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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For Fiscal Year Ended June 30, 1998
Commission file No. 1-9925
COPE, Inc.
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(Name of Small Business Issuer in its Charter)
Delaware 87-0427731
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification No.)
2200 Pacific Coast Hwy. No. 301, Hermosa Beach, California 90254
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (310) 376-7721
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $0.001
Check whether the issuer (1) filed all reports to be filed by section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes No X
--- ---
Check if there is no disclosure on delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrants knowledge, in definitive proxy or other
information statements incorporated by reference in Part III of this Form 10-KSB
or by amendment to this Form 10-KSB X
---
The revenues for the issuer's most recent fiscal year June 30, 1998 are $0.
The aggregate market value of the issuers voting stock held by
nonaffiliates as of March 1, 1999, computed with reference to the average bid
and asked price on that date was approximately $19,647,635
As of March 1, 1999, the issuer had 3,153,361 shares of its common stock,
par value $0.001, issued and outstanding.
Documents incorporated by reference: None.
Page 1 of 40 consecutively numbered pages
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Number and Caption Page
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PART I
1. Description of Business 1
2. Description of Property 4
3. Legal Proceedings 4
4. Submission of Matters to a Vote of Security Holders 5
PART II
5. Market for Common Equity and Related Stockholder Matters 5
6. Management's Discussion and Analysis or Plan of Operation 6
7. Financial Statements 8
8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 9
PART III
9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act 9
10. Executive Compensation 10
11. Security Ownership of Certain Beneficial Owners and Management 12
12. Certain Relationships and Related Transactions 13
13. Exhibits and Reports on Form 8-K 13
</TABLE>
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PART 1
ITEM. 1 DESCRIPTION OF BUSINESS
GENERAL
THIS IS AN ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED JUNE
30, 1998. THE REPORT WAS FILED IN MARCH 1999. SUBSEQUENT TO JUNE 30, 1998,
THE REGISTRANT UNDERWENT A CORPORATE REORGANIZATION WHICH RESULTED IN A
COMPLETE CHANGE IN BUSINESS, MANAGEMENT AND OWNERSHIP. UNLESS OTHERWISE
STATED, ALL INFORMATION INCLUDED IN THIS REPORT REFLECTS THE REGISTRANT, ITS
BUSINESS, MANAGEMENT AND OWNERSHIP AS OF JUNE 30, 1998.
This report is filed by COPE, Inc., a Delaware corporation formerly
known as Harrier, Inc. (referred to herein as the "Company"). For several
years prior to October 1998, the Company was engaged in the discovery,
development and sale of selected products and technologies in the health,
fitness and medical markets. Since 1996, the Company's strategic focus has
been to find a merger candidate. The Company has considered a merger to be a
priority due to the absence of significant sales of the Company's Bioptron
lamps and the Company's continuing inability to obtain the additional capital
necessary to fund its pharmaceutical research and development operations.
Unless the context otherwise requires, the term "Company" refers to
COPE, Inc., a Delaware corporation formerly known as Harrier, Inc., and its
majority owned subsidiary, Glycosyn Pharmaceuticals, Inc., a Delaware
corporation, and its equity interest in DermaRay International, LLC, a
California limited liability company.
COPE REORGANIZATION
In September, 1998, the Company closed a Securities Purchase Agreement and
Plan of Reorganization ("Reorganization Agreement") with COPE AG ("COPE"), a
Swiss stock corporation engaged in the business of providing high volume
information management consulting, services and solutions to Swiss, German and
Austrian companies. Pursuant to the Reorganization Agreement, the shareholders
of COPE became the controlling stockholders of the Company and COPE became a
wholly owned subsidiary of the Company (referred to herein as the "COPE
Reorganization"). In connection with the COPE Reorganization, the Company has
terminated its Bioptron operations and entered into an agreement with a related
party, New Capital Investment Fund ("NCIF"), to sell 2,850,000 shares of the
$.001 par value common stock ("Glycosyn Common Stock") of its subsidiary,
Glycosyn Pharmaceuticals, Inc., a Delaware corporation ("Glycosyn"), to NCIF in
exchange for NCIF's cancellation of $500,000 of indebtedness plus accrued
interest of $135,667 owed by the Company (referred to herein as the "Glycosyn
Recapitalization"). See "Glycosyn Recapitalization" below.
The Reorganization Agreement provides that immediately prior to the closing
("Closing") of the COPE Reorganization, the Company effected the Glycosyn
Recapitalization and filed an amendment (the "Amendment") to the Company's
Certificate of Incorporation to: (i) change the name of the Company to COPE
Inc.; and (ii) reverse split the outstanding shares of Common Stock of the
Company on a one for 58 basis. At the Closing, after the foregoing was
satisfied, the Company issued 2,862,000 shares (post-split) of the Company's
$.001 par value common stock ("Harrier Common Stock"), representing 91.4% of the
issued and outstanding shares of Harrier Common Sock after giving effect to the
Closing, in exchange for the COPE shareholders' transfer of all of the issued
and outstanding capital shares of COPE to the Company.
An annual meeting of the stockholders of the Company took place on
September 11, 1998 at which time the COPE Reorganization and the Glycosyn
Recapitalization was approved. Additional information concerning COPE, the COPE
Reorganization and the Glycosyn Recapitalization are included in a Proxy
Statement filed with the Securities and Exchange Commission and distributed to
the shareholders of the Company.
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Glycosyn Recapitalization
Glycosyn is approximately a 94% owned subsidiary of the Company and was
formed to further develop and finance technologies currently owned or licensed
by the Company in a field of carbohydrate chemistry called glycosylation, which
the Company believes to have broad applications in the fields of medical
therapeutics. Patents have been filed and issued for several pharmaceutical
compounds created through the Company's glycosylation process. Furthermore,
newer technologies are in the "discovery" stage, meaning chemical activity has
been characterized and further development is underway to support additional
patent applications.
The Glycosyn Recapitalization is part of a broader recapitalization of the
Company in connection with the COPE Reorganization. COPE conditioned its
agreement to reorganize with the Company upon the Company's substantial
divestiture of all assets, liabilities and operations, including Harrier's
ownership interest in Glycosyn. Company management considered and pursued
alternative means of satisfying COPE's demands, including the analysis of a
spin-off or sale of the Company's interest in Glycosyn. After consideration of
the available alternatives and in the absence of any equitable offers to
purchase Glycosyn, the Company has structured the following series of
transactions (referred to herein as the "Glycosyn Recapitalization") for
purposes of satisfying COPE's demands:
- Prior to the close of the COPE Reorganization, Harrier transferred
all of its assets and liabilities to Glycosyn. In connection therewith, the
principal creditors of Harrier, except NCIF, which is presently owed, will agree
to release Harrier of any further liability for their claims. In addition, NCIF
issued a $136,830 note payable to the Company for claims not released by the
creditors.
- Prior to the close of the COPE Reorganization, Harrier sold to NCIF
2,850,000 shares of its 5,000,000 Glycosyn Common Stock shares in consideration
of NCIF's agreement to cancel the $500,000 of indebtedness plus accrued interest
of $135,667 owed by Harrier. NCIF is an investment fund in which Harrier's
Chairman of the Board, Jurg Kehrli, and President, Kevin DeVito, are retained as
managers.
The Company's decision to sell 2,850,000 shares of Glycosyn Common Stock to
NCIF was motivated by (i) the Company's desire to retain ownership of Glycosyn
in the absence of an acceptable purchase offer and (ii) COPE's demand that
Harrier substantially divest all of its assets and liabilities. Upon the sale
of the 2,850,000 shares of Glycosyn Common stock, Harrier's interest in Glycosyn
will be reduced to approximately 40% and, as a result, the financial condition
and results of operations of Glycosyn will not be consolidated with the
Company's subsequent to the close of the COPE Reorganization. The Company's
reduction of its ownership interest in Glycosyn to a level which terminated the
Company's requirement to consolidate Glycosyn's financial statements has
satisfied COPE's demand for the substantial distribution of all operations and,
at the same time, allowed the Company to retain a significant ownership interest
in the subsidiary.
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GLYCOSYN OPERATIONS
Glycosyn seeks to fund and manage internal research and support laboratory
staff through fee for service chemistry contracts and the sale of glycosylated
delivery systems for anti-cancer therapies. Another objective, the completion of
pre-clinical development of HAR7 and related glycosylated camptothecins, is a
work in progress. Glycosyn also seeks to advance one analog to clinical trials
(IND) within 18 months of financing and to seek out and successfully execute at
least one alliance with a major pharmaceutical company for the development of
products based upon technologies of the Company within two (2) years after the
successful completion of the initial financing.
NEW CONCEPT THERAPEUTICS
Glycosyn acquired a minority equity interest in New Concept Therapeutics,
Inc., a North Carolina corporation ("NCT"), pursuant to an agreement ("NCT
Agreement") dated October 30, 1997. NCT was formed on July 1, 1997 for the
purpose of manufacturing and distributing boron-containing pharmaceutical
products for the treatment of cancer. NCT's products are used in connection
with boron neutron capture therapy, an experimental cancer treatment currently
under clinical trials in the United States and Europe.
Pursuant to the NCT Agreement, Glycosyn has agreed to purchase 23 shares of
the common stock of NCT, representing approximately 19% of the issued and
outstanding common shares of NCT, in consideration for Glycosyn's delivery of an
unsecured promissory note in the original principal amount of $250,000. The
Note bears interest at the rate of 10% per annum. The note balance amounted to
$85,500 at June 30, 1998, and as of October 30, 1998, Glycosyn has paid out
$207,500 to NCT under the Note. As additional consideration for its receipt of
the Note, NCT has granted Glycosyn an option ("NCT Option") to purchase all 49
of the issued and outstanding shares of NCT at an exercise price of $7,500 per
share for a two year period. The NCT Option is exercisable by Glycosyn subject
to its payment of the entire principal amount of the Note. The NCT Option
provides that Glycosyn may pay for the additional underlying NCT common shares
by Glycosyn's delivery of 1,225,000 shares of Glycosyn common stock (at a rate
of $0.30 per Glycosyn share).
The Company's intention with regard to NCT was to assist it in the
development and marketing of its boron-containing pharmaceutical products and,
in the event of the commercial success of NCT's products, acquire all of the
issued and outstanding common shares of NCT. At June 30, 1998, management
determined that, as a result of NCT's past, current and projected operating
losses, there had been a significant impairment in the carrying value of the
Company's investment in NCT. Therefore, a $250,000 unrealized loss was
recognized at June 30, 1998.
BIOPTRON LAMP
On November 29, 1994, the Company and Naturade, Inc. ("Naturade"), a
70-year old manufacturer and supplier of health and beauty products, formed
DermaRay International Limited Liability Company ("DermaRay"). During the fiscal
years ended June 30, 1998 and 1997, the Company had earned revenues of $0 and
$48,069 from the sale of the Bioptron Lamps. The Company and Naturade have
mutually agreed to terminate all operations.
Pursuant to an Asset Transfer and Plan of Liquidation and Dissolution
("Dissolution Agreement") dated June 30, 1997 between the Company, Naturade and
DermaRay, the parties agreed to terminate the DermaRay joint venture. Under
the Dissolution Agreement, Naturade agreed to purchase the Company's 50%
interest in DermaRay and its inventory of Lamps for $175,000, payable over time.
As of October 31, 1998, the Company had received all amounts due.
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PATENTS AND TRADEMARKS
The Company has filed individual and continuation-in-part patents on its
modified compounds and related chemical processes since January 1990. On
October 14, 1997, the Company received notice of allowance on its patent
entitled "Glycosylated Analogs of Camptothecin", a group of natural compounds
used for cancer treatment. This patent and several others are co-owned by the
Company and the University of Michigan because they involve technologies
developed pursuant to research agreements entered into with the University.
There can be no assurance that the Company will be successful in obtaining
patents for its products and processes in the countries in which applications
are still pending. Patents are difficult to obtain and only provide protection
to the holder for a specified period of time. In addition, it may be possible
for a competitor to successfully avoid an infringement action by making changes
to the technology or method of application. The Company believes that the
ability to obtain and enforce patents is essential to certain elements of its
business.
COMPETITION
The Company competes in the pharmaceutical industry where many competitors
have far greater financial, scientific and management resources. Although such
companies often license products to and form strategic alliances with smaller
companies, substantial resources are required to develop and clinically test
pharmaceutical products to the point where such relationships can be
established. Current resources are not sufficient to fully exploit the
Company's technology. Strategic alliances or other additional resources will be
necessary to develop proprietary GLYCOSYLATED molecules outside the scope of the
Company's internal drug development efforts.
PERSONNEL
As of June 30, 1998, the Company had four (4) employees engaged in
management, product development, marketing, and administrative functions. In
addition, the Company retains a number of consultants for specialized services.
Glycosyn currently employs two (2) of the four employees.
REGULATION
Most of the Company's products are subject to extensive regulation by
federal and state agencies, and similar agencies in foreign countries with
safety standards applicable to the manufacture and marketing of such products.
