================================================================================
As filed with the Securities and Exchange Commission on August 18, 1995
Registration No. _________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ROYCE LABORATORIES, INC.
------------------------
(Exact name of registrant as specified in its charter)
Florida
------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
59-2202295
---------------------------------------
(I.R.S. Employer Identification Number)
5350 N.W. 165th Street
Miami, Florida 33014
Telephone: (305) 624-1500
-------------------------------------------------
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
Patrick J. McEnany
President and Chief Executive Officer
Royce Laboratories, Inc.
5350 N.W. 165th Street
Miami, Florida 33014
Telephone: (305) 624-1500
---------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Philip B. Schwartz, P.A.
Broad and Cassel
Miami Center
201 South Biscayne Boulevard, Suite 3000
Miami, Florida 33131
Telephone: (305) 373-9437
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
================================================================================
<PAGE>
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A), OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
-------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Proposed Proposed
Maximum Maximum
Amount Offering Price Aggregate Amount of
Being Per Security Offering Registration
Title of Each Class of Securities Being Registered Registered Price Fee
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock(1)........................................... 833,333 $7.625 6,354,164.10 2,190.92
Common Stock issuable upon exercise of the Warrants(2) 833,333 6.50 5,416,664.50 1,867.67
Common Stock issuable upon exercise of the Placement
Agent Warrant(3).......................................... 83,333 6.00 499,998 172.40
------------------------------------------------------------------------------------------------------------------------------------
Total Registration Fee.................................... $4,230.99
====================================================================================================================================
<FN>
------------------
(1) These shares are being registered on behalf of certain selling
shareholders of the Company pursuant to the Company's registration
obligations owed to such shareholders. See "Selling Shareholders." The
Proposed Maximum Offering Price for these shares is estimated solely for
the purpose of calculating the registration fee pursuant to Rule 457,
based on average of the bid and ask closing price of the Company's Common
Stock on August 15, 1995.
(2) Represents shares of Common Stock issuable to certain selling shareholders
of the Company. These shares are being registered pursuant to the
Company's registration obligations owed to such shareholders. See
"Selling Shareholders." Each Warrant is exercisable at $6.50 per share.
See "Description of the Warrants."
(3) Represents shares of Common Stock issuable to Gruntal and Co. Incorporated
upon the exercise of outstanding common stock purchase warrants. Such
warrants are exercisable at $6.00 per share. See "Description of
Securities Registered - Placement Agent Warrant."
</FN>
</TABLE>
<PAGE>
ROYCE LABORATORIES, INC.
CROSS-REFERENCE SHEET
REGISTRATION STATEMENT CAPTION OR
ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
1. Forepart of Registration Statement and Front Cover Page
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages Inside Front and Outside Back
of Prospectus Cover Pages of Prospectus
3. Summary Information, Risk Factors and Prospectus Summary; Risk Factors
Ratio of Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security-Holders Selling Shareholders; Plan of
Distribution
8. Plan of Distribution Front Cover Page; Selling
Shareholders; Plan of
Distribution
9. Description of Securities to be Registered Description of Securities
Registered
10. Interests of Named Experts and Counsel Experts; Legal Matters
11. Material Changes Not Applicable
12. Incorporation of Certain Information by Incorporation of Certain
Reference Documents by Reference
13. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PRELIMINARY PROSPECTUS, DATED AUGUST 18, 1995
ROYCE LABORATORIES, INC.
COMMON STOCK
Royce Laboratories, Inc. (the "Company") hereby registers 833,333
shares (the "Shares") of its common stock, $.005 par value (the "Common Stock"),
for the account of certain selling shareholders. The Shares were issued in a
private placement which was completed on July 21, 1995 (the "Private
Placement"). See "Description of Securities - Private Placement." The Company is
also registering up to 833,333 shares of its Common Stock issuable upon the
exercise of warrants (the "Warrants") owned by the selling shareholders. The
Warrants were also issued in the Private Placement. See "Description of the
Warrants" for a description of the terms of the Warrants. Additionally, the
Company is registering up to 83,333 shares of its Common Stock issuable upon the
exercise of a warrant (the "Placement Agent Warrant") owned by Gruntal & Co.,
Incorporated ("Gruntal"). Gruntal received the Placement Agent Warrant as part
of its compensation for acting as the Placement Agent in the Private Placement.
See "Description of Securities Registered - Placement Agent Warrant" for a
description of the terms of the Placement Agent Warrant.
The holders of the Shares, the Warrants and the Placement Agent Warrant
(with respect to the shares of common stock underlying the Warrants and the
Placement Agent Warrant) may sell the shares of Common Stock registered hereby
from time to time in the public market. See "Plan of Distribution." The Company
will receive the proceeds from the exercise of the Warrants and the Placement
Agent Warrant (if it is exercised for cash), but will not receive any proceeds
from the sale by the Selling Shareholders or Gruntal of the shares of Common
Stock offered hereby. Further, the Selling Shareholders will not bear any of the
expenses related to this registration. The Company is obligated to register the
Shares and the shares of Common Stock underlying the Warrants pursuant to the
terms of the purchase agreements (collectively, the "Purchase Agreement")
between the Company and the purchasers of the Shares and the Warrants and by the
terms of the Placement Agent Warrant.
For all purposes hereunder, the registered holders of the Shares and
the Warrants and Gruntal may sometimes be collectively referred to herein as the
"Selling Shareholders" and the Shares, the shares of Common Stock underlying the
Warrants and the Shares of Common Stock underlying the Placement Agent Warrant
may sometimes be collectively referred to herein as the "Registered Securities."
The Common Stock is quoted on the automated quotation system of the
National Association of Securities Dealers, Inc. ("NASDAQ") under the symbol
"RLAB." On August 15, 1995, the average of the bid and ask closing prices of the
Common Stock was $7.625 per share.
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE
DISCUSSION UNDER "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is ___________, 1995
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C., and at its following
regional offices: Suite 788, 1375 Peachtree St. N.E., Atlanta, Georgia 30367;
Suite 1400, 500 West Madison Street, Chicago, Illinois; and 7 World Trade
Center, New York, New York. Copies of such material can also be obtained at
prescribed rates from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act of 1933, as amended (the "Act") with respect
to the securities being offered by this Prospectus. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits thereto. For further information about the Company and the securities
offered hereby, reference is made to the Registration Statement and to the
exhibits filed as a part thereof. The statements contained in this Prospectus as
to the contents of any contract or other document identified as exhibits in this
Prospectus are not necessarily complete and, in each instance, reference is made
to a copy of such contract or document filed as an exhibit to the Registration
Statement, each statement being qualified in any and all respects by such
reference. The Registration Statement, including exhibits, may be inspected
without charge at the principal reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all
or any part thereof may be obtained upon payment of fees prescribed by the
Commission from the Public Reference Section of the Commission at its principal
office in Washington, D.C. set forth above.
The Company's Common Stock is quoted on NASDAQ under the symbol "RLAB."
All of the reports required to be filed by the Company with NASDAQ and other
information concerning the Company can be inspected at 1735 K Street, N.W.,
Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are hereby
incorporated by reference in this Prospectus: (1) the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, as amended, (2) the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, (3) the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and
(4) the Company's Proxy Statement dated June 7, 1995, for use at the Company's
1995 Annual Meeting of Shareholders. Each document filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, subsequent to the date
of this Prospectus but prior to the termination of this offering to which this
Prospectus relates, shall be deemed to be incorporated by reference in this
Prospectus and made a part of this Prospectus from the date any such document is
filed. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the documents described above, other than exhibits to such
documents (unless such exhibits have been specifically incorporated by reference
therein). Requests for such copies should be directed to Robert E. Band, Vice
President - Finance, at the principal executive offices of the Company at 5350
N.W. 165th Street, Miami, Florida 33014, telephone (305) 624-1500.
-2-
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED INFORMATION, FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE
IN THIS PROSPECTUS. EACH INVESTOR IS URGED TO READ THIS PROSPECTUS IN ITS
ENTIRETY. UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL INFORMATION IN THIS
PROSPECTUS (I) HAS BEEN ADJUSTED TO REFLECT A ONE-FOR-THREE REVERSE STOCK SPLIT
OF THE OUTSTANDING COMMON STOCK WHICH BECAME EFFECTIVE ON DECEMBER 23, 1993, AND
(II) ASSUMES NO EXERCISE OF ANY OUTSTANDING OPTIONS OR WARRANTS.
INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE
HEADING "RISK FACTORS."
THE COMPANY
The Company develops, manufactures and markets generic prescription and
over-the-counter drugs in solid dosage form (tablets and capsules). Tablets and
capsules comprise the largest portion of the prescription pharmaceutical market.
As of the date of this Prospectus, the Company manufactures and markets the
following generic pharmaceutical products:
<TABLE>
<CAPTION>
BRAND NAME
PRODUCT NAME EQUIVALENT USE
------------ ---------- ---
<S> <C> <C>
Chlorzoxazone Parafon Forte(Registered trademark) Muscle relaxant
Doxepin Hydrochloride Sinequan(Registered trademark) Tranquilizer
Yohimbine Hydrochloride Yocon(Registered trademark) Sympathicolytic
and mydriatic
Perphenazine and Amitriptyline Triavil(Registered trademark) Anti-depressant
Hydrochloride
Amiloride Hydrochloride and Moduretic(Registered trademark) Anti-hypertensive
Hydrochlorothiazide
Lorazepam Ativan(Registered trademark) Tranquilizer
Baclofen Lioresal(Registered trademark) Muscle relaxant
Hydroxyzine Hydrochloride Atarax(Registered trademark) Tranquilizer
Cyclobenzaprine Hydrochloride Flexeril(Registered trademark) Muscle relaxant
Pindolol Visken(Registered trademark) Anti-hypertensive
Quinine Sulfate none Anti-malarial
</TABLE>
The Company has filed abbreviated new drug applications ("ANDAs") with
the Food and Drug Administration ("FDA") for ten additional products in 21
dosage strengths. Since January 1994, the FDA has approved the Company's ANDAs
for five generic prescription drugs and has also tentatively approved the
Company's ANDA for a sixth generic prescription drug. The Company currently has
approximately 20 products under development and expects to file ANDAs for
approximately 10 to 12 products over the next 12 months.
Generic drugs are the chemical and therapeutic equivalents of
brand-name drugs for which patents and/or marketing exclusivity rights have
expired. Although subject to the same standards for safety and effectiveness as
their brand name equivalents, generic drugs are typically sold under their
chemical names, typically at prices substantially below their brand name
equivalents. The Company believes that
-3-
<PAGE>
the market for generic pharmaceuticals has grown and will continue to grow
because of various factors, including the aging of the U.S. population,
continuing efforts to contain health care costs by governmental agencies, health
care institutions and third party payors, and the increasing awareness and
acceptance of generic drugs by physicians, pharmacists and consumers.
The Company's objective is to increase the number of products offered
while being an efficient, low cost manufacturer of generic pharmaceuticals. The
Company's product development strategy is to focus on selected niche products,
as well as on drugs such as Captopril, whose brand name equivalents have U.S.
sales of over $100 million. The Company has identified a number of products
which it believes offer growth opportunities, such as drugs having a controlled
substance as one of their active ingredients, certain overlooked products and
selected drugs with difficult-to-develop formulations. The Company sells its
products primarily to drug wholesalers, generic drug distributors, retail buying
groups, managed care organizations and drug chains. The Company believes that
its willingness to manufacture products under a customer's private label
provides an additional opportunity for growth since many of the larger generic
drug companies do not manufacture private label products. The Company believes
it has an efficient manufacturing facility and that it will realize significant
operating leverage as its sales volume increases.
The Company maintains its executive offices at 5350 N.W. 165th Street,
Miami, Florida 33014. Its telephone number is (305) 624-1500.
RECENT DEVELOPMENTS
In March 1995, the Company received a tentative approval from the FDA
of the Company's ANDA for Captopril (a generic version of Capoten(Registered
trademark)), an anti-hypertensive drug. In order to market Captopril, the
Company must receive final approval of its ANDA, which will not be granted until
the expiration of patent protection for Capoten(Registered trademark) and is
subject to the Company remaining in substantial compliance with current good
manufacturing practices. During 1994, sales of Capoten(Registered trademark) in
the United States were approximately $581 million.
On August 4, 1995, the Company was sued by Bristol-Myers Squibb
Company, Inc. and E.R. Squibb & Sons, Inc. (collectively, "Bristol-Myers") for
patent infringement relating to Captopril. The suit was brought in the U.S.
District Court for the Southern District of Florida (Case No. 95-1682).
Bristol-Myers holds the patent for Capoten(Registered trademark).
Under the recently adopted General Agreement on Tariffs and Trade
("GATT") treaty implementing legislation, patent protection for
Capoten(Registered trademark) was extended from August 8, 1995 until February
13, 1996. However, on June 26, 1995, the Company asserted in a certification
filed with the FDA that under GATT, the Company should have the right to market
Captopril after August 8, 1995, subject to the Company's possible obligation to
pay "equitable remuneration" to Bristol-Myers during the period between August
8, 1995 and February 13, 1996. This lawsuit was filed by Bristol-Myers in
response to the filing of the certification by the Company.
The suit seeks a declaration that Bristol-Myers' patent for
Capoten(Registered trademark) does not expire earlier than February 13, 1996,
that the Company is not entitled to market the product under GATT between August
8, 1995 and February 13, 1996 even with the payment of equitable remuneration
and that the Company's infringement of this patent is willful and deliberate. It
also seeks attorney's fees, costs and such other relief as the case may require
and the Court may deem just and proper. Although the
-4-
<PAGE>
Company has not yet marketed Captopril, Bristol-Myers claims that the filing of
the certification with the FDA was itself an infringement of the patent.
Bristol-Myers has stated that its position is supported by an FDA ruling and a
recent judicial opinion of the U.S. Court of Appeals for the Federal Circuit.
The Company believes that its interpretation of the GATT treaty
implementing legislation is accurate. The Company intends to vigorously contest
this suit. There can be no assurance as to the outcome of the suit. See "Risk
Factors - Tentative Approval of Captopril and General Agreement on Tariffs and
Trade ("GATT") Treaty."
USE OF PROCEEDS
The Company will receive none of the proceeds from sales of the
Registered Securities by the Selling Shareholders. Any proceeds received by the
Company upon the exercise of the Warrants and the Placement Agent Warrant will
be used for working capital.
OUTSTANDING SHARES
As of August 14, 1995, the following Company securities were
outstanding: (i) 12,815,979 shares of Common Stock; and (ii) options and
warrants to purchase an additional 3,064,458 shares of Common Stock.
PLAN OF DISTRIBUTION
The distribution of the Common Stock by the Selling Shareholders may be
effected from time to time in one or more transactions (which may involve block
transactions) in the over-the-counter market, on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), or any exchange on
which the Common Stock may then be listed, in negotiated transactions, through
the writing of options on shares (whether such options are listed on an options
exchange or otherwise), or a combination of such methods of sale, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. The Selling Shareholders may effect such
transactions by selling shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Shareholders and/or purchasers of
shares for whom they may act as agent (which compensation may be in excess of
customary commissions).
The Selling Shareholders may also sell such shares pursuant to Rule 144
promulgated under the Act, or may pledge shares as collateral for margin
accounts and such shares could be resold pursuant to the terms of such accounts.
The Selling Shareholders and any broker-dealers that act in connection with the
sale of Common Stock might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Act and any commissions received by them and any profit on
the resale of the shares might be deemed to be underwriting discounts or
commissions under the Act. The Selling Shareholders may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales
of the Common Stock against certain liabilities, including liabilities arising
under the Act.
-5-
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND FOOTNOTES)
THE SUMMARY FINANCIAL DATA SET FORTH BELOW IS DERIVED FROM THE
COMPANY'S FINANCIAL STATEMENTS AND SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND THE NOTES THERETO.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
YEARS ENDED DECEMBER 31, (UNAUDITED)
-------------------------------------------------------- -----------
1990 1991 1992 1993 1994 1994 1995
---- ---- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA(1)
-----------------
Net sales............................ $1,504 $1,991 $2,423 $3,519 $6,191 $2,464 $4,157
Gross profit......................... 203 541 25 443 1,561 501 1,261
Research and development............. 132 196 283 305 960 343 668
Selling, general and
administrative expenses........... 463 665 2,232 2,001 2,189 1,075 1,395
Operating loss....................... (392) (320) (3,060) (1,887) (1,605) (932) (802)
Other income (expense)............... (119) 42 162 (2,046)(2) 128 26 55
Net income (loss).................... (433) 68(3) (2,898) (3,933) (1,477) (906) (747)
Net income (loss) per
common share....................... $ (.18) $ .01 $ (.31) $ (.41) $ (.14) $ (.09) $ (.06)
Weighted average number of
shares outstanding................. 2,467 7,897 9,321 9,493 10,554 9,840 11,965
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1995
(UNAUDITED)
DECEMBER 31, DECEMBER 31, -----------
1993 1994 ACTUAL ADJUSTED(4)
-------------- --------------- ------ -----------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA
------------------
Working capital.......................... $2,800 $5,300 $4,347 $8,923
Total assets............................. 4,103 8,273 7,116 11,692
Current liabilities...................... 638 1,885 1,304 1,304
Long-term debt........................... - 33 156 156
Stockholders' equity..................... 3,465 6,355 5,656 10,232
<FN>
------------------
(1) Certain amounts presented in prior years' financial data have been
reclassified to conform to current year's presentation.
(2) Includes primarily non-cash charges to earnings, including $1,336,000 in
connection with the settlement of the class action and other litigation
and $768,000 in connection with the write-off of Piroxicam inventory and
related items.
(3) Includes a gain on settlement of indebtedness of $346,000.
(4) Adjusted to reflect the sale of 833,333 shares of Common Stock in the
Private Placement and the application of approximately $4,576,000 of the
net proceeds therefrom. See "Description of Securities Registered -
Private Placement."
</FN>
</TABLE>
-6-
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A
HIGH DEGREE OF RISK. THEREFORE, IN EVALUATING THE COMPANY AND ITS BUSINESS
PROSPECTS, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS IN ADDITION TO THE OTHER INFORMATION SET FORTH ELSEWHERE IN THIS
PROSPECTUS BEFORE PURCHASING SHARES OF COMMON STOCK IN THIS OFFERING.
HISTORY OF LOSSES. The Company has incurred substantial losses over the
last few years and had an accumulated deficit of approximately $16.3 million at
June 30, 1995. There can be no assurance that the Company will ever become
profitable.
DEPENDENCE ON NEW PRODUCT DEVELOPMENT. The Company's results of
operations will depend, to a significant extent, upon its ability to
successfully commercialize generic pharmaceutical products. Products must be
developed and tested, meet strict regulatory standards, receive requisite
regulatory approvals and be manufactured on a cost-effective basis before
successful commercialization can be achieved. The development and
commercialization process is time consuming and costly. Delays in any part of
the process or the inability of the Company to obtain regulatory approval of its
products could materially adversely affect the Company's future results of
operations. The Company believes that it takes between twelve and thirty months
from the time that an ANDA is filed until its approval, although such time
period has been longer in the past and may be longer in the future. The Company
is dependent on the FDA approval process to introduce new products to the
market. There can be no assurance as to when and if the Company will have new
products to market, or that, if its products are approved, they can be
successfully commercialized.
GOVERNMENT REGULATION. All pharmaceutical manufacturers, including the
Company, are subject to extensive regulation by the FDA and other federal and
state agencies. The Company is subject to periodic inspection of its facilities
and operations and testing of its products by the FDA. The FDA has extensive
enforcement powers over pharmaceutical manufacturers, including the power to
withhold or deny approvals of new products, suspend or withdraw prior product
approvals, request the recall of existing products, seize products, delay or
prevent product sales, enjoin production or shipping, and criminally prosecute
companies and individuals for violations of laws and regulations. Current FDA
procedures may delay initial product shipments. Any manufacturer failing to
comply with FDA requirements may be unable to obtain approvals for the
introduction of new products. In recent years, the ANDA filing procedure has
become more rigorous, time consuming and costly. Further, the Company cannot
predict the extent to which it may be affected by legislative and regulatory
developments concerning its products, operations or the health care field
generally. Regulatory compliance issues or regulatory changes affecting the
Company's operations or the approval or shipment of products could have a
material adverse effect upon the Company's business. See "Business - Government
Regulation." Between July 1992 and December 1993, the Company was in the FDA's
Validity Assessment Program and, as a result, during this period the Company
could not file ANDAs and the FDA did not review ANDAs previously filed by the
Company. The Company was released from this program in December 1993 and since
then has received ANDA approvals for five additional products and a tentative
approval for a sixth product.
TENTATIVE APPROVAL OF CAPTOPRIL AND GENERAL AGREEMENT ON TARIFFS AND
TRADE ("GATT") TREATY. The Company has been granted a tentative approval by the
FDA of its ANDA for Captopril, the generic version of Capoten(Registered
trademark). In order to market Captopril, the Company must receive final
approval of its ANDA, which will not
-7-
<PAGE>
be granted until the expiration of patent protection for Capoten(Registered
trademark) and is subject to the Company remaining in substantial compliance
with current good manufacturing practices. While the Company believes it will
receive final approval of its ANDA when patent protection for Capoten(Registered
trademark) expires, there can be no assurance it will receive such approval.
Under the recently adopted GATT Treaty implementing legislation, patent
protection for Capoten(Registered trademark) was extended from August 8, 1995 to
February 13, 1996. The FDA recently announced that it will not grant final
approval of any ANDAs for Captopril until February 13, 1996. Six generic drug
companies, including the Company, have received tentative approval of an ANDA
for Captopril. The Company has become involved in litigation relating to the
patent expiration date for Capoten(Registered trademark). See "Prospectus
Summary - Recent Developments." There can be no assurance as to when the Company
will be able to commence marketing this product.
PENDING SEC INVESTIGATION. In February 1993, the Securities and
Exchange Commission ("SEC") initiated a formal investigation into possible
violations of Federal securities laws by the Company and certain of its officers
and directors. The SEC investigation is focusing on the Company's public
disclosure during the period between July 1991 and April 1992 regarding the
status of the Company's ANDAs for Piroxicam and Minoxidil and on sales of
securities during this period by certain persons, including Company executive
officers and/or directors Patrick J. McEnany, Richard W. Gross, Rick A. Wilber,
Abul Bhuiyan and Nilkanth Patel. The Company believes that the SEC's
investigation is ongoing. No assurance can be given as to the outcome of the
SEC's investigation or that such outcome will not have a material adverse effect
upon the Company.
NECESSITY OF ADDITIONAL CAPITAL. The amount of capital required by the
Company at various times will depend, in part, on the timing of ANDA approvals
and, accordingly, the timing of the Company's new product introductions, as well
as the size of the market of each new product being launched. The Company may
require additional capital in the future to finance its research and
development, capital expenditues and working capital needs. Under its present
business plan, the Company anticipates that its available cash will meet its
capital requirements through March 31, 1996. While the Company believes that
additional financing will be available, there can be no assurance that such
financing will be secured. If the Company is unable to obtain such capital, it
will likely be forced to reduce the level of its research and development
efforts and to make other changes to its present business plan until such
funding can be secured, which may have a material adverse effect on the Company.
HEALTH CARE REFORM. There is significant political pressure to contain
health care costs at the federal and state levels. The Clinton administration
has previously proposed comprehensive legislation to reform the health care
system. In addition, members of Congress have submitted several alternative
plans for national health care reform. None of the proposals has been adopted.
Members of the Clinton administration and Congress have expressed an interest in
controlling the prices pharmaceutical companies charge for their products. It is
uncertain what reforms, if any, will ultimately be enacted by the federal
government or any state government. There can be no assurance that future
government or private cost control initiatives or other changes in the health
care market will not adversely affect the Company or its industry.
COMPETITION. The drug industry is highly competitive and the Company
experiences substantial competition in connection with the manufacture and sale
of its generic pharmaceuticals. The Company competes with generic drug
manufacturers, brand-name pharmaceutical companies that manufacture or market
generic drugs, the original manufacturers of brand-name drugs that continue to
produce such drugs after patent expirations or introduce generic versions of
their branded products, and manufacturers of new drugs that may compete with the
Company's generic drugs. Many competitors have a greater number of products on
the market and have greater financial and other
-8-
<PAGE>
resources, allowing them to devote greater resources to research and development
and marketing. Newly introduced generic products with limited or no other
generic competition are typically sold at higher selling prices, often resulting
in increased gross profit margins. As competition from other manufacturers
intensifies, selling prices typically decline. As a result, the maintenance of
profitable operations will be dependent, in part, on the Company's ability to
maintain efficient production capabilities and to develop and introduce new
products in a timely manner.
DEPENDENCE ON PRINCIPAL CUSTOMERS. During 1994 and 1993, two customers
accounted for approximately 24% and 27%, respectively, of the Company's net
sales. Further, during 1994 and 1993, the Company's ten largest customers
accounted for approximately 60% and 64%, respectively, of net sales. The loss of
any one of these customers may have an adverse effect on the Company's
operations.
DEPENDENCE ON LIMITED NUMBER OF PRODUCTS. At present, the Company
manufactures and markets 11 generic pharmaceutical products. During 1994, four
of the Company's products each accounted for more than 10 percent of the
Company's net sales (the largest of which accounted for approximately 22 percent
of the Company's net sales) and together accounted for approximately 69 percent
of the Company's net sales. Although the Company's strategy is to increase the
number of products offered, a significant loss of sales of any of these products
could have an adverse impact on the Company's results of operations. The Company
believes that as new products are developed and approved, the Company's largest
product and the Company's dependence thereon will vary from period to period.
DEPENDENCE ON SUPPLIERS. Sources for materials used in the Company's
products must be approved by the FDA, and only one source has been approved for
the active ingredient used in all but three of the Company's products. Any
interruption of materials from sole source suppliers or delays in FDA approval
of new suppliers could have a material adverse effect on the Company's business.
The Company intends to file supplements with the FDA for additional secondary
sources in the future. There can be no assurance as to when and if these
approvals will be received. The Company experienced raw material shortages
during 1993 with respect to its largest product and, while such shortages were
alleviated, there can be no assurance that they will not recur in the future.
PRODUCT LIABILITY INSURANCE. Production and sale of pharmaceutical
products involve an inherent risk of product liability claims and associated
adverse publicity. Insurance coverage is expensive, difficult to obtain and may
not be available in the future on acceptable terms or at all. Although the
Company currently maintains liability insurance for all of its products in the
amount of $3.0 million, there can be no assurance that coverage limits of the
Company's insurance policies will be adequate. A claim brought against the
Company, whether fully covered by insurance or not, could have a material
adverse effect upon the Company.
ATTRACTION AND RETENTION OF KEY PERSONNEL. The success of the Company's
present and future operations will depend, to a large extent, upon the continued
services of the Company's executive officers, including Patrick J. McEnany, its
Chairman and President. The loss of the services of certain of the executive
officers could have a material adverse effect on the Company. The Company's
success is also dependant upon its ability to attract and retain other highly
qualified scientific, managerial and manufacturing personnel. Competition for
such personnel is intense. The Company competes with numerous pharmaceutical and
health care companies, as well as with universities and nonprofit research
organizations for such personnel. There can be no assurance that the Company
will continue to be able to attract and retain qualified personnel.
-9-
<PAGE>
VOLATILITY OF STOCK MARKET. The market prices for securities of
companies engaged primarily in the development, manufacture and marketing of
pharmaceuticals has historically been volatile. The market price of the Common
Stock has been volatile in the past and may be volatile in the future. Various
factors may influence the market price of the Common Stock including
fluctuations in the Company's operating results, the announcement of
technological innovations or new commercial products by the Company or its
competitors, governmental regulation, regulatory approvals, publicity regarding
the status of the Company's product development efforts, political developments
or proposed legislation in the health care industry, and other investment
considerations.
SHARES ELIGIBLE FOR FUTURE SALE. Substantially all of the outstanding
Common Stock is available for sale in the public marketplace. There are also
outstanding stock options and warrants to purchase an aggregate of 3,064,458
shares of Common Stock at various exercise prices per share. The Company has an
effective registration statement on Form S-3 covering the public sale of, among
other items, 2,000,000 shares of Common Stock issued by the Company in a private
placement of the Common Stock completed during the third quarter of 1994. No
prediction can be made as to the effect, if any, that sales of shares of Common
Stock or the availability of such shares for sale will have on the market prices
prevailing from time to time. The possibility that substantial amounts of Common
Stock may be sold in the public market may adversely affect prevailing market
prices for the Common Stock, and could impair the Company's ability to raise
capital through the sale of its equity securities.
