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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, 1996 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, Suite 403, Boca Raton, Florida 33431
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 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. / /
The aggregate market value of the voting stock held by nonaffiliates of
the Registrant was $32,646,029 based upon the closing price of $1.625 on March
27, 1997.
Number of shares of Common Stock outstanding as of March 27, 1997: 24,776,816.
Documents Incorporated by Reference: None.
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Part I
Item 1. Business
Introduction
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 (561)
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 Mark) 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/cosmetic products, creating a new moisturizing technology for the
cosmetic and pharmaceutical industries. HyTech has concentrated its development
activities to date, primarily on the application of these biocompatible,
hydrophilic polymers in various personal care/cosmetic products for consumers
and oral care products for dental professionals. 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.
HyTech's products are currently sold in the United States exclusively
through direct response television and catalog sales, and internationally
through conventional retail stores and electronic retailing. During the fiscal
year ended December 31, 1996 ("Fiscal 1996"), substantially all sales of
HyTech were made to QVC, Inc. ("QVC"), the world's largest electronic
retailer.
Marketing
HyTech's expansion in product marketing primarily began with the
distribution of its first catalog in the middle of November 1996. HyTech also
expanded international marketing to include conventional retail store
distributorships in Australia and New Zealand, as well as electronic retailing
in Europe through an affiliate of QVC. In 1997 HyTech intends to continue the
expansion of its marketing plan in the United States, and may seek to add
distribution through prestige retail channels such as department and specialty
stores, boutiques and beauty salons.
One important aspect of management's expanding marketing plan was to
begin by testing new marketing strategies within its home state, Florida.
Management believes that the Florida market is strong and can be closely
monitored, while enabling them to determine the marketing strategy for
expanded global markets. This progressive marketing plan has taken form under
the following strategically managed areas.
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-Direct Response Television
Management believes that marketing Hydron products initially through
direct response television has afforded HyTech several advantages over
conventional in-store retailing, including: cash flow that has enabled HyTech
to internally finance product development and new marketing activities, the
ability to take advantage of time-sensitive opportunities by moving products
to market quickly, and the ability to conduct real time market research, which
has allowed management to make marketing decisions quickly and cost
effectively.
HyTech's personal care products are presently marketed through direct
response television in the Western Hemisphere exclusively by QVC, pursuant to
an amended license agreement with QVC. See "Amended Agreement with QVC."
Certain products are also sold in Europe by a QVC affiliate. In the United
States, QVC programming is transmitted live on cable television to
approximately sixty (60) million homes. In addition, "QVC-The Shopping
Channel," which is owned by QVC and an English partner, reaches several
million households in the United Kingdom, and QVC Deutschland GmbH, a
wholly-owned subsidiary of QVC, Inc., produces a televised shopping program
for the German market.
In Fiscal 1996, HyTech expanded its personal care, hair care and bath
and body product lines marketed on the QVC program, from twenty-one (21) items
(sku's) in Fiscal 1995 to thirty-five (35) items (sku's), five (5) of which
are from the hair care and bath and body product lines. Hair care and bath and
body items sell at a lower cost and somewhat lower margin than HyTech's skin
care products.
During Fiscal 1996, retail sales of Hydron products by QVC to
consumers decreased by twenty-two percent (22%), to approximately $16.4
million from $21 million in the fiscal year ended December 31, 1995 ("Fiscal
1995"). Retail sales of Hydron products by QVC to consumers increased thirty
percent (30%) in Fiscal 1995 from $16 million in fiscal year ended December
31, 1994 ("Fiscal 1994"). Approximately sixty-three (63%) percent of retail
sales in Fiscal 1996 occurred in connection with on-air marketing of Hydron
products by QVC, and the balance occurred as back-end or off-air sales, which
is primarily re-order business.
QVC maintains an inventory of Hydron products, which consumers may
purchase at any time. Back-end (off air) sales of Hydron products by QVC to
consumers decreased approximately six percent (6%) in Fiscal 1996 from Fiscal
1995, but increased 104% in Fiscal 1995 over Fiscal 1994.
Management believes that the lack of quality on-air time for Hydron
products resulted in the decrease in retail sales by QVC, as such lack of
quality on-air time affects both on-air retail sales as well as the reorder
business.
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"Hydron Care" hours have been part of QVC's regularly scheduled
programming since April 1994. The hour-long, live broadcasts generally feature
most currently available products, which are sold individually or by packaging
in various combinations of products. During the second half of Fiscal 1995,
QVC began airing regularly scheduled programming, including "Hydron Care,"
approximately every eight (8) weeks instead of 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.
Although the aggregate number of on-air QVC hours was substantially
the same for Fiscal 1996 (twenty-seven (27)) as compared with twenty-eight
(28) for Fiscal 1995, HyTech was not allotted substantial prime time hours or
weekends when consumers typically increase purchases. In the first six (6)
months of Fiscal 1996, the aggregate number of on-air QVC hours was nine (9),
as compared to sixteen (16) in the first six (6) months of Fiscal 1995. In the
second six (6) months of Fiscal 1996, the aggregate number of on-air QVC hours
increased to eighteen (18) from twelve (12) for the second six (6) months of
Fiscal 1995. Although management of HyTech is constantly pursuing
opportunities to increase the quantity and quality of on-air programming on
QVC, including new program formats, line extensions that may warrant
additional programming, as well as special promotions, management of HyTech
has no control over the amount and quality of air-time that QVC allots to
Hydron products.
During Fiscal 1996 ninety-seven percent (97%), during Fiscal 1995
ninety-eight percent (98%) and in Fiscal 1994 ninety-eight percent (98%), of
HyTech's sales, were made to QVC and affiliated companies. Management
anticipates that as QVC more fully exploits its amended license, QVC will
continue to represent the greatest percentage of sales in the fiscal year
ending December 31, 1997 ("Fiscal 1997"). The loss of QVC as a customer would
have a material, adverse impact upon the financial condition of HyTech.
However, management believes that if QVC were to cease acting as HyTech's
exclusive electronic retailer in the Western Hemisphere, HyTech would attempt
to reach the existing consumer base utilizing various marketing methods. No
assurance can be given that HyTech could market its products as successfully
utilizing any of such methods.
-Catalog Sales
In November 1996, Hydron Direct Marketing ("HyDirect"), a division of
HyTech, opened a new channel of distribution for Hydron products with the
launch of the Hydron Magalog(TM). This full-color catalog offers HyTech's
personal care products for sale directly to consumers. The Magalog also
provides information on new Hydron products, educates consumers on proper skin
and hair care, responds to customer questions, and facilitates re-ordering.
Net catalog sales for the first four (4) months of operations, commencing in
November 1996 were approximately $16,000 (for one-half of the month), $45,000,
$69,000 and $203,000, respectively.
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Management expects that increased distribution, value added
promotions, including free product samples, coupled with increased brand
awareness will continue to enhance catalog sales in Fiscal 1997. HyTech
currently markets the catalog to consumers through print advertising in
national women's magazines, as well as several athletic sponsorships and
community events. HyTech also markets the catalog to its shareholders, who
presently receive a twenty-five percent (25%) discount on all purchases
through the Hydron Magalog. Consumers can order a Hydron Magalog by calling
1-800-4-HYDRON.
In connection with its Magalog marketing program, HyTech signed
sponsorship agreements with Florida's Miami Heat professional basketball team,
the Miami Dolphins professional football team and Pro Player Stadium. Hydron
products and the 1-800-4-HYDRON number are promoted during games through
in-stadium advertising and product sampling. Brand awareness is promoted through
television and radio half-time and post game reports and broadcast segments
naming the "the Hydron Defensive Player of the Game" and "Hydron Best Defensive
Play of the Week." In addition, an over-the-counter, pharmaceutical, topical
analgesic, is promoted through 30- and 60-second direct response television and
radio advertisements on local area television and radio commercials. Management
is also seeking a sponsorship arrangement with the Florida Marlins professional
baseball team.
HyTech's sports marketing program also includes one-year sponsorships
of the Ft. Lauderdale Diving Team in Ft. Lauderdale, FL, and the United States
Olympic Training Center Men's Gymnastics Team in Colorado Springs, CO, signed
in June 12, 1996 and April 19, 1996, respectively. Both teams sent athletes to
the 1996 Olympic Games, and endorsed Hydron sunscreen, moisturizing and
topical analgesic products during U.S. and international competitions.
In the near future, the Hydron Magalog and on-line ordering through
an "Internet shopping cart" will be available directly to consumers through
HyTech's web site at http://www.hydron.com.
-Infomercials
In January 1995, HyTech entered into an agreement with two other
companies to form a joint venture known as Hydromercial Partners (the "Joint
Venture") to promote and sell HyTech's Hydron polymer-based skin care products
through a thirty (30) minute commercial ("Infomercial"), which the Joint
Venture has produced. Each company had a one-third interest in the profits and
losses of the Joint Venture, which had 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 Infomercial, which featured an eight
(8) product Hydron skin care collection, aired regularly on regional broadcast
and national cable networks from September 1995, following the completion of
successful test marketing, to April 30, 1996.
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In July 1996, pursuant to the amended QVC License Agreement (see
"Amended Agreement with QVC), the Joint Venture was dissolved (effective May
31, 1996), and HyTech entered into a new agreement with QVC to form an equal
partnership known as New Hydromercial Partners (the "Infomercial
Partnership"). During the fourth quarter of Fiscal 1996, the Infomercial
Partnership revised the existing Infomercial to test several new product
offers. The Infomercial Partnership plans to produce a second infomercial in
Fiscal 1997, to promote and sell new products in HyTech's skin care line.
The Infomercial Partnership supports infomercial programming with a
variety of marketing and promotional activities to maximize sales. These
include a telemarketing program to convert requests from Infomercial viewers
for product information into sales, and a program that encourages Infomercial
customers to purchase additional Hydron products, and offers them an
opportunity to receive the skin care collection on a regular basis without
having to re-order.
-Retail Stores
As the result of the QVC Amended License Agreement (see "Amended
Agreement with QVC"), HyTech is reviewing various methods of marketing Hydron
brand products through conventional retail distribution. Although management
has made no substantial commitments with respect to domestic retail store
marketing, in November 1996, HyTech signed an agreement with an
Australian-based health and beauty products distributor, Doctors Formula Pty.
Ltd., to market Hydron products for the first time in retail stores in
Australia and New Zealand. The agreement provides that Hydron products be sold
for the first time in retail stores in Australia and New Zealand, and is
subject to certain escalating minimum product purchase requirements.
Management has been advised that Doctors Formula Pty. Ltd. expects Hydron
products to be placed in approximately 100 retail outlets by April 1, 1997,
the anticipated Australian launch date. HyTech has reserved the right to sell
its products through electronic retailing in these markets.
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 using its patented cosmetic delivery system, focusing in
particular on products that appeal to an aging baby boomer generation,
currently one-third of the U.S. population. A survey of more than 1,200
30-to-50-year-olds, conducted by a major pharmaceutical company, found that:
76% are convinced they look younger than their actual age, 58% are influenced
by facial wrinkles or brown spots when judging people's age, and 77% think
women worry more than men about an aging facial appearance. HyTech's products
are designed to address these concerns, and include Hydron skin care, hair
care, bath and body, sun care, and over-the-counter pharmaceutical lines.
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HyTech launched eleven (11) new products in Fiscal 1996, bringing the
total number of individual products available to twenty-eight (28), all of
which use its patented cosmetic delivery system. All are presently being sold
to and marketed by QVC, and are also sold directly by HyTech to consumers
through the company's Magalog. In addition, some products are marketed through
HyTech's infomercial, direct response television advertisements, and retail
stores internationally.
Management believes that HyTech's product lines are unique, and offer
the following competitive benefits: they become water-insoluble on the skin's
surface, and unlike all other water-based creams and lotions, are not removed
by skin's perspiration or plain water; they are oxygen-permeable, allow skin
to breathe and leave no greasy afterfeel; they do not emulsify skin's natural
moisturizing agents, as do conventional creams and lotions; and they attract
and hold water, creating a cushion of moisture on the skin's surface that
promotes penetration of other beneficial product ingredients. All of these
products are based on HyTech's patented cosmetic delivery system, which permit
the product ingredients to deliver their intended benefits over an extended
period of time and in a more efficient manner. (See "Patents.") They are
dermatologist tested and approved for all skin types, and products for use
around the eye area are also ophthalmologist-tested, and safe for contact lens
wearers.
HyTech has also developed a variety of products that complement its
patented moisturizers. These include facial cleansing products that are free
of soaps and detergents; alpha-hydroxy products for the face and body that
clear the skin of its surface buildup of dead cells, to allow other products
to work more effectively; botanical cleansing products for the body; and a
product that visibly reduces the appearance of fine facial lines, that has
both short- and long-term benefits. HyTech has also applied the moisture
holding properties of the Hydron polymer to its line of hair care products,
creating a Hydronizing Complex that remains on the hair after rinsing, and
helps to repair damaged portions of the hair shaft.
During the past fiscal year, HyTech utilized its patented Hydron
polymer emulsion technology as an enhanced drug delivery system in the
development of a non-prescription, topical analgesic for minor arthritis and
sore muscle relief. The "Menthol Ice" product was launched by QVC in June
1996, and is presently sold through QVC, the Hydron Magalog, and direct
response television commercials. In addition to the Menthol Ice and sunscreens
which utilize the drug delivery system, HyTech is developing additional
over-the-counter products using its technology, which management expects to
market during Fiscal 1997 through QVC and other distribution channels.
Management also 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.
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HyTech is also exploring uses for the Hydron polymer and its patented
technology in color cosmetics, fragrances and consumer health care products.
The market for these products is highly competitive, and there are a
substantial number of manufacturers of these products that have greater
financial resources and marketing expertise than HyTech. Whether further
efforts are undertaken to develop these products for the commercial market
will depend upon management's evaluations of market potential, costs,
competitive benefits, regulatory approval and certain manufacturing
considerations, applicable to each product. There can be no assurances that
these products will be commercially marketed.
Professional Products
HyTech markets its hand and body moisturizer on a limited basis
directly to health care professionals. An independent clinical study indicates
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.
HyTech has also developed, and currently manufactures and sells on a
limited basis, a group of Hydron polymer-based products for dental
professionals under the Hydrocryl(Registered Mark) brand name. These include a
heat cured material used in the manufacturing of dentures, as well as cold
cure kits used in connection with relining or repairing 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 acrylic dentures
and denture repair kits, which are not hydrophilic.
Topical Drug Delivery System
Management believes that HyTech's patented Hydron emulsion 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 with which the treated skin may come into contact.
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During Fiscal 1996, HyTech applied its drug delivery system to
topical analgesics, and in June 1996 launched an over-the-counter product for
the relief of minor arthritis and sore muscle pain. HyTech also created a
Hydron Pharmaceuticals division to develop and market additional OTC products
based on this technology, several of which management expects to launch in
Fiscal 1997.
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
program, 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 initial term of the QVC License Agreement ran through April 1996,
and the term is automatically renewable for like terms if QVC purchases
certain escalating minimum quantities of product. QVC met the minimum purchase
requirements in order to maintain such exclusive rights for the initial two
(2) year term of the contract, and the term of the QVC License Agreement was
renewed. 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. 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.
Amended Agreement with QVC
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On July 19, 1996 HyTech entered into an amended license agreement
effective as of May 31, 1996 (the "Amendment") with QVC, which amends the QVC
License Agreement. The Amendment provides HyTech with certain retail marketing
rights to its Hydron brand product lines, (i.e., traditional department
stores, specialty stores, boutiques and beauty salons) and catalog sales, and
significantly higher minimum product purchase requirements for QVC in order
for QVC to maintain its exclusive rights to market Hydron brand consumer
products within North, South and Central America through direct response
television. In return, HyTech pays QVC a royalty on its retail sales of
consumer products in North, South and Central America.
The Amendment permits QVC to maintain its exclusive rights if QVC
purchases certain escalating minimum quantities of product over a two-year
term ending May 31, 1998. In return for such increased minimums, HyTech has
decreased the prices at which it sells Hydron brand consumer products to QVC.
Products sold to QVC or its affiliates for resale through infomercials are
excluded from the calculation of such minimum purchases levels. QVC has no
obligation to purchase Hydron brand consumer products except to maintain
exclusivity under the Amendment, which renews automatically for additional
two-year terms as long as the annual minimum purchase levels are met. No
assurances can be given that QVC will meet such escalating minimum purchase
levels in order to maintain its exclusive rights.
In conjunction with the execution and delivery of the Amendment, QVC
has paid HyTech $1.25 million in payment for the exercise of warrants to
purchase 500,000 shares of Common Stock, $.01 per share, ("Common Stock") of
HyTech at $2.50 per share. Further, HyTech has granted an additional warrant
to QVC to purchase 500,000 shares of Common Stock at $2.75 per share for a
five year period. Further still, with the exception of the aforementioned
warrant, QVC has agreed to a standstill provision not to purchase additional
shares of Common Stock without the consent of HyTech.
Concurrent with the execution and delivery of the Amendment, and as
part of the overall transaction, HyTech has granted to DTR Associates, a
Massachusetts limited partnership ("DTR"), an option to purchase 1.5 million
shares of Common Stock at the purchase price of $.01 per share (the "DTR
Option"). As the result of such grant, HyTech incurred a one-time non-cash
charge against earnings of approximately $3.1 million for the third quarter of
1996, which had no effect upon net shareholder's equity of HyTech. DTR had
previously introduced HyTech to QVC, had certain retail distribution rights
and was receiving a royalty payment from QVC on net sales from direct response
television. DTR terminated its right to receive such royalty payments and
relinquished its retail distribution rights in return for the DTR Option. If
the minimum purchase level for the first renewal period was met under the
License Agreement, DTR would have received approximately $5 million in royalty
payments over the next two years. In January 1997 DTR exercised its option.
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Finally, HyTech through its wholly-owned subsidiary, Hydron Direct,
Inc., entered into an agreement with QDirect Ventures, Inc., an affiliate of
QVC Inc., to form a new joint venture known as Hydromercial Partners to
promote and sell HyTech's Hydron(Registered Mark) polymer based skin care line
by means of a full length program commercial ("Infomercial"). See
"Marketing-Infomercial."
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/cosmetic 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 to National Patent of approximately
$338,000 for net product sales in Fiscal 1995 and approximately $387,000 for
sales in Fiscal 1996 under this agreement.
Foreign Operations
Direct foreign sales by HyTech in Fiscal 1996 were not significant as
a percentage of consolidated net sales. However, in November 1996, HyTech
signed an agreement for conventional retail sales with Doctors Formula Pty.
Ltd., an Australia-based health and beauty products distributor. The agreement
provides that Hydron products be sold for the first time in retail stores in
Australia and New Zealand, and is subject to certain escalating minimum
product purchase requirements. HyTech has reserved the right to sell its
products through electronic retailing in these markets.
In addition, HyTech markets its products in Europe through a QVC
affiliate in the United Kingdom. "Hydron Care" programming aired twenty-seven
(27) hours in
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Fiscal 1996 and twenty-eight (28) hours in Fiscal 1995 on the QVC affiliate in
the United Kingdom. Management 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 as amended.
Manufacturing
Hydron polymer-based products are manufactured exclusively for HyTech
by independent third parties. HyTech has principally used one cosmetic filler
because of its quality manufacturing and reasonable cost. During Fiscal 1996,
however, HyTech utilized additional third party manufacturers to produce
select new products. Also, HyTech and its primary cosmetic filler have
established relationships with other third party cosmetic fillers who could
produce HyTech's cosmetic products should increased capacity be required. To
date, contract manufacturing has permitted HyTech to meet rapidly escalating
inventory requirements in a timely manner. All raw materials and packaging
components for HyTech's consumer and professional product lines are readily
available to HyTech.
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, 1996, HyTech maintained inventory valued at
approximately $2.8 million, as compared to approximately $4.0 million at
December 31, 1995. The decrease in the amount of inventory resulted from
increased sales volume to QVC, offset by new product introductions.
HyTech has generally delivered its orders to QVC 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, 1996 or December 31, 1995. 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. Orders are generally shipped to customers of the Hydron Magalog within
a few days of placement of an order.
The Amended License Agreement provides that QVC purchase products
directly from HyTech for resale to consumers, and HyTech receive payment from
QVC thirty (30) days after QVC's receipt of such goods. In view of the thirty
(30) day payment terms in connection with sales to QVC and to the Infomercial
Partnership,
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management does not anticipate any difficulty in financing foreseeable inventory
requirements.
Research and Development
HyTech's research and development efforts during Fiscal 1996 aimed to
achieve greater diversification among HyTech's product lines, by broadening
the brand's appeal to an aging baby boomer marketplace, as well as younger and
older consumers. During the fiscal year ended December 31, 1996, HyTech's
contract research and development program completed development of an eye
makeup remover; an oil-free tinted moisturizers; a blemish concealer; a line
smoothing serum; a topical analgesic; a lip moisturizer with sunscreen; a
soap-free, botanical body scrub; a soap-free cleansing bar; and a botanical
hair styling gel, luminating spray and finishing spray.
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 1996 during 1997, 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. Management also anticipates devoting greater
resources in Fiscal 1997 to developing over-the-counter products, and is
exploring a strategic relationship with a fragrance company for the addition
of a fragrance line.
Vitamins, Minerals and Nutritional Supplements
In March 1997, HyTech entered into a manufacturing and supply,
"turn-key" agreement with a leading vitamin supplier for a vitamin, mineral
and nutritional supplement line to complement HyTech's facial, body and hair
care regimes. Management anticipates marketing vitamins, minerals and
nutritional supplements as part of a healthy skin care program through the
company's wholly-owned subsidiary, Hydron Pharmaceuticals, utilizing HyTech's
Magalog, web site, and electronic retailing. As HyTech has had no experience
in marketing vitamins, minerals and nutritional supplements, no assurances can
be given that this new line will be successful to any degree.
12
<PAGE>
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
moisture-attracting film that is non-greasy; is not dissolved by sebaceous
oils or perspiration; does not emulsify skin's natural oils and humectants;
and allows skin to breathe (air and moisture permeable). The film is insoluble
in water and resistant to rub-off, but can easily be removed with soap and
water.
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; 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.
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 having patents for an emulsification process
adaptable to an array of consumer goods strengthens its ability to bring
Hydron-based products to the marketplace, and that holding international
patents facilitates HyTech's efforts to market its products in other
countries. HyTech is aggressively pursuing new patentable technologies for
both cosmetic and pharmaceutical products.
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. its topical analgesic and
products that contain a sunscreen, are also classified as over-the-counter
drugs. Additional regulatory requirements for such products include additional
labeling requirements, registration of the manufacturer and semi-annual update
of the drug list.
Employees
13
<PAGE>
HyTech currently has eighteen (18) full-time employees, four (4) of
whom are executive officers or directors. HyTech also maintains relationships
with various consultants, who assist HyTech with new product development,
packaging design, and marketing, and hires temporary help in connection with
the increased operations associated with promotions.
In August 1996, HyTech expanded its corporate communications
department to manage all marketing communications activities, as well as
public and investor relations functions, in-house. In addition, during the
fourth quarter of Fiscal 1996 and the first quarter of Fiscal 1997, HyTech
significantly expanded its customer care department to accommodate catalog
orders and to respond promptly to consumer inquires.
Item 2. Properties
HyTech maintains its offices at Yamato Office Center, 1001 Yamato
Road, Suite 403, Boca Raton, Florida 33431, and occupies approximately 4,000
square feet of office space. During the first quarter of Fiscal 1997,
construction began to develop an additional 1,500 square feet of adjacent
office space, to accommodate expanded customer service and marketing
departments. The term of HyTech's 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 it main warehouse space of approximately 31,000
square feet at 95 Mayhill Street, Saddle Brook, New Jersey 07663 pursuant to
leases which expires in August 2000 at a monthly rents of approximately
$14,000.
In addition, HyTech maintains additional warehouse space of 1,200
square feet 6600 West Rogers Circle, Boca Raton, Florida 33487 , which expires
in September 1998 at a monthly rental of approximately $700. HyTech has
recently acquired additional warehouse and shipping space of approximately
3,200 square feet at 1120 Holland Drive, Suites nos. 9 and 19, Boca Raton,
Florida, pursuant to a lease which expires in March 2000, at a monthly rental
of approximately $2,250.
Management believes that such facilities are satisfactory for its
present needs.
Item 3. Legal Proceedings
HyTech is not a party to, and its property is not the subject of, any
material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders None.
14
<PAGE>
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
HyTech's Common Stock trades on the Nasdaq National Market tier of
The Nasdaq Stock Market ("The Nasdaq National Market") under the symbol HTEC.