In the pharmaceutical area, the FDA must submit all clinical testing protocols
for review, and the results of testing are subject to extensive analysis. The
FDA's approval cannot normally be obtained until a significant number of tests
have been conducted. There are similar requirements for obtaining approval of
pharmaceuticals in most foreign countries. There can be no assurances of the
likelihood or timing of any such approvals. The failure to receive approvals for
the Company's pharmaceutical products would prevent their sale in the applicable
jurisdictions.
ITEM 2. DESCRIPTION OF PROPERTY
During the fiscal year ended June 30, 1998, the Company occupied facilities
located in Hermosa Beach, California and in Cary, North Carolina. Both
properties are leased under arrangements from third parties.
ITEM 3. LEGAL PROCEEDINGS
On May 1, 1993, the Company completed a drug agreement with American
Diagnostica, Inc. ("ADI"), a private company located in Greenwich, Connecticut.
Pursuant to the agreement, ADI was required to develop and test synthetic drugs
using the Company's proprietary glycosylation processes. ADI had committed to
pay the Company $5,000 per month over 100 months and expend at least $800,000
for research and development.
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In June 1995, ADI informed the Company that it was unable to fund any
further obligations pursuant to the research and development portion of the drug
development agreement. The Company then terminated the related agreement for,
among other things, anticipatory repudiation. On August 24, 1995, ADI filed a
civil action for money damages alleging wrongful termination, substantial
compliance under the agreement, and that the Company was indebted to the
plaintiff for damages in an unspecified amount, plus punitive damages, attorney
fees and interest. In December 1995, Harrier moved the court for an order
compelling the plaintiff to submit the dispute to arbitration. In September
1996, the court granted the Company's motion, staying all proceedings pending
the conclusion of mandatory arbitration in California, as the parties provided
in the research and development agreement. As of the date of the consolidated
financial statements, no arbitration proceeding has been commenced by either
party. Management believes that it has meritorious circumstances, no
determination can be made as to the ultimate outcome of the litigation or as to
the necessity for any provision in the accompanying consolidated financial
statements for any liability that may result from an unfavorable outcome. In
addition, subsequent to year-end, and in connection with the COPE
Reorganization, New Capital AG, a related party, entered into a hold harmless
agreement with COPE whereby New Capital AG would pay for claims and cost arising
out of this litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock currently was traded on the Over The Counter
market, ("OTC") under the symbol "HARE". The current symbol is "COPE".
The following table sets forth, for the respective periods indicated, the
high and low bid prices for the common stock of the Company. The quotations
presented reflect inter-dealer prices, without retail markup, markdown, or
commissions, and may not necessarily represent actual transactions in the common
stock of the Company. Quotations reflect the 58 to 1 reverse stock split
described under the "COPE Reorganization."
<TABLE>
<CAPTION>
Quarter Ended High Bid Low Bid
<S> <C> <C>
September 30, 1996 $10.90 $7.25
December 31, 1996 $3.596 $3.596
March 31, 1997 $9.28 $7.54
June 30, 1997 $3.77 $3.77
September 30, 1997 $8.70 $6.96
December 31, 1997 $9.28 $9.28
March 31, 1998 $6.96 $6.96
June 30, 1998 $9.86 $9.86
</TABLE>
On March 1, 1999, the bid and ask prices as quoted on the OTC for the
Company's common stock were $34.00 and $36.50 respectively.
On March 1, 1999, there were approximately 372 holders of record of the
3,153,361 shares of the Company's common stock issued and outstanding.
Since its inception, no dividends have been paid on the Company's common
stock, and the Company does not presently have retained earnings to permit the
payment of a dividend. Although there are no restrictions on the
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declaration or payment of dividends set forth in the Articles of Incorporation
of the Company or any other agreement with stockholders, the Company expects
future earnings will be utilized for the development of its business.
Therefore, the Company does not anticipate paying dividends on its common stock
in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
In September, 1998, the Company closed a Securities Purchase Agreement and Plan
of Reorganization ("Reorganization Agreement") with COPE AG ("COPE"), a Swiss
stock corporation engaged in the business of providing high volume information
management consulting, services and solutions to Swiss, German and Austrian
companies. Pursuant to the Reorganization Agreement, the shareholders of COPE
became the controlling stockholders of the Company and COPE became a wholly
owned subsidiary of the Company (referred to herein as the "COPE
Reorganization"). In connection with the COPE Reorganization, the Company has
terminated its Bioptron operations and entered into an agreement with a related
party, New Capital Investment Fund ("NCIF"), to sell 2,850,000 shares of the
$.001 par value common stock ("Glycosyn Common Stock") of its subsidiary,
Glycosyn Pharmaceuticals, Inc., a Delaware corporation ("Glycosyn"), to NCIF in
exchange for NCIF's cancellation of $500,000 of indebtedness plus accrued
interest of $135,667 owed by the Company (referred to herein as the "Glycosyn
Recapitalization").
- Concurrent with the close of the COPE Reorganization, Harrier
transferred all of its assets and liabilities to Glycosyn. In connection
therewith, the principal creditors of Harrier, except NCIF, which is presently
owed $635,667 by Harrier, agreed to release Harrier of any further liability for
their claims.
- Concurrent with the close of the COPE Reorganization, Harrier sold
to NCIF 2,850,000 shares of its 5,000,000 Glycosyn Common Stock in consideration
of NCIF's agreement to cancel the $635,667 of indebtedness owed by Harrier. See
Part I, Item 1 "Description of Business - COPE Reorganization" and "-Glycosyn
Recapitalization."
This report contains various forward-looking statements that are based on
the Company's beliefs as well as assumptions made by and information currently
available to the Company. When used in this registration statement, the words
"believe," "expect," "anticipate," "estimate" and similar expressions are
intended to identify forward-looking statements. Such statements are subject to
certain risks, uncertainties and assumptions, including, without limitation, the
Company's continuing losses and working capital deficit; The Company's lack of
adequate working capital; the miscellaneous risks associated with the proposed
COPE reorganization, including the risk that the transaction will not be
consummated; and general economic conditions. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated, or
projected. The Company cautions potential investors not to place undue reliance
on any such forward-looking statements all of which speak only as of the date
made.
RESULTS OF OPERATIONS
YEAR ENDED JUNE 30, 1998 COMPARED TO YEAR ENDED JUNE 30, 1997
During the ended June 30, 1998 all operations of the Company related to the
Harrier / COPE Reorganization.
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LIQUIDITY AND CAPITAL RESOURCES
On June 30, 1998, the Company had total current assets of $47,693 and
total current liabilities of $1,600,027 resulting in working capital deficit of
$(1,552,334), which has worsened since the balance sheet date due to continuing
losses from operations. For the purpose of preserving the Company as a going
concern, the Company has entered in to the COPE Reorganization Agreement. In
connection with the COPE Reorganization, Harrier transferred substantially all
of its assets and liabilities to Glycosyn. In connection therewith, the
principal creditors of Harrier, except NCIF, which is presently owed the
$500,000 of indebtedness plus accrued interest of $135,667 by Harrier, agreed to
release Harrier of any further liability for their claims. At the same time,
Harrier will sell to NCIF 2,850,000 shares of its Glycosyn Common Stock in
consideration of NCIF's agreement to cancel the $635,667 owed by Harrier. See
Part I, Item 1 "Description of Business - COPE Reorganization" and "-Glycosyn
Recapitalization."
During the year ended June 30, 1998, the Company financed its operations
primarily with the proceeds from the sale of its equity securities, the
liquidation of its Bioptron Lamp operations and the receipt of $20,000 of Grant
funds from the National Cancer Institute. Additionally, the Company received a
$60,000 loan from NCIF. During the 1998 fiscal year, the Company raised
approximately $160,000 from the private placement of 29,828 shares of common
stock. All proceeds raised from the private placement were used for working
capital, transactional costs associated with the COPE Reorganization and funding
of certain obligations related to the acquisition of minority interest in New
Concept Therapeutics, Inc. See Part I, Item 1 "Description of Business -
"Glycosyn Operations" - New Concept Therapeutics."
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<TABLE>
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ITEM 7. FINANCIAL STATEMENTS
Page
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COPE, Inc. (formerly known as Harrier, Inc.) (A Delaware corporation):
Independent Auditor's Report. . . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheet as of June 30, 1998. . . . . . . . . . F-2
Consolidated Statements of Operations for the twelve month
periods ended June 30, 1998 and 1997. . . . . . . . . . . . . . F-3
Consolidated Statements of Changes in Stockholders' Equity
(Deficit) for the twelve month periods ended June 30, 1998
and 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Cash Flow for the twelve month
periods ended June 30, 1998 and 1997. . . . . . . . . . . . . . F-5-6
Notes to Consolidated Financial Statements. . . . . . . . . . . . F-7-20
</TABLE>
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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Inapplicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
COMPLIANCE WITH SECTION 16(a)
Set forth below are the Directors and Officers for the Company as of
June 30, 1998. In September 1998, the Company conducted a change in
management. Please see the Proxy Statement/Prospectus dated August 20, 1998
for comparable information concerning the current Directors and Officers of
the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION SINCE
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<S> <C> <C> <C>
Jurg Kehrli 56 Chairman/Director February, 1987
William P. Cordeiro 54 Director June, 1994
Kevin DeVito 39 President/Director July, 1992
Candace Beaver 37 Secretary and June, 1991
Chief Financial Officer
</TABLE>
All Directors and Executive Officers of the Company are elected or
appointed, respectively, to serve for a one-year term and hold their office
until their successors are elected or appointed and qualified.
The following is a brief resume of each Director and Executive Officer of
the Company:
Mr. Kehrli, Chairman, was formerly the President and a principal
shareholder of Kehrli Rontgen A.G. from which the Company originally acquired
the rights to a substantial number of its products. Mr. Kehrli is the son of
the founder of Kehrli Rontgen, A.G., a manufacturer of X-ray equipment, which he
managed for 22 years prior to his affiliation with the Company. Mr. Kehrli is
currently an independent financial and management consultant for European-based
companies.
Dr. Cordeiro, Director, holds a B. S. in Biology from the University of San
Francisco, an MBA in Finance from the University of Southern California, and a
Ph.D. in Executive Management from the Peter Drucker Graduate Management Center,
the Claremont Graduate School. He is an associate professor in the Management
Department of California State University's School of Business and Economics in
Los Angeles, co-founder of Bartik, Cordeiro and Associates, Inc. and was
previously Vice chairman of the Veta Grande Companies, Inc. and Planning Manager
for ARCO.
Mr. DeVito, President and Director, is a former financial consultant,
having previously been employed in this function with Cigna Financial Services,
Inc. He graduated from the University of California, Los Angeles. Mr. DeVito
joined the Company in 1990 as marketing manager and was promoted to President in
July 1992. Mr. DeVito's initial project for the Company was the attainment of
the Company's initial medical-use approvals for the Bioptron Lamp.
Mrs. Beaver, Secretary and Chief Financial Officer, was formerly the
Controller of Addison Design Consultants, Inc., an international design and
corporate identity firm. She is a graduate of the University of California,
Berkeley. Mrs. Beaver has worked in both the public and private accounting
profession for the past 11 years.
Those required to make filings under Section 16(a) have done so to the best
of the Company's knowledge.
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ITEM 10. EXECUTIVE COMPENSATION
The Summary Compensation Table below includes, for each of the fiscal years
ended June 30, 1998, 1997, and 1996 individual compensation for services to the
Company and its subsidiaries of the Chief Executive Officer (the "Named
Officer").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
---------------------------------------- -------------------------- --------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name Annual Restricted All Other
and Compen- Stock LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position (4) Year Salary($) Bonus ($) ($) ($) SARs (#) ($) ($)
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kevin DeVito 1998 -0- -0- -0- -0- -0- -0- -0-
President 1997 64,147 (2) -0- -0- --- --- --- (4)
1996 94,994 (2) -0- (1) --- --- --- (3)
</TABLE>
(1) Include $3,600 per year for car allowance and $1,680 per year for executive
insurance.
(2) Includes $900 per year for car allowance and $1,680 per year for executive
insurance.
(3) Includes $10,994 in deferred compensation earned in fiscal year 1995 and
paid in fiscal year 1996.
(4) Includes $14,574 in deferred compensation earned in fiscal year 1996 and
paid in fiscal year 1997.
Option/SAR Grants in Last Fiscal Year
No options were granted in fiscal year 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
Shown below is information with respect to the exercise of options granted under
the 1990 Incentive Stock Option Award Plan to the Named Officer and held by him
at June 30, 1998.
<TABLE>
<CAPTION>
Value of
Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
6/30/98 6/30/98
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized (s) Unexercisable (#) Unexercisable ($)
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<S> <C> <C> <C> <C>
Kevin DeVito -0- -0- -0- $0.00/0
</TABLE>
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<PAGE>
DIRECTOR COMPENSATION
Dr. Cordeiro is paid a Director's fee of $500 per month. No other Director
compensation was paid during fiscal year 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1998, the entire Board of Directors addressed all matters
concerning executive officer compensation since the Company did not have a
compensation committee.
STOCK OPTION PLAN
During the year ended June 30, 1990, the Company adopted the 1990 Plan. A
total of 1,500,000 shares of common stock may be issued under the 1990 Plan and
have been reserved by the Board of Directors for that purpose. Options may be
granted to Directors, Officers, employees and other individuals at terms and
exercise prices as determined by the Board of Directors.