-10-
<PAGE>
MARKET INFORMATION
The Common Stock is traded on the Nasdaq SmallCap Market under the
symbol "RLAB." The following are the high and low bid quotations for the
quarterly periods shown. Such prices represent quotes or prices between dealers
in securities and do not include retail markup, markdown, or commission and may
not necessarily represent actual transactions:
<TABLE>
<CAPTION>
1993 HIGH LOW
---- ---- ---
<S> <C> <C>
First Quarter $9.47 $5.63
Second Quarter 7.13 5.34
Third Quarter 7.03 5.25
Fourth Quarter 7.50 3.94
1994
----
First Quarter 8.00 6.13
Second Quarter 6.13 3.00
Third Quarter 4.75 2.75
Fourth Quarter 5.43 3.50
1995
----
First Quarter 8.81 4.50
Second Quarter 8.06 5.38
Third Quarter (through August 15, 1995) 7.94 6.25
</TABLE>
On August 15, 1995, the average of the bid and ask prices of the Common
Stock was $7.625 per share. At August 14, 1995, there were approximately 10,598
holders of record of the Common Stock.
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock and has
no present plans to do so in the foreseeable future. The Company's current
policy is to retain all earnings, if any, for use in the operation of its
business. The payment of future cash dividends, if any, will be at the
discretion of the Board of Directors and will depend upon earnings, financial
requirements of the Company and such other factors as the Board of Directors may
deem relevant.
-11-
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
shares of Common Stock being offered by the Selling Shareholders. Any net
proceeds received by the Company upon the exercise of the Warrants or the
Placement Agent Warrant will be used for working capital. Pursuant to the terms
of the Sales Agency Agreement between the Company and Gruntal, the Company will
pay Gruntal 1.5% of the gross proceeds from the exercise of the Warrants.
CAPITALIZATION
The following table sets forth the capitalization of the Company at
June 30, 1995, and as adjusted for the sale of 833,333 shares of the Common
Stock in the Private Placement and the application of the net proceeds
therefrom.
<TABLE>
<CAPTION>
JUNE 30, 1995
(IN THOUSANDS, EXCEPT SHARES)
-----------------------------
ACTUAL ADJUSTED
------ --------
<S> <C> <C>
Long Term Debt................................. $156 $156
Stockholders' Equity
Common Stock, $.005 par value
35,000,000 shares authorized,
issued and outstanding:
(i) actual, 11,975,146 shares; (ii) as
adjusted, 12,808,479 shares................. 60 64
Additional Paid in Capital................... 21,869 26,441
Accumulated Deficit.......................... (16,262) (16,262)
Less Treasury Stock, 2,500 shares, at cost... (11) (11)
------ ------
Total Stockholders' Equity..................... 5,656 10,232
------ ------
Total Capitalization........................... $ 5,812 $10,388
====== ======
</TABLE>
-12-
<PAGE>
DESCRIPTION OF THE WARRANTS
Each Warrant entitles the holder to purchase one share of Common Stock
at an exercise price of $6.50 per share. The following summary of certain
provisions of the Warrant is not complete and is qualified in its entirety by
reference to the form of Warrant, a copy of which is an exhibit to the
Registration Statement (of which this Prospectus forms a part). The holder of
each Warrant is entitled to certain registration rights.
The Warrants may be exercised at any time until July 21, 1996. After
the expiration date, warrant holders shall have no further rights. The Company
will not issue fractional shares of Common Stock. In lieu of fractional shares
of Common Stock, there will be paid to the holder of the Warrants at the time of
the exercise, and upon payment of the exercise price, an amount per share equal
to some fraction of the then current market price (as defined) of the shares of
Common Stock. The warrant holders do not have any voting and any other rights as
shareholders of the Company. The Warrants may not be redeemed by the Company.
The exercise price and the number of shares of Common Stock purchasable
upon the exercise of each Warrant are subject to increase or decrease upon the
happening of certain corporate events. These events are (i) the issuance of a
stock dividend or stock distribution to holders of the Common Stock or a
combination, subdivision or reclassification of the Common Stock; or (ii) the
issuance to all holders of the outstanding Common Stock, without charge to such
holders, of rights or warrants (expiring within forty-five (45) days after the
record date) for determining shareholders entitled to receive them to subscribe
for or purchase Common Stock, or evidence of indebtedness or assets (excluding
cash dividends or distributions payable out of consolidated earnings), or earned
surplus or dividends payable in shares of Common Stock or rights or warrants. No
adjustment in the exercise price will be required unless cumulative adjustments
require an adjustment of at least $.05.
Notwithstanding the foregoing, in case of any consolidation, merger or
sale of all or substantially all of the property of the Company, the holder of
each Warrant shall have the right, upon the subsequent exercise thereof, only to
receive the kind and amount of shares and other securities and property
(including cash) which such holder would have been entitled to receive by virtue
of such transaction had the warrants been exercised immediately prior to such
transaction.
DESCRIPTION OF SECURITIES REGISTERED
The following description of the capital stock of the Company is
subject to the Florida Business Corporation Act and the Company's Articles of
Incorporation (the "Articles") and Bylaws. Copies of the Articles and Bylaws are
exhibits to the Registration Statement (of which this Prospectus forms a part).
The authorized capital stock of the Company consists of 200,000 shares
of preferred stock, $.005 par value (the "Preferred Stock"), none of which is
issued and outstanding, and 35,000,000 shares of Common Stock, $.005 par value.
The holders of capital stock of the Company have no preemptive or other
subscription rights.
COMMON STOCK
Each outstanding share of Common Stock is fully paid and nonassessable.
Holders of outstanding shares of Common Stock are entitled to receive dividends
out of assets legally available therefor at such times and in such amounts
-13-
<PAGE>
as the Board of Directors may from time to time determine. Upon the liquidation,
dissolution, or winding up of the Company, the assets legally available for
distribution to the shareholders will be distributable ratably among the holders
of the Common Stock outstanding at the time, subject to the liquidation
preferences, if any, on any outstanding shares of Preferred Stock.
Holders of the shares of Common Stock have no conversion, subscription
or preemptive rights, and the shares are not subject to redemption. The rights
of the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any series of preferred stock that may be
issued in the future, including voting, dividend, and liquidation rights.
Each stockholder is entitled to one vote for each share of Common Stock
held by such stockholder. The holders of shares do not possess cumulative voting
rights. Therefore, the holders of more than fifty percent of the outstanding
shares voting for the election of directors could elect all of the directors who
are standing for election at such time, and, in such event, the holders of the
remaining shares would be unable to elect any of the Company's directors.
THE PRIVATE PLACEMENT
On July 21, 1995, the Company completed the Private Placement. In the
Private Placement, the Company sold 833,333 units of its securities at a
purchase price of $6.00 per unit. Each unit is comprised of one share of Common
Stock and a twelve-month warrant to purchase one share of Common Stock at an
exercise price of $6.50 per share. The Company received aggregate net proceeds
in the offering of approximately $4,576,000. Gruntal acted as the placement
agent of the Private Placement. In connection with the Private Placement,
Gruntal received a commission of seven percent of the gross proceeds of the
Private Placement and the Company paid accountable expenses of $70,000 to
Gruntal. Gruntal also received the Placement Agent Warrant. See "Placement Agent
Warrant" below. The proceeds of the Private Placement are being used for
research and development, capital expenditures and for working capital. See
"Management's Discussion of Financial Condition and Results of Operations -
Liquidity and Capital Resources."
The 833,333 units were sold in a transaction exempt from registration
under the Act by virtue of the exemption contained in Section 4(2) of the Act
and Regulation D of the rules and regulations thereunder.
This Registration Statement (of which this Prospectus forms a part)
registers for sale the 833,333 shares of Common Stock and the 833,333 shares of
Common Stock underlying the Warrants sold in the Private Placement.
Additionally, this Registration Statement registers for sale the 83,333 shares
of Common Stock underlying the Placement Agent Warrant. If this Registration
Statement has not been declared effective by October 21, 1995, the Company will
be obligated to issue to the investors in the Private Placement five-year
warrants to purchase 41,667 shares of the Common Stock at an exercise price of
$6.50 per share (and to register those shares in this Registration Statement).
PLACEMENT AGENT WARRANT
On July 21, 1995, at the closing of the Private Placement, the Company
issued to Gruntal as part of its compensation for its services, a warrant to
purchase 83,333 shares of Common Stock at an exercise price equal to $6.00 per
share exercisable until July 21, 1998 (the "Placement Agent Warrant"). The
holder of the Placement Agent Warrant may pay the exercise price in cash.
Alternately, the holder of the Placement Agent Warrant has the right at any time
and from time to time to exercise the Placement Agent Warrant in whole or in
part by surrendering the Placement Agent
-14-
<PAGE>
Warrant Certificate in exchange for the number of shares of Common Stock equal
to (x) the number of shares as to which the Placement Agent Warrants are being
exercised multiplied by (y) a fraction, the numerator of which is the Market
Price (as defined in the Placement Agent Warrant) of the Common Stock at the
date of exercise less the Exercise Price and the denominator of which is such
Market Price.
The exercise price and the number and kind of securities purchasable
upon exercise is subject to adjustment upon the declaration of certain dividends
and certain reclassifications, subdivisions and combinations of the Common
Stock, certain issuances of Common Stock and rights to acquire Common Stock, and
consolidations and mergers of the Company and sales or other transfers of all or
substantially all of the Company's property. The shares of Common Stock issuable
upon the exercise of the Placement Agent Warrants are being registered in the
Registration Statement (of which this Prospectus forms a part).
REGISTRATION RIGHTS
The Company is required to use its best efforts to maintain the
effectiveness of the Registration Statement (of which this Prospectus forms a
part) until July 21, 1997.
At any time after April 21, 1996, if the Holders of more than a
majority of the shares of Common Stock constituting the Shares, the shares of
Common Stock underlying the Warrants and the shares of Common Stock underlying
the Placement Agent Warrant, voting as a single class, select one or more
underwriters for an offering of the Registered Securities, the Company shall
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary indemnification and
contribution obligations, with the underwriters of such offering and make such
representations and warranties with respect to the Registration Statement or
post-effective amendment thereto, prospectus or amendment or supplement thereto,
and documents incorporated by reference, if any, to the Holders and the
underwriters, if any, of the Registered Securities in form, substance and scope
as are customarily made by registrants in secondary offerings of common stock in
transactions of that type. The Holders shall also enter into and perform their
customary obligations under any such agreement, including without limitation,
customary indemnification and contribution obligations.
TRANSFER AGENT
The transfer agent for the Common Stock and the Warrant Agent for the
Company's Series F Warrants is The Trust Company of New Jersey, 35 Journal
Square, Jersey City, New Jersey 07306.
-15-
<PAGE>
SELLING SHAREHOLDERS
The following table lists the number of shares of Common Stock being
registered in the Registration Statement (of which this Prospectus forms a part)
on behalf of each of the Selling Shareholders listed below and the approximate
percentage of the shares of Common Stock outstanding (assuming (i) that no
outstanding options or warrants (except the Warrants and the Placement Agent
Warrant) has been exercised). None of the Selling Shareholders other than Robert
E. Band, Steven Miller, Gregory Reed, Rick A. Wilber, Charles J. Simons and
Henry S. Keel, Jr. (who are executive officers and/or directors of the Company)
has had a material relationship with the Company or any of its affiliates within
the past three years. Other than with respect to the Selling Shareholders who
are executive officers, directors or beneficial owners of more than 5% of any
class of the voting securities of the Company, the Company is not aware of the
ownership of its securities by any of the Selling Shareholders.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
NAME OWNED BEFORE OFFERING SHARES OFFERED OWNED AFTER OFFERING
---- --------------------- -------------- --------------------
NUMBER PERCENT NUMBER PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Robert M. Adams 40,000 * 40,000 - -
C. Clark Ambrose 353,334 2.7 353,334 - -
Joan J. Ambrose 20,000 * 20,000 - -
Stephens Ambrose 20,000 * 20,000 - -
Avalon Group, Ltd. Defined
Benefit Trust 5,000 * 5,000 - -
Perry H. Bacon 45,000 * 45,000 - -
John S. Bai 400 * 400 - -
Robert E. Band(2) 23,333 * 10,000 13,333 *
Edward Bao & Marta
Bao, JTWROS 10,000 * 10,000 - -
Elaine M. Berson 2,000 * 2,000 - -
Marc M. Berson 4,000 * 4,000 - -
Richard Binder 16,666 * 16,666 - -
Peter Bisson & Fay Lambros
Bisson, JTWROS 10,000 * 10,000 - -
Allen L. Boorstein 10,000 * 10,000 - -
Ronald A. Cass 2,000 * 2,000 - -
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
NAME OWNED BEFORE OFFERING SHARES OFFERED OWNED AFTER OFFERING
---- --------------------- -------------- --------------------
NUMBER PERCENT NUMBER PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Chinook Equities 20,000 * 20,000 - -
Coastal Surgical Assn. PA
Profit Sharing Trust 24,000 * 24,000 - -
Lorelei Cole 8,332 * 8,332 - -
Loren Comitor 2,000 * 2,000 - -
Commercial Reserve Corp. 10,000 * 10,000 - -
Drobny/Fischer 56,666 * 56,666 - -
Elegant Solutions for
Business, Inc. 8,334 * 8,334 - -
Nan Mar Elia 20,000 * 20,000 - -
Robert M. Fomon 8,000 * 8,000 - -
James C. Gale, Trustee for
Ariana J. Gale 30,000 * 30,000 - -
Michael Gironta 12,000 * 12,000 - -
Gerald L. Gitner 5,000 * 5,000 - -
John D. Goldberg 8,334 * 8,334 - -
Sharon D. Gonsky D/B/A
SDG Associates 20,000 * 20,000 - -
Richard E. Goulding 8,334 * 8,334 - -
Charles L. Greenberg &
Donna Greenberg, JTWROS 20,000 * 20,000 - -
Gruntal & Co., Incorporated(1) 83,333 * 83,333 - -
Lionel Gary Hest & Amy
Hest, JTWROS 12,000 * 12,000 - -
C. Bradford Jeffries 14,000 * 14,000 - -
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
NAME OWNED BEFORE OFFERING SHARES OFFERED OWNED AFTER OFFERING
---- --------------------- -------------- --------------------
NUMBER PERCENT NUMBER PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Henry Keel(2) 97,914 * 20,000 77,914 *
Daniel Kleinberg & Elaine
Kleinberg, JTWROS 4,000 * 4,000 - -
Frank Bowman Krimmel II 20,000 * 20,000 - -
John Latshaw Trust 30,000 * 30,000 - -
Laurinberg Radiology PA
Profit Sharing Plan 80,000 * 80,000 - -
Steven J. Levinson 14,000 * 14,000 - -
Arthur Liss 8,332 * 8,332 - -
William J. McCluskey 3,000 * 3,000 - -
Bill F. McConnell 8,334 * 8,334 - -
McEnany Roofing, Inc. 5,000 * 5,000 - -
Michael Miller 10,000 * 10,000 - -
Steven R. Miller and
Roxanne G. Miller,
JTWROS(2) 30,700 * 10,000 20,700 *
Richard Moccia 10,000 * 10,000 - -
Ronda Morganstein 4,000 * 4,000 - -
Sy Nagorsky 3,334 * 3,334 - -
Bernabe Palomares MD IRA 80,000 * 80,000 - -
Prins Family Limited
Partnership 18,000 * 18,000 - -
Proper Service Retirement
Plan 8,332 * 8,332 - -
Robert Pumphrey, Jr. Profit
Sharing Plan 80,000 * 80,000 - -
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
NAME OWNED BEFORE OFFERING SHARES OFFERED OWNED AFTER OFFERING
---- --------------------- -------------- --------------------
NUMBER PERCENT NUMBER PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Gregory Reed and Joan
Reed, JTWROS(2) 67,837 * 6,666 61,171 -
Barry Richter 10,000 * 10,000 - -
Robinson-Sommer-Brand,
MDs, P.A. Profit
Sharing Plan F/B/O
David A. Sommer 5,000 * 5,000 - -
Gregg Rosenberg 15,000 * 15,000 - -
Stacey Rosenberg 15,000 * 15,000 - -
Martin E. Rosenfeld 10,000 * 10,000 - -
Joseph A. Rosin 8,334 * 8,334 - -
Joseph A. Russo 1,600 * 1,600 - -
Robert Sablowsky 10,000 * 10,000 - -
David Saks & Caroll
Saks, JTWROS 10,000 * 10,000 - -
Stewart A. Shiman 50,000 * 50,000 - -
Howard Silverman and
Phyllis Silverman,
JTWROS 15,000 * 15,000 - -
Charles J. Simons Revocable
Trust(2) 41,998 * 12,000 29,998 *
Howard "Buzz" Simons, Arie
Simons and Corey Simons,
JTWROS 16,666 * 16,666 - -
George Skakel 20,000 * 20,000 - -
David B. Smith 6,668 * 6,668 - -
Southern Medical Associates PA
Balanced Profit Sharing Plan 23,000 * 23,000 - -
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
NAME OWNED BEFORE OFFERING SHARES OFFERED OWNED AFTER OFFERING
---- --------------------- -------------- --------------------
NUMBER PERCENT NUMBER PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Superpharm Corporation 20,000 * 20,000 - -
James Thomas, Sr. MD IRA 82,000 * 82,000 - -
Joan Wainberg 2,000 * 2,000 - -
Stuart Wainberg 7,000 * 7,000 - -
Jack Weinstein 30,000 * 30,000 - -
Robert Weinstein 6,000 * 6,000 - -
Rick A. Wilber(2) 211,497 1.7 10,000 201,497 1.6
Linda Zankl(2) 13,000 * 13,000 - -
Seymour Zwickler,
IRA 10,000 * 10,000 - -
------
1,749,999(3)
=========
<FN>
----------------------
* Less than 1%
(1) For a description of the Placement Agent Warrant, see "Description of
Securities Registered - Placement Agent Warrant."
(2) Messrs. Keel, Reed, Simons and Wilber are directors of the Company. Ms.
Zankl is the wife of Patrick J. McEnany, the Chairman and Chief Executive
Officer of the Company (Mr. McEnany disclaims beneficial ownership over the
shares of Common Stock owned by his wife). Messrs. Band and Miller are
executive officers of the Company.
(3) Includes the Shares, the shares of Common Stock underlying the Warrants and
the shares of Common Stock underlying the Placement Agent Warrant.
</FN>
</TABLE>
-20-
<PAGE>
PLAN OF DISTRIBUTION
The distribution of the shares of Common Stock by the Selling
Shareholders may be effected from time to time in one or more transactions
(which may involve block transactions) in the over-the-counter market or on
NASDAQ (or any exchange on which the Common Stock may then be listed) in
negotiated transactions, through the writing of options (whether such options
are listed on an options exchange or otherwise), or a combination of such
methods of sale, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Selling
Shareholders may effect such transactions by selling shares to or through
broker-dealers, and such broker-dealer may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Shareholders
and/or purchasers of shares for whom they may act as agent. The Selling
Shareholders may also sell such shares pursuant to Rule 144 promulgated under
the Act, or may pledge shares as collateral for margin accounts and such shares
could be resold pursuant to the terms of such accounts. The Selling Shareholders
and any broker-dealers that act in connection with the sale of the Common Stock
might be deemed to be "underwriters" within the meaning of Section 2(11) of the
Act and any commission received by them and any profit on the resale of the
shares of Common Stock as principal might be deemed to be underwriting discounts
and commissions under the Act. The Selling Shareholders may agree to indemnify
any agent, dealer or broker-dealer that participates in transactions involving
sales of the Common Stock against certain liabilities, including liabilities
arising under the Act.
Because the Selling Shareholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Act, the Selling Shareholders will be
subject to prospectus delivery requirements under the Act. Furthermore, in the
event of a "distribution" of the shares, such Selling Shareholders, any selling
broker or dealer and any "affiliated purchasers" may be subject to Rule 10b-6
under the Exchange Act, which Rule would prohibit, with certain exceptions, any
such person from bidding for or purchasing any security which is the subject of
such distribution until his participation in that distribution is completed. In
addition, Rule 10b-7 under the Exchange Act prohibits any "stabilizing bid" or
"stabilizing purchase" for the purpose of pegging, fixing or stabilizing the
price of Common Stock in connection with this offering.
In order to comply with certain state securities laws, if applicable,
the Common Stock will not be sold in a particular state unless such securities
have been registered or qualified for sale in such state or any exemption from
registration or qualification is available and complied with.
The Company will not receive any of the proceeds from the sale of
shares of Common Stock by the Selling Shareholders. The proceeds, if any, from
the exercise of the Warrants and the Placement Agent Warrant will be received by
the Company; no brokerage commissions or discounts will be paid in connection
therewith.
EXPERTS
The financial statements incorporated in this Prospectus by reference
to the Annual Report on Form 10-K for the year ended December 31, 1994, have
been so incorporated in reliance on the report of Price Waterhouse LLP,
independent certified public accountants, given on the authority of said firm as
experts in auditing and accounting.
LEGAL MATTERS
Broad and Cassel, Miami, Florida, has acted as counsel to the Company
in connection with the Registration Statement and has rendered an opinion as to
the validity of the shares of Common Stock offered hereby.
-21-
<PAGE>
================================================================================
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED BY THE
COMPANY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY, AND IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THOSE SPECIFICALLY OFFERED HEREBY OR AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SALE WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
ANY OF THE DATES AS OF WHICH INFORMATION IS FURNISHED OR SINCE THE DATE OF THIS
PROSPECTUS.
----------------------------
TABLE OF CONTENTS
-----------------
PAGE
----
Available Information.................................................... 2
Incorporation of Certain Documents by Reference.......................... 2
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Market Information.......................................................11
Dividend Policy..........................................................11
Use of Proceeds..........................................................12
Capitalization...........................................................12
Description of the Warrants..............................................13
Description of Securities Registered.....................................13
Selling Shareholders.....................................................16
Plan of Distribution.....................................................21
Experts..................................................................21
Legal Matters............................................................21
1,749,999 SHARES
ROYCE LABORATORIES, INC.
Common Stock
(PAR VALUE $.005 PER SHARE)
-------------
PROSPECTUS
-------------
_________, 1995
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the Offering:
<TABLE>
<CAPTION>
AMOUNT*
-------
<S> <C>
SEC Registration Fee..................................... $4,230.99
Printing and Engraving .................................. 1,000.00
Legal Fees and Expenses.................................. 20,000.00
Accounting Fees and Expenses............................. 5,000.00
Blue Sky Fees and Expenses............................... 10,000.00
Miscellaneous............................................ 1,000.00
--------
Total.................................................. $41,230.99
=========
<FN>
--------------------
* Estimated, except SEC Registration Fee.
</FN>
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As authorized by Section 607.0831 of the Florida Business Corporations Act,
directors and officers of the Company are indemnified against liability under
certain circumstances. Reference is made to Article XI of the Company's Articles
of Incorporation, as amended, and to "Description of Securities."
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
3.1 Articles of Incorporation, as amended (incorporated by reference
from Exhibit 3.1 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992 (the "Form 10-K").
3.2 Certificate of Merger between Auntel Capital, Inc. and Auntel
Acquisition Corp. (incorporated by reference from Exhibit 3.2 to
the Form 10-K).
3.3 Restated and Amended By-laws (incorporated by reference from the
Forms 10-K for the fiscal years ended December 31, 1987 and
1989, respectively).
3.4 Articles of Amendment to Articles of Incorporation (incorporated
by reference from the Form 10-Q for the quarter ended June 30,
1995).
II-1
<PAGE>
ROYCE LABORATORIES, INC.
4.1 Specimen Certificate of Common Stock (incorporated by reference
from Exhibit 4.1 to the Form 10-K).
4.2 Specimen Warrant Certificate for the Series F Warrants
(incorporated by reference from Exhibit 4.2 to the Company's
Registration Statement on Form S-1, SEC file no. 33-72276).
4.3 Form of Warrant Agreement for the Series F Warrants
(incorporated by reference from Exhibit 4.3 to the Company's
Registration Statement on Form S-2, SEC file no. 33-72276).
4.4 Form of Warrant issued in the Private Placement*.
5.1 Opinion of Broad and Cassel*
10.1 Lease Agreement (incorporated by reference from Exhibit 10.1 to
the Form 10-K).
10.2 Royce Laboratories, Inc. Nonqualified Stock Option Plan, as
amended through December 23, 1987 (incorporated by reference to
Exhibit 10.2 to Registrant's Form 10-K for the fiscal year ended
December 31, 1989).
10.3 Employment Agreement between Abul K. Bhuiyan and Registrant
(incorporated by reference from Exhibit 10.3 to the Company's
Registration Statement on Form S-2, SEC file no. 33-72276).
10.4 Stock Option Agreement between Registrant and Goldline
Laboratories, Inc. (incorporated by reference from Exhibit 10.5
to the Form 10-K.)
10.5 Form of License Agreement between Registrant and Royce Research
and Development Limited Partnership I (incorporated by reference
from Exhibit 10.6 to the Form 10-K).
10.6 Form of Partnership Agreement of Royce Research and Development
Limited Partnership I (incorporated by reference from Exhibit
10.7 to the Form 10-K).
10.7 Employment Agreement between Patrick J. McEnany and Registrant
dated as of January 1, 1994 (incorporated by reference from
Exhibit 10.8 to the Form 10-K).
10.9 1992 Stock Option Agreement (incorporated by reference from
Exhibit 10.9 to the Company's Registration Statement on Form
S-2, SEC file no. 33-72276).
10.10 1995 Stock Option Agreement (incorporated by reference from the
Company's 1995 Proxy Statement, dated June 7, 1995).
10.11 Employment Agreement between Loren Gelber and Registrant
(incorporated by reference from Exhibit 10.10 to the Company's
Registration Statement on Form S-3, SEC File No. 33-84620).
II-2
<PAGE>
ROYCE LABORATORIES, INC.
10.12 Form of Subscription Agreement used in the Private Placement.*
10.13 Placement Agent Warrant issued to Gruntal & Co., Incorporated in
connection with the Private Placement.*
10.14 Form of Sales Agency Agreement between the Company and Gruntal &
Co., Incorporated.*
21.1 List of Subsidiaries of Registrant (incorporated by reference
from Exhibit 22.1 to the Form 10-K).
23.1 Consent of Broad and Cassel (included as part of Exhibit 5.1).
23.2 Consent of Price Waterhouse LLP, independent certified public
accountants.*
--------------------
* Filed herewith.
II-3
<PAGE>
ROYCE LABORATORIES, INC.
(b) Financial Statement Schedules (incorporated by reference to Item 14 of
the Form 10-K.) (Item 14(a)(2) of the Company's Report on Form 10-K of
the fiscal year ended December 31, 1994):
27.1 Schedule VIII - Valuation and Qualifying Accounts and Reserves
ITEM 17. UNDERTAKING.
(A) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any
additional or changed material information with respect to the plan of
distribution.
(2) For the purposes of determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(5) For purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plans' annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
ROYCE LABORATORIES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Royce
Laboratories, Inc. hereby certifies that it has reasonable grounds to believe
that it meets all of the requirements of Form S-3 and has duly caused this
Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Miami, Florida on the
16th day of August, 1995.
ROYCE LABORATORIES, INC.
By: /s/ PATRICK J. McENANY
------------------------------------------
Patrick J. McEnany, President
Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints Patrick J. McEnany with full power to act as
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place, and stead, in any and all
capacities (until revoked in writing) to sign any and all amendments (including
post-effective amendments and amendments thereto) to this Registration Statement
on Form S-3 of Royce Laboratories, Inc. and to file the same with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully for all intents and purposes, as
he might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact or his substitute may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ PATRICK J. McENANY Chairman of the Board, President, August 16, 1995
---------------------- Chief Executive and Operations
Patrick J. McEnany Officer
Secretary-Treasurer and August , 1995
---------------------- Director
Richard W. Gross
/s/ HENRY S. KEEL, JR. Director August 16, 1995
----------------------
Henry S. Keel, Jr.
II-5
<PAGE>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ GREGORY REED Director August 16, 1995
----------------------
Gregory Reed
/s/ RICK A. WILBER Director August 16, 1995
----------------------
Rick A. Wilber
/s/ HUBERT E. HUCKEL Director August 16, 1995
----------------------
Hubert E. Huckel
/s/ OGDEN R. REID Director August 16, 1995
----------------------
Ogden R. Reid
/s/ DAVID COHEN Director August 16, 1995
----------------------
David Cohen
/s/ CHARLES J. SIMONS Director August 16, 1995
----------------------
Charles J. Simons
/s/ ROBERT E. BAND Vice President - Finance and August 16, 1995
---------------------- Chief Financial Officer
Robert E. Band
II-6
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE OR SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY
TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH EXHIBIT I REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., MIAMI TIME, July , 1996
No. W- __________ Warrants
WARRANT TO PURCHASE
_____ SHARES OF
ROYCE LABORATORIES, INC.