The following tables indicate the closing prices for each quarter of HyTech's
last two (2) fiscal years, as reported by The Nasdaq National Market.
Fiscal 1996 High Closing Price Low Closing Price
- ----------- ------------------ -----------------
Fourth Quarter 2-1/4 1-7/8
Third Quarter 2-3/4 2
Second Quarter 3-1/4 2-7/16
First Quarter 3-3/8 1-13/16
Fiscal 1995 High Closing Price Low Closing Price
- ----------- ------------------ -----------------
Fourth Quarter 3-1/16 1-3/4
Third Quarter 5-1/16 2-15/16
Second Quarter 5-1/8 4-1/4
First Quarter 5-3/8 3-7/8
As of March 1, 1997, there were 4,230 record holders of HyTech's
Common Stock. No cash dividends were paid during the fiscal year ended
December 31, 1994 or at any time prior thereto. In January 1995, HyTech
instituted a regular quarterly cash dividend of two and one-half cents ($.025)
per share and paid a dividend in March, June, September and December 1995 and
1996. In March 1997, HyTech's Board of Directors declared a two and one-half
cents ($.025) per share dividend for record holders on March 17, 1997 and
payable on March 31, 1997. 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.
15
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Fiscal Years Ended December 31,
1996 1995 1994 1993 1992
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales $ 8,112,672 $ 7,303,468 $ 8,640,234 $ 698,109 $ 168,833
Distribution $ 3,149,718 - - - -
Agreement
Expense
------------ ----------- ----------- ----------- -----------
Operating income
(loss) $ (2,997,070) $ 1,566,212 $ 3,418,599 $(1,446,944) $(1,453,752)
------------ ----------- ----------- ----------- -----------
Interest and
investment $ 308,998 $ 325,010 $ 219,617 $ 85,909 $ 127,569
income
------------ ----------- ----------- ----------- -----------
Net income $ (2,823,977) $ 1,782,588 $ 3,638,206 $(1,361,085) $(1,338,225)
(loss)
------------ ----------- ----------- ----------- -----------
Net income
(loss)
per common $(.12) $ .08 $ .16 $(.07) $(.07)
share
------------ ----------- ----------- ----------- -----------
Total assets $ 12,741,140 $12,992,111 $13,809,583 $ 7,635,267 $ 6,657,326
------------ ----------- ----------- ----------- -----------
Total
stockholders' $ 11,981,480 $12,561,548 $13,013,459 $ 7,456,653 $ 6,610,889
equity
============ =========== =========== =========== ===========
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
HyTech sells specialty personal care/cosmetic 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 Amended 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
16
<PAGE>
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 1996 versus Fiscal 1995
Net sales for fiscal year ended December 31, 1996 ("Fiscal 1996") of
$8,112,672 reflect a increase of $809,204, or 11% from the $7,303,468 of net
sales for the fiscal year ended December 31, 1995 ("Fiscal 1995"). This
increase is primarily the result of QVC's purchasing patterns, along with
increased sales to the Infomercial Joint Venture and QVC Europe. QVC's
purchasing patterns are primarily affected by the timing of the Hydron Care
programming.
Approximately 97% and 98% of HyTech's sales during Fiscal 1996 and
Fiscal 1995, respectively 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 6 percentage points to 59% in
Fiscal 1996, compared to 65% in Fiscal 1995. This decrease is due primarily to
fluctuations in the mix of products sold to QVC in those periods, increased to
the Infomercial Partnership (at lower gross margins), and reduced pricing on
products sold to QVC as a result of the Amended License Agreement. Management
anticipates gross profit margins, relating to sales to QVC, to remain at
approximately 60%.
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 increased 181% to
$497,899 in Fiscal 1996, compared to $177,468 in Fiscal 1995. The amount of
R&D expenses per year varies, depending on the steps taken towards development
during such year, as well as the number and type of products under development
at such time. Included in R&D expense in Fiscal 1996 is approximately $200,000
of royalty fees paid to a consultant relating to product development under a
contract expiring on December 31, 1996.
Selling, general and administrative expenses in Fiscal 1996 increased
45% to $3,324,021 from $2,288,841 in Fiscal 1995. This increase is
attributable to an overall increase in salary requirements, expansion of
full-time staff, including customer service personnel, additional office and
warehouse rent and increased advertising expense, primarily relating to the
production, distribution and advertising for HyTech's new Magalog, a direct
mail catalog launched in November 1996.
17
<PAGE>
Distribution Agreement expense of $3,149,718 pertains to costs
incurred in connection with the execution of the Amended License Agreement. In
connection with the execution and delivery of the Amended License Agreement,
HyTech granted DTR an option to purchase 1.5 million shares of the company's
common stock at $.01 per share, resulting in a one-time non-cash charge
against earnings of approximately $3.1 million. This non-cash charge has no
effect on the company's shareholders equity.
Interest and investment income in Fiscal 1996 decreased 5% percent,
to $308,998 from $325,010 in Fiscal 1995, primarily as a result of lower
interest rates. HyTech maintains a conservative investment strategy, deriving
investment income primarily from U.S. Treasury securities.
Net income for Fiscal 1996 decreased to a net loss of $2,823,977 from
net income of $1,782,588 for Fiscal 1995, primarily as a result of the factors
discussed above. Discounting the effect of the expenses associated with the
Amended License Agreement, HyTech would have reported net income of $325,741, or
$.01 per share for Fiscal 1996.
- -------------------------------------------------------------------------------
(Forward Looking Statement)
In its Quarterly Report on Form 10-Q for the period ended September
30, 1996, HyTech made the forward looking statement to the effect that, based
upon proposed increases in air time that QVC would be required to make if it
is to meet the minimum purchase levels necessary to maintain its exclusive
rights, then management believed that HyTech would have record sales and
earnings for Fiscal 1997. Such statement was qualified by the following: "This
assumes, however, that QVC makes its purchases on a pro rata basis over the
annual term of the Amended License Agreement. Further, 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 exclusive rights."
As of March 13, 1997, QVC has made purchases of approximately $5.5
million during the first term of the Amended License Agreement, and based upon
present purchasing patterns, it appears that QVC will be approximately $5.0
million short of making the minimum purchase level necessary to maintain its
exclusive license. Management of QVC has requested that HyTech waive the
minimum purchase requirement of the first year of the Amended License
Agreement, which expires on May 31, 1997.
If an agreement is reached on waiving the minimum purchase levels for
the first term of the Amended License Agreement, then no assurance can be
given that HyTech will have record sales and earnings for Fiscal 1997. If no
agreement is reached with regard to waiving the minimum purchase requirement
for the first term, then either, (1) QVC will not make the minimum purchases
and HyTech will be able to terminate such relationship; or (2) QVC will make
an usually large purchase in order to maintain its exclusive rights prior to
the end of the term or the following thirty (30) day cure period.
18
<PAGE>
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. 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, as well as other
access to direct response television. No assurance can be given that HyTech
could reach any substantial portion of such existing customer base in the
foreseeable future utilizing any such alternative methods.
If QVC makes an unusually large purchase of Hydron products in order
to maintain its exclusive rights for the next twelve (12) month term of the
Amended License Agreement, then HyTech may experience unusually disparate
quarters, as it may take a substantial time for QVC to sell the products
purchased in the unusually large purchase order. Further, it will be highly
unlikely that QVC would make the minimum purchase levels for the following
term. Therefore, QVC may not provide HyTech with any substantial quantity or
quality of on-air hours in view of the impending termination of the
relationship.
(End of Forward Looking Statement)
- -------------------------------------------------------------------------------
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
19
<PAGE>
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,
20
<PAGE>
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.
Liquidity and Financial Resources
HyTech's overall financial condition remains strong as reflected in
the Consolidated Balance Sheets at December 31, 1996 compared to December 31,
1995. Working capital at December 31, 1996 was approximately $8.8 million and
cash flow from operations in Fiscal 1996 increased to $2,536,643 from
$1,716,931 in Fiscal 1995. 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 days after QVC's receipt of such
goods.
Investing activities used $238,570 in Fiscal 1996, as compared to
$859,509 in Fiscal 1995. 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.
21
<PAGE>
Financing activities in Fiscal 1996 and Fiscal 1995 related primarily
to the payment of cash dividends totaling $2,293,952 and $2,263,374,
respectively. Financing activities in Fiscal 1996 also generated $1,253,000 of
proceeds from the issuance of common stock.
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.
In November 1996 management commenced marketing of its products
through its catalog and has supported such marketing efforts with print
advertisements in national women's magazines, as well as athletic sponsorships
and community events. However, management recognizes that HyTech may not have
the financial resources to sustain a major, national advertising campaign to
successfully market its products. 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. In the event of the termination of the
QVC License Agreement, HyTech may seek other access to direct response
television to market its products.
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.
22
<PAGE>
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 10, 1997.
Name Position
- ---- --------
Harvey Tauman Director, Chairman of the Board,
Chief Executive Officer, President and
Treasurer
Richard Tauman Director, Chief Operating Officer 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
Thomas G. Burns Vice President, Finance and Chief
Financial Officer
Business Experience
Harvey Tauman, age 55, 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, Chief
Operating Officer and Executive Vice President.
Richard Tauman, age 30, became a Director and Vice President,
Production, in March 1994. In April 1995 he was appointed Executive Vice
President, and in May
23
<PAGE>
1996 he was appointed Chief Operating Officer. 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, Chief Executive
Officer, President and Treasurer.
Chaudhury M. Prasad, age 50 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 83 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. During Fiscal 1996 Mr.
Fiur filed one (1) Form 4 approximately one (1) week late disclosing one (1)
purchase of HyTech Common Stock.
Samuel M. Leb, age 73 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 56 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 41 and a Director since August 1992, has been
a practicing attorney since 1981 and is general counsel to the Company. 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., his predecessor firm,
which was 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 50, 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.
24
<PAGE>
Hugues Lamotte, age 54, 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.
Thomas G. Burns, age 39, 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, 1996, December 31, 1995 and December 31, 1994:
25
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Awards
- -------------------------------------------------------------------------------------------------------------------
Name and Principal Position Year Salary ($) Bonus ($) Other Number All Other
Annual of Compensation
Compensation Options
($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Harvey Tauman, Chief Executive Officer, 1996 422,604 100,000 50,660(2) -0- -0-
President and Treasurer(1) 1995 402,480 100,000 35,900(3) 100,000 -0-
1994 335,400 150,000 4,940 200,000 -0-
Richard Tauman, Chief Operating Officer and 1996 102,496 15,000 2,860 -0- -0-
Executive Vice President(4) 1995 74,360 12,500 -0- 60,000 -0-
1994 58,525 10,500 523,813(5) -0- -0-
Chaudhury M. Prasad, Vice President, 1996 80,288 10,000 -0- -0- -0-
Operations and Secretary(6) 1995 76,440 7,500 -0- 2,500 -0-
1994 72,800 7,500 679,939(7) -0- -0-
Karen Gray, Vice President, Corporate 1996 57,011 10,000 -0- -0- -0-
Communications(8) 1995 60,060 10,000 -0- 10,000 -0-
1994 54,000 7,500 103,750(9) -0- -0-
Thomas G. Burns, Vice President, Finance 1996 92,872 10,000 4,800 -0- -0-
and Chief Financial Officer(10) 1995 88,452 10,000 4,800 10,000 -0-
1994 48,600 5,000 2,800 50,000 -0-
============================================================================================================
</TABLE>
- --------
(1) As of December 31, 1996 Mr. Tauman beneficially held 2,000,000
restricted shares of Common Stock, with an aggregate value of $3,812,500 based
upon the closing price of HyTech's Common Stock as reported by the Nasdaq
Stock Market, National Market system, of $1.90625.
(2) Consists of $48,762 of salary for vacation time not taken and $4,940
for insurance premiums.
(3) Consists of $30,960 of salary for vacation time not taken and $4,940
for insurance premiums.
(4) As of December 31, 1996 Mr. Tauman beneficially held 15,000 restricted
shares of Common Stock, with an aggregate value of $28,594 based upon the
closing price of HyTech's Common Stock as reported by the Nasdaq Stock Market,
National Market system, of $1.90625.
(5) 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.
(6) As of December 31, 1996 Mr. Prasad held 200,200 restricted shares of
Common Stock, with an aggregate value of $381,631 based upon the closing price
of HyTech's Common Stock as reported by the Nasdaq Stock Market, National
Market system, of $1.90625.
(7) Represents income attributable to the difference between the exercise
price of stock options exercised and the fair market value of the Common Stock
on the date of such exercise.
(8) Ms. Gray, who left the Company in November 1996, did not hold any
restricted shares of Common Stock as of December 31, 1996.
(9) Represents income attributable to the difference between the exercise
price of stock options exercised and the fair market value of the Common Stock
on the date of such exercise.
(10) Mr. Burns did not hold any restricted shares of Common Stock as of
December 31, 1996.
26
<PAGE>
During Fiscal 1996 no stock option grants were made to HyTech's Chief
Executive Officer or any other persons who were executive officers of HyTech
and its subsidiaries for Fiscal 1996.
The following table sets forth certain information relating to option
exercises effected during Fiscal 1996, and the value of options held as of
such date by HyTech's Chief Executive Officer and all other persons who were
executive officers of HyTech and its subsidiaries for Fiscal 1996:
AGGREGATE OPTION EXERCISES FOR FISCAL 1996
AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value(11) of
Options at Unexercised In-the-
December 31, 1996 money Options at
December 31, 1996
- ---------------------------------------------------------
Name Shares Acquired on Value ($) Exercisable/ Exercisable/
Exercise Realized(12) Unexercisable Unexercisable
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Harvey Tauman -0- -0- 300,000/-0- -0-/-0-
- -----------------------------------------------------------------------------------------------------
Richard Tauman -0- -0- 60,000/-00 -0-/-0-
- -----------------------------------------------------------------------------------------------------
Chaudhury M. -0- -0- 2,500/-0- -0-/-0-
- -----------------------------------------------------------------------------------------------------
Prasad
- -----------------------------------------------------------------------------------------------------
Karen Gray -0- -0- 90,000/-0- 14,688/-0-
- -----------------------------------------------------------------------------------------------------
Thomas G. Burns -0- -0- 40,000/20,000 -0-/-0-
=====================================================================================================
</TABLE>
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
- --------
(11) Total value of unexercised options is based upon the closing price
($1.90625) of the Common Stock as reported by the Nasdaq Stock Market on
December 31, 1996.
(12) 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.
27
<PAGE>
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 during
Fiscal 1996 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
28
<PAGE>
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, Joseph A. Caccamo, Richard Banakus and Hugues Lamotte were granted
options to purchase 10,000 shares of Common Stock at the exercise price of $2.50
per share in September 1996.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of the close of
business on March 13, 1997 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 (ten (10) 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 Amount and Nature Approximate
Beneficial Owner of Beneficial Percent of Class
Ownership
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Harvey Tauman 3,925,000(13) 15.7%
Hydron Technologies, Inc.
1001 Yamato Road, Suite 403
Boca Raton, FL 33431
Richard Tauman 75,000(14) Less than 1%
Hydron Technologies, Inc.
1001 Yamato Road, Suite 403
Boca Raton, FL 33431
Chaudhury M. Prasad 202,700(15) Less than 1%
Hydron Technologies, Inc.
1001 Yamato Road, Suite 403
Boca Raton, FL 33431
Frank Fiur 274,000(16) 1.1%
469 W. 83rd Street
Hialeah, FL 33041
- -----------------------------------------------------------------------------------------------------------
</TABLE>
- --------
(13) 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; 45,000 shares held as trustee
for emancipated children; and 100,000 shares as a co-trustee. Also includes an
irrevocable proxy to vote 1,480,000 shares.
(14) Consists of 15,000 shares held directly; and options to purchase 60,000
shares.
(15) Consists of 200,200 shares held directly and options to purchase 2,500
shares.
(16) Consists of 130,000 shares held directly, 114,000 shares held by his
spouse; and options to purchase 30,000 shares of Common Stock. Mr. Fiur
disclaims beneficial ownership of 114,000 shares held by his spouse.
29
<PAGE>
Samuel M. Leb, M.D. 312,252(17) 1.3%
1905 So. Oak Haven Circle
No. Miami Beach, FL 33179
Nester M. Cardero, C.P.A. 40,000(18) Less than 1%
14222 S.W. 97th Terrace
Miami, FL 33183
Joseph A. Caccamo, Esq. Less than 1%
1001 Yamato Road, Suite 65,500(19)
403, Boca Raton, FL 33431
Thomas G. Burns 60,000(20) Less than 1%
Hydron Technologies, Inc.
1001 Yamato Road, Suite 403
Boca Raton, FL 33431
Richard Banakus 1,520,000(21) 6.1%
82 Verissimo Drive
Novato, CA 94947
Hugues Lamotte 420,000(22) 1.7%
Atlas Capital Limited
166 Piccadilly
Foxglove House
London, England W1V9DE
Victor Grillo(23) 1,480,000 5.9%
150 East Palmetto Park Road
Suite 700
Boca Raton, FL 33432
- --------
(17) Consists of 151,152 held as an IRA beneficiary, 6,000 shares held
directly, 80,000 shares held as a co-trustee and 35,100 shares held as a
co-trustee and a beneficiary; and options to purchase 40,000 shares.
(18) Consists of 1,500 shares held indirectly through an IRA, 1,500 shares
held by his spouse in an IRA, 7,000 shares of Common Stock held directly and
options to purchase 30,000 shares. Mr. Cardero disclaims beneficial ownership of
1,500 shares held by his spouse in an IRA.
(19) Consists of options to purchase 65,000 shares and 500 shares held as
trustee for the benefit of his children.
(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) Information derived from Schedule 13D Amendment No. 1 dated March 17,
1997 of Victor Grillo and DTR Associates, Limited Partnership.
30
<PAGE>
All officers and directors as a 6,894,452(24) 27.0%
group (10 persons)
Item 13. Certain Relationships and Related Transactions
Joseph A. Caccamo, a director of HyTech, is general counsel to
HyTech. Mr. Caccamo was paid $78,862 in legal fees and for reimbursement of
disbursements incurred on behalf of HyTech during Fiscal 1996. Commencing as
of August 1996, HyTech provides office space for Mr. Caccamo. Mr. Caccamo was
granted options in Fiscal 1996 to purchase 10,000 shares at $2.50, (a price
above the fair market value at the time of grant), and received a non-employee
director's fee of $5,000.
- --------
(24) Consists of 4,686,952 shares held directly and options to purchase
727,500 shares. Also includes an irrevocable proxy to vote 1,480,000 shares.
31
<PAGE>
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
1996 and 1995
Consolidated Statements of Operations for the F-3
Years Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' F-4
Equity for the Years ended December 31, 1996,
1995 and 1994
Consolidated Statements of Cash Flows for the F-5-6
Years Ended December 31, 1996, 1995 and 1994
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.
32
<PAGE>
(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).
33
<PAGE>
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
34
<PAGE>
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.
35
<PAGE>
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:
36
<PAGE>
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 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, 1995, and filed therein as the same exhibit
number, unless otherwise noted:
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
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Current Report on Form 8-K (Date of
Report - July 19, 1996), and filed therein as the same exhibit number, unless
otherwise noted:
37
<PAGE>
Exhibit No. and Description
4.11 Warrant Purchase Agreement dated as of May 31, 1996 between QVC and
HyTech, as Exhibit no. 4.1 therein
10.43 First Amendment to Licensing Agreement dated as of May 31, 1996 between
QVC and HyTech as Exhibit no. 10.1 therein
10.44 Letter Agreement between QDirect, Inc. And Hydron Direct, Inc. dated May
31, 1996 as Exhibit no. 10.2 therein
38
<PAGE>
The following exhibits are filed herewith:
10.45 Lease Agreement between Industrial Office Associates and Hydron
Technologies, Inc. dated March 10, 1997
10.46 Sponsorship Agreement with Pro Player Stadium dated as of January 1, 1997
10.47 Sponsorship Agreement with Miami Dolphins dated as of January 1, 1997
10.48 Executive Suite License Agreement dated March 4, 1997
10.49 Sponsorship Agreement with Miami Heat Limited Partnership and Sunshine
Network dated December 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
1996.
39
<PAGE>
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, 1996 and 1995,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1996.
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, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
West Palm Beach, Florida
February 19, 1997.
F-1
<PAGE>
Hydron Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
----------------------------------------------
1996 1995
----------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash, including cash equivalents of $5,441,109
and $4,235,295 at December 31, 1996 and 1995 $ 5,603,708 $ 4,346,587
Trade accounts receivable 611,731 1,002,969
Inventories 2,826,684 3,998,304
Prepaid expenses and other current assets 517,583 130,907
----------------------------------------------
Total current assets 9,559,706 9,478,767
Property and equipment, less accumulated depreciation
of $249,479 and $163,830 at December 31, 1996
and 1995 579,692 620,317
Deferred product costs, less accumulated
amortization of $4,005,576 and $3,697,400 at
December 31, 1996 and 1995 1,962,220 2,264,061
Investment in Joint Venture 238,128 221,366
Deposits 401,394 407,600
----------------------------------------------
$ 12,741,140 $ 12,992,111
----------------------------------------------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 453,337 $ 235,645
Accrued liabilities 306,323 194,918
----------------------------------------------
Total current liabilities 759,660 430,563
Commitments
Stockholders' equity:
Common Stock; $.01 par value; 30,000,000 shares authorized, 23,228,511 and
22,639,816 shares issued and outstanding at December 31, 1996
and 1995 232,285 226,398
Additional paid-in capital 20,351,654 18,113,632
Accumulated deficit (8,602,459) (5,778,482)
----------------------------------------------
Total stockholders' equity 11,981,480 12,561,548
----------------------------------------------
$ 12,741,140 $ 12,992,111
===============================================
</TABLE>
See accompanying notes.
F-2
<PAGE>
Hydron Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
---------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 8,112,672 $ 7,303,468 $ 8,640,234
Cost of sales 3,323,056 2,577,606 2,435,557
---------------------------------------------------------
Gross profit 4,789,616 4,725,862 6,204,677
Expenses:
Royalty expense 386,679 337,575 386,643
Research and development 497,899 177,468 211,909
Selling, general and administrative 3,324,021 2,288,841 1,842,414
Distribution agreement expense 3,149,718 - -
Amortization of deferred product costs 308,176 307,733 307,303
Depreciation and amortization 120,193 48,033 37,809
---------------------------------------------------------
7,786,686 3,159,650 2,786,078
---------------------------------------------------------
Operating income (loss) (2,997,070) 1,566,212 3,418,599
Other income (expense):
Interest and investment income 308,998 325,010 219,607
Equity in loss of joint venture (135,905) (78,634) -
---------------------------------------------------------
173,093 246,376 219,607
---------------------------------------------------------
Income (loss) before income taxes (2,823,977) 1,812,588 3,638,206
Income tax expense - 30,000 -
---------------------------------------------------------
Net income (loss) $ (2,823,977) $ 1,782,588 $ 3,638,206
=========================================================
Net income (loss) per common share $ (.12) $ .08 $ .16
=========================================================
Weighted average number of common
shares outstanding 22,905,175 23,138,665 22,666,970
=========================================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
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, 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 ($.10 per share) - - (2,263,374) - (2,263,374)
------------------------------------------------------------------------------------
Balance at December 31, 1995 22,639,816 226,398 18,113,632 (5,778,482) 12,561,548
Issuance of common stock
for services 86,695 867 183,994 - 184,861
Value of common stock options
issued for non-cash consideration - - 3,100,000 - 3,100,000
Issuance of common stock upon
exercise of stock options 502,000 5,020 1,247,980 - 1,253,000
Net loss - - - (2,823,977) (2,823,977)
Cash dividends ($.10 per share) - - (2,293,952) - (2,293,952)
------------------------------------------------------------------------------------
Balance at December 31, 1996 23,228,511 $232,285 $20,351,654 $ (8,602,459) $11,981,480
====================================================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
Hydron Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
Year ended December 31
1996 1995 1994
---------------------------------------------------
<S> <C> <C> <C>
Operating activities
Cash received from customers $ 8,503,910 $ 8,345,103 $ 6,857,170
Cash paid to suppliers and employees (6,245,766) (6,918,993) (6,663,432)
Proceeds from interest on investments 318,499 334,821 203,807
Cash paid for income taxes (40,000) (44,000) -
---------------------------------------------------
Net cash provided by operating activities 2,536,643 1,716,931 397,545
Investing activities
Purchase of investments (1,949,212) - (3,449,019)
Proceeds from sale of investments 1,949,212 - 3,449,019
Capital expenditures (79,568) (558,964) (56,801)
Payments for registering patents (6,335) (545) (12,504)
Investment in Joint Venture (152,667) (300,000) -
---------------------------------------------------
Net cash used by investing activities (238,570) (859,509) (69,305)
Financing activity
Proceeds from issuance of common stock 1,253,000 28,875 1,708,600
Dividends paid (2,293,952) (2,263,374) -
---------------------------------------------------
Net cash used (provided) by financing activities (1,040,952) (2,234,499) 1,708,600
---------------------------------------------------
Increase (decrease) in cash and cash equivalents 1,257,121 (1,377,077) 2,036,840
Cash and cash equivalents at beginning of year 4,346,587 5,723,664 3,686,824
---------------------------------------------------
Cash and cash equivalents at end of year $ 5,603,708 $ 4,346,587 $ 5,723,664
===================================================
Continued on following page.