No options were granted to officers and directors during the year ended
June 30, 1997 and 1998.
-11-
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 30, 1998, the number of shares
of the Company's common stock, par value $0.001 per share, held beneficially by
each person who was known by the Company to own beneficially more than 5% of the
Company's common stock, each director and all officers and directors as a group.
Except as otherwise indicated, the Company believes that the beneficial owners
of the common stock listed below, based on information furnished by such owners,
have sole investment and voting power with respect to such shares subject to
community property laws where applicable.
<TABLE>
<CAPTION>
Name & Amount &
Address of Nature of Percent
Beneficial Beneficial of
Owner Owner Class (9)
---------- ---------- ---------
<S> <C> <C>
Jurg Kehrli (1) 5,880 less than 1.0%
Kevin DeVito (1) 872 less than 1.0%
Bartik, Cordeiro
& Associates (1) 346 less than 1.0%
All Officers and 7,583 less than 1.0%
Directors as a
group (4 persons)
</TABLE>
(1) Address is 2200 Pacific Coast Highway, Suite 301, Hermosa Beach, California
90254.
-12-
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended June 30, 1996 the Company entered into a $500,000
loan agreement with New Capital Investment Fund ("NCIF"), an entity affiliated
with the President and the Chairman of the Board. The loan bears interest of
12%. Loan obligations can be paid with securities of either the Company or its
Glycosyn subsidiary. The note was paid off in September 1998 in consideration
for 2,850,000 common shares of Glycosyn (see Note 15).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) EXHIBITS
Exhibit
No. Description
------- -----------
<S> <C>
3(i) Articles of Incorporation (1)
Amendment to Articles of Incorporation
3(ii) Bylaws (1)
10.1 Agreement with Licensia Export Trading Co. dated December 12,
1986 (2)
10.2 Agreement with Erich Klemke dated June 6, 1988(3)
10.3 Amendment to agreement with European Investment and Equity
Trading dated March 30, 1989 (5)
10.4 Distribution agreement with Mobal AG, dated January 17, 1989 (4)
10.5 1989 Stock Option and Stock Award Plan (1)
10.6 Warrant Agreement dated as of November 13, 1989 among Harrier,
Inc. ASFAG AG and Martin S. Wohnlich (5)
10.7 Agreement dated November 10, 1989 between Tibech AG and Bioptron
AG (5)
10.8 Agreement dated February 7, 1990 between Tibech AG and Bioptron
AG (5)
10.9 Sales Agreement for HDC AG stock between Dr. Carl Odermatt and
the Company (5)
10.10 Distribution Agreement with Planeta, dated September 1, 1991
(with accompanying unofficial translation. (6)
10.11 Univ. of Michigan Agreement dated October 17, 1992. (10)
10.12 Univ. of Michigan Agreement dated March 18, 1992. (10)
-13-
<PAGE>
10.13 Sale of Assets Agreement by and between the Registrant and a
German Investor (8)
10.14 Agreement to Dissolve Joint Research and Development Project by
and between the Registrant and Tecno-Bio CO., Ltd. (9)
10.15 Purchase and License Agreement of HDC AG by and between the
Registrant and Tecno-Bio CO., Ltd. T (9)
10.16 Harrier, Inc./American Diagnostica Inc. R&D Joint Venture
Agreement (11)
10.17 Loan Agreement between New Capital Investment Fund and Harrier,
Inc. (12)
10.18 Asset Transfer and Plan of Liquidation and Dissolution dated June
30, 1997 between the Registrant, Naturade, Inc. and DermaRay, LLC
10.19 Securities Purchase Agreement and Plan of Reorganization dated
October 30, 1997 between Registrant and COPE AG
10.20 Agreement dated October 30, 1997 between Registrant and New
Concept Therapeutics, Inc.
10.21 Subsidiaries of the Registrant(6)
</TABLE>
- -------------------------
(1) Filed as an exhibit to Proxy Statement dated May 14, 1990, filed on May 16,
1990 (File No 1-9925), incorporated herein by reference.
(2) Filed as an exhibit to Report on form 10-K for the year-ended June 30,
1987, filed on March 18, 1988 (File No 1-9925), incorporated by reference.
(3) Filed as an exhibit to Report on form 10-K for the year-ended June 30,
1988, filed on November 3, 1988 (File No 1-9925), incorporated herein by
reference.
(4) Filed as an exhibit to Report on form 10-K for the year-ended June 30,
1989, filed on October 13, 1989 (File No 1-9925), incorporated herein by
reference.
(5) Filed as an exhibit to Report on form 10-K for the year-ended June 30,
1990, filed on October 13, 1990 (File No 1-9925), incorporated herein by
reference.
(6) Filed as an exhibit to Report on form 10-K for the year-ended June 30,
1991, filed on October 13, 1991 (File No 1-9925), incorporated herein by
reference.
(7) Filed as an exhibit to Report on form 8-K dated July 27, 1990,, filed on
September 6, 1990 (File No 1-9925), incorporated herein by reference.
(8) Filed as an exhibit to Report on Form 8-K dated July 10, 1992, filed on
July 31, 1992 (File No 1-9925), incorporated herein by reference.
(9) Filed as an exhibit to Report on form 8-K dated August 1, 1992, filed on
August 26, 1992 (File No 1-9925), incorporated herein by reference.
(10) Filed as an exhibit to Report on form 10-K for the year-ended June 30,
1992, filed on October 24, 1992 (File No. 1-9925), incorporated herein by
reference.
-14-
<PAGE>
(11) Filed as an exhibit to Report on Form 10-K for the year-ended June 30,
1993, filed on November 25, 1993 (File No. 1-9925), incorporated herein by
reference.
(12) Filed as an exhibit to Report on Form 10-K for the year-ended June 30,
1996, filed on December 3, 1996 (File No. 1-9925), incorporated herein by
reference.
Financial Statement Schedules are omitted because they are not applicable or
because the required information is contained in the Consolidated Financial
Statements or the notes thereto.
(b) REPORTS ON FORM 8-K
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, as amended, the Registrant has caused this report to be
signed on its behalf by the undersigned, hereunto duly authorized.
COPE, Inc. (formerly known as
Harrier, Inc.)
Date: March 10, 1999 By: /s/ Adrian Knapp
-------------------------------
Adrian Knapp, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
Date: March 10, 1999 By /s/ Adrian Knapp
------------------------------------
Adrian Knapp,
Chairman & Director
Date: March 10, 1999 By /s/Stephan Isenschmid
------------------------------------
Stephan Isenschmid,
President, CEO and Director
Date: March 10, 1999 By /s/ Markus Stalder
------------------------------------
Markus Stalder, Director
Date: March 10, 1999 By /s/ Kevin DeVito
------------------------------------
Kevin DeVito, Director and Secretary
Date: March 10, 1999 By /s/ Peter Koch
------------------------------------
Peter Koch, Director
-16-
<PAGE>
CONSOLIDATED AUDITED FINANCIAL STATEMENTS
COPE, Inc. (formerly known as Harrier, Inc.)
Years Ended June 30, 1998 and 1997
<PAGE>
COPE, Inc. (formerly known as Harrier, Inc.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
INDEPENDENT AUDITORS' REPORT F-1
FINANCIAL STATEMENTS
Consolidated Balance Sheet F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Changes in
Stockholders' Deficit F-4
Consolidated Statements of Cash Flows F-5 to F-6
Notes to Consolidated Financial Statements F-7 to F-20
</TABLE>
<PAGE>
RAIMONDO PETTIT GROUP
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
COPE, Inc. (formerly known as Harrier, Inc.)
Hermosa Beach, California
We have audited the accompanying consolidated balance sheet of COPE, Inc.
(formerly known as Harrier, Inc.) as of June 30, 1998, and the related
consolidated statements of operations, changes in stockholders' deficit, and
cash flows for the two years then ended. The consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of COPE, Inc. (formerly known as Harrier, Inc.) as of June 30, 1998 and the
consolidated results of their operations and their cash flows for the two
years then ended, in conformity with generally accepted accounting principles.
RAIMONDO PETTIT GROUP
Torrance, California
October 30, 1998
F-1
<PAGE>
<TABLE>
<CAPTION>
COPE, Inc. (formerly known as Harrier, Inc.)
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
JUNE 30, 1998
- --------------------------------------------------------------------------------
ASSETS
<S> <C>
Cash and cash equivalents $ 18,018
Amounts receivable from related parties 29,600
Other current assets 75
- --------------------------------------------------------------------------------
Total current assets 47,693
- --------------------------------------------------------------------------------
Property and equipment, net 17,249
Intangible assets, net 28,065
- --------------------------------------------------------------------------------
TOTAL ASSETS $ 93,007
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Accounts payable and accrued expenses $ 652,921
Convertible note payable to related party 625,333
Notes payable to related parties 160,423
Note payable 146,220
Dividend payable to Glycosyn preferred stockholders 15,130
- --------------------------------------------------------------------------------
Total current liabilities 1,600,027
- --------------------------------------------------------------------------------
MINORITY INTEREST 79,912
- --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCY (NOTES 9, 10, 12 AND 13)
STOCKHOLDERS' DEFICIT
Preferred stock, $.001 par value - authorized, 5,000,000
shares; issued and outstanding, 0 shares -
Common stock, $.001 par value - authorized, 30,000,000
shares; issued and outstanding, 270,662 shares 270
Additional paid-in capital 15,516,938
Accumulated deficit (17,066,431)
Cumulative translation adjustment (37,709)
- --------------------------------------------------------------------------------
Total stockholders' deficit (1,586,932)
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 93,007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-2
<PAGE>
COPE, Inc. (formerly known as Harrier, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30, 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
SALES $- $48,069
COST OF SALES - 50,383
- --------------------------------------------------------------------------------
GROSS PROFIT (Loss) - (2,314)
- --------------------------------------------------------------------------------
EXPENSES
Selling, general and administrative 235,223 290,442
Salaries and related expenses 244,035 357,049
Research and development 12,633 -
Amortization and depreciation 17,109 40,489
- --------------------------------------------------------------------------------
TOTAL EXPENSES 509,000 687,980
- --------------------------------------------------------------------------------
LOSS FROM OPERATIONS (509,000) (690,294)
- --------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
National Cancer Institute grant 20,000 80,000
Interest income (expense), net (79,920) (57,638)
Loss on sale of marketable securities - (15,716)
Miscellaneous income - 6,600
Loss on sale of investment in joint venture - (7,448)
Unrealized loss on investment (250,000) -
Minority interest in net loss of
consolidated subsidiary 25,978 -
- --------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE) (283,942) 5,798
- --------------------------------------------------------------------------------
LOSS BEFORE PROVISION FOR INCOME TAXES (792,942) (684,496)
PROVISION FOR INCOME TAXES 1,020 1,740
- --------------------------------------------------------------------------------
NET LOSS $(793,962) $(686,236)
- --------------------------------------------------------------------------------
BASIC AND DILUTED LOSS PER SHARE $(3.07) $(3.19)
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES: BASIC AND
DILUTED 259,038 214,972
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
COPE, Inc. (formerly known as Harrier, Inc.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
- --------------------------------------------------------------------------------------------------------------------------------
Common Stock Additional Cumulative Total
---------------------- Paid-in Accumulated Translation Stockholders'
Shares Amount Capital Deficit Adjustment Deficit
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, July 1, 1996 206,351 $11,968 $15,225,740 $(15,571,103) $(37,709) $(371,104)
Issuance of common stock 34,483 2,000 98,000 100,000
Dividend payable to Glycosyn
preferred stockholders (4,450) (4,450)
Net loss for the year
ended June 30, 1997 (686,236) (686,236)
- ------------------------------------------------------------------------------------------------------------------------------
Balances, June 30, 1997 240,834 $13,968 $15,323,740 $(16,261,789) $(37,709) $(961,790)
- ------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock 29,828 1,730 177,770 179,500
Adjustment to conform common
stock to post-split number of shares (15,428) 15,428 -
Dividend payable to Glycosyn
preferred stockholders (10,680) (10,680)
Net loss for the year
ended June 30, 1998 (793,962) (793,962)
- ------------------------------------------------------------------------------------------------------------------------------
Balances, June 30, 1998 270,662 $270 $15,516,938 $(17,066,431) $(37,709) $(1,586,932)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
COPE, Inc. (formerly known as Harrier, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30, 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(793,962) $(686,236)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 17,109 40,489
Loss on sale of investment in joint venture - 7,448
Loss on sale of marketable securities - 15,716
Minority interest in loss of combined entity (25,978) -
Unrealized loss on investment 250,000 -
Consulting services applied against
receivable from related party 5,478 -
Accrued interest 60,833 60,833
Increase (decrease) resulting
from changes in:
Amounts receivable from related parties - 45,070
Inventory - 40,411
Other current assets 29,669 (11,522)
Accounts payable and accrued expenses 82,242 (7,102)
- --------------------------------------------------------------------------------
Net cash used in operating activities (374,609) (494,893)
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - (54,849)
Proceeds from sale of marketable securities - 46,159
Collection on note receivable for sale of equity in
joint venture and inventory 120,000 20,000
Collection of receivable from related party - 5,798
- --------------------------------------------------------------------------------
Net cash provided by investing activities 120,000 17,108
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 160,000 100,000
Issuance of preferred stock of subsidiary 16,890 89,000
Borrowings from related party 60,000 -
Proceeds from note payable 142,000 -
Payments on note due to related party (164,500) -
- --------------------------------------------------------------------------------
Net cash provided by financing activities 214,390 189,000
- --------------------------------------------------------------------------------
</TABLE>
F-5
<PAGE>
COPE, Inc. (formerly known as Harrier, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30, 1998 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net decrease in cash (40,219) (288,785)
Cash and cash equivalents, beginning of year 58,237 347,022
- ----------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 18,018 $ 58,237
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
CASH PAID DURING THE YEAR FOR:
Interest $ - $ -
Taxes $ 1,020 $ 1,740
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Stock issued for services and commissions $ 19,501 $ -
Note receivable in consideration for sale of
equity in joint venture and inventory $ - $ 175,000
Dividend accrued on subsidiary preferred stock $ 10,680 $ 4,450
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
COPE, Inc. (formerly known as Harrier, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 ORGANIZATION AND DESCRIPTION OF BUSINESS
COPE, Inc. (formerly known as Harrier, Inc.) was organized under the laws of
the State of Utah on October 8, 1985 and later was reincorporated in the
State of Delaware. The Company is engaged in research, development and
marketing of a number of products which are at various stages of development.
