and DTR (Direct to Retail) Associates, a Massachusetts
limited partnership ("DTR"), to form a joint venture known as Hydromercial
Partners (the "Infomercial Joint Venture"). The purpose of the Infomercial Joint
Venture is to promote and sell HyTech's Hydron polymer-based skin care products
by means of a thirty (30) minute commercial ("Infomercial") for broadcast on
network and cable television.
Each of HDirect, QDirect and DTR has a one-third interest in the profits
and losses of the Infomercial 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. During Fiscal 1995, the sum of
$900,000 was provided in capital to the Infomercial Joint Venture in equal
amounts by the joint venture participants, and was used to produce the
Infomercial, conduct test marketing, and purchase media time on network and
cable television.
The Infomercial, which features the same eight-product Hydron skin
care collection sold on QVC, has been airing regularly on regional
broadcast and national cable networks since September 1995, following
the completion of successful test marketing. In December 1995, the
Infomercial Joint Venture additionally tested the Infomercial with focus
groups through an independent market research firm. The Infomercial Joint
Venture plans to revise and update the existing Infomercial in Fiscal 1996
utilizing focus group feedback. Management expects these changes to
further enhance front-end sales, and anticipates that the
Infomercial will significantly broaden HyTech's market for its consumer
products during Fiscal 1996. Also, management expects the
Infomercial Joint Venture to begin production in Fiscal 1996 of
a new infomercial, to promote and sell new products in HyTech's
skin care line as well as other new products.
In addition, during the fourth quarter of Fiscal 1995 and the first
quarter of Fiscal 1996, the Infomercial Joint Venture began other marketing and
promotional activities to maximize Infomercial sales. These include a program to
follow-up inquiries from Infomercial viewers for more information on Hydron
products and convert them into sales, and a telemarketing program for existing
Infomercial customers, to offer them an opportunity to automatically receive the
skin care collection on a regular basis without having to re-order, and to
encourage them to purchase additional Hydron products.
Management anticipates that during Fiscal 1996, QVC network programming
and Infomercial programming will be supplemented by additional marketing and
promotional activities, including but not limited to print and electronic direct
response marketing, advertising and public relations. In Fiscal 1995, numerous
major magazines with international distribution included Hydron skin care
products in feature articles and columns. In February 1996, HyTech contracted
with an agency specializing in broadcast media as well as health and beauty
print media, to provide broader public relations support for its products.
In addition, during Fiscal 1995, HyTech established and staffed a
customer service department to respond promptly to consumer inquires regarding
its products and technology. HyTech also launched a newsletter, mailed quarterly
to QVC and Infomercial customers who have previously purchased Hydron products.
The newsletter provides information on new Hydron products, educates consumers
on proper skin and hair care, responds to customer questions, and facilitates
re-ordering. Management believes that since its debut, the newsletter has had a
positive impact on back-end sales. HyTech simplifies re-ordering of its products
through QVC by printing QVC's toll-free telephone number and each product's
assigned QVC item number on all product packaging, package inserts and other
marketing material.
To a limited extent, HyTech also markets its personal care/cosmetics
products directly to shareholders, and its personal care/cosmetics and dental
products directly to the health care professionals. In Fiscal 1995, HyTech
expanded European marketing of its Hydrocryl dental products by adding an
exclusive distributor in Spain. Management expects to broaden direct marketing
efforts to U.S. customers during Fiscal 1996, and is actively seeking other
international distributorships. HyTech does not presently have a sales force
actively engaged in direct marketing to health care professionals. The health
care products market is highly competitive, and several other companies have
much greater capital resources, and utilize well established channels of
distribution to market their professional products. To date, HyTech has not
realized substantial revenues from sales of its professional products.
Manufacturing
Hydron polymer-based products are manufactured exclusively for HyTech by
independent third parties, and to date HyTech has principally used one cosmetic
filler because of its quality manufacturing and reasonable cost. All raw
materials and packaging components for HyTech's consumer and professional
product lines are readily available to HyTech. To date, contract manufacturing
has permitted HyTech to meet rapidly escalating inventory requirements in a
timely manner. During Fiscal 1996, HyTech expects to utilize additional third
party manufacturers to produce select new products. Also, HyTech and its primary
cosmetic filler have established relationships with additional third party
cosmetic fillers who could produce HyTech's cosmetic products should increased
capacity be required.
HyTech is not dependent on any sole manufacturer except National Patent,
which has agreed to make the Hydron polymer available to HyTech as needed, and
to provide HyTech with all manufacturing procedures (including know-how) and
render necessary and reasonable technical assistance, should National Patent be
unable to meet HyTech's requirements for Hydron polymer.
Inventory
At December 31, 1995, HyTech maintained inventory valued at
approximately $4.0 million, as compared to approximately $3.26 million at
December 31, 1994. The increase in the amount of inventory resulted from new
product introductions, as well as anticipated increases in sales volume to be
generated by the Infomercial.
HyTech delivers its orders within two (2) weeks of the date orders are
booked. As a result thereof, HyTech had no backlog of firm booked orders at
December 31, 1995 or December 31, 1994. Although the business of HyTech is not
seasonal, orders are placed by QVC after it determines its programming, and
therefore, fluctuations in sales, which to date have been virtually all to QVC,
may occur on a monthly and quarterly basis.
The QVC License Agreement provides that QVC purchase products directly
from HyTech for resale to consumers, and HyTech receive payment from QVC thirty
(30) days after shipment of goods. In view of the thirty (30) day payment terms
in connection with sales to QVC and to the Infomercial Joint Venture, management
does not anticipate any difficulty in financing foreseeable inventory
requirements.
Government Regulation
All of HyTech's skin care, hair care, and bath and body products are
"cosmetics" as that term is defined under the Federal Food, Drug and Cosmetics
Act ("FDC Act"), and must comply with the labeling requirements of the FDC Act,
the Fair Packaging and Labeling Act ("FPL Act"), and the regulations thereunder.
Certain of HyTech's products, i.e. those which contain a sunscreen, such as the
daytime Facial Moisturizer, are also classified as a "drug," as the categories
of cosmetic and drug are not mutually exclusive. Regulatory requirements for
sunscreen products include additional labeling requirements, registration of the
manufacturer and semi-annual update of the drug list.
Research and Development
During Fiscal 1995, HyTech's contract research and development program
substantially completed development of a hair conditioner and finishing spray,
an alpha-hydroxy (natural fruit acid) body creme, and a soap-free cleansing gel.
At year-end, development efforts were continuing for numerous other personal
care/cosmetic products. These efforts include product formulation, packaging
design and prototypes, extensive product safety and stability testing conducted
by dermatologists, along with non-comedogenicity tests where appropriate,
certain efficacy studies to support product claims, and consumer focus groups
and panel tests. HyTech's research and development program is headed by Charles
Fox, a consultant to HyTech, who was formerly director of product development
for Warner Lambert Company's personal products division and president of the
Society of Cosmetic Chemists.
Management anticipates completing development of products initiated in
Fiscal 1995 during Fiscal 1996, and expects to focus research and development
resources on additional Hydron polymer based products as determined by
management's assessment of consumer demand, compatibility with HyTech's
proprietary technology, and sales potential. HyTech also anticipates devoting
greater resources in Fiscal 1996 to developing new polymer technology that may
enhance the benefits of its patented emulsification process as a delivery system
for cosmetic and over-the-counter drug ingredients.
Foreign Operations
Direct foreign sales by HyTech in Fiscal 1995 were not significant as a
percentage of consolidated net sales. However, during Fiscal 1995 HyTech
significantly expanded its European marketing efforts, begun with a QVC
electronic retail affiliate in the United Kingdom in December 1994, by
increasing the frequency with which "Hydron Care" one-hour programs aired on the
network.
Management expects to further expand its marketing efforts in other
European countries, and in other markets in the Western Hemisphere during Fiscal
1996. In addition, HyTech is reviewing other opportunities to exploit its
consumer products through various retail marketing and distribution methods in
regions not covered under the QVC License Agreement.
Employees
HyTech currently has eight (8) full-time employees, five (5) of whom are
executive officers or directors. HyTech also maintains relationships with
various consultants, who assist HyTech with new product development, packaging
design, marketing, public and investor relations, financial and business
management.
Item 2. Properties
HyTech maintains its offices at Yamato Office Center, 1001 Yamato Road,
Suite 403, Boca Raton, Florida 33431, and occupies approximately 5,500 square
feet of office space. The term of the lease expires in August 2001 and requires
monthly rent of approximately $6,600 subject to increases in the Consumer Price
Index, plus increases in taxes and specified operating costs over set amounts.
HyTech maintains warehouse space of approximately 31,000 and 1,200
square feet at 95 Mayhill Street, Saddle Brook, New Jersey 07663 and 6600 West
Rogers Circle, Boca Raton, Florida 33487 pursuant to leases which expire in
August 2000 and September 1998 at monthly rents of approximately $14,000 and
$700, respectively.
Management believes that such facilities are satisfactory for its
present needs.
Item 3. Legal Proceedings
HyTech is not a party to, and its property is not the subject of, any
material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
HyTech's Common Stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market ("The Nasdaq National Market") under the symbol HTEC. The
following tables indicate the closing prices for each quarter of HyTech's last
two (2) fiscal years, as reported by The Nasdaq National Market.
Fiscal 1995 High Closing Price Low Closing Price
Fourth Quarter 3-1/16 1-3/4
Third Quarter 5-1/16 2-15/16
Second Quarter 5-1/8 4-1/4
First Quarter 5-3/8 3-7/8
Fiscal 1994 High Closing Price Low Closing Price
Fourth Quarter 6-5/16 4-1/4
Third Quarter 6-9/16 4-9/16
Second Quarter 4-15/16 2
First Quarter 2-31/32 2-1/16
As of March 1, 1996, there were 4,278 record holders of HyTech's Common
Stock. No cash dividends were paid during the fiscal year ended December 31,
1994 or at any time prior thereto. In January 1995, HyTech instituted a regular
quarterly cash dividend of two and one-half cents ($.025) per share and paid a
dividend in March, June, September and December 1995. In February 1996, HyTech's
Board of Directors declared a two and one-half cents ($.025) per share dividend
for record holders on March 15, 1996 and payable on March 29, 1996. The payment
of dividends in the future will be determined by the Board of Directors in light
of conditions then existing, including HyTech's earnings and financial
condition.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Fiscal Years Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net sales $ 7,303,468 $ 8,640,234 $ 698,109 $ 168,833 $ 164,147
Operating income
(loss) $ 1,566,212 $ 3,418,599 $(1,446,944) $(1,453,752) $(1,246,248)
Interest and
investment income $ 325,010 $ 219,607 $ 85,909 $ 127,569 $ 305,765
Net income (loss) $ 1,782,588 $ 3,638,206 $(1,361,085) $(1,338,225) $ (940,483)
Net income (loss)
per common
share $ .08 $ .16 $(.07) $(.07) $(.06)
Total assets $ 12,992,111 $13,809,583 $ 7,635,267 $ 6,657,326 $ 6,898,357
Total
stockholders'
equity $ 12,561,548 $13,013,459 $ 7,456,653 $ 6,610,889 $ 6,844,634
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
HyTech sells specialty personal care/cosmetics products, primarily for
skin care, and to a lesser extent oral health care products, most of which are
covered by patent, license and royalty agreements. The QVC License Agreement
provides that QVC will purchase licensed products solely from HyTech, and the
License Agreement with National Patent provides that HyTech will generally pay
royalties on its sales to National Patent and receive royalties from National
Patent from sales of certain of that company's products. HyTech is developing
other personal care/cosmetics for consumers and health care products for
professionals using Hydron polymers, and anticipates using its patented
technology as a drug delivery system in proprietary products, in which Hydron
polymers act as a drug release mechanism. HyTech intends to either seek
licensing arrangements for its drug delivery technology with third parties, or
develop and market proprietary products through its own efforts. HyTech
commenced marketing its products on QVC in April 1994.
Results of Operations - Fiscal 1995 versus Fiscal 1994
Net sales for the fiscal year ended December 31, 1995 ("Fiscal 1995") of
$7,303,468 reflect a decrease of $1,336,766, or 15% from $8,640,234 in net sales
for the fiscal year ended December 31, 1994 ("Fiscal 1994"). This decrease is
primarily the result of QVC's purchasing patterns, partially offset by increased
sales to the Infomercial Joint Venture and QVC's European affiliate ("QVC
Europe"). QVC's purchasing patterns, which are primarily affected by the timing
of Hydron Care programming, resulted in QVC holding approximately $1.8 million
more of HyTech's inventory, at QVC's cost, at December 31, 1994 than it held in
inventory at December 31, 1995. Retail sales of HyTech's products by QVC to
consumers increased thirty percent (30%) in Fiscal 1995 over retail sales in
Fiscal 1994.
No obligation exists for QVC to purchase product under the terms of the
QVC License Agreement, except to maintain such exclusive rights, and no
assurances can be given that QVC will meet the escalating minimum purchase
levels for subsequent years in order to maintain such exclusive rights.
Management is actively pursuing opportunities to increase on-air
programming on QVC in Fiscal 1996, focusing primarily on new program formats,
line extensions and special promotions. In Fiscal 1995, special one-day
promotions of Hydron products conducted by QVC in February and July generated
$2.4 million and $2.2 million in retail sales to consumers during two 24-hour
periods, respectively. However, no assurances can be given that QVC will grant
HyTech additional on-air selling time; and the failure to receive such
additional on-air selling time could negatively impact sales. Management
anticipates that increased sales to the Infomerical Joint Venture, albeit at
lower gross margins, together with an increase in back-end sales, may offset any
such decrease in sales, if any.
Approximately 98% of HyTech's sales during Fiscal 1995 and Fiscal 1994
were to QVC and its related entities, including the Infomercial Joint Venture
and QVC Europe. Management anticipates that sales to QVC will continue to grow
as HyTech further extends its skin care line, adds other product lines, and
broadens its marketing efforts to include other forms of electronic and
conventional retailing. Absent the consummation of marketing or distribution
arrangements with third parties other than QVC, the percentage of sales to QVC
and HyTech's dependence upon QVC as a substantial customer will remain
significant.
HyTech's gross profit margin decreased 7% to 65% in Fiscal 1995,
compared to 72% in Fiscal 1994. This decrease is due primarily to fluctuations
in the mix of products sold to QVC in those periods. During Fiscal 1995, HyTech
introduced five (5) new products, three (3) of which were hair care or bath and
body products which provide a lower profit margin than HyTech's skin care
products. Further, management, in conjunction with QVC, made the decision to
package several of HyTech's individual skin care products in a collection and
agreed to price such collection at a substantial discount from the aggregate
costs of all of the individual items. This marketing strategy is a concerted
effort by management to further broaden the number of consumers using HyTech's
products, as well as to increase the distribution of the complete Hydron product
line. Management believes that once consumers sample a wider variety of HyTech's
products, they are more likely to reorder more of such products, either the
entire collection, or individual products at higher prices.
Research and development ("R&D") expenses reflect HyTech's efforts to
identify new product opportunities, develop and package the products for
commercial sale, perform appropriate efficacy and safety tests, and conduct
consumer panel studies and focus groups. R&D expenses decreased 16% to $177,468
in Fiscal 1995, compared to $211,909 in Fiscal 1994. The amount of R&D expenses
per year varies, depending on the steps taken toward development during such
year, as well as the number and type of products under development at such time.
Substantially all of the R&D activities have been performed for HyTech by
Charles Fox Associates Inc. ("the Consultant") pursuant to a series of one-year
agreements.
HyTech has entered into an agreement with the Consultant providing for
research and development services for a one-year period commencing March 1,
1996, in return for a monthly fee of $5,000 plus reimbursement of expenses. In
addition, such agreement provides that the principal of the Consultant, Charles
Fox, will make live appearances on QVC, and will appear for taping of one (1) or
more infomercials for HyTech products. In return for such personal appearances,
during calendar year 1996 HyTech will pay a royalty to the Consultant equal to
two and one-half (2.5%) percent of the net sales of Hydron polymer based
products, with a maximum royalty of $218,125. Such royalty will be paid
quarterly, with a minimum quarterly sales royalty to the Consultant equal to
$54,531.25. Finally, the Consultant has agreed that such royalty payments will
be used solely to exercise three (3) outstanding stock options held by Charles
Fox to purchase an aggregate of 100,000 shares of common stock of HyTech.
Selling, general and administrative expenses in Fiscal 1995 increased
24% to $2,288,841 from $1,842,414 in Fiscal 1994. This increase is attributable
to an overall increase in salary requirements, expansion of full-time staff,
including customer service personnel, and increased advertising expenses,
primarily relating to the production and mailing of HyTech's quarterly
newsletter. This increase in overall selling, general and administrative
expenses was partially offset by a non-recurring, predominantly non-cash charge
in Fiscal 1994 of approximately $120,000 in legal and miscellaneous costs
related to the settlement of a lawsuit.
Interest and investment income in Fiscal 1995 increased 48% percent, to
$325,010 from $219,607 in Fiscal 1994, resulting from the investment of
additional cash from operations. HyTech maintains a conservative investment
strategy, deriving investment income primarily from U.S. Treasury securities.
Net income for Fiscal 1995 decreased 51% to $1,782,588 from
$3,638,206 for Fiscal 1994, primarily a result of the factors discussed
above.
Results of Operations - Fiscal 1994 versus Fiscal 1993
Net sales for Fiscal 1994 were $8,640,234, over 1,000% higher than net
sales of $698,109 for the fiscal year ended December 31, 1993 ("Fiscal 1993").
The increase is due primarily to the continued marketing of HyTech's All Over
Moisturizer and the commencement of marketing of ten (10) additional products in
HyTech's Best Defense by Hydron skin care line on QVC. HyTech's All Over
Moisturizer was launched on the shopping network in May 1993. Prior to that
time, although HyTech had attempted to market this product and its professional
oral health care products on a limited basis through other means, HyTech's
primary business focus before Fiscal 1993 was product research and development
based on its proprietary, patented technology. Approximately 98% and 59% of
HyTech's sales during Fiscal 1994 and Fiscal 1993, respectively, were to QVC.
HyTech's gross profit margin increased 27% to 72% in Fiscal 1994,
compared to 57% in Fiscal 1993. This increase is directly attributable to the
addition of higher margin facial skin care products introduced in Fiscal 1994.
R&D expenses decreased 48% to $211,909 in Fiscal 1994, compared to
$406,860 in Fiscal 1993, as management had conducted significant development
efforts during Fiscal 1993 in anticipation of marketing HyTech's products on
QVC. During Fiscal 1994, HyTech continued to develop products that were
subsequently launched by QVC.
Selling, general and administrative expenses in Fiscal 1994 increased
72% to $1,842,414 from $1,072,939 in Fiscal 1993. This increase is attributable
to an overall increase in salary requirements, expansion of full-time staff,
greater insurance expenses, and increased selling expenses due to significantly
higher sales. In addition, selling, general and administrative expenses for
Fiscal 1994 included a non-recurring, predominantly non-cash charge of
approximately $120,000 in legal and miscellaneous costs related to the
settlement of a lawsuit. The increase in overall selling, general and
administrative expenses due to growing sales levels was partially offset by a
decrease in the amount of advertising and marketing expenses that occurred as a
result of the marketing of HyTech's products by QVC.
Interest and investment income in Fiscal 1994 increased 156% percent, to
$219,607 from $85,909 in Fiscal 1993, resulting from substantially higher cash
balances due to increased sales levels.
Net income for Fiscal 1994 was $3,638,206 as compared to a net loss of
$1,361,085 for Fiscal 1993. This change is primarily a result of the factors
discussed above.
Liquidity and Financial Resources
HyTech's overall financial condition remains strong as reflected in the
Consolidated Balance Sheets at December 31, 1995 compared to December 31, 1994.
Working capital at December 31, 1995 was approximately $9.0 million and cash
flow from operations in Fiscal 1995 increased to $1,716,931 from $397,545 in
Fiscal 1994. HyTech's cash flow from operations is a direct result of its
marketing efforts with QVC. The QVC License Agreement provides that QVC purchase
products directly from HyTech for resale to consumers, and that HyTech receive
payment from QVC thirty (30) days after QVC's receipt of such goods.
Investing activities used $859,509 in Fiscal 1995, as compared to
$69,305 in Fiscal 1994. The Fiscal 1995 investing activities consisted primarily
of leasehold improvements for HyTech's new administrative office and HyTech's
investment in the Infomercial Joint Venture.
Financing activities in Fiscal 1995 related primarily to the payment of
cash dividends totaling $2,263,374. Financing activities in Fiscal 1994
generated proceeds of $1,708,600 from the issuance of common stock as the result
of the exercise of stock options.
Based on HyTech's absence of any short or long term debt, present cash
position, relatively small accounts payable, third-party contractual approach to
manufacturing and R&D, and present business strategy, management believes that
HyTech has adequate resources to meet normal, recurring obligations as they
become due. Further, in view of the thirty (30) day payment terms in connection
with sales to QVC, management does not anticipate any difficulty in financing
foreseeable inventory requirements. However, management recognizes that HyTech
does not have the financial resources to sustain a conventional national
advertising campaign to market its products in a conventional retail mode. In
view of the foregoing, management has obtained with QVC, and continues to seek
internationally, marketing, licensing and distribution agreements with third
parties which have greater financial resources and that can enhance HyTech's
product introductions with appropriate national marketing support programs.
The effect of inflation has not been significant upon either the
operations or financial condition of HyTech.
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements of HyTech are contained in this
report following Item 14.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
Part III
Item 10. Directors and Executive Officers of the Registrant
Identification of Directors and Executive Officers
Listed below are the directors and executive officers of HyTech as of
March 15, 1996.
Name Position
Director, Chairman of the Board,
Harvey Tauman Chief Executive Officer, President and
Treasurer
Richard Tauman Director and Executive Vice President
Chaudhury M. Prasad Director, Vice President, Operations and
Secretary
Frank Fiur Director
Samuel M. Leb, M.D. Director
Nestor M. Cardero, C.P.A. Director
Joseph A. Caccamo, Esq. Director
Richard Banakus Director
Hugues Lamotte Director
Karen Gray Vice President, Corporate Communications
Thomas G. Burns Vice President, Finance and Chief
Financial Officer
Business Experience
Harvey Tauman, age 54, has been Chairman of the Board of Directors,
Chief Executive Officer, President and Treasurer of the Company for more than
the past five (5) years. Mr. Tauman became a director of the Company in 1971.
Harvey Tauman is the father of Richard Tauman, who is a Director and Executive
Vice President.
Richard Tauman, age 29, became a Director and Vice President,
Production, in March 1994. In April 1995 he was appointed Executive Vice
President. In May 1989 he graduated from the University of Miami with a BBA
degree in Marketing, and since such time has worked for the Company,
predominately in product production. Richard Tauman is the son of Harvey Tauman,
the Chairman of the Board and President.
Chaudhury M. Prasad, age 49 and a Director since 1975, has been Vice
President, Operations, and Secretary of the Company for more than the past five
(5) years.
Frank Fiur, age 82 and a Director since 1980, has been a consultant to
the Company on business and financial matters for more than the past five (5)
years. In addition, he is a real estate broker and salesman for The Fiur
Organization, Inc., industrial real estate brokers.
Samuel M. Leb, age 72 and a Director since 1988, was a self-employed
practicing surgeon from 1958 through August 1993, when he retired. From 1969
through December 1987, he was a member of the Board of Trustees of Parkway
Regional Medical Center, North Miami Beach, Florida.
Nestor M. Cardero, age 55 and a Director since 1990, is a certified
public accountant in private practice. He was a tax partner at Karpel & Company,
P.A. from March 1989 through November 1990. Prior to that time and for more than
five (5) years, he was a tax partner at KPMG Peat Marwick and its predecessor
KMG Main Hurdman, the Company's former independent auditors.
Joseph A. Caccamo, age 40 and a Director since August 1992, has been a
practicing attorney since 1981. From May 1987 through February 1991, he was an
associate of Parker Chapin Flattau & Klimpl, New York City, and from February
1991 through August 1991, he was of counsel to Brandeis, Bernstein & Wasserman,
New York City. In September 1991 he founded Joseph A. Caccamo Attorney at Law,
P.C., which is general counsel to the Company. He is also a director of Jean
Philippe Fragrances, Inc., a company engaged in the production and distribution
of fragrances and cosmetics, which has its common stock listed on The Nasdaq
Stock Market (National Market System).
Richard Banakus, age 49, was elected as a member of the Board of
Directors in June 1995. During the period from April 1991 to the present, Mr.
Banakus has been a private investor with interests in a number of privately and
publicly held companies. From July 1988 through March 1991, he was the managing
partner of Banyan Securities, Larkspur, California, which he founded.
Hugues Lamotte, age 53, was elected as a member of the Board of
Directors in June 1995. Mr. Lamotte has been engaged in managerial, marketing
and asset management functions in international finance for the past
twenty-seven (27) years. He has a broad array of investment experience, working
both in the United States and European Community. From 1974 through 1993 he was
the Managing Director of Wertheim Schroder & Co., Incorporated, a full service
investment banking firm with offices in New York, London and Paris. He is
credited with starting the firm's European operation and opened offices in
London, Paris and Geneva, and was formerly President of Wertheim Schroder
International. During his association with Wertheim Schroder & Co., he advised
numerous European and United States institutional clients with regard to their
global asset allocations and investments. In 1993, he started an investment
firm, Atlas Capital Management, and is its Chairman and Chief Executive Officer.
In addition, he is the Manager of Atlas Global Fund. Mr. Lamotte is an MBA
graduate of the University of Paris.
Karen Gray, age 37, was appointed Vice President, Corporate
Communications in October 1993. From 1984 until October 1990, Ms. Gray was the
Director of Corporate Communications for ISI Systems, Inc., a then publicly held
company and producer and distributor of computer software for the insurance
industry. From November 1990 through December 1990, Ms. Gray was relocating to
Florida, where she founded Mar/Comm Associates, Inc., Miami Beach, Florida, a
marketing communications firm. From January 1991 to October 1993, she was the
principal of Mar/Comm Associates, Inc., which acted as a public and investor
relations consultant to the Company from June 1992 through October 1993.
Thomas G. Burns, age 38, was hired as Chief Financial Officer in June
1994, and was appointed as Vice President, Finance in April 1995. Mr. Burns
served most recently as Audit Senior Manager for Ernst & Young, LLP of West Palm
Beach, Florida, where he had worked as a certified public accountant since 1981.
Item 11. Executive Compensation
The following table sets forth a summary of all compensation awarded to,
earned by, or paid to HyTech's Chief Executive Officer and all other persons who
were executive officers of HyTech for services rendered in all capacities to
HyTech and its subsidiaries during the fiscal years ended December 31, 1995,
December 31, 1994 and December 31, 1993:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Awards
Other
Annual Number
Compensation of All Other
Name and Principal Position Year Salary ($) Bonus ($) ($) Options Compensation
<S> <C> <C> <C> <C> <C> <C>
Harvey Tauman, Chief Executive Officer, 1995 $402,480 $100,000 $ 4,940 100,000 $30,960
President and Treasurer(1) 1994 335,400 150,000 4,940 200,000 -0-
1993 260,251 -0- 1,381,110(2) -0- -0-
Richard Tauman, Executive Vice President(3) 1995 $ 74,360 $ 12,500 $ -0- 60,000 $ 2,860
1994 58,525 10,500 523,813(4) -0- -0-
1993 NA NA NA NA NA
Chaudhury M. Prasad, Vice President, 1995 $ 76,440 $ 7,500 $ -0- 2,500 -0-
Operations and Secretary(5) 1994 72,800 7,500 679,939(6) -0- -0-
1993 65,508 -0- 9,996 -0- -0-
Karen Gray, Vice President, Corporate 1995 $ 60,060 $ 10,000 $ -0- 10,000 -0-
Communications(7) 1994 54,000 7,500 103,750(8) -0- -0-
1993 8,400 -0- -0- 50,000 -0-
Thomas G. Burns, Vice President, Finance 1995 $ 88,452 $ 10,000 $ 4,800 10,000 -0-
and Chief Financial Officer(9) 1994 48,600 5,000 2,800 50,000 -0-
1993 NA NA NA NA NA
</TABLE>
_______________
(1) As of December 31, 1995 Mr. Tauman beneficially held 2,000,000
restricted shares of Common Stock, with an aggregate value of $3,500,000 based
upon the closing price of HyTech's Common Stock as reported by the Nasdaq Stock
Market, National Market system, of $1.75.
(2) Represents income attributable to the difference between the
exercise price of stock options and the fair market value of the Common Stock
on the date of exercise.
(3) As of December 31, 1995 Mr. Tauman beneficially held 100,000
restricted shares of Common Stock, with an aggregate value of $175,000 based
upon the closing price of HyTech's Common Stock as reported by the Nasdaq Stock
Market, National Market system, of $1.75.
(4) Represents income attributable to the difference between the
exercise price of stock options exercised and the fair market value of the
Common Stock on the date of such exercise.
(5) As of December 31, 1995 Mr. Prasad held 200,200 restricted shares
of Common Stock, with an aggregate value of $350,350 based upon the closing
price of HyTech's Common Stock as reported by the Nasdaq Stock Market, National
Market system, of $1.75.
(6) Represents income attributable to the difference between the
exercise price of stock options exercised and the fair market value of the
Common Stock on the date of such exercise.
(7) Ms. Gray did not hold any restricted shares of Common Stock as of
December 31, 1995.
(8) Represents income attributable to the difference between the
exercise price of stock options exercised and the fair market value of the
Common Stock on the date of such exercise.
(9) Mr. Burns did not hold any restricted shares of Common Stock as of
December 31, 1995.
The following table sets forth certain information relating to stock
option grants during Fiscal 1995, for HyTech's Chief Executive Officer and all
other persons who were executive officers of HyTech and its subsidiaries for
Fiscal 1995:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realized Value
Individualized Grants at Assumed Rates of Stock
Appreciation for Option Term
Number of
Securities Percent of Total
Underlying Options Granted Five (5%) Ten (10%)
Options to Employees in Exercise Expiration Percent Percent
Name Granted (#) Fiscal Year Price Date ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Harvey Tauman 100,000 0.48 $2.285 11/07/2000 $63,130 $139,502
Richard Tauman 10,000 0.05 2.285 11/07/2000 6,313 13,950
Richard Tauman 50,000 0.24 4.606 01/05/2000 63,631 140,608(1)
Chaudhury M.