</TABLE>
F-5
<PAGE>
Hydron Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
----------------------------------------------------
<S> <C> <C> <C>
Reconciliation of net income (loss) to net cash
provided by operating activities
Net income (loss) $ (2,823,977) $ 1,782,588 $ 3,638,206
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 428,369 355,766 345,112
Equity in losses of joint venture 135,905 78,634 -
Issuance of common stock for services 184,861 - 210,000
Issuance of stock options for non-cash consideration 3,100,000 - -
Changes in operating assets and
liabilities:
Trade accounts receivable 391,238 1,041,635 (1,783,064)
Inventories 1,171,620 (738,294) (2,610,680)
Prepaid expenses and other current
assets (386,676) (30,237) (19,539)
Deposits 6,206 (407,600) -
Accounts payable 217,692 (160,217) 267,160
Accrued liabilities 111,405 (205,344) 350,350
----------------------------------------------------
Total adjustments 5,360,620 (65,657) (3,240,661)
----------------------------------------------------
Net cash provided by
operating activities $ 2,536,643 $ 1,716,931 $ 397,545
----------------------------------------------------
</TABLE>
See accompanying notes.
F-6
<PAGE>
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
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.
F-7
<PAGE>
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 Financial Accounting Standards Board (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. HyTech analyses undiscounted cash flows on
an annual basis. No impairment losses have been recognized in the three year
period ended December 31, 1996.
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.
F-8
<PAGE>
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 and has adopted the disclosure-only provisions
of FASB Statement No. 123, "Accounting and Disclosure of Stock-Based
Compensation". Accordingly, no compensation cost has been recognized for
HyTech's stock option plans.
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.
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
$665,000, $205,000 and $1,000 for 1996, 1995 and 1994, respectively.
F-9
<PAGE>
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Inventories
At December 31, 1996 and 1995, inventories consist of the following:
1996 1995
------------------------------------
Finished goods $1,880,112 $3,044,890
Work-in-process 95,241 162,794
Raw materials and components 851,331 790,620
------------------------------------
$2,826,684 $3,998,304
------------------------------------
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.
F-10
<PAGE>
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 had a one-third interest in the profits and losses of the
Joint Venture, which had 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 was 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 produced. 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 $458,000 and $300,000, contributed in equal amounts by
the Joint Venture participants, was contributed during 1996 and 1995,
respectively to purchase additional air time. Sales to the Joint Venture
totalled approximately $459,000 and $230,000 in 1996 and 1995, respectively.
On July 19, 1996, in conjunction with the amended QVC license agreement (see
Note 5), the Joint Venture was dissolved and a new partnership (New Hydromercial
Partners) was formed between HyTech and QVC to continue the same activities as
the Joint Venture. Sales to New Hydromercial Partners totalled approximately
$60,000 in 1996.
5. Significant Customer
HyTech presently sells a substantial portion of its products to QVC and
affiliates. During the years ended December 31, 1996, 1995 and 1994,
approximately 97%, 98% and 98%, respectively, of HyTech's sales were made to QVC
and its affiliates. At December 31, 1996 and 1995, amounts due from QVC included
in trade accounts receivable were approximately $592,000 and $847,000,
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. On July 19,
1996, HyTech and QVC modified their license agreement (Amended License
Agreement). The Amended License Agreement provides HyTech with certain retail
marketing rights, and increases the minimum product purchase requirements QVC
must meet on a bi-annual basis to maintain their exclusive rights to market
Hydron consumer products through direct response television.
F-11
<PAGE>
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Significant Customer (continued)
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.
The Amended License Agreement provides that certain retail marketing rights
formerly held by Direct to Retail (QVC granted these rights to DTR under a
separate agreement), revert back to HyTech and that QVC will no longer pay a
royalty on retail sales of Hydron products to Direct to Retail (DTR). The retail
marketing rights include prestige retail channels of distribution such as
traditional department and specialty stores, boutique stores and beauty salons,
as well as catalog sales. QVC will receive a commission from HyTech on these
sales. Also concurrent with the execution of the Amended License Agreement, and
as part of the overall transaction, HyTech granted DTR an option to purchase 1.5
million shares of the Company's common stock at $.01 per share. As a result,
HyTech incurred a one-time non-cash charge against earnings of
approximately $3.15 million (Distribution Agreement Expense), which had no
effect on the Company's shareholders' equity. Also, QVC exercised options to
purchase 500,000 shares of HyTech's common stock, at $2.50 per share, and paid
HyTech $1.25 million. HyTech also granted to QVC warrants to purchase an
additional 500,000 shares at $2.75 per share. Both QVC and DTR have agreed to
standstill provisions not to purchase additional shares of HyTech's stock
without the Company's permission and DTR has given its proxy for its shares to
Harvey Tauman, HyTech's president, for as long as DTR holds them.
F-12
<PAGE>
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Income Taxes
For the years ended December 31, 1996 and 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 $493,000 and $2,031,000, respectively. 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.
The reconciliation of income tax rates, computed at the U.S. federal statutory
tax rates, to income tax expense is as follows:
1996 1995 1994
-------------------------------
Tax at U.S. statutory rates (34)% 34 % 34 %
State income taxes, net of federal tax benefit (4) 4 4
Valuation allowance adjustments 38 (36) (38)
Net effect of net operating loss not recognized - - -
-------------------------------
-0- % 2 % -0-
===============================
At December 31, 1996, HyTech had the following available net operating loss
carryforwards for tax purposes, which may be used to offset taxable income in
future periods:
Expires December 31,
2001 $ 163,000
2002 876,000
2003 601,000
2004 1,173,000
2005 1,094,000
2006 - 2008 4,173,000
------------------
$ 8,080,000
------------------
The tax benefit relating to $2,719,000 of the above net operating loss
carryforwards will be charged to stockholders equity in the period in which the
benefit is recognized.
F-13
<PAGE>
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Income Taxes (continued)
HyTech utilizes the liability method of accounting for income taxes required by
Financial Accounting Standards Board Statement No. 109 (FASB 109), "Accounting
for Income Taxes." At December 31, 1996 and 1995, net tax benefits of
approximately $4,505,000 and $3,700,000, respectively, relating primarily to net
operating loss carryforwards which may be realized in the future and the
issuance of the DTR warrants, are recorded as a deferred tax asset, net of a
valuation allowance in an equal amount. The valuation allowance increased by
approximately $805,000 for the year ended December 31, 1996 as a result of the
utilization of net operating loss carryforwards, the issuance of the DTR
Warrants and the expiration of a capital loss carryforward.
7. Stock Options and Warrants
The number of shares of common stock reserved for issuance at December 31, 1996
and 1995 was 3,948,805 and 2,577,500, 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:
Number of Option Price
Options Per Share
-------------------------
Outstanding at December 31, 1993 140,000 .875 to 1.00
Stock options exercised (140,000) .875 to 1.00
---------
Outstanding at December 31, 1996, 1995 and 1994 -0-
=========
At December 31, 1996, there were no options available for grant under this plan.
The options that were exercised under the above plan in fiscal 1994 resulted in
proceeds of $123,750.
F-14
<PAGE>
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:
Number of Option Price
Options Per Share
Outstanding at December 31, 1993 292,500 .75 to 2.56
Stock options exercised (292,500) .75 to 2.56
---------
Outstanding at December 31, 1996, 1995 and 1994 -0-
=========
At December 31, 1996 there were no options available for grant under this plan.
The options under the above plan that were exercised in fiscal 1994 resulted in
proceeds of $377,789.
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:
F-15
<PAGE>
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Stock Options and Warrants (continued)
1989 Stock Option Plan (continued)
<TABLE>
<CAPTION>
Weighted
Average
Number of Option Price Exercise
Options Per Share Price
-----------------------------------------
<S> <C> <C> <C>
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, 1996 and 1995 76,000 1.438 to 3.00 2.16
===========
</TABLE>
These options expire five years from the date of the grant and all outstanding
options are exercisable at December 31, 1996. There were 9,500 options available
for grant under this plan at December 31, 1996. The options that were exercised
under the above plan in fiscal 1994 resulted in proceeds of $164,250.
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>
Weighted
Average
Number of Option Price Exercise
Options Per Share Price
-----------------------------------------
<S> <C> <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 3.04
Stock options expired (25,000) 5.00 5.00
---------
Outstanding at December 31, 1996 432,500 2.285 to 4.606 2.92
=========
</TABLE>
F-16
<PAGE>
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,
1996, a total of 412,500 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.
Such plan provides grants of 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>
Weighted
Average
Number of Option Price Exercise
Options Per Share Price
----------------------------------------
<S> <C> <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 4.18
Stock options granted 60,000 2.50 2.50
----------
Outstanding at December 31, 1996 180,000 2.50 to 5.688 3.62
==========
</TABLE>
These options expire five years from the date of the grant and all outstanding
options are exercisable at December 31, 1996. There were 50,000 options
available for grant under this plan at December 31, 1996. The options that were
exercised under the above plan in fiscal 1994 resulted in proceeds of $50,000.
F-17
<PAGE>
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>
Weighted
Number of Average
Options/ Price Exercise
Warrants Per Share Price
-------------------------------------------
<C> <C> <C>
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 2.56
Stock options granted 2,000,000 .01 to 2.75 .70
Stock options exercised (588,695) 1.50 to 2.50 2.44
Stock options expired (15,000) 4.625 4.63
------------
Outstanding at December 31, 1996 2,658,305 .01 to 3.00 1.17
=============
</TABLE>
The options and warrants outstanding at December 31, 1996 generally expire two
to five years after the date of grant. At December 31, 1996, all outstanding
options and warrants are exercisable.
The options under this plan that were exercised in fiscal 1996, 1995 and 1994
resulted in proceeds of $1,253,000, $28,875 and $992,811, respectively. In
addition, during 1996, options were exercised for services valued at $184,861.
See Note 5 relating to options exercised by QVC and options granted to DTR and
QVC in conjunction with the Amended License Agreement.
F-18
<PAGE>
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. STOCK OPTIONS AND WARRANTS (CONTINUED)
Pro forma information regarding net income and earnings per share is required by
FASB Statement No. 123, which also requires that the information be determined
as if the Company has accounted for its stock options granted subsequent to
December 31, 1994 under the fair value method of that Statement. The fair value
for these options was estimated at the date of the grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1996
and 1995, respectively: risk free interest rates of 6.5%; a dividend yield of
3.34% and 2.46%; volatility factors of the expected market price of the
Company's Common Stock of .575 and .595; and the weighted average expected
life of the options of 3 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's stock options have characteristics significantly different than
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in managements opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of its stock options.
For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The effect of
compensation expense from stock option awards on proforma net income reflects
only the vesting of 1995 awards in 1995 and the vesting of 1996 and 1995 awards
in 1996, in accordance with Statement No. 123. Because compensation expense
associated with the stock option award is recognized over the vesting period,
the initial impact of applying Statement No. 123 may not be indicative of
compensation expense in future years, when the effect of the amortization of
multiple awards will be reflected in pro forma net income. The effect of
Statement No. 123 resulted in a pro forma net loss of $2,867,177 for the year
ended December 31, 1996 and pro forma net income of $1,435,854 for the year
ended December 31, 1995. In addition, the pro forma net loss per share is $.13
per share for the year ended December 31, 1996 and pro forma net income per
share of $.06 per share for the year ended December 31, 1995.
The weighted average grant-date fair value of options granted during the year
ended December 31, 1996 was $.72 for options whose exercise price was greater
than the market price on the date of the grant and $2.07 for options whose
exercise price was less than the market price on the date of the grant. The
weighted average remaining contractual life of all options outstanding at
December 31, 1996 is 3.31 years.
F-19
<PAGE>
Hydron Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Related Party Transactions
During the years ended December 31, 1996, 1995 and 1994, HyTech paid
approximately $79,000, $64,000 and $77,000, respectively, in legal fees to
attorney who is also a director of the Company.
9. Commitments
HyTech leases office and warehouse space under noncancelable lease agreements
which expire in August 2001 and September 2000, respectively. At December 31,
1996, the future minimum rental payments due under such noncancelable leases are
as follows:
1997 $ 266,000
1998 136,000
1999 85,000
2000 87,000
2001 59,000
--------------------
$ 633,000
====================
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. Total rent expense was approximately $240,000, $98,000 and $39,000
in 1996, 1995 and 1994, 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 $603,000 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.
F-20
<PAGE>
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 18, 1997
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 18, 1997 Dated: March 18, 1997
By: /s/ Richard Tauman By: /s/ Chaudhury M. Prasad
-------------------------- --------------------------
Richard Tauman, Director Chaudhury M. Prasad, Director
Date: March 18, 1997 Date: March 18, 1997
By: /s/ Frank Fiur By: /s/ Samuel M. Leb
-------------------------- --------------------------
Frank Fiur, Director Samuel M. Leb, M.D., Director
Date: March 19, 1997 Date: March 19, 1997
By: /s/ Nestor M. Cardero By: /s/ Joseph A. Caccamo
-------------------------- --------------------------
Nestor M. Cardero, Director Joseph A. Caccamo, Director
Date: March 18, 1997 Date: March 18, 1997
By: /s/ Richard Banakus By:
-------------------------- --------------------------
Richard Banakus, Director Hugues Lamotte, Director
Date: March 19, 1997 Date: March __, 1997
41
<PAGE>
EXHIBIT INDEX
-------------
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).
<PAGE>
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
<PAGE>
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.
<PAGE>
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:
<PAGE>
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 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, 1995, and filed therein as the same exhibit
number, unless otherwise noted:
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
The following documents heretofore filed with the Commission are
incorporated by reference to HyTech's Current Report on Form 8-K (Date of
Report - July 19, 1996), and filed therein as the same exhibit number, unless
otherwise noted:
<PAGE>
Exhibit No. and Description
4.11 Warrant Purchase Agreement dated as of May 31, 1996 between QVC and
HyTech, as Exhibit no. 4.1 therein
10.43 First Amendment to Licensing Agreement dated as of May 31, 1996 between
QVC and HyTech as Exhibit no. 10.1 therein
10.44 Letter Agreement between QDirect, Inc. And Hydron Direct, Inc. dated May
31, 1996 as Exhibit no. 10.2 therein
<PAGE>
The following exhibits are filed herewith:
10.45 Lease Agreement between Industrial Office Associates and Hydron
Technologies,
Inc. dated March 10, 1997
10.46 Sponsorship Agreement with Pro Player Stadium dated as of January 1, 1997
10.47 Sponsorship Agreement with Miami Dolphins dated as of January 1, 1997
10.48 Executive Suite License Agreement dated March 4, 1997
10.49 Sponsorship Agreement with Miami Heat Limited Partnership and Sunshine
Network dated December 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.
<PAGE>
THIS LEASE AGREEMENT
--------------------
MADE THE 10TH OF MARCH 1997
LESSOR: INDUSTRIAL OFFICE ASSOCIATES / A PARTNERSHIP
1140 HOLLAND DRIVE, SUITE #1
BOCA RATON, FLORIDA 33487
LESSEE: HYDRON TECHNOLOGIES, INC.
1001 YAMATO ROAD SUITE #403
BOCA RATON, FLORIDA 33431
PREMISES: 1120 HOLLAND DRIVE, SUITES #9 & #19
BOCA RATON, FLORIDA 33487
USE: SUPPLY WAREHOUSE FOR DISTRIBUTOR OF HEALTH & BEAUTY PRODUCTS
SQUARE FOOTAGE: 3,200 SQUARE FEET
RENT: $27,168.00 PER YEAR
COMMENCEMENT DATE: APRIL 10, 1997
EXPIRATION DATE: APRIL 9, 2000
SECURITY: $9,000.00
INSURANCE: $500,000 / $1,000,000
<PAGE>
LEASE INDEX
___________
1st Premises 25th Attorney's Fee
- --- ----
2nd Term 26th Bankruptcy
- --- ----
3rd Rent 27th Homestead Exemption
- --- ----
4th Accord and Satisfaction 28th Waiver of Estoppel
- --- ----
5th C.P.I. Increase 29th Mortgage Subordination
- --- ----
6th Late Charge 30th Condemnation
- --- ----
7th Use 31st Recapture
- --- ----
8th Occupational License 32nd Operating Expenses and Real
- --- ---- Estate
9th Repairs and Maintenance 33rd Deposits and Advances
- --- ----
10th Quiet Enjoyment 34th Security Deposit
- ---- ----
11th Assignment 35th Notices
- ---- ----
12th Binding Contract 36th Time of the Essence
- ---- ----
13th Utilities 37th Brokerage
- ---- ----
14th Signs 38th Recordation
- ---- ----
15th Parking, Common Areas and Building 39th Entire Agreement
- ---- Security ----
16th Alteration to the Premises/Removal 40th Validity of Lease
- ---- of Equipment ----
17th Lessor's Right to Perform Building 41st Estoppel Certificates
- ---- Renovation ----
18th Liens 42nd Hazardous Substance
- ---- ----
19th Casualty 43rd Relocation
- ---- ----
20th Insurance 44th Non-Disclosure
- ---- ----
21st Liability and Personal Property 45th Water Consumption
- ---- ----
22nd Nonliability for Injury, 46th Trash and Garbage Removal
- ---- Loss or Damage ----
23rd Inspection and Repair 47th Option Period
- ---- ----
24th Default 48th Right of First Offer
- ---- ----
<PAGE>
UPON THE FOLLOWING CONDITIONS AND COVENANTS
THIS LEASE, made and entered into this 10th day of March, 1997, by and
between INDUSTRIAL OFFICE ASSOCIATES (the "Lessor"), a Florida partnership
authorized to transact business in the State of Florida, whose address is
1140 Holland Drive, Suite 1, Boca Raton, Florida 33487, and HYDRON
TECHNOLOGIES, INC., 1001 Yamato Road Suite #403, Boca Raton, Florida 33431
(the "Lessee").
Lot 7, Block 4, South Congress Industrial Park as recorded in Official
Record Book 33, Pages 45 and 46 in and for Palm Beach County, Florida.
In consideration of the mutual promises, covenants and conditions herein
contained, and the rent reserved by Lessor, to be paid by Lessee to Lessor,
Lessor hereby leases to Lessee and Lessee hereby rents from Lessor, that
certain real property situated in Palm Beach County, Florida, hereinafter
described for the terms and conditions hereinafter set forth.
1st: PREMISES. The real property (the "Premises") hereby leased, let and
demised by Lessor unto Lessee is Suites #9 & #19 of 1120 Holland Drive, the
"Building" situated within the South Congress Industrial Park in Boca Raton,
Florida. The relative size and location of the Premises within the Building
are approximately 29 by 55 feet per unit.
A. Lessor has completed construction of the structural shell of the
Building, with utilities stubbed to a point, described in the Building
construction plans, on the boundary of the Premises. Lessor shall be responsible
for all improvements as described in (Exhibit A) attached hereto. Such
improvements will be limited to all perimeter walls separating the premises from
any adjoining units, all interior partition walls of a typical office unit
including sheetrock ceiling, painted sheetrock walls, air-conditioning systems,
bathroom and all electrical and plumbing necessary to the above. All
improvements or extra facilities in excess of (Exhibit A) to the premises will
be constructed exclusively by the Lessor under separate contract.
B. Lessor shall cause the construction of and improvements to the
Premises pursuant to the approved plans and specifications therefore, be
complete not later than ninety (90) days after commencement thereof (the
Premises Completion Date). The Premises Completion Date shall be the date of
receipt of a certificate of occupancy for the Premises. Inability of Lessor to
commence or complete construction of and improvement to the Premises in
accordance with the acts of God, war, emergencies or shortages or unavailability
of materials or other causes beyond Lessor's reasonable control, shall extend
the period for completion of construction and improvement by Lessor for a period
equal to the period(s) of such delay(s).
2nd: TERM. The term of this Lease shall commence on the date of execution
hereof (Commencement Date) and the accrual of rents hereunder, shall commence
on the date of execution hereof (Premise Completion Date) hereinafter defined
and shall extend to the 36th month. The lease will expire midnight 12:00 A.M.
(APRIL 9, 2000) the (Expiration Date).
3rd. RENT. Lessee agrees to pay Lessor, without demand, set-off or
deduction, a rent to Lessor in the amount of $27,168.00 per year plus tax,
$2,264.00 per month plus tax, beginning APRIL 10, 1997 and ending APRIL 9, 2000,
payable in equal monthly installments over the life of this lease, accruing from
the Commencement Date forward.
Upon the Premises Completion Date a one (1) month rental abatement shall
commence and shall extend to and expire on the thirtieth (30) day.
Each monthly installment of Base Rent shall be payable in advance on the
first (1st) day of each calendar month of the term to Lessor at Lessor's office
at Boca Raton, Florida, or at such other place Lessor may from time to time
designate in writing. If the Premise Completion Date is not on the first (1st)
day of a calendar month, Base Rent for the period between the Premise Completion
Date and the first (1st) day of the following month shall be apportioned on a
per diem basis, at the monthly rental rate hereinabove provided, and shall be
payable on the Premise Completion Date. In addition to the rentals herein
reserved, lessee shall also pay the amount of any use or sales tax on said rent
imposed by the State of Florida and any federal or local government, which taxes
and other assessments shall be paid at the same time and in the same manner as
each payment of rent.
4th: ACCORD AND SATISFACTION. No payment by lessee or receipt by Lessor 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 payment of rent shall be deemed an accord and satisfaction. Lessor may
accept such check or payment without prejudice to Lessor's right to recover the
balance of such installment or payment of rent, or pursue any other remedies
available to Lessor.
5th: C.P.I. INCREASE. At the expiration of the first year and second year as
set forth in article 3, the Lessee agrees to pay a C.P.I. increase over the
prior year rent. The annual rent will be increased annually by the percentage
that the Consumer Price Index hereinafter defined increases over the prior year
rent. The C.P.I. increase shall be calculated using the anniversary date C.P.I.
minus commencement date C.P.I. divided by the commencement date C.P.I. equaling
a percentage increase. The percentage increase is then multiplied by the prior
year full base rent (i.e. twelve monthly rents) equaling the new rental increase
added to the prior year rent.
Consumer Price Index shall be defined as the "Consumer Price Index for
Urban Wage Earners nd Clerical Workers (1967-100)" specified for "All Items",
relating to U.S. City Average and issued by the Bureau of Labor Statistics of
the United States Department of Labor. In the event the Index shall hereafter be
converted to a different standard reference base or otherwise revised, the
determination of any percentage increase shall be made with the use of such
conversion factor, formula or table for converting the Index as may be published
by the Bureau of Labor Statistics or, if said Bureau shall not publish the same,
then with the use of such conversion factor, formula or table as may be
published by Prentice-Hall, Inc. or, failing such publication, by any other
nationally recognized publisher of similar statistical information. In the event
the Index shall cease to be published, then for the purpose of this Schedule,
there shall be substituted for the Index such other Index as the Lessor and
Lessee shall agree upon, and, in the event the parties are unable to agree
within ninety (90) days after the Index ceases to be published, such matter
shall be resolved with the Rules of the American Arbitration Association.
The C.P.I. increase shall not exceed seven (7%) percent annually.
3
<PAGE>
6th: LATE CHARGE. The Lessor shall have the right to have payment of
rent as well as all additional rent set forth within this Lease made in cash or
corporate check or certified check during banking hours. Any payment, including
without limitation taxes, maintenance, rent paid during the lease period or
other additional rent, not made within five (5) days of the due date shall be
deemed late, and the Lessor shall have the right to assess a late charge of ten
(10%) percent of the amount of payment due, which amount shall be deemed
additional rent, expressly provided, however, that the Lessee shall pay an
additional late charge of five (5%) percent of any monthly installment for each
and every thirty (30) day period after the date that said monthly installment
was originally due. This provision shall be in addition to such other remedies
as the Lessor may have under this lease by reason of the breach by the Lessee of
any covenant or condition of said lease agreement.