Until June 30, 1997, the Company was selling the Bioptron Lamp (cosmetic and
medical uses) in the Western Hemisphere.
Glycosyn Pharmaceuticals, Inc. ("Glycosyn") is organized as a majority-owned
subsidiary under the laws of the State of Delaware. Glycosyn holds all of the
Company's biomedical technologies rights and obligations. The biomedical
technologies are currently in the pre-clinical development phase.
The accompanying consolidated financial statements include the accounts of
COPE, Inc. (formerly known as Harrier, Inc.), its wholly-owned subsidiary,
Harrier GmbH, a German corporation, and Glycosyn (collectively, the
"Company"). Harrier GmbH is a dormant corporation since 1992. All
significant intercompany transactions and balances have been eliminated.
In September, 1998, the Company reorganized, merged with Cope A.G. in a reverse
purchase transaction, changed its name to Cope, Inc. and effected a 1 for 58
reverse stock split (see Note 15 - Subsequent Event).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
MANAGEMENT'S ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles, requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment, including significant improvements thereto, are stated
at cost and are depreciated using the straight-line method over an estimated
useful life of 5 years. Maintenance and repairs are charged to expense as
incurred.
F-7
<PAGE>
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Glycosyn has a 19% interest in another entity which is accounted for under the
cost method. The Company assesses whether there has been a permanent impairment
in the value of its investments by considering factors such as quoted market
prices, estimated joint venture revenues and prospects and other economic
factors.
INTANGIBLE ASSETS
Intangible assets are owned by Glycosyn and include patents, product rights and
technology costs. All patent, product rights and technology costs are
capitalized and amortized over ten years using the straight-line method. The
Company assesses whether there has been a permanent impairment in the value of
intangible assets by considering factors such as expected future product
revenues, anticipated product demand and prospects and other economic factors.
INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which requires the recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been included in
the consolidated financial statements or tax returns. Under this method,
deferred tax liabilities and assets are determined based on the difference
between the consolidated financial statements and the tax basis of assets and
liabilities using enacted rates in effect for the year in which the differences
are expected to reverse. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.
FOREIGN CURRENCY TRANSLATION
The Company has one dormant German subsidiary. The cumulative translation
adjustment represents the historical effect of translation adjustments of this
subsidiary's pre 1992 activity.
LOSS PER COMMON SHARE
Effective December 31, 1997, the Company adopted Statement No. 128, "Earnings
Per Share." This new standard requires dual presentation of basic and diluted
earnings per share ("EPS") on the face of the statement of income and requires
reconciliation of the numerators and the denominators of the basic and diluted
EPS calculations.
F-8
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOSS PER COMMON SHARE (CONTINUED)
Basic net loss per common share is computed by dividing net loss by the weighted
average number of outstanding common shares during the periods presented. For
purposes of SFAS No. 128, basic loss per share and diluted loss per share are
the same amount as the impact of additional common shares that might have been
issued under the Company's stock option plan, warrants and convertible debt
would be anti-dilutive.
All references to the Company's number of shares reflect the 1 for 58 reverse
stock split described in Note 15 as if it had occurred at July 1, 1996.
CASH AND CASH EQUIVALENTS
The Company considers short-term investments which have maturities of three
months or less at the date of acquisitions to be cash equivalents. From time to
time, the Company's cash on deposit with banks exceeds the $100,000
federally-insured limit.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments included in current assets and
liabilities approximates fair value because of the short maturity of these
items.
ISSUANCE OF STOCK FOR SERVICES
Shares of the Company's common stock issued for services are recorded in
accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations" and Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), at the fair market value
of the stock issued or the fair market value of the services provided, whichever
value is the more clearly evident.
STOCK COMPENSATION PLAN
SFAS 123 encourages, but does not require, companies to record compensation cost
for stock-based employee compensation plans at fair value. The Company elected
to account for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. Accordingly, compensation
cost for stock options is measured as the excess, if any, of the quoted market
price
F-9
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK COMPENSATION PLAN (CONTINUED)
of the Company's stock at the date of the grant over the amount an employee must
pay to acquire the stock.
RECENT ACCOUNTING DEVELOPMENT
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in an entity's
financial statements. This statement requires an entity to classify items of
other comprehensive income by their nature in a financial statement and display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in-capital in the equity section of a statement of
financial position. This pronouncement is effective for fiscal years beginning
after December 15, 1997 and the Company expects to adopt the provision of this
statement in fiscal year 1999.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." This statement requires public enterprises
to report financial and descriptive information about its reportable operating
segments and establishes standards for related disclosures about product and
services, geographic areas, and major customers. This pronouncement is
effective for fiscal years beginning after December 15, 1997 and the Company
expects to adopt the provisions of this statement in fiscal year 1999.
3. AMOUNTS RECEIVABLE FROM RELATED PARTIES
During the year ended June 30, 1995, the Company acquired a 50% interest in
Derma Ray International Limited Liability Corporation ("Derma Ray"). Derma Ray
was formed to market, distribute and sell various health and cosmetic products.
On June 30, 1997, the Company sold its entire inventory and its interest in
Derma Ray in consideration for $40,000 in cash and a note receivable of
$135,000. The note is non-interest bearing and is due no later than June 30,
1998. As of October 30, 1998, the entire amount of the note had been repaid.
F-10
<PAGE>
4. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at cost, less accumulated
depreciation as of June 30, 1998:
<TABLE>
<S> <C>
Equipment $ 66,062
Furniture and fixtures 17,645
Leasehold improvements 32,585
----------
$ 116,292
Accumulated depreciation (99,043)
----------
$ 17,249
----------
----------
</TABLE>
Total depreciation expense for the years ended June 30, 1998 and 1997 was
$13,388 and $36,766, respectively.
5. INVESTMENTS
NEW CONCEPT THERAPEUTICS INVESTMENT ACQUISITION
Glycosyn acquired a minority interest in New Concept Therapeutics, Inc., a North
Carolina corporation ("NCT"), pursuant to an agreement ("NCT Agreement") dated
October 30, 1997. NCT was formed on July 1, 1997 for the purpose of
manufacturing and distributing boron-containing pharmaceutical products for the
treatment of cancer. NCT's products are used in connection with boron neutron
capture therapy, an experimental cancer treatment currently under clinical
trials in the United States and Europe. At June 30, 1998, and during the period
from NCT minority interest's acquisition through year end, neither the Company
nor Glycosyn had control or significant influence over NCT. Accordingly, this
investment was accounted for under the cost method.
Pursuant to the NCT Agreement, Glycosyn has agreed to purchase 23 shares of the
common stock of NCT, representing approximately 19% of the issued and
outstanding common shares of NCT, in consideration of Glycosyn's delivery of an
unsecured promissory note in the original principal amount of $250,000 (the
"Note"). The Note bears interest at the rate of 10% per annum and was due on or
before April 30, 1998. The Note balance amounted to $85,500 at June 30, 1998
and, as of October 30, 1998, Glycosyn has paid $207,500 under the Note.
F-11
<PAGE>
5. INVESTMENTS (CONTINUED)
NEW CONCEPT THERAPEUTICS INVESTMENT ACQUISITION (CONTINUED)
As additional consideration for the issuance of the Note, NCT granted Glycosyn
an option (the "NCT Option") to purchase all 123 of the issued and outstanding
shares of NCT at an exercise price of $7,500 per share for a two year period.
The NCT Option is exercisable by Glycosyn subject to its payment of the entire
principal amount of the Note. The NCT Option provides that Glycosyn may pay for
the underlying NCT common shares by Glycosyn's delivery of 1,225,000 shares of
Glycosyn common stock (at a rate of $0.30 per Glycosyn share).
The Company's intention with regard to NCT was to assist it in the development
and marketing of its boron-containing pharmaceutical products and, in the event
of the commercial success of NCT's products, acquire all of the issued and
outstanding common shares of NCT. At June 30, 1998, management determined that,
as a result of NCT's past, current and projected operating losses, there had
been a significant impairment in the carrying value of the Company's investment
in NCT. Therefore, a $250,000 unrealized loss on investment was recognized at
June 30, 1998.
MARKETABLE SECURITIES
During fiscal 1997, the Company sold $61,875 in marketable securities for
$46,159, recognizing a $15,716 loss included in the consolidated statement of
operations.
DERMA RAY
During the year ended June 30, 1995, the Company acquired a 50% interest in
Derma Ray for a $200,000 initial capital contribution. The excess of the
Company's contribution over its equity in the joint venture's net amount
amounted to $50,000 and was amortized over five years. During the year ended
June 30, 1997, Derma Ray incurred a gain of $16,803, of which $8,402 was
allocated to the Company and recorded in the 1997 consolidated statement of
operations. As disclosed in Note 3, the Company sold its membership interest to
Derma Ray and recorded a net loss of $7,448 in fiscal year 1997.
F-12
<PAGE>
6. INTANGIBLE ASSETS
The following is a summary of intangible assets at cost, less accumulated
amortization as of June 30, 1998:
<TABLE>
<S> <C>
Patents and patent applications $ 37,220
Accumulated amortization 9,155
-----------
$ 28,065
-----------
-----------
</TABLE>
The Company has filed individual and continuation-in-part patents on its
modified glycosylation compounds and related chemical processes since January,
1990. In September, 1992, the Company filed new patent applications covering
significant additions to its glycosylation process. These patents, which have
subsequently been issued, are co-owned by the Company and the University of
Michigan because they involve technologies developed pursuant to research
agreements entered into with the University. Compensation to the University for
future revenues generated from technology related to the co-owned patents has
not been determined at this time.
Total amortization charged to operations was $3,721 and $3,723 for the years
ended June 30, 1998 and 1997, respectively.
7. CONVERTIBLE NOTES PAYABLE TO RELATED PARTY AND OTHERS
On June 9, 1996, the Company entered into a $500,000 loan agreement with New
Capital Investment Fund ("NCIF") an entity affiliated with the President and the
Chairman of the Board. The loan bears interest at 12% and was due on June 4,
1998. The note was paid off in September 1998 in consideration for 2,850,000
common shares of Glycosyn (see Note 15).
On January 21, 1998, Glycosyn entered into another $60,000 loan agreement with
NCIF. The loan bears interest at 12% and the full amount of principal plus
interest is due at January 20, 1999. The loan is convertible into Glycosyn
common stock valued at 30% of the quoted market price at the maturity date.
On March 16, 1998, Glycosyn entered into a $142,000 convertible loan agreement.
Proceeds of the loan were used to make payments on a note due to NCT (see Note
5) and for general working capital purposes. The loan bears interest at 10% and
is due on March 16, 1999. At the lender's option, the principal and interest
can be repaid using Glycosyn's common stock valued at 30% of the quoted market
price at the time of maturity (or at an earlier date chosen by the lender).
F-13
<PAGE>
8. MINORITY INTEREST
At June 30, 1998, the Company owned approximately 94% of Glycosyn. During the
year ended 1998, Glycosyn issued 11,260 shares of its Series A preferred stock
with a $1.50 per share liquidation preference. During the year ended 1997,
Glycosyn sold 44,500 shares of its Series A preferred stock for $89,000 to a
related party. The preferred stock has a liquidation preference of $2 per share
($89,000), is convertible into shares of Glycosyn common stock and entitles the
holder to a dividend of 12% of the liquidation preference, payable quarterly in
common stock of Glycosyn. The preferred stock has been presented in the
accompanying financial statements as minority interest.
9. COMMON STOCK AND STOCK OPTION PLAN
During the year ended June 30, 1998, the Company issued 29,828 shares of common
stock in consideration for $160,000 and 15,517 common stock purchase warrants
(see Note 10) to existing shareholders and related parties.