Prasad 2,500 0.01 2.285 11/07/2000 1,578 3,488
Karen Gray 10,000 0.05 2.285 11/07/2000 6,313 13,950
Thomas G. Burns 10,000 0.05 2.285 11/07/2000 6,313 13,950
</TABLE>
The following table sets forth certain information relating to option
exercises effected during Fiscal 1995, and the value of options held as of such
date by HyTech's Chief Executive Officer and all other persons who were
executive officers of HyTech and its subsidiaries for Fiscal 1995:
AGGREGATE OPTION EXERCISES FOR FISCAL 1995
AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Value(10) of
Unexercised In-the-
money Options at
Number of Unexercised December 31, 1995
Shares Acquired Value ($) Exercisable/ Exercisable/
Name on Exercise Realized(11) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Harvey Tauman -0- -0- 300,000/-0- $-0-/-0-
Richard Tauman -0- -0- 60,000/-0- $-0-/-0-
Chaudhury M.
Prasad -0- -0- 2,500/-0- $-0-/-0-
Karen Gray -0- -0- 90,000/-0- $10,000/-0-
Thomas G. Burns -0- -0- 30,000/30,000 $-0-/-0-
</TABLE>
- --------
(10) Total value of unexercised options is based upon the closing price ($1.75)
of the Common Stock as reported by the Nasdaq Stock Market on December 31,
1995.
(11) Value realized in dollars is the amount that the shareholder is deemed
to have received as the result of the exercise of options, based upon the
difference between the fair market value of the Common Stock as reported by
the Nasdaq Stock Market on the date of exercise and the exercise price of the
options at the time of the exercise.
Harvey Tauman has an employment agreement with HyTech whereby he is to
serve as Chief Executive Officer, President and Treasurer of HyTech through
April 30, 2003. His salary will increase annually by an amount equal to the
greater of (i) 5% of his base salary for the immediately preceding employment
term or (ii) increases as reflected in the Consumer Price Index, and which may
also be increased at any time at the discretion of the Board of Directors. In
addition, effective September 1, 1993 contemporaneous with the commencement of
the effective date of the QVC License Agreement, the Board of Directors voted
to increase Mr. Tauman's base salary (as defined in the employment agreement)
by $100,000 in consideration of the services to be performed by Harvey Tauman
pursuant to the terms of the QVC License Agreement. Such increase in base
salary is to remain in effect only for the so long as the QVC License
Agreement shall remain in effect.
Richard Tauman has an employment agreement with HyTech whereby he is
to serve as Vice President, Production of HyTech through August 31, 2004. His
salary will increase annually by an amount equal to the greater of (i) five
percent (5%) of his base salary for the immediately preceding employment term
or (ii) increases as reflected in the Consumer Price Index and which may also
be increased at any time at the discretion of the Board of Directors.
Chaudhury M. Prasad has an employment agreement with HyTech whereby
Mr. Prasad is to serve as Secretary of HyTech through April 30, 2003. His
annual salary may be increased at any time at the discretion of the Board of
Directors.
Each of the above employment agreements provide that, if a change in
control of HyTech has occurred and thereafter such employee shall terminate
his employment with HyTech, or if his employment is terminated by HyTech for
any reason other than death or disability, such employee shall be entitled to
receive (i) his regular compensation, including all awards, perquisites and
benefits, through the date on which his employment terminates and (ii) a lump
sum payment in an amount equal to 2.99 times his "base amount" (as defined in
Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended).
Compensation of Directors
There are no standard arrangements whereby directors who are also
employees of HyTech are compensated.
Nonemployee directors receive an annual fee of $5,000, and in November
1995 each of Messrs. Frank Fiur, Samuel M. Leb, Nestor Cardero, Joseph A.
Caccamo, Richard Banakus and Hugues Lamotte were paid $5,000 for their service
as a director.
On December 22, 1993, the Board of Directors of HyTech adopted the
1993 Nonemployee Stock Option Plan (the "1993 Plan"). This Plan was approved
by the stockholders on July 19, 1994. The purpose of the 1993 Plan is to
assist HyTech in attracting and retaining key directors who are responsible
for continuing the growth and success of HyTech.
The 1993 Plan provides nonqualified stock options for nonemployee
directors to purchase an aggregate of 250,000 shares of Common Stock, with
grants of options to purchase 10,000 shares on each September 1st, and grants
of options to purchase 10,000 shares upon election or appointment of any new
nonemployee directors which will not be exercisable for a one (1) year period,
at an exercise price equal to the fair market value of HyTech's Common Stock
on the date of grant but in no event less that $2.50 per share. Each of
Messrs. Frank Fiur, Samuel M. Leb, Nestor Cardero and Joseph A. Caccamo were
granted options to purchase 10,000 shares of Common Stock at the exercise
price of $3.21875 per share in September 1995. Each of Messrs. Richard Banakus
and Hugues Lamotte were granted options to purchase 10,000 shares of Common
Stock at the exercise price of $4.78125 per share under the 1993 Plan upon
their election to the Board of Directors in June 1995.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of the close of business
on March 15, 1996 as to the total number of shares of equity securities of
HyTech, owned by each director, and by all officers and directors of HyTech as
a group (eleven (11) persons), and by each person known to HyTech to be the
beneficial owner of more than five percent (5%) of HyTech's Common Stock:
<TABLE>
<CAPTION>
Name and Address of Beneficial Amount and Nature of Approximate Percent
Owner Beneficial Ownership of Class
<S> <C> <C>
Harvey Tauman 2,390,000(12) 10.4%
1001 Yamato Road
Boca Raton, FL 33431
Richard Tauman 160,000(13) Less than 1%
1001 Yamato Road
Boca Raton, FL 33431
Chaudhury M. Prasad 202,700(14) Less than 1%
1001 Yamato Road
Boca Raton, FL 33431
Karen Gray 90,000(15) Less than 1%
1001 Yamato Road
Boca Raton, FL 33431
Frank Fiur 145,000(16) Less than 1%
469 W. 83rd Street
Hialeah, FL 33041
Samuel M. Leb. M.D. 301,252(17) 1.2%
1905 So. Oak Haven Circle
No. Miami Beach, FL 33179
Nester M. Cardero, C.P.A. 43,500(18) Less than 1%
14222 S.W. 97th Terrace
Miami, FL 33183
Joseph A. Caccamo. Esq. 45,500(19) Less than 1%
666 Third Avenue
18th Floor
New York, NY 10017
Thomas G. Burns 60,000(20) Less than 1%
1001 Yamato Road
Boca Raton, FL 33431
Richard Banakus 1,510,000(21) 6.7%
82 Verissimo Drive
Novato, CA 94947
Hugues Lamotte 410,000(22) 1.8%
Atlas Capital Limited
5 Clifford Street
London, W1X1RB England
All officers adn directors 5,215,952(23) 22.8%
group (11 persons)
</TABLE>
- --------------
(12) Consists of 1,000,000 shares held directly; options to purchase 300,000
shares; 766,889 shares held as co-trustee and life estate beneficiary of
Marital Trust of deceased spouse; 233,111 held as personal representative and
life estate beneficiary of estate of deceased spouse; and 90,000 shares held as
trustee for emancipated children.
(13) Consists of 55,000 shares held directly; 45,000 shares as beneficiary of a
trust; and options to purchase 60,000 shares.
(14) Consists of 200,200 shares held directly and options to purchase 2,500
shares.
(15) Consists of options to purchase shares.
(16) Consists of 125,000 shares held directly; and options to purchase 20,000
shares of Common Stock. Does not include 109,000 shares held directly by Evette
Fiur, his wife, as to which he disclaims beneficial ownership.
(17) Consists of 107,100 shares held jointly with his wife; 164,152 shares held
indirectly through an IRA; and options to purchase 30,000 shares.
(18) Consists of 1,500 shares held indirectly through an IRA, 2,000 shares held
jointly with his wife, 20,000 shares of Common Stock held directly and options
to purchase 20,000 shares. Does not include 1,500 shares held by his wife in an
IRA, as to which Mr. Cardero disclaims beneficial ownership.
(19) Consists of options to purchase 45,000 shares and 500 shares held as
trustee for the benefit of his family.
(20) Consists of options to purchase shares.
(21) Consists of 1,500,000 shares held directly and options to purchase 10,000
shares.
(22) Consists of 300,000 shares held directly and options to purchase 110,000
shares.
(23) Consists of 4,565,452 shares held directly and options to purchase 647,500
shares, as well as 3,000 shares held by National Patent Development
Corporation, which has granted to the Company a proxy to vote its shares of
Common Stock.
Item 13. Certain Relationships and Related Transactions
Joseph A. Caccamo, a director of HyTech, is the principal of Joseph A.
Caccamo Attorney at Law, P.C., general counsel to HyTech. Mr. Caccamo's firm
was paid $64,224 in legal fees and for reimbursement of disbursements incurred
on behalf of HyTech during Fiscal 1995. Mr. Caccamo was granted options in
Fiscal 1995 to purchase 10,000 shares at $3.21875, the fair market value at the
time of grant, and received a non-employee director's fee of $5,000.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements.
The following financial statements required by Item 8 follow Item 14 of
this Report:
Page
Report of Independent Certified
Public Accountants F-1
Financial Statements:
Consolidated Balance Sheets, December 31, F-2
1995 and 1994
Consolidated Statements of Operations for the
Years Ended December 31, 1995, 1994 and 1993 F-3
Consolidated Statements of Stockholders' F-4
Equity for the Years ended December 31, 1995,
1994 and 1993
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1995, 1994 and 1993 F-5-6
Notes to Consolidated Financial Statements F-7
All financial schedules are omitted since the required information is not
present or is not present in significant amounts sufficient to require
submission of the schedules, or because the information required is included in
the Consolidated Financial Statements or notes thereto.
(a)(3) Exhibits:
The following Exhibits are filed as a part of this Report:
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Annual Report on Form 10-K for the fiscal
year ended December 31, 1985:
Exhibit No. and Description
3.1 Restated Certificate of Incorporation of Dento-Med Industries, Inc.
("Dento-Med"), as Filed with the Secretary of State of New York on March 4,
1981 (filed therein as Exhibit 3.1).
The following document heretofore filed with the Commission is
incorporated by reference to HyTech's Annual Report on Form 10-K for the fiscal
year ended December 31, 1986:
Exhibit No. and Description
4.0 Non-Qualified Stock Option Plan (filed as Exhibit 4.0 therein).
The following document heretofore filed with the Commission is
incorporated by reference to HyTech's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987:
Exhibit No. and Description
3.2 By-laws of HyTech, as amended March 17, 1988 (filed therein as Exhibit
3.2).
4.1 Incentive Stock Option Plan, as amended January 2, 1987 (filed as Exhibit
4.1 therein).
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Annual Report on Form 10-K for the fiscal
year ended December 31, 1988:
Exhibit No. and Description
3.3 Certificate of Amendment of the Restated Certificate of Incorporation of
Dento-Med, as filed with the Secretary of State of the State of New York on
November 14, 1988 (filed therein as Exhibit 3.2).
10.6 Indemnification Agreement dated September 23, 1988 between Dento-Med and
Harvey Tauman (filed therein as Exhibit 10.8).
10.7 Indemnification Agreement dated September 23, 1988 between Dento-Med and
Ilene Tauman (filed therein as Exhibit 10.9).
10.8 Indemnification Agreement dated September 23, 1988 between Dento-Med and
Frank Fiur (filed therein as Exhibit 10.10).
10.9 Indemnification Agreement dated September 23, 1988 between Dento-Med and
Chaudhury M. Prasad (filed therein as Exhibit 10.11).
The following document heretofore filed with the Commission is
incorporated by reference to HyTech's Current Report on Form 8-K (date of
event--November 30, 1989):
Exhibit No. and Description
10.10 Agreement between Dento-Med and National Patent dated November 30, 1989
(filed as Exhibit 10.1 therein).
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989:
Exhibit No. and Description
4.2 1989 Stock Option Plan (filed as Exhibit 4.2 therein).
10.11 Indemnification Agreement between Dento-Med and Samuel M. Leb, M.D. dated
May 9, 1989 (filed as Exhibit 10.11 therein).
10.12 Indemnification Agreement between Dento-Med and Richard Tauman dated May
19, 1989 (filed as Exhibit 10.12 therein).
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991:
Exhibit No. and Description
10.13 Indemnification Agreement dated as of January 14, 1992 between Dento-Med
and Joseph A. Caccamo Attorney at Law, P.C. (filed as Exhibit 10.13 therein).
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992, and filed therein as the same exhibit number,
unless otherwise noted:
Exhibit No. and Description
4.3 Stock Option Agreement and Consulting Agreement between HyTech and John T.
Boone dated January 30, 1992.
4.4 Stock Option Agreement between HyTech and DTR Associates Limited
Partnership dated March 9, 1992.
4.7 Stock Option Agreement between HyTech and DTR Associates Limited
Partnership dated September 15, 1992.
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Current Report on Form 8-K (date of
report December 6, 1993), as amended by the Form 8 Amendment no. 1 to such
Current Report, and filed therein as the same exhibit number, unless otherwise
noted:
Exhibit No. and Description
4.9 Warrant Purchase Agreement, together with Series A and Series B Warrants,
dated December 6, 1993, between QVC Network, Inc. and Hydron Technologies,
Inc., filed as exhibit no. 4.3 therein.(1)
10.23 License Agreement dated December 6, 1993 between QVC Network, Inc. and
Hydron Technologies, Inc.(24)
- ----------
24 Filed in excised form, as confidential treatment has been granted for
certain portions thereof.
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993, and filed therein as the same exhibit number,
unless otherwise noted:
Exhibit No. and Description
3.4 Certificate of Amendment of the Restated Certificate of Incorporation of
Dento-Med, as filed with the Secretary of State of the State of New York on
July 30, 1993.
4.10 1993 Nonemployee Director Stock Option Plan.
10.24 Amended and Restated Employment Agreement between Dento-Med and Harvey
Tauman dated May 13, 1993.
10.25 Amendment to Amended and Restated Employment Agreement between HyTech
and Harvey Tauman dated December 20, 1993.
10.26 Amended and Restated Employment Agreement between Dento-Med and
Chaudhury M. Prasad dated May 13, 1993.
10.27 Indemnification Agreement dated April 22, 1993 between HyTech and Nestor
Cardero.
10.28 Indemnification Agreement dated November 16, 1993 between HyTech and
Karen Gray.
10.30 Agreement among HyTech, Jill International, Inc. and John Charles Revson
dated November 16, 1993.
The following document heretofore filed with the Commission is
incorporated by reference to HyTech's Current Report on Form 8-K (date of
report January 21, 1995), and filed therein as the same exhibit number, unless
otherwise noted:
Exhibit No. and Description
10.31 Letter Agreement among QDirect, Inc., Hydron Direct, Inc. and DTR
Associates dated January 17, 1995
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, and filed therein as the same exhibit number,
unless otherwise noted:
Exhibit No. and Description
10.33 Consulting Agreement made effective as of the 1st day of April, 1994
between Hydron Technologies, Inc. and The Pink Jungle, Inc.
10.35 Employment Agreement dated the 16th day of September, 1994 between and
Hydron Technologies, Inc. and Richard Tauman
10.36 Letter Agreement dated December 22, 1994 among Hydron Technologies,
Inc., Roy Reiner and Chemaid Laboratories, Inc.
10.37 Indemnification Agreement dated February 21, 1995 between and Hydron
Technologies, Inc. and Thomas G. Burns
The following exhibits are filed herewith:
Exhibit No. and Description
10.38 Lease for 1001 Yamato Road, Suite 403, Boca Raton, FL between PFRS
Yamato Corp. and Hydron Technologies, Inc. dated May 8, 1995
10.39 First Amendment to Lease for 1001 Yamato Road, Suite 403, Boca Raton, FL
between PFRS Yamato Corp. and Hydron Technologies, Inc. dated September 15,
1995
10.40 Agreement for use and occupancy of portion of 5 East Building, 95
Mayhill Street, Saddle Brook NJ, between Chemaid Laboratories, Inc. and Hydron
Technologies, Inc. dated February 9, 1996
10.41 Depository Agreement between Chemaid Laboratories, Inc. and Hydron
Technologies, Inc. dated February 9, 1996
10.42 Consulting Agreement between Charles Fox Associates, Inc. and Hydron
Technologies, Inc. dated February 5, 1996
11 Statement re: Computation of Earnings Per Share
21 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young, LLP, Independent Certified Public Accountants.
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed during the fourth quarter of fiscal
1995.
Report of Independent Certified Public Accountants
The Board of Directors and Stockholders
Hydron Technologies, Inc.
We have audited the accompanying consolidated balance sheets of Hydron
Technologies, Inc. and subsidiaries (HyTech) as of December 31, 1995 and 1994,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of HyTech's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Hydron
Technologies, Inc. and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young, LLP
West Palm Beach, Florida
February 21, 1996
Hydron Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1995 1994
-------- --------
<S> <C> <C>
Assets
Current assets:
Cash, including cash equivalents of $4,235,295
and $5,629,124 at December 31, 1995 and 1994 $ 4,346,587 $ 5,723,664
Trade accounts receivable 1,002,969 2,044,604
Inventories 3,998,304 3,260,010
Prepaid expenses and other current assets 130,907 100,670
------------- -----------
Total current assets 9,478,767 11,128,948
Property and equipment, less accumulated depreciation
of $163,830 and $141,000 at December 31, 1995
and 1994 620,317 109,386
Deferred product costs, less accumulated
amortization of $3,697,400 and $3,389,667 at
December 31, 1995 and 1994 2,264,061 2,571,249
Investment in Joint Venture 221,366 -
Deposits 407,600 -
------------- ------------
$12,992,111 $13,809,583
------------- ------------
------------- ------------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 235,645 $ 395,862
Accrued liabilities 194,918 400,262
------------- ------------
Total current liabilities 430,563 796,124
Commitments
Stockholders' equity:
Common Stock; $.01 par value; 30,000,000 shares authorized, 22,639,816 and
22,616,816 shares issued and outstanding at December 31, 1995
and 1994 226,398 226,168
Additional paid-in capital 18,113,632 20,348,361
Accumulated deficit (5,778,482) (7,561,070)
------------- ------------
Total stockholders' equity 12,561,548 13,013,459
------------- ------------
$12,992,111 $13,809,583
------------- ------------
------------- ------------
</TABLE>
See accompanying notes.
Hydron Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
----------- ------------ --------------
<S> <C> <C> <C>
Net sales $ 7,303,468 $ 8,640,234 $ 698,109
Cost of sales 2,577,606 2,435,557 303,250
----------- ------------ -------------
Gross profit 4,725,862 6,204,677 394,859
Expenses:
Royalty expense 337,575 386,643 34,399
Research and development 177,468 211,909 406,860
Selling, general and administrative 2,288,841 1,842,414 1,072,939
Amortization of deferred product costs 307,733 307,303 303,816
Depreciation and amortization 48,033 37,809 23,839
----------- ------------ ------------
3,159,650 2,786,078 1,841,853
----------- ------------ ------------
Operating income (loss) 1,566,212 3,418,599 (1,446,994)
Other income (expense):
Interest and investment income 325,010 219,607 85,909
Equity in loss of joint venture (78,634) - -
----------- ------------ ------------
246,376 219,607 85,909
----------- ------------ ------------
Income (loss) before income taxes 1,812,588 3,638,206 (1,361,085)
Income tax expense 30,000 - -
----------- ------------ ------------
Net income (loss) $ 1,782,588 $3,638,206 $(1,361,085)
----------- ------------ ------------
----------- ------------ ------------
Net income (loss) per common share $ .08 $ .16 $ (.07)
----------- ------------ ------------
----------- ------------ ------------
Weighted average number of common
shares outstanding 23,151,383 22,666,970 19,917,586
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes.
Hydron Technologies, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
---------- --------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 19,298,056 $192,981 $16,256,099 $(9,838,191) $ 6,610,889
Issuance of common stock 573,760 5,737 765,263 - 771,000
Issuance of common stock upon
exercise of stock options 1,330,500 13,305 1,422,544 - 1,435,849
Net loss - - - (1,361,085) (1,361,085)
---------- -------- ----------- ----------- ------------
Balance at December 31, 1993 21,202,316 212,023 18,443,906 (11,199,276) 7,456,653
Issuance of common stock
for services 130,000 1,300 208,700 - 210,000
Issuance of common stock upon
exercise of stock options 1,284,500 12,845 1,695,755 - 1,708,600
Net income - - - 3,638,206 3,638,206
---------- -------- ----------- ----------- ------------
Balance at December 31, 1994 22,616,816 226,168 20,348,361 (7,561,070) 13,013,459
Issuance of common stock upon
exercise of stock options 23,000 230 28,645 - 28,875
Net income - - - 1,782,588 1,782,588
Cash dividends ($.10 per share) - - (2,263,374) - (2,263,374)
---------- -------- ----------- ----------- ------------
Balance at December 31, 1995 22,639,816 $226,398 $18,113,632 $(5,778,482) $12,561,548
---------- -------- ----------- ----------- ------------
---------- -------- ----------- ----------- ------------
</TABLE>
See accompanying notes.
Hydron Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
----------- ----------- ------------
<S> <C> <C> <C>
Operating activities
Cash received from customers $ 8,345,103 $ 6,857,170 $ 436,569
Cash paid to suppliers and employees (6,918,993) (6,663,432) (2,052,678)
Proceeds from interest on investments 334,821 203,807 85,909
Cash paid for income taxes (44,000) - -
----------- ----------- ------------
Net cash provided (used) by operating activities 1,716,931 397,545 (1,530,200)
Investing activities
Purchase of investments - (3,449,019) -
Proceeds from sale of investments - 3,449,019 -
Capital expenditures (558,964) (56,801) -
Payments for registering patents (545) (12,504) (33,735)
Investment in Joint Venture (300,000) - -
----------- ------------ -----------
Net cash used by investing activities (859,509) (69,305) (33,735)
Financing activity
Proceeds from issuance of common stock 28,875 1,708,600 2,206,849
Dividends Paid (2,263,374) - -
----------- ----------- -----------
Net cash used (provided) by financing activities (2,234,499) 1,708,600 2,206,849
----------- ----------- -----------
(Decrease) increase in cash and cash equivalents (1,377,077) 2,036,840 642,914
Cash and cash equivalents at beginning of year 5,723,664 3,686,824 3,043,910
----------- ----------- -----------
Cash and cash equivalents at end of year $ 4,346,587 $ 5,723,664 $ 3,686,824
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Continued on following page.
Hydron Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
Reconciliation of net income (loss) to net cash
provided (used) by operating activities
Net income (loss) $ 1,782,588 $3,638,206 $(1,361,085)
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating
activities:
Depreciation and amortization 355,766 345,112 327,655
Equity in losses of joint venture 78,634 - -
Issuance of common stock for services - 210,000 -
Changes in operating assets and
liabilities:
Trade accounts receivable 1,041,635 (1,783,064) (261,540)
Inventories (738,294) (2,610,680) (382,360)
Prepaid expenses and other current
assets (30,237) (19,539) 14,953
Deposits (407,600) - -
Accounts payable (160,217) 267,160 111,774
Accrued liabilities (205,344) 350,350 20,403
------------ ----------- -----------
Total adjustments (65,657) (3,240,661) (169,115)
------------ ----------- -----------
Net cash provided (used) by
operating activities $ 1,716,931 $ 397,545 $(1,530,200)
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
See accompanying notes.
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
1. Description of Business and Summary of Significant Accounting Policies
Organization of Business
Hydron Technologies, Inc. and subsidiaries (HyTech) sells consumer and
professional products, primarily in the personal care/cosmetics field. Most of
these products are covered by patent, license and royalty arrangements which
provide that HyTech will generally pay royalties on its sales and receive
revenues from the sale of its products to nonaffiliated third parties, and
royalties from others. These arrangements include a royalty agreement with
National Patent Development Corporation (National Patent) in connection with
exclusive licenses which HyTech holds on certain oral health and other consumer
products containing Hydron polymers, and an exclusive licensing agreement with
QVC, Inc. (QVC) for the sale of HyTech's Hydron polymer-based consumer products
in the Western Hemisphere. QVC, a significant customer, purchases HyTech's
products and takes physical possession of these products prior to QVC's sale to
the ultimate end user. The products are sold and shipped to the end user by QVC.
The sales of HyTech's products to QVC are not conditioned upon QVC's sale of the
products to the ultimate end user. HyTech also holds the exclusive license with
National Patent to a Hydron polymer-based drug delivery system for topically
applied, nonprescription pharmaceutical products, which it intends to license to
third parties or use to develop proprietary products.
Basis of Presentation
The consolidated financial statements include the accounts of HyTech and all
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation. HyTech's investment in a joint venture is accounted
for using the equity method of accounting. 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.
Cash and Cash Equivalents
HyTech considers all highly liquid investments with a maturity of three months
or less at the date of acquisition to be cash equivalents. The credit risk
associated with cash equivalents is considered low due to the credit quality of
the issuers of the financial instruments.
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Description of Business and Summary of Significant Accounting Policies
(continued)
Concentration of Credit Risk
Trade accounts receivable are due primarily from QVC which, by contract, must
be paid to HyTech within 30 days after QVC's receipt of goods. HyTech performs
ongoing evaluations of its significant customers and does not require
collateral.
Inventories
Inventories are valued at the lower of cost (first-in, first-out) or market,
and include finished goods, work-in-progress and raw materials (see Note 2).
Long-Lived Assets
Long-lived assets, consisting primarily of deferred product costs, are accounted
for in accordance with FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", which was
adopted during 1995. FASB Statement No. 121 requires impairment losses be
recognized for long-lived assets when indicators of impairment are present and
the undiscounted cash flows are not sufficient to recover the assets' carrying
amount. No impairment losses have been recognized in the three year period ended
December 31, 1995.
Property and Equipment
Property and equipment, consisting primarily of office leasehold improvements,
furniture and fixtures, is carried at cost. Depreciation and amortization is
computed using the straight-line method over the estimated useful lives of the
assets.
Deferred Product Costs
Deferred product costs consist primarily of costs incurred for the purchase and
development of patents and product rights (see Note 3). The deferred product
costs are being amortized over their estimated useful lives of eight to 20
years using the straight-line method.
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Description of Business and Summary of Significant Accounting Policies
(continued)
Common Stock, Common Stock Options and Net Income (Loss) Per Share
When HyTech issues shares of common stock in exchange for services, an
expense is recognized over the period in which the services are rendered
based upon the fair value of such shares at the date such arrangements are
consummated or authorized by the Board of Directors, with a corresponding
credit to capital.
HyTech has elected to follow Accounting Principles Board (APB) Opinion No.
25, "Accounting for Stock Issued to Employees" and related Interpretations
in accounting for its stock options. Under APB Opinion No. 25, because the
exercise price of the stock options equals the market price of the
underlying stock on the date of the grant, no compensation expense is
recognized. In 1996, HyTech must adopt FASB Statement No. 123,
"Accounting and Disclosure of Stock-Based Compensation" and will present
the proforma disclosures required by the pronouncement. However, HyTech
will continue to account for stock options using APB Opinion No. 25.
Net income (loss) per share is based on the weighted average number of
common shares outstanding during the year. For the years ended December
31, 1995 and 1994, the assumed exercise of stock options did not result
in a material dilution. For the year ended December 31, 1993, no
adjustments have been made for the assumed exercise of stock options since
the effect on the loss per share would be antidilutive.
Revenue Recognition and Product Warranty
Revenue from product sales is recognized at the time of shipment. Provision
is made currently for estimated product returns from the ultimate end user.
Research and Development
Research and development costs are charged to operations when incurred and
are included in operating expenses.
Advertising
Advertising costs are expensed as incurred and are included in "selling,
general and administrative expenses". Advertising expenses amounted to
approximately $205,000, $1,000 and $80,000 for 1995, 1994 and 1993,
respectively.
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Inventories
At December 31, 1995 and 1994, inventories consist of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Finished goods $3,044,890 $1,661,600
Work-in-process 162,794 234,125
Raw materials and components 790,620 1,364,285
---------- ----------
$3,998,304 $3,260,010
---------- ----------
---------- ----------
</TABLE>
3. Deferred Product Costs and Royalty Agreements
From 1976 through 1989, HyTech and National Patent entered into various
agreements, wherein HyTech obtained the exclusive worldwide rights to market
products using Hydron polymers in the consumer and oral health fields, the two
fields in which HyTech has concentrated its research and development efforts,
and to utilize the Hydron polymer as a drug release mechanism in topically
applied, nonprescription pharmaceutical products. The Hydron polymer is the
underlying technology in substantially all of HyTech's products. National Patent
has the exclusive worldwide rights to market prescription drugs and medical
devices using Hydron polymers. Further, each has the right to exploit products
with Hydron polymers not in the other's exclusive fields. As consideration for
product rights obtained, HyTech issued National Patent an aggregate of 1,100,000
shares of common stock, valued at $5,370,000. The valuation for these shares was
based on the market prices of HyTech's common stock at the dates the agreements
were made.
The agreements require HyTech to pay a 5% royalty to National Patent based on
the net sales of products containing the Hydron polymer. Additionally, National
Patent is required to pay HyTech a 5% royalty on its net sales of Hydron polymer
products, except with respect to certain excluded products. In the area of
prescription and nonprescription drugs using Hydron polymers as a drug release
mechanism, both HyTech and National Patent have agreed to pay the other a
royalty equal to 5% of net sales and 25% of any license fees, royalties or
similar payments received from third parties with regard to such products
developed.
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Investment in Joint Venture
On January 17, 1995, HyTech entered into an agreement with QVC and another
company to form a joint venture know as Hydromercial Partners (the Joint
Venture). Each company has a one-third 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.
The purpose of the Joint Venture is to provide and sell HyTech's Hydron
polymer-based skin care line by means of a thirty (30) minute commercial
(Infomercial) which the Joint Venture will produce. The initial capital of
the Joint Venture, $600,000, was contributed in equal shares by the Joint
Venture participants, and was used to produce the Infomercial and conduct
test marketing. An additional $300,000, contributed in equal amounts by the
Joint Venture participants, was contributed during 1995 to purchase
additional air time. Sales to the Joint Venture totalled approximately
$230,000 in 1995.