Cash or certified check shall be required for any and all payments deemed
late.
7th: USE. Lessee, its successors and assigns, shall use the Premises
exclusively for the purpose of a warehouse and related activities and for
no other use or purpose whatsoever. Lessee shall comply with all laws,
ordinances, rules and regulations of applicable governmental authorities and
Lessor respecting the use, operation and activities of the Premises (including
sidewalks, streets, approaches, drives, entrances and other common areas serving
the Premises), and any part thereof, or permit any nuisance thereon. Lessee
shall not make any use of the Premises which would make void or voidable any
policy of liability, fire or extended coverage insurance covering the Premises.
Lessee shall maintain all interior windows, if any, in a neat and clean
condition and Lessee shall not permit rubbish, refuse or garbage to accumulate
or any fire or health hazard to exist upon or about the Premises. Lessee shall
use the Premises only for the purpose stated in this Lease and shall not leave
said Premises vacant or suffer or permit any waste or mistreatment thereof.
Lessee agrees to abide by any rules or regulations promulgated by Lessor
which shall not discriminate against Lessee.
Throughout the term of this lease, Lessee is not permitted, nor shall
Lessee permit any employees, agents, invitees or guests of Lessee, to bring onto
the center (the Lessee premises, the buildings 1120 and 1140 Holland Drive, and
all common areas) any birds, domestic or wild animals without the Lessor's
express written consent which may be unreasonably withheld.
8th: OCCUPATIONAL LICENSE. Lessee agrees to supply a copy of county and
city occupational licenses to Lessor prior to taking occupancy of the premises.
Lessee further agrees to keep both licenses current, and to supply Lessor with
copies of any, if any, renewals. In the event that any license is revoked,
suspended or no longer in effect, at Lessor's option, Lessor may cancel the
Lessee's lease upon written notice or make application for license on Lessee's
behalf, at Lessee's expense.
9th: REPAIRS AND MAINTENANCE. Lessor shall not be called upon and shall
have no obligation to make any repairs, improvements or alterations whatsoever
to the Premises. Lessee shall service, keep and maintain the interior of the
Premises, including all plumbing, wiring, piping, heating and cooling equipment
and fixtures and equipment on the interior of the Premises in good and
substantial repair during the entire term of this Lease. Lessee agrees to make
repairs promptly as they may be needed at its own expense, and at the end of the
term or upon termination of this Lease. Lessee shall deliver up the Premises in
good condition and repair, reasonable wear and tear excepted, and in a
broom-clean condition with all glass and all windows and doors intact.
At all times during the term of the Lease, Lessee, at lessee's expense,
shall maintain in effect and good standing with respect to the Premises service
contracts, pest control and janitorial service; provided, that Lessee
shall not be obligated to contract for any service that is provided to the
Premises by the Condominium Association, if any.
Lessee agrees to maintain the interior of the premises in a clean and
orderly fashion that is consistent with the use and appearance of the building.
In the event that Lessee does not conform to this provision, Lessor reserves the
right, upon written notice, and at the Lessee's sole cost and expense, to
re-enter the Lessee's premises for the specific purpose of rectifying the
condition and restoring the subject premises to the condition, use and
appearance intended by the parties at the time of this lease agreement.
10th: QUIET ENJOYMENT. Lessor covenants that so long as Lessee pays the
rent reserved in the Lease and performs its agreements hereunder, Lessee shall
have the right quietly to enjoy and use the Premises for the term hereof,
subject only to the provisions of this Lease.
11th: ASSIGNMENT. Lessee shall not assign this Lease nor any rights
hereunder, nor let or sublet all or part of the Premises, nor suffer or permit
any person or corporation to use any part of the Premises, without first
obtaining the express written consent of Lessor. Should Lessor consent to such
assignment of the Lease, or to a sublease of all or part of the Premises,
assignee or sublessee shall be responsible for a twenty (20%) percent increase
to the base rent. Lessee does hereby guarantee payment of all rent herein
reserved until the expiration of the original term and any extension or renewal
hereof and no failure of Lessor promptly to collect rent or any other such
charge from any assignee or sublessee, or any extension of the time for payment
of such rents, shall release or relieve Lessee from its guaranty or obligation
for payment of such rents.
The assignee or sublessee shall not be a then-existing lessee or tenant or
occupant of the buildings (1120 and 1140 Holland Drive) of which the demised
premises are a part, or a person or entity with whom Lessor is then dealing with
regard to leasing space in the buildings (1120 and 1140 Holland Drive), or with
whom Lessor has had any dealings within the past twelve (12) months with regard
to leasing space in the buildings (1120 and 1140 Holland Drive).
12th: BINDING CONTRACT. This contract shall bind the Lessor and its
assigns or successors, and the heirs, assigns, administrators, legal
representatives, executors or successors as the cause may be, of the lease.
13th: UTILITIES. Lessee shall pay all costs and expenses for
electricity, heating and cooling, and any and all other utilities separately
metered, furnished to or used in connection with the Premises for any purpose
whatsoever during the term of this Lease, promptly as each costs or expenses
shall become due and payable.
14th: SIGNS. Lessee shall not place or suffer to be placed or maintained
upon any exterior door, roof, wall or window of the Premises any sign, awning,
canopy or advertising matter or other thing of any kind, and will not place or
maintain any decoration, lettering or advertising matter on the glass of any
window or door of the Premises, and will not place or maintain any freestanding
standard within or upon the common areas of the Building or immediately adjacent
thereto, without first obtaining the express prior written consent of Lessor.
Lessee agrees at Lessee's sole expense to install and maintain such sign,
lettering, or other thing as may be approved by Lessor in good condition and
repair at all times and to remove the same at the end of the term of this Lease
as and if requested by Lessor. Upon removal thereof, Lessee agrees to repair any
damage to the Premises caused by such installation and/or removal.
4
<PAGE>
15th: PARKING, COMMON AREAS AND BUILDING SECURITY. In addition to the
Premises, Lessee shall have the right to non exclusive use, in common with
Lessor, other lessees and owners, and the guests, employees and invitees of same
of (a) automobile parking areas, driveways and footways, and (b) such loading
facilities and other facilities as may be designated from time to time by
Lessor, 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
Lessor; provided, however, that Lessor shall have the right at any time and from
time to time to assign parking for use by Lessee, its employees, guests and
invitees. At no time shall Lessee, it's employees, guests and invitees exceed
the use of eight parking stalls.
Lessee is strictly prohibited from the use of any parking stalls or
common areas for the purposes of servicing, repairing, cleaning, storage
or related activities of motor vehicles or other equipment.
The common areas shall be subject to the exclusive control and
management of Lessor, which shall have the right to establish, modify
and change and enforce from time to time rules and regulations with
respect to the common areas; and Lessee agrees to abide by and conform
with such rules and regulations.
16th: ALTERATIONS TO THE PREMISES AND REMOVAL OF EQUIPMENT. Lessee
shall not make any alteration or addition to the Premises, including but
not limited to the installation of air conditioning, without first
obtaining the express written consent of Lessor. Upon expiration and
termination of this Lease, all installations, fixtures, improvements
and alterations made or installed by Lessee, including but not limited
to electric lighting fixtures made by Lessee, and all repairs,
improvements, replacements and alterations to the Premises made by
Lessee, shall remain a part of the Premises as the property of Lessor,
except for trade fixtures.
17th: LESSOR'S RIGHT TO PERFORM BUILDING RENOVATIONS. Lessee
understands and agrees that Lessor may at any time or from time to time
during the term of this Lease, perform substantial renovation work in
and to the Building or the mechanical systems serving the Building
(which work may include, but not limited to, the repair or replacement
of the Building's exterior facade, exterior window glass, elevators,
electrical systems, air conditioning and ventilating systems, plumbing
system, common hallways, or lobby), any of which work may require access
to the same from within the Premises.
Lessee agrees that:
a) Lessor shall have access to the Premises at all reasonable
times, upon reasonable notice, for the purpose of performing such work,
and
b) Lessor shall incur no liability to Lessee, nor shall Lessee be
entitled to any abatement of rent on account of any noise, vibration, or other
disturbance to Lessee's business at the Premises (provided that Lessee is not
denied access to said Premises) which shall arise out of said access by Lessor
or by the performance by Lessor of the aforesaid renovations at the Building.
Lessor shall use reasonable efforts (which shall not include any
obligation to employ labor at overtime rates) to avoid disruption of
Lessee's business during any such entry upon the Premises by Lessor.
It is expressly understood and agreed by and between Lessor and
Lessee that if Lessee shall commence any action or proceeding seeking
injunctive, declaratory, or monetary relief in connection with the
rights reserved to Lessor under this provision, or if Lessor shall
commence any action or proceeding to obtain access to the Premises in
accordance with this provision, and if Lessor shall prevail in any such
action, then Lessee shall pay to Lessor, as additional rent under this
Lease, a sum equal to all legal fees, costs, and disbursements incurred
by Lessor in any way related to or arising out of such action or
proceeding.
18th: LIENS. Lessee agrees that it will make full and prompt payment of all
sums necessary to pay for the cost of repairs, alterations, improvements,
changes or other work done by Lessee to the Premises and further agrees to
indemnify and hold harmless Lessor from and against any and all such costs and
liabilities incurred by Lessee, and against any and all mechanic's,
materialman's or laborer's liens related to or arising out of such work or the
cost thereof which may be asserted, claimed or charged against the Premises or
the Building or site on which it is located. Notwithstanding anything to the
contrary in this Lease, the interest of Lessor in the Premises shall not be
subject to liens for improvements made by or for Lessee, whether or not the same
shall be made or done in accordance with an agreement between Lessor and Lessee,
and it is specifically understood and agreed that in no event shall Lessor or
the interest of Lessor in the Premises by liable for or subjected to any
mechanic's, materialman's or laborer's liens for improvements or work made by or
for Lessee; and this Lease specifically prohibits the subjecting of Lessor's
interest in the Premises to any mechanic's, materialman's or laborer's liens for
improvements made by Lessee or for which Lessee is reponsible for payment under
the terms of this Agreement. All persons dealing with Lessee are hereby placed
upon notice of this provision. In the event any notice or claim of lien shall
be asserted of record against the interest of Lessor in the Premises of Building
or the site on which it is located on account of or growing out of any
improvement or work done by or for Lessee, or any person claiming by, through or
under Lessee, or for improvements or work the cost of which is the
responsibility of Lessee, Lessee agrees to have such lien canceled and
discharged of record as a claim against the interest of Lessor in the Premises
or the Building or the site on which it is located (either by payment or bond as
permitted by law) within ten (10) days' after notice to Lessee by Lessor, and in
the event Lessee shall fail to do so, Lessee shall be considered in default
under this Lease.
At Lessor's Option, Lessee agrees to execute a Memorandum of this
Lease to be recorded in Public Records of Palm Beach County, Florida,
setting forth the provisions of this Article 18.
19th: CASUALTY. In the event the Premises are rendered untenantable
by fire or other casualty, Lessor shall have the option of terminating
this Lease or rebuilding the Premises and in such event written notice
of the election by Lessor shall be given to Lessee within 90 days after
the occurrence of the casualty. In the event Lessor elects to rebuild
the Premises, the Premises shall be restored to its former condition prior
to tenant improvement work (whether or not such improvement work may
have been performed by Lessor), within a reasonable time, during which
time no payment of rent or other sum due hereunder from Lessee to Lessor
shall abate. In the event Lessor elects to terminate this Lease, the
rent shall be paid to and adjusted as of this date of such casualty, and
the term of this Lease shall then expire and this Lease shall be of no
further force or effect and Lessor shall be entitled to sole possession
of the Premises.
20th: INSURANCE. Lessor shall not be liable for injury caused to
any person or property by reason of the failure of Lessee to perform any
of its covenants or agreements hereunder, nor for such damages or injury
caused by reason of any defect in the Premises now or in the future
existing, or for any damages or injury caused by reason of any present
or future defect in the plumbing, wiring or piping of the Premises or
Building or plumbing leaks or other consequences of such defects or
system failures. Lessee agrees to indemnify and hold harmless Lessor
from and against any and all loss, damage, claim, demand, liability or
expense by reason of any damages or injury to persons (including loss of
life) or property which may arise or be
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claimed to have arisen as a result of or in connection with the occupancy or use
of the Premises or common areas by Lessee. Lessee shall, at its expense, provide
and maintain in force during the entire term of this Lease, and any extension or
renewal hereof, public liability insurance with limits of coverage not less than
Five Hundred Thousand and No/100 Dollars ($500,000.00) for any property damage
or loss from any one (1) accident, and not less than One Million and No/100
Dollars ($1,000,000.00) for injury to any one (1) person from any one (1)
accident, applicable to the Premises. Each policy of insurance shall name as the
insured thereunder Lessor and Lessee. Each such liability insurance policy shall
be of the type commonly known as owner's, landlord's and tenant's insurance and
shall be obtained from a company satisfactory to Lessor. The original of each
such policy of insurance or certified duplicates thereof issued by the insurance
or insuring organization shall be delivered by Lessee to Lessor on or before ten
(10) days prior to occupancy of the Premises by Lessee, providing for thirty
(30) days notice of cancellation to Lessor.
Lessee shall provide at all times during which construction is being
performed upon the Premises by Lessee, including initial construction of the
Premises prior to the term of this Lease, and during any alteration of the
Premises builder's risk insurance with such reasonable limits as Lessor shall
from time to time require, and any such policy of insurance shall name as the
insured thereunder Lessor and Lessee as their interest may appear. Further,
Lessee shall maintain at all times during the term of the Lease, Workman's
Compensation and Employer's Liability insurance at legally required levels for
the benefit of all employees entering upon the Building as a result of or in
connection with their employment by Lessee.
21st: LIABILITY OF PERSONAL PROPERTY. All personal property placed or moved in
the premises above described shall be at the risk of the Lessee or owner
thereof, and Lessor shall not be liable for any damage to said personal
property, or to the Lessee arising from the bursting or leaking of water pipes,
or from any act of negligence of any co-Lessee or occupants of the building or
of any other person whomsoever.
22nd: NONLIABILITY FOR INJURY, LOSS, OR DAMAGE. Lessee acknowledges and
agrees that Lessor shall not be liable or responsible in any way to Lessee or
any other person for:
1. Any Injury arising from or out of any occurrence in, upon, at, or
relating to the Center (the premises, the buildings, 1120 and 1140 Holland
Drive, and all common areas) or any part thereof or any loss or damage to
property (including loss of use thereof) of Lessee or any other Person located
in the Center or any party thereof from any cause whatsoever, whether or not
such Injury, loss, or damage results from any fault, default, negligence, act,
or omission of Lessor or its agents, servants, employees, or any other Person
for whom Lessor is in law responsible;
2. (Without limiting the generality of the foregoing provisions of
this Section) any Injury to Lessee or any other Person or loss or damage to
property resulting from: fire; smoke; explosion; falling plaster, ceiling tiles,
fixtures, or signs; broken glass; steam; gas; fumes; vapors; odors; dust; dirt;
grease; acid; oil; any hazardous material or substance; debris; noise; air or
noise pollution; theft; vandalism; assault; battery, breakage; vermin;
electricity; computer or electronic equipment or systems malfunction or
stoppage; water; rain; flood; flooding; sinkhole; freezing; tornado; hurricane;
tropical depression; windstorm; snow; sleet; hail; frost; ice; excessive heat or
cold; sewage; sewer backup; toilet overflow; or leaks or discharges from any
part of the Center, or from any pipes, sprinklers, appliances, equipment
(including, without limitation, heating, ventilating, and air-conditioning
equipment); electrical or other wiring; plumbing fixtures; roof(s), windows,
skylights, doors, trapdoors, or subsurface of any floor or ceiling of any part
of the Center, or from the street or any place, or by dampness or climatic
conditions, or from any other cause whatsoever;
3. Any Injury, loss, or damage caused by other lessees or any Person
in the Center, or by occupants of adjacent property thereto, or by the public,
or by construction or renovation, or by any private, public, or quasi-public
work, or by interruption, cessation, or failure of any public or other utility
serice, or caused by Force Majeure;
4. Any Injury to Lessee or any other Person or any loss or damage
suffered to the Premises or the contents thereof by any reason of Lessor or its
representatives entering the Premises to undertake any work therein, or to
exercise any of Lessor's rights or remedies hereunder, or to fulfill any of
Lessor's obligations hereunder, or in the case of emergency; or
5. Any Injury, loss, or damage to property caused by perils insured
against or required to be insured against by Lessee pursuant to clause #20,
Insurance. Lessee shall promptly indemnify and hold Lessor harmless from and
against any and all claims in connection with any Injury of any loss or damage
to property referred to in this Section.
23rd: INSPECTION AND REPAIR. Lessor or its representatives shall have the
right at any reasonable time, to enter upon the Premises for the purpose of
inspection or for the purpose of making or causing to be made any repairs or
otherwise to protect its interest, and the exercise or failure to exercise said
right shall in no way diminish Lessee's obligations or enlarge Lessor's
obligations under this lease, or affect any right of Lessor, or create any duty
or liability by Lessor to Lessee or any third party. Lessor shall have the right
to show the Premises to a prospective tenant at any time within ninety (90) days
prior to the expiration or termination of this Lease, upon reasonable notice to
Lessee.
24th: DEFAULT. In the event Lessee shall fail (a) to make any rental or
other payment due hereunder within five (5) days after the same shall become
due, or (b) abandon the Premises during the term hereof, or (c) breach or fail
to perform any of the agreements herein other than the agreement to pay rent,
and shall fail to cure such breach or failure within three (3) days after
written notice from Lessor, or (d) breach or fail to perform any of the
agreements in clause #8 (Occupational Licenses), clause #9 (Repairs &
Maintenance), clause #13 (Utilities), or clause #20 (Insurance), and shall fail
to cure such breach or failure within thirty (30) days after written notice from
Lessor, then Lessor, in any such event(s), shall have the option to:
1. Sue for rents as they may become due;
2. Terminate this Lease, resume possession of the Premises for its own
account and recover immediately from Lessee the difference between the rent for
which provision is made in the Lease and fair rental value of the Premises for
the remainder of the Lease term, together with any other damage occasioned by or
resulting from the abandonment or a breach or default other than a default in
the payment of rent;
3. Resume possession and re-lease and re-rent the Premises for the
remainder of the lease term for the account of Lessee and recover from Lessee,
at the end of the lease term or at the time each payment of rent becomes due
under this Lease, as the Lessor may elect, the difference between the rent for
which provisions are made in this Lease and the rent received on the re-leasing
or re-renting, together with all costs and expenses of Lessor in connection with
such re-leasing or re-rental and the collection of rent and the cost of all
repairs or renovations reasonably necessary in connection with the re-leasing or
re-rental, and if this option is exercised, Lessor shall, in addition, be
entitled to recover from Lessee immediately any other damages occasioned by or
resulting from the abandonment or a breach or default in the payment of rent.
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The remedies for which provision is made in this Article 24 shall not be
exclusive and in addition thereto Lessor may pursue such other remedies as are
provided by law in the event of any breach, default or abandonment by Lessee. In
any event, and irrespective of any option exercised by Lessor, Lessee agrees to
pay and the Lessor shall be entitled to recover all costs and expenses incurred
by Lessor, including costs and reasonable attorney's fees in all trial and
appellate proceedings, in connection with collection of rent or damages or
enforcing other rights of Lessor in the event of a breach or default or
abandonment by Lessee, irrespective of whether or not Lessor elects to terminate
this Lease by reason of such a breach, default or abandonment. Lessee hereby
expressly waive any and all rights of redemption, if any, granted by or under
any present or future law in the event Lessee shall be evicted or dispossessed
for any cause, or in the event Lessor shall obtain possession of the Premises
by virture of the provisions of this Lease, or otherwise and Lessee waives any
right to trial by jury on ay issue which may be litigated herein.
Any and all sums due under the Lease from Lessee to Lessor and not paid on
the due date shall bear interest from the due date at the maximum rate
allowed by law until fully paid.
25th: ATTORNEY'S FEES. Lessee agrees to pay the cost of collection and all
reasonable attorney's fee on any part of said rental that may be collected by
suit or by attorney, after the same is past due.
26th: BANKRUPTCY. If the Lessee shall become insolvent or if bankruptcy
proceedings shall begin by or against the Lessee, before the end of said term
the Lessor is hereby irrevocably authorized at its opton, to forthwith cancel
this lease, as for a default, Lessor may elect to accept rent from such
receiver, trustee, or other judicial officer during the term of their occupancy
in their fiduciary capacity without effecting Lessor's rights as contained in
this contract, but no receiver, trustee or other judicial officer shall ever
have any right, title or interest in or to the above described property by
virtue of this contract.
27th: HOMESTEAD EXEMPTION. Lessee hereby waives and renounces for himself and
family any and all homestead and exemption rights he may have now, or hereafter,
under or by virtue of the constitution and laws of The State of Florida, or of
any other State, or of the United States, as against the payment of said rental
or any portion hereof, or any other obligation or damage that may accrue under
the terms of this agreement.
28th: WAIVER OF ESTOPPEL. The failure of Lessor to insist, in any one or more
instances, upon strict performance of any covenants or agreements of this Lease,
or to exercise any option of Lessor herein contained, shall not be construed as
a waiver or relinquishment for the future enforcement of such covenant,
agreement or option, but the same shall continue and remain in full force and
effect. Receipt of rent by Lessor, with knowledge of the breach of any covenant
or agreement hereof, shall not be deemed a waiver of such breach and no waiver
by Lessor of any provision hereof shall be deemed to have been made unless
expressed in writing and signed by Lessor.
29th: MORTGAGE SUBORDINATION. All rights and interests of Lessee hereunder are
and shall be and remain subject, subordinate and inferior to all mortgages
heretofore or hereafter given and encumbering the Premises, or any part
thereof, and shall likewise be subordinate and inferior to all renewals,
modifications, consolidations, replacements and extensions of any such mortgage,
and the right of the holder of any such mortgage shall at all times be and
remain prior and superior to all rights and interests of Lessee. This provision
shall operate as a subordinate agreement with respect to all such mortgages and
all renewals, modifications, consolidations, replacements and extensions
thereof. If the holder of any such mortgage or any person, firm or corporation
agreeing to make a loan secured by a mortgage on the Premises shall require
confirmation of any subordination agreement with respect to any mortgage
transaction, Lessee shall execute such confirmation or subordination agreement
in the form required by such mortgage holder or other person or corporation
agreeing to make a loan secured by a mortgage on the Premises, and the execution
of the same shall not diminish or affect the liability of lessee hereunder or of
any other party responsible for or guaranteeing the obligations of Lessee under
this Lease.
30th: CONDEMNATION. Lessor reserves unto itself, and Lessee assigns to Lessor,
all right to damages accruing on account of any taking or condemnation of any
part of the Premises, or by reason of any act of any public or quasi-public
authority for which damages are payable. Lessee agrees to execute such
instruments of assignment as may be required by Lessor, to join with Lessor in
any petition for the recovery of damages, if requested by Lessor, and to turn
over to Lessor any such damages that may be recovered in any such proceeding.
Lessor does not reserve to itself, and Lessee does not assign to Lessor, any
damages payable for trade fixtures installed by Lessee at its cost and
expense and which are not part of the realty.
In the event the Premises are deemed condemned after legal completion of
condemnation proceedings, Lessee shall have the right to terminate this lease
agreement upon one hundred and twenty (120) days notice to Lessor.
31st: RECAPTURE. It is hereby agreed and understood between Lessor and Lessee
that in the event the Lessor decides to remodel, alter or demolish all or any
part of the premises leased hereunder, or in the event of the sale or long
term lease of all or any part of the premises; requiring this space, the
Lessee hereby agrees to vacate same upon receipt of sixty (60) days written
notice and the return of any advance rental paid on account of this lease.
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33rd: DEPOSITS AND ADVANCES. Any funds paid by Lessee to Lessor as a deposit or
advance pursuant to the terms of this Lease, or any exhibit, addendum or
modification hereto, may be comingled with other funds of the Lessor and need
not be placed in trust, deposited in escrow or otherwise held in a segregated
account, and no interest shall accrue or be due thereon to Lessee. In addition,
if any sum or sums of money shall become payable by Lessee to Lessor pursuant
to the terms of this Lease, or any exhibit, addendum or modification hereto,
or by any law, ordinance or regulation affecting this Lease, Lessor shall have
the right to apply any deposits and advances theretofore made by Lessee against
such sums due by Lessee to Lessor.