During the year ended June 30, 1997, the Company issued 34,473 shares of common
stock (total value $100,000) and 34,473 common stock purchase warrants (see Note
10) to existing shareholders and related parties.
During the year ended June 30, 1990, the Company adopted an incentive stock
option and award plan. A total of 25,862 shares of common stock may be issued
under the plan and have been reserved by the Board of Directors for that
purpose. Options may be granted to Directors, Officers, employees and other
individuals at terms and exercise prices to be determined by the Board of
Directors. The following is a summary of all common stock options outstanding:
<TABLE>
<CAPTION>
JUNE 30, 1998 June 30, 1997
SHARES WAEP* Shares WAEP*
<S> <C> <C> <C> <C>
Outstanding, beginning of year 7,759 .29 14,035 2.72
Granted - - - -
Canceled-expired (7,759) .29 (6,276) 5.46
Exercised - - - -
------- -------
Outstanding, end of year - 7,759 .29
------- -------
------- -------
Exercisable, end of year - 7,759 .29
------- -------
------- -------
</TABLE>
F-14
<PAGE>
* Weighted average exercise price
10. WARRANTS
Convertibility rights, weighted average exercise price and remaining contractual
life attached to the common stock purchase warrants issued in connection with
public and private stock offerings are as follows:
<TABLE>
<CAPTION>
Series 1994 1995 1996 1997 1998
C and D Warrants Warrants Warrants Warrants Warrants
------- --------------- -------------- -------------- -------------- --------------
Shares WAEP* Shares WAEP Shares WAEP Shares WAEP Shares WAEP Shares WAEP
------ ----- ------ ---- ------ ---- ------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding,
June 30, 1996 7,336 $ 49.30 6,073 $ 62.64 33,868 $ 40.60 5,000 $ 25.52 - - - -
Issued - - - - - - - - 34,483 $ 7.54 - -
Canceled/Expired (7,336) 49.30 (6,073) 62.64 (33,868) 40.60 - - - - - -
Exercised - - - - - - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding,
June 30, 1997 - - - - - - 5,000 25.52 34,483 7.54 - -
Issued - - - - - - - - - - 15,517 7.54
Canceled/Expired - - - - - - (5,000) 25.52 - - - -
Exercised - - - - - - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding and
exercisable,
June 30, 1998 - - - - - - - 34,483 $ 7.54 15,517 $ 7.54
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted
average
remaining
contractual
life - - - - 21.5 months 26.7 months
Range of exercise
price - - - $7.54 $7.54
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Weighted average exercise price
F-15
<PAGE>
11. INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
For the Years Ended June 30,
----------------------------
1998 1997
<S> <C> <C>
Current:
State $ 1,020 $ 1,740
Foreign - -
------- -------
1,020 1,740
Deferred - -
------- ------
$1,020 $1,740
------- ------
------- ------
</TABLE>
The reconciliation of the effective tax rates and U.S. statutory tax rates are
as follows:
<TABLE>
<CAPTION>
For the Years Ended June 30,
----------------------------
1998 1997
<S> <C> <C>
Tax benefit at statutory rate (34%) (34%)
Change in valuation allowance 34% 34%
----- -----
0% 0%
----- -----
----- -----
</TABLE>
At June 30, 1998, the Company has net operating loss carryforwards, for income
tax reporting purposes, of approximately $12,363,358 and $1,978,544 available to
offset future federal and California taxable income, respectively. The federal
carryforwards expire in 2009 and the California carryforwards expire in 1999.
The utilization of net operating loss carryforwards may be limited under the
provisions of Internal Revenue Code Section 382.
At June 30, 1998, the Company had available tax credit carryforwards comprised
of federal and state research and experimentation credits of $1,263 and $8,512,
respectively. The California and federal research and experimentation credit
carryforwards expire in 2009 and 2012, respectively.
F-16
<PAGE>
11. INCOME TAXES (CONTINUED)
The components of the net deferred tax asset and (liability) are as follows:
<TABLE>
<CAPTION>
For the Years Ended June 30,
----------------------------
1998 1997
<S> <C> <C>
State taxes $ 347 $ 354
Net operating loss carryforward 4,378,445 4,383,141
Patents 1,532 1,738
Credits 9,775 65,474
Depreciation and amortization (1,345) 28,270
---------- ----------
Subtotal 4,338,754 4,478,977
Valuation allowance (4,338,754) (4,478,977)
---------- ----------
Total $ - $ -
---------- ----------
---------- ----------
</TABLE>
12. COMMITMENTS
Operating Leases
The Company leases office space under an operating lease that expires in fiscal
year 1999. Total rent expense amounted to $32,851 and $46,390 for the years
ended June 30, 1998 and 1997, respectively.
13. CONTINGENCY - JOINT RESEARCH AND DEVELOPMENT AGREEMENT
On May 1, 1993, the Company completed a drug development agreement with American
Diagnostica, Inc. ("ADI"), a private company located in Greenwich, Connecticut.
Pursuant to the agreement, ADI was required to develop and test synthetic drugs
using the Company's proprietary glycosylation processes. ADI has committed to
pay the Company $5,000 per month over 100 months and expend at least $800,000
for research and development.
F-17
<PAGE>
13. CONTINGENCY - JOINT RESEARCH AND DEVELOPMENT AGREEMENT (CONTINUED)
In June 1995, ADI informed the Company that it was unable to fund any further
obligations pursuant to the research and development portion of the drug
development agreement. The Company then terminated the related agreement for,
among other things, anticipatory repudiation. On August 24, 1995, ADI filed a
civil action for money damages alleging wrongful termination, substantial
compliance under the agreement, and that the Company was indebted to the
plaintiff for damages in an unspecified amount, plus punitive damages, attorney
fees and interest. In December, 1995, Harrier moved the court for an order
compelling the plaintiff to submit the dispute to arbitration. In September,
1996, the court granted the Company's motion, staying all proceedings pending
the conclusion of mandatory arbitration in California, as the parties provided
in the research and development agreement. As of the date of the consolidated
financial statements, no arbitration proceeding has been commenced by either
party. Management believes that it has meritorious defenses to all of ADI's
claims and that the claims are substantially without merit. Under current
circumstances, no determination can be made as to the ultimate outcome of the
litigation or as to the necessity for any provision in the accompanying
consolidated financial statements for any liability that may result from an
unfavorable outcome. In addition, subsequent to year end, and in connection
with the Cope Reorganization (see Note 15), New Capital A.G., a related party,
entered into a hold harmless agreement with Cope whereby New Capital A.G. would
pay for any claims and costs arising out of this litigation.
14. NATIONAL CANCER INSTITUTE GRANT
In December 1996, Glycosyn was awarded a $100,000 grant to finance research on
its medical technologies. $80,000 was received and expensed during fiscal year
1997, whereas the remaining $20,000 was received and expensed during fiscal year
1998.
15. SUBSEQUENT EVENTS
COPE REORGANIZATION
In September, 1998, the Company closed a Securities Purchase Agreement and Plan
of Reorganization ("Reorganization Agreement") with COPE AG ("COPE"), a Swiss
stock corporate engaged in the business of providing high volume information
management consulting, services and solutions to Swiss, Germany and Austrian
companies. Pursuant to the Reorganization Agreement, the shareholders of COPE
became the controlling stockholders of the Company and COPE became a
wholly-owned subsidiary of the Company (referred to herein as the "COPE Reor-
F-18
<PAGE>
15. SUBSEQUENT EVENTS (CONTINUED)
COPE REORGANIZATION (CONTINUED)
ganization"). In connection with the COPE Reorganization, the Company entered
into an agreement with a related party, New Capital Investment Fund ("NCIF"), to
sell 2,850,000 shares of the $.001 par value common stock ("Glycosyn Common
Stock") of its subsidiary, Glycosyn, to NCIF in exchange for NCIF's cancellation
of $500,000 of indebtedness plus accrued interest (see Note 7) owed by the
Company (referred to herein as the "Glycosyn Recapitalization"). See "Glycosyn
Recapitalization" below.
In accordance with the Reorganization Agreement, immediately prior to the
closing ("Closing") of the COPE Reorganization, the Company effected the
Glycosyn Recapitalization and filed an amendment (the "Amendment") to the
Company's Certificate of Incorporation to: (i) change the name of the Company to
COPE Inc.; and (ii) reverse split the outstanding shares of Common Stock of the
Company on a one for 58 basis. At the Closing, after the foregoing was
satisfied, the Company issued 2,862,000 shares (post-split) of the Company's
$.001 par value common stock ("Harrier Common Stock"), representing
approximately 91.4% of the issued and outstanding shares of Harrier Common Stock
after giving effect to the Closing, in exchange for the COPE shareholders'
transfer of all of the issued and outstanding capital shares of COPE to the
Company.
Additional information concerning COPE, the COPE Reorganization and the Glycosyn
Recapitali-zation were included in a Proxy Statement filed with the Securities
and Exchange Commission and distributed to the shareholders of the Company.
GLYCOSYN RECAPITALIZATION
The Glycosyn Recapitalization is part of a broader recapitalization of the
Company in connection with the COPE Reorganization. The Company has structured
the following series of transactions (referred to herein as the "Glycosyn
Recapitalization"):
- Prior to the close of the COPE Reorganization, Harrier transferred all
of its assets and liabilities to Glycosyn. In connection therewith,
the principal creditors of Harrier agreed to release Harrier of any
further liability for their claims. In addition, NCIF issued a
$136,830 note payable to the Company for claims that were not
released by the creditors.
F-19
<PAGE>
Prior to the close of the COPE Reorganization, Harrier sold to NCIF 2,850,000
shares of its 5,000,000 Glycosyn Common Stock shares in consideration of
NCIF's agreement to cancel the $500,000 note and accrued interest owed by
Harrier.
15. SUBSEQUENT EVENTS (CONTINUED)
GLYCOSYN RECAPITALIZATION (CONTINUED)
Upon the sale of the 2,850,000 shares of Glycosyn common stock, Harrier's
interest in Glycosyn was reduced to approximately 40% and, as a result, the
financial condition and results of operations of Glycosyn will not be
consolidated with the Company for financial statements issued subsequent to the
close of the COPE Reorganization.
<PAGE>
ASSET TRANSFER AGREEMENT AND PLAN OF LIQUIDATION AND DISSOLUTION
THIS ASSET TRANSFER AGREEMENT AND PLAN OF LIQUIDATION AND DISSOLUTION
("Agreement") is entered into as of June ___, 1997, by and among HARRIER, INC.,
a Delaware corporation ("Harrier"), NATURADE, INC., a Delaware corporation
("Naturade") and DERMARAY INTERNATIONAL, L.L.C., a California limited liability
company (the "Company"). Harrier and Naturade are hereinafter referred to
individually as a "Member" and collectively as the "Members."
R E C I T A L S
A. Harrier and Naturade previously organized the Company pursuant to that
certain limited Liability Company Agreement ("LLC Agreement") dated November 29,
1994.
B. Harrier and Naturade are the sole Members of the Company, with Harrier
owning a 50% Membership Interest (as that term is defined at Section 1.6(q) of
the LLC Agreement) and Naturade owning a 50% Membership Interest.
C. The Members desire to liquidate and dissolve the Company pursuant to
the laws of the State of California and this Agreement.
D. The Members have duly authorized and approved the transactions
contemplated by this Agreement.
A G R E E M E N T
It is agreed as follows:
1. SALE AND PURCHASE OF ASSETS.
1.1 TRANSFER. Subject to and upon the terms and conditions set forth
herein, Harrier agrees to sell, assign, convey, transfer and deliver
("Transfer") to the Company, and the Company agrees to purchase from Harrier,
the following assets ("Assets"):
(a) Harrier's entire Membership Interest in the Company; and
(b) Harrier's bioptron lamp inventory, as identified and
described in the Schedule of Assets attached as Schedule 1 hereto ("Inventory").
1.2 CONSIDERATION. The consideration to be paid by the Company to
Harrier for the Assets on or before the Initial Closing Date (as defined below)
shall be $175,000. Harrier acknowledges its prior receipt of $20,000 of such
amount. The Company shall deliver the balance of the consideration on the
Initial Closing Date pursuant to an unsecured promissory note ("Note") in the
original principal amount of $155,000 in the favor of the Note attached hereto
as Exhibit A.
-1-
<PAGE>
1.3 CLOSING. The initial closing ("Closing") of the transactions
under this Agreement shall take place on June ___, 1997 (the "Initial Closing
Date"). On the Initial Closing Date, Harrier shall transfer all of its right,
title and interest in and to the Inventory to the Company pursuant to the bill
of sale attached hereto as Exhibit B, and the Company shall deliver the
originally executed Note to Harrier. Upon each payment by the Company of a
portion of the principal amount outstanding under the Note, the Company shall be
deemed to have redeemed a proportional amount of Harrier's Membership Interest.
For example, upon Naturade's payment of $15,500 of the principal amount under
the Note (representing 10% of the original principal amount) the Company shall
be deemed to have redeemed 5% of Harrier's Membership Interest (representing
10% of Harrier's original Membership Interest). The redemptions hereunder shall
take place upon, and concurrent with, each payment of principal under the Note,
without the need for any further action on the part of any party, and each such
redemption shall be referred to as a "Closing."