COMMON STOCK
WARRANT CERTIFICATE
This Warrant Certificate certifies that ____________, or registered
assigns, is the registered holder of Warrants (the "Warrants") to purchase
initially, at any time from the date hereof until 5:30 p.m., Miami time, on July
, 1996 ("Expiration Date"), up to the number of fully paid and nonassessable
shares of common stock, $.005 par value ("Common Stock") of ROYCE LABORATORIES,
INC., a Florida corporation (the "Company") set forth above, at the initial
exercise price, subject to adjustment in certain events (the "Exercise Price"),
of $6.50 per share of Common Stock upon surrender of this Warrant Certificate
and payment of the Exercise Price at an office or agency of the Company, but
subject to the conditions set forth herein and in Exhibit I hereto. Payment of
the Exercise Price shall be made by certified or official bank check payable to
the order of the Company.
No Warrant may be exercised after 5:30 p.m., Miami time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void. If the Expiration Date shall in the
State of Florida be a holiday or a day on which banks are authorized to close,
then the Expiration Date shall mean 5:30 P.M., Miami
<PAGE>
Time, the next following day which in the State of Florida is not a holiday or a
day on which banks are authorized to close.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the provisions of the
Subscription Agreement between the Company and the initial Holder hereof and
subject to the provisions of Exhibit I hereto, which Exhibit I is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants.
Exhibit I hereto provides that upon the occurrence of certain events
the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; PROVIDED,
HOWEVER, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair the rights of the holder
as set forth in Exhibit I.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in Exhibit I,
without any charge except for any tax or other governmental charge imposed in
connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in
Exhibit I hereto shall have the meanings assigned to them in Exhibit I hereto.
-2-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of _____________ ___, 1995.
ROYCE LABORATORIES, INC.
[SEAL] By:_____________________________
Name:
Title:
Attest:
___________________________
Name:
Secretary
-3-
<PAGE>
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ________ shares of Common
Stock and herewith tenders in payment for such securities a certified or
official bank check payable in New York Clearing House funds to the order of
Royce Laboratories, Inc. in the amount of $________, all in accordance with the
terms hereof. The undersigned requests that a certificate for such securities
be registered in the name of _____________ whose address is ___________________
and that such Certificate be delivered to __________________ whose address is
___________________________________.
Dated: Signature __________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
____________________________________________
(Insert Social Security or Other
Identifying Number of Holder)
____________________________________________
Signature Guarantee
-4-
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED ______________________ hereby sells, assigns and transfers
unto
________________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ Attorney, to
transfer the within Warrant Certificate on the books of the within named
Company, with full power of substitution.
Dated:___________________ Signature:__________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
____________________________________________
(Insert Social Security or Other Identifying
Number of Assignee)
____________________________________________
Signature Guarantee
-5-
<PAGE>
EXHIBIT I
Section 1. EXERCISE OF WARRANT. The Warrants initially are
exercisable at an aggregate initial exercise price per share of common stock,
$.005 par value per share (the "Common Stock") of Royce Laboratories, Inc. (the
"Company") set forth in Section 3 hereof (subject to adjustment as provided in
Section 5 hereof) payable by certified or official bank check. Upon surrender of
a Warrant Certificate with the annexed Form of Election to Purchase duly
executed, together with payment of the Exercise Price (as hereinafter defined)
for the shares of Common Stock purchased at the Company's principal offices in
Florida (presently located at 5350 N.W. 165th Street, Miami, FL 33014) the
registered holder of a Warrant Certificate ("Holder" or "Holders") shall be
entitled to receive a certificate or certificates for the shares of Common Stock
so purchased. The purchase rights represented by each Warrant Certificate are
exercisable at the option of the Holder thereof, in whole or in part (but not as
to fractional shares of the Common Stock underlying the Warrants). In the case
of the purchase of less than all the shares (the "Shares") of Common Stock
purchasable under any Warrant Certificate, the Company shall cancel said Warrant
Certificate upon the surrender thereof and shall execute and deliver a new
Warrant Certificate of like tenor for the balance of the shares of Common Stock
purchasable thereunder.
Section 2. ISSUANCE OF CERTIFICATES. Upon the exercise of the
Warrants, the issuance of certificates for shares of Common Stock or other
securities, properties or rights underlying such Warrants, shall be made
forthwith (and in any event within ten (10) business days thereafter) without
charge to the Holder thereof including, without limitation, any tax which may be
payable in respect of the issuance thereof, and such certificates shall be
issued in the name of, or in such names as may be directed by, the Holder
thereof; PROVIDED, HOWEVER, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the Holder and
the Company shall not be required to issue or deliver such certificates unless
or until the persons or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Shares
(and/or other securities, property or rights issuable upon the exercise of the
Warrants) shall be executed on behalf of the Company by the manual or facsimile
signature of the then present Chairman or Vice Chairman of the Board of
Directors or President or Vice President of the Company under its corporate seal
reproduced thereon, attested to by the manual or facsimile signature of the then
present Secretary or Assistant Secretary of the Company.
Section 3. EXERCISE PRICE.
3.1 INITIAL AND ADJUSTED EXERCISE PRICE. Except as otherwise
provided in Section 5 hereof, the exercise price of each Warrant shall be $6.50
per share of Common Stock. The adjusted exercise price shall be the price which
shall result from time to time from any and all adjustments of the initial
exercise price in accordance with the provisions of Section 5 hereof.
<PAGE>
3.2 EXERCISE PRICE. The term "Exercise Price" as used herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context.
Section 4. REGISTRATION RIGHTS.
4.1 SECURITIES ACT OF 1933 LEGEND. The Warrants, the Shares and any
of the other securities issuable upon exercise of the Warrants have not been
registered under the Securities Act of 1933, as amended (the "Act"). Upon
exercise of the Warrants, in part or in whole, the certificates representing the
Shares underlying the Warrants and any of the other securities issuable upon
exercise of the Warrants (collectively, the "Warrant Shares") shall bear the
following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE OR SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY
TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
4.2 REQUIRED REGISTRATION. The Holders of the Warrants shall be
entitled to the benefits of the registration rights with respect to the Warrant
Shares contained in Section D of the Subscription Agreement between the Company
and the initial Holder of this Warrant relating to the purchase of Warrants
which constituted a portion of the Units sold pursuant thereto. Said Section D
is hereby incorporated by reference in and made a part of this Exhibit I as if
fully set forth herein.
Section 5. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SHARES.
5.1 SUBDIVISION AND COMBINATION. In case the Company shall at any
time (i) subdivide the outstanding shares of Common Stock into a larger number
of shares, (ii) combine the outstanding shares of Common Stock into a smaller
number of shares, (iii) declare a dividend on the outstanding shares of Common
Stock payable in shares of Common Stock, or (iv) issue by reclassification of
its Common Stock any shares of its capital stock, the Exercise Price in effect
immediately after the record date for such dividend or distribution or the
effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding immediately before
such dividend, distribution, subdivision, combination or reclassification, and
of which the denominator shall be the number of shares of Common Stock
outstanding
-2-
<PAGE>
immediately after such dividend, distribution, subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event
specified above shall occur.
5.2 ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 5, the number of
Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full share by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares issuable
upon exercise of the Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
5.3 DEFINITION OF COMMON STOCK. For the purpose of this Agreement,
the term "Common Stock" shall mean (i) the class of stock designated as Common
Stock in the Articles of Incorporation of the Company as may be amended as of
the date hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value. In the event that the Company shall after the date hereof issue Common
Stock with greater or superior voting rights than the shares of Common Stock
outstanding as of the date hereof, the Holder, at its option, may receive upon
exercise of any Warrant either shares of Common Stock or a like number of such
securities with greater or superior voting rights.
5.4 MERGER OR CONSOLIDATION. (a) In case the Company after the date
hereof (i) shall consolidate with or merge into any other person and shall not
be the continuing or surviving corporation of such consolidation or merger, or
(ii) shall permit any other person to consolidate with or merge into the Company
and the Company shall be the continuing or surviving person but, in connection
with such consolidation or merger, the Common Stock shall be changed into or
exchanged for stock or other securities of any other person or cash or any other
property, or (iii) shall transfer all or substantially all of its properties or
assets to any other person, or (iv) shall effect a capital reorganization or
reclassification of the Common Stock (other than a capital reorganization or
reclassification resulting in the issue of additional shares of Common Stock for
which adjustment in the Exercise Price is provided in this Section 5), then, and
in the case of each such transaction, proper provision shall be made so that,
upon the basis and the terms and in the manner provided in this Agreement and
the Warrants, the Holders of the Warrants, upon the exercise thereof at any time
after the consummation of such transaction, shall be entitled to receive (at the
aggregate Exercise Price in effect at the time of such consummation for all
Common Stock issuable upon such exercise immediately prior to such
consummation), in lieu of the Common Stock or other securities issuable upon
such exercise prior to such consummation, the highest amount of securities, cash
or other property to which such Holders would actually have been entitled as
shareholders upon such consummation if such Holders had exercised the rights
represented by the Warrants immediately prior thereto, subject to adjustments
(subsequent to such consummation) as nearly equivalent as possible to the
adjustments provided for in this Section 5.
-3-
<PAGE>
5.5 ASSUMPTION OF OBLIGATIONS. Notwithstanding anything contained in
the Warrants to the contrary, the Company will not effect any of the
transactions described in clauses (i) through (iv) of Section 5.4 unless, prior
to the consummation thereof, each person (other than the Company) which may be
required to deliver any stock, securities, cash or property upon the exercise of
the Warrants as provided herein shall assume, by written instrument delivered to
the Holders of the Warrants, (a) the obligations of the Company under the
Warrants (including this Exhibit I) (and if the Company shall survive the
consummation of such transaction, such assumption shall be in addition to, and
shall not release the Company from, any continuing obligations of the Company
under this Exhibit I and the Warrants) and (b) the obligation to deliver to such
Holders such shares of stock, securities, cash or property as, in accordance
with the foregoing provisions of this Section 5, such Holders may be entitled to
receive, and such person shall have similarly delivered to such Holders an
opinion of counsel for such person stating that the Warrants (including this
Exhibit I) shall thereafter continue in full force and effect and the terms
hereof (including, without limitation, all of the provisions of this Section 5)
shall be applicable to the stock, securities, cash or property which such person
may be required to deliver upon any exercise of the Warrants or the exercise of
any rights pursuant hereto.
5.6 DIVIDENDS AND OTHER DISTRIBUTIONS. If, at any time or from time
to time after the date of this Warrant, the Company shall issue or distribute to
the holders of shares of Common Stock evidences of its indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or distribution
payable in shares of Common Stock, referred to in Section 5.1, and also
excluding cash dividends or cash distributions paid out of net profits legally
available therefor if the full amount thereof, together with the value of other
dividends and distributions made substantially concurrently therewith or
pursuant to a plan which includes payment thereof, is equivalent to not more
than 5% of the Company's net worth) (any such non-excluded event being herein
called a "Special Dividend"), the Exercise Price shall be adjusted by
multiplying the Exercise Price then in effect by a fraction, the numerator of
which shall be the then current market price of the Common Stock (defined as the
average for the thirty consecutive business days immediately prior to the record
date of the daily closing price of the Common Stock as reported by the national
securities exchange upon which the Common Stock is then listed or if not listed
on any such exchange, the average of the closing prices as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") Stock Market's National Market, or if not then listed on the NASDAQ
National Market, the average of the highest reported bid and lowest reported
asked prices as reported by the NASDAQ, or if not then publicly traded, as the
fair market price as determined by the Company's Board of Directors) less the
fair market value (as determined by the Company's Board of Directors) of the
evidences of indebtedness, cash, securities or property, or other assets issued
or distributed in such Special Dividend applicable to one share of Common Stock
and the denominator of which shall be such then current market price per share
of Common Stock. An adjustment made pursuant to this Section 5.6 shall become
effective immediately after the record date of any such Special Dividend.
-4-
<PAGE>
5.7 OTHER DILUTIVE EVENTS. In case any event shall occur as to which
the other provisions of this Section 5 are similar to, but not strictly
applicable but as to which the failure to make any adjustment would not fairly
protect the purchase rights represented by the Warrants (including this Exhibit
I) in accordance with the essential intent and principles hereof then, in each
such case, the Holders of a majority of all Warrants issued simultaneously
herewith may appoint a firm of independent public accountants of recognized
national standing reasonably acceptable to the Company, which shall give their
opinion as to the adjustment, if any, on a basis consistent with the essential
intent and principles established herein, necessary to preserve the purchase
rights represented by the Warrants (including this Exhibit I). Upon receipt of
such opinion the Company will promptly mail a copy thereof to the Holders and
shall make the adjustments described therein. The fees and expenses of such
independent public accountants shall be borne by the Company. The issuance by
the Company of shares of capital stock, including, without limitation, shares of
Common Stock, for consideration less than the Exercise Price, or the issuance of
convertible securities or derivative securities, convertible into shares of
capital stock at a conversion price or exercise price less than the Exercise
Price shall not be deemed an event that requires an adjustment under this
Section 5.7.
5.8 NOTICE OF ADJUSTMENT EVENTS. Whenever the Company contemplates
the occurrence of an event which would give rise to adjustments under this
Section 5, the Company shall mail to each Holder, at least thirty (30) days
prior to the record date with resect to such event or, if no record date shall
be established, at least thirty (30) days prior to such event, a notice
specifying (i) the nature of the contemplated event, (ii) the date of which any
such record is to be taken for the purpose of such event, (iii) the date on
which such event is expected to become effective and (iv) the time, if any is to
be fixed, when the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable in connection with such event.
5.9 NOTICE OF ADJUSTMENTS. Whenever the Exercise Price or the kind
of securities or property issuable upon exercise of the Warrants, or both, shall
be adjusted pursuant to this Section 5, the Company shall make a certificate
signed by its President or a Vice President and by its Chief Financial Officer,
Secretary or Assistant Secretary, setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method of which such
adjustment was calculated (including a description of the basis on which the
Company made any determination hereunder), and the Exercise Price and the kind
of securities or property issuable upon exercise of the Warrants after giving
effect to such adjustment, and shall cause copies of such certificate to be
mailed (by first class mail postage prepaid) to each Holder promptly after each
adjustment.
5.10 PRESERVATION OF RIGHTS. The Company will not, by amendment of
its Articles of Incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of the Warrants (including this Exhibit I) or the rights
represented thereby, but will at all times in good faith assist in the carrying
out
-5-
<PAGE>
of all such terms and in the taking of all such action as may be necessary
or appropriate in order to protect the rights of the Holders of the Warrants
against dilution or other impairment.
5.11 WHEN NO ADJUSTMENT REQUIRED. No adjustment in the Exercise Price
shall be required unless such adjustment would require an increase or decrease
of at least $0.05 per share of Common Stock; PROVIDED, HOWEVER, that any
adjustments which by reason of this Section 5.11 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment;
PROVIDED FURTHER, however, that adjustments shall be required and made in
accordance with the provisions of this Section 5 (other than this Section 5.11)
not later than such time as may be required in order to preserve the tax-free
nature of a distribution to the Holders of the Warrants. All calculations under
this Section 5 shall be made to the nearest cent or to the nearest 1/100th of a
share, as the case may be. Anything in this Section 5 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Exercise Price, in addition to those required by this Section 5, as it in its
discretion shall deem to be advisable in order that any stock dividend,
subdivision of shares or distribution of rights to purchase stock or securities
convertible or exchangeable for stock hereafter made by the Company to its
shareholders shall not be taxable.
Section 6. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each
Warrant Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holder at the principal executive office of the Company, for a
new Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Shares in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
Section 7. ELIMINATION OF FRACTIONAL INTERESTS. The Company
shall not be required to issue certificates representing fractions of shares of
Common Stock upon the exercise of the Warrants, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights.
Section 8. RESERVATION AND LISTING OF SECURITIES. The Company
shall at all times reserve and keep available out of its authorized shares of
Common Stock, solely for the purpose of issuance upon the exercise of the
Warrants, such number of shares of Common Stock or other securities, properties
or rights as shall be issuable upon the exercise thereof. The Company covenants
and agrees that, upon exercise of the Warrants and payment of the Exercise Price
therefor, all shares of Common Stock and other securities issuable upon such
exercise shall
-6-
<PAGE>
be duly and validly issued, fully paid, nonassessable and not subject to the
preemptive rights of any shareholder. As long as the Warrants shall be
outstanding, the Company shall use its best efforts to cause all shares
of Common Stock issuable upon the exercise of the Warrants to be listed on all
securities exchanges and/or included in the automated quotation system of the
Nasdaq Stock Market (subject to official notice of issuance) with respect to
which the Common Stock issued to the public in connection herewith may then be
so listed and/or quoted.
Section 9. NOTICES TO WARRANT HOLDERS. Nothing contained in this
Exhibit I shall be construed as conferring upon the Holders the right to vote or
to consent or to receive notice as a shareholder in respect of any meetings of
shareholders for the election of directors or any other matter, or as having any
rights whatsoever as a shareholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders
of its shares of Common Stock for the purpose of determining
the holders thereof who are entitled to receive any dividend
or other distribution payable; or
(b) the Company shall offer to all the holders of
its Common Stock any additional shares of capital stock of
the Company or securities convertible into or exchangeable
for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or
(c) a voluntary or involuntary dissolution,
liquidation or winding-up of the Company (other than in
connection with a consolidation or merger) or any capital
reorganization, re-capitalization or reclassification or
a sale of all or substantially all of its property, assets
and business as an entirety shall be proposed;
then, in any one or more of said events, the Company will mail to each Holder of
a Warrant a notice specifying (i) the date or expected date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right, and (ii)
the date or expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, sale, dissolution, liquidation or
winding-up is to take place and the time, if any such time is to be fixed, as of
which the holders of record of Common Stock shall be entitled to exchange their
shares of Common Stock for the securities or other property deliverable upon
such reorganization, reclassification, recapitalization, consolidation, merger,
sale, dissolution, liquidation or winding-up. Such notice shall be mailed at
least thirty (30) days prior to the date therein specified.
-7-
<PAGE>
Section 10. NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly given or made at the
time delivered by hand if personally delivered; five calendar days after mailing
if sent by registered or certified mail; when answered back, if telexed; when
receipt is acknowledged, if telecopied; and the next business day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next day
delivery (except that a notice of change of address shall not be deemed to have
been given until actually received by the addressee):
(a) If to the registered Holder of the Warrants, to
the address of such Holder as shown on the books of the
Company; or
(b) If to the Company, to the address set forth in
Section 1 hereof or to such other address as the Company may
designate by notice to the Holders.
Section 11. SUCCESSORS. All the covenants and provisions of this
Exhibit I shall be binding upon and inure to the benefit of the Company, the
Holders and their respective successors and assigns hereunder.
Section 12. GOVERNING LAW. This Exhibit I and each Warrant shall
be governed and construed in accordance with the laws of the State of Florida
applicable to contracts made and performed in the State of Florida without
giving effect to the principles of conflicts of law thereof.
Section 13. ENTIRE AGREEMENT; MODIFICATION. This Exhibit I
(including the Warrant Certificate and the Subscription Agreements with respect
to registration rights) contains the entire understanding between the parties
hereto with respect to the subject matter hereof and may not be modified or
amended except by a writing duly signed by the party against whom enforcement of
the modification or amendment is sought.
Section 14. SEVERABILITY. If any provision of this Exhibit I shall
be held to be invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision of this Exhibit I.
Section 15. CAPTIONS. The caption headings of the Sections of this
Exhibit I are for convenience of reference only and are not intended to be, nor
should they be construed as, part of this Exhibit I and shall be given no
substantive effect.
-8-
<PAGE>
Section 16. BENEFITS OF THIS EXHIBIT I. Nothing in this Exhibit I
shall be construed to give any person or corporation other than the Company and
the registered Holder(s) of the Warrant Certificates or Warrant Shares any legal
or equitable right, remedy or claim under this Exhibit I; and this Exhibit I
shall be for the sole and exclusive benefit of the Company and any registered
Holder(s) of the Warrant Certificates or Warrant Shares.
-9-
BROAD AND CASSEL
ATTORNEYS AT LAW
August 16, 1995
Royce Laboratories, Inc.
5350 N.W. 165th Street
Miami, FL 33014
Re: Royce Laboratories, Inc. (the "Company")
Registration Statement on Form S-3
Ladies and Gentlemen:
You have requested our opinion with respect to the securities included in
the Company's registration statement on Form S-3 (the "Registration Statement")
which has been filed with the Securities and Exchange Commission.
As counsel to the Company, we have examined the original or certified
copies of such records of the Company and such agreements, certificates of
public officials, certificates of officers or representatives of the Company and
others, and such other documents as we deem relevant and necessary for the
opinions expressed in this letter. In such examination, we have assumed the
genuineness of all signatures on original documents and the conformity to
original documents of all copies submitted to us as conformed or photostat
copies. As to various questions of fact material to such opinions, we have
relied upon statements or certificates of officials and representatives of the
Company and others.
The legal opinion expressed herein relates solely to Florida law. Based
upon and subject to the foregoing, we are of the opinion that:
<PAGE>
When the Registration Statement becomes effective under the
Securities Act of 1933, as amended, and the securities are issued
and distributed as contemplated in the Registration Statement, the
securities will constitute legally issued, fully paid and non-
assessable securities of the Company.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the use or our name under "Legal
Matters" in the Prospectus constituting part of the Registration Statement. In
giving such consent, we do not thereby admit that we are included within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ Broad and Cassel
BROAD AND CASSEL
================================================================================
SUBSCRIPTION AGREEMENT
--------------
ROYCE LABORATORIES, INC.
--------------
A Minimum of 500,000 Units and
A Maximum of 833,333 Units
Each Unit consisting of one share of Common Stock
and a Warrant to purchase one share of
Common Stock of Royce Laboratories, Inc.
To: Royce Laboratories, Inc.
5350 N.W. 165th Street
Miami, Florida 33014
This Subscription Agreement is made between Royce Laboratories, Inc., a
Florida corporation (the "Company"), and the undersigned prospective purchaser
who is subscribing hereby to purchase units of the Company's securities (the
"Units"), each Unit composed of one share (the "Shares") of the Company's common
stock, $.005 par value ("Common Stock") and a twelve-month warrant to purchase
one share of Common Stock at an exercise price of $6.50 per share (the
"Warrants"). The purchase price per Unit (the "Purchase Price") is $6.00. This
subscription is submitted to you in accordance with and subject to the terms and
conditions described in this Subscription Agreement and the Confidential Private
Placement Memorandum dated July 6, 1995, together with any supplements or
amendments thereto (collectively, the "Memorandum"), relating to an offering
(the "Offering") of (a) a minimum of 500,000 Units and (b) a maximum of 833,333
Units.
In consideration of the Company's agreement to sell the Units to the
undersigned upon the terms and conditions summarized in the Memorandum, the
undersigned agrees and represents as follows:
A. SUBSCRIPTION.
(1) The undersigned hereby irrevocably subscribes for and agrees to
purchase the number of Units indicated on the signature page hereto at the
Purchase Price. The undersigned encloses herewith a check or money order payable
to Gruntal & Co., Incorporated (the "Placement Agent") (or has made payment by
wire transfer of funds in accordance with instructions from the Placement Agent)
in the full amount of the purchase price of the Units for which the undersigned
is subscribing (the "Payment").
(2) The undersigned understands that all Payments by check or money order
as provided in paragraph A(1) above shall be delivered to the Placement Agent
(as described in Section IV of the Subscription Instructions) and, thereafter,
such Payments will be held in escrow for the undersigned's benefit by the
Placement Agent. The offering period will expire
<PAGE>
on July 14, 1995, unless extended to August 14, 1995 in the sole discretion of
the Company and the Placement Agent (the "Expiration Date"), on the basis
described in the Memorandum. The closing will occur on or about the fifth
business day after the Expiration Date or such earlier date that the Company
elects to close after receipt of subscriptions for the Minimum Offering (the
"Closing Date"). Upon receipt by the Company of the requisite payment for all
Units to be purchased by the subscribers whose subscriptions are accepted (each,
a "Purchaser", and collectively, the "Purchasers"), on the Closing Date and
subject to the satisfaction of certain conditions, the Shares and Warrants so
purchased will be issued in the name of each such Purchaser, and the name of
such Purchaser will be registered on the transfer books of the Company as the
record owner of such Shares and Warrants. The Company will issue to each
Purchaser the stock and warrant certificates representing the Shares and
Warrants purchased, respectively. If the Company has not received subscriptions
for at least the Minimum Offering on or prior to the Expiration Date, the
Payment (or in the case of rejection of a portion of the undersigned's
subscription, the part of the Payment relating to such rejected portion) will be
returned promptly, without interest, on the basis described in the Memorandum.
(3) The undersigned hereby acknowledges receipt of a copy of the
Memorandum, and agrees to be bound hereby upon (i) execution and delivery to the
Company, in care of the Placement Agent, of the signature page to the
undersigned's completed questionnaire (the "Questionnaire") and this
Subscription Agreement and (ii) acceptance on the Closing Date by the Company of
the undersigned's subscription (the "Subscription").
(4) The undersigned agrees that the Company and the Placement Agent may,
in their sole and absolute discretion, reduce the undersigned's subscription to
any number of Units that in the aggregate does not exceed the number of Units
hereby applied for without any prior notice to or further consent by the
undersigned. The undersigned hereby irrevocably constitutes and appoints the
Placement Agent and each officer of the Placement Agent, each of the foregoing
acting singly, in each case with full power of substitution, the true and lawful
agent and attorney-in-fact of the undersigned, with full power and authority in
the undersigned's name, place and stead to amend this Subscription Agreement and
the Questionnaire, including, in each case, the undersigned's signature page
thereto, to effect any of the foregoing provisions of this paragraph A(4).
B. REPRESENTATIONS AND WARRANTIES.
The undersigned hereby represents and warrants to and agrees with the
Company and the Placement Agent and each dealer selected by the Placement Agent
to sell Units after consultation with the Company (the "Selected Dealers") as
follows:
(1) The undersigned has been furnished with and has carefully read the
Memorandum (including, without limitation, the appendices thereto), and is
familiar with and understands the terms of the Offering. In evaluating the
suitability of an investment in the Company, the undersigned has not relied upon
any representations or other information (whether oral or written) from the
Company, the Placement Agent or any Selected Dealer (or any agent or
representative of any of them), other than as set forth in the Memorandum. With
respect to individual tax and other economic considerations involved in this
investment, the undersigned is not relying on the Company or the Placement Agent
or any Selected Dealer (or any agent or representative of any of them). The
undersigned has carefully considered and has, to the extent the undersigned
believes such discussion necessary, discussed with the undersigned's
professional legal, tax, accounting and financial advisers the suitability of an
investment in the Units for the
<PAGE>
undersigned's particular tax and financial situation and has determined that the
Units being subscribed for by the undersigned are a suitable investment for the
undersigned.
(2) The undersigned acknowledges that (i) the undersigned has had the
right to request copies of any documents, records and books pertaining to this
investment and (ii) such documents, records and books which the undersigned has
requested (including, without limitation, the Memorandum) have been made
available for inspection by the undersigned and the undersigned's attorney,
accountant or other adviser(s).
(3) The undersigned and/or the undersigned's adviser(s) has/have had a
reasonable opportunity to ask questions of and receive answers from a person or
persons acting on behalf of the Company concerning the Offering and all such
questions have been answered to the full satisfaction of the undersigned.
(4) No oral or written representations have been made other than those set
forth in the Memorandum, and no oral or written information furnished to the
undersigned or the undersigned's adviser(s) in connection with the Offering were
in any way inconsistent with the information stated in the Memorandum.
(5) The undersigned is not subscribing for the Units as a result of or
subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or meeting to which the public
was invited.
(6) If the undersigned is a natural person, the undersigned has reached
the age of majority in the state in which the undersigned resides, the
undersigned has adequate means of providing for the undersigned's current
financial needs and contingencies, is able to bear the substantial economic
risks of an investment in the Units for an indefinite period of time, has no
need for liquidity in such investment and, at the present time, could afford a
complete loss of such investment.
(7) The undersigned or the undersigned's purchaser representative, as the
case may be, has such knowledge and experience in financial, tax and business
matters so as to enable the undersigned to utilize the information made
available to the undersigned in connection with the Offering to evaluate the
merits and risks of an investment in the Units and to make an informed
investment decision with respect thereto. The undersigned is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D ("Regulation
D") under the Securities Act of 1933 as amended (the "Securities Act") and is
acquiring the Units for investment and not with a view to resale or
distribution.