5. Significant Customer
HyTech presently sells a substantial portion of its products to QVC. During
the years ended December 31, 1995, 1994 and 1993, approximately 92%, 98% and
59%, respectively, of HyTech's sales were made to QVC. At December 31, 1995
and 1994, amounts due from QVC included in trade accounts receivable were
approximately $847,000 and $2,037,000, respectively. HyTech entered into a
license agreement with QVC in 1993, whereby QVC was granted exclusive rights
to market and distribute HyTech's proprietary consumer products using Hydron
polymers in the Western Hemisphere. The license agreement expires in May 1996
and is automatically renewable in two year terms if QVC purchases certain
escalating minimum quantities of products. As of December 31, 1995, QVC has
met the minimum purchase requirements for the initial term expiring in 1996.
No obligation exists for QVC to purchase product except to maintain such
exclusive rights, and no assurances can be given that QVC will meet the
escalating minimum purchase levels for subsequent years in order to maintain
such exclusive rights. If QVC does not meet such minimum purchase levels,
then HyTech has the right to terminate the agreement and seek other marketing
and distribution arrangements for its products, which may include QVC on a
nonexclusive arrangement. Although management believes that there are other
avenues for selling its products, the loss of QVC as a customer would be
financially disruptive to HyTech.
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Income Taxes
The income tax provision for 1995 of $30,000 reflects alternative minimum tax
after the utilization of net operating loss carryforwards of approximately
$1,781,000. For the year ended December 31, 1994, there was no income tax
provision due to significant permanent differences between financial and tax
reporting of 1994 transactions, principally a tax deduction for the exercise
of certain nonqualified stock options, and to the utilization of net
operating loss carryforwards of approximately $2,031,000. There was no income
tax provision for the year ended December 31, 1993 due to HyTech's net
operating losses.
The reconciliation of income tax rates, computed at the U.S. federal
statutory tax rates, to income tax expense is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Tax at U.S. statutory rates 34 % 34 % (34) %
State income taxes, net of federal tax benefit 4 4 (4)
Valuation allowance adjustments (36) (38) 38
Net effect of net operating loss not recognized - - -
------ ------ ------
2 % -0- -0-
------ ------ ------
------ ------ ------
</TABLE>
At December 31, 1994, HyTech had the following available net operating loss
carryforwards for tax purposes, which may be used to offset taxable income in
future periods:
<TABLE>
<CAPTION>
<S> <C>
Expires December 31,
2001 $ 768,000
2002 876,000
2003 601,000
2004 1,173,000
2005 1,094,000
2006 - 2008 4,172,000
------------
$ 8,684,000
------------
------------
</TABLE>
In addition to the net operating loss carryforwards, HyTech has a capital loss
carryforward of approximately $691,000 which expires in 1996.
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Income Taxes (continued)
Effective January 1, 1993, HyTech changed its method of accounting for income
taxes from the deferred method to the liability method required by Financial
Accounting Standards Board Statement No. 109 (FASB 109), "Accounting for Income
Taxes." At December 31, 1995 and 1994, net tax benefits of approximately
$3,700,000 and $4,300,000, respectively, relating primarily to net operating
loss carryforwards which may be realized in the future, are recorded as a
deferred tax asset, net of a valuation allowance in an equal amount. The
valuation allowance decreased by approximately $600,000 for the year ended
December 31, 1995 as a result of the utilization of net operating loss
carryforwards. Included in the tax benefit relating to net operating loss
carryforwards is a $1,033,000 benefit that will be charged to stockholder's
equity in the period in which that benefit is recognized.
7. Stock Options and Warrants
The number of shares of common stock reserved for issuance at December 31,
1995 and 1994 was 2,577,500 and 2,591,500, respectively.
Nonqualified Stock Option Plan
HyTech has a nonqualified stock option plan whereby up to 500,000 shares may be
granted to employees, directors and consultants. The options may be granted at
prices greater than, less than or equal to the fair market value at the date of
grant and are exercisable at the date of grant and expire at various times up
to ten years from the date of grant. Activity with respect to this plan is as
follows:
<TABLE>
<CAPTION>
Number of Option Price
Options Per Share
---------- --------------
<S> <C> <C>
Outstanding at December 31, 1992 390,000 $.875 to $1.00
Stock options exercised (250,000) .875
----------
Outstanding at December 31, 1993
Stock options exercised (140,000) .875 to 1.00
----------
Outstanding at December 31, 1995 and 1994 -0-
----------
----------
</TABLE>
At December 31, 1995, there were no options available for grant under this plan.
The options that were exercised under the above plan in fiscal 1994 and 1993
resulted in proceeds of $123,750 and $218,750, respectively.
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Stock Options and Warrants (continued)
Incentive Stock Option Plan
HyTech has an Employee Incentive Stock Option Plan covering a maximum of
1,000,000 shares of common stock. Options granted under the plan are exercisable
at prices equal to the fair market value of the shares at the date of grant,
except that options granted to persons owning 10% or more of the outstanding
common stock carry an exercise price equal to 110% of the fair market value at
the date of grant. Options are exercisable by each optionee according to the
terms contained in each option and expire five to ten years after the date of
grant. Activity with respect to this plan is as follows:
<TABLE>
<CAPTION>
Number of Option Price
Options Per Share
--------- -------------
<S> <C> <C>
Outstanding at December 31, 1992 402,500 $.75 to $2.56
Stock options granted 70,000 1.58
Stock options exercised (180,000) .825 to 2.56
---------
Outstanding at December 31, 1993 292,500 .75 to 2.56
Stock options exercised (292,500) .75 to 2.56
---------
Outstanding at December 31, 1995 and 1994 -0-
---------
---------
</TABLE>
At December 31, 1995 there were no options available for grant under this plan.
The options under the above plan that were exercised in fiscal 1994 and 1993
resulted in proceeds of $377,789 and $227,024, respectively.
1989 Stock Option Plan
Under the 1989 Stock Option Plan, HyTech may grant incentive stock options,
nonqualified stock options and/or stock appreciation rights to key employees,
officers, directors and consultants of HyTech, and its present and future
subsidiaries to purchase an aggregate of 1,000,000 shares of HyTech's common
stock. Activity with respect to this plan is as follows:
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Stock Options and Warrants (continued)
1989 Stock Option Plan (continued)
<TABLE>
<CAPTION>
Number of Option Price
Options Per Share
--------- ---------------
<S> <C> <C>
Outstanding at December 31, 1992 603,500 $.619 to $1.50
Stock options granted 50,000 2.50
Stock options exercised (403,500) .619 to .825
---------
Outstanding at December 31, 1993 250,000 .75 to 2.50
Stock options exercised (175,000) .75 to 1.50
---------
Outstanding at December 31, 1994 75,000 1.438 to 2.50
Stock options granted 2,000 3.00 to 4.00
Stock options expired (1,000) 4.00
---------
Outstanding at December 31, 1995 76,000 1.438 to 3.00
---------
---------
</TABLE>
These options expire five years from the date of the grant and all outstanding
options are exercisable at December 31, 1995. There were 9,500 options available
for grant under this plan at December 31, 1995. The options that were exercised
under the above plan in fiscal 1994 and 1993 resulted in proceeds of $164,250
and $281,324, respectively.
1993 Stock Option Plan
During 1993, HyTech adopted the 1993 Stock Option Plan. Under the 1993 Stock
Option Plan, HyTech may grant incentive stock options, nonqualified stock
options and/or stock appreciation rights to key employees, officers, directors
and consultants of HyTech to purchase an aggregate of 1,000,000 shares of
HyTech's common stock. Activity with respect to this plan is as follows:
<TABLE>
<CAPTION>
Number of Option Price
Options Per Share
--------- ----------------
<S> <C> <C>
Outstanding at December 31, 1993 - -
Stock options granted 250,000 $2.625 to $4.125
---------
Outstanding at December 31, 1994 250,000 2.625 to 4.125
Stock options granted 207,500 2.285 to 5.00
---------
Outstanding at December 31, 1995 457,500 2.285 to 5.00
---------
---------
</TABLE>
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Stock Options and Warrants (continued)
1993 Stock Option Plan (continued)
These options expire five years from the date of the grant. At December 31,
1995, a total of 427,500 of these options are exercisable and there were 542,500
options available for grant under this plan.
1993 Nonemployee Director Stock Option Plan
During 1993, HyTech adopted the 1993 Nonemployee Director Stock Option Plan.
Under this plan, HyTech may grant stock options to nonemployee directors of
HyTech to purchase an aggregate of 250,000 shares of HyTech's common stock. Each
nonemployee director shall be granted an option to purchase 10,000 shares of
HyTech's common stock on each September 1st throughout the term of this plan at
exercise prices equal to the fair market value of HyTech's common stock on the
date of the grant, but in no event less than $2.50 per share. Activity with
respect to this plan is as follows:
<TABLE>
<CAPTION>
Number of Option Price
Options Per Share
--------- ------------
<S> <C> <C>
Outstanding at December 31, 1993 40,000 $ 2.50
Stock options granted 40,000 5.688
Stock options exercised (20,000) 2.50
---------
Outstanding at December 31, 1994 60,000 2.50 to 5.6875
Stock options granted 60,000 3.219 to 4.781
---------
Outstanding at December 31, 1995 120,000 2.50 to 5.688
---------
---------
</TABLE>
These options expire five years from the date of the grant and all outstanding
options are exercisable at December 31, 1995. There were 110,000 options
available for grant under this plan at December 31, 1995. The options that were
exercised under the above plan in fiscal 1994 resulted in proceeds of $50,000.
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Stock Options and Warrants (continued)
Other Options and Warrants
HyTech has agreements with several consultants who are to provide financial,
business and technical advice to HyTech in connection with the research,
development, marketing and promotion of its products and other matters. In
exchange, these consultants were granted warrants and nonqualified stock
options to purchase shares of HyTech's common stock at prices representing
the fair market value of the shares at the date of grant. Activity with
respect to options and warrants granted to these consultants is summarized
below:
<TABLE>
<CAPTION>
Number of
Options/ Price
Warrants Per Share
--------- ----------------
<S> <C> <C>
Outstanding at December 31, 1992 1,364,000 $.813 to $3.00
Stock options granted 960,000 1.44 to 2.50
Stock options exercised (497,000) .813 to 2.50
---------
Outstanding at December 31, 1993 1,827,000 .813 to 3.00
Stock options and warrants granted 105,000 2.50 to 4.625
Stock options exercised (657,000) .813 to 2.50
---------
Outstanding at December 31, 1994 1,275,000 .938 to 4.625
Stock options granted 10,000 5.00
Stock options exercised (23,000) .938 to 1.50
---------
Outstanding at December 31, 1995 1,262,000 1.375 to 4.625
---------
---------
</TABLE>
The options and warrants outstanding at December 31, 1995 generally expire two
to five years after the date of grant. At December 31, 1995, all outstanding
options and warrants are exercisable, except for warrants to purchase
300,000 shares of common stock of HyTech granted to QVC at an exercise price
of $2.50 per share. These warrants are exercisable based on QVC meeting
certain purchase commitments through July 31, 1996.
The options under this plan that were exercised in fiscal 1995, 1994 and
1993 resulted in proceeds of $28,875, $992,811 and $708,751, respectively.
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Commitments
HyTech leases office and warehouse space under noncancelable lease agreements
which expire in August 2001 and September 2000, respectively. At December 31,
1995, the future minimum rental payments due under such noncancelable leases
are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 225,120
1997 265,855
1998 136,166
1999 85,048
2000 86,861
Thereafter 59,176
---------- -----------
$ 858,226
-----------
-----------
</TABLE>
The warehouse lease agreement required a deposit of approximately $385,000 that
will be utilized to pay rent and certain expenses during the last half of the
lease term. Rent expense was approximately $98,000, $39,000 and $40,000 in 1995,
1994 and 1993, respectively.
HyTech has employment agreements with three executive officers, providing for
their continued employment through August 31, 2004. The combined current annual
salaries are approximately $553,000 with annual increases of the greater of 5%
per year or the annual increase in the CPI, and may also be increased at the
discretion of the Board of Directors.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HYDRON TECHNOLOGIES, INC.
(Registrant)
By:/s/ Harvey Tauman
Harvey Tauman, President
Date: March 26, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
By: /s/ Harvey Tauman By: /s/ Thomas G. Burns
----------------- -------------------
Harvey Tauman, Thomas G. Burns
Chairman of the Board (principal financial
(principal executive officer) and accounting officer)
Date: March 26, 1996 Dated: March 26, 1996
By: /s/ Richard Tauman By: /s/ Chaudhury M. Prasad
------------------ -----------------------
Richard Tauman, Director Chaudhury M. Prasad, Director
Date: March 26, 1996 Date: March 26, 1996
By: /s/ Frank Fiur By: ________________________
--------------
Frank Fiur, Director Samuel M. Leb, M.D., Director
Date: March 25, 1996 Date: March __, 1996
By: /s/ Nestor M. Cardero By: /s/ Joseph A. Caccamo
--------------------- ---------------------
Nestor M. Cardero, Director Joseph A. Caccamo, Director
Date: March 25, 1996 Date: March 28, 1996
By: /s/ Richard Banakus By: ______________________
-------------------
Richard Banakus, Director Hugues Lamotte, Director
Date: March 27, 1996 Date: March __, 1996
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBIT INDEX TO
REPORT ON FORM 10-K
(Mark One)
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1995 or
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from to .
------------------
Commission file Number 0-6333
HYDRON TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
New York 13-1574215
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1001 Yamato Road, Boca Raton, Florida 33431
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 994-6191
The following Exhibits are filed as a part of this Report:
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Annual Report on Form 10-K for the fiscal
year ended December 31, 1985:
Exhibit No. and Description
3.1 Restated Certificate of Incorporation of Dento-Med Industries,
Inc. ("Dento-Med"), as Filed with the Secretary of State of New York on
March 4, 1981 (filed therein as Exhibit 3.1).
The following document heretofore filed with the Commission is
incorporated by reference to HyTech's Annual Report on Form 10-K for the
fiscal year ended December 31, 1986:
Exhibit No. and Description
4.0 Non-Qualified Stock Option Plan (filed as Exhibit 4.0 therein).
The following document heretofore filed with the Commission is
incorporated by reference to HyTech's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987:
Exhibit No. and Description
3.2 By-laws of HyTech, as amended March 17, 1988 (filed therein as
Exhibit 3.2).
4.1 Incentive Stock Option Plan, as amended January 2, 1987 (filed as
Exhibit 4.1 therein).
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Annual Report on Form 10-K for the fiscal
year ended December 31, 1988:
Exhibit No. and Description
3.3 Certificate of Amendment of the Restated Certificate of Incorporation
of Dento-Med, as filed with the Secretary of State of the State of New York on
November 14, 1988 (filed therein as Exhibit 3.2).
10.6 Indemnification Agreement dated September 23, 1988 between Dento-Med
and Harvey Tauman (filed therein as Exhibit 10.8).
10.7 Indemnification Agreement dated September 23, 1988 between Dento-Med
and Ilene Tauman (filed therein as Exhibit 10.9).
10.8 Indemnification Agreement dated September 23, 1988 between Dento-Med
and Frank Fiur (filed therein as Exhibit 10.10).
10.9 Indemnification Agreement dated September 23, 1988 between
Dento-Med and Chaudhury M. Prasad (filed therein as Exhibit 10.11).
The following document heretofore filed with the Commission is
incorporated by reference to HyTech's Current Report on Form 8-K (date of
event--November 30, 1989):
Exhibit No. and Description
10.10 Agreement between Dento-Med and National Patent dated November 30,
1989 (filed as Exhibit 10.1 therein).
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989:
Exhibit No. and Description
4.2 1989 Stock Option Plan (filed as Exhibit 4.2 therein).
10.11 Indemnification Agreement between Dento-Med and Samuel M. Leb,
M.D. dated May 9, 1989 (filed as Exhibit 10.11 therein).
10.12 Indemnification Agreement between Dento-Med and Richard Tauman dated
May 19, 1989 (filed as Exhibit 10.12 therein).
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991:
Exhibit No. and Description
10.13 Indemnification Agreement dated as of January 14, 1992 between
Dento-Med and Joseph A. Caccamo Attorney at Law, P.C. (filed as Exhibit
10.13 therein).
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992, and filed therein as the same exhibit number,
unless otherwise noted:
Exhibit No. and Description
4.3 Stock Option Agreement and Consulting Agreement between HyTech and
John T. Boone dated January 30, 1992.
4.4 Stock Option Agreement between HyTech and DTR Associates Limited
Partnership dated March 9, 1992.
4.7 Stock Option Agreement between HyTech and DTR Associates Limited
Partnership dated September 15, 1992.
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Current Report on Form 8-K (date of report
December 6, 1993), as amended by the Form 8 Amendment no. 1 to such Current
Report, and filed therein as the same exhibit number, unless otherwise noted:
Exhibit No. and Description
4.9 Warrant Purchase Agreement, together with Series A and Series B
Warrants, dated December 6, 1993, between QVC Network, Inc. and Hydron
Technologies, Inc., filed as exhibit no. 4.3 therein.(1)
10.23 License Agreement dated December 6, 1993 between QVC Network, Inc. and
Hydron Technologies, Inc.(1)
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993, and filed therein as the same exhibit number,
unless otherwise noted:
- ------------------
(1) Filed in excised form, as confidential treatment has been granted for
certain portions thereof.
Exhibit No. and Description
3.4 Certificate of Amendment of the Restated Certificate of Incorporation
of Dento-Med, as filed with the Secretary of State of the State of New York on
July 30, 1993.
4.10 1993 Nonemployee Director Stock Option Plan.
10.24 Amended and Restated Employment Agreement between Dento-Med and Harvey
Tauman dated May 13, 1993.
10.25 Amendment to Amended and Restated Employment Agreement between HyTech
and Harvey Tauman dated December 20, 1993.
10.26 Amended and Restated Employment Agreement between Dento-Med and
Chaudhury M. Prasad dated May 13, 1993.
10.27 Indemnification Agreement dated April 22, 1993 between HyTech and
Nestor Cardero.
10.28 Indemnification Agreement dated November 16, 1993 between HyTech and
Karen Gray.
10.30 Agreement among HyTech, Jill International, Inc. and John Charles
Revson dated November 16, 1993.
The following document heretofore filed with the Commission is
incorporated by reference to HyTech's Current Report on Form 8-K (date of
report January 21, 1995), and filed therein as the same exhibit number, unless
otherwise noted:
Exhibit No. and Description
10.31 Letter Agreement among QDirect, Inc., Hydron Direct, Inc. and DTR
Associates dated January 17, 1995
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, and filed therein as the same exhibit number,
unless otherwise noted:
Exhibit No. and Description
10.33 Consulting Agreement made effective as of the 1st day of April,
1994 between Hydron Technologies, Inc. and The Pink Jungle, Inc.
10.35 Employment Agreement dated the 16th day of September, 1994 between
and Hydron Technologies, Inc. and Richard Tauman
10.36 Letter Agreement dated December 22, 1994 among Hydron
Technologies, Inc., Roy Reiner and Chemaid Laboratories, Inc.
10.37 Indemnification Agreement dated February 21, 1995 between and Hydron
Technologies, Inc. and Thomas G. Burns
The following exhibits are filed herewith:
Exhibit No. and Description
10.38 Lease for 1001 Yamato Road, Suite 403, Boca Raton, FL
between PFRS Yamato Corp. and Hydron Technologies, Inc.
dated May 8, 1995
10.39 First Amendment to Lease for 1001 Yamato Road, Suite 403,
Boca Raton, FL between PFRS Yamato Corp. and Hydron
Technologies, Inc. dated September 15, 1995
10.40 Agreement for use and occupancy of portion of 5 East Building,
95 Mayhill Street, Saddle Brook NJ, between Chemaid Laboratories,
Inc. and Hydron Technologies, Inc. dated February 9, 1996
10.41 Depository Agreement between Chemaid Laboratories, Inc.
and Hydron Technologies, Inc. dated February 9, 1996
10.42 Consulting Agreement between Charles Fox Associates, Inc.
and Hydron Technologies, Inc. dated February 5, 1996
11 Statement re: Computation of Earnings Per Share
21 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young, LLP, Independent Certified
Public Accountants
Exhibit 10.38
LEASE
YAMATO OFFICE CENTER
BOCA RATON, FLORIDA
THIS INDENTURE OF LEASE made the 8 day of May, 1995.
I. BASIC LEASE PROVISIONS AND IDENTIFICATION OF EXHIBITS:
1.01 BASIC LEASE PROVISIONS:
A. BUILDING AND ADDRESS:
Yamato Office Center
1001 Yamato Road
Boca Raton, Florida
B. LANDLORD AND ADDRESS:
PFRS Yamato Corp.
250 Australian Avenue, Suite 400
West Palm Beach, FL 33401
C. LANDLORD'S MANAGEMENT AGENT AND ADDRESS:
M16 Management Services of Florida, Inc.
1001 Yamato Road
Boca Raton, Florida
D. TENANT AND CURRENT ADDRESS:
HYDRON TECHNOLOGIES, INC.
941 Clint Moore Road
Boca Raton, FL 33487
E. GUARANTOR(S), IF ANY, AND CURRENT ADDRESS(ES):
N/A
F. RENTABLE AREA OF THE "PREMISES":
5,914 square feet
G. LOCATION OF THE RENTED "PREMISES":
Suite 403
H. TENANT'S PROPORTIONATE SHARE:
6.5%
I. LEASE TERM:
Six (6) Years
J. COMMENCEMENT DATE OF TERM:
The date which is the earlier of (a) one hundred and
twenty (120) days from Lease execution; (b) receipt of
a Certificate of Occupancy for the leased premises.
K. EXPIRATION DATE OF TERM:
Six (6) years following the Commencement Date of Term.
L. MONTHLY BASE RENT:
$4,065.88 ($8.25 per rentable square foot per annum)
M. INITIAL MONTHLY RENT ADJUSTMENT DEPOSIT:
$2,459.24 ($4.99 per rentable square foot per annum)
N. ANNUAL MONTHLY BASE RENT:
CPI escalations with a 5% cap per annum
0. SECURITY DEPOSIT:
$8,131.76
P. TENANT'S PERMITTED USE OF PREMISES:
Corporate Headquarters for a company involved with health, beauty,
cosmetics, medical and dental products and related businesses.
Q. LEASING BROKERS:
1. Landlord's Broker: Arvida Realty Sales, Ltd.
2. Tenant's Broker:
Gimbelstob Realty, Inc.
1.02 ENUMERATION OF LEASE PROVISIONS:
The exhibits, workletter and rider, if any, enumerated in this
Section and attached to this Lease are incorporated into this Lease by this
reference and are to be construed as a part of this Lease. In the event of
any conflict between the terms of any such exhibit or rider and the other
provisions of this Lease, the terms of the exhibit or rider shall control.
Exhibit 1 - Legal Description of Land
Exhibit 2 - Plan of Premises (Cross Hatched Area)
Exhibit 3 - Workletter Agreement ("Workletter")
Exhibit 4 - Rules and Regulations
II. PREMISES, TERM AND FAILURE TO GIVE POSSESSION:
2.01 LEASE OF PREMISES:
Landlord, for the term and upon the conditions provided in this Lease
hereby leases to Tenant and Tenant hereby leases from Landlord the Premises
depicted on Exhibit 2 hereto which are or will be contained in the
aforesaid office Building located or to be located on a portion of the
property (the "Property") commonly known as Yamato Office Center, Yamato
Road, Boca Raton, Florida, which Property is legally described on Exhibit 1
hereto, together with the nonexclusive irrevocable license to use during
the term of the Lease while Tenant is not in default, in common with all
others entitled to use all areas and facilities on the Property, intended
for common use (herein referred to as the "Common Areas"), subject to the
terms and conditions of this Lease and to reasonable, rules and regulations
for the use thereof as prescribed from time to time by Landlord.
2.02 TERM:
The term of this Lease (the "Term") shall commence on the date (the
"Commencement Date") specified in Section 1.O1J and shall expire on the
date (the "Expiration Date") specified in Section 1.01K unless sooner
terminated as otherwise provided in this Lease and subject to Tenant's
right, if any, to extend the Term pursuant to an option to Extend Lease
Term Rider, if such rider be attached hereto.
2.03 FAILURE TO GIVE POSSESSION:
If Landlord shall be unable to give possession of the Premises on the
Commencement Date by reason of any of the following: (i) the Building has
not been sufficiently completed to make the Premises ready for occupancy,
(ii) Landlord has not completed its preparation of the Premises, (iii)
Landlord is unable to give possession of the Premises by reason of the
holding over or retention of possession of any tenant, tenants or
occupants, or (iv) for any other reason, Landlord shall not be subject to
any liability for the failure to give possession on said date. Under such
circumstances (except as otherwise provided in Article III of the
Workletter), the Monthly Base Rent and the Rent Adjustments reserved and
covenanted to be paid herein shall not commence until the Premises are
available for occupancy by Tenant, and no such failure to give possession
on the Commencement Date shall affect the validity of this Lease or the
obligations of Tenant hereunder, nor shall the same be construed to extend
the term of this Lease. A written notice from Landlord or manager to Tenant
setting forth the date upon which the Premises shall become, or became,
available for occupancy shall be binding and conclusive upon Tenant unless
disputed by Tenant in writing within ten (10) days after the date of such
notice. If the Premises are ready for occupancy prior to the Commencement
Date and Tenant, with Landlord's written permission, occupies the Premises
prior to said date, Tenant shall pay Monthly Base Rent and Rent Adjustments
for the period of occupancy prior to the Commencement Date on a
proportionate per diem basis. The Premises shall not be deemed to be
unready for Tenant's occupancy or incomplete if: (i) only minor
insubstantial details of construction, decoration or mechanical adjustments
remain to be done in the Premises or any part thereof, or (ii) if the delay
in the availability of the Premises for occupancy shall be due
to special work, changes, alterations or additions required to be made
by Tenant in the layout or finish of the Premises or any part thereof; or
(iii) such delay in the availability of the Premises shall be caused in
whole or in part by Tenant through the delay of Tenant in submitting plans,
supplying information, approving plans, specifications or estimates, giving
authorizations or otherwise or shall be caused in whole or in part by delay
and/or default on the part of Tenant and/or its subtenant or subtenants. In
the event of any dispute as to whether the Premises are ready for Tenant's
occupancy, the decision of Landlord's architect shall be final and binding
on the parties.
III. RENT:
3.01 DEFINITIONS:
For purposes of this Lease, the following terms shall have the
meanings ascribed to them in this Section 3.01:
A. "Calendar Year" shall mean the twelve month period from January l
through December 31 in any year during which this Lease is in effect.
B. "Tenants Proportionate Share", as set forth in Section 1.01H of the
Lease, has been determined by dividing the Rentable Area of the
Premises, as set forth in Section 1.01F of the Lease, by the Rentable
Area contained in the Building, namely, 90,699 square feet.
C. "Operating Expenses" shall mean and include all amounts, expenses
and costs of whatever nature that Landlord incurs because of or in
connection with the ownership, operation, management, replacement or
maintenance of the Real Property (as hereinafter defined). Operating
Expenses shall not include the cost of replacement of capital
investment items (except as provided below in Section 3.01(c)(8)),
specific costs for special items or services billed to and paid by
specific tenants of the Building or leasing commissions. Operating
Expenses shall be determined in accordance with sound management
accounting practices consistently applied and shall include, but shall
not be limited to, the following:
1. Wages, salaries, fees, related taxes, insurance costs,
benefits (including amounts payable under medical, pension and
welfare plans and any amounts payable under collective bargaining
agreements), and reimbursement of expenses of and relating to all
personnel engaged in operating, repairing, managing, replacing
and maintaining the Real Property.
2. All supplies and materials used in operating, repairing and
maintaining the Real Property.
3. Legal and accounting fees and expenses directly attributable
to management and operation of the Real Property.
4. Cost of all utilities for the Building, including, without
limitation, water, power, fuel, heating, lighting, air
conditioning, ventilation and public and service telephones.
5. Fees and other charges payable under or in respect of all
maintenance, repair, janitorial, scavenger and other service
agreements for or pertaining to the Real Property.
6. Cost of all insurance relating to the Real Property, its
occupancy or operations.
7. Costs of repairs and maintenance of the Real Property,
excluding only such costs which are paid by the proceeds of
insurance, by Tenant or by other third parties (other than
payment by Tenant or other tenants of the Building of the Rent
Adjustments).
8. Amortization, at a market rate of interest, of the cost of
installation of capital investment items that are for the purpose
of reducing operating costs or that may be required by
governmental authority. All such costs shall be amortized over
the reasonable life of the capital investment items, with the
reasonable life and amortization schedule being determined in
accordance with sound management accounting practices.
9. Management fees and reimbursed expenses of Landlord's
Management Agent and administrative expenses not borne by
Landlord's Management Agent.
10. Fees and charges under any declaration of covenants,
easements or restrictions affecting the Real Property.
If at any time the Building is not fully occupied or Landlord is not
supplying services to all rentable areas of the Building during an
entire Calendar Year, then Landlord may adjust actual Operating
Expenses to Landlord's reasonable estimate, made based upon actual
prices available in the location of the Building with all available
discounts taken, of that amount which would have been paid or incurred
by Landlord as Operating Expenses had the Building been fully occupied
or serviced and as if Landlord had performed all the services the
Landlord would customarily perform, and the Operating Expenses as so
adjusted shall be deemed to be the actual Operating Expenses for such
Calendar Year. Likewise, if Landlord does not furnish during any
Calendar Year any particular work or service (the cost of which, if
performed by Landlord, would constitute an Operating Expense) to a
tenant, other than the Tenant under this Lease, which has undertaken
to perform such work or service in lieu of the performance thereof by
Landlord, then Operating Expenses shall be deemed to be increased by
an amount equal to the additional expense which would reasonably have
been incurred during such Calendar Year by Landlord if it had, at its
cost, furnished such work or service to such tenant. Nothing in the
foregoing shall be deemed to relieve any obligation of Landlord to
perform services for Tenant under this Lease in accordance with any
term or provision elsewhere set forth in this Lease. If any Real
Property expense, though paid in one Calendar Year, relates to more
than one Calendar Year, at the option of the Landlord, such expense
may be proportionately allocated among such Calendar Years.