34th: SECURITY DEPOSIT. Lessee has deposited with Lessor and Lessor hereby
acknowledges receipt of the sum of $9,000.00, which shall be held by Lessor,
without accrual of interest, as security for the faithful performance by Lessee
of all the terms of this Lease by Lessee to be observed and performed. Said
deposit shall not be mortgaged, assigned, transferred or encumbered by
Lessee without the express prior written consent of Lessor and any such act
on the part of Lessee shall be without force and effect and shall not be
binding upon Lessor. If any of the rents herein reserved or any other sum
payable by Lessee or Lessor hereunder shall be overdue or unpaid, or should
Lessor make payments on behalf of this Lease, then Lessor, at its option and
without prejudice to any other remedy which Lessor may have on account
thereof, may appropriate and apply said entire deposit, or so much thereof
as may be necessary to compensate Lessor, toward the payment of any rent
or additional sum due hereunder or to any loss or damage
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sustained by Lessor due to such breach on the part of Lessee; and Lessee shall
forthwith upon demand restore said security deposit to the original sum
deposited. Should Lessee comply with all of the terms and promptly pay all of
the rentals and all other sums payable by Lessee to Lessor as they become due,
said deposit shall be returned in full to Lessee at the end of the term. In the
event of bankruptcy or other creditor debt proceedings against Lessee, the
security deposit shall be deemed to be first applied to the payment of rent and
other charges due Lessor for a period prior to the filing of such proceedings.
Lessor may deliver the security and any other deposit made hereunder by
Lessee to the purchaser of Lessor's interest in the Premises and in the event
that such interest be sold or otherwise conveyed, and thereupon Lessor shall be
discharged from any further liability with respect to such deposit; and this
provision shall also apply to any subsequent transferee of Lessor.
35th: NOTICES. All notices required or contemplated by this Lease shall be in
writing and shall be delivered in person or by United States Certified Mail,
Return Receipt Requested, addressed to the party to whom such notice is directed
at the addresses set forth in the first paragraph of this Lease. By giving at
least two (2) days' prior written notice to the other party, either party may
change its address for notices hereunder.
36th: TIME OF THE ESSENCE. It is understood and agreed between the parties
hereto that time is of the essence of this contract and this applies to all
terms and conditions contained herein.
37th: BROKERAGE. Lessee acknowledges that it has not dealt, consulted or
negotiated with any real estate broker, salesperson or agent other than
COMMERCIAL FLORIDA REALTY PARTNERS, INC. (the "Broker"), and Lessee hereby
agrees to indemnify and hold harmless Lessor from and against any and all loss
and liability resulting from or arising out of any claim that Lessee has dealt
or negotiated with any real estate broker, salesperson or agent other than the
Broker in connection with the transaction which is the subject of this Lease.
38th: RECORDATION. This Agreement is not to be recorded in the Public Records,
and if Lessee does record this Agreement, Lessee shall be in default and Lessor
shall be entitled to exercise any of its rights as a result of Lessee's default.
39th: ENTIRE AGREEMENT. Lessee agrees that Lessor has not made any statement,
promise or agreement, or taken upon itself any engagement whatsoever, verbally
or in writing, in conflict with the terms of this Lease, or in which any way
modifies, varies, alters, enlarges or invalidates any of its provisions. This
Lease sets forth the entire understanding between Lessor and Lessee, and shall
not be changed, modified or amended and Lessee, except by an instrument in
writing signed by the party against whom the enforcement of any such change,
modification or amendment is sought. The covenants and agrements herein
contained shall bind, and the benefit and advantages hereof shall inure to,
the respective heirs, legal representatives, successors and assigns of Lessor
and Lessee. Whenever used the singular number shall include the plural, and the
plural the singular and the use of any gender shall include all genders. The
headings set forth in this Lease are for ease of reference only, and shall not
be interpreted to modify or limit the provisions hereof. This Lease shall be
construed in accordance with the laws of the State of Florida.
40th: VALIDITY OF LEASE. The rights of the Lessor under the foregoing shall be
cumulative, and failure on the part of the Lessor to exercise promptly any
rights given hereunder shall not operate to forfeit any of the said rights. The
terms, conditions, covenants and provisions of this lease shall be deemed to be
severable. If any clause or provision herein contained shall be adjudged to be
invalid or unenforceable by a court of competent jurisdicition or by operation
of any applicable law, it shall not affect the validity of any other clause or
provision herein, but such other clauses or provisions shall remain in full
force in effect.
40th: VALIDITY OF LEASE. The rights of the Lessor under the foregoing
shall be cumulative, and failure on the part of the Lessor to exercise
promptly any rights given hereunder shall not operate to forfeit any of
the said rights. The terms, conditions, covenants and provisions of this
lease shall be be deemed to be severable. If any clause or provision
herein contained shall be adjudged to be invalid or unenforceable by a
court of competent jurisdiction or by operation of any applicable law,
it shall not affect the validity of any other clause or provision
herein, but such other clauses or provisions shall remain in full force
in effect.
41st: ESTOPPEL CERTIFICATES. Within no more than ten (10) days after
receipt of written request, the Lessee shall furnish to the Lessor a
certificate, duly acknowledged, certifying, to the extent true:
a) that this Lease is in full force and effect:
b) that the Lessee knows of no default hereunder on the part of
the Lessor, or if it has reason to believe that such a default
exists, the nature thereof in reasonable detail;
c) the amount of the rent being paid and the last date to which
rent has been paid;
d) that this Lease has not been modified, or if it has been
modified, the terms and dates of such modifications;
e) that the term of this Lease has been commenced;
f) the commencement and expiration dates;
g) whether all work to be performed by the Lessor has been
completed;
h) whether the Renewal Term option has been exercised;
i) whether there exist any claims or deductions from, or defenses
to, the payment of Rent; and
j) such other matters as may be reasonably requested by the
Lessor.
If the Lessee fails to execute and deliver to the Lessor a completed
certificate as required under this Section, the Lessee hereby appoints
the Lessor as his attorney-in-fact to execute and deliver such
certificate for and on behalf of the Lessee.
42nd: HAZARDOUS SUBSTANCE. The Lessee shall not use in any way, or
permit or suffer the use of the Leased Premises or any part thereof, to
either directly or indirectly prepare, produce, generate, manufacture,
refine, treat, transport, store, maintain, handle, dispose of transfer,
or process any Hazardous Substance as defined herein, unless it has
received the prior written consent of the Lessor, which may be
unreasonably witheld.
Any Substance which the Lessor permits the Lessee to treat, store,
transfer, or dispose of must be done in strict compliance with any and
all federal, state, county, or municipal statutes or laws now or at any
time hereafter in effect, including but not limited to, the
Comprehensive Environment Response, Compensation, and Liability Act (42
U.S.C. 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. 1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. 6901 et seq.), The Federal Water Pollution Control Act (33 U.S.C.
1251 et seq.), the Clean Air Act (42 U.S.C. 7401 et seq.), the Toxic
Substances Control Act, as amended (15 U.S.C. 2601 et seq.), and the
Occupational Safety and Health Act (29 U.S.C. 651 et seq.), as these
laws have been amended or supplemented.
"Hazardous Substance" means any pollutant, contaminant, toxic or
hazardous waste, dangerous substance, potentially dangerous substance,
noxious substance, toxic substance, flammable, explosive, radioactive
material, urea formaldehyde foam insulation, asbestos, PCBs, or any
other substances the removal of which is required, or the manufacture,
preparation, production, generation, use, maintenance, treatment,
storage, transfer, handling or ownership of which is restricted,
prohibited, regulated or penalized by any and all federal, state,
county, or municipal statutes or laws now or at any time hereafter in
effect, including but not limited to, the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. 9601 et seq.), the
Hazardous Material Transportation Act (49 U.S.C. 1801 et seq.) the
Resource Conversation and Recovery Act (42 U.S.C. 6901 et
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seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.), the
Clean Air Act (42 U.S.C. 7401 et seq.), the Toxic Substances Control Act, as
amended (15 U.S.C. 2601 et seq.), and the Occupational Safety and Health Act (29
U.S.C. 651 et seq.), as these laws have been amended or supplemented.
45th: WATER CONSUMPTION. Lessee shall be responsible and shall reimburse
Lessor for all costs and expenses relating to water capacity, commodity, and
sewer charges in excess of one thousand five hundred gallons (1,500 gals.) per
month as determined by Lessor during the term of this Lease, promptly as each
costs or expenses shall become due and payable.
46th: TRASH AND GARBAGE REMOVAL. Lessee shall be responsible and shall
reimburse Lessor for all costs and expenses relating to trash and garbage
removal in excess of five (5) cubic yards per month as determined by Lessor
during the term of the Lease, promptly as each costs or expenses shall become
due and payable.
47th: OPTION PERIOD. At the expiration of the first three (3) year period as
set forth in Articles 2 & 3, if this lease shall be in full force and effect,
and the Lessee shall have complied in all respects with the agreements,
conditions, covenants and terms, and the Lessee is not in default of this Lease,
either at the time this option is exercised or at the time this option period
commences, the Lessor will, at the option of the Lessee, grant to the Lessee an
additional term of the demised premises for one further term of three (3) years
commencing April 10, 2000 and ending April 9, 2003; under the same terms and
conditions of this lease, with the exception of the rent amount, and shall
continue without interrution, provided Lessee has executed said option no less
than one hundred twenty (120) days prior to April 9, 2000 by written notice to
Lessor by certified mail, return receipt.
The rent for the period beginning April 10, 2000 and ending April 9, 2001 shall
be the rent for the period beginning April 10, 1999 and ending April 9, 2000
plus C.P.I. plus tax which is to be paid on the first day of each and every
month commencing April 10, 2000 and a like sum on the first day of each and
every month thereafter until and including April 9, 2001.
The rent for the period beginning April 10, 2001 and ending April 9, 2002 shall
be the rent for the period beginning April 10, 2000 and ending April 9, 2001
plus C.P.I. plus tax which is to be paid on the first day of each and every
month commencing April 10, 2001 and a like sum on the first day of each and
every month thereafter until and including April 9, 2002.
The rent for the period beginning April 10, 2002 and ending April 9,
2003 shall be the rent for the period beginning April 10, 2001 and ending
April 9, 2002 plus C.P.I. plus tax which is to be paid on the first day of each
and every month commencing April 10, 2002 and a like sum on the first day of
each and every month thereafter until and including April 9, 2003.
48th: RIGHT OF FIRST OFFER. Provided this Lease shall be in full force and
effect, and the Lessee shall have complied in all respects with the agreements,
conditions, covenants and terms, and the Lessee is not in default of this Lease,
either at the time this option is exercised or at the commencement date of this
option, Lessor will grant to the Lessee a onetime "Right of First Offer" to
lease units #10 and #20 of 1120 Holland Drive should the possession of the units
become available to the Lessor to lease during the period commencing April 10,
1997 and ending April 9, 2000.
Should Lessee either reject such offer, fail to execute a Lease Agreement for
units #10 and #20 of 1120 Holland Drive within seven (7) days after written
notification to Lessee, or a period of seven (7) days has elapsed after receipt
of written notice from Lessor, the Lessee will have irretrievably lost such
right to said units and Lessor's obligation under the clause will be null and
void and without further force and effect throughout the remainder of the term
of this Lease Agreement. Lessor shall thereafter be free to lease said units
either in proportions or in its entirety to any third party Lessee on whatever
terms and conditions Lessor may decide in its sole discretion, without again
complying with all the provisions of this clause.
This "Right of First Offer" is exclusive to the Lessee and shall become null and
void upon the occurrence of an assignment of the Lease or a sublet of all or
part of the Premises of this Lease Agreement.
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CONFIRMATION WITH LAWS AND REGULATIONS
The Lessor may pursue the relief or remedy sought in any invalid
clause, by conforming the said clause with the provisions of the
statutes or the regulations of any governmental agency in such case made
and provided as if the particular provisions of the applicable statutes
or regulations were set forth herein at length.
In all references herein to any parties, persons, entities or
corporations, the use of any particular gender or the plural or singular
number is intended to include the appropriate gender or number as the
text of the within instruments may require. All the terms, convenants
and conditions herein contained shall be for and shall inure to the
benefit of and shall bind the respective parties hereto, and their
heirs, executors, administrators, personal or legal representatives,
successors and assigns.
IN WITNESS WHEREOF
The parties hereto have hereunto set their hands and seals, or caused
these presents to be signed by their proper corporate officers and their proper
corporate seal to be hereto affixed, the day and year first above written.
Lessor: By: /s/ John Di Chiara Date: 3/12/97
----------------------------------------------
Industrial Office Associates
John Di Chiara, General Partner
1140 Holland Drive Suite #1
Boca Raton, Florida 33487
Lessee: By: /s/ Chaudhury M. Prasad Date: 3/12/97
----------------------------------------------
Hydron Technologies, Inc.
Chaudhury M. Prasad, Vice President Operations
1001 Yamato Road Suite #403
Boca Raton, Florida 33431
(561) 994-6191
SIGNED, SEALED AND DELIVERED IN THE PRESENCE OF OR ATTESTED BY
/s/ [Illegible]
----------------------------
Witness for Lessor
/s/ [Illegible]
----------------------------
Witness for Lessee
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CORPORATE ACKNOWLEDGEMENT
State of Florida, County of Palm Beach: Be it remembered, that on March 12,
1997, before me, the subscriber, _____________, personally appeared __________,
who, I am satisfied, is the person so named in and who executed the within
instrument, and thereupon he acknowledged that he signed, sealed and delivered
the same as this act and deed, for the uses and purposes therein expressed.
BY: _______________________
State of Florida, County of Palm Beach: Be it remembered, that on 13th day of
March, 1997, before me, the subscriber, Angelieque Polizzi, personally appeared
Chaudhury M. Prasad, who, being by me duly sworn on his oath, deposes and makes
proof to my satisfaction, that he is the Secretary of Hydron Technologies Inc,
the Corporation named in the within instrument; that Harvey Tauman, the
President of said Corporation; that the execution, as well as the making of this
Instrument, has been duly authorized by a proper resolution of the Board of
Directors of the said Corporation; that deponent well knows the corporate seal
of said Corporation; and that the seal affixed to said Instrument is the proper
corporate seal and was thereto affixed and said Instrument signed and delivered
by said Harvey Tauman, President as and for the voluntary act and deed of said
Corporation, in the presence of deponent, who thereupon subscribed his name
thereto as attesting witness.
Sworn to and subscribed before me, the date aforesaid.
By: /s/ Angelique F. Polizzi
------------------------
[SEAL] ANGELIQUE F. POLIZZI
My Comm Exp.1/01/00
Bonded By Service Ins
No. CC546732
[X]Personally Known []Other I D
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EXHIBIT A
1) Lessor shall be responsible for the initial cost and the installation of a
five (5) ton roof-mounted central air-conditioning system for unit #9 of 1120
Holland Drive.
2) Lessor shall be responsible for the initial cost and the installation of a
five (5) ton roof-mounted central air-conditioning system for unit #19 of 1120
Holland Drive.
3) Lessor shall be responsible for the labor and material for the painting of
the interior warehouse walls (off-white) and floor (gray) for both units #9 and
#19 of 1120 Holland Drive.
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Exhibit 10.46
SPONSORSHIP AGREEMENT
Agreement, made and effective as of the 1st day of January, 1997 by and
among South Florida Stadium Corporation, a Florida corporation ("STADIUM"), and
Robbie Scoreboard Corporation ("SCOREBOARD"), a Florida corporation, with their
principal offices at 2269 N.W. 199th Street, Miami, Florida 33056 (collectively
STADIUM and SCOREBOARD shall be referred to as "STADIUM ENTITIES"), and Hydron
Technologies, Inc. ("Hydron"), a New York corporation, with its principal place
of business at 1001 Yamato Road, Suite 403, Boca Raton, Florida 33431.
WHEREAS, STADIUM owns and operates the open-air, multi-use sports and
entertainment facility known as Pro Player Stadium in Dade County, Florida ("Pro
Player"); and
WHEREAS, SCOREBOARD is the owner of all rights to sell electronic
advertising times on the video display screens and message boards (the "Message
Boards") and on the advertising signboards (the "Signboards") which are located
in the Stadium (sometimes collectively referred to as the "Facilities"); and
WHEREAS, Pro Player will be used by the Miami Dolphins and the Florida
Marlins as the site for its regularly scheduled pre-season and regular season
home games and will be leased to other tenants for the staging of other athletic
events, concerts and other events; and
WHEREAS, the STADIUM ENTITIES and Hydron desire rights and other
considerations from their respective organizations, and each is willing to grant
such rights and considerations based upon the terms and conditions set forth in
this Agreement.
NOW THEREFORE, in consideration of the premises, the respective
undertakings and commitments of the STADIUM ENTITIES and Hydron hereunder, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the STADIUM ENTITIES and Hydron agree as follows:
1. ADVERTISING SPACE. During the term of this Agreement,
SCOREBOARD agrees to sell and make available to Hydron, and Hydron agrees to
purchase from SCOREBOARD advertising space and time on the Facilities as
follows:
(a) Signboards. Hydron shall have the right to display
a fixed (nonelectronic) advertising panel on a Signboard at Pro Player. The size
of such advertising panel, the location of the Signboard to which such
advertising panel may be affixed and the term of its placement is set forth on
the attached Exhibit "A".
<PAGE>
2. SPECIAL PROVISIONS APPLICABLE TO NONELECTRONIC ADVERTISING
MESSAGES. The following terms and conditions shall apply to the display of
nonelectronic advertising messages on a Signboard at Pro Player:
(a) The costs associated with the initial preparation of the
advertising panel and for the initial installation of the advertising panel for
display on the Signboard shall be the responsibility of, and at the expense of
STADIUM.
(b) Hydron may periodically change the advertising panel, but
shall give the stadium manager reasonable notice of such a change in order to
enable him to coordinate the installation of the new advertising panel. Hydron
shall be responsible for the costs of preparation and installation of any
changed advertising panel and Hydron shall comply with the reasonable policies
or rules of STADIUM ENTITIES in the preparation of such revised advertising
panel.
(c) Hydron's advertising panel shall be fully illuminated at
night events or other times when the Message Boards are illuminated. No
advertising or structures shall be permitted to obstruct the view of Hydron's
advertising panel, and SCOREBOARD shall not permit any person (including the
media) to drape or otherwise obscure any advertising panel of Hydron at any time
or for any reason. SCOREBOARD shall not, nor shall it permit any other person
to, alter Hydron's advertising panel without Hydron's prior written consent.
3. GENERAL PROVISIONS APPLICABLE TO ALL ADVERTISING MESSAGES.
The following terms and conditions shall apply to the display of all advertising
messages on the Facilities:
(a) All advertising messages of Hydron shall be in
compliance with generally-accepted community standards of good taste, and the
reasonable determination of SCOREBOARD shall be conclusive on this issue.
(b) Hydron shall not use the Facilities in a manner
that will constitute a violation of any applicable laws, ordinances, or other
government regulations or rules.
(c) The advertising space described in paragraph 1
above shall be displayed during each event held at Pro Player for which
admission is charged. Provided, however, that Hydron shall not have its
advertising Signboard displayed during any event sponsored by a religious or
community organizations if such sponsor objects to the nature of the product
being advertised.
4. ADVERTISING FEE. Hydron shall pay STADIUM a sponsorship fee
(the "Fee") each year during the term of this Agreement in consideration
for the rights granted to it hereunder, plus applicable sales and other
taxes, as follows:
Payment Due Date Payment Amount
---------------- --------------
Within five (5) business days
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of the date of this Agreement $100,000
February 1, 1998 $100,000
February 1, 1999 $100,000
February 1, 2000 $100,000
Assuming that the only taxes applicable to the above payments are sales
taxes, currently at the rate of 6.5%,with respect to the benefits provided in
paragraph 6 hereunder, the total annual payment due shall equal $106,500. If
sales taxes increase or it is determined that other taxes are applicable to
these amounts, Hydron shall owe such additional amounts in addition to the
foregoing.
5. EXECUTIVE SUITE LICENSE AND TERMINATION OF CLUB SEATS.
Hydron shall enter into a Executive Suite License Agreement for an Executive
Suite located at Pro Player and at the prices described on Exhibit "A" in the
form attached hereto as Exhibit "B". The term of the Executive Suite License
Agreement shall be the same as the term of the Sponsorship Agreement as provided
in Section 6(a) below, notwithstanding the language contained in Exhibit "B"
with respect thereto. In consideration of Hydron's execution of the Executive
Suite License Agreement, Harvey Tauman, Hydron's president and chairman, shall
be released from his obligations in respect of the club seat license agreement
to which he is a party simultaneously with the execution and delivery of this
Agreement. Any funds held by Stadium, for security or otherwise, shall be
immediately released to Harvey Tauman, provided that a replacement security
deposit is delivered by Hydron. The term of the License Agreement shall be four
years commencing with the first day of the Florida Marlins 1997 regular season
and ending upon the conclusion of the Miami Dolphins 2000 football season
including post season games. Hydron shall have the right to terminate this
Executive Suite License upon written notice to the STADIUM ENTITIES at any time
between November 1, 1997 and December 15, 1997, in which event the Executive
Suite License shall terminate following the Miami Dolphins last regular or
post-season game, if any. If Hydron does not timely exercise its right to
terminate the Suite License Agreement, then Hydron agrees that the Suite License
shall continue for the entire four (4) year term unless earlier terminated as
provided in the Suite License Agreement.
6. TERM.
(a) Unless terminated earlier pursuant to sections 6(b)
or 6(c), this Agreement shall extend for a term of four (4) Florida Marlins
baseball seasons, beginning as of approximately April 1, 1997 and continuing
through the Florida Marlins post-season following the Florida Marlins 2000
baseball season and four (4) Miami Dolphins football seasons, beginning as of
August 1, 1997, and continuing through the Miami Dolphins post-season following
the Miami Dolphins 2000 football season.
(b) Without prejudice to any of their other rights, any party
may terminate this Agreement upon written notice if the other party shall fail
to perform any material term or condition of this Agreement, and the defaulting
party fails to correct such default within five (5) business days, in respect of
monetary defaults, and thirty (30) days, in respect of non-monetary
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<PAGE>
defaults, after receipt of written notice, or fails to take substantial action
to correct such default if the default cannot be corrected within thirty (30)
days.
(c) Hydron shall also have the right to terminate this
Agreement, upon written notice to STADIUM ENTITIES at any time between November
1, 1997 and December 15, 1997 in which event the Agreement shall be terminated
following the Miami Dolphins last 1997 regular or post-season game, if any. If
Hydron does not timely exercise its right to terminate this Agreement, then
Hydron agrees that the Agreement shall continue for the entire four (4) year
term unless earlier terminated pursuant to Section 6(b).
7. MISCELLANEOUS.
(a) This Agreement shall be binding upon and shall
inure to the benefit of STADIUM ENTITIES, Hydron and their respective successors
and assigns.
Hydron shall have the right to assign its interest in this Agreement to
an entity (i) that is a parent corporation or an affiliated company, (as the
term "affiliate" is defined under the rules and regulations promulgated under
the Federal Securities Laws), provided that such affiliate assignee is
financially able to perform its obligations hereunder, (ii) whose credit
worthiness and business reputation are reasonably acceptable to the STADIUM
ENTITIES, and (iii) that assumes in writing the obligations of Hydron under this
Agreement provided, however, that Hydron shall not be released from
responsibility hereunder if such assignee fails to make payment of the Fee to
SCOREBOARD in accordance with the provisions of this Agreement and in accordance
with the provisions of the Suite License Agreement.
(b) This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Florida.
(c) This Agreement and the Suite License Agreement constitute
the entire Agreement between STADIUM ENTITIES and Hydron relative to the matters
discussed herein and supersedes any prior oral or written understandings or
agreements relative to such matters. This Agreement may only be amended by a
written instrument signed by STADIUM ENTITIES and Hydron.
(d) Each party shall pay all taxes as required by law for the
respective services provided by them in connection with the performance of this
Agreement.
(e) The failure of any party to this Agreement to
insist upon the performance of any of the terms and conditions of this
Agreement, or the waiver of any breach of any of the terms and conditions of
this Agreement, shall not be construed as thereafter waiving any such terms and
conditions which shall continue in full force and effect.
(f) Each party shall indemnify and hold harmless the other
parties, their officers, directors, agents and employees, from and against any
and all damage, loss, liability or expense, including but not limited to
attorney's fees and legal costs suffered directly or by reason
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<PAGE>
of any claim, suit or judgment brought by or in favor of any person or persons
for damages, loss or expense due to damages sustained by such person or persons
which arises out of performance of this Agreement; provided, however, that each
party shall be responsible for any negligent acts or omissions of their agents
or employees.