(8) The undersigned acknowledges that the Units, the Shares, the Warrants
and the shares of Common Stock underlying the Warrants (collectively, the
"Securities") have not been registered under the Securities Act or under the
securities laws of any state. The undersigned will not sell, transfer or
otherwise dispose of any Securities unless they are registered under the
Securities Act and any applicable state securities laws or pursuant to available
exemptions from such registration. The undersigned represents that he is
purchasing the Securities for the undersigned's own account, for investment and
not with a view to resale or distribution except in compliance with the
Securities Act. The undersigned has not offered or sold any portion of the
Securities being acquired nor does the undersigned have any present intention of
dividing such Securities with others or of selling, distributing or otherwise
disposing of any portion of such Securities either currently or after the
passage of a fixed or determinable period of time or upon the occurrence or
nonoccurrence of any predetermined event or circumstance in violation
<PAGE>
of the Securities Act. The undersigned is aware that an exemption from the
registration requirements of the Securities Act pursuant to Rule 144 promulgated
thereunder is not presently available; and, except as provided in paragraph D
below, the Company has no obligation to register the Securities subscribed for
hereunder or to make available an exemption from the registration requirements
pursuant to such Rule 144 or any successor rule for resale of the Securities.
(9) The undersigned recognizes that investment in the Units involves
substantial risks, including loss of the entire amount of such investment, and
has taken full cognizance of and understands all of the risks related to a
purchase of the Units.
(10) The undersigned acknowledges that each certificate representing any of
the Securities shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE OR
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT
OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH SECURITIES ACT
AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO COUNSEL FOR THIS
CORPORATION, IS AVAILABLE.
(11) The undersigned acknowledges and agrees that it shall not be entitled
to seek any remedies with respect to the Offering from any party other than the
Company, the Placement Agent or the Selected Dealer which solicited the
undersigned's subscription.
(12) If this Subscription Agreement is executed and delivered on behalf of
a partnership, corporation, trust or estate: (i) such partnership, corporation,
trust or estate has the full legal right and power and all authority and
approval required (a) to execute and deliver, or authorize execution and
delivery of, this Subscription Agreement and all other instruments executed and
delivered by or on behalf of such partnership, corporation, trust or estate in
connection with the purchase of its Units, (b) to delegate authority pursuant to
a power of attorney and (c) to purchase and hold such Units; (ii) the signature
of the party signing on behalf of such partnership, corporation, trust or estate
is binding upon such partnership, corporation, trust or estate; and (iii) such
partnership, corporation or trust has not been formed for the specific purpose
of acquiring such Units, unless each beneficial owner of such entity is
qualified as an "accredited investor" within the meaning of Rule 501(a) of
Regulation D and has submitted information substantiating such individual
qualification.
(13) If the undersigned is a retirement plan or is investing on behalf of a
retirement plan, the undersigned acknowledges that investment in the Units poses
risks in addition to those associated with other investments, including the
inability to use losses generated by an investment in the Units to offset
taxable income.
(14) The undersigned shall indemnify and hold harmless the Company, the
Placement Agent and each Selected Dealer, and each officer, director or control
person of any such entity, who is or may be a party or is or may be threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
<PAGE>
investigative, by reason of or arising from any actual or alleged
misrepresentation or misstatement of facts or omission to represent or state
facts made or alleged to have been made by the undersigned to the Company, the
Placement Agent or any Selected Dealer (or any agent or representative of any of
them) or omitted or alleged to have been omitted by the undersigned, concerning
the undersigned or the undersigned's authority to invest or financial position
in connection with the Offering, including, without limitation, any such
misrepresentation, misstatement or omission contained in the Questionnaire or
any other document submitted by the undersigned, against losses, liabilities and
expenses actually and reasonably incurred by the Company, the Placement Agent,
any Selected Dealer or any officer, director or control person of any such
entity in connection with such action, suit or proceeding for which the Company,
the Placement Agent, any Selected Dealer or such officer, director or control
person has not otherwise been reimbursed (including attorneys' fees, judgments,
fines and amounts paid in settlement).
C. UNDERSTANDINGS.
The undersigned understands, acknowledges and agrees with the Company,
the Placement Agent and each Selected Dealer as follows:
(1) This Subscription may be rejected, in whole or in part, by the
Company or the Placement Agent, in the sole and absolute discretion of either of
them, at any time before the Closing Date, as the case may be, notwithstanding
prior receipt by the undersigned of notice of acceptance of the undersigned's
Subscription.
(2) The undersigned hereby acknowledges and agrees that the
Subscription hereunder is irrevocable by the undersigned, that, except as
required by law, the undersigned is not entitled to cancel, terminate or revoke
this Subscription Agreement or any agreements of the undersigned hereunder and
that this Subscription Agreement and such other agreements shall survive the
death or disability of the undersigned and shall be binding upon and inure to
the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives and permitted assigns. If the undersigned is
more than one person, the obligations of the undersigned hereunder shall be
joint and several and the agreements, representations, warranties and
acknowledgements herein contained shall be deemed to be made by and be binding
upon each such person and his/her heirs, executors, administrators, successors,
legal representatives and permitted assigns.
(3) No Federal or state agency has made any finding or determination
as to the accuracy or adequacy of the Memorandum or as to the fairness of the
terms of this Offering for investment nor any recommendation or endorsement of
the Units.
(4) The Offering is intended to be exempt from registration under the
Securities Act by virtue of Section 4(2) of the Securities Act and the
provisions of Regulation D thereunder, which is in part dependent upon the
truth, completeness and accuracy of the statements made by the undersigned
herein and in the Questionnaire.
(5) There can be no assurance that the undersigned will be able to
sell or dispose of any of the Securities. It is understood that in order not to
jeopardize the Offering's exempt status under Section 4(2) of the Securities Act
and Regulation D, any transferee may, at a minimum, be required to fulfill the
investor suitability requirements thereunder.
<PAGE>
(6) The Placement Agent and any Selected Dealer will receive
compensation in connection with the Offering but none of them is guaranteeing or
assuming responsibility for the operation or possible liability of the Company,
including, without limitation, compliance by the Company with the agreements
entered into in connection with the Offering, and none of them will supervise or
participate in the operation or management of the Company.
(7) The undersigned acknowledges that the information contained in
the Memorandum is confidential and non-public and agrees that all such
information shall be kept in confidence by the undersigned and neither used by
the undersigned for the undersigned's personal benefit (other than in connection
with this Subscription), nor disclosed to any third party for any reason;
PROVIDED, HOWEVER, that this obligation shall not apply to any such information
that (i) is part of the public knowledge or literature and readily accessible at
the date hereof, (ii) becomes part of the public knowledge or literature and
readily accessible by publication (except as a result of a breach of this
provision) or (iii) is received from third parties (except third parties who
disclose such information in violation of any confidentiality agreements or
obligations, including, without limitation, any Subscription Agreement entered
into with the Company).
(8) The representations, warranties and agreements of the undersigned
contained herein and in any other writing delivered in connection with the
transactions contemplated hereby shall be true and correct in all respects on
and as of the date of the sale of the Units as if made on and as of such date
and shall survive the execution and delivery of this Subscription Agreement and
the purchase of Units.
(9) IN MAKING AN INVESTMENT DECISION, PURCHASERS MUST RELY ON THEIR
OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED. THE UNITS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THE
MEMORANDUM OR THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
(10) The offering and sale of the Units are intended to be exempt from
registration under the securities laws of certain U.S. states. A Purchaser
residing in one or more of the following states shall note the language set
forth below, which is required to be included in this Agreement by the
securities laws of those states. The Purchaser must note that there are
restrictions on transfer of all Securities.
ALL STATES: THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR
THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
LAWS. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE MEMORANDUM. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED
<PAGE>
UNDER THE SECURITIES ACT, AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
FLORIDA: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE FLORIDA SECURITIES
ACT IN RELIANCE UPON EXEMPTION PROVISIONS CONTAINED THEREIN. ANY SALE MADE
PURSUANT TO SUCH EXEMPTION PROVISIONS IS VOIDABLE BY THE PURCHASER WITHIN THREE
DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY THE PURCHASER TO THE
ISSUER, AN AGENT OF THE ISSUER OR AN ESCROW AGENT. A WITHDRAWAL WITHIN SUCH
THREE DAY PERIOD WILL BE WITHOUT ANY FURTHER LIABILITY TO ANY PERSON. TO
ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A LETTER OR TELEGRAM TO
THE COMPANY AT THE ADDRESS SET FORTH IN THIS MEMORANDUM, INDICATING HIS
INTENTION TO WITHDRAW.
SUCH LETTER OR TELEGRAM SHOULD BE SENT AND POSTMARKED PRIOR TO THE END OF THE
AFOREMENTIONED THIRD BUSINESS DAY. IT IS ADVISABLE TO SEND SUCH LETTER BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS RECEIVED AND ALSO
TO EVIDENCE THE TIME IT WAS MAILED. IF THE REQUEST IS MADE ORALLY, IN PERSON OR
BY THE TELEPHONE, TO AN OFFICER OF THE COMPANY, A WRITTEN CONFIRMATION THAT THE
REQUEST HAS BEEN RECEIVED SHOULD BE REQUESTED.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT,
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS INVOLVED FOR AN INDEFINITE PERIOD OF TIME.
CONNECTICUT: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER SECTION 36-486 OF
THE CONNECTICUT UNIFORM SECURITIES ACT, AND THEREFORE, MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY
REGISTERED UNDER THE ACT, OR THE SECURITIES ACT OF THIS STATE, IF SUCH
REGISTRATION IS REQUIRED, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
NEW JERSEY: THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE BUREAU
OF SECURITIES OF THE STATE OF NEW JERSEY, NOR HAS THE BUREAU PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. THE FILING OF THE WITHIN OFFERING DOES NOT
CONSTITUTE APPROVAL OF THE ISSUE OR THE SALE THEREOF BY THE BUREAU OF
SECURITIES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
D. REGISTRATION UNDER THE SECURITIES ACT OF 1933.
(a) The Company agrees that it will:
<PAGE>
(1)(a) File on or prior to the 30th day following the Closing Date
(the "Target Filing Date") a registration statement (the "Registration
Statement") covering all Registered Securities (as hereinafter defined)
purchased by the holders of the Registered Securities (the "Holders") with the
Securities and Exchange Commission (the "Commission") on an appropriate form
available for the sale of the Shares by the undersigned from time to time in the
over-the-counter market, in privately negotiated transactions or in a
combination of such methods, and (b) use its best efforts to cause the
Registration Statement to be declared effective by the Commission as soon as
practicable after the date of such filing. In the event that (i) the
Registration Statement is not filed by the Company with the Commission on or
prior to the Target Filing Date or (ii) the Registration Statement is not
declared effective by the Commission on or prior to the 60th day following the
date the Registration Statement is filed (the "Target Effective Date"), the
Company will issue, in each such case, to each Purchaser, at the close of
business on the Target Filing Date and/or the Target Effective Date, as the case
may be, a warrant to purchase a number of shares of Common Stock equal to the
product of the number of Shares purchased by such Purchaser and .05 (rounded
upward to the nearest share), at an exercise price per share equal to the
Purchase Price. Such warrants (the "Additional Warrants") shall be issued
pursuant to a warrant agreement among the Company, the undersigned and the other
Purchasers (the "Additional Warrant Agreement"), and shall have the same terms
and conditions (including, without limitation, registration rights) as the
Warrants. Any obligation of the Company to issue warrants to the Purchasers
pursuant to this paragraph (1) shall be in addition to any liability which the
Company may otherwise have to the Purchasers for a breach of its obligations
hereunder.
(2) Prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith as may be necessary to keep the Registration Statement effective until
all of the Registered Securities have been sold pursuant thereto, but not for a
period to exceed two years from the Closing Date (the "Registration Period") and
to comply with the provisions of the Securities Act and the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder (collectively,
the "Exchange Act"), with respect to the disposition of all of the Registered
Securities.
(3) Notify the Holders after becoming aware that (i) the Registration
Statement or the prospectus included therein or any prospectus amendment or
supplement or post-effective amendment has been filed and, with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective or (ii) the Commission has requested an amendment of or supplement to
the Registration Statement or related prospectus or additional information.
(4) Furnish promptly to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the Securities Act,
and such other documents as the Holders may reasonably request in order to
facilitate the disposition of any of the Registered Securities.
(5) Use its best efforts to register and qualify the Registered
Securities under such other securities or Blue Sky laws of such states as shall
be reasonably requested by the Holders, and prepare and file in those states
such amendments (including post-effective amendments) and supplements and to
take such other actions as may be necessary to maintain such registration and
qualification in effect at all times during the Registration Period, and to take
all other actions necessary or advisable to enable the disposition of the
Registered Securities in such states, PROVIDED that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states.
<PAGE>
(6) At any time following the nine-month anniversary of the Closing
Date, if the Holders of more than a majority of the shares of Common Stock
constituting the Registered Securities, voting as a single class, select one or
more underwriters for an offering of the Registered Securities, the Company
shall enter into and perform its obligations under an underwriting agreement, in
usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering and make such representations and warranties with respect to the
Registration Statement or post-effective amendment thereto, prospectus or
amendment or supplement thereto, and documents incorporated by reference, if
any, to the Holders and the underwriters, if any, of the Registered Securities
in form, substance and scope as are customarily made by registrants in secondary
offerings of common stock in transactions of that type. The Holders shall also
enter into and perform their customary obligations under any such agreement,
including, without limitation, customary indemnification and contribution
obligations. Within ten days after receipt of a written notice (the "Notice")
indicating that the requisite holders of Registered Securities intend to proceed
with an underwritten offering, the Company will give written notice of such
request to all other holders of Registered Securities and will use its best
efforts to include in such underwritten offering all Registered Securities with
respect to which the Company has received written requests for inclusion therein
within ten days after the receipt of the Company's notice. Notwithstanding the
foregoing, the Company shall be entitled to postpone, for a period of not more
than ninety (90) days after receipt of the Notice, the filing of a post-
effective amendment to the Registration Statement or any other required document
relating to such underwritten offering, if the Chief Executive Officer of the
Company certifies (based upon a resolution of the Board of Directors or the
Executive Committee of the Board of Directors) to such Holders that the Company
intends to file, within 30 days after receipt of the Notice (the "Notification
Date"), a registration statement (the "Company Registration Statement") with the
Commission relating to an underwritten offering of shares of Common Stock to be
sold by the Company; PROVIDED, that (i) if the Company does not file the Company
Registration Statement on or prior to the 30th day following the Notification
Date, the Company shall promptly comply with the first three sentences of this
paragraph (6), (ii) if the Company Registration Statement includes any
securities of the Company owned by any of the securityholders of the Company,
the Company will include the Registered Securities owned by electing Holders in
the Company Registration Statement as part of its underwritten offering, (iii)
if the Company has elected to postpone the underwritten offering of the
Registered Securities in the manner set forth above, the Holders giving the
Notice may, at any time until 10 days after they receive notification from the
Company that the Company intends to proceed with the steps required in the first
three sentences of this paragraph (6), by notice in writing, withdraw such
request and therefore preserve the right provided in this paragraph (6) for such
Holders to request in the future an underwritten offering of the Registered
Securities, and (iv) the Registration Period shall be extended by an additional
ninety (90) days. Subject to the foregoing, the Holders shall collectively only
be entitled to request one underwritten offering pursuant to this paragraph (6),
and any Holder who does not request inclusion in such underwritten offering
shall be deemed to have waived his right to request such underwritten offering.
A requested underwritten offering will not count as the permitted underwritten
offering until the registration statement (or post effective amendment thereto)
covering it has become effective, so long as such registration statement has not
become effective due solely to the activities or decisions of any of the
Holders. The out-of-pocket expenses of the Company in connection with the
preparation and filing of the Company Registration Statement, as described in
this paragraph (6), shall be borne by the Holders in proportion to the number of
shares of Common Stock included therein; PROVIDED, HOWEVER, that if such
offering is not exclusively a secondary offering of the Company's securities,
such expenses shall be borne by the Company.
<PAGE>
(7) Notify the Holders, at any time when a prospectus relating to
Registered Securities covered by the Registration Statement is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
The Company shall promptly amend or supplement the Registration Statement to
correct any such untrue statement or omission, and provide the Holders with an
amended or supplemented prospectus with respect to the Registered Securities
that corrects such untrue statement or omission.
(8) Notify the Holders of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or any
registration statement covering securities of the Company or the initiation of
any proceedings for that purpose or of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registered Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose. The Company will use its best efforts to prevent
the issuance of any stop order and, if a stop order is issued, to obtain the
lifting thereof at the earliest possible time.
(9) Provide the Holders and a single firm of counsel designated as
Holders' counsel by the holders of a majority in interest of the shares of
Common Stock constituting the Registered Securities (as well as such other legal
and financial advisers as the Holders shall require) with the Registration
Statement and all amendments and supplements thereto promptly after the filing
of such materials with the Commission.
<PAGE>
(10) Make generally available to its security holders as soon as
practicable, but not later than 90 days after the close of the period covered
thereby, an earnings statement (in form complying with the provisions of Rule
158 under the Securities Act) covering a twelve-month period beginning not later
than the first day of the Company's fiscal quarter next following the effective
date of the Registration Statement.
(11) At the request of the Holders, furnish to the underwriters from
time to time of the Registered Securities on such date or dates that Registered
Securities are delivered to underwriters for sale (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such sale, in
form and substance as is customarily given to underwriters in an underwritten
public offering and reasonably satisfactory to the Holders delivering such
Registered Securities for sale and the underwriters, addressed to such Holders
and the underwriters and (ii) "cold comfort" letters, dated the date of the
pricing of such sale of Registered Securities and such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering and reasonably satisfactory to
the Holders delivering such Registered Securities for sale and the underwriters,
addressed to such Holders and the underwriters.
(12) Make available for inspection by the Holders, any underwriters
participating in the offering pursuant to the registration or by any attorney,
accountant or other agent retained by the Holders or any such underwriters
(collectively, the "Inspectors") all financial and other records, pertinent
corporate documents and properties of the Company (collectively, the "Records")
and such opportunities to discuss the business of the Company with its officers
and the independent public accountants who have certified its most recent annual
financial statements as shall be reasonably necessary to enable each Inspector
to exercise its due diligence responsibility, and cause the officers, directors
and employees of the Company to supply all information reasonably requested by
any such Inspector in connection with the registration. Records which the
Company determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a material
misstatement or omission in the Registration Statement, (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or a governmental body, (iii) the disclosure of such
Records is required by any governmental regulatory body with jurisdiction over
such Inspector or (iv) the information in such Records has been made generally
available to the public. Each seller of Registered Securities agrees that it
will, upon learning that disclosure of such Records is sought in a court of
competent jurisdiction or by any governmental body, give notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of the Records deemed confidential.
(13) Use its best efforts to cause the Registered Securities to be
listed on all securities exchanges and/or included in the automated quotation
system of the Nasdaq Stock Market with respect to which the Common Stock may
then be so listed or quoted.
(14) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Holders of the Registered Securities pursuant to
the Registration Statement.
(15) Pay all expenses in connection with the filing of the
Registration Statement. The Company's expenses shall include, without
limitation, expenses for the registration, filing or qualification of the
Registered Securities and all registration, listing, filing and qualification
<PAGE>
fees, printers fees, accounting fees (including the expenses of any "cold
comfort" letters) and the fees and disbursements of counsel for the Company.
(16) To the fullest extent permitted by law, the Company will
indemnify each Holder, and each underwriter, of Registered Securities being sold
by any such Holder or underwriter pursuant to this paragraph (and any person who
controls such Holder or underwriter within the meaning of Section 15 of the
Securities Act) against all claims, losses, damages, liabilities and expenses
under the Securities Act, the Exchange Act, or other Federal or state statutory
laws or regulations, at common law or otherwise, insofar as such losses, claims,
damages, liabilities and expenses (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of material
fact contained in any registration statement filed pursuant to this paragraph or
in any amendment thereof, or in any preliminary prospectus or prospectus
relating thereto, or in any amendment thereof or supplement thereto or any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that the Company shall not be liable to any such Holder or underwriter in
respect of any claims, losses, damages, liabilities or expenses resulting from
any untrue statement or omission or alleged omission made in reliance upon and
in conformity with written information furnished to the Company by such Holder
or underwriter specifically for use in connection with such registration
statement and prospectus and each such Holder and underwriter will indemnify, to
the fullest extent permitted by law, the Company, each person, if any, who
controls the Company within the meaning of said Section 15 of the Securities
Act, each director of the Company and each officer of the Company who signs the
registration statement against claims, losses, damages, liabilities and expenses
which they may incur by reason of any such untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by such Holder or
underwriter, as the case may be, specifically for use in connection with such
registration statement and prospectus.
(b) For purposes of this Section D, the term "Registered Securities"
means (i) the Shares, (ii) the shares of Common Stock issuable upon exercise of
(a) the Warrants, (b) any Additional Warrants, and (c) any warrants issuable to
the Placement Agent in connection with the Offering as described in the
Memorandum, and (iii) any Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any convertible security, warrant, right or
other security which is issued as) a dividend or other distribution with respect
to the shares of Common Stock referred to in clauses (i) and (ii) above;
PROVIDED, HOWEVER, that the term Registered Securities shall exclude shares of
Common Stock sold by Holders in the over-the-counter market prior to the request
for the underwritten offering.
(c) It shall be a condition precedent to the obligations of the
Company under this Section D to take any action pursuant to this Agreement with
respect to each Holder that such Holder shall furnish to the Company such
information regarding itself, the Registered Securities held by it and the
intended method of disposition of such securities as shall be reasonably
required to effect the registration of the Registered Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.
(d) With a view to making available to Purchasers the benefits of
Rule 144 ("Rule 144") under the Securities Act and any other rule or regulation
of the Commission that may at any time permit Holders to sell securities of the
Company to the public without registration, the Company agrees to use its best
efforts to:
<PAGE>
(1) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times after 90 days after the
effective date of the Registration Statement;
(2) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(3) furnish to each Holder, so long as such Holder owns any
Registered Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 (at any
time after 90 days after the effective date of the Registration Statement), (ii)
a copy of the most recent annual or quarterly report of the Company and such
other reports and documents so filed by the Company, and (iii) such other
publicly available information as may be reasonably requested in availing the
Holders of any rule or regulation of the Commission which permits the selling of
any such securities without registration.
(e) Rights under this Section D may be assigned by each Holder to
transferees or assignees of such; PROVIDED, HOWEVER, that the Company is, within
a reasonable time after such transfer or assignment, furnished with written
notice of the name and address of such transferee or assignee and the Registered
Securities with respect to which such registration rights are being assigned;
PROVIDED, HOWEVER, that such assignment shall be effective only if, immediately
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act.
The term "Holders" as used in this Section D includes permitted assignees of
rights under this Agreement in accordance with this Section D.
E. GRANT OF POWER OF ATTORNEY.
(1) The undersigned understands that if the Company does not meet certain
of its obligations set forth in paragraph D above, each of the subscribers whose
Subscription is accepted intends to enter into the Additional Warrant Agreement
referred to in paragraph D above pursuant to which the Additional Warrants will
be issued to such subscribers. In order to facilitate the execution of the
Additional Warrant Agreement and the issuance of the Additional Warrants, the
undersigned grants the following power of attorney to the Placement Agent for
the limited purposes set forth below.
(2) The undersigned hereby irrevocably constitutes and appoints any
officer of the Placement Agent (the "Attorney") the true and lawful agent and
attorney-in-fact of the undersigned, with full power and authority, in the
undersigned's name, place and stead, to execute and deliver on behalf of the
undersigned at any time on or prior to the Closing Date, the Additional Warrant
Agreement or any amendments or supplements thereto or any instrument amending
the same, the execution and delivery by the Attorney of such Additional Warrant
Agreement, amendments or supplements being conclusive evidence that such
execution and delivery were authorized hereby.
(3) It is expressly understood and intended by the undersigned that the
power of attorney granted in paragraph E(2) above (the "Power of Attorney") is
coupled with an interest, is irrevocable and may be delegated by said Attorney.
The Power of Attorney shall survive the death or incapacity of the undersigned
or, if the undersigned is a partnership, corporation or trust, the dissolution,
liquidation or termination thereof, or the assignment of the undersigned's
<PAGE>
Shares, Warrants or Additional Warrants or any part thereof. This Power of
Attorney shall terminate upon the earlier to occur of (i) the rejection of the
undersigned's Subscription by the Company or the Placement Agent and (ii) the
day immediately following the Closing Date.
F. MISCELLANEOUS.
(1) Capitalized terms used in this Subscription Agreement, if not
otherwise defined herein, shall have the respective meanings attributed to such
terms in the Memorandum. All pronouns and any variations thereof used herein
shall be deemed to refer to the masculine, feminine, impersonal, singular or
plural, as the identity of the person or persons may require.
(2) Except as set forth in paragraph A(4) herein, neither this
Subscription Agreement nor any provision hereof shall be waived, modified,
changed, discharged, terminated, revoked or canceled, except by an instrument in
writing signed by the party effecting the same against whom any waiver,
modification, change, discharge, termination, revocation or cancellation is
sought.
(3) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed: (i) if to the
Company, to Royce Laboratories, Inc., 5350 N.W. 165th Street, Miami, Florida
33014, Attention: President, with a copy to the Placement Agent at the address
contained on page iii of the Subscription Instructions or (ii) if to the
undersigned, at the address for correspondence set for in the Questionnaire, or
at such other address as may have been specified by written notice given in
accordance with this paragraph F(3).
(4) Failure of the Company to exercise any right or remedy under this
Subscription Agreement or any other agreement between the Company and the
undersigned, or otherwise, or delay by the Company in exercising such right or
remedy, will not operate as a waiver thereof. No waiver by the Company will be
effective unless and until it is in writing and signed by the Company.
(5) This Subscription Agreement shall be enforced, governed and construed
in all respects in accordance with the laws of the State of New York, as such
laws are applied by New York courts to agreements entered into and to be
performed in New York by and between residents of New York, and shall be binding
upon the undersigned, the undersigned's heirs, estate, legal representatives,
successors and assigns and shall inure to the benefit of the Company, the
Placement Agent and any Selected Dealer, and their respective successors and
assigns. If any provision of this Subscription Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed to be modified to conform with such statute or rule of law. Any
provision hereof that may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision hereof.
(6) This Subscription Agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof and may be amended
only by a writing executed by both parties hereto.
<PAGE>
G. EXECUTION OF AGREEMENT BY POWER OF ATTORNEY.
THE UNDERSIGNED ACKNOWLEDGES THAT THE UNDERSIGNED HAS SIGNED THIS
SUBSCRIPTION AGREEMENT ON THE UNDERSIGNED'S OWN BEHALF, AND NOT BY POWER OF
ATTORNEY, UNLESS SUCH POWER OF ATTORNEY EXPRESSLY PROVIDES FOR THE FURTHER
DELEGATION OF SUCH POWER OF ATTORNEY BY THE HOLDER THEREOF AND, IN SUCH EVENT,
THE UNDERSIGNED REPRESENTS THAT ATTACHED HERETO IS A TRUE AND COMPLETE COPY OF
SUCH POWER OF ATTORNEY.
H. SIGNATURE.
The signature of this Subscription Agreement is contained as part of the
applicable Subscription Package, entitled "Signature Page."
ROYCE LABORATORIES, INC.
AND
GRUNTAL & CO., INCORPORATED
-----------------
WARRANT AGREEMENT
Dated as of July 21, 1995
<PAGE>
WARRANT AGREEMENT, dated as of July 21, 1995, between ROYCE
LABORATORIES, INC., a Florida corporation (the "Company") and GRUNTAL & CO.,
INCORPORATED (the "Placement Agent").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Placement Agent
warrants ("Warrants") to purchase up to 83,333 shares of Common Stock (as
defined in Section 7.3 hereof) pursuant to Section 4(b) of the Sales Agency
Agreement (defined below);
WHEREAS, pursuant to the sales agency agreement (the "Sales Agency
Agreement"), dated as of July 6, 1995, between the Placement Agent and the
Company, the Placement Agent has agreed to act as agent in connection with a
private offering by the Company of up to 833,333 units (the "Units"), each Unit
consisting of one share of common stock, par value $.005 per share (the "Common
Stock"), of the Company and one twelve-month warrant to purchase one share of
Common Stock at an exercise price of $6.50 per share; and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as defined in the Sales Agency Agreement) by the
Company to the Placement Agent in consideration for, and as part of the
Placement Agent's compensation in connection with, the performance of the
Placement Agent pursuant to the Sales Agency Agreement.
NOW, THEREFORE, in consideration of the premises, the payment by the
Placement Agent to the Company of an amount equal to $.005 multiplied by the
number of shares of Common Stock for which the Warrants are exercisable, the
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. GRANT. The Placement Agent is hereby granted the right
to purchase, at any time from the date hereof until 5:30 p.m., New York time, on
July 21, 1998 (the "Exercise Period"), up to an aggregate of 83,333 shares of
Common Stock, such number of shares to be determined in accordance with the
terms of Section 4(b) of the Sales Agency Agreement (the "Shares") at an initial
exercise price (subject to adjustment as provided in Section 7 hereof) of $6.00
per share of Common Stock, subject to the terms and conditions of this
Agreement.