D. "Taxes" shall mean and include all federal, state and local
government taxes, assessments and charges of any kind or nature,
whether general, special, ordinary or extraordinary, paid or payable
by Landlord, in a Calendar Year with respect to the ownership,
management, operation, maintenance, repair or leasing of the Real
Property; provided, real estate taxes and special assessments (except
as provided below) shall be included in Taxes for a Calendar Year only
to the extent such taxes and assessments are due and payable during
such Calendar Year, regardless of when assessed. Taxes shall include,
without limitation, real estate and transit district taxes and
assessments, use taxes, ad valorem taxes, personal property taxes,
applicable state sales taxes, assessments and charges in lieu of, or
substituted for, any or all of the foregoing taxes, assessments and
charges. Notwithstanding any provision of this Section 3.01D to the
contrary, Taxes shall not include any federal, state or local
government income, franchise, capital stock, inheritance or estate
taxes, except to the extent such taxes are in lieu of or a substitute
for any of the taxes, assessments and charges previously described in
this Section 3.01D.
Taxes shall also include the amount of all fees, costs and expenses
(including, without limitation, attorneys' fees and court costs) paid
or incurred by Landlord each Calendar Year in seeking or obtaining any
refund or reduction of Taxes or for contesting or protesting any
imposition of Taxes, whether or not successful and whether or not
attributable to Taxes assessed, paid or incurred in such Calendar
Year. If any special assessment payable in installments is levied
against all or any part of the Real Property, then at Landlord's
discretion, Taxes for the Calendar Year in which such assessment is
due and payable and for each Calendar Year thereafter shall include
only the amount of any installments of such assessment plus interest
thereon paid or payable during such Calendar Year (without regard to
any right to pay, or payment of, such assessment in a single payment).
E. "Real Property" shall mean the Land, site improvements located upon
the Property and the Building.
F. "Consumer Price Index" ("CPI") shall mean the "Consumer Price Index
for all Urban Consumers" published by the Bureau of Labor Statistics
of the United States Department of Labor, U.S. City Average, All Items
(1967 = 100). The Consumer Price Index for the Calendar Year in which
the Commencement Date of this Lease occurs or for any subsequent
Calendar Year shall mean the mathematical average of the Consumer
Price Index for all months during such year for which a Consumer Price
Index is published. If the manner in which the Consumer Price Index is
determined by the Department of Labor shall be substantially revised,
an adjustment shall be made in such revised index which would produce
results equivalent, as nearly as possible, to those which would have
resulted if the Consumer Price Index had not been so revised. If the
1967 average shall no longer be used as an index of 100, such change shall
constitute a substantial revision. If the Consumer Price Index shall become
unavailable to the public because publication is discontinued, or
otherwise, Landlord will substitute therefor a comparable index based upon
changes in the cost of living or purchasing power of the consumer dollar
published by a governmental agency or, if no such index shall then be
available, a comparable index published by a major bank or other financial
institution or by a university or a recognized financial publication.
G. "Rent Adjustment" or "Rent Adjustments" means any amount owed by
Tenant as its contribution to Operating Expenses and/or Taxes. The
Rent Adjustments shall be determined pursuant to Section 3.05 below
and shall be paid, in addition to Monthly Base Rent.
H. "Rent Adjustment Deposit" means a monthly deposit required to be
made by Tenant during each Calendar Year, or portion thereof, as an
estimated prepayment of the Rent Adjustments anticipated for such
Calendar Year. For the Calendar Year in which the Commencement Date
occurs, each Rent Adjustment Deposit shall be in an amount estimated
from time to time by Landlord by written notice to Tenant. The Initial
Monthly Rent Adjustment Deposit is set forth in Section 1.01M of this
Lease. Thereafter, except as provided below, each Rent Adjustment
Deposit shall be equal to one-twelfth (1/12) of the actual Rent
Adjustment for the preceding Calendar Year (annualized, if
appropriate, for the Calendar Year in which the Commencement Date
occurs). Notwithstanding the foregoing, until the end of the Calendar
Year in which Taxes actually paid reflect assessment of the Real
Property as fully improved, Landlord may include in the Rent
Adjustment Deposit its estimate of Taxes which reflect anticipated
increases in the assessment of the Real Property. During the last
complete Calendar Year or during any partial Calendar Year in which
the Lease terminates, Landlord may include in the Rent Adjustment
Deposit its estimate of Rent Adjustments which may not be finally
determined until after the termination of this Lease.
3.02 PAYMENT OF RENT:
Tenant shall pay to Landlord's Management Agent, or such other person
or entity or at such other place as Landlord may from time to time direct
in writing, all amounts due Landlord from Tenant hereunder, including,
without limitation, Monthly Base Rent (including CPI Escalations), and the
Rent Adjustments plus all applicable state sales tax thereon (hereinafter
defined and referred to collectively as "Rent"). All checks for payment of
Rent shall be payable to the order of PFRS Yamato Corp., and each such
payment check shall be clearly identified on its face so that said
Management Agent can apply such payment toward the proper tenant's account.
Rent shall be paid without abatement, deduction or setoff of any kind. It
being the intention of the parties that, to the full extent permitted by
law, Tenant's covenant to pay Rent shall be independent of all other
covenants contained in this Lease.
3.03 PAYMENT OF MONTHLY BASE RENT:
Tenant shall pay Monthly Base Rent monthly, in advance, on the first
day of each calendar month during the Lease Term, except that Monthly Base
Rent for the first full calendar month of the Lease Term shall be paid
concurrently with the execution of this Lease by Tenant. If Tenant is
granted occupancy of the Premises and therefore the Lease Term commences on
a day other than the first day of a calendar month,,then this Lease shall
then be in full force and effect except that the Monthly Base Rent for such
month shall be prorated on a per diem basis based on a thirty (30) day
month and said prorated portion of Monthly Base Rent shall be paid by
Tenant on the first day- of the next calendar month following the month in
which such commencement occurs as Tenant's first scheduled Monthly Base
Rent payment hereunder. If the Lease Term terminates on a day other than
the last day of a calendar month, the Monthly Base Rent shall be prorated
on a per diem basis as aforesaid, the excess of the installment of Monthly
Base Rent paid concurrently with the execution of this Lease by Tenant over
such prorated amount shall be refunded Tenant within sixty (60) days
following the date of such termination.
3.04 CPI ESCALATION OF MONTHLY BASE RENT:
On January 1st of each Calendar Year, the Monthly Base Rent payable by
Tenant shall be adjusted to be that sum (but in no event less than the sum
payable for the preceding Calendar Year on an annualized basis) which is
derived by multiplying the same payable for the preceding Calendar Year on
an annualized basis, by a fraction, the numerator of which shall be the
"Index" (as defined below) in effect for the September of the Calendar Year
immediately preceding the Calendar Year for which the adjustment is to be
made, and the denominator of which shall be the "Index" in effect for
September of the Calendar Year immediately preceding the Calendar Year
during which the Commencement Date shall have occurred. Upon the occurrence
of each and every escalation of Monthly Base Rent pursuant to this Section
3.04 hereof, the term Monthly Base Rent, solely for purposes of calculating
the CPI Escalation Amount, shall thenceforth mean the amount of Monthly
Base Rent as previously escalated pursuant to this Section 3.04. Tenant
shall pay to Landlord, as provided in Section 3.06 hereinbelow, the CPI
Escalation Amount, as hereinabove determined, with respect to each Calendar
Year or portion thereof during the Lease Term, in monthly installments,
each installment being equal to the CPI Escalation Amount, at the same time
and place as Monthly Base Rent hereunder is to be paid.
Notwithstanding anything contained herein to the contrary, commencing
on the (fourth) 4th anniversary of the Commencement Date and each year
thereafter, the Monthly Base Rent payable by Tenant shall be adjusted in
accordance with CPI increases with a five percent (5%) cap per annum over
the previous year's monthly Base Rent paid by Tenant.
3.05 EXPENSE AND TAX ADJUSTMENTS ("RENT ADJUSTMENT"):
Tenant shall pay to Landlord, as provided in Section 3.06 hereinbelow,
Rent Adjustments during the Lease Term as follows:
A. For each Calendar Year during the Lease Term, Tenant shall pay
Landlord, as a Rent Adjustment for such Calendar Year, Tenant's
Proportionate Share of Operating Expenses attributable to such
Calendar Year.
B. For each Calendar Year during the Lease Term, Tenant shall pay
Landlord, as a Rent Adjustment for such Calendar Year, Tenant's
Proportionate Share of Taxes attributable to such Calendar Year.
C. Tenant shall pay Landlord the Rent Adjustment Deposits at the same
time and place as the Monthly Base Rent is to be paid under this
Lease. The Rent Adjustment Deposits shall be credited against the Rent
Adjustment due for the current Calendar Year, but finally determined
in the succeeding Calendar Year.
3.06 STATEMENT OF LANDLORD:
As soon as feasible, but in no event later than 90 days after the end
of such calendar year, after the expiration of the first Calendar Year of
this Lease and each Calendar Year thereafter, Landlord will furnish Tenant
a statement showing the following:
(i) Operating Expenses and Taxes for such Calendar Year;
(ii) The amount of the Rent Adjustments due Landlord for such Calendar
Year, less credit for Rent Adjustment Deposits paid, if any;
(iii) The Rent Adjustment Deposits due in the current Calendar Year
including the amount or revised amount due for months prior
to the rendition of the statements; and,
(iv) The Current CPI and the CPI Escalation Amount due in the current
Calendar Year and payable pursuant to Section 3.04 of this Lease.
Tenant shall pay to Landlord any amounts due in accordance with said
statement. If the Lease Term commences on other than the first day of a
Calendar Year, or ends on other than the last day of a Calendar Year, then
the Rent Adjustment due Landlord for such Calendar Year shall be prorated
for such fractional Calendar Year. Monthly Base Rent shall be paid as
provided in Section 3.03 of this Lease, the Rent Adjustment shall be paid
within thirty (30) days after receipt of such statement, and Rent
Adjustment Deposits shall be paid as provided in Section 3.05C of this
Lease. If the total amount of Rent Adjustment Deposits paid by Tenant
during any Calendar Year, such excess shall be credited against Rent
Adjustment Deposits next due under Section 3.05 above. If no such payments
are next due, such excess shall be refunded by Landlord. No interest or
penalties shall accrue on any amounts which Landlord is so obligated to
credit or pay to Tenant.
3.07 SURVIVAL.
Tenant's obligations under this section of the Lease shall survive the
expiration or earlier termination of the term of this Lease. Tenant shall
pay all sums of money or charges required to be paid by Tenant under this
Lease as additional rent.
IV. SECURITY DEPOSIT:
As security for the performance of its obligations under this Lease,
Tenant, upon execution of this Lease, shall deposit with Landlord's
Management Agent a security deposit in the amount set forth in Section
1.010 hereof (the "Security Deposit"), and agrees from time to time to pay
Landlord within three (3) business days following receipt of a request
therefor, any sum or sums of money paid or deducted therefrom by Landlord
pursuant to the provisions of this Lease, in order that at all times during
the Lease Term there shall be continually deposited with the Landlord, a
sum which shall never be less than the amount originally deposited as
the Security Deposit. The Security Deposit shall not be deemed an advance
payment of Rent, nor a measure of damages for any default by Tenant under
this Lease, nor shall the Security Deposit be a bar or a defense to any
action that Landlord may commence against Tenant. In the event of any
default by Tenant hereunder, Landlord shall have the right, but
shall not be obligated, to apply or retain all or any portion of the
Security Deposit in payment of Tenant's obligations hereunder, but any such
application or retention shall not have the effect of curing any such
default. Landlord shall not be obligated to hold the Security Deposit as a
separate fund, but may commingle the same with its other funds. Upon
expiration of the Lease Term, the Security Deposit (or the balance thereof
remaining after payment out of the same or deductions therefrom as provided
above) shall be returned to Tenant no later than sixty (60) days following
such expiration. No interest shall be payable with respect to the Security
Deposit. Landlord or any owner of the Building may transfer or assign the
Security Deposit to any new owner of the Building or to any assignee or
transferee of this Lease or may credit the Security Deposit against the
purchase price of the Building and upon such transfer or credit all
liability of the transferor or assignor of such Security Deposit shall
cease and come to an end.
V. SERVICES:
5.01 BUILDING SERVICES:
As long as the Tenant is not in default of this Lease, Landlord will:
A. provide unrestricted elevator service during "business hours"
(defined below). We may provide unrestricted elevator service for
longer hours. We may also provide "restricted access" elevator
service, through a security system which we may install during all
other hours; and
B. provide heating, ventilating and air conditioning service to the
interior Common Areas of the Building during business hours.
5.02 BUSINESS HOURS DEFINITION:
"Business Hours", for the purposes of this Article are Mondays through
Fridays, from 7 a.m. to 6 p.m. and Saturdays from 8 a.m. to 1 p.m.,
Holidays excepted.
5.03 INTERRUPTION OF SERVICES:
Interruption of any service to be provided by Landlord hereunder or of
any utility or other service to the Building or the Premises, in whole or
in part caused by repairs, renewals, improvements, changes of service,
alterations, accidents, acts of God or an enemy, strikes, lockouts, labor
controversies, insurrections, picketing (whether legal or illegal) laws,
orders or regulations of any federal, state, county or municipal
authorities, accidents or casualties whatsoever, inability of
Landlord to obtain electricity, fuel, water or supplies, or by the act or
default of Tenant or any person other than Landlord, or by any other cause
or causes beyond the reasonable control of Landlord, shall not be deemed
an eviction or disturbance of Tenant's use and possession of the Premises
or any part thereof, or render Landlord liable for damages by abatement or
reduction of Rent or otherwise or relieve Tenant from performance of
Tenant's obligations under this Lease.
5.04 ELECTRICAL SERVICES:
The electrical current consumed relative to the Premises shall be
separately metered and Tenant shall pay for all such electrical current
directly to the utility company supplying said service. Tenant will bear
the cost of the electric meter and the installation thereof. Tenant agrees
to purchase from Landlord all replacement lamps, bulbs, ballasts and
starters used in the Premises and to pay Landlord a standard reasonable
charge for furnishing and replacing such lamps, bulbs, ballasts and
starters. Tenant acknowledges that it shall be responsible for making
arrangements for and shall pay the cost of the installation, repair and
maintenance of its own telephone system. At no time shall Tenant permit the
use of electricity consumed in the Premises to exceed the capacity of
feeders to the Building or the risers or wiring installation. Landlord does
not warrant or represent that such capacity shall be adequate for Tenant's
purposes.
5.05 GOVERNMENTAL COMPLIANCE:
Tenant agrees that Landlord's compliance with any mandatory or
voluntary energy conservation measures or other legal requirements
instituted by any appropriate governmental authority shall not be
considered a violation of any terms of this Lease and shall not entitle
Tenant to terminate this Lease or require abatement or reduction of the
Rent hereunder.
5.06 ADDITIONAL SERVICES:
Landlord shall in no event be obligated to furnish any services or
utilities, other than those specified above in this Article V. If Landlord
elects to furnish services or utilities requested by Tenant in addition to
those specified above (including utility services at times other than those
specified), Tenant shall pay to Landlord Landlord's then prevailing rates
for such services and utilities within ten (10) days after receipt of
Landlord's invoices therefor. If Tenant shall fail to make any such
payment, Landlord may, without notice to Tenant, and in addition to
Landlord's other remedies under this Lease, discontinue any or all of the
additional services. No failure to furnish or discontinuance of any service
pursuant to this Section 5.06 shall result in any liability of Landlord to
Tenant or be deemed to be a constructive eviction or a disturbance of
Tenant's use of the Premises.
VI. TENANT'S USE AND ENJOYMENT OF PREMISES:
6.01 USE OF PREMISES:
Tenant shall occupy and use the Premises only for general office
purposes in order to conduct the business or profession specified in
Section 1.01P. Tenant shall not occupy or use the Premises (or permit the
use or occupancy of the Premises) for any purpose or in any manner which:
(A) is unlawful or in violation of any applicable legal, governmental or
quasi-governmental requirement, ordinance or rule (including the Board of
Fire Underwriters); (B) may be dangerous by the terms and conditions of
this Lease including the rules and regulations set forth in the Rules and
Regulations Exhibit attached hereto and made a part hereof. Tenant shall,
at its own cost and expense, obtain all licenses and permits necessary for
any such use.
6.02 LANDLORD'S ACCESS TO PREMISES:
The Tenant shall permit the Landlord to erect, use and maintain pipes,
ducts, wiring and conduits in and through the Premises in a reasonable
manner so as to not hinder Tenant's business. The Landlord or Landlord's
agents shall have the right to enter upon the Premises on reasonable notice
to Tenant to inspect the same, to perform janitorial and cleaning services
and/or to make such repairs, alterations, improvements or additions to the
Premises or the Building as the Landlord may deem necessary or desirable,
and the Landlord shall be allowed to take all material into and upon said
Premises that may be required therefor without the same constituting an
eviction of the Tenant in whole or in part and the Rent reserved shall not
abate while said repairs, alterations, improvements, or additions are being
made, by reason of loss or interruption of business of the Tenant, or
otherwise. If the Tenant shall not be personally present to open and permit
an entry into said Premises, at any time, when for any reason an entry
therein shall be necessary or permissible, the Landlord or Landlord's
agents may enter the same by a master key or pass key, or may forcibly
enter the same, without rendering the Landlord or such agents liable
therefor (if during such entry Landlord or Landlord's agents shall accord
reasonable care to Tenant's property), and without in any manner affecting
the obligations and covenants of this Lease. Nothing herein contained,
however, shall be deemed or construed to impose upon the Landlord any
obligations, responsibility or liability whatsoever, for the care,
supervision or repair of the Building or any part thereof, other than as
herein provided. The Landlord shall also have the right at any time without
the same constituting an actual or constructive eviction and without
incurring any liability to the Tenant therefor, to change the arrangement
and/or location of entrances or passageways, doors and doorways, and
corridors, elevators, stairs, toilets or public parts of the Building, and
to close entrances, doors, corridors, elevators or other facilities,
provided that in no event shall Tenant access to the Premises be
restricted. The Landlord shall not be liable to the Tenant for any expense,
injury, loss or damage resulting from work done in or upon, or the use of,
any adjacent or nearby building, land, street or alley.
6.03 TENANT'S REMOVAL OF TENANT'S FIXTURES/EQUIPMENT:
Tenant, at any time Tenant is not in default hereunder, may remove its
movable trade fixtures and equipment from the Premises. Tenant shall
repair any damage to the Premises caused by such removal, failing which
Landlord may remove the same and repair the Premises and Tenant shall pay
the cost thereof to Landlord on demand.
6.04 CONTROL OF COMMON AREAS:
All Common Areas shall at all times be subject to the exclusive
control and management of Landlord. The Common Areas are to be used and
occupied by Tenant under a irrevocable, non-exclusive license during the
term of the Lease while Tenant is not in default. Tenant shall not be
entitled to any compensation or diminution or abatement of Rent in the
event such license shall be revoked, or in the event Landlord shall at any
time change the site, area, location or arrangement of any of the Common
Areas, or in the event the type of facilities at any time forming a part of
the Common Areas shall be changed or deemed a constructive or actual
eviction.
VII. CONDITION OF PREMISES:
Tenant shall notify Landlord in writing within thirty (30) days after
Tenant takes possession of the Premises of any defects in the Premises
claimed by Tenant. Except for defects stated in such notice, Tenant shall
be conclusively deemed to have accepted the Premises in the condition
existing on the date Tenant first takes possession, and to have waived all
claims relating to the condition of the Premises. No agreement of Landlord
to alter, remodel, decorate, clean or improve the Premises or the Building
and no representation regarding the condition of the Premises or the
Building has been made by or on behalf of Landlord to Tenant, except as
stated in this Lease or in the Workletter Agreement, if there is such a
Workletter Agreement, it is hereby attached to and made a part hereof as
Exhibit 3.
VIII. ASSIGNMENT, SUBLETTING AND OTHER TENANT TRANSFERS:
8.01 TRANSFERS, ASSIGNMENTS, SUBLETTING, ETC.:
Tenant shall not assign, sublet or transfer this Lease or any interest
therein, sublet or permit the occupancy or use by others of the Premises or
any part thereof, or allow any transfer hereof or any lien upon Tenant's
interest by operation of law or otherwise (collectively, a "Transfer"),
without the prior written consent of Landlord, which, except as otherwise
provided in this Section 8.01, Landlord may withhold in the exercise of its
absolute discretion. Further, in no event shall Tenant ever pledge,
encumber or mortgage this Lease or any interest herein. Any Transfer which
is not in compliance with the provisions of this Article VIII shall, at the
option of Landlord, be void and of no force or effect. Tenant shall, by
written notice in the form specified in the following sentence, advise
Landlord of Tenant's intention on a stated date (which shall not be less
than sixty (60) days after the date of Tenant's notice) to sublet, assign,
or transfer any part or all of the Premises or its interest therein for the
balance or any part of the Lease Term, and in such event, Landlord shall
have the right, to be exercised by giving written notice to Tenant within
thirty (30) days after receipt of Tenant's notice, to recapture the space
described in Tenant's notice and such recapture notice shall, if given,
cancel and terminate this Lease with respect to the space therein
described as of the date stated in Tenant's notice. Tenant's notice shall
state the name and address of the proposed subtenant, assignee, pledgee,
mortgagee or transferee, and a true and complete copy of the proposed
sublease, assignment, pledge, mortgage or other conveyance and all related
documentation, executed by both parties shall be delivered to Landlord
with said notice. If Tenant's notice shall cover all of the space hereby
demised, and Landlord shall elect to give the aforesaid recapture notice
with respect thereto, then the Lease Term shall expire and end on the date
stated in Tenant's notice as fully and completely as if that date had been
herein definitely fixed for the expiration of the Lease Term. If, however,
this Lease is terminated pursuant to the foregoing with respect to less
than the entire Premises, the Monthly Base Rent (including the CPI
Escalation Amount, if any) and Rent Adjustments then in effect shall be
adjusted on the basis of the number of rentable square feet retained by
Tenant in proportion to the original Rentable Area of the Premises, and
this Lease as so amended, shall continue thereafter in full force and
effect. In such event, Tenant shall pay the cost of erecting demising
walls and public corridors and making other required modifications to
physically separate the portion of the Premises remaining subject to this
Lease from the rest of the Premises. If Landlord, upon receiving Tenant's
said notice states that it intends to sublet or assign any such space,
shall not exercise its right to cancel and terminate as aforesaid,
Landlord will not unreasonably withhold its consent to Tenant's subletting
or assigning the space covered by its notice.*
*Notwithstanding the foregoing, Landlord hereby consents to all
subsidiaries of Tenant, now or hereinafter organized, occupying the
Premises, as long as the use does not conflict with local zoning permitted
use.
8.02 TENANT'S RESPONSIBILITIES, EXCESS RENT:
If Tenant shall sublet or assign the Premises or any part thereof or
assign any interest in this Lease at a rental rate (or additional
consideration) in excess of the then current Monthly Base Rent and Rent
Adjustments per rentable square foot, said excess Rent (or additional
consideration) shall be and become the property of Landlord and shall be
paid to Landlord as it is received by Tenant. If Tenant shall sublet the
Premises or any part thereof, Tenant shall be responsible for all actions
and neglect of the subtenant and its officers, partners, employees, agents,
guests and invitees as if such subtenant and such persons were employees of
Tenant. Nothing in this Section 8.02 shall be construed to relieve Tenant
from the obligation to obtain Landlord's prior written consent to any
proposed sublease.
8.03 NO WAIVER BY LANDLORD:
The consent by Landlord to any Transfer shall not be construed as a
waiver or release of Tenant from liability for the performance of all
covenants and obligations to be performed by Tenant under this Lease, and
Tenant shall remain liable therefor, nor shall the collection or acceptance
of Rent from any assignee, subtenant or occupant constitute a waiver or
release of Tenant from any of its obligations or liabilities under this
Lease. Any consent given pursuant to this Article VIII shall not be
construed as relieving Tenant from the obligation of obtaining Landlord's
prior written consent to any subsequent assignment or subletting.
8.04 TENANT'S DISSOLUTION:
If Tenant is a partnership, a withdrawal or change, whether voluntary,
involuntary or by operation of law or in one or more transactions, of
partners owning a controlling interest in Tenant shall be deemed a
voluntary assignment of this Lease and subject to the provisions of this
Article VIII. If Tenant is a corporation, any dissolution, merger,
consolidation or other reorganization of Tenant, or the sale, transfer or
redemption of a controlling interest of the capital stock of Tenant in one
or more transactions shall be deemed a voluntary assignment of this Lease
and subject to the provisions of this Article VIII. The preceding sentence,
however, shall not apply to any corporation the stock of which is traded
through a national or regional exchange or over-the-counter.
IX. MAINTENANCE:
9.01 LANDLORD'S MAINTENANCE:
Landlord shall maintain and make necessary repairs to foundations,
roofs, exterior walls, and the structural elements of the Building, and,
subject to the provisions of Article XV, the electrical, plumbing, heating,
ventilation and air conditioning systems of the Building and the public
corridors, washrooms and lobby of the Building, except that Landlord shall
not be responsible for: (A) the maintenance or repair of any such systems
which are located within the Premises and are supplemental or special to
the Building's standard systems, whether installed pursuant to the
Workletter Agreement or otherwise; (B) maintenance or repair of floor or
wall coverings, interior glass windows, doors, window sashes, counters,
door frames or office fronts located within the Premises (excepting normal
cleaning); and (C) the cost of performing any of said maintenance or
repairs caused by the negligence of Tenant, its employees, agents,
servants, licensees, subtenants, contractors or invitees, shall be paid by
Tenant.
9.02 TENANT'S MAINTENANCE:
Tenant, at its expense, shall keep and maintain the Premises in good
order, condition and repair, reasonable wear and tear accepted, and in
accordance with all applicable legal governmental and quasi-governmental
requirements, ordinances and rules (including the Board of Fire
Underwriters), Tenant shall promptly and adequately repair all damages to
the Premises and replace or repair all damaged or broken glass in the
interior of the Premises, fixtures or appurtenances. If Tenant fails to
perform any of its obligations set forth in this Section 9.02, Landlord, in
its sole discretion, may perform the same, and Tenant shall pay to Landlord
the cost hereof upon demand.
Tenant shall keep in force a standard maintenance agreement on all
heating and air conditioning equipment solely serving the Premises and
provide a copy of said maintenance agreement to Landlord. Tenant shall also
maintain a log of, and notify Landlord of, any of its agents going onto the
roof areas.
X. ALTERATIONS AND IMPROVEMENTS:
10.01 TENANT'S ALTERATIONS:
Tenant, without prior written consent of Landlord, which shall not be
unreasonably withheld or delayed, shall not make or cause to be made any
alterations, improvements, additions or installations in or to the
Premises. If Landlord so consents, before commencement of any such work or
delivery of any materials into the Premises or the Building, Tenant shall
furnish to Landlord for approval: architectural plans and specifications,
names and addresses of all contractors and subcontractors, copies of all
contracts, affidavits from engineers acceptable to Landlord stating that
the alterations will not in any way adversely affect the mechanical,
heating, ventilating, air conditioning, and the electrical systems in the
Building, necessary permits and licenses, certificates of insurance and
instruments of indemnification against any and all claims, costs, expenses,
damages and liabilities which may arise in connection with such work, and
such other documents requested by Landlord, all in such form and amount as
may be satisfactory to Landlord. In addition, prior to commencement of any
such work or delivery of any materials into the Premises, Tenant shall
provide Landlord with appropriate evidence of Tenant's ability to pay for
such work and materials in full, and, if requested by Landlord, shall
deposit with Landlord at such time such security for the payment of said
work and materials as Landlord may require. Whether or not Tenant furnishes
the foregoing, Tenant agrees to indemnify and hold Landlord, the Landlord's
partners, the record title holder, any mortgagee of the Building,
Landlord's Management Agent and their respective directors, officers,
agents and employees (hereinafter for convenience sometimes collectively
referred to as the ("Indemnitees") forever harmless against all claims and
liabilities of every kind, nature and description which may arise out of or
in any way be connected with such work. All such work shall be done only by
contractors or mechanics approved by Landlord and at such time and in such
manner as Landlord may from time to time designate which shall not be
unreasonably withheld or delayed. Tenant shall pay the cost of all such
work and the cost of decorating the Premises and the Building occasioned
thereby. Upon completion of such work, Tenant shall furnish Landlord with
contractors' affidavits and full and final waivers of lien and receipted
bills covering all labor and materials expended and used in connection
therewith. All such work shall be in accordance with all applicable legal,
governmental and quasi-governmental requirements, ordinances and rules
(including the Board of Fire Underwriters), and all requirements of applicable
insurance companies. All such work shall be done in a good and workmanlike
manner and with the use of good grades of materials. In no event shall any
approvals given by Landlord under this Lease constitute any warranty by
Landlord to Tenant of the adequacy of the design, workmanship or quality of
such work or materials for Tenant's intended use or impose any liability upon
Landlord in connection with the performance of such work. All alterations,
improvements, temporary or permanent, additions and installations to or on the
Premises, whether placed there by Landlord or Tenant, shall, unless Landlord
requests their removal, become part of the Premises at the time of their
installation and shall remain in the Premises at the expiration or termination
of this Lease, or termination of Tenant's right of possession of the Premises,
without compensation or credit to Tenant.
10.02 LIENS:
Without limitation of the provisions of Section 10.01, Tenant agrees
not to suffer or permit any lien of any mechanic or materialman to be
placed or filed against the Premises or the Building. In case any such lien
shall be filed, Tenant shall immediately satisfy and arrange for immediate
release of such lien of record. If Tenant shall fail to have such lien
immediately satisfied and released of record, Landlord may, on behalf of
Tenant, without being responsible for making any investigation as to the
validity of such lien and without limiting or affecting any other remedies
Landlord may have, pay the same and Tenant shall pay the Landlord on demand
the amount so paid by Landlord.
10.03 TENANT DECORATING VISIBLE TO THE PUBLIC:
Landlord hereby reserves the right to approve the color, nature,
quality, design and character of any of Tenant's interior decorating and
furnishings which are visible to the public from public areas of the
Building, including, but not limited to, the lobby, public hallways and
corridors, foyers and atriums. Such approval by Landlord shall not be
unreasonably withheld or delayed.