(g) Any notice provided for in or concerning this Agreement
shall be in writing and shall be deemed sufficiently given when sent by
certified for registered mail to the addresses of the parties as first written
above.
SIGNATURES ON FOLLOWING PAGE
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<PAGE>
IN WITNESS WHEREOF, STADIUM ENTITIES and Hydron have executed this
Agreement as of the date set forth below.
SOUTH FLORIDA STADIUM CORPORATION
By: /s/ Robert Kramm
--------------------------------
Robert Kramm, President
Date:
------------------------------
ROBBIE SCOREBOARD CORPORATION
By: /s/ Robert Kramm
--------------------------------
Robert Kramm, President
Date:
------------------------------
Hydron Technologies, Inc.
By: /s/ Harvey Tauman
--------------------------------
Name: Harvey Tauman
Title: President and Chairman
Date:
------------------------------
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<PAGE>
EXHIBIT A
SIGNAGE
Location: Secondary Tri-Vision Sign on West Scoreboard in the
upper left corner
Size: 12' x 15' (flood lit).
Term: Four (4) years, however, Hydron has right to
terminate after the first year pursuant to Section 6
of the Agreement.
EXECUTIVE SUITE
Location: Suite 320A
Annual Suite Fees: 1997 - $90,000.00, payable at time of execution of
the Suite License Agreement
1998 - $62,000.00
1999 - $76,000.00 plus an amount equal to the
percentage increase in the Consumer Price
Index from 1998 to 1999
2000 - $76,000.00 plus an amount equal to the
percentage increase in the Consumer Price
Index from 1999 to 2000
Security Deposit: $38,000, payable at time of execution of the Suite
License Agreement
<PAGE>
SPONSORSHIP AGREEMENT
THIS SPONSORSHIP AGREEMENT ("Agreement") is made and entered into as of
this 1st day of January, 1997, by and between HYDRON TECHNOLOGIES, INC., a New
York corporation with its principal offices located at 1001 Yamato Road, Suite
403, Boca Raton, Florida 33431, ("Hydron") and MIAMI DOLPHINS, LTD., a Florida
limited partnership with its principal offices located at 7500 Southwest 30th
Street, Davie, Florida 33314 ("Dolphins").
WHEREAS, the Dolphins own and operate the Miami Dolphins, a
professional football team and member of the National Football League, which
presently is scheduled to play its home games at Pro Player Stadium in Miami,
Florida (the "Stadium"); and Hydron desires to be a sponsor of the Miami
Dolphins for certain entertainment and promotional purposes in connection with
the Miami Dolphins including its home games during the term of this Agreement;
and
NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, Hydron and the Dolphins hereby agree as follows:
1. TERM OF AGREEMENT
1.1 The term of this Agreement shall commence on the date
hereof and terminate upon the conclusion of the week following the conclusion of
the Dolphins 2000 regular season or post season, if applicable (the "Term" or
"Initial Term"). However, this Agreement may be earlier terminated in accordance
with the provisions hereof.
1.2 Hydron shall have the right to terminate this Agreement
upon written notice to Dolphins at any time between November 1, 1997 and
December 15, 1997, in which event this Agreement shall be terminated following
the Dolphins last 1997 regular or post-season game, if any. If Hydron does not
timely exercise its right to terminate this Agreement, then Hydron agrees that
this Agreement shall continue for the entire four (4) year term unless earlier
terminated pursuant to Section 8 of this Agreement.
2. SPONSORSHIP RIGHTS
2.1 For the Term of this Agreement, the Dolphins will provide
Hydron with certain advertising and promotional benefits as are set forth in and
in accordance with Exhibit "A" attached hereto and made a part hereof (the
"Sponsorship Rights").
2.2 For the Term of this Agreement, Hydron shall be designated
as a sponsor of the Dolphins in the Sunscreen/Skin Care Category (as defined
below) and a licensee of the Marks (as defined below) in the Sunscreen/Skin
Category by the Dolphins. For purposes of this Agreement, the term
"Sunscreen/Skin Care Category" means the product category consisting of
sunscreen, sun protection and similar skin care products.
2.3 The Sponsorship Rights granted by the Dolphins to
Hydron are subject to
<PAGE>
termination in whole or in part at any time upon written notice to Hydron if
such Sponsorship Rights conflict with any exclusive advertising rights granted
by NFL Properties, Inc. to one of its advertisers or sponsors. In the event of
any such termination of exclusivity, the non-terminated Sponsorship Rights
granted to Hydron by the Dolphins shall nonetheless continue for the remainder
of the Term and the provisions of Section 8.2 shall apply. As of the date
hereof, the Dolphins have no knowledge of any claim by NFL Properties that the
Sponsorship Rights violate or conflict with exclusive rights granted by NFL
Properties.
3. CONSIDERATION
3.1 In consideration of the Sponsorship Rights granted to
Hydron hereunder:
(a) Hydron shall pay to the Dolphins an aggregate
amount of $96,000 (plus any applicable sales and other taxes) as follows: Hydron
shall pay Dolphins the sum of $24,000 (plus any applicable sales and other
taxes) on July 1, 1997, July 1, 1998, July 1, 1999 and July 1, 2000.
3.2 In the event that the consideration is not paid by Hydron
on or before the applicable payment due date, said failure to pay shall be
considered a material breach by Hydron, and the Dolphins may elect to charge
Hydron a late fee of 1.5% per month of the payment then due and owing until it
is paid in full. The Dolphins agree to provide written notice to Hydron of the
failure to receive any payment, and Hydron shall have a five (5) business day
period following delivery of written notice in which to cure the payment default
before the Dolphins may elect to terminate this Agreement and pursue applicable
remedies. It is agreed by Hydron that any such election of remedies does not
waive any other remedies for breach of contract available to the Dolphins.
3.3 Except as otherwise specifically provided in this
Agreement, including Exhibit "A", each of the parties shall pay its own expenses
of performing its obligations under this Agreement.
4. USE OF MARKS
4.1 Hydron and the Dolphins may use the name, logos, colors,
trademarks, service marks, or other identifying features ("Marks") of the other,
as specifically contemplated in connection with the Sponsorship Rights, subject
to any limitations set forth in this Agreement.
4.2 All advertising material and any use of the other parties'
Marks by a party is subject to the prior written approval of the Mark owner.
Either party shall submit all such materials or proposed usage of a Mark to the
other party at least two weeks prior to its intended use. The Mark owner shall
have the right to inspect and require changes or deletions (including the right
to disapprove of such advertisement or use of Marks in their entirety) of
advertising and promotional copy or material that the Mark owner may deem to be
contrary to its policies or best interests. Such requirements will not be
unreasonably imposed, and the foregoing approvals and
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<PAGE>
requirements will be consistently given and imposed on all sponsors or users of
the Marks, as the case may be.
4.3 Any and all public announcements or press releases by or
on behalf of the other party regarding the Sponsorship Rights or the details of
this Agreement shall be subject to the consent of the other party, and each
party shall have the right to approve in advance the contents and timing
thereof. Notwithstanding the foregoing, the Dolphins acknowledge that Hydron, as
a publicly held company, has disclosure obligations pursuant to the federal
securities laws. Hydron agrees to take the comments of the Dolphins into account
in preparing and disseminating such disclosure, but notwithstanding comments
from the Dolphins, Hydron shall make such disclosure as may be required by law.
4.4 For purposes of this Agreement, the Dolphins and Hydron
expressly recognize that the Marks are the unique, valid and exclusive property
of the respective owner of the Mark. The Dolphins and Hydron agree that they
shall not, either during the term of this Agreement or thereafter, directly or
indirectly, contest the validity of the other's Marks or any of the
registrations pertaining thereto, in the United States or elsewhere, nor adopt
the other's Marks or any term, word, mark or designation which is in any aspect
confusingly similar to the other's Marks. The Dolphins and Hydron specifically
acknowledges that any use of the Marks pursuant to this Agreement shall not
create for the Dolphins or Hydron any right, title or interest in the other's
Marks. The Dolphins and Hydron further agree that they will not at any time do
or cause to be done any act or thing, directly or indirectly, which contests or
in any way impairs or tends to impair any part of the right, title and interest
of the other in its Marks; and the Dolphins and Hydron shall not, in any manner,
represent that it has any ownership interest in the other's Marks or the
registrations therefor. Upon termination of this Agreement, the Dolphins and
Hydron shall immediately terminate all use of the other's Marks.
4.5 Hydron expressly recognizes that the Dolphins have
previously granted the exclusive rights to license and sublicense its Marks to
NFL Properties, Inc., and that the grant to Hydron of the right to use the Marks
is subject to the prior approval of NFL Properties, Inc. In the event that such
approval is not so given by NFL Properties, Inc., then such usage rights of
Hydron shall immediately terminate. The Dolphins represent that they will use
reasonable efforts to obtain the consent of NFL Properties, Inc. to the
execution and performance of this Agreement prior to their execution hereof. In
any such event, the provisions of Section 8.2 will apply.
5. STADIUM POLICY; GOVERNING LEAGUE POLICIES
5.1 Hydron and the Dolphins agree that this Agreement shall be
performed in accordance with rules and policies of the Stadium as may be
applicable to this Agreement, if any. The Dolphins will advise Hydron of any
development of or changes in these rules and policies that might adversely
affect the terms of this Agreement.
5.2 The parties agree that this Agreement shall automatically
be subject to any new or amended National Football League (the "NFL") rules or
regulations applicable to advertising or promotional benefits provided by NFL
member teams to its sponsors effective as
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<PAGE>
of the date such regulation shall take effect and that this Agreement shall
incorporate and be subject to the Constitution, By-Laws, rules and regulations,
the duly authorized resolutions of the governing body, the decrees and rulings
of the commissioner and the terms and conditions of any and all agreements to
which the NFL is a party and as to which the NFL has bound its member clubs
(collectively all of such regulations, resolutions, decrees and agreements are
referred to as the "Governing League Policies"). The Dolphins shall advise
Hydron of any changes therein which may materially and adversely affect the
Sponsorship Rights. As of the date hereof, the Dolphins have no knowledge of any
claim by the NFL that the Sponsorship Rights violate any Governing League Rules.
5.3 Without limiting any other potential uses of the Dolphins'
Marks, Hydron agrees that the Dolphins may allow or authorize any League Sponsor
(as defined below) to engage in advertising and promotional activities in the
Dolphins' local market (including, without limitation, the Stadium), or
otherwise provide benefits to such League Sponsor, if such League Sponsor is
entitled to engage in such activities or receive such benefits pursuant to any
sponsorship or promotional licensing arrangement now or hereafter entered into
between such League Sponsor and the NFL or any of its affiliates (including,
without limitation, NFL Properties, Inc., NFL Enterprises, Inc. and NFL Films,
Inc.). For purposes of this Agreement the term, "League Sponsor" shall mean any
person or entity which currently is, or at any time becomes a sponsor or
promotional licensee of or with respect to any NFL event or program now or
hereafter in existence. By way of illustration only and without limiting the
generality of the foregoing, League Sponsors may place advertising and
promotional materials (including displays) in the Stadium, in connection with a
League event, such as the Super Bowl.
5.4 If any rule or regulation of the Stadium, or any Governing
League Policy as described in Sections 5.1, 5.2 or 5.3 requires the termination
or revision of any Sponsorship Right, such Sponsorship Right shall be revised or
terminated upon written notice to Hydron and the provisions of Section 8.2 shall
apply to such termination or revisions.
6. REPRESENTATIONS AND WARRANTIES
6.1 Hydron represents and warrants to the Dolphins the
following, all of which representations and warranties shall apply during the
Term of this Agreement.
(a) Hydron is a corporation in good standing under
the laws of the state of New York and is duly authorized to transact business in
Florida, with full power and authority to enter into and fully perform its
obligations under this Agreement. The execution and delivery of this Agreement
on behalf of Hydron has been duly authorized by Hydron and this Agreement
constitutes a valid, binding and enforceable obligation of Hydron.
(b) Neither this Agreement nor anything required to
be done hereunder by Hydron violates or shall violate any corporate charter,
contract or other document to which Hydron is a party or by which it is
otherwise bound.
6.2 The Dolphins represents and warrants to Hydron the
following, all of
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<PAGE>
which representations and warranties shall apply during the Term of this
Agreement
(a) The Dolphins is a Florida limited partnership in
good standing under the laws of the State of Florida and the Dolphins is duly
authorized to transact business in Florida, with full power and authority to
enter into and fully perform its obligations under this Agreement. The execution
and delivery of this Agreement on behalf of the Dolphins has been duly
authorized by the Dolphins and this Agreement constitutes a valid, binding and
enforceable obligation thereof.
(b) Neither this Agreement nor anything required to
be done hereunder by the Dolphins violates or shall violate any partnership
agreement, corporate charter, contract or other document to which the Dolphins
is a party or by which it is otherwise bound.
7. HOLD HARMLESS AND INDEMNIFICATION
7.1 Each of the parties shall indemnify and hold harmless the
other, and their respective partners, shareholders, officers, employees, agents
and representatives (collectively, the "Indemnitees") from and against any and
all claims, orders, damages, liabilities, costs and expenses, including
reasonable attorney's fees, arising out of the other party's negligent actions
or omissions with respect to this Agreement, or such party's wilful misconduct
or breach of any representation, warranty or agreement in this Agreement
applicable to it. Neither party shall have an obligation to indemnify or hold
harmless an Indemnitees from any claim arising from or related to the
Indemnitees negligence or misconduct. Each party hereto shall promptly notify
the other of any claim or litigation to which the indemnity set forth in this
paragraph applies. Each of the parties agree to defend all actions to which such
indemnity applies and to conduct the defense thereof at its expense and by
qualified counsel, which counsel shall be reasonably satisfactory to the
Indemnitees. Each of the parties agree that the foregoing indemnities also apply
for the benefit of the NFL (and its affiliates), South Florida Stadium
Corporation, the owner and operator of Pro Player Stadium and their respective
officials, officers, partners, agents and employees, who shall be deemed third
party beneficiaries of this Agreement for the purpose of enforcing these
indemnity obligations. These indemnity obligations shall survive the termination
or expiration of this Agreement.
7.2 Insurance. The Dolphins shall, at its own expense,
maintain in effect throughout the term of this Agreement, comprehensive general
liability insurance policies with carriers of recognized standing, with limits
of liability of at least One Million Dollars ($1,000,000), governing any and all
property damage and person injury (including death) arising out of activities
covered by this Agreement. Hydron shall, at its own expense, maintain in effect
throughout the term of this Agreement, comprehensive general liability insurance
policies with carriers of recognized standing, with limits of liability of at
least One Million Dollars ($1,000,000), covering any and all property damage and
personal injury (including death) arising out of activities covered by this
Agreement and shall obtain and maintain such additional insurance coverage as
the Dolphins shall reasonably require with respect to any Sponsored Events or
similar activities.
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8. TERMINATION
8.1(a) Without prejudice to any other rights, the Dolphins
shall have the right to terminate this Agreement upon written notice to Hydron
if Hydron fails to perform or comply with any term or condition of this
Agreement within five (5) business days following delivery of written notice for
a payment default or within thirty (30) days following written notice of any
other breach of this Agreement sent to Hydron stating such failure or failures;
provided that any such failure remains uncured at the end of such period.
(b) Without notice to any rights, Hydron shall have
the right to terminate this Agreement upon written notice to Dolphins, if
Dolphins fail to perform or comply with any material terms or conditions of this
Agreement within thirty (30) days following delivery of written notice to
Dolphins stating such failure or failures; provided that any failure remains
uncured at the end of such period.
8.2 This Agreement may be terminated by the Dolphins or
modified to reduce or eliminate certain promotional benefits (such as use of
Marks or Sponsorship Rights), as described in Sections 2.3, 4.5 and 5.4 hereof.
Upon any such termination or modification, the Dolphins will in good faith
attempt to substitute a promotional benefit of equivalent promotional value for
any benefits that the Dolphins was forced to eliminate; or, if the Dolphins is
unable to substitute a promotional benefit of similar magnitude, then the
Dolphins and Hydron shall attempt, in good faith, to agree upon an adjustment in
the amount of fees payable by Hydron to the Dolphins under this Agreement. If
the Dolphins and Hydron cannot agree upon an adjustment in the amount of fees
payable hereunder, then Dolphins and Hydron agree to arbitrate the adjustment in
fees and to be bound by the decision of the arbitrators. Any such arbitration
shall be conducted in accordance with the rules of the American Arbitration
Association.
8.3 Upon termination of this Agreement, all rights and
privileges granted to Hydron hereunder shall automatically revert to the
Dolphins. Upon termination of this Agreement by the Dolphins pursuant to
paragraph 8.1(a), any and all payments then or later due to the Dolphins shall
become due and payable in full immediately, and no portion of any prior payments
made to the Dolphins shall be refundable.
8.4 In the event that Hydron terminates this Agreement
pursuant to the provisions of Section 8.1(b), then the fees paid, if any, for
the balance of the term of this Agreement shall be immediately refunded to
Hydron provided Hydron has not received sponsorship rights or benefits equal to
such fees.
9. MISCELLANEOUS
9.1 The parties hereto agree to maintain in confidence the
terms and conditions of this Agreement, except to the extent that a proposed
disclosure by a party of any specifications or conditions hereof is authorized
in advance by the other party pursuant to Section 4.3 or is otherwise required
by law.
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9.2 It is mutually understood and agreed that Hydron and the
Dolphins, and their respective partners, officers, employees, representatives
and agents are, at all times, herein, acting and performing separately and
independently of each other and are in no way or manner to represent themselves
as agents or employees of the other party. As such, no party shall incur any
expenses or create any liens or encumbrances in another party's name or against
another party's interests. This Agreement shall not create a joint venture,
partnership, or a relationship of principal and agent, or of employer and
employee, between the parties.
9.3 All notices required to be given hereunder shall be
properly served if in writing and delivered either by (i) personal delivery,
(ii) certified or registered mail, postage prepaid, facsimile, or (iii) by
recognized overnight courier service which delivers only upon the signed receipt
of the addressee, which in any case shall be delivered to the respective
addresses set forth at the beginning of this Agreement or such other addresses
as may be designated by written notice by such party. Notice shall be deemed
given on the date of delivery of such notice to the recipient or the date of
refusal to accept delivery of such notice by the addressee or its agent.
9.4 In connection with any action arising from or in
connection with the enforcement of this Agreement, the prevailing party shall be
entitled to an award of its expenses, including reasonable attorneys' fees and
disbursements, incurred or paid before and at trial or any other proceeding
which may be instituted, at any tribunal level, and whether or not suit or any
other proceeding is instituted.
9.5 This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida. Jurisdiction and venue for any
legal proceedings arising out of this Agreement shall exclusively lie in the
state and federal courts situate in Broward County, Florida.
9.6 No party may assign any of its rights or obligations
hereunder without the prior written consent of the other party, except that
Hydron may assign its rights and obligations under this Agreement to its parent,
its successor or to an affiliate (as such term is defined under the rules and
regulations promulgated under the federal securities laws of the U.S.) upon the
reasonable consent of the Dolphins that such affiliate assignee has the
financial means and corporate authority to perform such obligations and Hydron
may not withhold its consent to an assignment of this Agreement in the event of
a merger or reorganization of the Dolphins, a sale of all or substantially all
of the Dolphins' assets or a consolidation of the Dolphins with any of its
affiliates or related parties.
9.7 In the event that the performance of this Agreement is
prevented because of an act of nature or force majeure or if the exhibition of
any scheduled home games of the Dolphins is canceled because of strike, lockout,
labor dispute or other cause of similar nature beyond the reasonable control of
the Dolphins, the same shall not constitute a breach of this Agreement. The
Dolphins hereby agree, in good faith, to attempt to reschedule any aspect of the
Sponsorship Rights which is prevented from occurring as scheduled, at such date
as may be
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reasonably agreeable to the Dolphins and Hydron. If one or more events or
benefits are unable to be rescheduled during the Term of this Agreement, the
provisions of Section 8.2 shall apply in the same manner as if such failure to
reschedule caused a termination of a Sponsorship Right. Nothing stated in this
Agreement grants Hydron any sponsorship, promotional or other rights with
respect to any Super Bowl, Pro Bowl or NFL conference championship or play-off
games or any other football game(s) which are not part of the preseason or
regular season schedule of games to be played at home by the Miami Dolphins.
9.8 This Agreement (including Exhibit "A") sets forth the
entire understanding and agreement of the parties hereto with respect to its
subject matter and supersedes all prior under standings or agreements between
the parties relating to the same subject matter. Any amendments or modifications
to this Agreement shall be in writing, as mutually agreed upon by both parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective authorized representatives, effective as of the
date first shown above.
HYDRON TECHNOLOGIES, INC.
By: /s/ Harvey Tauman
-------------------------------------
Harvey Tauman
President and Chairman
Date:
------------------------------
MIAMI DOLPHINS, LTD., a Florida limited
partnership
By: SOUTH FLORIDA FOOTBALL
CORPORATION, its General Partner
By: /s/ Eddie Jones
-------------------------------------
Eddie Jones, President
Date:
------------------------------
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EXHIBIT A
MIAMI DOLPHINS/HYDRON TECHNOLOGIES, INC.
SPONSORSHIP RIGHTS
Season-Long Merchandising
PRINT ADVERTISING
The Dolphins will provide to Hydron:
o One full page, four (4) color
advertisement for Hydron in all ten (10)
issues of GameDay Magazine, the official
publication of the National Football
League and the Miami Dolphins distributed
at Pro Player Stadium during each year
during the Term.
PROMOTIONAL MEDIA
In connection with this Agreement, Dolphins will provide the following
promotional media:
1996 BENEFITS PROVIDED TO HYDRON
o Executive Suite: 320A. Use of the
executive suite for the December 8, 1996
game vs. the New York Giants. The game
will include twelve (12) tickets and two
(2) parking passes.
o Stadium Signage: Hydron sign will be in
place on the West Scoreboard - Secondary
Tri-Vision Panel for the December 8, 1996
game vs. the New York Giants and the
December 16, 1996 game vs. the Buffalo
Bills.
o Product Sampling: Hydron will provide ten
thousand (10,000) sunscreen samples which
will be distributed to club level patrons
prior to and during the December 8, 1996
game vs. the New York Giants. The Dolphins
will permit Hydron to set up four (4)
display booths which will be staffed by
Hydron employees to distribute the
sunscreen.
1997-2000 BENEFITS TO HYDRON
o "Defensive Play of the Week" Promotion: Hydron will be the title
sponsor of the 30-second Jumbtron video "Defensive Player of the Week"
promotion which will be displayed during each Miami Dolphins home game.
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o Product Sampling: The Dolphins will permit Hydron to distribute
sunscreen product samples to fans in attendance at one (1) home game
during each contract year. Hydron will set up four (4) display booths
and will staff them with Hydron employees. The Dolphins will also
permit Hydron to distribute sunscreen product samples during the first
two (2) weeks of training camp at the Dolphins training facility in
Davie during each contract year.
o Team Affiliation: Hydron will be permitted to advertise itself as a
"Proud Sponsor of the Miami Dolphins" in the skin care category.
o Easements: The Miami Dolphins will use reasonable efforts to provide
endorsements of Hydron sunscreen/skin protection products from its
training staff.
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PRO PLAYER STADIUM
EXECUTIVE SUITE LICENSE AGREEMENT
This License Agreement ("Agreement") is made and entered into by and
between ROBBIE STADIUM CORPORATION, a Florida corporation, with offices at 2269
N.W. 199th Street, Miami, Florida 33056, ("Owner") and Hydron Technologies, Inc.
whose address is 1001 Yamato Road, Boca Raton, Florida 33431, whose telephone
number is (561) 994-6191 and whose designee and contact for the purposes of this
Agreement is Mr. Harvey Tauman.
W I T N E S S E T H:
In consideration of the mutual covenants and agreements set forth in
this Agreement, Owner and Licensee do hereby agree as follows:
A. Grant of License. Subject to the terms and conditions set forth in this
Agreement, Owner hereby grants Licensee the privilege and right to the
use and possession as described herein of the executive suite (the
"Suite") located in Pro Player Stadium, Dade County, Florida (the
"Stadium") and identified by number in Paragraph B.
B. Basic Terms. As used herein, the following terms shall apply to this
Agreement:
1. Suite. The Suite shall have the following
characteristics:
a. This License is for Suite Number 320A.
b. The Suite shall have the following number of
Total Seats: Twelve (12).
c. The Suite shall have a location in relation
to the playing field in the Stadium shown in
attached Exhibit A.
2. Ticket Allotment. The Ticket Allotment for the Suite
shall be Twelve (12) season tickets for Miami
Dolphins home games and Twelve (12) season tickets
for Florida Marlins homes games.