Section 2. WARRANT CERTIFICATES. The warrant certificates (the
"Warrant Certificates") delivered and to be delivered pursuant to this Agreement
shall be in the form set forth in Exhibit A, attached hereto and made a part
hereof, with such appropriate insertions, omissions, substitutions and other
variations as required or permitted by this Agreement.
<PAGE>
Section 3. EXERCISE OF WARRANT.
3.1 METHOD OF EXERCISE. The Warrants initially are exercisable at
an aggregate initial exercise price per share of Common Stock set forth in
Section 5 hereof (subject to adjustment as provided in Section 7 hereof) payable
by certified or official bank check in New York Clearing House funds. Upon
surrender of a Warrant Certificate with the annexed Form of Election to Purchase
duly executed, together with payment of the Exercise Price (as hereinafter
defined) for the shares of Common Stock purchased at the Company's principal
offices in Florida (presently located at 5350 N.W. 165th Street, Miami, Florida
33014), the registered holder of a Warrant Certificate ("Holder" or "Holders")
shall be entitled to receive a certificate or certificates for the shares of
Common Stock so purchased. The purchase rights represented by each Warrant
Certificate are exercisable at the option of the Holder thereof, in whole or in
part (but not as to fractional shares of the Common Stock underlying the
Warrants). In the case of the purchase of less than all the shares of Common
Stock purchasable under any Warrant Certificate, the Company shall cancel said
Warrant Certificate upon the surrender thereof and shall execute and deliver a
new Warrant Certificate of like tenor for the balance of the shares of Common
Stock purchasable thereunder.
3.2 EXERCISE BY SURRENDER OF WARRANTS. In addition to the method of
payment set forth in Section 3.1 and in lieu of any cash payment required
thereunder, the Holder(s) of the Warrants shall have the right at any time and
from time to time to exercise the Warrants in whole or in part by surrendering
the Warrant Certificate in the manner specified in Section 3.1 in exchange for
the number of shares of Common Stock equal to (x) the number of shares as to
which the Warrants are being exercised MULTIPLIED BY (y) a fraction, the
numerator of which is the Market Price (as defined below) of the Common Stock
less the Exercise Price and the denominator of which is such Market Price.
Solely for the purposes of this paragraph, Market Price shall be calculated
either (i) on the date which the form of election attached hereto is deemed to
have been sent to the Company pursuant to Section 12 hereof ("Notice Date") or
(ii) the then current market price (defined in Section 7.6 hereof) preceding the
Notice Date, whichever of (i) or (ii) is greater.
Section 4. ISSUANCE OF CERTIFICATES. Upon the exercise of the
Warrants, the issuance of certificates for shares of Common Stock or other
securities, properties or rights underlying such Warrants, shall be made
forthwith (and in any event within five (5) business days thereafter) without
charge to the Holder thereof including, without limitation, any tax which may be
payable in respect of the issuance thereof, and such certificates shall (subject
to the provisions of Section 6 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof; PROVIDED, HOWEVER, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the persons or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
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The Warrant Certificates and the certificates representing the Shares
(and/or other securities, property or rights issuable upon the exercise of the
Warrants) shall be executed on behalf of the Company by the manual or facsimile
signature of the then present Chairman or Vice Chairman of the Board of
Directors or President or Vice President of the Company under its corporate seal
reproduced thereon, attested to by the manual or facsimile signature of the then
present Secretary or Assistant Secretary of the Company. Warrant Certificates
shall be dated the date of execution by the Company upon initial issuance,
division, exchange, substitution or transfer.
Section 5. EXERCISE PRICE.
5.1 INITIAL AND ADJUSTED EXERCISE PRICE. Except as otherwise
provided in Section 7 hereof, the exercise price of each Warrant shall be $6.00
per share of Common Stock. The adjusted exercise price shall be the price which
shall result from time to time from any and all adjustments of the initial
exercise price in accordance with the provisions of Section 7 hereof.
5.2 EXERCISE PRICE. The term "Exercise Price" as used herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context.
Section 6. REGISTRATION RIGHTS.
6.1 SECURITIES ACT OF 1933 LEGEND. The Warrants, the Shares and any
of the other securities issuable upon exercise of the Warrants have not been
registered under the Securities Act of 1933, as amended (the "Act"). Upon
exercise of the Warrants, in part or in whole, the certificates representing the
Shares underlying the Warrants and any of the other securities issuable upon
exercise of the Warrants (collectively, the "Warrant Shares") shall bear the
following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE OR SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY
TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
6.2 PIGGYBACK REGISTRATION. If, at any time during the period
commencing on the date hereof and ending on July 21, 2000, the Company proposes
to register any of its securities under the Act (other than in connection with a
merger, pursuant to Form S-8 or a successor form, or pursuant to a post
effective amendment to a registration statement filed by the
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Company prior to the date hereof), it will give written notice by delivery in
person, registered or certified mail (postage prepaid, return receipt
requested), telex, telecopier or overnight air courier guaranteeing next day
delivery, at least thirty (30) days prior to the filing of each such
registration statement, to the Placement Agent and to all other Holders of the
Warrants and/or the Warrant Shares (the "Registrable Securities") of its
intention to do so. If the Placement Agent or other Holders of the Warrants
and/or Warrant Shares notify the Company within twenty (20) days after receipt
of any such notice of its or their desire to include any Warrant Shares in such
proposed registration statement, the Company shall afford each of the Placement
Agent and such Holders of the Warrants and/or Warrant Shares the opportunity to
have any such Warrant Shares registered under such registration statement;
PROVIDED, HOWEVER, that if the Placement Agent and such Holders shall be the
only persons exercising such rights to have securities registered under such
registration statement, then the Company shall not be obligated to comply with
the registration request unless it receives such notice from Holders (including
the Placement Agent) of at least one thousand (1,000) Warrants and/or Warrant
Shares; PROVIDED FURTHER, HOWEVER, that the Company shall not be obligated to
comply with the registration request if, and so long as, such Warrant Shares may
be publicly sold by the Holders thereof pursuant to an effective registration
statement.
Notwithstanding the foregoing, if in the case of an underwritten offering
by the Company, the managing underwriter of such offering shall advise the
Company in writing that, in its opinion, the distribution of the Warrant Shares
requested to be included in the registration concurrently with the other
securities being registered would adversely affect the market price of such
other securities, then the offering and sale of such Warrant Shares shall be
delayed for such period, not to exceed ninety (90) days, as such managing
underwriter shall request. In the event of a delay as provided in the preceding
sentence, the Company shall file such supplements and post-effective amendments,
and take any such other steps as may be necessary, to permit the proposed
offering and sale of such Warrant Shares for a period of ninety (90) days
immediately following the end of such period of delay.
Notwithstanding the provisions of this Section 6.2, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 6.2 (irrespective of whether a written request for inclusion of any
such securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
6.3 DEMAND REGISTRATION.
(a) At any time during the period commencing on the date hereof
and ending on July 21, 1998, the Holders of the Warrants and/or Warrant Shares
representing a "Majority" (as hereinafter defined) of such securities (assuming
the exercise of all of the Warrants) shall have the right (which right is in
addition to the registration rights under Section 6.2 hereof), exercisable by
written notice to the Company, to have the Company prepare and file with the
Securities and Exchange Commission (the "Commission"), on one occasion, a
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registration statement and such other documents, including a prospectus, as may
be necessary in the opinion of both counsel for the Company and counsel for the
Placement Agent and the Holders, in order to comply with the provisions of the
Act, so as to permit a public offering and sale of their respective Warrant
Shares for six (6) consecutive months by such Holders and any other Holders of
the Warrants and/or Warrant Shares who notify the Company within twenty (20)
days after receiving notice from the Company of such request; PROVIDED, HOWEVER,
that the Company shall not be obligated to comply with the registration request
if, and so long as, such Warrant Shares may be publicly sold by the Holders
thereof pursuant to an effective registration statement.
(b) The Company covenants and agrees to give written notice of
any registration request under this Section 6.3 by any Holder or Holders to all
other registered Holders of the Warrants and the Warrant Shares within ten (10)
days from the date of the receipt of any such registration request.
(c) In addition to the registration rights under Section 6.2
and subsection (a) of this Section 6.3, at any time during the period commencing
on the date hereof and ending on July 21, 1998 the Holders of a Majority of the
Warrants and/or Warrant Shares shall have the right, exercisable by written
request to the Company, to have the Company prepare and file with the
Commission, on one occasion, a registration statement so as to permit a public
offering and sale for six (6) consecutive months by such Holders of their
Warrant Shares; PROVIDED, HOWEVER, that the provisions of Section 6.4(b) hereof
shall not apply to any such registration request and registration and all costs
incident thereto (including the reasonable costs of the Company's counsel with
respect to such registration) shall be at the expense of the Holder or Holders
making such request; PROVIDED FURTHER, HOWEVER, that the Company shall not be
obligated to comply with the registration request if, and so long as, such
Warrant Shares may be publicly sold by the Holders thereof pursuant to an
effective registration statement.
(d) No right of the Holders under this Section 6.3 shall be
deemed to have been exercised if with respect to such right:
(A) the requisite notice given by Holders pursuant to this
Section 6.3 is withdrawn prior to the date of filing of a
registration statement or if a registration statement filed by
the Company under the Securities Act pursuant to this Section
6.3 is withdrawn prior to its effective date, in either case, by
written notice to the Company from the Holders of fifty percent
(50%) or more of the Warrants and/or Warrant Shares to be included
or which are included in such registration statement stating that
such Holders have elected not to proceed with the offering
contemplated by such registration statement because a registration
statement filed by the Company pursuant to this Section 6.3, in the
reasonable opinion of counsel for such Holders or the managing
underwriter of the proposed public offering, contains an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
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therein, in light of the circumstances under which they were made,
not misleading (other than any such statement or omission relating
to such Holders and based on information supplied or failed to be
supplied by such Holders) and the Company has not, promptly after
written notice thereof, corrected such statement or omission in an
amendment filed to such registration statement pursuant to Section
6.4(m); or
(B) a registration statement pursuant to this Section 6.3
shall have become effective under the Securities Act and (i) the
underwriters shall not purchase any Warrant Shares because of a
failure of a condition contained in the underwriting agreement due
to an act of the Company relating to the offering covered by such
registration statement or (ii) less than eighty-five percent (85%)
of the Warrant Shares included therein shall have been sold as a
result of any stop order, injunction or other order or requirement
of the Commission or other governmental agency or court.
6.4 COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. In
connection with any registration under Section 6.2 or 6.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement within thirty (30) days of receipt of any demand
therefor, shall use its best efforts to have any registration statements
declared effective at the earliest possible time, and shall furnish each Holder
desiring to sell Warrant Shares such number of prospectuses as shall reasonably
be requested.
Notwithstanding the foregoing, the Company shall be entitled to
postpone, for a period of not more than sixty (60) days after receipt of a
request to effect a registration, the filing of any registration statement
otherwise required to be prepared and filed by it pursuant to Section 6.3 hereof
if, at any time it receives a request for registration, the Board of Directors
of the Company determines in its reasonable business judgment that such
registration and offering would interfere with any material financing,
acquisition, corporate reorganization or other material transaction or
development involving the Company and promptly gives the Holders demanding
registration written notice of such determination; PROVIDED that (i) upon such
postponement by the Company, the Company shall be required to file such
registration statement as soon as practicable after the Board of Directors of
the Company shall determine, in its reasonable business judgment, that such
registration and offering will not interfere with the aforesaid material
financing, acquisition, corporate reorganization or other material transaction
or development involving the Company, (ii) the Company may utilize this right
once each year; PROVIDED, HOWEVER, that the Company shall not utilize this right
more than one time unless, prior to utilizing such right, the Company delivers
to the Holders an opinion of counsel to the Company, satisfactory to the
Holders, to the effect that such postponement by the Company is necessary to
avoid interference with a material financing, acquisition, corporate
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<PAGE>
reorganization or other material transaction or development involving the
Company, (iii) the Holders who made such written request to effect such
registration, may, at any time in writing (until 10 days after they receive
written notification from the Company that the Company intends to proceed with
the filing of a registration statement), withdraw such request for such
registration and therefore preserve the right provided in Section 6.3 hereof for
such Holders to again request such registration, and (iv) the Exercise Period
shall automatically be extended by an additional one hundred and eighty (180)
days.
(b) The Company shall pay all of its costs, fees and expenses
(but not underwriting or selling commissions or expenses of the Holder(s)), in
connection with all registration statements filed pursuant to Sections 6.2 and
6.3(a) hereof including, without limitation, the Company's legal and accounting
fees, printing expenses, blue sky fees and expenses. The Holder(s) will pay all
costs, fees and expenses in connection with any registration statement filed
pursuant to Section 6.3(c). If the Company shall fail to comply with the
provisions of Section 6.4(a), the Company shall, in addition to any other
equitable or other relief available to the Holder(s), extend the Exercise Period
by such number of days as shall equal the delay caused by the Company's failure,
and be liable for any or all damages as the Holder(s) may be entitled to as a
matter of law.
(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrant Shares included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as the Holder(s) shall reasonably designate; PROVIDED that
the Company shall not be obligated to qualify to do business in any such
jurisdiction or to file any general consent to service of process in any
jurisdiction in any action other than one arising out of the offering or the
sale of the Warrant Shares.
(d) Nothing contained in this Agreement shall be construed as
requiring a Holder to exercise its Warrants prior to the closing of an offering
pursuant to a registration statement referred to in Sections 6.2 or 6.3 hereof.
(e) In connection with any registration statement filed
pursuant to Section 6.2 hereof, the Company shall furnish to each Holder
participating in any underwritten offering and to each underwriter, a signed
counterpart, addressed to such Holder or underwriter, of (i) an opinion of
counsel to the Company, dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, an opinion
dated the date of the closing under the underwriting agreement), and (ii) a
"cold comfort" letter, dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, a letter
dated the date of the closing under the underwriting agreement), signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such registration statement, in each case
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
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<PAGE>
counsel and in accountants' letters delivered to underwriters in underwritten
public offerings of securities.
(f) The Company shall as soon as practicable after the
effective date of the registration statement, and in any event within fifteen
(15) months thereafter, make "generally available to its security holders"
(within the meaning of Rule 158 under the Act) an earnings statement (which need
not be audited) complying with Section 11(a) of the Act and covering a period of
at least twelve (12) consecutive months beginning after the effective date of
the registration statement.
(g) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below, and to the managing underwriters, copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement and permit each Holder and underwriter to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the NASD. Such
investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable times
and as often as any such Holder or underwriter shall reasonably request.
(h) The Company will indemnify, and, if such indemnity is
unavailable, will agree to just and equitable contribution to, the Holders of
Warrant Shares which are included in each registration statement referred to in
Sections 6.2 and 6.3 hereof, and the underwriters of such Warrant Shares,
substantially to the same extent as the Company has indemnified, and agreed to
just and equitable contribution to, the Underwriters of its public offering of
Common Stock pursuant to the Underwriting Agreement. Each selling Holder of
Warrant Shares, severally and not jointly, will indemnify and hold harmless the
Company, its directors, its officers who shall have signed any such registration
statement and each person, if any, who controls the Company within the meaning
of Section 15 of the Act to the same extent as the foregoing indemnity from the
Company, but in each case to the extent, and only to the extent, that any
statement in or omission from or alleged omission from such registration
statement, any final prospectus, or any amendment or supplement thereto was made
in reliance upon information furnished in writing to the Company by such selling
Holder specifically for use in connection with the preparation of such
registration statement, any final prospectus or any such amendment or supplement
thereto; PROVIDED, HOWEVER, that the obligation of any Holder of Warrant Shares
to indemnify the Company under the provisions of this paragraph (h) shall be
limited to the product of the number of Warrant Shares being sold by the selling
Holder and the market price of the Common Stock on the date of the sale to the
public of these Warrant Shares.
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(i) For purposes of this Agreement, the term "Majority," in
reference to the Holders of Warrants or Warrant Shares, shall mean in excess of
fifty percent (50%) of the then outstanding Warrants or Warrant Shares that (i)
are not held by the Company, an officer, creditor, employee or agent thereof or
any of their respective affiliates, members of their family, persons acting as
nominees or in conjunction therewith or (ii) have not been resold to the public
pursuant to a registration statement filed with the Commission under the Act.
(j) The Company shall promptly notify each Holder of Warrants
and/or Warrant Shares covered by such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the Act, upon the
Company's discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and at the request of any such Holder promptly prepare and furnish
to such Holder and each underwriter, if any, a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made.
(k) The Company shall enter into an underwriting agreement with
the managing underwriters of an underwritten offering covered by Section 6.2
hereof. Such agreement shall be reasonably satisfactory in form and substance to
the Company, each Holder and such managing underwriters, and shall contain such
representations, warranties and covenants by the Company and such other terms as
are customarily contained in agreements of that type used by the managing
underwriter. The Holders shall be parties to any underwriting agreement
relating to an underwritten sale of their Warrant Shares and may, at their
option, require that any or all the representations, warranties and covenants of
the Company to or for the benefit of such underwriters shall also be made to and
for the benefit of such Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holders and their intended
methods of distribution.
Section 7. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SHARES.
7.1 SUBDIVISION AND COMBINATION. In case the Company shall at any
time (i) subdivide the outstanding shares of Common Stock into a larger number
of shares, (ii) combine the outstanding shares of Common Stock into a smaller
number of shares, (iii) declare a dividend on the outstanding shares of Common
Stock payable in shares of Common Stock, or (iv) issue by reclassification of
its Common Stock any shares of its capital stock, the Exercise Price in effect
immediately after the record date for such dividend or distribution or the
effective
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date of such subdivision, combination or reclassification shall be adjusted so
that it shall equal the price determined by multiplying the Exercise Price in
effect immediately prior thereto by a fraction, of which the numerator shall be
the number of shares of Common Stock outstanding immediately before such
dividend, distribution, subdivision, combination or reclassification, and of
which the denominator shall be the number of shares of Common Stock outstanding
immediately after such dividend, distribution, subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event
specified above shall occur.
7.2 ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 7, the number of
Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full share by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares issuable
upon exercise of the Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
7.3 DEFINITION OF COMMON STOCK. For the purpose of this Agreement,
the term "Common Stock" shall mean (i) the class of stock designated as Common
Stock in the Articles of Incorporation of the Company as may be amended as of
the date hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value. In the event that the Company shall after the date hereof issue Common
Stock with greater or superior voting rights than the shares of Common Stock
outstanding as of the date hereof, the Holder, at its option, may receive upon
exercise of any Warrant either shares of Common Stock or a like number of such
securities with greater or superior voting rights.
7.4 MERGER OR CONSOLIDATION. (a) In case the Company after the
date hereof (i) shall consolidate with or merge into any other person and shall
not be the continuing or surviving corporation of such consolidation or merger,
or (ii) shall permit any other person to consolidate with or merge into the
Company and the Company shall be the continuing or surviving person but, in
connection with such consolidation or merger, the Common Stock shall be changed
into or exchanged for stock or other securities of any other person or cash or
any other property, or (iii) shall transfer all or substantially all of its
properties or assets to any other person, or (iv) shall effect a capital
reorganization or reclassification of the Common Stock (other than a capital
reorganization or reclassification resulting in the issue of additional shares
of Common Stock for which adjustment in the Exercise Price is provided in this
Section 7), then, and in the case of each such transaction, proper provision
shall be made so that, upon the basis and the terms and in the manner provided
in this Agreement and the Warrants, the Holders of the Warrants, upon the
exercise thereof at any time after the consummation of such transaction, shall
be entitled to receive (at the aggregate Exercise Price in effect at the time of
such consummation for all Common Stock issuable upon such exercise immediately
prior to such consummation), in lieu of the Common Stock or other securities
issuable upon such exercise prior to such consummation, the highest amount of
securities, cash or other property to which
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such Holders would actually have been entitled as shareholders upon such
consummation if such Holders had exercised the rights represented by the
Warrants immediately prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments provided for
in this Section 7.
7.5 ASSUMPTION OF OBLIGATIONS. Notwithstanding anything contained
in the Warrants to the contrary, the Company will not effect any of the
transactions described in clauses (i) through (iv) of Section 7.4 unless, prior
to the consummation thereof, each person (other than the Company) that may be
required to deliver any stock, securities, cash or property upon the exercise of
the Warrants as provided herein shall assume, by written instrument delivered
to, and reasonably satisfactory to, the Holders of the Warrants, (a) the
obligations of the Company under this Agreement and the Warrants (and if the
Company shall survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Agreement and the Warrants) and (b) the
obligation to deliver to such Holders such shares of stock, securities, cash or
property as, in accordance with the foregoing provisions of this Section 7, such
Holders may be entitled to receive, and such person shall have similarly
delivered to such Holders an opinion of counsel for such person, which counsel
shall be reasonably satisfactory to such Holders, stating that this Agreement
and the Warrants shall thereafter continue in full force and effect and the
terms hereof (including, without limitation, all of the provisions of this
Section 7) shall be applicable to the stock, securities, cash or property which
such person may be required to deliver upon any exercise of the Warrants or the
exercise of any rights pursuant hereto.
7.6 DIVIDENDS AND OTHER DISTRIBUTIONS. If, at any time or from time
to time after the date of this Warrant, the Company shall issue or distribute to
the holders of shares of Common Stock evidences of its indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or distribution
payable in shares of Common Stock, referred to in Section 7.1, and also
excluding cash dividends or cash distributions paid out of net profits legally
available therefor if the full amount thereof, together with the value of other
dividends and distributions made substantially concurrently therewith or
pursuant to a plan which includes payment thereof, is equivalent to not more
than five percent (5%) of the Company's net worth) (any such non-excluded event
being herein called a "Special Dividend"), the Exercise Price shall be adjusted
by multiplying the Exercise Price then in effect by a fraction, the numerator of
which shall be the then current market price of the Common Stock (defined as the
average for the thirty consecutive business days immediately prior to the record
date (or, if such calculation is being made pursuant to Section 3.2, the Notice
Date) of the daily closing price of the Common Stock as reported by the national
securities exchange upon which the Common Stock is then listed or if not listed
on any such exchange, the average of the closing prices as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") Stock Market's National Market, or if not then listed on the NASDAQ
National Market, the average of the highest reported bid and lowest reported
asked prices as reported by the NASDAQ, or if not then publicly traded, as the
fair market price as determined by the Company's Board of
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Directors) less the fair market value (as determined by the Company's Board of
Directors) of the evidences of indebtedness, cash, securities or property, or
other assets issued or distributed in such Special Dividend applicable to one
share of Common Stock and the denominator of which shall be such then current
market price per share of Common Stock. An adjustment made pursuant to this
Section 7.6 shall become effective immediately after the record date of any such
Special Dividend.
7.7 OTHER DILUTIVE EVENTS. In case any event shall occur as to
which the other provisions of this Section 7 are similar to, but not strictly
applicable but as to which the failure to make any adjustment would not fairly
protect the purchase rights represented by this Agreement and the Warrants in
accordance with the essential intent and principles hereof then, in each such
case, the Holders of Warrants representing a Majority may appoint a firm of
independent public accountants of recognized national standing reasonably
acceptable to the Company, which shall give their opinion as to the adjustment,
if any, on a basis consistent with the essential intent and principles
established herein, necessary to preserve the purchase rights represented by
this Agreement and the Warrants. Upon receipt of such opinion (the "Holders'
Opinion"), if the Company agrees with the Holders' Opinion, it will promptly
mail a copy thereof to the Holders and shall make the adjustments described
therein. If the Company does not agree with the Holders' Opinion, the Company
shall cause the Company's independent auditors to review the Holders' Opinion.
If the Company notifies the Holders within thirty (30) days from the receipt of
the Holders' Opinion that based upon the opinion of the Company's independent
auditors it objects to the Holders' Opinion, then the accountants rendering the
Holders' Opinion and the Company's independent auditors shall select a third
firm of independent public accountants who will have thirty (30) days to deliver
its opinion to the Company and the Holders. The opinion of such third firm
shall be conclusive and binding on the Company and the Holders. The fees and
expenses of all of such independent public accountants shall be borne one-half
by the Company and one-half by the Holders, so long as the adjustment specified
in the Holders' Opinion exceeds five percent (5%) of the Exercise Price and/or
the number of Warrant Shares for which the Warrants are exercisable.
7.8 NOTICE OF ADJUSTMENT EVENTS. Whenever the Company contemplates
the occurrence of an event which would give rise to adjustments under this
Section 7, the Company shall mail to each Holder, at least thirty (30) days
or to the record date with resect to such event or, if no record date shall
be established, at least thirty (30) days prior to such event, a notice
specifying (i) the nature of the contemplated event, (ii) the date of which any
such record is to be taken for the purpose of such event, (iii) the date on
which such event is expected to become effective and (iv) the time, if any is to
be fixed, when the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable in connection with such event.
7.9 NOTICE OF ADJUSTMENTS. Whenever the Exercise Price or the kind
of securities or property issuable upon exercise of the Warrants, or both, shall
be adjusted pursuant to this Section 7, the Company shall make a certificate
signed by its President or a Vice
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President and by its Chief Financial Officer, Secretary or Assistant Secretary,
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method of which such adjustment was calculated
(including a description of the basis on which the Company made any
determination hereunder), and the Exercise Price and the kind of securities or
property issuable upon exercise of the Warrants after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (by first
class mail postage prepaid) to each Holder promptly after each adjustment.
7.10 PRESERVATION OF RIGHTS. The Company will not, by amendment of
its Articles of Incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Agreement or the Warrants or the rights represented
thereby, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holders of the Warrants
against dilution or other impairment.
7.11 WHEN NO ADJUSTMENT REQUIRED. No adjustment in the Exercise
Price shall be required unless such adjustment would require an increase or
decrease of at least $0.05 per share of Common Stock; PROVIDED, HOWEVER, that
any adjustments which by reason of this Section 7.11 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment;
PROVIDED FURTHER, HOWEVER, that adjustments shall be required and made in
accordance with the provisions of this Section 7 (other than this Section 7.11)
not later than such time as may be required in order to preserve the tax-free
nature of a distribution to the Holders of the Warrants. All calculations under
this Section 7 shall be made to the nearest cent or to the nearest 1/100th of a
share, as the case may be. Anything in this Section 7 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Exercise Price, in addition to those required by this Section 7, as it in its
discretion shall deem to be advisable in order that any stock dividend,
subdivision of shares or distribution of rights to purchase stock or securities
convertible or exchangeable for stock hereafter made by the Company to its
shareholders shall not be taxable.
Section 8. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each
Warrant Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holder at the principal executive office of the Company, for a
new Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Shares in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of
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the Warrants, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
Section 9. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall
not be required to issue certificates representing fractions of shares of Common
Stock upon the exercise of the Warrants, nor shall it be required to issue scrip
or pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
Section 10. RESERVATION AND LISTING OF SECURITIES. The Company
shall at all times reserve and keep available out of its authorized shares of
Common Stock, solely for the purpose of issuance upon the exercise of the
Warrants, such number of shares of Common Stock or other securities, properties
or rights as shall be issuable upon the exercise thereof. The Company covenants
and agrees that, upon exercise of the Warrants and payment of the Exercise Price
therefor, all shares of Common Stock and other securities issuable upon such
exercise shall be duly and validly issued, fully paid, nonassessable and not
subject to the preemptive rights of any shareholder. As long as the Warrants
shall be outstanding, the Company shall use its best efforts to cause all shares
of Common Stock issuable upon the exercise of the Warrants to be listed on all
securities exchanges and/or included in the automated quotation system of the
Nasdaq Stock Market (subject to official notice of issuance) with respect to
which the Common Stock issued to the public in connection herewith may then be
so listed and/or quoted.
Section 11. NOTICES TO WARRANT HOLDERS. Nothing contained in this
Agreement shall be construed as conferring upon the Holders the right to vote or
to consent or to receive notice as a shareholder in respect of any meetings of
shareholders for the election of directors or any other matter, or as having any
rights whatsoever as a shareholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of
its shares of Common Stock for the purpose of determining the
holders thereof who are entitled to receive any dividend or other
distribution payable; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the
Company or securities convertible into or exchangeable for
shares of capital stock of the Company, or any option, right or
warrant to subscribe therefor; or
(c) a voluntary or involuntary dissolution, liquidation
or winding-up of the Company (other than in connection with a
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consolidation or merger) or any capital reorganization, re-
capitalization or reclassification or a sale of all or
substantially all of its property, assets and business as an
entirety shall be proposed;
then, in any one or more of said events, the Company will mail to each Holder of
a Warrant a notice specifying (i) the date or expected date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right, and (ii)
the date or expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, sale, dissolution, liquidation or
winding-up is to take place and the time, if any such time is to be fixed, as of
which the holders of record of Common Stock shall be entitled to exchange their
shares of Common Stock for the securities or other property deliverable upon
such reorganization, reclassification, recapitalization, consolidation, merger,
sale, dissolution, liquidation or winding-up. Such notice shall be mailed at
least thirty (30) days prior to the date therein specified.