1.4 INSTRUMENTS OF TRANSFER, ETC. Harrier shall deliver to the
Company at each Closing and thereafter upon the Company's request such
additional bills of sale, assignments and other good and sufficient instruments
of Transfer in form and substance satisfactory to Buyer and its counsel as are
necessary to effectively Transfer all of Harrier's right, title and interest in
the Assets to the Company. At any time after each Closing, Harrier shall
execute, acknowledge and deliver to the Company any further documents,
assurances or other matters, and will take any other action consistent with the
terms of this Agreement that may reasonably be requested by the Company and as
are necessary or desirable to carry out the purpose of this Agreement.
1.5 TITLE TO ASSETS. Harrier has and will Transfer to the Company
good and marketable title to the Assets, free and clear of all mortgages,
pledges, security interests, liens, claims, charges, restrictions and
encumbrances. No financing statements under the Uniform Commercial Code or
similar laws naming Harrier as debtor have been filed in any jurisdiction with
respect to the Assets.
2. DISSOLUTION AND WINDING UP.
2.1 REDEMPTION OF MEMBERSHIP INTEREST. Upon the Company's final
payment of the outstanding principal amount under the Note ("Dissolution Date"),
the Company shall be deemed to have redeemed Harrier's entire Membership
Interest and the Company shall be deemed to have dissolved in accordance with
Article XII of the LLC Agreement.
2.2 NOTIFICATION OF CREDITORS. On the Dissolution Date, Naturade, as
the sole Member, the Company, shall give written notice of commencement of
winding up to the Company in substantially the form of Exhibit C, indicating
that the assets of the Company are to be distributed in liquidation to the
remaining Member.
2.3 SECRETARY OF STATE FILINGS. As soon as practicable after the
Dissolution Date, and after receiving tax clearance certificates from the
California Franchise Tax Board as required by law, Naturade shall execute a
Certificate of Dissolution on Form LLC-3 and a Certificate of Cancellation on
Form LLC-4/7 in accordance with the provisions of the California Corporations
Code, and cause such Certificates to be filed in the office of the Secretary of
State of California.
-2-
<PAGE>
3. MUTUAL REPRESENTATIONS, WARRANTIES AND COVENANTS. Each party
represents, warrants and covenants to the other as of the date hereof and as of
each Closing as follows:
3.1 ORGANIZATION. Each party is duly organized, validly existing and
in good standing under the laws of the state of its organization.
3.2 POWER AND AUTHORITY. Each party has all requisite power and
authority to enter into and to carry out all of the terms of this Agreement and
all other documents executed and delivered in connection herewith. All action
on the part of the party, its officers, directors, shareholders and members
necessary for the authorization, execution, delivery and performance of this
Agreement by the party has been taken and no further authorization on the part
of the party is required to consummate the transactions provided for in this
Agreement. When executed and delivered by the party, this Agreement shall
constitute the valid and legally binding obligations of the party enforceable in
accordance with its terms. Neither the execution, delivery nor performance of
this Agreement by the party shall (i) violate or result in a breach of any
provisions of the party's charter documents, (ii) constitute a default or result
in a breach of any contract or agreement to which it is a party or its assets or
properties are bound, or (iii) violate any order, writ, injunction, decree,
judgment or other restriction of any court, administrative agency or
governmental body.
3.3 AGREEMENT TO PERFORM NECESSARY ACTS. Each party agrees to
perform any further acts and execute and deliver any documents which may be
reasonably necessary to carry out the provisions and purposes of this Agreement.
4. MISCELLANEOUS.
4.1 CUMULATIVE REMEDIES. Any person having any rights under any
provision of this Agreement will be entitled to enforce such rights
specifically, to recover damages by reason of any breach of any provision of
this Agreement, and to exercise all other rights granted by law, which rights
may be exercised cumulative and not alternatively.
4.2 SUCCESSORS AND ASSIGNS. The rights and obligations of the
parties under this Agreement shall not be assignable without the written consent
of the other parties, provided, however, that nothing herein shall restrict
Harrier's right to assign its interests under the Note. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not.
4.3 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement or the other documents.
4.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts when taken together will constitute one and the
same agreement.
-3-
<PAGE>
4.5 NOTICES. Any approvals, consents or notices required or
permitted to be sent or given shall be delivered in writing personally or
mailed, certified mail, return receipt requested, to the following addresses and
shall be deemed to have been received within five days after such mailing:
If to the Company: DermaRay International, L.L.C.
7110 East Jackson Street
Paramount, California 90723
Attn: Michael Fernicola, President
If to Naturade: Naturade, Inc.
7110 East Jackson Street
Paramount, California 90723
Attn: Michael Fernicola, President
If to Harrier: Harrier, Inc.
2200 Pacific Coast Highway, Suite 301
Hermosa Beach, California 90254
Attn: Kevin DeVito, President
4.6 GOVERNING LAW; ARBITRATION. The validity, meaning and effect of
this Agreement shall be determined in accordance with the laws of the State of
California, applicable to contracts made and to be performed in that state,
without regard to its conflicts of laws rules; provided however that the Federal
Arbitration Act of the United States shall govern issues as to arbitrability.
If a dispute arises in connection with or relating to this Agreement and the
parties are unable to resolve it within forty-five (45) days through direct
negotiations, the dispute shall be referred to final and binding arbitration to
be held in Los Angeles, California in accordance with the rules of the American
Arbitration Association for Commercial Arbitration (as they may be amended from
time to time). The award of the arbitrator(s) shall be final and binding upon
the parties hereto and may be enforced by any court of competent jurisdiction.
4.7 LITIGATION COSTS. If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default, or misrepresentation in connection with any
of the provisions thereof, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it or they
may be entitled.
4.8 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties with respect to the subject matter
thereof, and supersedes all prior and contemporaneous agreements and
understandings.
IN WITNESS WHEREOF, each of the parties to this Agreement has executed or
caused this Agreement to be executed as of the date first above written.
"HARRIER"
-4-
<PAGE>
Harrier, Inc.,
a Delaware corporation
By: /s/ Kevin Devito
-------------------------------------
Kevin DeVito, President
"NATURADE"
Naturade, Inc.,
a Delaware corporation
By: /s/ Michael Fernicola
-------------------------------------
Michael Fernicola, President
"DERMARAY"
DermaRay International, L.L.C.,
a California limited liability company
By: /s/ Michael Fernicola
-------------------------------------
Michael Fernicola, President
-5-
<PAGE>
SCHEDULE 1
INVENTORY LIST
-6-
<PAGE>
EXHIBIT A
UNSECURED PROMISSORY NOTE
PARAMOUNT, CALIFORNIA $155,000
JUNE __, 1997
FOR VALUE RECEIVED, DERMARAY INTERNATIONAL, L.L.C., a California limited
liability company (the "Company"), promises to pay on or before March 31, 1998
to the order of Harrier, Inc. or assigns ("Holder"), at the address designated
by Holder, the principal amount of One Hundred Fifty-Five Thousand Dollars
($155,000). The outstanding principal amount under this Note shall not bear
interest and shall be due and payable no later than March 31, 1998; provided,
however, the Company shall apply at least __% of the gross proceeds from its
sale of bioptron lamps towards the payment of the outstanding principal amount
of this Note and otherwise use its best efforts to pay the outstanding principal
amount under this Note as soon as possible.
Upon the happening of any Event of Default as set forth below and the
giving of notice by the Holder as provided herein, this Note shall become
immediately due and payable in full, without presentment or protest, both of
which are hereby waived by the Company. In such case, Holder may proceed to
protect and enforce its rights by a suit in equity, action at law, or other
appropriate proceedings. In case of any Event of Default, the Company will
reimburse Holder for its reasonable costs and expenses, including attorney's
fees, incurred in connection with the enforcement of its rights under this Note.
"Event of Default" whenever used herein means any one of the following
events:
(a) Default in the payment of principal under this Note when it
becomes due;
(b) The entry of a decree or order by the court having jurisdiction
in the premises adjudging the Company bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company under applicable bankruptcy laws, or
appointing a receiver, liquidator, assignee, trustee (or similar official) of
the Company or any substantial part of its property, and the continuance of such
decree or order in effect for a period of thirty (30) consecutive days; or
(c) The institution by the Company of proceedings to be adjudicated
as a bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer to consent seeking reorganization or relief under applicable
bankruptcy laws, or the consent by it to the filing of any such petition or to
the appointment of any receiver, liquidator, assignee, trustee (or similar
official) the Company or any substantial part of its property, or the making by
it of any assignment for the benefit of creditors.
Except as otherwise provided in this Note, the Company:
(a) Waives demand, presentment for payment, notice of non-payment,
grace,
A-1
<PAGE>
protest, notice of protest, notice of acceleration of the indebtedness
due hereunder and all other notice in collecting this Note;
(b) Consents to all extensions or rearrangements or postponements of
time or payment of this Note, whether or not for a term or terms in excess of
the original term hereof, and to any other indulgence with respect hereto
without notice, consent or consideration to any of them; and
(c) Waives any right it may have to require Holder to exercise the
remedies available on default in any particular order.
WITNESS the signature of a duly authorized officer of the Company.
DERMARAY INTERNATIONAL, L.L.C.,
a California limited liability company
By: /s/ Michael Fernicola
-----------------------------------
Michael Fernicola, President
A-2
<PAGE>
EXHIBIT B
BILL OF SALE
This Bill of Sale is made this ___ day of June 1997 by and between HARRIER,
INC., a Delaware corporation (hereinafter referred to as "Seller"), and DERMARAY
INTERNATIONAL, L.L.C., a California limited liability company (hereinafter
referred to as "Purchaser").
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, Seller does hereby sell, assign, grant, convey, set
over, confirm and deliver to Purchaser and its successors and assigns forever,
all of Seller's right title and interest in and to those "Assets" set forth on
Exhibit "A" attached hereto, free and clear of any and all liens, claims and
encumbrances of any kind.
Simultaneously with the execution and delivery hereof and from time to time
thereafter, Seller will execute and deliver to Purchaser such additional
documents of transfer with respect to the Assets as Purchaser may reasonably
require in order to effectuate this transaction.
IN WITNESS WHEREOF, the Sellers have caused this instrument to be executed
on the date above-written.
"SELLER"
HARRIER, INC.,
a Delaware corporation
/s/ Kevin DeVito
--------------------------------------------
Kevin DeVito, President
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EXHIBIT C
NOTICE OF COMMENCEMENT OF VOLUNTARY PROCEEDINGS
TO WIND UP, LIQUIDATE AND DISSOLVE
TO: ALL CREDITORS AND CLAIMANTS
NOTICE IS HEREBY GIVEN pursuant to Section 17352(a) of the California
Corporations Code that DERMARAY INTERNATIONAL, L.L.C., a California limited
liability company (the "Company"), whose principal office is located at 7110
East Jackson Street, Paramount, California 90723, has voluntarily elected to
wind up its affairs, liquidate and dissolve.
Proceedings for the winding up of the Company commenced on_______________,
199__, on which date all of the members of the Company consented to the
winding up, liquidation and dissolution of the Company.
Dated: ___________, 199__ DERMARAY INTERNATIONAL, L.L.C.
a California limited liability company
By: /s/ Michael Fernicola
----------------------------------
Michael Fernicola, President
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CERTIFICATE OF MAILING OF
NOTICE OF COMMENCEMENT OF VOLUNTARY PROCEEDINGS
TO WIND UP, LIQUIDATE AND DISSOLVE
The undersigned hereby certifies that he is the President of DERMARAY
INTERNATIONAL, L.L.C., a California limited liability company (the "Company");
and that on ___________, 199__, he mailed to all known creditors and claimants
whose addresses appear on the books of the Company, a notice of election to wind
up, liquidate and dissolve the Company, a copy of such notice being attached
hereto as Exhibit A, by depositing a copy of such notice in the United States
mail at Paramount, California, in a sealed envelope with postage prepaid and
addressed to each of such persons at the addresses appearing on the books of the
Company.
Executed on _____________, 199__, at ___________________, Los Angeles
County, California.
/s/ Michael Fernicola
----------------------------------
Michael Fernicola, President
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SECURITIES PURCHASE AGREEMENT
AND PLAN OF REORGANIZATION
THIS SECURITIES PURCHASE AGREEMENT AND PLAN OF REORGANIZATION ("Agreement")
is entered into on October 30, 1997 by and among HARRIER, INC., a Delaware
corporation ("Harrier"), COPE AG, a Swiss corporation ("COPE"), and STEPHAN
ISENSCHMID ("Isenschmid") and ADRIAN KNAPP ("Knapp") as majority stockholders of
COPE (the "Majority Stockholders").
R E C I T A L S
A. Harrier has authorized capital stock consisting of 30,000,000 shares of
common stock, $.001 par value ("Harrier Common Stock"), and 5,000,000 shares of
preferred stock, $.001 par value ("Harrier Preferred Stock"). Harrier has
issued and outstanding 15,317,923 shares of Harrier Common Stock and no shares
of Harrier Preferred Stock.