XI. WAIVER OR CERTAIN CLAIMS AND INDEMNITY:
11.01 WAIVER OF CLAIMS:
To the extent permitted by law, the Tenant releases the Landlord from,
and waives all claims for, damage to person or property sustained by the
Tenant resulting directly or indirectly from any act or neglect of any
tenant or occupant of the Building or of any other person, excluding
Landlord or Landlord's agents and servants. This Section 11.01 shall apply
especially, but not exclusively, to the flooding of basements or other
subsurface areas, and to damage caused by refrigerators, sprinkling
devices, air conditioning apparatus, water, snow, frost, steam, excessive
heat or cold, falling plaster, broken glass, sewage, gas, odors or noise,
or the bursting or leaking of pipes or plumbing fixtures,
and shall apply equally whether any such damage results from the act or
neglect of the Landlord or of other tenants, occupants or servants in the
Building or of any other person, and whether such damage be caused or
resulted from anything or circumstances above mentioned or referred to, or
any other thing or circumstance whether of a like nature or of a wholly
different nature. If any such damage, whether to the Premises or to the
Building or any part thereof, or whether to the Landlord or to other
tenants in the Building, results from any act or neglect of the Tenant,
its employees, agents, invitees and customers, the Tenant shall be liable
therefor and the Landlord, at the Landlord's option, may repair such
damage and the Tenant, upon demand by Landlord, shall reimburse the
Landlord forthwith for the total cost of such repairs.
11.02 INDEMNITY:
Tenant agrees to save, defend, indemnify and hold the Indemnitees
harmless against any and all claims, demands, costs and expenses, including
reasonable attorneys' fees for the defense thereof, arising from Tenant's
occupation of the Premises or from any breach or default on the part of
Tenant in the performance of any covenant or agreement on the part of
Tenant to be performed pursuant to the terms of this Lease, or from any act
or negligence of Tenant, its agents, servants, employees or invitees, in or
about the Premises. In case of any action or proceeding brought against the
Indemnitees by reason of any such claim, upon notice from Landlord, Tenant
covenants to defend such action or proceeding by counsel reasonably
satisfactory to Landlord.
XII. TENANT'S DEFAULT AND LANDLORD'S REMEDIES:
12.01 EVENTS OF DEFAULT:
The occurrence of any one or more of the following matters constitutes
a default ("Default") by Tenant under this Lease:
A. Failure by Tenant to pay, within five (5) business days after the
due date, any Rent or any other amounts due and payable by Tenant
under this Lease;
B. Failure by Tenant to observe or perform any of the covenants in
this Lease in respect to assignment and subletting;
C. Failure by Tenant to cure forthwith, after notice thereof from
Landlord or another tenant acquiring knowledge thereof, any hazardous
condition that Tenant has created in violation of law or of this
Lease;
D. Failure by Tenant to observe or perform any other covenant,
agreement, condition or provision of this Lease, if such failure shall
continue for forty-five (45) days after written notice thereof to
Tenant by Landlord;
E. The levy upon under execution or the attachment by legal process of
the leasehold interest of Tenant, or the filing or creation of a lien
in respect of such leasehold interest;
F. If Tenant or any guarantor of this Lease becomes insolvent or
bankrupt or admits in writing its inability to pay its debts as they
mature, makes an assignment for the benefit of its creditors, or
applies for or consents to the appointment of a trustee or receiver
for itself or for all or a part of its property;
G. If proceedings for the appointment of a trustee, custodian or
receiver of Tenant or any guarantor of this Lease or for all or a part
of Tenant's or such guarantor's property are filed against Tenant or
such guarantor and are not dismissed within thirty (30) days;
H. If proceedings in bankruptcy, or other proceedings for relief under
any law for the relief of debts, are instituted by or against Tenant
or any guarantor of this Lease, and, if instituted against Tenant or
such guarantor, are allowed against either or are consented to by
either or are not dismissed within sixty (60) days thereof;
I. If Tenant shall repeatedly default in the timely payment of Rent or
any other charges required to be paid hereunder, or shall repeatedly
default in keeping, observing or performing any other covenant,
agreement, condition or provision of this Lease, whether or not Tenant
shall timely cure any such payment or other default. For the purposes
of this subsection, the occurrence of similar defaults three (3) times
during any twelve (12) month period shall constitute a repeated
default.
Any notice periods provided for under this Article XII shall run
concurrently with any statutory notice periods and any notice given
hereunder may be given simultaneously with or incorporated into any such
statutory notice.
12.02 LANDLORD'S RIGHTS AND REMEDIES:
If a Default occurs, Landlord shall have the following rights and
remedies, which shall be distinct, separate and cumulative, and which may
be exercised by Landlord concurrently or consecutively in any combination
and which shall not operate to exclude or deprive Landlord of any other
right or remedy allowed it hereunder or by operation of law:
A. Landlord may terminate this Lease by giving to Tenant notice of
Landlord's intention so to do, in which event the Lease Term shall
end, and all right, title and interest of Tenant hereunder shall
expire, on the date stated in such notice, and the Landlord may
accelerate and declare immediately due and payable, the whole or any
part of the Rent and other charges, payments, costs, and expenses
herein agreed to be paid by Tenant for the entire unexpired balance of
the term of this Lease;
B. Landlord may terminate the right of Tenant to possession of the
Premises without terminating this Lease by giving notice to Tenant
that Tenant's right of possession shall end on the date stated in such
notice, whereupon the right of Tenant to possession of the
Premises or any part thereof shall cease on the date stated in such
notice, but Tenant's obligations under this Lease shall continue in
full force and effect. Any funds from rerental of the Premises will be
credited against Tenant's obligations under the Lease.
C. Landlord may enforce the provisions of this Lease and may enforce and
protect the rights of Landlord hereunder by a suit or suits in equity or
at law for the specific performance of any covenant or agreement
contained herein, or for the enforcement of any other appropriate legal
or equitable remedy, including injunctive relief and recovery of all
monies due or to become due from Tenant under any of the provisions of
this Lease.
12.03 TENANT SURRENDER OF POSSESSION, RE-ENTRY BY LANDLORD; EFFECT:
A. If Landlord exercises either of the remedies provided for in
subparagraphs A and B of Section 12.02, Tenant shall surrender
possession and vacate the Premises immediately and deliver possession
thereof to Landlord, and Landlord may then, or at any time thereafter,
re-enter and take complete and peaceful possession of the Premises,
full and complete license so to do being granted to Landlord, and
Landlord may remove all occupants and property therefrom, using such
force as may be necessary, without being deemed in any manner guilty
of trespass, eviction or forcible entry and detainer and without
relinquishing Landlord's right to Rent or any other right given to
Landlord hereunder by operation of law.
B. If Landlord terminates the right of Tenant to possession of the
Premises without terminating this Lease, such termination of
possession shall not release Tenant, in whole or in part, from
Tenant's obligation to pay the Rent due hereunder for the full stated
Lease Term, and the aggregate amount of the Monthly Base Rent and Rent
Adjustments, based on the Monthly Base Rent and Rent Adjustments most
recently in effect, for the period from the date stated in the notice
terminating possession to the end of the stated Lease Term shall, at
Landlord's option, at once mature and be immediately due and payable
by Tenant to Landlord (as described in Section 12.04) together with
any other amounts due hereunder, and Landlord shall have the right to
immediate recovery of all such amounts. Alternatively, at Landlord's
option, Landlord shall have the right, from time to time, to recover
from Tenant, and Tenant shall remain liable for, all Monthly Base Rent
and Rent Adjustments and any other sums then due under this Lease and
thereafter accruing as they become due under this Lease during the
period from the date of such notice of termination of possession to
the end of the Lease Term. Landlord may file suit from time to time to
recover any such sums and no suit or recovery by Landlord of any such
sums or portion thereof shall be a defense to any subsequent suit
brought for any other sums due under this Lease.
C. In the event Landlord terminates the right of Tenant to possession
of the Premises without terminating this Lease as aforesaid, Landlord
may, but shall be under no obligation to, relet the Premises or any
part thereof for the account of Tenant for such rent, for such time
(which may be for a term extending beyond the Lease Term) and upon
such terms as Landlord in Landlord's sole discretion shall determine,
and Landlord shall not be required to accept any tenant offered by
Tenant or to observe any instructions given by Tenant relative to such
reletting. Also, in any such event, Landlord may make repairs,
alterations and additions in or to the Premises and redecorate the
same to the extent deemed by Landlord necessary or desirable, and, in
connection therewith, change the locks to the Premises, and Tenant
shall upon demand pay the cost thereof together with Landlord's
expenses of reletting. Landlord may collect the rents from any such
reletting and apply the same first to the payment of the expenses of
re-entry, redecoration, repair and alterations and the expense of
reletting (including without limitation broker's commissions and
reasonable attorneys' fees) and second to the payment of Rent herein
provided to be paid by Tenant. Any excess or residue shall operate
only as an offsetting credit against the amount of Rent as the same
theretofore became or thereafter becomes due and payable hereunder,
but the use of such offsetting credit to reduce the amount of Rent due
Landlord, if any, shall not be deemed to give Tenant any right, title
or interest in or to such excess or residue and any such excess or
residue shall belong solely to Landlord. No such re-entry or
repossession, repairs, alterations and additions, or reletting shall
be construed as an eviction or ouster of Tenant, an election on
Landlord's part to terminate this Lease or an acceptance of a
surrender of this Lease, unless a written notice of such intention be
given to Tenant by Landlord, or shall operate to release Tenant in
whole or in part from any of Tenant's obligations hereunder. Landlord
may, at any time and from time to time, sue and recover judgment for
any deficiencies remaining after the application of the proceeds of
any such reletting.
12.04 RECOVERY OF RENT AND OTHER SUMS BY LANDLORD:
In the event of the termination of this Lease by Landlord as provided
for by subparagraph A of Section 12.02 or otherwise, Landlord shall be
entitled to recover from Tenant all Monthly Base Rent and Rent Adjustments
accrued and unpaid for the period up to and including such termination
date, as well as all other additional sums payable by Tenant hereunder. In
addition, Landlord shall be entitled to recover, as damages for loss of the
benefit of its bargain and not as a penalty, the sum of: (A) the
unamortized cost to Landlord, computed and determined in accordance with
generally accepted accounting principles, of any tenant improvements,
provided by Landlord at its expense, (B) the aggregate sum which at the
time of such termination represents the excess, if any, of the present
value of the aggregate Monthly Base Rent and Rent Adjustments at the same
annual rate for the remainder of the Lease Term as then in effect over the
then present value of the then aggregate fair rental value of the Premises
for the balance of the Lease Term, immediately prior to such termination,
such present worth to be computed in each case on the basis of a four
percent (4%) per annum discount from the respective dates upon which
rentals would have been payable hereunder had the Lease Term not been
terminated, and (C) any damages in addition thereto, including reasonable
attorneys' fees and court costs, which Landlord shall have sustained by
reason of the breach of any of the covenants of this Lease other than for
the payment of Rent.
12.05 LANDLORD'S EXPENSES:
Tenant shall pay all costs, charges and expenses, including court
costs and reasonable attorneys' fees incurred by Landlord or its
beneficiaries in enforcing Tenant's obligations under this Lease, in the
exercise by Landlord of any of its remedies in the event of a Default, in
any litigation, negotiation or transactions in which Tenant causes
Landlord, without Landlord's fault, to become involved or concerned, or in
consideration of any request for approval of or consent to any action by
Tenant which is prohibited by this Lease or which may be done only with
Landlord's approval or consent, whether or not such approval or consent is
given.
12.06 LANDLORD'S REMEDIES CUMULATIVE:
All of Landlord's rights and remedies under this Lease shall be
cumulative with and in addition to any and all rights and remedies which
Landlord may have at law or equity. Any specific remedy provided for in any
provision of this Lease shall not preclude the concurrent or consecutive
exercise of a remedy provided for in any other provision hereof.
XIII. SURRENDER OF PREMISES:
13.01 SURRENDER:
At the termination of this Lease, by lapse of time or otherwise,
Tenant shall surrender possession of the Premises to Landlord and deliver
all keys to the Premises and all locks therein to Landlord and make known
to the Landlord the combination of all combination locks in the Premises,
and shall, subject to Article XV, return the Premises and all equipment and
fixtures of the Landlord therein to Landlord in broom clean condition in as
good condition as when Tenant originally took possession (ordinary wear and
tear excepted), failing which Landlord may restore the Premises and such
equipment and fixtures to such conditions and the Tenant shall pay the cost
thereof to Landlord on demand.
13.02 FIXTURES:
Upon termination of this Lease or of Tenant's right to possession of
the Premises, by lapse of time or otherwise, all installations, additions,
partitions, hardware, light fixtures, floor coverings, non-trade fixtures
and improvements, temporary or permanent (excepting movable furniture and
movable equipment belonging to Tenant), in or upon the Premises, whether
placed there by Tenant or Landlord, shall be Landlord's property and shall
remain upon the Premises, all without compensation, allowance or credit to
Tenant.
13.03 SURVIVAL:
All obligations of Tenant under this Article XIII shall survive the
termination of this Lease, by lapse of time or otherwise.
XIV. HOLDING OVER:
Tenant shall pay Landlord double the Monthly Base Rent, plus
Landlord's estimate of the Rent Adjustments then applicable for each month
or portion thereof Tenant retains possession of the Premises, or any
portion thereof, after the expiration or termination of this Lease, and
also shall pay all damages sustained by Landlord, consequential as well as
direct, by reason of such retention of possession. The provisions of this
Article XIV shall not constitute a waiver by Landlord of any re-entry
rights of Landlord hereinbefore or by law provided. If Tenant retains
possession of the Premises, or any part thereof, for thirty (30) days after
the expiration or termination of this Lease, then at the sole option of
Landlord expressed by written notice to Tenant, but not otherwise, such
holding over shall constitute a renewal of this Lease for a period of one
(1) year on the same terms and conditions as provided in this Lease, except
that the Monthly Base Rent shall be one hundred fifty percent (150%) of the
Monthly Base Rent in effect as of said date of expiration or termination of
this Lease.
XV. DAMAGE OR DESTRUCTION BY FIRE OR OTHER CASUALTY:
15.01 SUBSTANTIAL UNTENANTABILITY:
If more than fifty percent (50%) of the Building or Premises is
damaged or destroyed by fire or other casualty and, in Landlord's
reasonable opinion, such damage will not permit Tenant to carry on its
normal pre-existing business in the Premises, or remainder thereof,
Landlord may elect either to: (A) terminate this Lease as of the date of
the fire or other casualty by giving Tenant written notice thereof within
ninety (90) days after said date; or (B) proceed to repair or restore the
Building or the Premises, other than leasehold improvements and personal
property paid for or installed by Tenant, and this Lease shall remain in
full force and effect. If Landlord elects to proceed pursuant to subsection
(B) above, Landlord shall notify Tenant thereof within forty-five (45) days
after the date of such fire or other casualty, which notice shall contain
Landlord's reasonable estimate of the time required to substantially
complete such repair or restoration. In the event such estimate indicates
that the time so required will exceed one hundred eighty (180) days from
the date of the casualty, then Tenant shall have the right to terminate
this Lease effective as of the date of such casualty by giving written
notice thereof to Landlord not later than twenty (20) days after the date
of Landlord's notice. If Landlord's estimate indicates that the repair or
restoration can be substantially completed within one hundred eighty (180)
days, or if Tenant fails to exercise its right to terminate this Lease, as
aforesaid, this Lease shall remain in force and effect. In all cases
relative to such repair or restoration pursuant to this Article XV, due
allowance shall be made for reasonable delay caused by adjustment of
insurance loss, strikes, governmental approvals, labor difficulties or any
cause beyond Landlord's reasonable control.
15.02 INSUBSTANTIAL UNTENANTABILITY:
If less than fifty percent (50%) of the Building or Premises is
damaged or destroyed by fire or other casualty and, in Landlord's reasonable
opinion, such damage will not interfere with Tenant's conduct of its normal
pre-existing business in the Premises, or remainder thereof, then Landlord
shall proceed to repair and restore the Building or the Premises, other than
the leasehold improvements and personal property paid for or installed by
Tenant, unless such damage occurs during the last twelve (12) months of the
Term, in which event Landlord shall have the right to terminate this Lease as
of the date of such fire or other casualty by giving written notice thereof to
Tenant within one hundred and eighty (180) days after the date of such fire or
other casualty.
15.03 RENT ABATEMENT:
If this Lease is not terminated pursuant to Section 15.01, Monthly
Base Rent and Rent Adjustments shall abate for that part of the Premises
which is untenantable on a per diem basis from the date of the fire or
other casualty until Landlord has substantially completed the repair and
restoration work in the Premises which it is required to perform, provided,
that as a result of such fire or other casualty, Tenant does not occupy the
portion of the Premises which is untenantable during such period.
Notwithstanding anything to the contrary in this Article XV, Tenant shall
not have the right to terminate this Lease and Rent shall in no event abate
if such fire or other casualty, cause, condition or thing was caused by the
wilful act or neglect of Tenant, its employees, agents, contractors or
invitees.
XVI. EMINENT DOMAIN:
16.01 TAKING OF WHOLE OR SUBSTANTIAL PART:
In the event that the whole or a substantial part of the Premises
shall be condemned or taken in any manner for any public or quasi-public
use (including a deed given in lieu of condemnation), and as a result
thereof, the remainder of the Premises cannot be used for the same purpose
as prior to such taking, the Lease Term shall terminate as of the date
possession is taken and Monthly Base Rent and Rent Adjustments shall be
apportioned as of said date; provided, however, if Landlord elects to make
comparable space in the Building available to Tenant under the same Rent
and terms as herein provided, Tenant shall accept such space and this Lease
shall then apply to such space, provided Landlord pays all expenses of
Tenant's move to such space.
16.02 TAKING OF PART:
If less than a substantial part of the Premises shall be so condemned
or taken (including a deed given in lieu of condemnation) and after such
taking the Premises can be used for the same purposes as prior thereto, the
Lease Term shall cease only as to the part so taken as of the date
possession shall be taken by such authority, and Tenant shall pay full Rent
up to that date (with appropriate refund by Landlord of such Rent
attributable to the part so taken as may have been paid in advance for any
period subsequent to the date possession is taken) and thereafter Monthly
Base Rent and Rent Adjustments shall be equitably adjusted to reflect the
reduction in the Premises by reason of such taking. Landlord shall, at its
expense, make all necessary repairs or alterations to the Building so as
to constitute the remaining Premises as a complete architectural unit,
provided that Landlord shall not be obligated to undertake any such repairs
or alterations if the cost thereof exceeds the award resulting from such
taking. The foregoing notwithstanding, if as a result of any taking
including a governmental order that the grade of any street, alley or other
property adjacent to the Building is to be changed and such taking or
change of grade makes it necessary or desirable to substantially remodel or
restore the Building, Landlord shall have the right to terminate this Lease
upon one hundred and eighty (180) days' prior written notice and the
Monthly Base Rent and Rent Adjustment hereunder shall be apportioned as of
the effective termination date.
16.03 COMPENSATION:
Landlord shall be entitled to receive the entire price or award from
any such sale, taking or condemnation without any payment to Tenant, and
Tenant hereby assigns to Landlord all of Tenant's interest, if any, in any
such award; provided, however, Tenant shall have the right separately to
pursue against the condemning authority an award in respect of the loss, if
any, to leasehold improvements paid for by Tenant without any credit or
allowance thereafter from Landlord or deduction from Landlord's award.
XVII. TENANT'S INSURANCE:
17.01 MINIMUM COVERAGE:
Tenant, at Tenant's expense, agrees to maintain in force during the
Term: (A) Comprehensive General Liability Insurance on an occurrence basis
with minimum limits of liability be of not less than $1,000,000 for bodily
injury, personal injury or death to any one person and $3,000,000 for
bodily injury, personal injury or death to more than one person and
$500,000 with respect to damage to property, including water and sprinkler
damage; (B) Fire Insurance, with all risk coverage, vandalism and
malicious mischief endorsements, to include water sprinkler damage, in an
amount adequate to cover the full replacement value of all leasehold
improvements (except to the extent the same are included within the
definition of "Building Standard Work", but not "Tenant's Extra Work" in
the Workletter Agreement attached hereto) and all fixtures, contents and
wall and floor coverings in the Premises; and (C) if the nature of Tenant's
operation is such as to place any or all of its employees under the
coverage of local workman's compensation laws or similar statutes, Tenant
shall also keep in force at the times aforesaid, at its own expense,
workman's compensation or similar insurance affording statutory coverage
and containing statutory limits.
17.02 ADDITIONAL INSURED, ENDORSEMENTS, WAIVERS, ETC.:
The policy referred to in Section 17.01 shall name the Indemnitees as
additional insured and shall not provide for deductible amounts in excess
of $1,000. Each policy referred to in Section 17.01 shall be issued by one
or more responsible insurance companies licensed to do business in the
state of Florida and reasonably satisfactory to Landlord and shall contain
the following provisions and endorsements: (A) that
such insurance may not be canceled or amended without thirty (30) days'
prior written notice to the Landlord; (B) an express waiver of any right
of subrogation by the insurance company against the Indemnitees; and (C)
that the policy shall not be invalidated should the insured waive in
writing prior to a loss, any or all rights of recovery against any other
party for losses covered by such policies. Landlord agrees that
Scottsdale Insurance Company is satisfactory to Landlord.
17.03 CERTIFICATES OF INSURANCE, ADDITIONAL WAIVERS:
Tenant shall deliver to Landlord, certificates of insurance of all
policies and renewals thereof to be maintained by Tenant hereunder, not
less than ten (10) days prior to the Commencement Date hereunder and not
less than thirty (30) days prior to the expiration date of each policy.
Provided that the insurance policies of Tenant shall not be invalidated nor
will the right of the insured to collect the proceeds payable under such
policies be adversely affected by the waiver contained in the following
portion of this sentence, Tenant hereby expressly waives all rights of
recovery which it might otherwise have against the Indemnitees, for loss or
damage to person, property or business to the extent that such loss or
damage is covered by valid and collectible insurance policies,
notwithstanding that such loss or damage may result from the negligence of
the Indemnities, excluding intentional acts. Tenant shall use its best
efforts to obtain from its insurer the right to waive claims as set forth
in the preceding sentence without thereby invalidating its insurance or
affecting its right to proceeds payable thereunder.
17.04 NO CONCURRENT INSURANCE:
Tenant shall not take out separate insurance concurrent in form or
contributing, in the event of loss, with that required to be furnished by
Tenant, or increase the amounts of any existing insurance by securing an
additional policy or additional policies without naming Landlord and all
other persons and entities then required to be named as additional insureds
pursuant hereto as additional insured parties thereunder.
17.05 EFFECT OF FAILURE TO INSURANCE:
If, for any reason, Tenant fails to provide and keep in force any or
all of the insurance policies required of Tenant under this Article, then
Tenant shall indemnify Landlord and hold Landlord harmless from and against
any loss which would have been covered by the insurance Tenant fails so to
provide or keep in force. Nothing contained in this section shall be
construed to limit Tenant's indemnity of Landlord under Section 17.01
hereof.
XVIII. RULES AND REGULATIONS:
Tenant agrees to observe and not to interfere with the rights reserved
to Landlord pursuant to Article XIX hereof and agrees, for itself, its
employees, agents, contractors, invitees and licenses, to comply with the
rules and regulations as shall be adopted by Landlord pursuant to Article
XIX of this Lease. Any material violation by Tenant of any of the rules and
regulations contained in Exhibit 4 attached to this Lease, or any other
Section of this Lease, or as hereafter may be adopted by Landlord
pursuant to Article XIX of this Lease, may be restrained; but whether or
not so restrained, Tenant acknowledges and agrees that it shall be and
remain liable for all damages, loss, costs and expenses resulting from any
violation by Tenant of any thereof. Nothing contained in this Lease shall
be construed to impose upon Landlord any duty or obligation to enforce said
rules or regulations, or the terms, covenants and conditions of any other
lease against any other tenant or any other persons, and Landlord shall not
be liable to Tenant for violation of the same by any other tenant, its
employees, agents, invitees, or by any other person.
XIX. ADDITIONAL RIGHTS RESERVED TO LANDLORD:
Landlord shall have the following rights exercisable without notice
and without liability to Tenant for damage or injury to property, person or
business (all claims for damage being hereby waived and released by Tenant)
and without effecting an eviction or disturbance of Tenant's use or
possession or giving rise to any claim for set-offs or abatement of Rent.
A. To change the name or street address of the Building, or the suite
number of the Premises.
B. To install and maintain signs on the exterior and interior of the
Building.
C. To designate all sources furnishing sign painting and lettering,
towels, coffee cart service, vending machines, or toilet supplies used
or consumed on the Premises and the Building.
D. To have pass keys to the Premises. No locks shall be changed
without the prior written consent of Landlord.
E. To grant to anyone the exclusive right to conduct any business or
render any service in the Building, provided such exclusive right
shall not operate to exclude Tenant from the use expressly permitted
by this Lease.
F. To enter the Premises to make inspections, decorations, repairs,
alterations or additions in or to the Premises or the Building,
specifically including, but without limiting the generality of the
foregoing, to make repairs, additions or alterations within the
Premises to mechanical, electrical and other facilities serving other
premises in the Building, to make repairs, additions or alterations to
the Building which may change, eliminate or remove Common Areas,
parking areas, if any or the method of ingress or egress from the
Building and such areas, to convert Common Areas into leasable areas,
or otherwise alter, repair or reconstruct the Common Areas or change
the use thereof, and to perform any acts related to the safety,
protection, preservation, reletting, sale or improvement of the
Premises or the Building.
G. To display the Premises to prospective Tenants at reasonable times
during the last six (6) months of the Lease Term, provided same
does not interfere with Tenant's normal business operations.
H. To approve the weight, size and location of safes and other heavy
equipment and articles in and about the Premises and the Building (so
as not to exceed the legal live load), and to require all such times
and furniture and similar items to be moved into and/or out of the
Building and Premises only at such times and in such manner as
Landlord shall reasonably direct in writing. Movements of Tenant's
property into or out of the Building and within the Building are
entirely at the risk and responsibility of Tenant and Landlord
reserves the right to reasonably require permits before allowing any
such property to be moved into or out of the Building.
I. To prohibit the placing of vending or dispensing machines of any
kind in or about the Premises without the prior written permission of
Landlord.
J. To have access to all mail chutes or boxes according to the rules
of the United States Postal Service.
K. To require all persons entering or leaving the Building during such
hours as Landlord may from time to time reasonably determine to
identify themselves to a watchman by registration or otherwise, and to
establish their right to enter or leave and to exclude or expel any
peddler, solicitor or beggar at any time from the Premises or the
Building.
L. To close the Building at 6:00 p.m. on weekdays, 1:00 p.m. on
Saturdays, and all day on Sundays and Holidays, or at such other
reasonable times as Landlord may determine, subject, however, to
Tenant's right to after hours or early access by one or more coded
keys furnished by Landlord to such authorized personnel of Tenant as
Tenant identifies in writing to Landlord. Such coded key access shall
be provided only to the Premises and such limited public areas of the
Building required for Tenant to enter and leave the Premises and shall
be administered under such regulations as shall be prescribed from
time to time by Landlord in its sole discretion.
M. To inspect, decorate, alter, repair or improve the Premises and the
Building at any time, and Landlord and its representatives for that
purpose may enter on and about the Premises and the Building with such
material as Landlord may deem necessary, may erect scaffolding and all
other necessary structures on or about the Premises and the Building
and may close or temporarily suspend operations of entrances, doors,
corridors, elevators, driveways, parking areas, loading docks or other
facilities, provided same does not interfere with Tenant's normal
business operations.
N. To have and retain a paramount fee simple record title to the
Premises free and clear of any act of Tenant purporting to burden or
encumber it.
O. To establish the rules and regulations for the Building and
Premises referred to in Article XVIII hereof.
XX. TRANSFER OF LANDLORD'S INTEREST:
Landlord hereby reserves the right to sell, assign or transfer this
Lease. In such event this Lease shall remain in full force and effect,
subject to the performance by Tenant of all the terms, covenants and
conditions on its part to be performed. In the event that such assignee or
transferee agrees to perform all the terms, covenants and conditions of
Landlord pursuant to this Lease which are to be performed by Landlord from
and after the effective date of such sale, assignment or transfer of this
Lease (as the case may be), then, upon any such sale, assignment or
transfer, other than merely as security, Tenant agrees to look solely to
the responsibility of assignee or transferee with respect to all matters in
connection with this Lease and the transferor Landlord shall be released
from any further obligations hereunder.
XXI. SUBORDINATION AND ATTORNMENT:
21.01 SUBORDINATION:
Landlord has heretofore and may hereafter from time to time execute
and deliver a mortgage or trust deed in the nature of a mortgage, both
sometimes hereinafter referred to as "Mortgage", against the Building, the
Property or any interest therein. This Lease and the rights of Tenant
hereunder shall be and are hereby made expressly subject and subordinate at
all times to the lien of any such Mortgage now or hereafter existing
against the Property and/or the Building, and to all advances made or
hereafter to be made upon the security thereof. Tenant agrees to execute
and deliver such further instruments subordinating this Lease to any such
Mortgage as may be requested in writing by Landlord from time to time,
provided, however, that any such subordination at all times shall be
subject to the right of Tenant to remain in possession of the Premises
under the terms of this Lease for the Term, notwithstanding any foreclosure
of such Mortgage, or any sale pursuant thereto, so long as Tenant is not in
default under this Lease. Tenant acknowledges that its title is and always
shall be subordinate to the title of the owner of the Property and
Building, and nothing herein contained shall empower Tenant to do any act
which can, shall or may encumber the title of the owner of the Property or
the Building. Notwithstanding anything to the contrary contained herein,
Mortgagee by notice in writing to the Tenant may subordinate the lien of its
Mortgage to this Lease.
21.02 ATTORNMENT:
In event of foreclosure of any such Mortgage described in Section
21.01 above by voluntary agreement or otherwise, or the commencement of any
judicial action seeking such foreclosure, Tenant, at the request of the
then Landlord, shall attorn to and recognize such Mortgagee or purchaser in
foreclosure as Tenant's Landlord under this Lease. Tenant agrees to execute
and deliver at any time upon request of such Mortgagee, purchaser, or their
successors, any instrument to further evidence such attornment.