Section 12. NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly given or made at the
time delivered by hand if personally delivered; five calendar days after mailing
if sent by registered or certified mail; when answered back, if telexed; when
receipt is acknowledged, if telecopied; and the next business day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next day
delivery (except that a notice of change of address shall not be deemed to have
been given until actually received by the addressee):
(a) If to the registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in
Section 3 hereof or to such other address as the Company may
designate by notice to the Holders.
Section 13. SUPPLEMENTS AND AMENDMENTS. The Company and the
Placement Agent may from time to time supplement or amend this Agreement without
the approval of any holders of Warrant Certificates (other than the Placement
Agent) in order to cure any ambiguity, to correct or supplement any provision
contained herein which may be defective or inconsistent with any provisions
herein, or to make any other provisions in regard to matters or questions
arising hereunder which the Company and the Placement Agent may deem necessary
or desirable and which the Company and the Placement Agent deem shall not
adversely affect the interests of the Holders of Warrant Certificates.
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<PAGE>
Section 14. SUCCESSORS. All the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company, the
Holders and their respective successors and assigns hereunder.
Section 15. GOVERNING LAW; SUBMISSION TO JURISDICTION. This
Agreement and each Warrant issued hereunder shall be governed and construed in
accordance with the laws of the State of New York applicable to contracts made
and performed in the State of New York without giving effect to the principles
of conflicts of law thereof. If any action or proceeding shall be brought by
the Placement Agent or any of the Holders in order to enforce any right or
remedy under the Warrants or this Agreement, the Company hereby consents to and
submits to, the jurisdiction of the courts of the State of New York and of any
federal court sitting in the Borough of Manhattan, City of New York. The
Company agrees that process in any such action or proceeding may be served in
the manner provided by New York law for service on foreign persons, as
appropriate.
The Company, the Placement Agent and the Holders agree that the
prevailing party(ies) in any such action or proceeding shall be entitled to
recover from the other party(ies) all of its/their reasonable legal costs and
expenses relating to such action or proceeding and/or incurred in connection
with the preparation therefor.
Section 16. ENTIRE AGREEMENT; MODIFICATION. This Agreement
(including the Sales Agency Agreement to the extent portions thereof are
referred to herein, and the Subscription Agreements (as defined in the Sales
Agency Agreement) with respect to registration rights) contains the entire
understanding between the parties hereto with respect to the subject matter
hereof and may not be modified or amended except by a writing duly signed by the
party against whom enforcement of the modification or amendment is sought.
Section 17. SEVERABILITY. If any provision of this Agreement
shall be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision of this Agreement.
Section 18. CAPTIONS. The caption headings of the Sections of
this Agreement are for convenience of reference only and are not intended to be,
nor should they be construed as, part of this Agreement and shall be given no
substantive effect.
Section 19. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give any person or corporation other than the Company and
the Placement Agent and any other registered Holder(s) of the Warrant
Certificates or Warrant Shares any legal or equitable right, remedy or claim
under this Agreement; and this Agreement shall be for the sole and exclusive
benefit of the Company, the Placement Agent and any other registered Holder(s)
of the Warrant Certificates or Warrant Shares.
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<PAGE>
Section 20. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and such counterparts shall together constitute but
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
SEAL ROYCE LABORATORIES, INC.
By:_____________________________
Name:
Title:
Attest:
________________________
GRUNTAL & CO., INCORPORATED
By:_____________________________
Name:
Title:
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<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE OR SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY
TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, July 21, 1998
No. W- 83,333 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Gruntal & Co., Incorporated,
or registered assigns, is the registered holder of 83,333 Warrants to purchase
initially, at any time from the date hereof until 5:30 p.m., New York time, on
July 21, 1998 ("Expiration Date"), up to 83,333 fully paid and nonassessable
shares of common stock, $.005 par value ("Common Stock") of ROYCE LABORATORIES,
INC., a Florida corporation (the "Company"), at the initial exercise price,
subject to adjustment in certain events (the "Exercise Price"), of $6.00 per
share of Common Stock upon surrender of this Warrant Certificate and payment of
the Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the Warrant Agreement, dated as of July 21,
1995, between the Company and Gruntal & Co., Incorporated (the "Warrant
Agreement"). Payment of the Exercise Price shall be made by
A-1
<PAGE>
certified or official bank check in New York Clearing House funds payable to the
order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; PROVIDED,
HOWEVER, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair the rights of the holder
as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of July 21, 1995
ROYCE LABORATORIES, INC.
[SEAL] By:_____________________________
Name:
Title:
Attest:
___________________________
Name:
Secretary
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<PAGE>
FORM OF ELECTION TO PURCHASE
PURSUANT TO SECTION 3.1
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ________ shares of Common
Stock and herewith tenders in payment for such securities a certified or
official bank check payable in New York Clearing House funds to the order of
Royce Laboratories, Inc. in the amount of $________, all in accordance with the
terms hereof. The undersigned requests that a certificate for such securities
be registered in the name of whose address
is ___________________ and that such Certificate be delivered to
__________________ whose address is ___________________________________.
Dated:
Signature _________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
____________________________________________
(Insert Social Security or Other Identifying
Number of Holder)
____________________________________________
Signature Guarantee
FORM OF ELECTION TO PURCHASE
PURSUANT TO SECTION 3.2
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ________ shares of Common
Stock all in accordance with the terms of Section 3.2 of the Warrant Agreement,
dated as of July ___, 1995, between Royce Laboratories, Inc. and Gruntal & Co.,
Incorporated. The undersigned requests that a certificate for such securities
be registered in the name of __________________ whose address is
__________________ and that such Certificate be delivered to _____________ whose
address is _____________________________.
Dated: Signature __________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
____________________________________________
(Insert Social Security or Other Identifying
Number of Holder)
____________________________________________
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Signature Guarantee
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<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED ______________________ hereby sells, assigns and transfers
unto ________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ Attorney, to
transfer the within Warrant Certificate on the books of the within named
Company, with full power of substitution.
Dated:___________________ Signature:__________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
____________________________________________
(Insert Social Security or Other Identifying
Number of Assignee)
____________________________________________
Signature Guarantee
A-6
ROYCE LABORATORIES, INC.
SALES AGENCY AGREEMENT
July 6, 1995
Gruntal & Co., Incorporated
14 Wall Street
New York, New York 10005
Dear Sirs:
Royce Laboratories, Inc., a Florida corporation (the "Company"),
proposes to offer for sale in a private offering (the "Offering") pursuant to
Regulation D ("Regulation D") under the Securities Act of 1933, as amended (the
"Act"), a minimum of 500,000 units and a maximum of 833,333 units (the "Units"),
each Unit consisting of one share (a "Share") of common stock, par value $.005
per share (the "Common Stock"), of the Company, and one twelve-month warrant to
purchase one share of Common Stock at an exercise price of $6.50 per share
(individually, a "Warrant" and collectively, the "Warrants"). The Offering will
be made solely to "accredited investors" as defined in Regulation D. This is to
confirm our agreement concerning your acting as our exclusive placement agent
(the "Placement Agent") in connection with the Offering.
The Company has prepared and delivered to the Placement Agent copies of
a confidential private placement memorandum, dated July 6, 1995, relating to,
among other things, the Company, the Units and the terms of the Offering. Such
confidential private placement memorandum delivered to the Placement Agent,
including all exhibits thereto and all documents delivered therewith and
incorporated by reference therein, is referred to herein as the "Memorandum"
unless such confidential private placement memorandum or any such exhibits or
documents shall be supplemented or amended in accordance with this Agreement, in
which event the term "Memorandum" shall refer to such confidential private
placement memorandum and such exhibits and documents as so supplemented or
amended from and after the time of delivery to the Placement Agent of such
supplement or amendment.
1. APPOINTMENT OF PLACEMENT AGENT.
On the basis of the representations and warranties contained
herein, and subject to the terms and conditions set forth herein, the Company
hereby appoints you as its Placement Agent and grants to you the exclusive right
to offer, as its agent, the Units pursuant to the terms of this Agreement. On
the basis of such representations and warranties, and subject to such
conditions, you hereby accept such appointment and agree to use your best
efforts to secure
<PAGE>
subscriptions to purchase a minimum of 500,000 Units (the "Minimum Amount") and
a maximum of 833,333 Units (the "Maximum Amount") pursuant to the terms of this
Agreement. The agency created hereby is not terminable by the Company except
upon termination of the Offering contemplated hereby or upon expiration of the
Offering Period (as defined below) in accordance with the terms of this
Agreement.
2. TERMS OF THE OFFERING.
(a) The Minimum Amount and the Maximum Amount shall be
offered for sale to prospective investors in this Offering ("Prospective
Investors") at a purchase price of $6.00 per Unit (the "Offering Price"). The
minimum investment by a Prospective Investor shall be $60,000 (10,000 Units),
provided that the Company and the Placement Agent may reduce the minimum
investment in their sole discretion. Officers, directors and employees of the
Company, and the Placement Agent and its officers, directors and employees may
purchase Units on the same terms and conditions as other investors and such
Units shall be included in determining whether the Minimum Amount and the
Maximum Amount have been subscribed for, and all references herein to
subscriptions from Prospective Investors shall be deemed to include such Units.
(b) The Offering shall commence on the date hereof (the
"Commencement Date") and shall expire at 5:00 P.M., New York time, on July 14,
1995, unless extended by mutual agreement of the Company and the Placement Agent
until not later than August 14, 1995. Such period, as the same may be so
extended, shall hereinafter be referred to as the "Offering Period."
(c) Each Prospective Investor who desires to purchase
Units shall be required to deliver to the Placement Agent one copy of a
subscription agreement in the form annexed to the Memorandum (a "Subscription
Agreement"), including the investor questionnaire, and payment in the amount
necessary to purchase the number of Units such Prospective Investor desires to
purchase. The Placement Agent shall not have any obligation to independently
verify the accuracy or completeness of any information contained in any
Subscription Agreement or the authenticity, sufficiency or validity of any check
or other form of payment delivered by any Prospective Investor in payment for
Units.
(d) The Placement Agent shall hold all funds received
from a Prospective Investor in escrow in an account maintained by it and shall
deliver the executed copy of the Subscription Agreement received from such
Prospective Investor to the Company. The Company shall notify the Placement
Agent promptly of the acceptance or rejection of any subscription. The Company
shall have the right, in its sole discretion to reject any subscription.
(e) If subscriptions to purchase at least the Minimum
Amount are not received from Prospective Investors prior to the expiration of
the Offering Period and accepted by the Company, the Offering shall be canceled,
all funds received by the Placement Agent from
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<PAGE>
Prospective Investors shall be refunded in full, without interest (such
interest, if any, to be retained by the Placement Agent), and this Agreement and
the agency created hereby shall be terminated without any further obligation on
the part of either party, except as provided in Section 10 hereof.
(f) You may engage other persons that are members of
the National Association of Securities Dealers, Inc. ("NASD") or registered
representatives of such members to assist you in the Offering (each such person
being hereinafter referred to as a "Selected Dealer") and you may allow such
persons such part of the compensation and payment of expenses payable to you
hereunder as you shall determine. Each Selected Dealer shall be required to
agree in writing to comply with the provisions of, and to make the
representations, warranties and covenants contained in, Sections 5(b) and 6(b)
by executing the form of Selected Dealer Agreement attached hereto as Exhibit I.
On or prior to the Closing (as defined below), the Placement Agent shall deliver
a copy of each executed Selected Dealer Agreement to the Company. By executing
this Agreement, the Company hereby agrees to make, and is deemed to make, the
representations and warranties to, and covenants and agreements with, each
Selected Dealer (including an agreement to indemnify such Selected Dealer under
Section 9 hereof) who has executed the Selected Dealer Agreement as are
contained in this Agreement.
3. CLOSING.
(a) Subject to the conditions set forth in Section 8
hereof, if subscriptions to purchase at least the Minimum Amount have been
received prior to the expiration of the Offering Period and accepted by the
Company, the closing under this Agreement (the "Closing") shall be held at the
offices of Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, New York, at
10:00 A.M., New York time, on the fifth business day following the date upon
which the Placement Agent receives notice from the Company that subscriptions to
purchase at least the Minimum Amount have been so accepted or at such other
place, time, or date as the Company and you shall agree upon (the "Closing
Time"). The Company shall provide the notice required by the preceding sentence
as promptly as practicable. The date upon which the Closing is held shall
hereinafter be referred to as the "Closing Date."
Notwithstanding anything contained herein to the contrary, in
no event shall the Company accept subscriptions to purchase in excess of the
Maximum Amount.
(b) At the Closing, the Company hereby authorizes the
Placement Agent to retain from the funds deposited with the Placement Agent in
payment for Units the amounts payable to the Placement Agent pursuant to
Sections 4(a) and 7 of this Agreement. Promptly after the Closing Date, the
Company shall deliver to the purchasers of Units certificates representing the
shares of Common Stock and the Warrants to which they are entitled.
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<PAGE>
4. COMPENSATION.
(a) If subscriptions to purchase at least the Minimum
Amount are received from Prospective Investors prior to the expiration of the
Offering Period and accepted by the Company, you shall be entitled, as
compensation for your services as Placement Agent under this Agreement, to an
amount equal to 7.0% of the gross proceeds received by the Company from the sale
of Units payable by the Company on the Closing Date with respect to the Units.
(b) If subscriptions to purchase at least the Minimum
Amount have been received from Prospective Investors prior to the expiration of
the Offering Period and accepted by the Company, the Company shall issue and
sell to you or your designees warrants (the "Agent's Warrants") to purchase the
number of shares of Common Stock of the Company (the "Agent's Warrant Shares")
equal to 10% of the number of Units sold by the Company on the Closing Date,
exercisable for a period of three years from the Closing Date, at an exercise
price equal to $6.00 per share. The purchase price for the Agent's Warrants
shall equal $.005 multiplied by the number of Agent's Warrant Shares for which
such Agent's Warrants are exercisable. The Agent's Warrants shall be issued
pursuant to a warrant agreement between the Company and the Placement Agent (the
"Placement Agent Warrant Agreement") substantially in the form attached hereto
as Exhibit II.
(c) If subscriptions to purchase at least the Minimum Amount
have been received from Prospective Investors prior to the expiration of the
Offering Period and accepted by the Company, the Company shall pay to you an
amount equal to 1.5% of the gross proceeds received by the Company as a result
of the exercise of any Warrants, payable by the Company within ten (10) business
days of any such exercise.
5. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to, and agrees with, the Placement Agent and the
Selected Dealers that:
(i) The Memorandum, at all times during the
period from the date hereof to and including the Closing Date, does not, and
during such period will not, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, all in light of the circumstances
under which they were made. Each statute, regulation, legal and governmental
proceeding, contract, agreement, instrument, lease, license, or other document
described in the Memorandum has been accurately described therein in all
material respects.
(ii) No document provided by the Company to
Prospective Investors pursuant to Section 6(a)(vii) hereof, and no oral
information provided by the Company to Prospective Investors, will contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
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misleading. Contracts to which the Company or any of its subsidiaries is a party
provided by the Company to Prospective Investors shall not be deemed to contain
any untrue statement of a material fact or to omit to state any material fact if
the contract so provided is a true, correct and complete copy of such contract,
as amended or modified through the date it is so provided.
(iii) The Company has not, directly or indirectly,
solicited any offer to buy or offered to sell any shares of Common Stock or any
other securities of the Company during the twelve-month period ending on the
date hereof except for the securities as may be described in the Memorandum, and
has no present intention to solicit any offer to buy or to offer to sell any
Common Stock or any other securities of the Company other than pursuant to this
Agreement, as described in the Memorandum or as set forth on Schedule 5(a)(iii)
hereto.
(iv) The Company has made all filings required to
be made by it under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Company's reports and other documents filed with the
Securities and Exchange Commission (the "Commission") in 1994 and until the date
hereof conformed in all material respects to the requirements of the Exchange
Act and the rules and regulations of the Commission thereunder, and none of such
documents contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(v) Each of the Company and its subsidiary is
(A) a corporation duly organized, validly existing and in good standing under
the laws of Florida, with full power and authority to own or lease all of the
assets owned or leased by it and to conduct its business as described in the
Memorandum and (B) duly qualified to do business and in good standing as a
foreign corporation in all jurisdictions in which the nature of the activities
conducted by it or the character of the assets owned or leased by it makes such
qualification necessary. The Company does not own, and at the Closing Time will
not own, directly or indirectly, any shares of stock or any other securities of
any corporation or have any equity interest in any firm, partnership, joint
venture, association or other entity, other than Royce Research Group, Inc., its
sole subsidiary, and the interest in Royce Research and Development Limited
Partnership I (the "Partnership") owned by Royce Research Group, Inc., the
general partner of the Partnership. Complete and correct copies of the Articles
of Incorporation and of the By-laws of the Company and its subsidiary, and of
the Partnership Agreement of the Partnership, as in effect on the date hereof,
have been delivered to you, and no changes therein will be made on or subsequent
to the date hereof and prior to the Closing Date; provided, however, that the
Company intends to seek shareholder approval at its 1995 Annual Meeting of
Shareholders of an amendment to its Articles of Incorporation that would
increase the number of authorized shares of Common Stock from 16,666,666-2/3 to
35,000,000 shares.
(vi) Since the dates as of which information is
given in the Memorandum, other than as set forth therein, (A) there has not been
any material adverse change or any development involving a prospective material
adverse change in the general
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affairs, business, prospects, properties, management, condition (financial or
otherwise) or results of operations of the Company or its subsidiary, whether or
not arising from transactions in the ordinary course of business, (B) except in
the ordinary course of business, neither the Company nor its subsidiary has
incurred, and neither the Company nor its subsidiary will have incurred, any
material liabilities or obligations, direct or indirect, or have entered into
any material transaction, (C) the Company has not and will not have paid or
declared any dividends or other distributions on its capital stock and (D) there
has not been any change in the capital stock of the Company or any material
change in the short-term or long-term debt of the Company or its subsidiary.
(vii) Price Waterhouse LLP, whose report is
included as part of the Memorandum, are independent public accountants with
respect to the Company and its subsidiary as required by the Act and the rules
and regulations thereunder with respect to registration statements filed under
the Act.
(viii) The consolidated financial statements,
together with related notes and schedules of the Company and its subsidiary,
included as part of the Memorandum comply in all respects with the requirements
of the Act and the rules and regulations thereunder applicable to registration
statements filed under the Act and present fairly the financial position of the
Company and its subsidiary on the respective dates indicated and its statement
of operations for the respective periods covered thereby. The financial
information and statistical data set forth in the Memorandum under the captions
"Summary Financial Data" and "Selected Financial Data" are fairly stated in all
material respects in relation to the financial statements of the Company and its
subsidiary from which they have been derived. Such financial statements, and
related notes and schedules, have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis through the entire
period involved.
(ix) (a) Except as described in the
Memorandum, there is no action, suit, investigation or proceeding pending or
threatened before or by any federal or state court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign,
including, without limitation, the Commission, the Food and Drug Administration
(the "FDA"), the Drug Enforcement Administration (the "DEA") or the Department
of Justice (the "DOJ"), or arbitrator to which the Company or its subsidiary is
or may become a party or of which any property of the Company or its subsidiary
is subject or affected that (A) might affect the consummation of the
transactions contemplated under this Agreement, including the issuance or
validity of the Units, Shares and Warrants, (B) might have a material adverse
effect on the condition (financial or otherwise), sales, properties, earnings,
net worth, prospects, results of operations or businesses of the Company and its
subsidiary, taken as a whole ("Material Adverse Effect"), or any of its
principal officers, or (C) relates to a violation of the federal Food, Drug, and
Cosmetic Act (the "FDC Act"), the federal Controlled Substances Act (and each
state's equivalent of such act) (collectively, the "CSA"), or any regulations
promulgated thereunder. All pending legal or governmental proceedings to which
the Company or its subsidiary is a party or of which any of their respective
properties are subject or affected which are not described in
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the Memorandum, including ordinary routine litigation incidental to the
business, would not have a Material Adverse Effect. No labor dispute with the
employees of the Company exists or is threatened or imminent that could have a
Material Adverse Effect.
(b) The Company has not received any
notice, since its removal from the Validity Assessment Program established by
the FDA (the "Validity Assessment Program"), from the FDA, the DEA or the DOJ,
that any product ever manufactured or marketed by the Company or its subsidiary
is, or is alleged to be, an unapproved or misbranded new drug including, without
limitation, (1) an order or request from the FDA, the DEA or the DOJ or other
authorized governmental or regulatory body that the Company or its subsidiary
recall or withdraw from the market or cease to market any of its products, or
(2) a lawsuit filed by the United States against any of the Company's products
or against the Company or its subsidiary or any of their respective officers,
directors or employees alleging that any of the Company's products is an
unapproved or misbranded new drug.
(c) The Company has not been served,
since its removal from the Validity Assessment Program, with any complaint or
received any other notice of lawsuits, arbitrations, legal or administrative or
regulatory proceedings, charges, complaints or investigations by any state
regulatory agency against or pending against or relating to any permits (as
defined below). Except as disclosed in the Memorandum under the captions
"Business-Government Regulation," "Business-Validity Assessment Program" and
"Business-Legal Proceedings," since being released from the Validity Assessment
Program there have not been any drug application withdrawals, product recalls or
similar actions by the Company. All pre-clinical and clinical studies conducted
by or on behalf of the Company, as well as all manufacturing, labeling and
distribution of materials related to all drug development activities, have been
conducted in compliance with applicable FDA and DEA rules and regulations in all
material respects.
(d) The Company is not aware that any of
the drugs described in the Memorandum under the caption "Business -- Products"
are unsafe or inefficacious.
(x) (a) The Company and its subsidiary have
all approvals, licenses, franchises, authorizations and permits (collectively,
"permits") necessary under all applicable statutes, codes, rules, regulations,
orders and decrees of governments or governmental bodies (collectively, "laws")
that are material to the ownership, lease or use of their respective properties
or the conduct of their respective businesses as described in the Memorandum.
Neither the Company nor its subsidiary has received notice of any proceedings
relating to the revocation or modification of any such permits that, singly or
in the aggregate, would have a Material Adverse Effect, and each of the Company
and its subsidiary is in all material respects in compliance with such permits
and laws.
(b) All necessary new drug applications
(the "NDAs"), abbreviated new drug applications (the "ANDAs"), investigational
new drug applications (the
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"INDs"), premarket approval applications and amendments and/or supplements
thereto, as required by the FDC Act, the regulations of the FDA adopted
thereunder, and any policies issued by the FDA in connection with such INDs,
NDAs, or ANDAs, premarket approval applications and amendments and/or
supplements thereto, have been filed with the FDA for all drugs sold by the
Company, and all necessary approvals and acknowledgements have been obtained
from the FDA. The Company owns all rights to the NDAs, ANDAs, INDs and
controlled substance registrations that are necessary to the businesses of the
Company and its subsidiary as now conducted or proposed to be conducted, in each
case as described in the Memorandum.
(c) The Company has complied in all
material respects with all requirements imposed on the controlled substance
products sold or proposed for sale or testing by the Company relating to the
premarket development, production, sale and marketing thereof, pursuant to the
CSA, the implementing regulations promulgated by the DEA thereunder, and any
policies issued by DEA concerning the premarket development, production, sale
and marketing of such controlled substances, including any conditions for
approval or acknowledgements, such as issuance of all registration and licensing
applications, and/or any other requirements, such as physical security,
recordkeeping, reporting and filing requirements, that are specific to such
controlled substances.
(xi) Each of the Company and its subsidiary owns,
or is licensed to use, all patents, patent applications, inventions, trademarks,
trade names, applications for registration of trademarks, copyrights, know-how,
trade secrets, licenses and rights in any thereof ("Proprietary Rights") that
are material to the respective businesses of the Company and its subsidiary as
now conducted and as proposed to be conducted, in each case as described in the
Memorandum. The Company and its subsidiary do not have any knowledge of, and the
Company and its subsidiary have not given or received any notice of any pending
conflict with or infringement of, the rights of others with respect to any
Proprietary Rights or with respect to any license of Proprietary Rights. No
action, suit, arbitration, or legal, administrative or other proceeding, or
domestic or foreign governmental investigation is pending or, to the best of the
Company's knowledge, threatened, which involves any Proprietary Rights. Neither
the Company nor its subsidiary is subject to any judgment, order, writ,
injunction or decree of any court or any federal, state, local, foreign or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or any arbitrator, or has entered into or is a party to any
contract that restricts or impairs the use of any such Proprietary Rights in a
manner which would have a material adverse effect on the use of any of the
Proprietary Rights. No Proprietary Rights used by the Company or its subsidiary
and no services or products sold by the Company or its subsidiary conflict with
or infringe upon, to the knowledge of the Company and its subsidiary, any
proprietary rights available to any third party. Neither the Company nor its
subsidiary has received written notice of any pending conflict with or
infringement upon such third party proprietary rights. Neither the Company nor
its subsidiary has entered into any consent, indemnification, forbearance to sue
or settlement agreement with respect to Proprietary Rights other than in the
ordinary course of business. To the best
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knowledge of the Company, no claims have been asserted by any person with
respect to the validity of or the Company's or its subsidiary's ownership of or
right to use the Proprietary Rights and, to the best knowledge of the Company,
there is no reasonable basis for any such claim. The Proprietary Rights are
valid and enforceable and no registration relating thereto has lapsed, expired
or been abandoned or canceled or is the subject of cancellation or other
adversarial proceedings, that would have a Material Adverse Effect, and all
applications therefor are pending and are in good standing. The Company and its
subsidiary have complied, in all material respects, with their respective
contractual obligations relating to the protection of the Proprietary Rights
used pursuant to licenses. To the best knowledge of the Company, no person is
infringing on or violating the Proprietary Rights owned or used by the Company
or its subsidiary.
(xii) The Company has an authorized, issued and
outstanding capitalization as set forth in the Memorandum, and will have the pro
forma as adjusted capitalization set forth therein at the Closing Time; all of
the issued shares of capital stock of the Company have been duly authorized and
validly issued, are fully paid and nonassessable and conform to the descriptions
thereof contained in the Memorandum; and none of the issued shares of capital
stock of the Company has been issued in violation of any preemptive or similar
right. Except as described in the Memorandum, there are no outstanding (A)
securities or obligations of the Company convertible into or exchangeable for
any shares of capital stock of the Company, (B) warrants, rights or options to
subscribe for or purchase from the Company any such capital stock or any such
convertible or exchangeable securities or obligations or (C) obligations for the
Company to issue such shares, any such convertible or exchangeable securities or
obligations, or any such warrants, rights or obligations. All of the issued
shares of capital stock of the Company's subsidiary have been duly authorized
and validly issued, are fully paid and nonassessable, and are owned by the
Company free and clear of all liens, encumbrances, equities or claims.
(xiii) Except with respect to 16,666 shares of
Common Stock and options to purchase 24,000 shares of Common Stock owned by
Goldline Laboratories, Inc., the underwriters' warrants owned by Paradise Valley
Securities, Inc. and Chatfield Dean & Co., options (subject to a vesting
schedule) to purchase 50,000 shares of Common Stock owned by Major
Pharmaceuticals, Inc. and the number of shares of Common Stock equal to $50,000
that is payable to American Generics, Inc. and Dr. Ravi Chandran upon the
occurrence of certain conditions precedent, and as otherwise described in the
Memorandum, there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the Company to
include such securities in the securities being registered pursuant to any
registration statement filed by the Company under the Act.
(xiv) The Shares to be issued and sold to
Prospective Investors as part of the Units, as provided in the Subscription
Agreements, have been duly authorized and when
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issued and delivered against payment therefor will be validly issued, fully paid
and nonassessable and will conform to the description thereof in the Memorandum.
The Common Stock has been registered under the Exchange Act and has been
approved for quotation on the Nasdaq SmallCap Market.
(xv) The Warrants to be issued and sold to
Prospective Investors as part of the Units as provided in the Subscription
Agreements and the additional warrants (the "Additional Warrants") which may be
issued to the purchasers of the Units (under certain conditions specified in the
Subscription Agreements) (the Warrants and the Additional Warrants are
hereinafter referred to collectively as the "Warrants") have been duly
authorized and, when issued and delivered, will be validly issued, fully paid
and non-assessable and will conform to the description thereof in the
Memorandum; the Warrants are exercisable for Common Stock in accordance with the
terms of a Warrant Certificate, including Exhibit I thereto (collectively, the
"Warrant Certificate"); the shares of Common Stock issuable upon the exercise of
the Warrants have been duly authorized and reserved for issuance upon such
exercise and such shares, when issued upon such exercise in accordance with the
terms of the Warrant Certificate, will be duly authorized, validly issued, fully
paid and non-assessable; and there are no preemptive or other rights to
subscribe for or to purchase, nor any restriction upon the voting or transfer
of, any shares of the Common Stock issuable upon exercise of the Warrants
pursuant to the Company's Articles of Incorporation or By-laws or any agreement
or other outstanding instrument to which the Company is a party or is otherwise
known to the Company.