B. Glycosyn Pharmaceuticals, Inc. ("Glycosyn") is a Delaware corporation
with authorized capital stock consisting of 10,000,000 shares of common stock,
$.001 par value ("Glycosyn Common Stock"), and 5,000,000 shares of preferred
stock, $.001 par value ("Glycosyn Preferred Stock"). Glycosyn has issued and
outstanding 5,262,100 shares of Glycosyn Common Stock, of which Harrier owns
5,000,000 shares, and 250,000 shares of Glycosyn Preferred Stock designated as
Series A Preferred Stock.
C. COPE has share capital of SFr106,000 consisting of 1,060 shares (the
"COPE Shares") of SFr100 par value capital stock ("COPE Capital Stock").
D. Prior to the Closing (as defined in Section 1.4), Harrier shall effect
a 1 for 45 reverse split ("Reverse Split") of the issued and outstanding shares
of Harrier Common Stock.
E. Prior to Closing, each stockholder of COPE other than the Majority
Stockholders shall execute a subscription agreement substantially in the form of
Exhibit B hereto (the "Subscription Agreement") (each such other stockholder a
"Subscriber" and all of the Subscribers together with the Majority Stockholders,
the "Selling Stockholders").
F. The Selling Stockholders wish to sell the COPE Shares and Harrier
wishes to acquire the COPE Shares, at the Closing, in exchange for the transfer
to the Selling Stockholders of an aggregate of 2,862,000 shares (post-split) of
Harrier Common Stock ("Harrier Shares"), subject to the terms and upon the
conditions hereinafter set forth.
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A G R E E M E N T
It is agreed as follows:
1. SECURITIES PURCHASE AND REORGANIZATION.
1.1 AGREEMENT TO EXCHANGE SECURITIES. Subject to the terms and upon
the conditions set forth herein, and in the case of the Subscribers, pursuant to
the Subscription Agreement, each Selling Stockholder agrees to sell, assign,
transfer and deliver to Harrier, and Harrier agrees to purchase from each
Selling Stockholder, at the Closing, the COPE Shares owned by the respective
Selling Stockholder as set forth on the List of Selling Stockholders, in
exchange for the transfer, at the Closing, by Harrier to each Selling
Stockholder of a pro rata share of Harrier Shares. A Selling Stockholder's pro
rata share of Harrier Shares shall be determined by multiplying the total number
of Harrier Shares (I.E., 2,862,000 shares (post-split) of Harrier Common Stock)
by a fraction, the numerator of which is the total number of COPE Shares owned
by the Selling Stockholder at the Closing and the denominator of which is the
total number of COPE Shares issued and outstanding at the Closing.
1.2 INSTRUMENTS OF TRANSFER.
(a) COPE SHARES. The Selling Stockholders shall deliver to
Harrier at the Closing evidence of the COPE Shares with such endorsements,
assignments and other instruments of transfer, in form satisfactory to Harrier
and its counsel, in order to effectively vest in Harrier all of the Selling
Stockholders' right, title and interest in and to the COPE Shares. From time to
time after the Closing, and without further consideration, the Selling
Stockholders will execute and deliver such other instruments of transfer and
take such other actions as Harrier may reasonably request in order to more
effectively transfer to Harrier the securities intended to be transferred
hereunder.
(b) HARRIER SHARES. Harrier shall deliver to the Selling
Stockholders at the Closing original certificates evidencing Harrier Shares, in
form and substance satisfactory to COPE and its counsel, in order to effectively
vest in the Selling Stockholders all right, title and interest in and to the
Harrier Shares. From time to time after the Closing, and without further
consideration, Harrier will execute and deliver such other instruments and take
such other actions as the Selling Stockholders may reasonably request in order
to more effectively issue to them Harrier Shares.
1.3 APPROVAL OF HARRIER STOCKHOLDERS. Harrier will duly call and
will promptly hold a meeting of its stockholders for the purpose of approving
its acquisition of the COPE Shares on the terms and conditions set forth in this
Agreement and in connection therewith will comply fully with the applicable
provisions of the Bylaws of Harrier and the Delaware General Corporation Law
relating to the calling and holding of a meeting of stockholders for such
purpose. In connection with the foregoing, and except as expressly limited by
Section 3.9, Harrier will comply fully with the requirements of the Securities
Exchange Act of 1934 Act, as amended ("Exchange Act"), and the rules and
regulations thereunder with respect to the solicitation of proxies for use at
such meeting.
1.4 CLOSING. The closing ("Closing") of the exchange of the COPE
Shares and Harrier Shares shall take place at Holiday Inn Crowne Plaza, 300
North Harbor Drive, Redondo Beach,
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California, at 10:00 a.m., local time, on January 30, 1998, or at such other
time and place as may be mutually agreed to in writing by the Selling
Stockholders and Harrier ("Closing Date").
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each
Majority Stockholder severally represents, warrants and covenants to and with
Harrier as follows:
2.1 POWER AND AUTHORITY. The Majority Stockholder has all requisite
individual power and authority to enter into and to carry out all of the terms
of this Agreement and all other documents executed and delivered in connection
herewith. All individual action on the part of the Majority Stockholder
necessary for the authorization, execution, delivery and performance of this
Agreement by the Majority Stockholder has been taken and no further
authorization on the part of the Majority Stockholder is required to consummate
the transactions provided for in this Agreement. When executed and delivered by
the Majority Stockholder, this Agreement shall constitute the valid and legally
binding obligation of the Majority Stockholder enforceable in accordance with
its terms, subject to the qualification and limitation that the procedural and
remedial rights of the other parties to this Agreement may be limited or
rendered unenforceable by (i) bankruptcy, insolvency, reorganization, moratorium
or other similar laws, (ii) legal or equitable principles now or hereafter in
effect relating to or affecting the enforcement of rights or remedies generally,
or (iii) the availability of equitable remedies.
2.2 OWNERSHIP OF AND TITLE TO SECURITIES. The List of Majority
Stockholders set forth on Exhibit A hereto (the "Stockholder List") accurately
sets forth the name, residence address and number of shares of COPE Capital
Stock owned by the Majority Stockholder. The Majority Stockholder represents
that, except for the COPE Shares or as disclosed on the COPE Disclosure Schedule
attached as Schedule 1 hereto ("COPE Disclosure Schedule"), there are no
warrants, options, subscriptions, calls, or other similar rights of any kind for
the issuance or purchase of any securities of COPE held by the Majority
Stockholder. The Majority Stockholder represents that the Majority Stockholder
has and will transfer to Harrier good and marketable title to the COPE Shares
which it owns as set forth on the Stockholder List, free and clear of all
pledges, security interests, mortgages, liens, claims, charges, restrictions or
encumbrances, except for restrictions under applicable U.S. federal or state
securities laws.
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<PAGE>
2.3 INVESTMENT AND RELATED REPRESENTATIONS.
(a) HARRIER SHARES AS REGULATION S OR "RESTRICTED" SECURITIES.
The Majority Stockholder is aware that neither the Harrier Shares nor the offer
or sale thereof to the Majority Stockholder has been registered under the U.S.
Securities Act of 1933, as amended ("Securities Act"), or under any foreign or
state securities law. The Majority Stockholder further understands that no
registration statement has been filed with the Securities and Exchange
Commission ("SEC"), nor with any other U.S. or foreign regulatory authority and
that, as a result, any benefit which might normally accrue to an investor such
as the Majority Stockholder by an impartial review of such a registration
statement by the SEC or other regulatory commission will not be forthcoming.
The Majority Stockholder acknowledges that the Harrier Shares are being offered
alternatively pursuant to Regulation S under the Securities Act and certain
exemptions from Section 5 of the Securities Act. The Majority Stockholder
acknowledges that, except as otherwise disclosed on the COPE Disclosure
Schedule, it is not a "U.S. person" as defined by Rule 902(o) under the
Securities Act, a copy of which has been provided to each Majority Stockholder,
and that it is not acquiring the Harrier Shares for the account or benefit of
any "U.S. person." The Majority Stockholder understands that to the extent
Regulation S does not apply to Harrier's issuance of Harrier Shares to the
Majority Stockholder, the Harrier Shares will be characterized as "restricted"
securities under U.S. federal securities laws inasmuch as they are being
acquired in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited circumstances.
The Majority Stockholder represents that the Majority Stockholder is familiar in
general with Rule 144 under the Securities Act (which provides generally for a
one year holding period and limitations on the amount of "restricted" securities
that can be sold in compliance with the rule uon completion of the holding
period), and understands the resale limitations imposed thereby and by the
Securities Act. The Majority Stockholder agrees that the Majority Stockholder
will not sell all or any portion of Harrier Shares except in accordance with
Regulation S, pursuant to registration under the Securities Act or pursuant to
an available exemption from registration under the Securities Act. The Majority
Stockholder understands that each certificate for Harrier Shares issued to the
Majority Stockholder or to any subsequent transferee shall be stamped or
otherwise imprinted with an appropriate legend summarizing the restrictions
described in this Section 2.4(a) and that Harrier shall refuse to transfer the
Harrier Shares except in accordance with such restrictions, such legend to be
substantially as follows:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND SUCH SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT; (2) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904
OF REGULATION S UNDER THE SECURITIES ACT, OR (3) PURSUANT TO
AN EXEMPTION FROM REGISTRATION, IN EACH CASE AS CONFIRMED IN
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND IN
EACH CASE IN ACCORDANCE WITH ANY OTHER APPLICABLE LAW.
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(b) INVESTMENT REPRESENTATION. This Agreement is made with the
Majority Stockholder in reliance upon the Majority Stockholder's representation
to the other parties to this Agreement, which by the Majority Stockholder's
execution of this Agreement the Majority Stockholder hereby confirms, that the
Harrier Shares to be received by the Majority Stockholder are being acquired
pursuant to this Agreement for investment and not with a view to the public
resale or distribution thereof unless in accordance with Regulation S, pursuant
to an effective registration statement or exemption under the Securities Act.
(c) NO PUBLIC SOLICITATION. The Majority Stockholder is
acquiring the Harrier Shares after private negotiation and has not been
attracted to the acquisition of the Harrier Shares by any press release,
advertising or publication.
(d) ACCESS TO INFORMATION. The Majority Stockholder believes it
has received all of the information it considers necessary or appropriate for
deciding whether to acquire the Harrier Shares, including, but not limited to
the copies of the Harrier SEC Reports (as defined in Section 4.4). The Majority
Stockholder further represents that it has had an opportunity to ask questions
of, and to receive answers from, Harrier regarding Harrier, its business and
prospects, and the Harrier Shares.
(e) INVESTOR SOPHISTICATION AND ABILITY TO BEAR RISK OF LOSS.
The Majority Stockholder, if a corporation or a partnership, has not been
organized for the purpose of acquiring the Harrier Shares. The Majority
Stockholder acknowledges that it is able to protect its interests in connection
with the acquisition of the Harrier Shares and can bear the economic risk of
investment in such securities without producing a material adverse change in the
Majority Stockholder's financial condition. The Majority Stockholder otherwise
has such knowledge and experience in financial or business matters that the
Majority Stockholder is capable of evaluating the merits and risks of the
investment in the Harrier Shares.
3. REPRESENTATIONS AND WARRANTIES OF COPE, ISENSCHMID AND KNAPP. COPE,
Isenschmid and Knapp each severally represents, warrants and covenants to and
with Harrier as follows:
3.1 CORPORATE ORGANIZATION, ETC. COPE is a Swiss corporation duly
organized, validly existing and in good standing under the laws of Switzerland
and is duly qualified to do business and is in good standing as a foreign
corporation under the laws of each jurisdiction in which the character or
location of the assets owned or leased by it require qualification, except where
the failure to so qualify would not materially adversely affect the business or
condition, financial or otherwise, of COPE. COPE has delivered or prior to the
Closing Date will deliver to Harrier complete and correct copies of its bylaws
and other organizational documents, as amended, certified by the Chairman of
COPE to be complete and correct. COPE owns all of the issued and outstanding
securities of COPE GmbH, Ltd., a German corporation, COPE Handelsgmbh, an
Austrian limited liability company, and Xpert, Inc., a Florida corporation.
Other than COPE GmbH, COPE Handelsgmbh and Xpert, Inc. (the "COPE
Subsidiaries"), COPE has no subsidiaries or equity ownership in any other
entities. No warrants, options, subscriptions, calls, commitments, or other
rights or agreements of any kind for the purchase, issuance or sale of the
capital shares of COPE GmbH, COPE Handelsgmbh or Xpert, Inc. are outstanding or
otherwise exist.
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3.2 CAPITALIZATION. The authorized, issued and outstanding
capitalization of COPE is as recited in the second recital to this Agreement.
All issued and outstanding shares of COPE Capital Stock have been duly
authorized and validly issued and are fully paid and non-assessable and none of
such issued and outstanding shares of COPE Capital Stock have been issued in
violation of the preemptive rights of any past or present stockholders. No
warrants, options, subscriptions, calls, commitments or other rights or
agreements of any kind issued, granted or entered into by COPE for the purchase,
issuance or sale of, or security exchangeable for or convertible into, any
authorized shares of COPE Capital Stock are outstanding or otherwise exists and
no authorized unissued shares of COPE Capital Stock are reserved for any
purpose. The Majority Stockholders are the only holders of COPE Capital Stock
and the Stockholder List accurately sets forth the names and residence addresses
and number of COPE Shares owned by the Majority Stockholders.