3. Suite Fee. (See Paragraph E).
a. Annual Suite Fee: 1997 - $90,000.00
1998 - $62,000.00
1999 - $76,000.00
2000 - $76,000.00
<PAGE>
b. Initial Payment due: $90,000.00 due on or
before March 1, 1997. $62,000.00 due on or
before March 1, 1998. Thereafter, the Suite
Fee of $76,000.00 shall be due and payable
by Licensee not later than March 1st, each
year during the term of this Agreement.
4. Term. Four (4) years (See Paragraph F).
5. Security Deposit: $38,000.00 (See Paragraph G).
C. Furnishings, Decor and Alteration of Suite; Suite Services. Schedule 1
to this Agreement governs the manner in which the Suite shall be
furnished and equipped and sets forth services to be provided to the
Suite.
D. Possession and Use, Tickets and Parking. Schedule 2 to this Agreement
governs Licensee's right of use and access, rights with respect to
tickets and rights with respect to parking.
E. Payments. Section 3.1 of Schedule 3 of this Agreement governs the
payment of the annual Suite Fee.
F. Term. Section 3.2 of Schedule 3 to this Agreement governs the term of
this Agreement and Licensee's right of first refusal. This Agreement
shall become effective and binding when executed by both Licensee and
Owner.
G. Security Deposit. Section 3.3 of Schedule 3 of this Agreement governs
the payment of the Security Deposit.
H. Other Terms and Conditions. Schedule 4 to this Agreement sets forth
other Terms and Conditions applicable to this Agreement.
I. Special Stipulations. Schedule 5, if Schedule 5 is attached hereto,
contains any modifications of this Agreement or additional agreements
between the parties.
J. Entire Agreement. This Agreement, consisting of this basic Agreement
and Schedules 1, 2, 3, 4 and (if attached) Schedule 5, constitutes the
entire Agreement between the parties. This Agreement supersedes all
prior agreements or negotiations concerning the subject matter hereof.
No representation, promise or undertaking heretofore or concurrently
made, whether in advertising or marketing materials, discussions or
otherwise, shall be binding on either party unless specifically set
forth herein.
IN WITNESS WHEREOF, this Agreement shall become effective and binding
upon the parties when executed by both Licensee and Owner, as indicated below.
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ROBBIE STADIUM CORPORATION, a Florida
corporation
By:
------------------------------
Name:
-------------------------
Title:
------------------------
Date:
-------------------------
LICENSEE*:
By:
------------------------------
Name:
-------------------------
Title:
------------------------
Date:
-------------------------
By:
------------------------------
Name:
-------------------------
Title:
------------------------
Date:
-------------------------
- --------
* Each person or persons listed above as Licensee must sign this Agreement.
If the Licensee is a corporation or a partnership, the title of the authorized
signatory must be included.
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EXHIBIT A
(Location of Suite)
4
<PAGE>
SCHEDULE 1
Furnishings, Decor and Alterations
of the Suite; Suite Services
1.1 During the term of this Agreement, Owner shall provide the following to
the Suite:
a. The following fixtures, furnishings
and equipment: upholstered chair seats
facing the playing field; carpeted floor;
wall coverings; built-in cabinetry
(including lockable liquor cabinet); sink
with running cold water; ice-maker;
counter-size refrigerator; color television;
lounge-seats and table; and such other
furnishings as Owner shall provide;
b. Color television, with standard all-channel
reception for the Miami area and closed
circuit broadcasts of any football games
played by the Miami Dolphins or any baseball
games played by the Florida Marlins as may
be available to Owner;
c. Heat, air conditioning, ventilation, running
cold water, and electricity during all games
and events for which the Stadium is open for
use by the general public;
d. Ordinary repair and maintenance of the
interior and exterior of the Suite made
necessary by normal wear and tear;
e. Dusting, sweeping and cleaning the Suite and
rubbish removal and disposal following each
Stadium game or event;
f. Telephone equipment and local area telephone
service at Owner's expenses;
g. Food and beverage services through the
caterer licensed by Owner at Licensee's
order and expense; and
h. Such other special services as Owner, in its
sole discretion, may offer at prevailing
rates and terms established from time to
time by Owner.
1.2 Licensee shall not make any additions or alterations in the interior
or exterior of the Suite or the fixtures, furnishings and equipment therein
without the prior written
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consent of Owner. However, Licensee may supply articles of appointment, such as
pictures, plants or insignia reasonable in size and in good taste, as determined
solely by Owner. Any such additions, or alterations permitted by Owner shall be
made at Licensee's expense and be made free of any liens or encumbrances, in a
good workmanlike manner, and in compliance with all applicable permits,
authorizations, building and zoning laws, ordinances, orders, rules, regulations
and requirements of all governmental authorities having appropriate
jurisdiction. Any fixtures or materials incorporated in or attached to the Suite
by Licensee shall become the property of Owner unless Licensee shall have
obtained the written approval of Owner to remove same prior to the expiration of
the term of this Agreement, and if so removed, Licensee shall, at its own
expense, repair and restore the Suite to its condition as of the commencement of
this Agreement.
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SCHEDULE 2
Possession and Use, Tickets and Parking
2.1 Possession and Use.
Licensee shall be entitled to the use and possession of the Suite
during the term of this Agreement, except as provided in Section 2.2 below, and
subject to the provisions of this Agreement. Licensee and Licensee's guests
shall be entitled to use the Suite only at times for which appropriate tickets
for admission to the Suite have been obtained and the Stadium is intended to be
open for use by the general public. Licensee and Licensee's guests shall be
bound by and shall observe the terms and conditions upon which tickets for
admission to the Stadium have been issued by the sponsor or promoter of such
event including, without limitation, the policy with respect to the cancellation
or postponement of the game or event.
Access to the Suites shall be from the club level of the Stadium
through a private door to the Suites. Access to the club level shall be shared
only by persons holding appropriate tickets for admission to the Suites and to
the club level seats. Each Suite shall be provided with a lock system.
This Agreement provides Licensee only with the right and privilege to
possess and use the Suite in the manner set forth herein, and except as pertains
to the special right and privilege to so possess and use the Suite, this
Agreement does not confer upon Licensee or Licensee's guests any greater or
lesser rights and privileges with respect to admission to the Stadium than
afforded to other holders of tickets for admission thereto.
2.2 Admission Tickets.
Licensee's rights with respect to admission tickets for events at the
Stadium, including Miami Dolphins' and Florida Marlins' pre-season and regular
season games and Special Events shall depend on whether Licensee is a Stadium
Licensee, Dolphins' Licensee or Marlins' Licensee, as hereinafter defined.
Licensees which are entitled to both Miami Dolphins' and Florida Marlins' season
tickets are sometimes hereinafter referred to as "Stadium, Licensees"; Licensees
which are entitled to Miami Dolphins' season tickets only are sometimes
hereinafter referred to as "Dolphins' Licensees"; and Licensees which are
entitled to Florida Marlins' season tickets only are sometimes hereinafter
referred to as "Marlins' Licensees". Stadium Licensees, Dolphins' Licensees and
Marlins' Licensees shall be entitled to the following respective benefits set
forth below:
a) Stadium Licensees. During the term of this Agreement,
Stadium Licensee shall receive the number of admission tickets to the Stadium
set forth in Paragraph B above for access to the Suite for each pre-season and
regular season football game played by the Miami Dolphins at the Stadium and
each regular season baseball game played
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by the Florida Marlins at the Stadium. Additionally, Owner shall make available
and Stadium Licensee shall be free to purchase (i) up to four (4) direct access
tickets for admission to the Suite for all pre-season and regular season Miami
Dolphins' games, and (ii) up to (4) direct access tickets for admission to the,
Suite for all regular season Florida Marlins' games.
Stadium Licensee shall also have the opportunity to purchase the
required admission tickets to the Stadium for access to the Suite for any other
games or events at the Stadium, including but not limited to post-season
football games of the Miami Dolphins, post-season baseball games of the Florida
Marlins, Major League Baseball All-Star Games, college bowl games, or concerts
(collectively, "Special Events"), for which Stadium Licensee desires to use the
Suite. Admission tickets for such other games or events shall be priced by the
sponsor or promoter of the game or event, but in no event shall the admission
price charged to Stadium Licensees and their guests exceed the admission price
charged for an admission ticket to the highest priced category of seats in the
Stadium. If after Owner offers tickets for purchase for Special Events at the
Stadium, Stadium Licensee determines not to purchase any of such tickets for the
Suite within the time specified, then, at the option of Owner, the use of the
Suite for such Special Event shall revert to Owner and Owner shall be free to
sell the use of the Suite for such Special Event to a third party. In the event
Stadium Licensee purchases some, but not all of the admission tickets to the
Suite for a Special Event, Owner may make available for purchase by others,
including executive suite licensees who have been relocated or otherwise denied
access to their respective suites, any unpurchased admission tickets for seats
in and access to the Suite.
In the event the Suite is deemed by the promoter of any event, concert
or game hosted in the Stadium to have obstructed or non-manifest seats, Stadium
Licensee shall not have the right to purchase admission tickets to the Suite.
However, Owner in its sole discretion, may offer alternative seating in the
Stadium to Stadium Licensee on terms and in locations to be determined by Owner.
Notwithstanding any other provision herein to the contrary, it is
understood and agreed that the availability of the upper tier of Suites (i.e.,
Suites No. 301 et seq., collectively, the "300 Level Suites") during any Super
Bowl Games held in the Stadium will be subject to the requirements of the
National Football League. Accordingly, Stadium Licensees of 300 Level Suites may
be required either to relinquish use and possession of their Suite for any Super
Bowl Game held in the Stadium or to share possession of their Suite with others
who have been required to do so. A Stadium Licensee of a 300 Level Suite shall
be entitled to purchase admission tickets to the Super Bowl Game for at least
fifty percent (50%) of the seats in their respective suites. Owner shall make
reasonable effort (but can make no guaranty) to place Stadium Licensees of 300
Level Suites and their guests in comparable suites as closely together as
circumstances will permit.
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Stadium Licensees of Suites located in the lower tier of Suites (i.e.,
Suites No. 201 et seq., collectively, the "200 Level Suites") shall be entitled
to exclusive use and possession of their respective suites during any Super Bowl
Game held in the Stadium and shall be entitled to purchase admission tickets for
each seat in and access to their respective suites; provided, however, that any
seat for which any admission ticket has not been purchased within the time
specified by Owner in advance of the Super Bowl Game may be made available by
Owner to others, including Stadium Licensees of 300 Level Suites who have been
required to relinquish possession of their Suite, as aforesaid, to accommodate
requirements of the National Football League.
b) Dolphins' Licensees. During the term of this Agreement,
Dolphins' Licensee shall receive the number of admission tickets to the Stadium
set forth in Paragraph B above for access to the Suite for each pre-season and
regular season football game played by the Miami Dolphins at the Stadium.
Additionally, Owner shall make available and Dolphins' Licensee shall be free to
purchase up to four (4) direct access tickets for admission to the Suite for all
pre-season and regular season Miami Dolphins games.
Dolphins' Licensee shall also have the opportunity to purchase the
required admission tickets to the Stadium for access to the Suite for any other
games or events at the Stadium, including but not limited to all post-season
football games of the Miami Dolphins, college bowl games, or concerts
(collectively, "Special Events"), but specifically excluding any and all
baseball related events, such as post-season baseball games of the Florida
Marlins and Major League Baseball All Star Games, for which Dolphins' Licensee
desires to use the Suite. Admission tickets for such other games or events shall
be priced by the sponsor or promoter of the game or event, but in no event shall
the admission price charged to Dolphins' Licensee and its guests exceed the
admission price charged for an admission ticket to the highest priced category
of seats in the Stadium. After Owner offers tickets for purchase for Special
Events at the Stadium, if Dolphins' Licensee shall determine not to purchase any
of such tickets for the Suite within the time specified, then, at the option of
Owner, the use of the Suite for such Special Event shall revert to Owner and
Owner shall be free to sell the use of the Suite to a third party. In the event
Dolphins' Licensee purchases some, but not all of the admission tickets to the
Suite for a Special Event, Owner may make available for purchase by others,
including executive suite licensees who have been relocated or otherwise denied
access to their respective suites, any unpurchased admission tickets for seats
in the Suite.
Dolphins' Licensee shall also be given the opportunity to purchase
tickets for any other games or events at the Stadium, subject to availability.
In the event the Suite is deemed by the promoter of any event, concert
or game hosted in the Stadium to have obstructed or non-manifest seats,
Dolphins' Licensee shall
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<PAGE>
not have the right to purchase admission tickets to the Suite. However, Owner in
its discretion, may offer alternative seating in the Stadium to Dolphins'
Licensee on terms and in locations to be determined by Owner.
Notwithstanding any other provision herein to the contrary, it is
understood and agreed that the availability of the upper tier of Suites (i.e.,
Suites No. 301 et seq., collectively, the "300 Level Suites") during any Super
Bowl Games held in the Stadium will be subject to the requirements of the
National Football League. Accordingly, Dolphins' Licensees of 300 Level Suites
may be required either to relinquish use and possession of their Suite for any
Super Bowl Game held in the Stadium or to share possession of their Suite
with others who have been required to do so. A Dolphins' Licensee of a 300 Level
Suite shall be entitled to purchase admission tickets to the Super Bowl Game for
at least fifty percent (50%) of the seats in their respective suites. Owner
shall make reasonable effort (but can make no guaranty) to place Dolphins'
Licensees of 300 Level Suites and their guests in comparable suites as close
together as circumstances will permit.
Dolphins' Licensees of Suites located in the lower tier of Suites
(i.e., Suites No. 201 et seq., collectively, the "200 Level Suites") shall be
entitled to exclusive use and possession of their respective suites during any
Super Bowl Game held in the Stadium and shall be entitled to purchase admission
tickets for each seat in and access to their respective suites; provided,
however, that any seat for which any admission ticket has not been purchased
within the time specified by Owner in advance of the Super Bowl Game may be made
available by Owner to others, including Dolphins' Licensees of 300 Level Suites
who have been required to relinquish possession of their Suite, as aforesaid, to
accommodate requirements of the National Football League.
c) Marlins' Licensees. During the term of this Agreement,
Marlins' Licensee shall receive the number of admission tickets to the Stadium
set forth in Paragraph B above for access to the Suite for each regular season
baseball game played by the Florida Marlins at the Stadium. Additionally,
Marlins' Licensee shall also have the opportunity to purchase the required
admission tickets to the Stadium for access to the Suite for any of the
following games for which Marlins' Licensee desires to use the Suite: exhibition
baseball games played at the Stadium, post-season baseball games of the Florida
Marlins (including World Series games) played at the Stadium and the Major
League Baseball All-Star Game to be held at the Stadium in the year 2000.
Admission tickets for such games shall be priced by the sponsor or promoter of
the game, but in no event shall the admission price charged to Marlins' Licensee
and its guests exceed the admission price charged for an admission ticket to the
highest priced category of seats in the Stadium. After Owner offers tickets for
purchase for such games at the Stadium, if Marlins' Licensee shall determine not
to purchase any tickets for the Suite within the time specified, then, at the
option of Owner, the use of the Suite for such game shall revert to Owner and
Owner shall be free to sell the use of the Suite to a third party. In the event
Marlins' Licensee purchases some, but not all of the admission tickets to the
Suite for
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such games, Owner may make available for purchase by others, including executive
suite licensees who have been relocated or otherwise denied access to their
respective suites, any unpurchased admission tickets for seats in the Suite.
Marlins' Licensee shall also be given the opportunity to purchase
tickets for any other games or events at the Stadium, subject to availability.
In the event the Suite is deemed by the promoter of any such game
hosted in the Stadium to have obstructed or non-manifest seats, Marlins'
Licensee shall not have the right to purchase admission tickets to the Suite.
However, Owner in its sole discretion, may offer alternative seating in the
Stadium to Marlins' Licensee on terms and in locations to be determined by
Owner.
2.3 Special Parking.
Stadium, Dolphins' and Marlins' Licensees shall have the right to
obtain, at no additional cost, four (4) V.I.P. automobile parking spaces located
in designated Stadium site parking areas at the Stadium at the times during
which such Licensees are entitled to use the Suite. Stadium, Dolphins' and
Marlins' Licensees shall have the option to purchase additional parking passes,
depending upon availability, on a first-come, first served basis at the then
prevailing rates.
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SCHEDULE 3
Payments, Term and Security Deposit
3.1 Suite Fee.
The use and possession of the Suite shall be contingent upon payment to
Owner of the fee (the "Suite Fee") for each Contract Year at the times set forth
herein and in the amounts set forth in Paragraph B, plus any sales, use,
property or other governmental taxes due with respect to Licensee's use of the
Suite or imposed upon the payment of the Suite Fee (except for any federal,
state or local income, franchise or similar tax imposed upon Owner). The entire
Suite Fee for the initial year shall be payable on or before the date specified
in Paragraph B. Thereafter, the Suite Fee shall be due and payable by Licensee
not later than March 1st, each year during the term of this Agreement. The Suite
Fee includes an aggregate of several charges including the license of the Suite,
and a sum payable each year, as applicable, to the Miami Dolphins for Miami
Dolphins' season tickets and/or to the Florida Marlins for Florida Marlins'
season tickets provided to Licensee.
In the event that the Suite Fee is not paid at such times and in such
amounts as set forth above, then Licensee acknowledges and agrees that use and
possession of the Suite shall be subject to the Default provisions of Section
4.2 hereof. In the event that the Owner does not receive payment in full from
Licensee on or before the applicable payment due date set forth above the Owner
may consider said failure to pay a material breach, and may elect to charge
Licensee a late fee of one (1.0%) percent per month of the payment then due and
owing until it is paid in full and, without limitation of its other remedies,
Owner may terminate this Agreement upon such failure to pay in accordance with
Section 4.2.
The Suite Fee payable hereunder shall remain the same and shall not
increase until the commencement of the third year of any four year term
Agreement, the commencement of the fourth year of any seven year term Agreement
or the commencement of the sixth year of any ten year term Agreement (the period
when the Suite Fee remains unchanged shall be referred to as the "Freeze
Period"). After the Freeze Period, each year by February 1, the Suite Fee is
subject to adjustment as follows:
A. If in any year the prices charged for Executive Suite tickets
for the Florida Marlins' or the Miami Dolphins' home games are
increased from the prices charged for such tickets during the
preceding year, then the Suite Fee may be increased by the
aggregate amount of increased prices for that number of seats
in the Executive Suite. (For example, if all ticket prices
increased $1.00 per game ticket over the preceding year and
the Suite has 12 seats, the increase in the Suite Fee pursuant
to this paragraph would be
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calculated as follows: Dolphins Tickets (10 home games) $1 X
12 X 10 = $120 Suite Fee increase; Marlins tickets (assuming
81 home games) $1 X 12 X 81 = $972 Suite Fee increase.)
Notwithstanding the foregoing, the Suite Fee of a Dolphins'
Licensee shall not increase due to an increase in the prices
of Florida Marlins' tickets and the Suite Fee of a Marlins'
Licensee shall not increase due to an increase of prices for
Miami Dolphins' tickets.
B. The Suite Fee may also be increased each year by an
amount of up to five percent (5%) of the Suite Fee for the
preceding Contract Year based upon the percentage increase in
the Consumer Price Index for National Consumers (as published
by the Bureau of Labor Statistics of the U.S. Department of
Labor) over the preceding Contract year.
3.2 Term and Right of First Refusal.
The term of this Agreement shall commence upon the execution of this
Agreement by both Licensee and Owner, and shall expire on February 28th after
that number of years in the term following the calendar year in which the
Licensee has initially been issued tickets for the Suite for either the Florida
Marlins' or Miami Dolphins' games in the Stadium (whichever issuance is
earlier). As used in this Agreement, the term "Contract Year" shall mean the
twelve-month period commencing March 1, and expiring February 28, during the
term, except that in the year of execution, the Contract Year shall commence
with the date of execution and expire on February 28th. If this Agreement is a
renewal of an existing License Agreement between Owner and Licensee, then the
term and initial Contract Year hereunder shall commence upon the expiration of
the existing License Agreement.
If not in default in the performance of Licensee's obligations under
this Agreement, Licensee shall have the right of first refusal to renew this
license after the expiration of the term of this Agreement at such suite fee and
on such other terms and conditions as Owner may, in its discretion, determine.
The Licensee's right of first refusal shall be offered and exercised in
accordance with the following procedures. On or about the thirteenth month prior
to the expiration of the term of this Agreement, Owner shall submit to Licensee
a license agreement which sets forth the suite fee and other terms and
conditions offered by Owner for the license of the Suite. Licensee may exercise
its right of first refusal by executing and returning such license agreement to
Owner, together with any deposit or other payment which may be required
thereunder, within thirty (30) days after the agreement is sent to Licensee by
Owner. If Licensee shall not timely return such agreement to Owner together with
the required deposit or payment, then this right of first refusal shall
terminate and Owner shall be free to offer the Suite for license to a third
party.
3.3 Security Deposit.
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As security for the prompt and full payment of the Suite Fee and the
full and faithful performance by Licensee of each and every other obligation of
Licensee under this Agreement, Licensee has deposited with Owner the sum set
forth in Paragraph B as the "Security Deposit", the receipt of which is hereby
acknowledged by Owner. It is a condition of the Bank that is financing the
construction of the Stadium that Owner collect a security deposit and that such
deposit be held throughout the entire term. Accordingly, the Security
Deposit shall remain with Owner throughout the term of this Agreement and
Licensee may not apply such deposit to its obligations to pay annual Suite Fees.
The Security Deposit may be commingled by Owner with its independent funds, and
may be used by Owner for payment of any and all indebtedness incurred by Owner
in connection with the construction of the Stadium and the improvements located
thereon. No interest shall be paid to Licensee on the Security Deposit. If, at
any time during the term of this Agreement, any portion of the Suite Fee or any
other amount payable by Licensee to Owner pursuant to this Agreement is not
promptly paid when due, then Owner may, without waiving any other remedy which
it may have under this Agreement, appropriate and apply all or any portion of
the Security Deposit to the payment of such amount. Licensee shall, in such
event and upon written demand of Owner forthwith, remit to Owner an amount
sufficient to restore the Security Deposit to the original sum deposited, and
Licensee's failure to do so within five (5) business days after receipt of such
demand shall constitute a breach of this Agreement. If Licensee's right to the
use and possession of the Suite is terminated pursuant to Section 4.2 above,
then Owner may, at its option, appropriate and apply the Security Deposit, or so
much thereof as may be necessary, to compensate Owner for any loss or damage
sustained or suffered by Owner due to Licensee's breach. Otherwise, the Security
Deposit shall be returned to Licensee at the expiration of the term of this
Agreement, or any renewal term, less any costs and expenses incurred by Owner in
restoring the Suite to the condition required hereunder.
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SCHEDULE 4
Other Terms and Conditions
4.1 Covenants of Licensee.
Licensee covenants and agrees with Owner as follows:
A. While in possession of the Suite, Licensee shall keep and
maintain the Suite in good repair, order and condition, except for
normal wear and tear, and shall reimburse Owner for costs incurred by
Owner to repair any damage caused by Licensee or Licensee's guests to
the Suite or to the property of Owner therein. License shall not be
responsible for any damage caused by persons using the Suite other than
Licensee or Licensee's guests.
B. Licensee and Licensee's guests shall abide by and observe rules
and regulations established from time to time by Owner pertaining to
the use and occupancy of the Suite provided, however, that such rules
and regulations do not materially interfere with Licensee's use and
enjoyment of the Suite for the purposes intended.
C. Licensee and Licensee's guests shall at all times maintain
proper decorum while using the Suite and shall comply with all present
and future laws, ordinances, orders, rules and regulations of all
governmental authorities and will not suffer or permit to remain any
use or manner of use of the Suite in violation thereof.
D. Licensee shall not permit the preparation of food in the Suite
nor shall Licensee permit any food or beverages to be brought into the
Suite, except such food or beverage provided exclusively through the
Stadium caterer or otherwise purchased at the Stadium.