(xvi) The Agent's Warrants to be issued and sold
to the Placement Agent as provided in the Placement Agent Warrant Agreement have
been duly authorized and, when issued and delivered against payment therefor,
will be validly issued, fully paid and nonassessable and will conform to the
description thereof in the Memorandum; the Agent's Warrants are exercisable for
Common Stock in accordance with the terms of the Placement Agent Warrant
Agreement and at the price therein provided; the shares of Common Stock issuable
upon the exercise of the Agent's Warrants have been duly authorized and reserved
for issuance upon such exercise and such shares, when issued upon such exercise
in accordance with the terms of the Placement Agent Warrant Agreement, will be
duly authorized, validly issued, fully paid and nonassessable; and there are no
preemptive or other rights to subscribe for or to purchase, nor any restriction
upon the voting or transfer of, any shares of the Common Stock issuable upon
exercise of the Agent's Warrants pursuant to the Company's Articles of
Incorporation or By-laws or any agreement or other outstanding instrument to
which the Company is a party or is otherwise known to the Company.
(xvii) All offers and sales of securities of the
Company issued prior to the date hereof were at all relevant times duly
registered or exempt from the registration requirements of the Act and were duly
registered or the subject of an available exemption from the registration
requirements of the applicable state securities or "blue sky" laws.
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(xviii) Neither the Company nor its subsidiary is
(A) in violation of its respective Articles of Incorporation or By-laws, (B) in
violation of any statute, law, rule, code, administrative regulation, ordinance,
judgment, order or decree of any government, governmental instrumentality,
court, domestic or foreign, or arbitration panel or other body applicable to it
where such violation would have a Material Adverse Effect or (C) in default in
the performance or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, voting agreement,
voting trust agreement, loan agreement, bond, debenture, note or other evidence
of indebtedness, lease, sublease, license agreement, contract or other agreement
or instrument to which it is a party or by which it or any of its respective
properties are bound or affected ("Contracts"), where such defaults, singly or
in the aggregate, would have a Material Adverse Effect. To the knowledge of the
Company, no other party under any Contract is in default in any material respect
thereunder which affects the Company or its subsidiary.
(xix) The Company has all requisite power and
authority to execute, deliver and perform its obligations under this Agreement,
the Subscription Agreements, the Warrant Certificates and the Placement Agent
Warrant Agreement. Each of this Agreement, the Subscription Agreements, the
Warrant Certificates and the Placement Agent Warrant Agreement have been duly
and validly authorized, executed and delivered by the Company, and each of this
Agreement, the Subscription Agreements, the Warrant Certificates and the
Placement Agent Warrant Agreement constitutes a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with its
respective terms, except as rights to indemnity and contribution hereunder and
thereunder may be limited by the securities laws of the United States and except
as such enforceability may be limited by bankruptcy, insolvency, reorganization
or similar laws or equitable principles affecting the enforcement of creditors'
rights generally.
(xx) The issuance of the Common Stock, the
Warrants and the Agent's Warrants, and the execution, delivery and performance
of this Agreement, the Subscription Agreements, the Warrant Certificates and the
Placement Agent Warrant Agreement, and the consummation of the transactions
contemplated hereby and thereby, do not and will not conflict with or result in
a material breach or violation of any of the terms or provisions of, or
constitute a material default under, or give rise to rights of termination
under, or result in the acceleration of any obligation under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or its subsidiary pursuant to the terms of any indenture,
mortgage, deed of trust, voting agreement, voting trust agreement, loan
agreement, bond, debenture, note or other evidence of indebtedness or result in
a material breach or violation of any of the terms or provisions of, or
constitute a material default under any lease, sublease, contract or other
agreement or instrument to which the Company or its subsidiary is a party or by
which the Company or its subsidiary or any of their respective properties or
assets are bound or affected, nor will such action result in any violation of
the provisions of the Articles of Incorporation or By-laws of the Company or its
subsidiary or a material violation of any applicable statute, law, rule, code,
administrative regulation, ordinance, judgment, order or decree of any
government, governmental instrumentality or court, domestic
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or foreign, or arbitration panel or other body, having jurisdiction over the
Company or its subsidiary or any of their respective properties or obligations.
(xxi) No consent, approval, authorization, license
or order of or from, or registration, qualification, declaration or filing with,
federal, state, local, foreign or other governmental authority or any person or
court, administrative agency, or other body is required for the consummation of
the transactions contemplated in this Agreement, the Subscription Agreements,
the Warrant Certificates or the Placement Agent Warrant Agreement, except as may
have been made or obtained under any state securities or "blue sky" laws or
pursuant to Regulation D.
(xxii) The Company and its subsidiary are in
compliance in all material respects with all applicable federal, state and local
environmental laws and regulations, including, without limitation, those
applicable to emissions to the environment, waste management and waste disposal
(collectively, the "Environmental Laws"), except for any noncompliance as may be
described in the Memorandum, and to the best of the Company's knowledge, there
are no circumstances that would prevent, interfere with, or materially increase
the cost of such compliance in the future. Except as set forth in the
Memorandum, there is no claim under any Environmental Law, including common law
("Environmental Claim"), pending or, to the knowledge of the Company, threatened
against or affecting the Company or its subsidiary and, to the best of the
Company's knowledge, there are no past or present actions, activities,
circumstances, events or incidents, including, without limitation, releases of
any material into the environment, that could form the basis of any
Environmental Claim against or affecting the Company or its subsidiary.
(xxiii) Each of the Company and its subsidiary has
good and marketable title to all property owned by it, in each case free and
clear of all liens, charges, encumbrances or restrictions except as described in
the Memorandum or such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such property
by the Company. Except as described in the Memorandum, all material Contracts to
which the Company or its subsidiary is a party or by which the Company or its
subsidiary or any of their respective properties or assets are bound are valid,
subsisting and enforceable and are in full force and effect.
(xxiv) The Company (A) has paid all federal, state,
local and foreign taxes for which it is liable and has furnished all information
returns it is required to furnish pursuant to the Internal Revenue Code of 1986,
as amended, (B) has established adequate reserves for such taxes that are not
due and payable and (C) does not have any tax deficiency or claims outstanding,
proposed or assessed against it.
(xxv) The Company maintains insurance of the types
and in amounts that it deems adequate for its business in the exercise of its
reasonable business judgment, all of which are in full force and effect.
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(xxvi) There are no claims, payments, issuances,
arrangements or understandings, whether oral or written, for services in the
nature of a finder's or origination fee with respect to the sale of the Units,
Shares or Warrants.
(xxvii) Neither the Company nor to the best of the
Company's knowledge any of the Company's officers, employees, agents or any
other person acting on behalf of, at the direction of or for the benefit of the
Company has, directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to customers in the ordinary
course of business) to any customer, supplier, employee or agent of a customer
or supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which (a) might subject the Company or any other such person to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign), (b) if not given in the past, might have had a
Material Adverse Effect or (c) if not continued in the future, might result in a
Material Adverse Effect. The Company's internal accounting controls are
sufficient to cause the Company to comply with the Foreign Corrupt Practices Act
of 1977, as amended. There are no transactions between or among the Company or
its subsidiary and any of their officers, directors or shareholders or any
affiliate of any such officer, director or shareholder that are required to be
described in and are not described in the Memorandum.
(xxviii) Neither the Company nor, to the knowledge of
the Company, any of its affiliates has, directly or through any agent, sold,
offered for sale or solicited offers to buy nor will any of the foregoing
directly buy any security of the Company, as defined in the Act, that is or will
be integrated with the sale of the Units, Shares or Warrants in a manner that
would require the registration, pursuant to the Act, of the Offering.
(b) REPRESENTATIONS AND WARRANTIES OF THE PLACEMENT
AGENT AND SELECTED DEALERS. The Placement Agent, and each Selected Dealer that
the Placement Agent may from time to time appoint, by signing the Selected
Dealer Agreement, hereby represents and warrants to, and agrees with, the
Company and each other as to itself only as follows:
(i) Such Placement Agent or Selected Dealer will
not offer or sell any Units to any investor that the Placement Agent or such
Selected Dealer did not have reasonable grounds to believe and did not believe,
was an "accredited investor" and otherwise met the suitability standards
described in the Memorandum.
(ii) Such Placement Agent or Selected Dealer will
not offer or sell any Units by means of any form of general solicitation or
general advertising, including, without limitation, the following:
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(a) any advertisement, article, notice
or other communication published in any newspaper, magazine or similar medium or
broadcast over television or radio; and
(b) any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
(iii) Such Placement Agent or Selected Dealer is a
member in good standing of the NASD or is a registered representative thereof
and is licensed to offer and sell the Units, Shares and Warrants in each
jurisdiction in which the Placement Agent or such Selected Dealer has customers
to which the Units, Shares and Warrants are offered and sold.
(iv) Such Placement Agent or Selected Dealer will
only pay a commission to a person licensed to receive such commission in the
particular state in which an investor purchasing Units resides.
(v) The representations and warranties contained
in the Certificate of Selected Dealer attached to the form of Selected Dealer
Agreement are true and correct as to the Selected Dealer that executed such
Certificate and are true and correct as to the Placement Agent as if it had
executed such a certificate.
6. COVENANTS.
(a) COVENANTS OF THE COMPANY. The Company covenants to
the Placement Agent and each Selected Dealer that it will:
(i) Notify you immediately, and confirm such
notice promptly in writing, (A) when any event shall have occurred during the
period commencing on the date hereof and ending on the later of the expiration
of the Offering Period and the Closing Date, as a result of which the Memorandum
would include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (B) of the receipt of any notification with respect
to the modification, rescission, withdrawal or suspension of the qualification
or registration of the Units, Shares or Warrants or of an exemption from such
registration or qualification, in any jurisdiction. The Company will use its
best efforts to prevent the issuance of any such modification, rescission,
withdrawal or suspension and, if any such modification, rescission, withdrawal
or suspension is issued and you so request, to obtain the lifting thereof as
promptly as possible.
(ii) Not supplement or amend the Memorandum
unless you and your counsel shall have approved of such supplement or amendment
in writing. If, at any time during the period commencing on the date hereof and
ending on the later of the expiration of the Offering Period or the Closing
Date, any event shall have occurred as a result of which the Memorandum contains
any untrue statement of a material fact or omits to state any material fact
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required to be stated therein or necessary to make the statements therein not
misleading, or if, in the opinion of counsel to the Company or counsel to the
Placement Agent, it is necessary at any time to supplement or amend the
Memorandum to comply with the Act, Regulation D or any applicable securities or
"blue sky" laws, the Company will promptly prepare an appropriate supplement or
amendment (in form and substance satisfactory to you and your counsel) that will
correct such statement or omission or that will effect such compliance.
(iii) Deliver without charge to the Placement
Agent such number of copies of the Memorandum and any supplement or amendment
thereto as may reasonably be requested by the Placement Agent.
(iv) Not, directly or indirectly, solicit any
offer to buy from, or offer to sell to any person any Units, Shares or Warrants,
except through the Placement Agent.
(v) Not solicit any offer to buy or offer to
sell Units, Shares and Warrants by any form of general solicitation or
advertising, including, without limitation, any advertisement, article, notice
or other communication published in any newspaper, magazine or similar medium or
broadcast over television or radio or any seminar or meeting whose attendees
have been invited by any general solicitation or advertising.
(vi) Use its best efforts to qualify or register
the Units, Shares and Warrants for offering and sale under, or establish an
exemption from such qualification or registration under, the securities or "blue
sky" laws of such jurisdictions as you may reasonably request. The Company will
not consummate any sale of Units, Shares and Warrants in any jurisdiction or in
any manner in which such sale may not be lawfully made.
(vii) At all times during the period commencing on
the date hereof and ending on the later of the expiration of the Offering Period
and the Closing Date, provide to each Prospective Investor or his purchaser
representative, if any, on request, such information (in addition to that
contained in the Memorandum) concerning the Offering, the Company and any other
relevant matters as it possesses or can acquire without unreasonable effort or
expense and extend to each Prospective Investor or his purchaser representative,
if any, the opportunity to ask questions of, and receive answers from, the
Company concerning the terms and conditions of the Offering and the business of
the Company and to obtain any other additional information, to the extent it
possesses the same or can acquire it without unreasonable effort or expense, as
such Prospective Investor or purchaser representative may consider necessary in
making an informed investment decision or in order to verify the accuracy of the
information furnished to such Prospective Investor or purchaser representative,
as the case may be. Any additional written information provided to a Prospective
Investor by the Company will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein not
misleading. Copies of any such written information will promptly be given to the
Placement Agent.
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(viii) Before accepting any subscription to
purchase Units from, or making any sale to, any Prospective Investor, have
reasonable grounds to believe and does believe that (A) such Prospective
Investor is an "accredited investor" and meets all other suitability
requirements for investing in the Units set forth in the Memorandum, and (B) all
representations made and furnished by such Prospective Investor in the
Subscription Agreement and related documents are true and correct in all
material respects.
(ix) File five copies of a Notice of Sales of
Securities on Form D with the Commission no later than 15 days after the first
sale of the Units and file a final notice on Form D with the Commission no later
than 30 days after the last sale of Units. The Company shall file promptly such
amendments to such Notices on Form D as shall become necessary and shall also
comply with any filing requirement imposed by the laws of any state or
jurisdiction in which offers and sales are made. The Company shall furnish you
and your counsel with copies of all such filings promptly after any such filing
is made.
(x) Place the following legend on all
certificates representing the Common Stock, the Warrants, the Agent's Warrants,
and the shares of Common Stock for which the Warrants and Agent's Warrants are
exercisable:
"The securities represented hereby have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or any state securities laws and neither the
securities nor any interest therein may be offered, sold,
transferred, pledged or otherwise disposed of except pursuant
to an effective registration statement under such Act or such
laws or an exemption from registration under such Act and such
laws which, in the opinion of counsel for the holder, which
counsel and opinion are reasonably satisfactory to counsel for
this corporation, is available."
(xi) Not, directly or indirectly, engage in any
act or activity that may jeopardize the status of the Offering and sale of the
Units, Shares and Warrants as exempt transactions under the Act or under the
securities or "blue sky" laws of any jurisdiction in which the Offering may be
made. Without limiting the generality of the foregoing, and notwithstanding
anything contained herein to the contrary, the Company shall not, during the six
months following completion of the Offering, (A) directly or indirectly, engage
in any offering of securities which, if integrated with the Offering in the
manner prescribed by Rule 502(a) of Regulation D and applicable releases of the
Commission, may jeopardize the status of the Offering and sale of the Units,
Shares and Warrants as exempt transactions under Regulation D or (B) engage in
any offering of securities, without the opinion of counsel reasonably
satisfactory to the Placement Agent to the effect that such offering would not
result in integration with this Offering, or if integration would so result,
that such integration would not jeopardize the status of this Offering as an
exempt transaction under Regulation D.
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(xii) Apply the net proceeds from the sale of the
Units for the purposes set forth under the caption "Use of Proceeds" in the
Memorandum in the manner indicated thereunder.
(xiii) Not, during the period commencing on the
date hereof and ending on the later of the expiration of the Offering Period and
the Closing Date, issue any press release or other communication or hold any
press conference with respect to the Company, its financial condition, results
of operations, business, properties, assets or liabilities, or the Offering,
without your prior written consent (which shall not be unreasonably withheld).
(xiv) The Company will not, from the date hereof
until six months after the Closing Date, without your prior written consent,
offer, sell, contract to sell, grant an option relating to, or otherwise dispose
of, any securities of the Company, or file a registration statement under the
Act to register any shares of the Company's capital stock, including shares of
Common Stock, other than (1) the sale of the Units pursuant to the Subscription
Agreements, (2) the filing of a registration statement relating to the Shares
and the shares of Common Stock underlying the Warrants and the Agent's Warrants
pursuant to the Subscription Agreements and the Placement Agent Warrant
Agreement or a post-effective amendment to any of the Company's registration
statements filed prior to the date hereof, (3) pursuant to existing employment
agreements, existing stock options or options currently reserved for the future
grant or warrants outstanding on the date of the Memorandum and disclosed in the
Memorandum, and (4) the filing of a registration statement on Form S-8 covering
the options referred to in clause (3); and the Company will cause each of its
directors and officers to deliver to you an agreement satisfactory in form and
substance to you, whereby each agrees, from the date hereof until six months
after the Closing Date, not to offer, sell, contract to sell or grant an option
relating to, or otherwise dispose of any shares of Common Stock, or securities
of the Company convertible or exchangeable into Common Stock, directly or
indirectly, without your prior written consent.
(xv) The Company shall furnish to you as early as
practicable prior to each of the date hereof and the Closing Date, but not later
than two full business days prior thereto, a copy of the latest available
unaudited interim financial statements of the Company (which in no event shall
be as of a date more than 30 days prior to the date of the Memorandum) which
have been read by the Company's independent public accountants, as stated in
their letters to be furnished pursuant to Section 8(h) hereof.
(xvi) For a period of five years after the Closing
Date, furnish you, without charge, the following:
(a) within 120 days after the end of
each fiscal year, three copies of financial statements certified by independent
certified public accountants, including a balance sheet, statement of income,
and statement of cash flows of the Company and its then existing subsidiaries,
with supporting schedules, prepared in accordance with generally accepted
accounting principles, as at the end of such fiscal year and for the 12 months
then ended, which
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may be on a consolidated basis, and, within 60 days after the end of each fiscal
quarter, three copies of unaudited interim financial statements, as at the end
of such quarter and for the three months then ended;
(b) as soon as practicable after they
have been sent to shareholders of the Company or filed with the Commission,
three copies of each annual and interim financial and other report or
communication sent by the Company to its shareholders or filed with the
Commission; and
(c) as soon as practicable, two copies
of every press release in respect of the Company or its affairs which was
released by the Company.
(xvii) For a period of one year from the Closing
Date, grant to the Placement Agent a right of first refusal to act as lead
manager or placement agent with respect to any proposed future financings of
securities of the Company or any of its subsidiaries or affiliates. If the
Company or such affiliate considers making an offering of securities during such
period, it shall promptly give written notice of its intent to the Placement
Agent. Such notice shall include the material terms of the proposed offering.
The Placement Agent shall have 20 days from the date on which it receives the
Company's written notice to decide whether it wishes to act as lead manager or
placement agent with respect to the Company's proposed offering of securities.
If the Placement Agent wishes to exercise its right of first refusal hereunder,
it shall advise the Company in writing of its decision within such twenty day
period and shall use its best efforts in good faith to complete the Company's
proposed offering. In that regard, the Company and the Placement Agent shall
enter into such an underwriting or placement agreement relating to such offering
containing such terms as are customary with respect to such offerings. The
Placement Agent's failure to respond in writing to the Company's notice within
such twenty day period shall constitute a decision on the part of the Placement
Agent that it does not wish to act as lead manager or placement agent with
respect to the Company's proposed offering. If, however, the terms of such
proposed offering are subsequently modified in a material manner, the rights of
the Placement Agent under this subsection shall apply to such modified proposal
as if the original proposal had not been made. The Placement Agent's failure to
exercise its rights with respect to any particular proposed offering shall not
affect its rights relative to future proposed offerings during the term of this
right of first refusal.
(xviii) Promptly file an additional listing
application with the Nasdaq Stock Market covering the Shares and the shares of
Common Stock underlying the Warrants and the Agent's Warrants and any other
shares of Common Stock that are required to be included in such application.
(b) COVENANTS OF THE PLACEMENT AGENT AND SELECTED
DEALERS. The Placement Agent and each Selected Dealer, if any, hereby covenants
and agrees, severally, as to itself only and not jointly, as follows:
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(i) Such Placement Agent or Selected Dealer will
not accept the subscription of any person unless immediately before accepting
such subscription the Placement Agent or such Selected Dealer has reasonable
grounds to believe and does believe that (A) such person is an "accredited
investor" and otherwise meets the suitability standards described in the
Memorandum and (B) all representations made and information furnished by such
person in the Subscription Agreement and related documents are true and correct
in all material respects. Such Placement Agent or Selected Dealer agrees to
notify the Company promptly if the Placement Agent or Selected Dealer, shall, at
any time during the period after delivery of the documents furnished by such
person to the Company in connection with subscription for Units and immediately
before the sale of Units to such person, no longer reasonably believes one or
more of the foregoing matters with respect to such person.
(ii) Such Placement Agent or Selected Dealer will
solicit purchasers of Units only in the jurisdictions in which such solicitation
may, upon the advice of counsel, be made under applicable securities or "blue
sky" laws and in which the Placement Agent or Selected Dealer, as the case may
be, is qualified so to act.
(iii) Such Placement Agent or Selected Dealer will
render its services in connection with the Offering in accordance with
Regulation D.
(iv) Such Placement Agent or Selected Dealer will
only pay a commission to a person licensed to receive such commission in the
particular state in which an investor purchasing Units resides.
(v) Upon notice from the Company that the
Memorandum is to be amended or supplemented (which the Company will promptly
give upon becoming aware of any untrue statement of a material fact required to
be stated in the Memorandum or omission to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading), such Placement Agent or Selected Dealer will
immediately cease use of the Memorandum until the Placement Agent and such
Selected Dealer have received such amendment or supplement and thereafter will
make use of the Memorandum only as so amended or supplemented, and such
Placement Agent or Selected Dealer will deliver a copy of such amendment or
supplement to each Prospective Investor to whom a copy of the Memorandum had
previously been delivered (and who had not returned such copy) and whose
subscription had not been rejected.
7. PAYMENT OF EXPENSES.
(a) Whether or not the transactions contemplated by
this Agreement are consummated or this Agreement is terminated, the Company will
pay all fees, charges and expenses incident to the performance by the Company of
its obligations hereunder, including, without limitation, all fees, charges, and
expenses in connection with (i) the preparation, printing, reproduction, filing,
distribution and mailing of the Memorandum, this Agreement, the
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Subscription Agreements, the Warrant Certificates, the Placement Agent Warrant
Agreement and all other documents relating to the offering, purchase, sale and
delivery of the Units, Shares and Warrants and any supplements or amendments
thereto, including the fees and expenses of counsel to the Company and the cost
of all copies thereof, (ii) the issuance, sale, transfer and delivery of the
certificates evidencing the Shares, the Warrant Shares, the Warrants, the
Agent's Warrants and the Agent's Warrant Shares, including any transfer or other
taxes payable thereon and the fees of any Transfer Agent or Registrar, (iii) the
registration or qualification of the Units, Shares and Warrants or the securing
of an exemption therefrom under state or foreign "blue sky" or securities laws,
including, without limitation, filing fees payable in the jurisdictions in which
such registration or qualification or exemption therefrom is sought and the
costs of preparing preliminary, supplemental and final "Blue Sky Surveys"
relating to the offer and sale of the Units, Shares and Warrants and the
reasonable fees and disbursements of counsel for the Placement Agent in
connection therewith; (iv) the filing fees, if any, payable to the Commission
and the Nasdaq Stock Market; and (v) all other costs, fees, taxes and expenses
incident to the performance of its obligations hereunder that are not otherwise
specifically provided for in this Section.
(b) Whether or not the transactions contemplated by
this Agreement are consummated or this Agreement is terminated (other than due
to the Placement Agent's deliberate refusal to proceed on a timely basis,
without cause), the Company shall reimburse the Placement Agent for its
accountable out-of-pocket expenses in serving as Placement Agent under this
Agreement, and for its out-of-pocket expenses in serving as a prospective
underwriter of the Company's proposed public offering, including, without
limitation, the reasonable fees and disbursements of its counsel (not to exceed
an aggregate of $70,000, excluding the fees, charges and expenses referred to in
subsection (a)(iii) above).
8. CONDITIONS.
(i) CONDITIONS OF PLACEMENT AGENT'S OBLIGATIONS. The obligations of
the Placement Agent pursuant to this Agreement and the right of the Company to
obtain on the Closing Date the funds representing Units purchased at the Closing
shall be subject to the performance by the Company of its obligations hereunder,
and to the satisfaction of the following additional conditions:
(a) On the Closing Date, the Company shall have
accepted subscriptions for the purchase of the Minimum Amount.
(b) On or prior to the Closing Date, the Placement
Agent shall have been furnished such information, documents and certificates as
it may reasonably require for the purpose of enabling it to review the matters
referred to in this Section 8 and in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties,
covenants, agreements or conditions herein contained, or as it may otherwise
reasonably request.
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(c) The representations and warranties of the Company
contained in this Agreement shall be true and correct on the Closing Date with
the same effect as if made on the Closing Date, and all covenants and agreements
contained in this Agreement to be performed on the part of the Company and all
conditions contained in this Agreement to be fulfilled or complied with by the
Company at or prior to the Closing Date shall have been duly performed,
fulfilled or complied with and the Placement Agent shall have received a
certificate to such effect, dated the Closing Date, from the chief executive
officer and chief financial officer of the Company.
(d) At the Closing, the Company shall have executed and
delivered to the Placement Agent the Placement Agent Warrant Agreement. The
Company shall also have satisfied its obligations under Sections 4(a), 7(a) and
7(b).
(e) You shall have received originally executed copies
of the agreements referred to in Section 6(a)(xiv) from each director and
officer of the Company, and the Company shall have furnished to you evidence
that it has given its transfer agent appropriate "stop transfer" instructions in
accordance with the provisions of such agreements.
(f) At the Closing Time, you shall have received the
opinion of Broad and Cassel, counsel for the Company, dated the Closing Time and
in form and substance satisfactory to counsel to the Placement Agent to the
effect that:
(i) Each of the Company and its subsidiary is
(A) duly organized and existing as a corporation in good standing under the laws
of Florida, with full corporate power and authority to own or lease all of the
assets owned or leased by it and to conduct its business as described in the
Memorandum, and (B) duly qualified to do business and in good standing as a
foreign corporation in all jurisdictions in which the nature of the activities
conducted by it or the character of the assets owned or leased by it makes such
qualification necessary, except for such jurisdictions where the failure, either
singly or in the aggregate, to do so or be in good standing would not have a
Material Adverse Effect. To such counsel's knowledge, the Company does not own,
directly or indirectly, any shares of stock or any other securities of any
corporation, or have any equity interest in any firm, partnership, joint
venture, association or other entity, other than Royce Research Group, Inc., its
sole subsidiary, and the Partnership.
(ii) The Company has all requisite corporate
power and authority to execute, deliver and perform its obligations under this
Agreement, the Subscription Agreements, the Warrant Certificates and the
Placement Agent Warrant Agreement. This Agreement, the Subscription Agreements,
the Warrant Certificates and the Placement Agent Warrant Agreement have been
duly and validly authorized, executed and delivered by the Company, and each of
this Agreement, the Subscription Agreement, the Warrant Certificates and the
Placement Agent Warrant Agreement constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
respective terms except as rights to indemnity and contribution hereunder and
thereunder may be limited by the securities laws of the United States
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and except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws or equitable principles affecting the enforcement
of creditors' rights generally.
(iii) The issuance of the Units, Shares and the
Warrants and the execution, delivery and performance of this Agreement, the
Subscription Agreements, the Warrant Certificates and the Placement Agent
Warrant Agreement and the consummation of the transactions contemplated hereby
and thereby do not and will not conflict with or result in a material breach or
violation of any of the terms or provisions of, or constitute a material default
under, or give rise to rights of termination under, or result in the
acceleration of any obligation under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company or
its subsidiary pursuant to the terms of any indenture, mortgage, deed of trust,
voting agreement, voting trust agreement, loan agreement, bond, debenture, note
or other evidence of indebtedness known to such counsel after due inquiry or
result in a material breach or violation of any of the terms or provisions of,
or constitute a material default under any lease, sublease, contract or other
agreement or instrument known to such counsel after due inquiry to which the
Company or its subsidiary is a party or by which the Company or its subsidiary
or any of their respective properties or assets are bound or affected, nor will
such action result in any violation of the provisions of the Articles of
Incorporation or By-laws of the Company or its subsidiary or any applicable
statute, law, rule, code, administrative regulation, ordinance, judgment, order
or decree known to such counsel of any government, governmental instrumentality
or court, domestic or foreign, or arbitration panel or other body having
jurisdiction over the Company or its subsidiary or any of their respective
properties or obligations.