21.03 ATTORNEY-IN-FACT:
As and for additional security for the performance of its duties
hereunder and to induce Landlord to enter into this Lease, the Tenant shall
execute promptly such instruments or certificates to carry out the intent
of Article XXII hereinbelow and Sections 21.01 and 21.02 above, as shall be
requested by the Landlord, or any Mortgagee. The Tenant hereby irrevocably
appoints the Landlord, as attorney-in-fact for the Tenant with full power
and authority to execute and deliver in the name of the Tenant any such
instruments or certificates. If within fifteen (15) days after the date of
a written request by Landlord, or any Mortgagee to execute such
instruments, that Tenant shall not have executed the same, the Landlord
may, at its option, cancel this Lease without incurring any liability on
account thereof, and the Term hereby granted is expressly limited
accordingly.
XXII. ESTOPPEL CERTIFICATE:
Within fifteen (15) days after request therefor by Landlord or any
mortgagee, or prospective mortgagee, Tenant agrees to deliver to Landlord
or prospective owner, or mortgagee or prospective mortgagee, an Estoppel
Certificate in recordable form, binding upon Tenant, wherein Tenant shall
certify and agree that: (A) the Lease is in full force and effect, and
indicate what the commencement date of the Lease is; (B) Tenant has no
offsets or defenses to its performance of the terms and conditions of this
Lease, including the payment of Rent, if such be the case, or if there are
any such defenses or offsets, specifying the same; (C) Tenant is in the
possession of the Premises; (D) Tenant will not pay Rent more than one (1)
month in advance to the Landlord; (E) Tenant will not look to any mortgagee
for any security deposits paid to Landlord hereunder unless such deposits
have been received in cash by such mortgagee from Landlord; (F) if an
assignment of rents or leases has been served upon the Tenant by a
mortgagee or prospective mortgagee, acknowledging receipt thereof and
agreeing to be bound by the provisions thereof; (G) Tenant will give to the
first mortgagee copies of all notices required or permitted to be given by
Tenant to Landlord; and (H) any other reasonable requirements of Landlord
or mortgagee, provided Tenant does not incur any additional cost or expense
and such requirements do not materially change any terms of this Lease.
XXIV. NOTICES:
All notices, demands, approvals, consents, requests for approval or
consent or other writings in this Lease provided to be given, made or sent
by either party hereto to the other ("Notice") shall be in writing and
shall be deemed to have been fully given, made or sent when made by
personal service or deposited in the United States Mail, certified or
registered, and postage prepaid and properly addressed as follows:
To Landlord: Landlord's Management Agent at the address set forth in
Section 1.01C.
To Tenant: (i) If any Notice is to be given Tenant prior to
occupancy, to the address set forth in Section 1.01D.
(ii) If any Notice is to be given Tenant after
occupancy, to the Premises provided
however, if the Premises shall have been vacated,
Notice may be posted on the door to the Premises.
The address to which any Notice should be given, made or sent to
either party may be changed by written notice given by such party as above
provided. Consistent with the provisions of Section 21.04 hereinabove,
whenever Landlord is in default hereunder, Tenant shall give written notice
of such default to any mortgagee of which Tenant has been advised in
writing as being entitled to such notice. Any notice, demand, request or
consent to be made by or required of Landlord, may be made and given by
Landlord's Management Agent with the same force and effect as if made and
given by Landlord.
XXV. REAL ESTATE BROKERS:
Tenant represents that, except for ARVIDA REALTY SALES, LTD. &
GIMBELSTOB REALTY, INC. Tenant has not dealt with any real estate broker,
sales person, or finder in connection with this Lease, and no such person
initiated or participated in the negotiation of this Lease, or showed the
Premises to Tenant. Tenant hereby agrees to indemnify and hold harmless
Landlord and Landlord's Management Agent from and against any and all
liabilities and claims for commissions and fees arising out of a breach of
the foregoing representation. Landlord shall be responsible for the payment
of all commissions to the broker, if any, specified in this Article XXV,
based upon the leasing commission policy and agreements of Landlord
applicable to the Building and in effect as of the date of this Lease.
XXVI. MISCELLANEOUS:
26.01 LATE CHARGES:
All rent as defined in Article III (unless otherwise provided herein,
and other than the Monthly Base Rent, Rent Adjustment Deposits, which shall
be due as hereinbefore provided) owed by the Tenant to the Landlord
hereunder shall be paid within five (5) business days from the date the
Landlord renders the statements of account therefor. All such amounts
(including without limitation Monthly Base Rent, CPI Escalation Amounts,
Rent Adjustments and Rent Adjustment Deposits) shall bear interest from the
date due until the date paid at eighteen percent (18%) or the maximum legal
rate of interest, allowed by law, if such maximum legal rate is applicable
and lower. Further, in the event that Tenant fails to pay Rent when due,
Tenant shall be charged and be liable for payment of a TWO HUNDRED FIFTY
AND NO/100 ($250.00) DOLLAR Late Payment Processing Fee, in each such
instance.
26.02 ENTIRE AGREEMENT:
This Lease, the Exhibits, and any Riders attached hereto contain the
entire agreement between Landlord and Tenant concerning the Premises and
there are no other agreements, either oral or written.
26.03 NO OPTION:
The execution of this Lease by Tenant and delivery of same to Landlord
or the Broker or Landlord's Management Agent does not constitute a
reservation of or option for the Premises or an agreement to enter into a
Lease. This Lease shall become effective only if and when Landlord executes
and delivers the same to Tenant, provided, however, the execution and
delivery by Tenant of this Lease to Landlord or the Broker or Landlord's
Management Agent shall constitute an irrevocable offer by Tenant to lease the
Premises on the terms and conditions herein contained, which offer may not be
withdrawn or revoked for thirty (30) days after such execution and delivery.
If Tenant is a corporation, partnership, association or any other entity, it
shall deliver to Landlord, concurrently with the delivery to Landlord of an
executed Lease, certified resolutions of Tenant's directors or other governing
person or body authorizing execution and delivery of this Lease and the
performance by Tenant of its obligations hereunder and the authority of the
party executing the Lease as having been duly authorized to do so.
26.04 ACCORD AND SATISFACTION:
No payment by Tenant or receipt by Landlord of a lesser amount than
any installment or payment of Rent due shall be deemed to be other than on
account of the amount due, and no endorsement or statement on any check or
any letter accompanying any check or payment of Rent shall be deemed an
accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such
installment or payment of Rent or pursue any other remedies available to
Landlord. No receipt of money by Landlord from Tenant after the termination
of this Lease of Tenant's right of possession of the Premises shall
reinstate, continue or extend the Lease Term.
26.05 NO WAIVER OF DEFAULTS:
No waiver of any provision of this Lease shall be implied by any
failure of Landlord to enforce any remedy on account of the violation of
such provision, even if such violation be continued or repeated
subsequently, and no express waiver shall affect any provision other than
the one specified in such waiver and in that event only for the time and in
the manner specifically stated. No receipt of monies by Landlord from
Tenant after the termination of this Lease will in any way alter the length
of the Lease Term or Tenant's right of possession hereunder or, after the
giving of any notice, shall reinstate, continue or extend the Lease Term or
affect any notice given Tenant prior to the receipt of such monies, it
being agreed that after the service of notice or the commencement of a suit
or after final judgment for possession of the Premises, Landlord may
receive and collect any Rent due, and the payment of Rent shall not waive
or affect said notice, suit or judgment, nor shall any such payment be
deemed to be other than on account of the amount due, nor shall the
acceptance of Rent be deemed a waiver of any breach by Tenant of any term,
covenant or condition of this Lease.
26.06 LANDLORD'S OBLIGATIONS ON SALE OF BUILDING:
Consistent with Article XX hereof, in the event of any sale or other
transfer of the Building, Landlord shall be entirely freed and relieved of
all agreements and obligations of Landlord hereunder accruing or to be
performed after the date of such sale or transfer.
26.07 CROSS DEFAULT, DEFAULT UNDER OTHER LEASE:
If the term of any lease (other than this Lease) made by Tenant for
any demised premises in the Building shall be terminated or terminable
after the making of this Lease, because of any default by Tenant under such
other Lease, such fact shall empower Landlord, at Landlord's sole option,
to declare this Lease to be in default by written notice to Tenant.
26.08 BINDING EFFECT:
This Lease shall be binding upon and inure to the benefit of Landlord
and Tenant and their respective heirs, legal representatives,
successors and permitted assigns, but this provision shall not
operate to permit any transfer, assignment, mortgage, encumbrance, lien,
charge or subletting contrary to the provisions of this Lease.
26.09 MODIFICATION OF LEASE:
Should any mortgagee, require a modification or modifications of this
Lease, which modification or modifications will not bring about any
increased cost or expense to Tenant or in any other way substantially
change the rights and obligations of Tenant hereunder, then and in such
event, Tenant agrees to execute each such modification. Any and all
modifications or amendments to this Lease must be in writing and executed
by Landlord and Tenant.
26.10 CAPTIONS:
The Article and Section captions in this Lease are inserted only as a
matter of convenience and in no way define, limit, construe, or describe
the scope or intent of such Articles and Sections.
26.11 APPLICABLE LAW AND SEVERABILITY:
This Lease shall be construed in accordance with the laws of the State
of Florida. If any term, covenant, or condition of this Lease or the
application thereof to any person or circumstance shall to any extent be
invalid or unenforceable, the remainder of this Lease, or the application
of such term, covenant or condition to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be
affected thereby and each item, covenant or condition of this Lease shall
be valid and be enforced to the fullest extent permitted by law.
26.12 TIME:
Time is of the essence of this Lease and the performance of all
obligations hereunder.
26.13 LANDLORD'S RIGHT TO PERFORM TENANT'S DUTIES:
If Tenant fails to timely perform any of its duties under this Lease
or the Workletter Agreement, Landlord shall have the right (but not the
obligation), after the expiration of any grace period elsewhere under this
Lease or the Workletter Agreement expressly granted to Tenant for the
performance of such duty, to perform such duty on behalf and at the expense
of Tenant without further prior notice to Tenant, and all sums expended or
expenses incurred by Landlord in performing such duty shall be deemed to be
additional rent under this Lease and shall be due and payable upon demand
by Landlord.
26.14 LIMITATION ON RIGHT OF RECOVERY AGAINST LANDLORD:
Tenant acknowledges and agrees that the liability of Landlord
under this Lease shall be limited to its interest in the Yamato Office
Center ("Project") and any judgments rendered against Landlord shall be
satisfied solely out of the proceeds of sale of its interest in the Project.
No personal judgment shall lie against Landlord upon extinguishment of its
rights in the Project and any judgment so rendered shall not give rise to any
right of execution or levy against Landlord's assets. The provisions hereof
shall inure to the Landlord's successors and assigns including Mortgagee.
26.15 RADON GAS:
Notice to Prospective Tenant. Radon is a naturally occurring
radioactive gas that, when it has accumulated in a building in sufficient
quantities, may present health risks to persons who are exposed to it over
time. Levels of radon that exceed federal and state guidelines have been
found in buildings in Florida. Additional information regarding radon and
radon testing may be obtained from your county public health unit. Pursuant
to SS404.056(8), Florida Statutes.
IN WITNESS WHEREOF, this Lease has been executed by the parties hereto
as of the date first set forth above.
LANDLORD: TENANT: HYDRON TECHNOLOGIES,INC.
PFRS YAMATO CORP. /s/ Thomas G. Burns
BY: /s/ Barry S. Altshuler __________________________
BY: Barry S. Altshuler BY: /s/ Thomas G. Burns
Its Authorized Signatory Its Vice President - Finance
ATTEST: ATTEST:
BY: /s/ BY: /s/ Chaudhury M. Prasad
Its Asset Specialist Its Secretary
EXHIBIT 1
LEGAL DESCRIPTION
A parcel of property in the City of University Park, Palm Beach
County, Florida, lying North of the right-of-way of 51st Street (Yamato
Drive), more particularly described as follows:
The East 500 feet of the South 790 feet of the following parcels. The West
1/2 of the Southeast 1/4 and the West 1/2 of the West 1/2 of the East 1/2
of the Southeast 1/4, all in Section 1, Township 47 South, Range 42 East.
and
the West 500 feet of the East 1,497 feet of the North 80 feet of the
Northeast 1/4 of Section 12, Township 47 South, Range 42 East, subject to
drainage reservation containing 9.985 acres more of less.
Exhibit 2
THE YAMATO OFFICE CENTER
Fourth Floor Lease Plan
[FLOOR PLAN]
DIAGRAM OF FOURTH FLOOR SHOWING: DANIELS & ROBERTS EXPANSION 1,286 RSF
DANIEL'S & ROBERT'S SUITE 408
THE PRUDENTIAL GROUP SUITE 400
CRAMER JOHNSON WIGGINS SUITE 402
Exhibit 3
Work Agreement
Tenant Performance
WORK AGREEMENT
THIS AGREEMENT made as of the 8 day of May, 1995, between PFRS YAMATO CORP.
("Landlord") and HYDRON TECHNOLOGIES, INC. ("Tenant"). The parties hereby
acknowledge that they have heretofor entered, or are contemporaneously herewith
entering, a certain lease or tenant expansion agreement dated __________, 19__
(the "Lease") for premises (the "Premises") known as Suite(s) 403, located in
the property known as Yamato Office Center (the "Property").
1. The Work. Under the Lease, Tenant has agreed to accept the Premises "as
is," without any obligations for the performance of improvements or other work
by Landlord, and Tenant desires to perform certain improvements thereto (the
"Work"). Such Work shall be in accordance with the provisions of this Work
Agreement, and to the extent not expressly inconsistent herewith, in accordance
with the provisions of the Lease, including without limitation, Article 8
thereof. Performance of the Work shall not serve to abate or extend the time for
the commencement of Rent under the Lease, except to the extent Landlord delays
approvals beyond the times permitted below.
2. Cost of the Work. Except as provided hereinafter, Tenant shall pay all
costs (the "Costs of the Work") associated with the Work whatsoever, including
without limitation, all permits, inspection fees, fees of space planners,
architects, engineers, and contractors, utility connections, the cost of all
labor and materials, bonds, insurance, and any structural or mechanical work,
addition HVAC equipment or sprinkler heads, or modifications to any building
mechanical, electrical, plumbing or other systems and equipment or relocation of
any existing sprinkler heads, either within or outside the Premises required as
a result of the layout, design, or construction of the Work.
Of the Costs of the Work, Landlord shall reimburse Tenant the amount of
$__________ per square foot of rentable area of the Premises (the "Improvement
Allowance"). (If such blank space is not filled in, then there is no Improvement
Allowance.) The Improvement Allowance shall be funded by Landlord within thirty
(30) days after the Work has been completed in accordance with the "Space Plan"
and "Working Drawings" approved by Landlord in writing in accordance with the
provisions hereof, and Tenant has submitted all invoices, lien waivers,
affidavits of payment, and such other evidence as Landlord may reasonably
require that the cost of the Work has been paid for and that no mechanic's,
materialmen's or other such liens have been or may be filed against the Property
or the Premises arising out of the design or performance of the Work. In the
alternative, at Landlord's sole option, Landlord may elect to fund the
Improvement Allowance in installments, not more frequently than monthly, based
on applications for payment and releases of lien rights, submitted by Tenant on
Landlord's standard form for use by contractors requesting progress payments,
together with such lien releases and affidavits of payments by Tenant's general
contractor and subcontractors contemplated therein, and such other documentation
as Landlord may reasonably require. Landlord may issue checks to fund the
Improvement Allowance jointly to Tenant, its general contractor, and, at
Landlord's option, to any subcontractors or suppliers.
3. Space Plan and Specifications.
a. No later than ten (10) days after the date of this Work Agreement set
forth above, Tenant shall submit two (2) sets of a "Space Plan" (as described in
Section 16) to Landlord for approval.
b. Landlord shall, within ten (10) days after receipt thereof, either
approve said Space Plan, or disapprove the same advising Tenant of the reasons
for such disapproval. In the event Landlord disapproves said Space Plan, Tenant
shall modify the same, taking into account the reasons given by Landlord for
said disapproval, and shall submit two sets of the revised Space Plan to
Landlord within five (5) days after receipt of Landlord's initial disapproval.
4. Working Drawings and Engineering Report.
a. No later than ten (10) days after receipt of Landlord's approval of the
Space Plan, Tenant shall submit to Landlord for approval two (2) sets of
"Working Drawings" (as defined in Section 16), and a report (the "Engineering
Report") from Tenant's mechanical, structural and electrical engineers
indicating any special heating, cooling, ventilation, electrical, heavy load or
other special or unusual requirements of Tenant.
b. Landlord shall, within twenty (20) working days after thereof, either
approve the Working Drawings and Engineering Report, or disapprove the same
advising Tenant of the reasons for disapproval. If Landlord disapproves of the
Working Drawings or Engineering Report, Tenant shall modify and submit revised
Working Drawings, and a revised Engineering Report, taking into account the
reasons given by Landlord for disapproval, within five (5) days after receipt of
Landlord's initial disapproval.
5. Landlord's Approval. Landlord shall not unreasonably withhold or delay
approval of any Space Plan, Working Drawings, or Engineering Report submitted
hereunder if they provide for a customary office layout, with finishes and
materials generally conforming to building standard finishes and materials
currently being used by Landlord at the Property, are compatible with the
Property's shell and core construction, and if no modifications will be required
for the Property electrical, heating, air-conditioning, ventilation, plumbing,
fire protection, life safety, or other systems or equipment, and will not
require any structural modifications to the Property, whether required by heavy
loads or otherwise.
6. Space Planners, Architects, Engineers, and Contractors. The Space Plan,
Working Drawings, Engineering Report and the Work, shall be prepared and
performed by such space planners, architects, engineers and contractors as
Landlord customarily engages or recommends for use at the Property; provided,
Tenant may substitute another licensed, bonded, reputable and qualified space
planner, architect, engineer or contractor, who will work in harmony with each
other and those of Landlord so as to ensure proper maintenance of good labor
relationships, and in compliance with all applicable labor agreements existing
between trade unions and the relevant chapter of the Association of General
Contractors of America. Such substitutions may be made only with Landlord's
prior written approval. Such approval shall be granted or denied within fifteen
(15) days after Landlord receives from Tenant a written request for such
substitution, containing a reasonable designation of the proposed party's
background, references and qualifications. Any such substitution shall not serve
to delay the times for submission of the Space Plan, Working Drawings and
Engineering Report required herein, except to the extent that Landlord delays
granting or denying approval beyond the aforementioned fifteen (15) day period.
7. Change Orders. No changes, modifications, alterations or additions to
the approved Space Plan or Working Drawings may be made without the prior
written consent of the Landlord after written request therefor by Tenant. In the
event that the Premises are not constructed in accordance with said approved
Space Plan and Working Drawings, then Tenant shall not be permitted to occupy
the Premises until the Premises reasonably comply in all respects with said
approved Space Plan and Working Drawings; in such case, the Rent shall
nevertheless commence to accrue and be payable as otherwise provided in the
Lease.
8. Compliance. Tenant's work shall comply in all respects with the
following: (a) the Building Code of the City and State in which the Building
is located and State, County, City or other laws, codes, ordinances and
regulations, as each may apply according to the rulings of the controlling
public official, agent or other such person, (b) applicable standards of the
National Board of Fire Underwriters and National Electrical Code, and
(c) building material manufacturer's specifications.
9. Guarantees. Each contractor, subcontractor and supplier participating in
Tenant's Work shall guarantee that the portion thereof for which he is
responsible shall be free from any defects in workmanship and materials for a
period of not less than one (1) year from the date of completion thereof. Every
such contractor, subcontractor, and supplier shall be responsible for the
replacement or repair, without additional charge, of all work done or furnished
in accordance with its contract which shall become defective within one (1)
year after completion thereof. The correction of such work shall include,
without additional charge, all additional expenses and damages in connection
with such removal or replacement of all or any part of Tenant's Work, and/or the
Property and/or common areas, or work which may be damaged or disturbed thereby.
All such warranties or guarantees as to materials or workmanship of or with
respect to Tenant's Work shall be contained in the contract or subcontract which
shall be written such that said warranties or guarantees shall inure to the
benefit of both the Landlord and Tenant, as their respective interests may
appear, and can be directly enforced by either. Tenant covenants to give
Landlord any assignment or other assurances necessary to effect such right of
direct enforcement. Copies of all contracts and subcontracts shall be furnished
to Landlord promptly after the same are entered.
10. Performance.
a. Tenant's Work shall be commenced within fifteen (15) days after Landlord
approves the Working Drawings, and shall thereafter be diligently prosecuted to
completion, subject to delays for reasons beyond Tenant's control (except
financial matters). All Work shall conform with the Working Drawings approved
by Landlord in writing, and Landlord may periodically inspect the Work for
such compliance. Tenant's Work shall be coordinated under Landlord's direction
with the work being done or to be performed for or by other tenants in the
Property so that Tenant's Work will not interfere with or delay the completion
of any other construction work in the Property.
b. Tenant's Work shall be performed in a thoroughly safe, first-class and
workmanlike manner in conformity with the approved Space Plan and Working
Drawings, and shall be in good and usable condition at the date of completion.
c. Tenant shall be required to obtain and pay for all necessary permits
and/or fees with respect to Tenant's Work, and the same shall be shown to
Landlord prior to commencement of the Work.
d. Each contractor and subcontractor shall be required to obtain prior
written approval from Landlord for any space outside the Premises within the
Property, which such contractor or subcontractor desires to use for storage,
handling, and moving of his materials and equipment, as well as for the location
of any facilities for his personnel.
e. The contractors and subcontractors shall be required to remove from the
Premises and dispose of, at least once a week and more frequently as Landlord
may direct, all debris and rubbish caused by or resulting from the construction.
Upon completion of Tenant's Work, the contractors and subcontractors shall
remove all surplus materials, debris and rubbish of whatever kind remaining
within the Property which has been brought in or created by the contractors and
subcontractors in the performance of Tenant's Work. If any contractor or
subcontractor shall neglect, refuse or fail to remove any such debris, rubbish,
surplus material or temporary structures within two (2) days after notice to
Tenant from Landlord with respect thereto, Landlord may cause the same to be
removed by contract or otherwise as Landlord may determine expedient, and charge
the cost thereof to Tenant as additional Rent under the Lease.
f. Tenant shall obtain and furnish Landlord all approvals with respect to
electrical, water and telephone work as may be required by the respective
company supplying the service. Tenant shall obtain utility service, including
meter, from the utility company supplying service, unless Landlord elects to
supply such service and/or meters.
g. Landlord shall have the right to require Tenant to furnish bonds or
other security in form and amount reasonably satisfactory to Landlord for the
prompt and faithful performance and payment for Tenant's Work.
h. Landlord's acceptance of Tenant's Work as being complete in accordance
with the approved Space Plan and Working Drawings shall be subject to Landlord's
inspection and written approval. Tenant shall give Landlord 5 days prior written
notification of the anticipated completion date of Tenant's Work.
i. If contemplated or permitted under the statutes of the State in which
the Property is located, within ten (10) days after completion of construction
of Tenant's Work, Tenant shall execute and file a Notice of Completion with
respect thereto and furnish a copy thereof to Landlord upon recordation, failing
which, Landlord may itself execute and file the same on behalf of Tenant as
Tenant's agent for such purpose.
j. Tenant shall, at its cost and expense construct, purchase, install and
perform any and all items of Tenant's Work, stock its merchandise, and employ
its personnel so as to obtain any governmentally required certificate of
occupancy and to occupy the Premises as soon as possible, and in all cases on or
before the date required therefor hereunder or under the Lease.
k. If an expansion joint occurs within the Premises, Tenant shall install
finish floor covering to or covering such joint in a workmanlike manner, and
Landlord shall not accept responsibility for any finish floor covering applied
to or installed over the expansion joint.
l. Copies of "as built" drawings shall be provided to Landlord no later
than thirty (30) days after completion of the Work.
m. Landlord's approval of Tenant's plans and specifications, and Landlord's
recommendations or approvals concerning contractors, subcontractors, space
planners, engineers or architects, shall not be deemed a warranty as to the
quality or adequacy of the Work, or the design thereof, or of its compliance
with Laws, codes and other legal requirements.
n. Tenant shall conduct its labor relations and relations with employees so
as to avoid strikes, picketing, and boycotts of, on or about the Premises or
Property. If any employees strike, or if picket lines or boycotts or other
visible activities objectionable to Landlord are established, conducted or
carried out against Tenant, its employees, agents, contractors, subcontractors
or suppliers, in or about the Premises or Property, Tenant shall immediately
close the Premises and remove or cause to be removed all such employees, agents,
contractors, subcontractors and suppliers until the dispute has been settled.
o. Landlord shall not be responsible for any disturbance or deficiency
created in the air conditioning or other mechanical, electrical or structural
facilities within the Property or Premises as a result of the Work. If such
disturbances or deficiencies result, Tenant shall correct the same and restore
the services to Landlord's reasonable satisfaction, within a reasonable time.
p. If performance of the Work shall require that additional services or
facilities (including without limitation, extra or after-hours elevator usage or
cleaning services) be provided, Tenant shall pay Landlord's reasonable charges
therefor.
q. Tenant's contractors shall comply with the rules of the Property and
Landlord's requirements respecting the hours of availability of elevators and
manner of handling materials, equipment and debris. Demolition must be performed
after 6:00 p.m. on weekends. Delivery of materials, equipment and removal of
debris must be arranged to avoid any inconvenience or annoyance to other
occupants. The Work and all cleaning in the Premises must be controlled to
prevent dirt, dust or other matter from infiltrating into adjacent tenant or
mechanical areas.
r. Landlord may impose reasonable additional requirements from time to time
in order to ensure that the Work, and the construction thereof does not disturb
or interfere with any other tenants of the Property, or their visitors,
contractors or agents, nor interfere with the efficient, safe and secure
operation of the Property.
11. Insurance. All contractors and sub-contractors shall carry Worker's
Compensation Insurance covering all of their respective employees in the
statutory amounts. Employer's Liability Insurance in the amount of at least
$500,000 per occurrence, and comprehensive general liability insurance of at
least $3,000,000 combined single limit for bodily injury, death, or property
damage; and the policies therefor shall cover Landlord and Tenant, as additional
insureds, as well as the contractor or subcontractor. Tenant shall carry
builder's risk insurance coverage respecting the construction and improvements
to be made by Tenant, in the amount of the anticipated cost of construction of
the Work (or any guaranteed maximum price). All insurance carriers hereunder
shall be rated at least A and X in Best's Insurance Guide. Certificates for all
such insurance shall be delivered to Landlord before the construction is
commenced or contractor's equipment is moved onto the Property. All policies of
insurance must require that the carrier give Landlord twenty (20) days' advance
written notice of any cancellation or reduction in the amounts of insurance. In
the event that during the course of Tenant's Work any damage shall occur to the
construction and improvements being made by Tenant, then Tenant shall repair the
same at Tenant's cost.
12. Signage. Notwithstanding anything contained herein to the contrary,
Landlord shall cause signage of building standard material and design to be
placed on or near the door of the Premises and Tenant shall pay the cost thereof
to Landlord upon demand. The amount due from Tenant therefor shall be deemed
"Rent" under the Lease. Tenant shall promptly advise Landlord what name or names
Tenant wishes for said signage. The content of all signage shall be subject to
Landlords' prior written approval. No other signage may be installed or placed
outside the Premises by Tenant.
13. Asbestos. If the Property was constructed at a time when asbestos was
commonly used in construction, Tenant acknowledges that asbestos-containing
materials ("ACM") may be present at the Property, and that airborne asbestos
fibers may involve a potential health hazard unless proper procedures are
followed. In such case, before commencing the Work, Tenant and its contractor
shall consult with Landlord and Landlord's asbestos consultant concerning
appropriate procedures to be followed. Landlord shall, at Tenant's expense,
undertake any necessary initial asbestos-related work, before Tenant commences
the Work. During performance of the Work, Tenant shall require that its
contractor comply with all laws, rules, regulations and other governmental
requirements, as well as all directives of Landlord's asbestos consultant,
respecting ACM. Tenant hereby irrevocably appoints Landlord and Landlord's
asbestos consultant as Tenant's attorney-in-fact for purposes of supervising and
directing any asbestos-related aspects of the Work (but such appointment shall
not relieve Tenant from its obligations hereunder, nor impose any affirmative
requirement on Landlord to provide such supervision or direction).
14. Liens. Tenant shall keep the Property and Premises free from any
mechanic's, materialman's or similar liens or other such encumbrances in
connection with the Work, and shall indemnify and hold Landlord harmless from
and against any claims, liabilities, judgments, or costs (including attorney's
fees) arising in connection therewith. Tenant shall give Landlord notice at
least twenty (20) days prior to the commencement of the Work (or such additional
time as may be necessary under applicable laws), to afford Landlord the
opportunity of posting and recording appropriate notices of non-responsibility.
Tenant shall remove any such lien or encumbrance by bond or otherwise within
thirty (30) days after written notice by Landlord, and if Tenant shall fail to
do so, Landlord may pay the amount necessary to remove such lien or encumbrance,
without being responsible for investigating the validity thereof. The amount
paid shall be deemed additional rent under the Lease payable upon demand,
without limitation as to other remedies available to Landlord under the Lease.
Nothing contained herein shall authorize Tenant to do any act which shall
subject Landlord's title to the Property or Premises to any liens or
encumbrances whether claimed by operation of law or express or implied contract.
Any claim to a lien or encumbrance upon the Property or Premises arising in
connection with the Work shall be null and void, or at Landlord's option shall
attach only against Tenant's interest in the Premises and shall in all respects
be subordinate to Landlord's title to the Property and Premises.
15. Indemnity. Tenant shall indemnify, defend and hold harmless Landlord
(and Landlord's principals, partners, agents, trustees, beneficiaries, officers,
employees and affiliates) from and against any claims, demands, losses, damages,
injuries, liabilities, expenses, judgments, liens, encumbrances, orders, and
awards, together with attorneys' fees and litigation expenses arising out of or
in connection with the Work, or Tenant's failure to comply with the provisions
hereof, or any failure by Tenant's contractors, subcontractors or their
employees to comply with the provisions hereof, except to the extent caused by
Landlord's intentional or negligent acts.
16. Certain Definitions.
A. "Space Plan" herein means a floor plan, drawn to scale, showing: (1)
demising walls, corridor doors, interior partition walls and interior doors,
including any special walls, glass partitions or special corridor doors, (2) any
restrooms, kitchens, computer rooms, file rooms and other special purpose rooms,
and any sinks or other plumbing facilities, or other special facilities or
equipment, (3) any communications system, indicating telephone and computer
outlet locations, and (4) any other details or features required to reasonably
delineate the Work to be performed.