4.2 Default.
In the event Licensee fails to pay when due any amounts (including,
without limitation, the Suite Fee) to be paid by Licensee pursuant to this
Agreement or otherwise defaults in the performance or observation of its duties
and obligations under this Agreement, Owner may, at its option, terminate the
rights of Licensee hereunder by giving Licensee thirty (30) days prior written
notice. In the event that Licensee shall not have cured the default or breach
specified in said notice within said thirty (30) day period, then Owner may
terminate the right of Licensee to the use and possession of the Suite and all
other rights or privileges of Licensee under this Agreement and declare the
entire unpaid balance of the Suite Fee immediately due and payable, whereupon
Owner shall have no further obligation of any kind to Licensee and may enter the
Suite and remove all items of property of Licensee for storage at Licensee's
expense. Owner may, without waiving any other right or remedy to which it may be
entitled, immediately apply
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the Security Deposit to Licensee's obligations to pay the Suite Fee or other
amounts owed to Owner as a result of such default. Upon Owner's termination of
Licensee's license to use the Suite, Owner shall be free to relicense the Suite
to a third party without obligation to Licensee. Owner may relicense the right
to the use and possession of the Suite to another party; provided that, if there
are any other Suites in the Stadium available to be licensed, Owner may give
priority to licensing such other suites. Licensee shall remain obligated to make
all payments due or becoming due under this Agreement, but if Owner licenses the
right to the use and possession of the Suite to another party, then all amounts
received from such other party applicable to any remaining period of this
Agreement shall be applied first to the expense of relicensing and then to the
reduction of any obligations of Licensee to Owner under this Agreement. If the
consideration collected by Owner upon any such relicensing is not sufficient to
pay the full amount of all such obligations of Licensee, Licensee shall pay any
such deficiency upon demand.
The foregoing remedies of Owner shall not be to the exclusion of any
other right or remedy set forth herein or otherwise available to Owner in law or
in equity. Each of Owner and Licensee shall be responsible for all reasonable
attorney's fees and costs incurred by Owner or Licensee as may be the case in
the enforcement of this Agreement provided that litigation is actually commenced
and the party seeking such attorney's fees is the prevailing party. In the event
that such enforcement results in trial, the prevailing party shall be entitled
to recover all reasonable attorney's fees incurred as a result hereof, including
fees and costs of any appellate proceedings. Licensee and Owner hereby waive
trial by jury.
No waiver by Owner of any default or breach by Licensee of its obligations
hereunder shall be construed to be a waiver or release of any other or
subsequent default or breach by Licensee hereunder, and no failure or delay by
Owner in the exercise of any remedy provided for herein shall be construed to
constitute a forfeiture or waiver thereof or of any other right or remedy
available to Owner.
4.3 Strikes, Damage, Destruction, Etc.
In the event of any damage to or destruction of the Suite or the
Stadium which renders the Suite or the Stadium unusable, then, Owner shall
attempt to relocate Licensee to another executive suite at the Stadium. However,
if Owner is unable to relocate Licensee to another executive suite at the
Stadium, then, the Suite Fee payable hereunder shall be abated during the period
of time that the Suite is unusable. Any such abatement of the Suite Fee shall be
computed annually by dividing the number of games and other events for which the
Suite was unusable by Licensee by the total number of games and events in the
Stadium for which Licensee was entitled use during the applicable year including
the number of such scheduled games and events which were canceled as a result of
any such damage or destruction. Any such abatement shall be offset against the
next succeeding installment of the Suite Fee payable by Licensee. If in the
event of any damage to or destruction of the Suite or the Stadium, Owner elects
not to repair or restore
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same, this Agreement shall terminate as of the date of such damage or
destruction, and the entire amount of the abatement shall be promptly paid to
Licensee.
In the event of force majeure or any strike or other labor disturbance
which results in the cancellation of any Miami Dolphins' or Florida Marlins'
scheduled game(s) at the Stadium, or the cancellation of any other scheduled
event(s) at the Stadium, then, the Owner shall return to Licensee, as Licensee's
sole and exclusive remedy for such termination or cancellation, the aggregate
ticket price for admission to any such canceled game(s) or event(s) purchased by
Licensee for the Suite. In the event that the Florida Marlins shall relocate and
shall play its home games at a ball park other than the Stadium, then, the Owner
shall return to Licensee, as Licensee's sole and exclusive remedy for such
relocation, the aggregate ticket price paid by Licensee for admission to the
Suite for any Florida Marlins' games which are not played at the Stadium.
4.4 Access by Owner.
Owner, its officers, agents, employees, and representatives shall be
entitled to have access to the Suite on such occasions and to such extent as
Owner, shall in its sole discretion, deem necessary or appropriate for the
proper performance of the duties and obligations required or contemplated to be
performed by Owner or to be observed by Licensee under this Agreement for the
compliance with the rules and regulations governing use of the Stadium. For such
purposes, Owner shall retain duplicate keys to the Suite and the cabinets in the
Suite, and Licensee shall not change the locks or place any additional locks on,
or otherwise restrict or impede Owner's access to, the Suite or the cabinets
therein.
4.5 Owner's Right to Relocate.
Owner expressly reserves the right after the execution and during the
term of this Agreement, at its sole cost and expense, to remove the Licensee
from the Suite and relocate the Licensee to some other suite of Owner's choosing
of the same approximate size, if Owner determines that such relocation is
necessary in connection with any construction or renovation projects at the
Stadium. Licensee, by the execution of this Agreement, acknowledges the
foregoing right of Owner, and no rights granted in this Agreement to Licensee
shall be deemed to have been breached or interfered with by reason of Owner's
exercise of the right of relocation reserved in this Section 4.5. Licensee
agrees that Owner's exercise of its election to remove and relocate Licensee
shall not terminate this Agreement or release the Licensee, in whole or in part,
from Licensee's obligation to pay the Suite Fees and perform the covenants and
agreements under this Agreement for the full term of this Agreement.
4.6 Disclaimer of Liability.
Owner shall not be liable or responsible for any loss, damage, or
injury to any person or to any property of Licensee or Licensee's guests in or
upon the Suite or the
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Stadium, resulting from any cause whatsoever, including but not limited to theft
and vandalism, and including the sole or joint negligence of Owner, unless due
to the intentional misconduct of Owner or Owner's employees, agents or other
representatives.
In addition, Licensee agrees to indemnify and hold Owner harmless from
and against any liability, losses, claims, demands, costs and expenses including
attorney's fees and litigation expenses arising out of any personal injury or
property damage occurring in or upon the Suite or the Stadium due to or
resulting from the breach by Licensee or Licensee's guests of any of the terms
and conditions of this Agreement or of any applicable laws, rules, regulations
or orders of any governmental agency having appropriate jurisdiction over the
Stadium, the Suite or over any actions or negligence of Licensee, or from any
other cause whatsoever, including but not limited to the sole or joint
negligence of the Owner.
4.7 Third Party Beneficiaries.
Owner has heretofore arranged financing for the construction of the
Stadium and the Suite with a financial institution (the "Bank"). Licensee
acknowledges that Owner has pledged and may in the future pledge its interests
in this Agreement to the Bank and that the Bank will be relying on, and will be
entitled to rely on, the commitments made by Licensee in this Agreement and that
the Bank shall have the rights of a third party beneficiary with respect to this
Agreement.
4.8 Miscellaneous.
A. Upon the expiration of the term of this Agreement (or, if
applicable, upon the expiration of any renewal term pursuant to
Licensee's right of first refusal under Section 3.2 hereof) or upon the
earlier termination of this Agreement, Licensee shall surrender
possession of the Suite to Owner in the condition in which it was
originally delivered to Licensee, except for normal wear and tear, and
damage caused by casualty or force beyond the control of Licensee or
Licensee's guests.
B. Licensee shall not sell, assign, sublease, pledge or otherwise transfer
or encumber this Agreement, or any of Licensee's rights and obligations
hereunder without first offering to Owner the right to accept any such
transfer on its own behalf. If Owner does not accept Licensee's offer
to assign this Agreement to Owner within ten (10) days after Licensee
delivers written notice to Owner of its intent to so transfer this
Agreement, Licensee may transfer this Agreement upon obtaining the
prior written consent of Owner, which consent may not be unreasonably
withheld. Any attempted sale, assignment, sublease, pledge, transfer
or encumbrance in contravention of the foregoing shall be null, void
and of no force or effect, and shall be deemed to be a breach of this
License Agreement by Licensee. Any such breach by Licensee shall give
rise to a right by Owner to (i) prohibit admission to the Suite for any
purchaser, assignee, sublessee, pledgee or other transferee whom
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Owner has not approved or provided its consent, and (ii) terminate this
License Agreement and following such termination by Owner, Licensee
shall forfeit its right to the Security Deposit. Licensee shall
indemnify and hold harmless Owner and shall remain fully liable for any
property damage, personal injury or death resulting from or arising in
connection with any such sale, assignment, pledge, transfer or
encumbrance to which Owner has not consented.
C. It is understood that Owner has mortgaged, pledged, assigned or
otherwise encumbered the Suite, this Agreement and/or the Security
Deposit as security for financing improvements to be made to the suites
or other facilities operated by Owner in the Stadium or for other
purposes of the Owner, and that this Agreement and the rights and
interests of Licensee hereunder shall be subordinate thereto; provided
that any such mortgagee, pledgee, assignee or the holder of any such
lien shall agree in writing to recognize this Agreement and the rights
and interests of Licensee hereunder in the event of foreclosure or
enforcement of said lien if Licensee is not then in default in the
performance of Licensee's obligations under this Agreement.
D. All notices, demands and other communications between the
parties required or appropriate hereunder shall be in writing and
deemed given if mailed, postage prepaid, to the address set forth above
for the Owner and to the address set forth in Paragraph B for the
Licensee, or to such other address as may be designated by either
party, from time to time, in writing.
E. This Agreement shall be construed and enforced in accordance with the
laws of the State of Florida.
F. This Agreement and all the terms and provisions hereof shall
inure to the benefit of and be binding upon the parties hereto, and
their respective successors and permitted assigns. If Licensee is a
natural person, this Agreement shall automatically terminate upon the
death of Licensee. No amendment or modification to this Agreement shall
be effective unless the same is in writing and signed by both Owner and
Licensee and is consented to by the Bank.
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SCHEDULE 5
Special Stipulation
Notwithstanding Paragraph B4. of this Agreement, Licensee shall have
the right to terminate this Agreement, subject to the provisions contained in
this Schedule 5.
Licensee's right to terminate shall be exercisable for a period
commencing December 1, 1997 and ending on the final day of March, 1998 (the
"Termination Period"). The termination right may be exercised by, and shall
become effective only upon, Licensee's delivery to Owner of written notice of
its intention to terminate during the Termination Period. Upon the exercise of
such termination, all of Licensee's rights under this Agreement (except for any
rights with respect to the Security Deposit), including but not limited to
Licensee's right of refusal under Schedule 3.2, shall automatically terminate.
No such termination shall affect Licensee's obligation arising under the
Agreement with respect to the 1st year of the term or which otherwise extend
beyond the term of this Agreement.
Upon the expiration of the Termination Period without the effective
exercise of its termination rights, Licensee shall have no further termination
rights under this
Agreement.
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Exhibit 10.49
[LOGO OF MIAMI HEAT]
================================================================================
SPONSORSHIP AGREEMENT
THE PARTIES TO THIS AGREEMENT, THE MIAMI HEAT LIMITED PARTNERSHIP ("HEAT" OR
"MIAMI HEAT") LOCATED AT: 1 S.E. 3RD AVENUE, SUITE 2300, MIAMI, FL. 33131;
SUNSHINE NETWORK ("SUNSHINE") LOCATED AT: 200 E. LAS OLAS BOULEVARD, SUITE 1290,
FT. LAUDERDALE, FL. 33301; AND HYDRON TECHNOLOGIES, INC. ("HYDRON") LOCATED AT:
1001 YAMATO ROAD, SUITE 403, BOCA RATON, FL. 33431 AGREE AS FOLLOWS:
1. HYDRON shall participate as an official corporate sponsor of the MIAMI
HEAT. In accordance with this status HYDRON shall have the right to use
the MIAMI HEAT logo in their advertising as mutually agreed upon by
HYDRON and the HEAT, with prior written consent of the HEAT which shall
not be unreasonably withheld or delayed and subject to the rules,
regulations, and fees of the NBA as they currently exist or from time
to time may be amended.
2. HYDRON shall participate as an official sponsor of the MIAMI HEAT
English Radio Network. HYDRON shall receive one (1) minute of produced
advertising spots during the HEAT's English radio broadcasts based on
all HEAT regular season games for the remainder of the 1996-97 season
to begin on December 3, 1996 and during all pre-season and eighty-two
(82) regular season games of the 1997-98 season. In addition, HYDRON
shall be the title sponsor of the "Hydron Technologies Defensive Player
of the Game" feature to take place during post-game of each of the
HEAT's remaining games during the 1996-97 season and all HEAT games
during the 1997-98 season. At the option of HYDRON, the title of the
"Hydron Technologies Defensive Player of the Game" feature shall be
changed to: "Hydron Best Defense Player of the Game."
3. HYDRON shall participate as an official sponsor of the MIAMI HEAT
Hispanic Radio Network. HYDRON shall receive one (1) minute of produced
advertising spots during the HEAT's Hispanic radio broadcasts based on
all HEAT regular season games for the remainder of the 1996-97 season
to begin on December 3, 1996 and during all pre-season and eighty-two
(82) regular season games of the 1997-98 season. In addition, HYDRON
shall be the title sponsor of the "Hydron Technologies Defensive Player
of the Game" feature to take place during post-game of each of the
HEAT's remaining games during the 1996-97 season and all HEAT games
during the 1997-98 season. At the option of HYDRON, the title of the
"Hydron Technologies Defensive Player of the Game" feature shall be
changed to: "Hydron Best Defense Player of the Game."
================================================================================
Hydron Technologies Sponsorship Agreement Page 1
<PAGE>
[LOGO OF MIAMI HEAT]
================================================================================
4. HYDRON agrees to purchase produced advertising spots of the same length
of time as their regular season spots on both the English and Hispanic
Radio Networks for any and all post-season games should the HEAT
advance to the NBA Playoffs during the 1996-97 and/or 19978-98 seasons
at a rate of $600.00 per game during the English broadcasts and $300.00
per game during the Hispanic broadcasts.
5. HYDRON shall participate as an in-arena advertiser with the MIAMI HEAT.
HYDRON shall receive an advertising panel measuring 60' in length and
3' in height on the HEAT's courtside scorer's table signage in the
Miami Arena for the 1996-97 and 1997-98 seasons. Said signage will run
on a rotating schedule for a minimum of three (3) in-game televised
minutes (average of six (6) in-arena minutes) during each HEAT home
game with the exception of those games broadcast to a national
television audience. The design, layout and content of all
advertisements shall be subject to the prior written approval of the
HEAT which shall not be unreasonably withheld or delayed. HYDRON shall
provide the HEAT with camera-ready artwork necessary for the
preparation of the signage. The HEAT shall be responsible for the costs
of the original preparation and installation of the advertisements, as
well as their maintenance. HYDRON shall be responsible for any
replacement of the advertising panel made at its option.
6. HYDRON shall receive four (4) VIP floor seats for each remaining HEAT
regular season home game beginning on November 30, 1996 and all
pre-season and regular season home games during the 1997-98 season
which will be located in Section 112, VIP Row, Seats 1-4. HYDRON shall
have the option of purchasing these seats in the event that the HEAT
advance to the NBA Playoffs during the 1996-97 and/or 1997-98 seasons
at a playoff rate to be determined by the HEAT.
7. HYDRON shall participate as a sponsor of the MIAMI HEAT Magazine, the
official magazine of the HEAT. HYDRON shall receive one (1) full-page
four-color advertisement in each of the remaining seven (7) issues of
the 1996-97 season and all nine (9) monthly issues during the 1997-98
season.
8. HYDRON shall receive a VIP Suite to include twelve (12) suite tickets
and basic catering for one (1) mutually agreeable HEAT regular season
home game during the 1996-97 and 1997-98 seasons.
================================================================================
Hydron Technologies Sponsorship Agreement Page 2
<PAGE>
[LOGO OF MIAMI HEAT]
================================================================================
9. HYDRON shall sponsor a product sampling night during a HEAT regular
season home game during each of the 1996-97 and 1997-98 seasons. HYDRON
shall have the opportunity to provide fans free samples of their
products as they enter the Miami Arena on the designated game dates.
The dates and elements of the promotion shall be mutually agreed upon
by HYDRON and the HEAT and it will be the responsibility of HYDRON to
provide all product samples with final written approval from the HEAT
which shall not be unreasonably withheld or delayed.
10. HYDRON shall receive the following advertising and promotional
consideration on SUNSHINE NETWORK during the MIAMI HEAT 1996-97 and
1997-98 seasons:
A. Entitlement of the HEAT "Halftime Report" on Sunshine
Network for thirty-one (31) games during the 1996-97 season
from December 14, 1996 through April 18, 1997 and thirty-one
(31) games on SUNSHINE during the 1997-98 season to be
determined by the HEAT and SUNSHINE.
B. One (1) thirty-second (:30) commercial announcement
during thirty-one (31) HEAT "Halftime Reports" on SUNSHINE
during each of the 1996-97 and 1997-98 seasons to be determined
by the HEAT and SUNSHINE.
C. One (1) sixty-second (:60) commercial announcement in
thirty-one (31) HEAT telecasts (to be placed on rotation during
the fourth quarter) on SUNSHINE during each of the 1996-97 and
1997-98 seasons to be determined by the HEAT and SUNSHINE.
D. One (1) opening audio/video billboard identification
during the "Halftime Report" of thirty-one (31) games during
each of the 1996-97 and 1997-98 seasons to be determined by the
HEAT and SUNSHINE.
E. One (1) on-air mention of the "Halftime Report" during
the second quarter of thirty-one (31) HEAT telecasts on
SUNSHINE during each of the 1996-97 and 1997-98 seasons to be
determined by the HEAT and SUNSHINE.
F. HYDRON shall receive a total of twenty-five (25)
ten-second (:10) HEAT "Salutes" to air on SUNSHINE during the
1996-97 and 1997-98 seasons. These "Salutes", produced by
SUNSHINE, will read "Hydron is a proud sponsor of the Miami
HEAT on Sunshine Network." HEAT footage will be included along
with HYDRON'S logo.
11. HYDRON shall agree to purchase the same amount of advertising time as
the regular season at a rate of $5,312.50 per game should the HEAT
advance to the NBA Playoffs during the 1996-97 and/or the 1997-98
seasons.
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Hydron Technologies Sponsorship Agreement Page 3
<PAGE>
[LOGO OF MIAMI HEAT]
================================================================================
12. As the schedule permits during the 1996-97 and 1997-98 seasons, the
HEAT may schedule a sponsor appreciation trip to a HEAT NBA pre-season
or regular season away game. Two executives of HYDRON, as invited by
the HEAT, shall have the option of flying commercial with the
designated group to participate in this sponsor appreciation program.
HYDRON's designated executives would receive complimentary game
tickets, hotel accommodations, and transportation.
13. The MIAMI HEAT shall endeavor to provide HYDRON with additional sponsor
services, privileges and amenities. These benefits may include golf and
tennis outings, sponsor functions and other programs as determined by
the HEAT.
14. As all of the HEAT's Sponsorship and Promotional Agreements are
required to be, this Agreement is subject to the NBA Constitution,
By-Laws and Rules and Regulations as they presently exist and may from
time to time be amended. HEAT has provided to HYDRON a copy of the
current National Basketball Association Constitution, By-Laws and Rules
and Regulations of the NBA, and convenants and agrees to promptly
provide to HYDRON any and all amendments and supplements thereto.
15. The agreed upon cost of the corporate sponsorship to HYDRON is $321,250
for the 1996-97 season and $336,250 for the 1997-98 season for a
two-year total of $657,500.
16. This Agreement shall not be assigned by any party without the prior
written consent of the other two (2) parties.
17. 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.
18. Subject to the foregoing, the term of this Agreement shall begin upon
the execution hereof and shall continue through the last MIAMI HEAT
regular season or playoff basketball game of the 1997-98 season. In
exchange for advertising consideration in this Agreement and other
consideration granted to HYDRON by the HEAT, HYDRON agrees to pay the
HEAT the following amounts on the dates indicated below:
================================================================================
Hydron Technologies Sponsorship Agreement Page 4
<PAGE>
[LOGO OF MIAMI HEAT]
================================================================================
CONTRACT YEAR PAYMENT DATE AMOUNT
------------- ------------ ------
1996-97 December 20, 1996 $120,000
February 1, 1997 $100,625
April 1, 1997 $100,625
1997-98 October 1, 1997 $120,000
December 1, 1997 $108,125
February 1, 1998 $108,125
It is understood that this Agreement will automatically renew for the
1997-98 season unless written notice is given by either party between
June 1, 1997 and July 1, 1997.
The payment due dates as outlined in this agreement will serve as
invoices for the said amount due. All payments are to be in receipt at
the MIAMI HEAT offices on or before the specified due date. In the
event that any payment under this Sponsorship Agreement by HYDRON is
not made when due, then in such event, the HEAT shall provide written
notice of such default to HYDRON at their principal executive offices,
and HYDRON shall have the right to cure each such default by making the
appropriate payment within five (5) business days from the effective
date of such notice of default. The MIAMI HEAT reserves the right to
charge a penalty of 18% interest per annum, or the highest rate allowed
by law, on any payments that have not been received by the HEAT after
the five (5) designated business days from the effective date of the
notice. HYDRON shall be responsible for any taxes (other than income
taxes) or similar charges imposed by any governmental entity regarding
the granting of advertising or any other rights included in this
agreement.
19. Any notice or other communication under the provisions of this
Sponsorship Agreement shall be in writing, and shall be given by
postage prepaid, registered or certified mail, return receipt
requested; by hand delivery with an acknowledgment 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.
================================================================================
Hydron Technologies Sponsorship Agreement Page 5
<PAGE>
[LOGO OF MIAMI HEAT]
================================================================================
I HAVE READ THE FOREGOING AND IT CLEARLY REFLECTS OUR AGREEMENT.
Date: HYDRON TECHNOLOGIES, INC.
------------------------------ By and Through Its
Authorized Representative
--------------------------------------
Date: SUNSHINE NETWORK
------------------------------ By and Through Its
Authorized Representative
--------------------------------------
Date: MIAMI HEAT
------------------------------ By and Through Its
Authorized Representative
--------------------------------------
================================================================================
Hydron Technologies Sponsorship Agreement Page 6
<PAGE>
HYDRON TECHNOLOGIES, INC. AND SUBSIDIARIES
Exhibit (11) - Statement Re: Computation of Earnings Per Share
Years Ended December 31,
--------------------------------------
1996 1995 1994
------------ ------------ -----------
Primary:
Average shares outstanding 22,905,175 22,632,180 22,077,710
Net effect of dilutive stock
options - based on the
treasury stock method using
average market price - 506,485 589,260
------------ ------------ -----------
Totals 22,905,175 23,138,665 22,666,970
============ ============ ===========
Net income $ (2,823,977) $ 1,782,588 $ 3,638,206
============ ============ ===========
Per share amount $ (0.12) $ 0.08 $ 0.16
============ ============ ===========
Fully diluted:
Average shares outstanding 22,905,175 22,632,180 22,077,710
Net effect of dilutive stock
options - based on the
treasury stock method using
quarter-end market price - 519,203 825,044
------------ ------------ -----------
Totals $ 22,905,175 $ 23,151,383 $22,902,754
============ ============ ===========
Net income $ (2,823,977) $ 1,782,588 $ 3,638,206
============ ============ ===========
Per share amount $ (0.12) $ 0.08 $ 0.16
============ ============ ===========
<PAGE>
Exhibit 21
Subsidiaries of the Registrant
Name State of Incorporation
Hydron Healthcare, Inc. Delaware
Spargos Advertising, Inc. Florida
Hydron Direct, Inc. Delaware
<PAGE>
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, 33-84554 and 333-11765)
of Hydron Technologies, Inc. and in the related Prospectus of our report dated
February 19, 1997, with respect to the financial statements of Hydron
Technologies, Inc. included in this Annual Report (Form 10-K) for the year ended
December 31, 1996.
/s/ Ernst & Young, LLP
West Palm Beach, Florida
March 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,603,708
<SECURITIES> 0
<RECEIVABLES> 611,731
<ALLOWANCES> 0
<INVENTORY> 2,826,684
<CURRENT-ASSETS> 9,559,706
<PP&E> 829,171
<DEPRECIATION> 249,479
<TOTAL-ASSETS> 12,741,140
<CURRENT-LIABILITIES> 759,660
<BONDS> 0
0
0
<COMMON> 232,285
<OTHER-SE> 20,351,654
<TOTAL-LIABILITY-AND-EQUITY> 12,741,140
<SALES> 8,112,672
<TOTAL-REVENUES> 8,285,765
<CGS> 3,323,056
<TOTAL-COSTS> 3,323,056
<OTHER-EXPENSES> 7,786,686
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,823,977)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,823,977)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,823,977)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