(iv) The Shares and Warrants to be issued and
sold pursuant to the Subscription Agreements have been duly authorized, and,
when issued and delivered against payment therefor, the Shares and Warrants will
be validly issued, fully paid and non-assessable and will conform to the
description thereof in the Memorandum. The Common Stock has been registered
under the Exchange Act and approved for quotation on the Nasdaq SmallCap Market.
An application to list additional shares with respect to the Shares and Warrant
Shares has been approved by the Nasdaq Stock Market.
(v) The Company has an authorized capitalization
as set forth in the Memorandum; all of the issued shares of capital stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable and conform to the descriptions thereof contained in the
Memorandum; and, to the knowledge of such counsel, none of the issued shares of
capital stock of the Company has been issued in violation of any preemptive or
similar right. To such counsel's knowledge and except as described in the
Memorandum, there are no outstanding (A) securities or obligations of the
Company convertible into or exchangeable for any shares of capital stock of the
Company, (B) warrants, rights or options to subscribe for or purchase from the
Company any such capital stock or any such convertible or exchangeable
securities or obligations or (C) obligations for the Company to issue such
shares, any such convertible or exchangeable securities or obligations, or any
such warrants, rights or obligations.
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All of the issued shares of capital stock of the Company's subsidiary have been
duly authorized and validly issued, are fully paid and nonassessable, and, to
such counsel's knowledge, are owned by the Company free and clear of all liens,
encumbrances, equities or claims.
(vi) To the knowledge of such counsel, all offers
and sales of securities of the Company issued prior to the date hereof and after
1990 were at all relevant times duly registered or exempt from the registration
requirements of the Act and were duly registered or the subject of an available
exemption from the registration requirements of the applicable state securities
or "blue sky" laws.
(vii) The certificates evidencing the Shares and
Warrants are in due and proper form.
(viii) The Agent's Warrants to be issued and sold
to the Placement Agent provided in the Placement Agent Warrant Agreement have
been duly authorized and, when issued and delivered against payment therefor,
will be validly issued, fully paid and nonassessable and will conform to the
description thereof in the Memorandum; the Agent's Warrants are exercisable for
Common Stock in accordance with the terms of the Placement Agent Warrant
Agreement and at the prices therein provided; the shares of Common Stock
issuable upon the exercise of the Agent's Warrants have been duly authorized and
reserved for issuance upon such exercise and such shares, when issued upon such
exercise in accordance with the terms of the Placement Agent Warrant Agreement,
will be duly authorized, validly issued, fully paid and nonassessable; and there
are no preemptive or other rights to subscribe for or to purchase, nor any
restriction upon the voting or transfer of, any shares of the Common Stock
issuable upon exercise of the Agent's Warrants pursuant to the Company's
Articles of Incorporation or By-laws or any agreement or other outstanding
instrument known to such counsel after due inquiry.
(ix) The Warrants have been duly authorized and,
when issued and delivered against payment therefor, will be validly issued,
fully paid and non-assessable and will conform to the description thereof in the
Memorandum; the Warrants are exercisable for shares of Common Stock in
accordance with the terms of the Warrants, the Warrant Certificates and at the
prices therein provided; the shares of Common Stock issuable upon the exercise
of the Warrants have been duly authorized and reserved for issuance upon such
exercise and such shares, when issued upon such exercise in accordance with the
terms of the Warrant Certificates, will be duly authorized, validly issued,
fully paid and non-assessable; and there are no preemptive or other rights to
subscribe for or to purchase, nor any restriction upon the voting or transfer
of, any shares of the Common Stock issuable upon exercise of the Warrants
pursuant to the Company's Articles of Incorporation or By-laws or any agreement
or other outstanding instrument known to such counsel after due inquiry.
(x) No consent, approval, authorization, license
or order of or from, or registration, qualification, declaration or filing with,
any federal, state, local, foreign or other
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governmental authority or any person or court, administrative agency, tribunal
or other body is required for the consummation of the transactions contemplated
herein or in the Subscription Agreements, the Warrant Certificates or the
Placement Agent Warrant Agreement, except as may have been made or obtained
under any state securities or "blue sky" laws and the filing of a Notice of
Sales of Securities on Form D pursuant to Regulation D.
(xi) To such counsel's knowledge and except as
described in the Memorandum, there is no action, suit or proceeding pending or
threatened before or by any federal or state court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign, to which
the Company or its subsidiary is or may become a party or of which any property
of the Company or its subsidiary is subject or affected that (i) might affect
the issuance or validity of the Stock or (ii) if adversely determined against
the Company, might individually or in the aggregate result in a Material Adverse
Effect.
(xii) To such counsel's knowledge, the Company and
its subsidiary have all approvals, licenses, franchises, authorizations and
permits (collectively, "permits") necessary under all applicable statutes,
codes, rules, regulations, orders and decrees of governments or governmental
bodies (collectively, "laws"), that are material to the ownership, lease or use
of their respective properties or the conduct of their respective businesses. To
such counsel's knowledge, neither the Company nor its subsidiary has received
notice of proceedings relating to the revocation or modification of any such
permits, which, singly or in the aggregate, would have a Material Adverse
Effect; and to such counsel's knowledge, the Company is in all material respects
in compliance with such permits and laws.
(xiii) Each of the statutes, regulations, legal and
governmental proceedings, contracts, agreements, instruments, leases, licenses
or other documents described in the Memorandum has been accurately described
therein in all material respects. Such counsel does not know of any statutes,
regulations, legal or governmental proceedings, agreements, instruments, leases,
licenses or other documents which are required to be described in registration
statements on Form S-1 filed with the Commission that are not so described in
the Memorandum.
(xiv) To such counsel's knowledge, neither the
Company nor its subsidiary is (A) in violation of its respective Articles of
Incorporation or By-laws, (B) in violation of any statute, law, rule, code,
administrative regulation, ordinance, judgment, order or decree of any
government, governmental instrumentality, court, domestic or foreign, or
arbitration panel or other body applicable to it where such violation would have
a Material Adverse Effect or (C) in default in the performance or observance of
any Contract where, in the case of clause (C), such defaults, singly or in the
aggregate, would have a Material Adverse Effect. To the knowledge of such
counsel, no other party under any Contract is in default in any material respect
thereunder which would have a Material Adverse Effect.
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(xv) To such counsel's knowledge and except as
described in the Memorandum and in Section 5(a)(iii) of this Agreement, there
are no contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of the
Company owned or to be owned by such person or to require the Company to include
such securities in the securities being registered pursuant to any other
registration statement filed by the Company under the Act.
(xvi) The Offering of the Units, Shares and
Warrants if conducted without any general solicitation or general advertising
and otherwise in the manner described under "Terms of the Offering" and
elsewhere in the Memorandum, constitutes a transaction exempt from the
registration requirements of the Act. In rendering the opinion set forth in the
immediately preceding sentence, such counsel may rely without investigation upon
the accuracy of the covenants, representations and warranties of the Company,
the Placement Agent and any Selected Dealers in this Agreement.
(xvii) The issuance of the Agent's Warrants to the
Placement Agent or its designees constitute transactions exempt from the
registration requirements of the Act.
(xviii) Nothing has come to such counsel's attention
to give such counsel reason to believe that any of the representations and
warranties of the Company contained in this Agreement or in any certificate or
document contemplated under this Agreement to be delivered is not true or
correct in all material respects or that any of the covenants and agreements
contained in this Agreement or in any such certificate or document to be
performed on the part of the Company or any of the conditions contained in this
Agreement or in any such certificate or document, or set forth in the Memorandum
to be fulfilled or complied with by the Company has not been or will not be duly
and timely performed, fulfilled or complied with in any material respect.
(xix) The issuance of the Additional Warrants, if
conducted in the manner described in the Memorandum, will constitute a
transaction exempt from the registration requirements of the Act. In rendering
the opinion set forth in the immediately preceding sentence, such counsel may
rely without investigation upon the accuracy of the covenants, representations
and warranties of the Company, the Placement Agent and any Selected Dealers in
this Agreement.
In addition to the matters set forth above, such counsel shall
state that in the course of the preparation of the Memorandum they participated
in conferences with officers and other representatives of the Company and
representatives of the independent public accountants for the Company, at which
conferences the contents of the Memorandum and related matters were discussed
and, although such counsel is not passing upon, and does not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained in the Memorandum on the basis of the foregoing, nothing has come to
such counsel's attention which
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leads such counsel to believe that the Memorandum, as of its date and as of the
Closing Date, included an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that such
counsel need express no belief with respect to the financial statements,
schedules and other financial data included in the Memorandum.
In rendering such opinion, such counsel may rely as to factual
matters upon certificates or written statements from officers of the Company or
upon certificates of public officials.
In rendering its opinion hereunder, counsel shall not be
required to express any opinions with respect to compliance with federal, state
and local statutes, laws and regulations (including, without limitation, the
federal Food, Drug and Cosmetic Act and the Controlled Substances Act) relating
to the development, marketing and manufacturer of the Company's products, the
FDA application process, and the manufacturing and distribution of such
products, or matters, regarding the application of the patent laws to the
business and products of the company, including statutes, laws and regulations
administered by the Food and Drug Administration, the Drug Enforcement
Administration, and state and local authorities having jurisdiction over
pharmaceutical companies such as the Company.
For purposes of such opinion, the terms "to the knowledge,"
"to the best knowledge," "known to such counsel" or other similar words shall
mean the actual, current knowledge of those attorneys in counsel's law firm who
have provided services to the Company. Further, for purposes of such opinion,
when counsel's opinion is after "due inquiry," it shall mean that such counsel
has made reasonable inquiry of those representatives of the Company who are, in
the judgment of such counsel, likely to know the facts upon which the opinion
will be based and does not mean that such counsel has made searches of the
public record or inquiries of third persons to verify the facts underlying the
opinion. For all purposes, knowledge does not include constructive knowledge of
matters.
(g) At the Closing Time, you shall have received the
opinion of Burditt & Radzius, Chartered, special regulatory counsel to the
Company, dated the Closing Time, and in form and substance satisfactory to
counsel to the Placement Agent, to the effect that:
(i) The statements under the captions "Risk Factors
- Tentative Approval of Captopril and General Agreement on Tariffs and Trade
("GATT") Treaty", "Business-Government Regulation," and "Business-Validity
Assessment Program" (collectively the "Regulatory Portion") in the Memorandum,
to the extent that they reflect matters of law, summaries of law or regulations,
or regulatory status, are correct in all material respects, subject to the
qualifications set forth therein.
(ii) Nothing has come to the attention of such
counsel that would lead such counsel to believe that the Regulatory Portion, as
of the date of the Memorandum and as
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of the Closing Date, includes an untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(iii) Nothing has come to the attention of such
counsel that would lead such counsel to believe that any of the representations
and warranties of the Company contained in Sections 5(a)(ix), 5(a)(x) or
5(a)(xxi) of this Agreement are not true and correct.
In rendering such opinion, such counsel may rely as to factual
matters upon certificates or written statements from officers of the Company or
upon certificates of public officials.
(h) At the Closing Time, Price Waterhouse LLP shall
have furnished to you a letter, dated as of the date of its delivery, addressed
to you and in form and substance satisfactory to you, to the effect that:
(ii) In their opinion, the consolidated financial
statements and schedules and notes examined by them and included in the
Memorandum comply as to form in all material respects with the applicable
accounting requirements of the Act and the rules and regulations thereunder.
(iii) On the basis of inquiries and procedures
conducted by them, including a reading of the latest available unaudited interim
financial statements of the Company and its subsidiary, inquiries of officials
of the Company and its subsidiary responsible for operational, financial and
accounting matters, a reading of the minute books of the Company and its
subsidiary and other specified procedures and inquiries, nothing has come to
their attention that caused them to believe that (A) any unaudited financial
statements of the Company and its subsidiary set forth in the Memorandum do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the rules and regulations thereunder or are not
fairly presented in conformity with generally accepted accounting principles
applied on a basis consistent with that of the audited financial statements; and
(B) at a specified date not more than five days prior to the date of such letter
there was any change in the capital stock, increase in long-term debt, or any
decrease in the current net assets or shareholders' equity of the Company and
its subsidiary, each as compared with the amounts shown in the balance sheet as
of March 31, 1995 included in the Memorandum or, from April 1, 1995 to the
specified date, there were any decreases, on a proportional basis, as compared
to the quarter ended March 31, 1995, in net sales or gross profit, or any
increase in operating loss, loss before income tax benefit and extraordinary
item, net loss and net loss per share, except in all instances for changes,
decreases or increases which the Memorandum disclose have occurred or may occur
and except for such other changes, decreases or increases which you shall in
your sole discretion accept.
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(iv) In addition to their examination referred to
in their reports included in the Memorandum and the inquiries and limited
procedures referred to in clause (iii) above, they have performed other
procedures, not constituting an audit, with respect to certain numerical data
and financial information appearing in the Memorandum, required by you and
specified in such letter and have compared such data and information with the
accounting records of the Company and found them to be in agreement.
(i) At the Closing Time, all corporate and other
proceedings taken or to be taken by the Company in connection with the issuance,
sale and delivery of the Units, Shares and Warrants and the transactions
contemplated hereby or described in the Memorandum and all documents incident
thereto shall be satisfactory in form and substance to you and your counsel.
(j) There shall not have occurred, at any time prior to
the Closing, (i) any domestic or international event, act or occurrence that has
materially disrupted, or in your reasonable opinion will in the immediate future
materially disrupt, the securities markets; (ii) a general suspension of, or a
general limitation on prices for, trading in securities on the New York Stock
Exchange or the American Stock Exchange or in the over-the-counter market; (iii)
any outbreak or escalation of major hostilities or other national or
international calamity; (iv) any banking moratorium declared by a state or
federal authority; (v) any moratorium declared in foreign exchange trading by
major international banks or other persons; (vi) any material interruption in
the mail service or other means of communication within the United States; (vii)
any material adverse change in the business, properties, assets, results of
operations, financial condition or prospects of the Company and its subsidiaries
taken as a whole make it inadvisable to proceed with the offering, sale and
delivery of the Units, Shares and Warrants; (viii) the Company shall have
sustained a loss material or substantial to the Company by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such act is insured, will, in the Placement Agent's
reasonable opinion, make it inadvisable to proceed with the offering, sale and
delivery of the Units, Shares and Warrants; or (ix) any change in the market for
securities in general or in political, financial or economic conditions which,
in your reasonable business judgment, makes it inadvisable to proceed with the
offering, sale and delivery of the Units, Shares and Warrants.
(k) On the Closing Date, the Placement Agent shall have
received a certificate, dated the Closing Date, signed by Patrick J. McEnany,
President, Chief Executive and Chief Operating Officer, Loren Gelber, Vice
President -- Regulatory Compliance (as to regulatory matters) and Robert E.
Band, Vice President -- Finance and Chief Financial Officer, in form and
substance satisfactory to you, to the effect that:
(i) The representations, warranties and
agreements of the Company contained herein were, when originally made, and are,
at the time such certificate is dated, true and correct.
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(ii) They have carefully examined the Memorandum
and (A) as of the date of such certificate the statements in the Memorandum are
true and correct and the Memorandum does not include any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (B) since the date
of the Memorandum, no event has occurred which necessitates an amendment or
supplement to the date of the Memorandum in order to make the statements therein
not true or not misleading.
(iii) Each of the covenants required herein to be
performed by the Company on or prior to the date of such certificate has been
duly, timely and fully performed and each condition herein required to be
complied with by the Company on or prior to the date of such certificate has
been duly, timely and fully complied with.
(l) On the Closing Date, the Placement Agent shall have
received a certificate, dated the Closing Date, signed by the Secretary of the
Company, in form and substance satisfactory to the Placement Agent, certifying
as to (i) the incumbency and the signatures of those officers of the Company
executing this Agreement, the Subscription Agreements, the Shares, the Warrants,
the Agent's Warrants, the Warrant Certificates, the Placement Agent Warrant
Agreement and certificates or other documents to be pursuant to the terms of
such agreements, (ii) the Articles of Incorporation and By-laws of the Company
and its subsidiary and (iii) the resolutions of the Board of Directors of the
Company (or duly appointed committee thereof) authorizing the execution and
delivery of this Agreement, the Subscription Agreements, the shares of Common
Stock, the Warrants, the Agent's Warrants, the Warrant Certificates and the
Placement Agent Warrant Agreement and the transactions contemplated hereby and
thereby.
Any certificate or other document signed by any officer of the
Company and to you or to your counsel shall be deemed a representation and
warranty by the Company hereunder as to the statements made therein. If any
condition to your obligations hereunder has not been fulfilled as and when
required to be so fulfilled, you may terminate this Agreement or, if you so
elect, in writing waive any such conditions which have not been fulfilled or
extend the time for their fulfillment. In the event that you elect to terminate
this Agreement, you shall notify the Company of such election in writing. Upon
such termination, neither party shall have any further liability or obligation
to the other except as provided in Section 10 hereof.
(ii) CONDITIONS OF THE COMPANY'S OBLIGATIONS. On the Closing Date,
the Company shall have received a certificate(s) dated the Closing Date, signed
by the Placement Agent and the Selected Dealers to the effect that the
representations and warranties of the Placement Agent and the Selected Dealers
contained herein were, when originally made, and are, as of the time such
certificate(s) is dated, true and correct.
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9. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless
the Placement Agent, the Selected Dealers and each person, if any, who controls
the Placement Agent or any Selected Dealer within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, and each of them, from and against
any and all loss, liability, claim, damage, expense or action, joint or several
(including, but not limited to, any and all reasonable expenses incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever and any amount paid in settlement of any
litigation), commenced or threatened, or of any claim whatsoever, to which they
or any of them may become subject under the Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, liability, claim, damage, expense or action arises out of
or is based upon (i) any untrue statement or alleged untrue statement made by
the Company in Section 5 of this Agreement, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the Memorandum (or any
amendment or supplement thereto), or any omission or alleged omission therefrom
of a material fact required to be stated therein or necessary in order to make
the statements therein not misleading, or (iii) any untrue statement or alleged
untrue statement of a material fact contained in any application or other
document executed by the Company or based upon written information furnished by
or on behalf of the Company filed in any jurisdiction in order to qualify all or
any of the Units, Shares or Warrants under the securities laws thereof or filed
with the Commission, the NASD or any securities exchange, or any omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary in order to make the statements therein not misleading; provided,
however, that the Company shall not be liable in any such case to the extent
that such untrue statement or omission or such alleged untrue statement or
omission was made in reliance upon and in conformity with information furnished
in writing by or on behalf of the Placement Agent or any Selected Dealer to the
Company expressly for use in the Memorandum or any such application or document.
The Company acknowledges that the statements in the first paragraph of text
under the caption "Terms of the Offering" in the Memorandum constitute the only
information furnished in writing by the Placement Agent or any Selected Dealer
expressly for inclusion in the Memorandum. The indemnity agreement contained in
this Section 9 is in addition to any liability which the Company may otherwise
have to the Placement Agent or any Selected Dealer or any controlling person of
the Placement Agent or any Selected Dealer.
(b) The Placement Agent agrees that it will
indemnify and hold harmless the Company, each of its officers and directors and
each person who controls the Company within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act against any and all loss, liability, claim,
damage, expense or action, joint or several, to the same extent as the foregoing
indemnity from the Company to you, but only with respect to statements or
omissions made in the Memorandum in reliance upon and in conformity with
information furnished in writing by the Placement Agent to the Company expressly
for use in the Memorandum. The indemnity agreement contained in this Section
9(b) is in addition to any liability which the Placement Agent may otherwise
have to the Company or any of its directors,
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officers, or controlling persons. The Company acknowledges that the statements
set forth in the first paragraph of text under the caption "Terms of the
Offering" in the Memorandum constitutes the only information furnished in
writing by the Placement Agent expressly for inclusion in the Memorandum.
(c) Promptly after receipt by an indemnified
party under this Section 9 of notice of any claim, threatened claim or the
commencement of any action, the indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party under this Section 9, notify
the indemnifying party in writing of the claim, threatened claim or the
commencement of that action; provided, however, that the failure to notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have to an indemnified party otherwise than under this Section 9.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein, and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with its counsel, who shall be reasonably satisfactory to the indemnified party.
After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim, threatened claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 9 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that you shall have the right to
employ counsel to represent you and your controlling persons who may be subject
to liability arising out of any claim in respect of which indemnity may be
sought by the Placement Agent or any Selected Dealer against the Company under
this Section 9 if, in your reasonable judgment, it is necessary for you, a
Selected Dealer and those controlling persons to be represented by separate
counsel in order to avoid an actual or potential conflict of interest or if you
shall have reasonably concluded that there may be defenses available to you and
those controlling persons different from or in addition to those available to
the Company, and in either such event the reasonable fees and expenses of such
separate counsel shall be paid by the Company. An indemnifying party shall not
be liable for any settlement of any action or claims effected without its
written consent (which consent shall not unreasonably be withheld).
(d) Anything herein to the contrary
notwithstanding, the indemnity agreement of the Company in subsection (a) of
this Section 9 hereof, the representations and warranties in Section 5 hereof
and any representation or warranty as to the accuracy of the Memorandum
contained in any certificate furnished by the Company pursuant to Section 8
hereof, insofar as they may constitute a basis for indemnification for
liabilities (other than payment by the Company of expenses incurred or paid in
the successful defense of any action, suit or proceeding) arising under the Act,
shall not extend to the extent of any interest therein of a controlling person
or partner of the Placement Agent or any Selected Dealer who is a director,
officer or controlling person of the Company, as of the date of the Memorandum,
except in each case to the extent that an interest of such person shall have
been determined by a court of appropriate jurisdiction as not against public
policy as expressed in the Act. Unless
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in the opinion of counsel for the Company the matter has been settled by a
controlling precedent, the Company will, if a claim for such indemnification is
asserted, submit to a court of appropriate jurisdiction the question whether
such interest is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
(e) In order to provide for just and equitable
contribution in circumstances in which indemnification provided for in
subsections (a) or (b) of this Section 9 is unavailable, the Company, on the one
hand, and the Placement Agent and the Selected Dealers, on the other hand, shall
contribute to the aggregate loss, claim, damage, expense and liability to which
the Company, on the one hand, and the Placement Agent and the Selected Dealers,
on the other hand, may be subject (and, in any case where the Company is seeking
contribution from the Placement Agent or the Selected Dealers, after seeking
contribution from persons who control the Company within the meaning of the Act,
and officers and directors of the Company, who may be liable for contribution
and after deducting from such loss, claim, damage, expense and liability the
amount of contribution obtained from such persons) in such proportions as are
applicable to reflect the relative benefits received by the Company, on the one
hand, and the Placement Agent and the Selected Dealers, on the other hand, from
the offering of the Units; provided, however, that if such allocation is not
permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (c) of this Section 9, then the relative fault
of the Company, on the one hand, and the Placement Agent and the Selected
Dealers, on the other hand, in connection with the statements or omissions that
resulted in such losses, claims, damages and liabilities and other relevant
equitable considerations will be considered together with such relative
benefits. The relative benefits received by the Company, on the one hand, and
the Placement Agent and the Selected Dealers, on the other hand, shall be deemed
to be in the same proportion as the total net proceeds from the Offering (before
deducting expenses) received by the Company bear to the total discounts and
commissions received by the Placement Agent, in each case appearing on the cover
page of the Memorandum (or, in the case of a Selected Dealer, the allowance paid
to such Selected Dealer); provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The relative fault of the Company, on the one hand, and of
the Placement Agent and the Selected Dealers, on the other hand, shall be
determined by reference to, among other things, whether in the case of an untrue
statement or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact, such statement or omission relates to
information supplied by the Company, on the one hand, or by the Placement Agent
and the Selected Dealers, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statements or omission. The Company, the Placement Agent and the Selected
Dealers agree that it would not be just and equitable if contribution pursuant
to this subsection (e) were determined by pro-rata allocation or by any other
method of allocation that does not take account of the equitable considerations
referred to in this subsection (e). The amount paid or payable by the
indemnified party as a result of the losses, claims, damages or liabilities
referred to above in this subsection (e) shall be deemed to include any legal or
other expenses reasonably incurred by such
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indemnified party in connection with investigating or defending against or
appearing as a third-party witness in any such action or claim. For purposes of
this subsection (e), each person, if any, who controls the Placement Agent or a
Selected Dealer within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act shall have the same rights to contribution as such Placement Agent
and Selected Dealers and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, each
officer and director of the Company shall have the same rights to contribution
as the Company, subject in each case to clause (C) of this paragraph. Each party
entitled to contribution agrees that upon the service of a summons or other
initial legal process upon it in any action instituted against it in respect of
which contribution may be sought, it will promptly give written notice of such
service to the party or parties from whom contribution may be sought, but the
omission so to notify such party or parties of any such service shall not
relieve the party from whom contribution may be sought from any obligations it
may have hereunder or otherwise (except as specifically provided in subsection
(c) of this Section 9). No party shall be liable for contribution with respect
to any action or claim settled without its consent (which consent shall not
unreasonably be withheld).
10. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties, covenants and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants and
agreements at the Closing Date, and such representations, warranties, covenants
and agreements, including the indemnity and contribution agreements contained in
Section 9, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Placement Agent or any indemnified
person, or by or on behalf of the Company or any person or entity which is
entitled to be indemnified under Section 9(b), and shall survive termination of
this Agreement or the issuance, sale and delivery of the Units, Shares and
Warrants. In addition, notwithstanding any election hereunder or any termination
of this Agreement, and whether or not the terms of this Agreement are otherwise
carried out, the provisions of Sections 6(a)(xvii) (only if the Minimum Amount
is sold), 7, 9, 10 and 12 shall survive termination of this Agreement and shall
not be affected in any way by such election or termination or failure to carry
out the terms of this Agreement or any part thereof.
11. NOTICES. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing and, if sent to the
Placement Agent, shall be mailed, or telexed or telegraphed and confirmed by
letter, to its address set forth above, with a copy to Neil Gold, Esq.,
Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, New York 10103 or if
sent to the Company, shall be mailed, or telexed or telegraphed and confirmed by
letter, to Royce Laboratories, Inc., 5350 N.W. 165th Street, Miami, Florida
33014, Attention: President, with a copy to Philip B. Schwartz, Esq., Broad and
Cassel, Miami Center, 201 South Biscayne Boulevard, Suite 3000, Miami, Florida
33131. All notices hereunder shall be effective upon receipt by the party to
which it is addressed.
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12. ASSIGNMENT. This Agreement shall not be assigned by any
party hereto without the prior written consent of the other parties hereto.
13. PARTIES. (a) Except as provided below, this Agreement shall
inure solely to the benefit of, and shall be binding upon, the Placement Agent
and the Company and the persons and entities referred to in Section 9 who are
entitled to indemnification or contribution, and their respective successors,
legal representatives and assigns (which shall not include any purchaser, as
such, of Units), and no other person shall have or be construed to have any
legal or equitable right, remedy or claim under or in respect of or by virtue of
this Agreement or any provision herein contained.
(b) Each Prospective Investor and purchaser of Units shall be
entitled to rely on and enforce the representations, warranties and agreements
made by the Company in favor of the Placement Agent under this Agreement.
14. CONSTRUCTION. This Agreement shall be governed and construed
in accordance with the laws of the State of New York applicable to contracts
made and performed in the State of New York without giving effect to the
principles of conflicts of law thereof. If any action or proceeding shall be
brought by the Placement Agent in order to enforce any right or remedy under
this Agreement, the Company hereby consents to and submits to, the jurisdiction
of the courts of the State of New York and of any federal court sitting in the
Borough of Manhattan, City of New York. The Company agrees that process in any
such action or proceeding may be served in the manner provided by New York law
for service on foreign persons, as appropriate.
15. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
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16. PRIOR AGREEMENTS; AMENDMENTS.
(a) This Agreement shall supersede any agreement or
understanding, oral or in writing, express or implied, between the Company and
you relating to the sale of the Units and the Agent's Warrants, other than the
Placement Agent Warrant Agreement and the rights granted to the Placement Agent
in the Subscription Agreements.
(b) No change, amendment or supplement to, or waiver
of, this Agreement or any term, provision or condition contained herein, shall
be valid or of any effect unless in writing and signed by the party against whom
such is asserted.
If the foregoing correctly sets forth the understanding between us,
please so indicate in the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement between us.
Very truly yours,
ROYCE LABORATORIES, INC.
By:______________________________
Patrick J. McEnany
President and Chief
Executive Officer
Accepted as of the date first above written.
New York, New York
GRUNTAL & CO., INCORPORATED
By:_________________________________
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EXHIBITS
I Selected Dealers Agreement
II Warrant Agreement
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CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our
report dated March 28, 1995, which appears on page F-2 of Royce
Laboratories, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1994. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
/s/ Price Waterhouse LLP
-------------------------
PRICE WATERHOUSE LLP
Miami, Florida
August 16, 1995