B. "Working Drawings" herein means fully dimensioned architectural
construction drawings and specifications, and any required engineering drawings
(including mechanical, electrical, plumbing, air-conditioning, ventilation and
heating), and shall include any applicable items described above for the Space
Plan, and if applicable: (1) electrical outlet locations, circuits and
anticipated usage therefor, (2) reflected ceiling plan, including lighting,
switching, and any special ceiling specifications, (3) duct locations for
heating, ventilating and air-conditioning equipment, (4) details of all
millwork, (5) dimensions of all equipment and cabinets to be built in, (6)
furniture plan showing details of space occupancy, (7) keying schedule, (8)
lighting arrangement, (9) location of print machines, equipment in lunch rooms,
concentrated file and library loadings and any other equipment or systems (with
brand names wherever possible) which require special consideration relative to
air-conditioning, ventilation, electrical, plumbing, structural, fire
protection, life-fire-safety system, or mechanical systems, (10) special
heating, ventilating and air conditioning equipment and requirements, (11)
weight and location of heavy equipment, and anticipated loads for special usage
rooms, (12) demolition plan, (13) partition construction plan, (14) type and
color of floor and wall-coverings, wall paint and any other finishes, and any
other details or features required to completely delineate the Work to be
performed.
17. Taxes. Tenant shall pay prior to delinquency all taxes, charges or
other governmental impositions (including without limitation, any real estate
taxes or assessments, sales tax or value added tax) assessed against or levied
upon Tenant's fixtures, furnishings, equipment and personal property located in
the Premises and the Work to the Premises under this Agreement. Whenever
possible, Tenant shall cause all such items to be assessed and billed separately
from the property of Landlord. In the event any such items shall be assessed and
billed with the property of Landlord, Tenant shall pay its share of such taxes,
charges or other governmental impositions to Landlord within thirty (30) days
after Landlord delivers a statement and a copy of the assessment or other
documentation showing the amount of such impositions applicable to Tenant.
18. INCORPORATED INTO LEASE; DEFAULT. THE PARTIES AGREE THAT THE PROVISIONS
OF THIS WORK AGREEMENT ARE HEREBY INCORPORATED BY THIS REFERENCE INTO THE LEASE
FULLY AS THOUGH SET FORTH THEREIN. In the event of any express inconsistencies
between the Lease and this Work Agreement, the latter shall govern and control.
If Tenant shall default under this Work Agreement, Landlord may order that all
Work being performed in the Premises be stopped immediately, and that no further
deliveries to the Premises be made, until such default is cured, without
limitation as to Landlord's other remedies. Any amounts payable by Tenant to
Landlord hereunder shall be paid as additional rent under the Lease. Any default
by the other party hereunder shall constitute a default under the Lease and
shall be subject to the remedies and other provisions applicable thereto under
the Lease. If Tenant shall default under the Lease or this Work Agreement and
fail to cure the same within the time permitted for cure under the Lease, at
Landlord's option, all amounts paid or incurred by Landlord towards the
Improvement Allowance shall become immediately due and payable as additional
Rent under the Lease.
LANDLORD: PFRS YAMATO CORP.
By: /s/
______________________________
Authorized Signatory
TENANT: HYDRON TECHNOLOGIES, INC.
By: /s/
______________________________
Vice President-Finance
EXHIBIT 4
RULES AND REGULATIONS FOR THE PROJECT
Article 1
GENERAL PROVISIONS
Section 1.01 Applicability. These rules and regulations apply to you just
as if they were included in the main body of the Lease. Other tenants in
the Project will be obligated to comply with the same or similar rules and
regulations.
Section 1.02 Additional Rules & Amendments. We reserve the right to make
such other reasonable rules and regulations which we determine, from
time to time, are necessary or appropriate for the safety, care,
protection, cleanliness or good order of the Project, so long as such rules
and regulations do not discriminate against you, or materially interfere
with your ability to conduct your business at the Premises. Any
additional rules and regulations will be binding on you with the same
force and effect as if they had been included in these Rules and
Regulations and had been in existence at the time you signed this Lease or
otherwise acquired your interest in the Premises. We also reserve the
right at any time to modify or revoke any existing rule or regulation.
Section 1.03 Conflict with Lease Provisions. To the extent any of these
provisions specifically contradict any other provision of this Lease,
including any addendum, amendment, rider or other exhibit to this Lease,
such other provision shall control.
ARTICLE 2
OPERATING OF PREMISES
Section 2.01 Signs and Advertising. No signs or advertising matter of any
kind may be placed on or within five (5) feet of the interior surface of
any glass front doors or exterior window of the Premises. No signs or
advertising matter of any nature may be placed on the surface of any
exterior door. No pennants, banners or other advertising may be suspended
from the ceiling or interior walls of any Premises. You may not display
any "For Sale", "For Rent" or similar sign in the Premises if it is visible
outside the Premises.
Section 2.02 Deliveries. Unless otherwise stated in the Lease, you agree to
use your best efforts to cause all delivery vehicles servicing the Premises
to load and unload in the rear of the Premises all supplies, goods,
packages, furniture, equipment and all other items being delivered to you.
Delivery during other business hours will not be absolutely prohibited,
provided such deliveries do not in our reasonable opinion constitute a
nuisance to the operation of the Project.
Section 2.03 Theft or Loss. You are fully responsible for the protection of
your Premises and its contents from robbery, theft, vandalism, pilferage or
other loss.
ARTICLE 3
REQUIREMENTS. RESTRICTION AND PROHIBITIONS
Section 3.01 Limitations on Use. You agree not to:
(a) make or permit any unlawful, improper or offensive use of the
Premises or the Project, or permit any nuisance on it, including any
objectionable odors, sounds, vibrations or other use which interferes
with the use or enjoyment by other tenants of their premises or the
Common Areas of the Project;
(b) permit waste paper or garbage to accumulate on the Premises or the
Common Areas;
(c) permit any fire or health hazard to exist on or near the Premises;
(d) place any merchandise, advertising or display, on the exterior of
the Premises, in the vestibule or entrance to the Premises, or on the
Common Areas of the Project;
(e) install electrical or other equipment which we determine might
cause impairment or interference with the provision of service to the
Project;
(f) permit delivery of merchandise to any locations other than those
we have designated;
(g) use any loudspeaker, voice-making or other sound production,
transmissions or projections device that can be heard by anyone
outside the Premises;
(h) use any search lights that are visible to anyone outside of the
Premises;
(i) injure, overload the floor, deface, or otherwise harm the Premises
or any equipment installed on it;
(j) use or operate any machinery, equipment or other device which is
harmful to the Premises;
(k) make any use of the Premises which might void any fire or extended
coverage insurance covering the Premises;
(l) burn any trash of any kind in or about the Premises;
(m) conduct any television or radio broadcast; or
(n) permit live entertainment within or outside the Premises in such a
manner that it may be heard or experienced outside the Premises;
(o) change or add locks without our consent;
(p) place or keep any bicycles or vehicles in the Premises;
(q) permit the Premises to be used for lodging or any immoral purpose.
Section 3.02 Television & Radio Equipment. You agree not to install any
antenna or aerial wire, or radio or television equipment inside or outside
the Premises (other than typical consumer radio or television models)
without our prior written approval, which, if granted, may specify the
terms and conditions of any such installations, except as provided in
the Lease.
Section 3.03 Vending Machines. You agree not to operate for use by the
general public any coin or token operating vending machine or similar
device for the sale of any goods, wares, merchandise, food, beverages or
services, including but not limited to pay telephones, pay lockers, pay
toilets, scales, amusement devised, machines for the sale of beverages,
goods, candy, newspapers, cigarettes or other commodities, without our
advance written consent. However, you may install vending machines or
similar devised for use only by you and your employees and guests, provided
such installation is in a non-public area of your Premises.
Section 3.04 Hazardous Substances or Conditions. You agree not to keep in
the Premises any inflammable, combustible or explosive substance nor any
substance which would create or tend to create a dangerous or combustible
condition. You agree not to cause or allow the presence, storage, use,
maintenance or removal of asbestos, PCB transformers, other toxic,
hazardous or contaminated substances or underground storage tanks
(collectively, "Hazardous Waste") in, on or about the Premises without our
prior written consent. If your business requires use or possession of
Hazardous Waste, you must advise us and obtain our consent before bringing
any Hazardous Waste on to or creating such condition within the Premises.
If you use or maintain Hazardous Waste on the Premises, you agree to
handle, store, transport and dispose of all Hazardous Waste at your sole
cost and expense in accordance with all then-existing local, state and
federal rules and laws. Provided it is lawful to do so, you agree to enter
into a contract(s) with a company certified to handle the Hazardous Waste
for the transport and disposal of all Hazardous Waste from the Premises. A
copy of all such contracts and all renewals must be provided to us.
We may, at our sole option, now or in the future, obtain a report from an
environmental consultant of our choice as to whether you have been or are
using any part of the Premises or the Shopping Center for the improper use,
handling, storage, transportation or disposal of Hazardous Waste. If any
such report indicates such improper use, handling, storage, transportation
or disposal of Hazardous Waste, you agree to immediately reimburse us for
the cost of obtaining the environmental report, and in addition, we may
require that all violations of the law with respect to the Hazardous
Waste be corrected and/or that you obtain all necessary environmental
permits and approval. If you do not correct all violation(s) of law and do
not obtain all necessary permits within a reasonable time after demand from
us, then we may declare the Lease in default and/or may cause the Premises
and any surrounding areas to be freed from the Hazardous Waste at your
sole cost and expense, which you agree to reimburse us for on
demand as additional rent.
You hereby agree to indemnify, defend, save and keep us and our employees,
partners, successors and assigns, harmless from any and all liabilities,
obligations, charges, losses, damages, penalties, claims, actions and
expenses, including without limitation, engineers' and professional
fees, soil tests and chemical analysis, court costs and legal fees and
expenses through all trial, appellate and administrative levels, imposed
on, incurred by or asserted against us, in any way relating to, arising out
of, or in connection with the use, handling, storage, transportation or
disposal of the Hazardous Waste. The foregoing indemnification shall
survive any assignment or termination of the Lease.
Section 3.05 Animals. You agree not to keep or permit birds or animals
within the Premises, (except if your permitted use is a pet store,
veterinary clinic or similar business).
Section 3.06 Rear Hallways. If the Premises are serviced by a rear hallway,
that hallway must be used only for entering and exiting the Premises, for
bringing in supplies and for the removal of trash, and will at no time be
used for the storage of supplies or trash.
Section 3.07 Insurance Rates. You agree not to allow any activity in the
Premises which will increase the rate of insurance for the Premises or the
Project.
Section 3.08 Maintenance of Premises. You agree to:
(a) maintain any lettering or logo or other thing you have installed
on the exterior of the Premises in good condition and repair at all
times; and
(b) Landlord will maintain the entry doors in good repair and in a
neat and clean condition.
ARTICLE 4
USE OF COMMON AREAS & OPERATION OF THE PROJECT
Section 4.01 Restrictions on Use of Common Areas. Neither you, your agents
or employees may use the parking areas or any other Common Areas for any
advertising, political campaigning or other similar use, including, without
limitation, the distribution of advertising or campaign leaflets or flyers.
You agree not to obstruct, litter, mar, damage or permanently or
temporarily store materials in or on any part of the hallways,
corridors, exterior doors or walls, landscaped areas, or any other portion
of the Common Areas, and you agree to be responsible for any such damage
caused by you or your employees, agents or contractors.
Section 4.02 Security. We may take all measures we may deem reasonably
necessary or appropriate for the security of the Project, the tenants
and their invitees, licensees, or employees including, but not limited to,
searching for cause or suspected cause of any person entering, leaving, or
within the Project, the evacuation of the Project or any part thereof for
drill purposes or otherwise, the temporary denial to tenants and their
invitees, employees, or licensees for access to the Project or any portion
thereof, and the closing of the Project on non-business days, legal
holidays and after business hours.
Section 4.03 Parking. You agree that we have the right to designate
certain parking spaces or areas for use by certain tenants or their
customers. If we do so, you agree that neither you or your employees will
park in areas not designated for your respective use. You agree that you
and your officers and employees will park your automobiles only in those
areas we may designate from time to time for employee parking. Within
five (5) days after our written request, you agree to furnish us the
automobile license numbers assigned to your cars and the cars of all of
your employees. If after receipt of written warning, you or your
employees do not park your vehicles in designated parking areas, we may,
at our option, charge you $20.00 per day or partial day per car parked in
any area other than the one(s) designated. You agree not to park, or
permit your employees, suppliers or visitors to park any vehicle in a way
that will interfere with the use of the parking areas, driveways or
loading areas. You agree that we have the right, if we deem it
appropriate, to tow away vehicles in order to enforce these restrictions.
Notwithstanding anything contained herein to the contrary, Landlord agrees
to provide Tenant, at no extra charge, five (5) reserved covered parking
spaces in a location designated by Landlord during the initial term of this
Lease. See Exhibit 5.
Exhibit 5
YAMATO OFFICE CENTER
CANOPY PARKING
[PLAN OF PARKING LOT]
RIDER 1
Tenant is hereby granted an option to extend the Term for two (2)
additional periods of five (5) consecutive Lease Years each ("Extension
Period"), on the same terms and conditions in effect under the Lease
immediately prior to the Extension Period, except that Tenant shall have no
further right to extend, and monthly Base Rent shall be increased to the
Prevailing Renewal Rate, and Tenant shall have no further option to extend.
The option to extend may be exercised only by giving Landlord written
notice thereof no earlier than one year and no later than six months prior
to the commencement of the Extension Period. Said exercise shall, at
Landlord's election, be null and void if Tenant is in default under the
Lease at the date of said notice or at any time thereafter and prior to
commencement of the Extension Period and said default is not cured. The
term "Lease Year" herein means each twelve month annual period, commencing
with the first day of the Extension Period, without regard to calendar
years.
If Tenant shall fail to exercise the option herein provided, said option
shall terminate, and shall be null and void and of no further force and
effect. Tenant's exercise of said option shall not operate to cure any
default by Tenant of any of the terms or provisions in the Lease, nor to
extinguish or impair any rights or remedies of Landlord arising by virtue
of such default. If the Lease or Tenant's right to possession of the
Premises shall terminate in any manner whatsoever before Tenant shall
exercise the option herein provided, or if Tenant shall have subleased or
assigned all or any portion of the Premises, then immediately upon such
termination, sublease or assignment, the option herein granted to extend
the Term, shall simultaneously terminate and become null and void. Such
option is personal to Tenant. Under no circumstances whatsoever shall the
assignee under a complete or partial assignment of the Lease, or a
subtenant under a sublease of the Premises, have any right to exercise the
option to extend granted herein. Time is of the essence of this provision.
WITNESSES: LANDLORD:
PFRS YAMATO CORP.
/s/
BY: /s/
Authorized Signatory
/s/
TENANT:
HYDRON TECHNOLOGIES, INC.
/s/
BY: /s/
Vice President-Finance
/s/
RIDER 2
Satellite Antenna. Landlord and Tenant acknowledge and agree that in the event
Tenant desires to install and operate, at its own expense, a satellite antenna
receiving dish (the "Satellite Antenna") on the roof of the Building, Landlord
shall not unreasonably withhold or delay its consent to such installation and
operation, provided, however, that Tenant provide a sketch of the proposed
Satellite Antenna and a list of its specifications, including, without
limitation, its dimensions and weight. Landlord may withhold its consent in the
event that it determines, in its reasonable discretion, that the Satellite
Antenna would be aesthetically unpleasing, or would damage the Building or any
of the Building systems. The Satellite Antenna shall be placed in a location
mutually acceptable to Landlord and Tenant and shall be installed and
maintained in a manner approved by Landlord at Tenant's sole expense. Tenant
shall also be entitled to install and maintain the wiring between the Premises
and the Satellite Antenna, in such locations as shall be approved by Landlord.
Tenant shall pay all taxes, permits, fees, insurance premiums and repairs to the
roof or any other part of the Building resulting from the installation and
operation of the Satellite Antenna. Tenant also agrees to assure that the
installation of the Satellite Antenna does not violate and governmental, state
or local codes, rules and regulations. Landlord reserves the right to, at its
own cost and expense, relocate the Satellite Antenna at any time, provided
Landlord shall have given notice to Tenant of Landlord's intention to so
relocate the Satellite Antenna, and further provided the new location allows
Tenant to continue operation of the Satellite Antenna for the purposes it was
installed. At the expiration or sooner temination of this Lease, the Tenant
will, at its own expense, remove the Satellite Antenna and leave the portion of
the Building where the Satellite Antenna and the wiring were located in good
order and repair, reasonable wear and tear excepted.
WITNESSES: LANDLORD:
PFRS YAMATO CORP.
/s/ BY: /s/
Authorized Signatory
/s/
TENANT:
HYDRON TECHNOLIGIES, INC.
/s/ BY: /s/
Vice President-Finance
/s/
FIRST ADDENDUM TO LEASE BETWEEN
PFRS YAMATO CORP AND HYDRON TECHNOLOGIES, INC.
1. Notwithstanding the provisions set forth in Section 1.01 of the Lease,
Landlord shall provide Tenant with a Tenant Improvement Allowance in the
amount of $118,289.00 (5,143 usable square feet x $23.00 per usable square
foot), which shall be applied as a credit against monthly base rent as
follows:
a. Tenant shall receive free base rent for the first twenty-nine (29)
months after the commencement date of the Lease term. On thirtieth
month (30th), Tenant shall pay the monthly base rent of $3,687.40,
which equals a $378.48 reduction in the monthly base rent.
b. Tenant shall remain obligated to pay the monthly rent adjustment
deposits as they become due in accordance with the terms of the Lease.
c. Beginning the first day of the 31st month after the commencement date
of the Lease term, and each month thereafter, Tenant shall pay base
rent in addition to the monthly rent adjustment deposit.
2. Tenant shall construct improvements to the Premises in accordance with
the provisions of the Work Agreement, attached to the Lease as Exhibit 3.
Tenant shall pay a sum not less than $118,289.00 for out of pocket costs
for the improvement to the Premises. Tenant shall provide Landlord with
evidence of payment of the costs of the improvements within 10 days from
the receipt of a certificate of occupancy.
3. The parties agree that the amount of Tenant's Improvement Allowance as
set forth in paragraph 1 above, may be subject to change upon verification
from Landlord's architect of the number of useable square feet contained in
the Premises. Landlord's architect shall provide Tenant with his
calculations within 10 days from receipt of the certificate of occupancy.
The amount of Tenant's Improvement Allowance shall total $23.00 multiplied
by each useable square foot contained in the Premises. Landlord's
architects calculation of the useable square feet contained in the Premises
shall be deemed conclusive for the purposes of calculating the Tenant
Improvement Allowance. Tenant's free rent period as provided in paragraph 1
(a) above and Tenant's obligation for out of pocket costs as set forth in
paragraph 2 above, will be adjusted accordingly.
LANDLORD: TENANT:
PFRS Yamato Corp. Hydron Technologies, Inc.
By: /s/ By: /s/
By: /s/ By: /s/
Its: Authorized Signatory Its: Vice President-Finance
ATTEST: ATTEST:
By: /s/ By: /s/
Its: Asset Specialist Its: Secretary
EXHIBIT "ML"
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE, dated this _______ day
of _______________, 19__, by and between P.F.R.S. YAMATO CORPORATION,
whose address is 250 Australian Avenue South, Suite 400, West Palm
Beach, Florida 33401 (Landlord) and Hydron Technologies, Inc. whose
address is 941 Clint Moore Rd., Boca Raton, FL, (Tenant).
WITNESSETH
Landlord hereby demises and leases unto Tenant and Tenant hereby
hires and takes from Landlord, upon and subject to the covenants and
agreements set forth in that certain Lease dated May 8, 1995, (the
"Lease"), made between Landlord and Tenant, certain premises (Demised
Premises) comprising part of the commercial real property known as
Yamato Office Center, located upon the tract of land described in
Exhibit 1 attached hereto and made a part hereof, and consisting of the
parcel of land, together with the building(s) erected thereon.
Landlord and Tenant desire to record this Memorandum of Lease for
the purpose of placing the public on notice of inquiry as to the
specific provisions, terms, covenants and conditions of the Lease, all
of which are incorporated herein by reference with the same force and
effect as if herein set forth and effect as if herein set forth in full.
Specifically, the Lease contains, among others, the following covenants
and agreements between the parties:
Neither Tenant nor anyone claiming by, through or under Tenant,
including, without limitation, contractors, subcontractors, materialmen,
mechanics and laborers, shall have any right to file or place
mechanic's, materialmen's or other liens of any kind whatsoever upon the
demised premises or upon the tract of land described on Exhibit 1, or
any portion thereof; on the contrary, any such liens are specifically
prohibited and shall be null and void and of no further force or effect.
Notice is hereby given pursuant to Section 713.10, Florida Statutes,
that the Lease contains the following provision:
The interest of the Landlord in and to the Yamato Office Center and the
demised premises shall not be subject to liens for improvements made by
Tenant or any agents, employees or contractors.
This Memorandum of Lease is being recorded in lieu of recording the
Lease itself for the purpose of placing the public on notice of inquiry
as to the specific provisions, terms, covenants and conditions thereof,
and nothing herein contained is intended to or does change, modify or
affect any of the terms or provisions of the Lease or the rights,
duties, obligations, easements and covenants running with the land
created hereby, all of which remain in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed and
sealed this Memorandum of Lease as of the day and year first above
written.
LANDLORD:
P.F.R.S. YAMATO CORPORATION
By: MIG REALTY ADVISORS, INC.
Agent for: P.F.R.S. YAMATO
CORPORATION
By: ______________________________
Its: Authorized Signatory
SIGNATURE BLOCK CONTINUED ON NEXT PAGE
TENANT: HYDRON TECHNOLOGIES, INC.
By: /s/
Its: Vice President-Finance
As to Tenant:
STATE OF FLORIDA
COUNTY OF PALM BEACH
The foregoing instrument was acknowledged before me this 28th day
of April, 1995, by Thomas G. Burns on behalf of the Company. The
above-named individual (x) is personally known to me, or ( ) has
produced the following identification ____________________________
which bears a serial or other identifying number and did (did not) take
an oath.
/s/
NOTARY PUBLIC, State of Florida
My Commission Expires: May 29, 1993
Commission Number: 00 378094
---------------
If applicable
/s/ Sylvia Cohen
Print or Type Name of Notary
As to Landlord:
STATE OF FLORIDA
COUNTY OF _____________________
The foregoing instrument was acknowledged before me this _____ day
of ______________________, 19__, by _______________________ on behalf of
the ___________________________________. The above-named individual ( )
is personally known to me, or ( ) has produced the following
identification __________________________ which bears a serial or other
identifying number and did (did not) take an oath.
__________________________________
NOTARY PUBLIC, State of Florida
My Commission Expires:
Commission Number:________________
If applicable
_____________________________
Print or Type Name of Notary
Arvida Realty Sales, Ltd.
COMMERCIAL DIVISION
7900 GLADES ROAD
P.O. BOX 100
BOCA RATON, FLORIDA 33429
TELEPHONE: (407) 479-1225
LICENSED REAL ESTATE BROKERS
REAL ESTATE AGENCY DISCLOSURE
SELLER/LESSOR: PFRS YAMATO CORP.
BUYER(S)/LESSEE: HYDRON TECHNOLOGIES, INC.
PROPERTY: YAMATO OFFICE CENTER, 1001 Yamato Road, Boca Raton, FL
SALESPERSON: Ingrid A. Fulmer and Andrea H. Raskin
ARVIDA REALTY SALES, LTD. and the Salesperson (together "ARSL") hereby
disclose to the Buyer/Lessee that ARSL is acting as the real estate broker,
broker-salesperson with respect to the purchase or lease (as applicable) of
the Property solely on behalf of Seller/Lessor as an (check one) x agent ___
employee ___ independent contractor. Accordingly, ARSL undertakes no duty of
disclosure, representation or otherwise to Buyer/Lessee in this
transaction.
This Disclosure is given in accordance with Rule 21V-10, 033, Florida
Administrative Code.
The undersigned acknowledges receipt of this Disclosure prior to the
undersigned's execution of the contract or lease (as applicable) for
the subject transaction.
- ---------------------------------------------
Buyer/Lessee
/s/ Vice President-Finance
Buyer/lessee
Date:
--------------------------------------
Exhibit 10.39
FIRST AMENDMENT TO LEASE
This First Amendment to Lease is made this 15th day of September, 1995 by
and between P.F.R.S. YAMATO ("Landlord") and HYDRON TECHNOLOGIES, INC.
("Tenant").
W I T N E S S E T H:
WHEREAS, on or about May 8, 1995 Landlord and Tenant entered
into a Lease and First Addendum to Lease for space at the Yamato
Office Center ("Lease"): and
WHEREAS, pursuant to the Lease, Tenant leased approximately
5,914 square feet consisting of suite 403, Yamato Office Center,
1001 Yamato Road, Boca Raton, FL ("Demised Premises"); and
WHEREAS, Tenant desires to expand the Demised Premises to
lease an additional 350 rentable square feet and modify the Tenant
Improvement Allowance and applicable rent credits as set forth
herein.
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Newly Demised Premises. Landlord hereby leases to Tenant
and Tenant hereby leases from Landlord the area outlined on Exhibit
"A" attached hereto, consisting of approximately 6,276 rentable
square feet of space located at suite 403, Yamato Office Center,
1001 Yamato Road, Boca Raton, Florida, hereinafter referred to as
the "Newly Demised Premises."
2. Tenant Improvement Allowance. Landlord shall provide
Tenant with a Tenant Improvement Allowance in an amount not to
exceed $125,511.00 (5,457 usable square feet x $23.00 per usable
square foot), which shall be applied as a credit against monthly
base rent as follows:
a. Tenant may improve the newly demised premises in
phases. Tenant's credit against monthly base rent
shall be determined in accordance with the amount
of tenant improvements completed. For example, if
Tenant improves only 3,000 square feet as phase one
of its construction, upon obtaining a certificate
of occupancy for the improved space, Tenant shall
receive a credit against monthly base rent for
$69,000.00. Additional credits against monthly base
rent shall be determined in the same manner upon
obtaining a certificate of occupancy for each
additional phase of construction.
b. Tenant shall remain obligated to pay the monthly
rent adjustment deposits as they become due in
accordance with the terms of the Lease.
c. At any time during the term of this Lease when
Tenant exhausts its monthly base rent credits,
Tenant shall commence paying monthly base rent in
addition to the monthly rent adjustment deposits.
4. Improvements. Tenant shall construct improvements to the Newly
Demised Premises, in accordance with the terms of the Lease.
5. All terms and conditions of the Lease as originally executed and to
the extent not modified herein shall remain in full force and effect.
6. The terms of the Lease and this First Amendment to Lease shall
constitute the entire understanding of the parties and may not be amended,
supplemented, modified, waived or changed orally, but only in writing signed
by the party as to whom enforcement of any such amendment, supplement,
modification or waiver is souqht and making specific reference to the Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed or cause
to be executed this First Amendment to Lease as of the date first
written above.
WITNESSES: LANDLORD
P.F.R.S YAMATO CORP.
/s/ By: /s/ Barry S. Altshuler
__________________ Name: Barry S. Altshuler
Title: Authorized Signatory
/s/
__________________
TENANT:
HYDRON TECHNOLOGIES, INC.
/s/ By: /s/ Thomas G. Burns
__________________ Name: Thomas G. Burns
Title: Vice President, Finance
/s/
__________________
Exhibit 10.40
AGREEMENT
THIS AGREEGMENT, dated as of 2/9/1996, by and between CHEMAID
LABORATORIES, INC. ("Chemaid"), a New Jersey corporation, having an
office located at 100 Mayhill Street, Saddle Brook, New Jersey, and
HYDRON TECHNOLOGIES, INC. ("HyTech"), a New York corporation, having an
office located at 1001 Yamato Road, Suite 403, Boca Raton, Florida
33431. Chemaid and HyTech shall hereinafter, at times, be referred to
together as the "Parties" or individually as a "Party" and this
agreement shall hereinafter be referred to as the "Agreement".
W I T N E S S E T H:
WHEREAS, on or about September 13, 1995, Chemaid entered into a
certain lease agreement, a copy of which is attached hereto and made a
part hereof (the "Lease"), between Chemaid as tenant, and MAYHILL STREET
REALTY CO., L.L.C., a New York limited liability company, as landlord
(the "Landlord"), for premises commonly known as the 5 East Building
located at 95 Mayhill Street, Saddle Brook, New Jersey, and as more
fully described in the Lease (the "Premises"); and
WHEREAS, HyTech has been using and occupying and desires to continue
to use and occupy a portion of the Premises as allocated by the Parties
pursuant to the terms and conditions set forth in this Agreement; and
WHEREAS, HyTech acknowledges that it has no right to use or occupy the
License Premises (as hereinafter defined) except as may be permitted
pursuant to the terms and conditions of this Agreement and has requested
that Chemaid grant it permission to use and occupy same for the five (5)
year period of the Lease ("License Period"); and
WHEREAS, Chemaid is willing to allow HyTech to use and occupy the
License Premises for the License Period on the terms, convenants and
conditions hereinafter set forth; and
WHEREAS, on or about the date hereof, the Parties are entering into a
Depository Agreement whereby HyTech and Chemaid shall establish a
Depository Account which shall hold the funds which are currently being
held in escrow by Cole, Schotz, Meisel, Forman and Leonard, P.A.
NOW, THEREFORE, in consideration of the mutual covenants herein
expressed and for other good and valuable consideration, the receipt and
sufficency of which are hereby acknowledged, the Parties agree as
follows:
Section 1 - Recitals. The recitals set forth hereinabove are
incorporated herein by reference as though fully set forth at length.
Section 2 - Allocation of Usable Warehouse Space.
(a) Upon the effective date of the Lease, each Party shall have the
right to occupy on an exclusive basis fifty (50%) percent of the Usable
Warehouse Space (as hereinafter defined) at the Premises. For purposes
of this Agreement, "Usable Warehouse Space" means the total square
footage of floor area and office space demised to the Parties under the
Lease less the square footage within the Premises consisting of
bathrooms and loading docks. Each Party has the non-exclusive rights to
use the bathrooms, loading docks and office space. On each semi-annual
anniversary date of the date of this Agreement, the Parties shall
mutually determine any adjustments to be made to the percentage of
Usable Warehouse Space of the Premises which each Party may occupy;
provided, however, that neither Party shall be allocated less than
thirty-five (35%) percent of the total Usable Warehouse Space. The
percentage of Useable Warehouse Space of the Premises which HyTech may
occupy, from time to time, pursuant to this Section shall be referred to
as the "License Premises."
(b) If Chemaid as tenant under the Lease sublets, grants a license
to, or otherwise permits a third party to use and occupy all or a portion
of the office space located on the Premises for compensation, the
payments received by Chemaid from said third party (less any costs
incurred by Chemaid relating to said third party) shall be allocated and
paid to the Parties hereunder in proportion to each Party's then
allocation of Usable Warehouse Space pursuant to the terms and
conditions of this Agreement.
Section 3 - License. Chemaid hereby grants to HyTech and HyTech
hereby accepts from Chemaid, a license ("License") to use and occupy the
License Premises for the License Period. Chemaid represents to HyTech
that the Lease permits (i) the License, and (ii) the use of the Premises
for the storage, warehousing and distribution of cosmetics and health
and beauty products.
Section 4 - Allocation and Payment of Expenses.
(a) All expenses and other obligations of Chemaid under the Lease,
including, but not limited to, Rent, Taxes, utilities and other expenses
(collectively, "Expenses"), shall be allocated between the Parties based
upon the percentage of Usable Warehouse Space which is allocated to each
Party for the period to which such expenses are attributable (the
"Expense Share"), as set forth under Section 2 of this Agreement. For
example, if a Party is allocated sixty (60%) percent of the Usable
Warehouse Space, its Expense Share shall be sixty (60%) percent of the
Expenses.
(b) HyTech shall remit its Expense Share attributable to the Premises
directly to Chemaid within five (5) business days after request therefor
from Chemaid. Failure by HyTech to so remit its Expense Share to
Chemaid within said time period shall be considered an "Event of
Default" under this Agreement.
(c) Notwithstanding the foregoing, Expenses shall not include any and
all fees, fines, assessments, charges, administrative charges,
penalties, interest or the like, which may be imposed or charged by the
Landlord of the Lease, which are not caused by a default under or breach
of this Agreement on the part of HyTech.
Section 5 - Term. This Agreement shall commence as of the date of the
Lease and shall terminate upon the expiration or earlier termination of
the Lease; provided, however, if on the date on which this Agreement
terminates, either Party shall have unperformed obligations hereunder,
then, in such event, the term of this Agreement shall continue only with
respect to such unpaid and/or unperformed obligations. Notwithstanding
anything to the contrary contained herein, Chemaid may terminate the
License if HyTech commits an Event of Default which remains uncured for
thirty (30) days after HyTech receive notice of such default. For
purposes of this Agreement, an Event of Default shall also include, but
not be limited to, any act or omission by HyTech which constitutes a
breach of or default in the Lease.
Section 6 - Indemnification.
(a) If HyTech shall be subject to any claim, demand or penalty with
respect to its obligations under this Agreement, HyTech shall indemnify
and hold harmless Chemaid against all losses, judgments, settlements,
fines, taxes, penalties, costs (including reasonable attorneys' fees) or
damages of any kind assessed against or incurred by Chemaid as a result
thereof.
(b) HyTech agrees to indemnify and hold harmless Chemaid, its
officers and directors and each controlling person of Chemaid, from and
against all losses, claims, damages or liabilities, joint or several,
to which they or any of them may become subject, and to reimburse each
such persons so indemnified for any and all reasonable attorneys' fees
or other expenses (including the cost of any investigation and
preparation) reasonably incurred by them or any of them in connection
with any claim or litigation, whether or not resulting in any
liabilities, insofar as such losses, claims, damages, liabilities, or
litigation arise out of or are based upon any act or omission by HyTech
which constitutes a breach of or default under the Lease.
(c) Chemaid agrees to indemnify and hold harmless HyTech, its
officers and directors and each controlling person of HyTech, from
and against all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject, and to
reimburse each such persons so indemnified for any and all reasonable
attorneys' fees or other expenses (including the cost of any
investigation and preparation) reasonably incurred by them or any of
them in connection with any claim or litigation, whether or not
resulting in any liabilities, insofar as such losses, claims, damages,
liabilities, or litigation arise out of or are based upon any default in
the Lease by Chemaid continuing beyond any applicable notice and cure
period; provided, however, that HyTech has not committed any breach of,
or default in, this Agrement, or that any such default does not arise
out of any actions or omissions by HyTech, its officers and directors,
or any controlling person of HyTech.
Section 7 - Remedies. If HyTech shall default in its obligations
hereunder, Chemaid shall have all remedies available to it at law or
equity, including, without limitation, specific performance.
Section 8 - Further Instruments. HyTech agrees at any time or times
and from time to time, to make, execute and deliver any and all such
other instruments or documents and do any and all such acts and/or
things as Chemaid shall reasonably require for the purpose of giving
full force and effect to this Agreement.
Section 9 - Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Parties, their heirs, and successors in
interest of every kind and nature whatsoever.
Section 10 - Modifications. No term, provision or condition of this
Agreement may be modified unless in writing and signed by both Parties.
Section 11 - Complete Understanding. This Agreement together with the
Depository Agreement constitute the complete understanding amoung the
Parties with respect to subject matter contained herein and no
statement, representation, warranty or covenant has been made by any
Party with respect thereto, except as expressly set forth herein.
Section 12 - Governing Law and Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of
New Jersey (without giving effect to conflicts of law). The Parties
hereby consent to the personal jurisidiction of the federal or state
courts located in the State of New Jersey as the exclusive forum to
resolve disputes hereunder.
Section 13 - Severability. In case any one (1) or more of the
provisions of this Agreement shall be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected
thereby.
Section 14 - Notices. All notices, consents or other communications
required or permitted to be given by any Party hereunder shall be in
writing (including telecopy or other similar writing) and shall be given
by personal delivery, certified or registered mail, postage prepaid, or
telecopy (or other similar writing) as follows:
If to Chemaid:
Chemaid Laboratories, Inc.
100 Mayhill Street
Saddle Brook, New Jersey
With a copy to:
Richard W. Abramson, Esq.
Cole, Schotz, Meisel, Forman & Leonard, P.A.
Court Plaza North
25 Main Street
P.O. Box 800
Hackensack, New Jersey 07602-0800
If to HyTech:
Hydron Technologies, Inc.
1001 Yamato Road, Suite 403
Boca Raton, Florida 33431
Attention: Mr. Harvey Tauman, President
With a copy to:
Joseph A. Caccamo Attorney at Law, P.C.
666 Third Avenue, 18th Floor
New York, New York 10017-4011
or such other address or addresses as either Party hereto shall have
designated by notice in writing to the other Party hereto. Any notice,
consent or other communication required or permitted to be given
hereunder shall have been deemed to be given on the date of mailing,
personal delivery or telecopy or other similar means (provided the
appropriate answer back is received) thereof and shall be conclusively
presumed to have been received on the second business day following the
date of mailing or, in the case of personal delivery or telecopy or
other similar means, the day of delivery thereof, except that a change
of address shall not be effective until actually received.
Section 15 - Definitions. Any capitalized term contained in this
Agreement whioch is not defined herein shall have the meaning given to
it under the Lease.
Section 16 - Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, each Party has caused this Agreement to be
executed the day and year first above written.
CHEMAID LABORATORIES, INC.
By: /s/ Roy Reiner
-------------------------
Roy Reiner, President
HYDRON TECHNOLOGIES, INC.
By: /s/ Harvey Tauman
-------------------------
Harvey Tauman, President
Exhibit 10.41
DEPOSITORY AGREEMENT
DEPOSITORY AGREEMENT made this 9th day of February, 1996 by and between
Hydron Technologies, Inc., a New York corporation ("HyTech"), with its principal
place of business at 1001 Yamato Road, Suite 403, Boca Raton, Florida 33431, and
Chemaid Laboratories, Inc., a New Jersey corporation ("Chemaid"), with its
principal place of business at 100 Mayhill Street, Saddle Brook, New Jersey
07663. HyTech and Chemaid are sometimes collectively referred to as the
"Parties".
W I T N E S S E T H:
WHEREAS, Chemaid is a party to a lease dated September 13, 1995 between
Chemaid as tenant and Mayhill Street Realty Co., L.L.C. as landlord, (the
"Lease") for the premises commonly known as the 5 East Building located at 95
Mayhill Street, Saddle Brook, New Jersey, and as more particularly described in
the Lease (the "Premises");
WHEREAS, Chemaid and HyTech have entered into a License Agreement dated
the date hereof (the "License Agreement") to provide for the use and occupancy
of a portion of the premises as allocated by the Parties as set forth therein;
WHEREAS, the law firm of Cole, Schotz, Meisel, Forman & Leonard, P.A.
("Escrow Agent"), Hackensack, New Jersey, is holding the principal amount of
$385,229.04, in four interest bearing escrow accounts for the benefit of the
parties (the "Escrow"); and
WHEREAS, Chemaid and HyTech desire to amend the License Agreement to
provide for collateral security for HyTech's obligations to Chemaid in
accordance with the provisions of the License Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and promises contained herein, the parties hereto hereby agree as follows:
1. Depository Arrangement. The following depository arrangement shall
govern the rights of the Parties as to collateral security for HyTech's
obligations to Chemaid in accordance with the provisions of the License
Agreement.
2. Establishment of Depository Account; Close of Escrow.
(A) The Parties covenant and agree to forthwith open a joint account at
Smith Barney, 20801 Biscayne Boulevard, 2nd Floor, North Miami Beach, Florida
33180 ("Depository Account"), and to cause the principal amount of $385,229.04
to be withdrawn forthwith from Escrow and deposited into the Depository Account.
(B)Any and all interest earned on the Escrow shall upon the closing of
the Escrow be immediately paid to HyTech.
3. Maintenance and Operation of Depository Account.
(A) The Depository Account shall be a joint account, which shall
require two (2) signatures to authorize any and all withdrawals therefrom. One
(1) authorized signatory shall be from HyTech, either Harvey Tauman, President
or Richard Tauman, Executive Vice President of HyTech, and one (1) authorized
signatory shall be from Chemaid, either Roy Reiner, President, or Marc Reiner of
Chemaid.
(B) From the period commencing two and one-half (2-1/2) years from the
commencement date of the Lease and ending upon termination of the License
Agreement, Chemaid on a monthly basis, shall utilize an amount equal to the
remaining Escrow Amount divided by the number of months remaining until the
expiration of the term of the Lease to satisfy all or a portion of HyTech's
obligations to Chemaid each month under the provisions of the License Agreement
until termination of the License Agreement. In furtherance of the foregoing,
HyTech covenants and agrees to provide to Chemaid a check from the Depository
Account equal to the amount of obligation of HyTech for each such month, signed
by either Harvey Tauman or Richard Tauman, which must be received by Chemaid not
less than the later of (i) five (5) business days prior to the commencement of
the month for which payment is being made or (ii) five business days from the
date on which HyTech receives notice of a revision to the amount of its monthly
obligation to Chemaid in accordance with the provisions of the License
Agreement.
(C) In the event that the Landlord under the Lease requires two (2)
months rent as security in addition to the two (2) months rent already deposited
with the Landlord by Chemaid (making the total security deposit equal to four
(4) months rent), then in such event, said additional two (2) months rent (which
equals the sum of $42,270.00) shall be paid from the Depository Account to the
Landlord. Said amount shall be applied to satisfy HyTech's obligations under the
License Agreement during the final four (4) months of the Lease.
(D) The funds maintained in the Depository Account shall be invested in
such interest bearing investments as HyTech in its discretion shall determine.
(E) Any and all interest, dividends or capital gains earned or paid on
the funds maintained in the Depository Account shall be paid monthly to HyTech
without any other action of the Parties.
(F) HyTech shall have the right to change the financial institution in
which the Depository Account is maintained upon thirty (30) days notice to
Chemaid.
(G) Upon termination of the License Agreement, if HyTech's obligations
to Chemaid pursuant to the provisions of the License Agreement are fully
satisfied, then the balance of the funds in the Depository Account shall be
forthwith paid to HyTech.
4. Default.
(A) In the event HyTech fails to comply with the provisions of
paragraph 3(b) above, then in such event, such failure shall constitute an
"Event of Default".
(B) In the event HyTech commits an Event of Default which remains
uncured for thirty (30) days after HyTech receives notice of such Event of
Default, then in such event, the remaining balance of the Depository Account
shall be immediately due and payable to Chemaid.
5. Indemnification. HyTech agrees to indemnify and hold harmless
Chemaid, its officers and directors and each controlling person of Chemaid, from
and against all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject whether as a result of any third
party claim, breach of this Agreement or otherwise, and to reimburse each such
persons so indemnified for any and all legal or other expenses (including the
cost of any investigation and preparation) reasonably incurred by them or any of
them in connection with any claim or litigation, whether or not resulting in any
liabilities, insofar as such losses, claims, damages, liabilities, or litigation
arise out of or are based upon any act or omission by HyTech which constitutes a
breach of or default under this Agreement.
6. Cumulative Rights. The rights and remedies granted in this Agreement
are cumulative and not exclusive, and are in addition to any and all other
rights and remedies granted and permitted under and pursuant to law.
7. No Waiver. The failure of any of the parties hereto to enforce any
provision hereof on any occasion shall not be deemed to be a waiver of any
preceding or succeeding breach of such provision or any other provision.
8. Entire Agreement. This Agreement together with the License Agreement
constitutes the entire agreement and understanding of the parties hereto and no
amendment, modification or waiver of any provision herein shall be effective
unless in writing, executed by the party charged therewith.
9. Governing Law and Jurisdiction. This Agreement shall be construed,
interpreted and enforced in accordance with and shall be governed by the laws of
the State of New Jersey without regard to the principles of conflicts of laws.
The Parties hereto consent to the personal jurisdiction of the federal or state
courts located in the State of New Jersey as the exclusive forum to resolve
disputes hereunder.
10. No Assignment. This Agreement may not be assigned by the parties
hereto, and any attempted assignment hereof shall be void and of no effect.
11. Paragraph Headings. The paragraph headings herein have been
inserted for convenience of reference only, and shall in no way modify or
restrict any of the terms or provisions hereof.
12. Notices. Any notice or other communication under the provisions of
this Agreement shall be in writing, and shall be given by postage prepaid,
registered or certified mail, return receipt requested; by hand delivery with an
acknowledgement copy requested; or by the Express Mail service offered by the
United States Post Office or any reputable overnight delivery service, directed
to the addresses set forth above, or to any new address of which any party
hereto shall have informed the others by the giving of notice in the manner
provided herein. Such notice or communication shall be effective, if sent by
postage prepaid, registered or certified mail, return receipt requested, three
(3) days after it is mailed within the continental United States; if sent by
Express Mail or any reputable overnight delivery service, one (1) day after it
is forwarded; or by hand delivery, upon receipt.
13. Unenforceability; Severability. If any provision of this Agreement
is found to be void or unenforceable by a court of competent jurisdiction, then
the remaining provisions of this Agreement, shall, nevertheless, be binding upon
the parties with the same force and effect as though the unenforceable part had
been severed and deleted.
14. Further Assurances. Subsequent to the execution and delivery of
this Agreement, either Party shall at any one time and from time to time, at the
request of the other Party and without further cost or expense to the requesting
Party, execute and deliver such other documents and take such other actions as
the requesting Party may reasonably request for the purpose of giving full force
and effect to this Agreement.
15. Counterparts. This Agreement may be executed in counterparts, all
of which shall be deemed to be duplicate originals.
IN WITNESS WHEREOF, the parties hereto have executed this instrument
the date first above written.
HYDRON TECHNOLOGIES, INC.
By: /s/ Harvey Tauman
Harvey Tauman, President
CHEMAID LABORATORIES, INC.
By: /s/ Roy Reiner
Roy Reiner, President
Exhibit 10.42
CONSULTING AGREEMENT
AGREEMENT made this 5th day of February, 1996 by and between HYDRON
TECHNOLOGIES, INC., a New York corporation having its offices at 1001 Yamato
Road, Suite 403, Boca Raton, Florida 33431 (the "Company") and CHARLES FOX
ASSOCIATES, INC., a New Jersey corporation with its principal place of business
at 39-08 Tierney Place, Fairlawn, New Jersey 07410 (the "Consultant").
W I T N E S S E T H:
WHEREAS, the Consultant has acquired considerable knowledge and
expertise with respect to research and development for cosmetics and health and
beauty products; and,
WHEREAS, the Company desires to obtain the benefits of the Consultant's
knowledge and expertise and the Consultant is agreeable thereto.
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and promises contained herein, the parties hereby agree as follows:
1. Research and Development Activities.
(a) The Company hereby retains the Consultant, and the Consultant
hereby accepts and agrees, to serve as an independent general advisor and
consultant to the Company on all matters relating to research and development
activities of the Company (the "R&D Activities"). The Consultant shall advise
and consultation with respect to performing the R&D Activities for the purpose
of producing completed, formulated and stabile products acceptable to the
Company (the "Products") suitable for commercial exploitation prior to the
expiration of the term of this Agreement.
(b) It is understood and agreed that consumer product safety testing
for certain of the Products may not have been completed prior to the expiration
of the term of this Agreement. In the event such testing reveals that additional
work is to be performed on the Products in order to make them safe for consumer
use and the Company requests the Consultant to complete such consumer product
safety testing, then in such event, the Consultant covenants and agrees, and
shall perform, such additional work as may be necessary in order to make the
Products safe for consumer use in return for a fee $5,000 per month until
completion of such testing.
(c) The Consultant's R&D Activities under this paragraph no. 1 shall be
provided principally within the State of New Jersey, and at such other place or
places and at such time or times, on reasonable notice, as the officers of the
Company shall reasonably determine from time to time. In the event the
Consultant shall travel outside of the State of New Jersey at the request of the
Company, then in such event, the Company shall reimburse the Consultant for the
reasonable expenses of such traveling.
(d) The Consultant shall keep himself available to consult with and
advise the Company to the best of its ability with respect to the matters
specified above for such number of hours per week, if so requested by the
Company, as may be necessary to complete the development of the Products prior
to the expiration of the term of this Agreement.
(e) The Consultant covenants and agrees to make available Charles Fox
to perform substantially all of the services required to be performed by the
Consultant hereunder.
2. Personal Appearances. The Consultant covenants and agrees to make
Charles Fox available to appear on live television broadcasts at the studios of
QVC, as may be requested by the Company or QVC, for the purpose of marketing
Products as well as existing products of the Company ("Personal Appearances").
3. Term of R&D Activities and Personal Appearances. The term for which
the Consultant will perform the R&D Activities and make the Personal Appearances
shall be for the twelve (12) month period of March 1, 1996 through February 28,
1997 (the "Initial Term"). The Company shall have the right to extend the
Initial Term of this Agreement for one (1) additional twelve (12) month period,
from March 1, 1997 through February 28, 1998 (the "Additional Term"), by giving
notice to the Consultant by no later than February 1, 1997.
4. Monthly Remuneration. In full consideration of the R&D Activities to
be performed and the Personal Appearances to be made by the Consultant under
paragraph nos. 1 and 2 hereof, the Company agrees to pay to the Consultant the
sum of $60,000, payable in equal monthly installments of $5,000 during the
Initial Term of this Agreement, and each of the Company and the Consultant
agrees to negotiate in good faith the amount of the fee payable to the
Consultant by the Company for services of the Consultant for the Additional
Term, if this Agreement is extended by the Company.
5. Infomercial Services.
(a) During the Initial Term and the Additional Term, if any, the
Consultant covenants and agrees to make Charles Fox available to appear for
taping of one (1) or more infomercials for the purpose of marketing products of
the Company.
(b) The Consultant hereby consents to the use of the image, likeness
and voice of Charles Fox in the infomercial produced by Hydromercial Partners,
of which the Company is a general partner, as well as any future infomercials to
be produced by or on behalf of the Company.
6. Infomercial Royalty Payments.
(a) In consideration of the performance of the infomercial services as
set forth in paragraph no. 5(a) and (b) hereof, commencing as of January 1, 1996
and running through December 31, 1996 (the "Royalty Period"), the Company shall
pay a royalty to the Consultant equal to two and one-half (2.5%) percent of the
Net Sales (as hereinafter defined) of the Company of Hydron polymer based
products ("Hydron Based Products"), with a maximum royalty of $218,125 (the
"Sales Royalty"). Notwithstanding anything to the contrary herein or elsewhere
contained, the Sales Royalty for the Royalty Period shall not be terminated in
the event of the association between the Consultant and the Company is
terminated, whether as the result of the death of Charles Fox, or otherwise.
(b) The Consultant covenants and agrees that the Sales Royalty shall be
used solely to exercise three (3) outstanding stock options held by Charles Fox,
individually, i.e., the nonqualfied stock options dated as of April 8, 1992,
July 1, 1992 and October 21, 1993 (collectively the "Options") to purchase an
aggregate of 100,000 shares of Company's common stock, $.01 par value per share.
(c) For purposes hereof, "Net Sales" shall be deemed to mean the
invoiced amount of Hydron Based Products shipped or sold by the Company to a
non-affiliated entity, less allowances, discounts, uncollectible accounts, and
returns, and sales taxes and freight charges separately stated.
(d) The Sales Royalty hereunder shall be accounted for and paid
quarterly within forty-five (45) days after the close of each three (3) month
period for the period of January 1, 1996 through December 31, 1996.
Notwithstanding the two and one-half (2.5%) percent rate of Sales Royalty as set
forth in paragraph no. 4(a) hereof, the Company shall pay a minimum quarterly
sales royalty to the Consultant equal to $54,531.25 ("MQSR") at the time it
accounts and pays the Sales Royalty. Any and all Sales Royalties paid in excess
of the MQSR shall be credited against the next MQSR and total Sales Royalty due.
(e) The Company shall deliver to the Consultant at the time each Sales
Royalty payment is due, a statement signed by the Chief Financial Officer of the
Company indicating (i) the invoice price of all articles of Products shipped
during the periods covered by such Sales Royalty payment, (ii) the amount of
deductions from gross sales, and (iii) a computation of the amount of Sales
Royalty payable hereunder for said period.
7. Ownership of the Products, etc.
(a) Any and all of the Products, as well as, including but without
limitation, any and all pamphlets, books, reports, drawing, specifications,
prototypes, laboratory models, patents, patent applications, inventions,
improvements and/or discoveries (whether or not patentable) developed during the
R&D Activities are, and shall remain, the exclusive property of the Company.
(b) At any time and from time to time, at the request of Company and
without further cost or expense to Company, the Consultant shall execute and
deliver such instruments of conveyance or transfer and take such other actions
as Company may request in order to vest in Company good and marketable title to
the Products, including, but not limited to, assistance in preparing patent
applications. In furtherance thereof, the Consultant hereby grants to Company an
irrevocable power of attorney to effect same in the name and stead of
Consultant. The Company need not take any other action, nor have any other
documents executed, to effect such power of attorney; and the Consultant
expressly acknowledges and agrees that such power of attorney is irrevocable and
shall be deemed to be coupled with an interest.
8. Prohibited Action. The Consultant and Charles Fox shall not engage
in any acts or conduct and shall not make any statement which can reasonably be
expected to have an adverse affect on the business, financial condition or
reputation of the Company or its products.
9. Confidential Information. The Consultant and Charles Fox shall not
directly or indirectly either during the term of this Agreement or thereafter,
disclose to anyone (except in the regular course of the Company's business), or
use in competition with the Company, any information acquired by the Consultant
during the period the Consultant is performing services for the Company with
respect to the Company's operations or affairs (including, but not limited to,
products, product formulation and specification, names, addressed and
requirements of customers or prospective customers, and the business methods,
procedures, programs and forms of the Company, all of which the Consultant
acknowledges to be confidential).
10. Relationship of the Consultant to the Company. The Consultant shall
be an independent contractor; in no event shall the Consultant or Charles Fox be
considered an agent of the Company. Under no circumstances shall the Consultant
or Charles Fox have, or claim to have, power of decision in any activities on
behalf of the Company. Further, the Company acknowledges, that as independent
contractors, each of the Consultant an Charles Fox have the right to perform
services for other companies in the cosmetic field; provided, that in no event
shall the Consultant or Charles Fox breach paragraph numbers 7, 8 or 9 hereof.
11. Equitable Relief. In the event the Consultant shall commit or cause
to commit a breach of this Agreement (including but not limited to the
provisions of paragraph numbers 7, 8, 9 and 10 hereof, and with regard to
Charles Fox, solely the provisions of paragraph numbers 7, 8, 9 and 10 hereof),
then in any such event, each of Charles Fox and the Consultant hereby consents
to the granting of a temporary or permanent injunction against him and it,
respectively, by any court of competent jurisdiction prohibiting such violations
of any provision of this Agreement. In any proceeding for an injunction and upon
any motion for a temporary or permanent injunction, each of the Consultant and
Charles Fox agrees that their ability to answer in damages shall not be a bar or
interposed as a defense to the granting of such temporary or permanent
injunction against the Consultant or Charles Fox. Each of the Consultant and
Charles Fox further agrees that the Company will not have an adequate remedy at
law in the event of any breach by the Consultant or Charles Fox hereunder and
the Company will suffer irreparable damage and injury if any of such provisions
of this Agreement are breached.
12. Cumulative Rights. The rights and remedies granted in this
Agreement are cumulative and not exclusive, and are in addition to any and all
other rights and remedies granted and permitted under and pursuant to law.
13. No Waiver. The failure of any of the parties hereto to enforce any
provision hereof on any occasion shall not be deemed to be a waiver of any
preceding or succeeding breach of such provision or any other provision.
14. Entire Agreement. This Agreement constitutes the entire agreement
and understanding of the parties hereto and no amendment, modification or waiver
of any provision herein shall be effective unless in writing, executed by the
party charged therewith.
15. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with and shall be governed by the laws of the State of
New York without regard to the principles of conflicts of laws.
16. Assignment and Delegation of Duties. This Agreement may not
be assigned by the parties hereto, and any attempted assignment hereof shall be
void and of no effect. This Agreement is in the nature of a personal service
contract and the duties imposed hereby are non-delegable.
17. Paragraph Headings. The paragraph headings herein have been
inserted for convenience of reference only, and shall in no way modify or
restrict any of the terms or provisions hereof.
18. Notices. Any notice or other communication under the provisions of
this Agreement shall be in writing, and shall be given by postage prepaid,
registered or certified mail, return receipt requested, by hand delivery with an
acknowledgement copy requested, or by the Express Mail service offered by the
United States Post Office or by any other reputable commercial overnight
delivery service, directed to the addresses set forth above, or to any new
address of which any party hereto shall have informed the others by the giving
of notice in the manner provided herein. Such notice or communication shall be
effective, if sent by mail, three (3) days after it is mailed within the
continental United States; if sent by Express Mail or overnight delivery
service, one day after it is sent; or by hand delivery, upon receipt.
19. Unenforceability; Severability. If any provision of this Agreement
is found to be void or unenforceable by a court of competent jurisdiction, then
the remaining provisions of this Agreement, shall, nevertheless, be binding upon
the parties with the same force and effect as though the unenforceable part had
been severed and deleted.
20. No Third Party Rights. The representations, warranties and other
terms and provisions of this Agreement are for the exclusive benefit of the
parties hereto, and no other person shall have any right or claim against any
party by reason of any of those terms and provisions or be entitled to enforce
any of those terms and provisions against any party.
21. Counterparts. This Agreement may be executed in counterparts, all
of which shall be deemed to be duplicate originals.
IN WITNESS WHEREOF, the parties hereto have executed this
instrument the date first above written.
HYDRON TECHNOLOGIES, INC.
By: /s/ Harvey Tauman
Harvey Tauman, President
CHARLES FOX ASSOCIATES, INC.
By: /s/ Charles Fox
Charles Fox, President
Solely with regard to paragraph numbers 7, 8, 9 and 10 of this Agreement:
/s/ Charles Fox
CHARLES FOX
HYDRON TECHNOLOGIES, INC. AND SUBSIDIARIES
Exhibit (11) - Statement Re: Computation of Earnings Per Share
Years Ended December 31,
------------------------------------------
1995 1994 1993
------------ ------------ ------------
PRIMARY
Average shares outstanding 22,632,180 22,077,710 19,917,586
Net effect of dilutive stock
options - based on the
treasury stock method using
average market price 506,485 589,260
------------ ------------ ------------
Totals 23,138,665 22,666,970 19,917,586
============ ============ ============
Net income $ 1,782,588 $ 3,638,206 $ (1,361,085)
============ ============ ============
Per share amount $ 0.08 $ 0.16 $ (0.07)
============ ============ ============
FULLY DILUTED
Average shares outstanding 22,632,180 22,077,710 19,917,586
Net effect of dilutive stock
options - based on the
treasury stock method using
year-end market price 519,203 825,044
------------ ------------ ------------
Totals 23,151,383 22,902,754 19,917,586
============ ============ ============
Net income $ 1,782,588 $ 3,638,206 $ (1,361,085)
============ ============ ============
Per share amount $ 0.08 $ 0.16 $ (0.07)
============ ============ ============
Exhibit 21
Subsidiaries of the Registrant
Name State of Incorporation
Hydron Healthcare, Inc. Delaware
Spargos Advertising, Inc. Florida
Hydron Direct, Inc. Delaware
Exhibit 23.1
Consent of Ernst & Young, LLP
Independent Certified Public Accountants
We consent to the incorporation by reference in the Registration Statements
(forms S-3 No. 33-47060, 33-47610, 33-61204, 33-78296 and 33-84554) of Hydron
Technologies, Inc. and in the related Prospectus of our report dated February
21, 1996, with respect to the financial statements of Hydron Technologies, Inc.
included in this Annual Report (Form 10-K) for the year ended December 31, 1995.
/s/ Ernst & Young, LLP
West Palm Beach, Florida
March 27, 1996
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 4,346,587
<SECURITIES> 0
<RECEIVABLES> 1,002,969
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<PP&E> 784,147
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0
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<COMMON> 226,398
<OTHER-SE> 18,113,623
<TOTAL-LIABILITY-AND-EQUITY> 12,992,111
<SALES> 7,303,468
<TOTAL-REVENUES> 7,628,478
<CGS> 2,577,606
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<OTHER-EXPENSES> 3,159,650
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<INCOME-PRETAX> 1,812,588
<INCOME-TAX> 30,000
<INCOME-CONTINUING> 1,782,588
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