3.3 CORPORATE POWER AND AUTHORITY. COPE and each of the COPE
Subsidiaries has all requisite corporate power and authority to own or lease all
of its properties and assets, to operate its properties and assets and to carry
on its businesses as now conducted. COPE has all requisite corporate power and
authority to enter into and to carry out all of the terms of this Agreement.
All corporate action on the part of COPE and its stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by COPE has
been taken and no further corporate authorization on the part of COPE is
required to consummate the transactions provided for in this Agreement. Neither
the execution, delivery nor performance of this Agreement by COPE or the
Majority Stockholders shall violate or result in a breach of any provisions of
the Bylaws or other organizational documents, as amended, of COPE. Neither the
execution, delivery nor performance of this Agreement by the Majority
Stockholders shall constitute a default or result in a breach of or accelerate
the performance required under any mortgage, deed of trust, lien, lease,
restriction or other contract or agreement to which COPE or any of its
properties or assets are bound or affected, or violate any order, writ,
injunction, decree, judgment or other restriction of any court, administrative
agency or governmental body.
3.4 FINANCIAL STATEMENTS. COPE has furnished to Harrier its
consolidated balance sheet as of the end of its fiscal year ended December 31,
1996 and its consolidated statements of earnings, stockholders' equity and cash
flows for the fiscal years ended December 31, 1996 and 1995, together with
appropriate notes to such consolidated financial statements. Prior to the
Closing, COPE shall deliver to Harrier the aforementioned financial statements,
accompanied by reports thereon containing opinions without comment or
qualification, except as therein noted, by its independent certified public
accountants. COPE has also furnished to Harrier its consolidated balance sheet
as of June 30, 1997 and its consolidated statements of earnings and cash flows
for the six months ended on such date, together with appropriate notes to such
consolidated financial statements.
All of the foregoing consolidated financial statements (collectively, the
"COPE Financial Statements"), including in each case the related notes, have
been prepared in conformity with United States generally accepted accounting
principles consistently applied and are correct and complete in all material
respects and such consolidated financial statements fairly present the financial
position of COPE and the COPE Subsidiaries as of the dates of such balance
sheets and the results of operations for the respective periods indicated.
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3.5 ABSENCE OF UNDISCLOSED LIABILITIES. COPE and the COPE
Subsidiaries have no material liabilities, fixed or contingent, other than
(i) liabilities fully reflected in the COPE Financial Statements, or
(ii) liabilities incurred since June 30, 1997 in the ordinary course of business
or as contemplated or permitted by this Agreement or referred to in the COPE
Disclosure Schedule, all of which in the aggregate, taking into consideration
all other changes in the financial condition of COPE and the COPE Subsidiaries
in the ordinary course of business, have had no material adverse affect on the
financial position or results of operations of COPE and the COPE Subsidiaries,
taken as a whole, or on the conduct of its businesses.
3.6 ABSENCE OF ADVERSE CHANGES. Except as disclosed in the COPE
Disclosure Schedule or the COPE Financial Statements, since June 30, 1997, there
has not been (i) any material adverse change in the assets or liabilities or in
the condition, financial or otherwise, or business, properties, earnings or net
worth of COPE and the COPE Subsidiaries, taken as a whole, or (ii) any damage or
destruction in the nature of a casualty loss, whether covered by insurance or
not, materially and adversely affecting any property or business of COPE or the
COPE Subsidiaries which is material to the consolidated financial condition,
operation or business of COPE and the COPE Subsidiaries, taken as a whole.
3.7 CONTRACTS AND AGREEMENTS. Set forth in the COPE Disclosure
Schedule is a list of all contracts and agreements (including loan agreements),
other than contracts for goods or services in the ordinary course of business,
to which COPE or any COPE Subsidiary is a party or by which it is bound,
involving more than $50,000. Except as set forth in the COPE Disclosure
Schedule, none of the contracts and agreements will expire or be terminated or
be subject to any modification of terms or conditions upon the consummation of
the transactions contemplated by this Agreement. Except as set forth in the
COPE Disclosure Schedule, neither COPE nor any COPE Subsidiary is in default in
any material respect under the terms of any such contract or agreement nor in
default in the payment of any principal of or interest on any indebtedness for
borrowed money nor has any event occurred which, with the passage of time or
giving of notice, would constitute such a default by COPE or any COPE Subsidiary
and no other party to any such contract or agreement is in default in any
material respect thereunder nor has any such event occurred with respect to such
party.
3.8 NO VIOLATION OR LITIGATION. Except as set forth in the COPE
Disclosure Schedule, neither COPE nor any COPE Subsidiary is in material
violation of any law or order, writ, injunction or decree of any court or other
governmental department, commission, board, bureau, agency or instrumentality,
and there are no material lawsuits, proceedings, claims or governmental
investigations pending or, to the knowledge of any executive officer of COPE,
threatened against COPE, any COPE Subsidiary or against the properties or
business of any of them, nor is there any reasonable basis known to COPE for any
such action and there is no action, suit, proceeding or investigation pending,
threatened or, to the knowledge of COPE, contemplated which questions the
legality, validity or propriety of the transactions contemplated by this
Agreement.
3.9 ACCURACY OF PROXY STATEMENT. Harrier's notice of special meeting
and proxy statement ("Proxy Statement"), including any amendments or supplement
thereto, will, when the Proxy Statement is mailed to the stockholders of Harrier
as contemplated by Section 1.3 hereof, contain the information with respect to
COPE and the Selling Stockholders required by the Exchange Act and the rules and
regulations thereunder. The Proxy Statement will not, at the time of mailing,
at the time of the meeting of stockholders of Harrier or at the Closing, include
any untrue statement of a material fact
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or omit to state a material fact with respect to COPE or the Selling
Stockholders required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Selling Stockholders make no representations as to
statements or omissions regarding information solely relating to Harrier, it
being the agreement of the parties that responsibility for such statements or
omissions rests solely with Harrier.
3.10 EMPLOYEE OR CONSULTING AGREEMENTS. The COPE Disclosure Schedule
lists all plans, contracts, and arrangements, oral, implied or written, included
but not limited to union contracts, employment agreements, consulting
agreements, employee manuals, incentive payment plans and employee benefit
plans, whereunder COPE or any COPE Subsidiary has any obligations (other than
obligations to make current wage or salary payments terminable on notice of
90 days or less) to its officers or employees or other persons or their
beneficiaries or whereunder any of such person owes money to COPE or any COPE
Subsidiary, except to the extent any such obligation is set forth in the COPE
financial statements.
3.11 INSURANCE. COPE and the COPE Subsidiaries each maintain
policies of fire and casualty, liability and other forms of insurance in such
amounts and against such risks and losses as are reasonable for its businesses
and properties, and will keep such insurance in full force and effect through
the Closing. A list and brief description (including effective and termination
dates) of all policies of insurance, including insurance providing benefits for
employees, owned or held by COPE or the COPE Subsidiaries on the date hereof and
of all material performance bonds maintained by COPE on the date hereof are set
forth in the COPE Disclosure Schedule. Neither COPE nor any of the COPE
Subsidiaries are subject to any liabilities as a self-insurer of its business
and property which could have a material adverse impact on its business,
properties or prospects, taken as a whole, except as disclosed in the COPE
Disclosure Schedules.
3.12 TRADEMARKS AND PATENTS. COPE and the COPE Subsidiaries have no
material trademarks, trade names, copyrights, inventions, patents or
applications therefor which are owned, used, registered in the name of or
licensed to COPE or any COPE Subsidiary, except for those listed in the COPE
Disclosure Schedule. Except as disclosed in the COPE Disclosure Schedule, no
proceedings have been instituted or are pending or threatened or contemplated
which challenge the validity of the ownership by COPE or any COPE Subsidiary of
any such trademark, trade name, copyright, invention or patent. Except as
disclosed in the COPE Disclosure Schedule, neither COPE nor any COPE Subsidiary
has licensed anyone to use any such trademark or any technical know how or other
proprietary rights of COPE or any COPE Subsidiary.
3.13 NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No order of
any court or administrative agency is in effect which restrains or prohibits
COPE or the Selling Stockholders from consummating the transactions contemplated
hereby, and no suit, action, investigation, inquiry or proceeding by any
governmental body or other person or legal or administrative proceeding has been
instituted or threatened which questions the validity or legality of COPE's or
the Selling Stockholders' consummation of the transactions contemplated hereby.
3.14 APPROVALS AND CONSENTS. There are no permits, consents,
mandates or approvals of public authorities, either U.S. or Swiss, federal,
state or local, or of any third party necessary for COPE's or the Selling
Stockholders' consummation of the transactions contemplated hereby.
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3.15 BROKERAGE. No broker or finder has acted directly or indirectly
for the Selling Stockholders in connection with this Agreement or the
transactions contemplated hereby, and no broker or finder is entitled to any
brokerage or finder's fee or other commission in respect thereof based in any
way on agreements, arrangements or understandings made by or on behalf of the
Selling Stockholders.
3.16 PERMITS AND OTHER OPERATING RIGHTS. Except as disclosed in the
COPE Disclosure Schedule, COPE and the COPE Subsidiaries currently possess all
permits, licenses, certificates and other authorizations from third parties,
including, without limitation, foreign and domestic governmental authorities,
necessary or required by applicable provisions of law and judicial decisions,
and by the property and contract rights of third parties, for it to own or lease
its properties and assets and to operate its business in the manner in which it
is intended.
3.17 EMPLOYEE RETIREMENT PLANS. Neither COPE nor any COPE Subsidiary
has an employee pension, retirement or benefit plan.
3.18 PERSONAL PROPERTY, INVENTORIES AND TITLE TO PROPERTY. All
personal property owned, leased or used by COPE and the COPE Subsidiaries is
reflected in the COPE Financial Statements, and is in good operating and working
condition and fit for operation in the usual course of business, ordinary wear
and tear excepted. Except as set forth in the COPE Disclosure Schedule, COPE
and the COPE Subsidiaries have good and marketable title to all of their assets,
and a good and valid leasehold interest in all property leased by the
corporation, free and clear of all liens.
3.19 ENVIRONMENTAL MATTERS. There has been no manufacture, refining,
storage, disposal or treatment of Hazardous Substances (as hereinafter defined)
by COPE or any COPE Subsidiary at any real property currently or in the past
owned, operated, used, leased or contracted for by COPE or any COPE Subsidiary,
or otherwise in violation of any Environmental Laws (as hereinafter defined) or
which would require remedial action under any Environmental Law. During the
past three years neither COPE nor any COPE Subsidiary has received (a) notice of
any such violation with respect to any Hazardous Substance at or by any of such
real property, (b) notice from any governmental agency that COPE or any COPE
Subsidiary, or any present or former owner, lessee or operator of such real
property, is a potentially responsible party for cleanup liability with respect
to the emission, discharge or release of any Hazardous Substance or for any
other matter arising under the Environmental Laws or in any litigation,
administrative proceeding, finding, order, citation, notice, investigation or
complaint under any Environmental Law, or (c) notice of violation, citation,
complaint, request for information, order, directive, compliance schedule,
notice of claim, proceeding or litigation from any party concerning COPE's or
any COPE Subsidiaries' compliance with any Environmental Law. As used herein
"Environmental Laws" means the Resource Conservation Recovery Act, the
Comprehensive Environmental Responsibility Compensation and Liability Act, the
Superfund Amendments and Reauthorization Act, the Toxic Substances Control Act,
the Hazardous Materials Transportation Act, the Clean Air Act, the Clean Water
Act, and other similar foreign, federal, state and local laws, as amended,
together with all regulations issued or promulgated thereunder, relating to
pollution, the protection of the environment or the health and safety of workers
or the general public. As used herein "Hazardous Substance" means any hazardous
substance, hazardous or toxic waste, hazardous material, polutant or
contaminant, as those or similar terms are used in the Environmental Laws,
including, without limitation, asbestos and asbestos-related products,
chlorofluorocarbons, oils or petroleum derived compounds, polychlorinated
biphenyl, pesticides and radon.
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3.20 TAX MATTERS. COPE and each COPE Subsidiary has timely filed all
tax returns and all information returns and reports required to be filed by or
with respect to it under the laws of its jurisdiction for all periods ending on
or prior to the date hereof and will timely file all such returns and reports
required to be filed from the date hereof through the Closing Date. COPE and
the COPE Subsidiaries have paid all taxes which have become due or payable, and
will pay on or prior to the Closing Date all taxes which have become due or
payable on or prior to the Closing Date.
3.21 TRANSACTIONS WITH AFFILIATES. Except as set forth in the notes
to the COPE Financial Statements or the COPE Disclosure Schedule, neither COPE
nor any COPE Subsidiary has purchased, acquired or leased any property or
services from, or sold, transferred or leased any property or services to, or
loaned or advanced any money to, or borrowed any money from, or guaranteed or
otherwise become liable for any indebtedness or other obligations of, or
acquired any capital stock, obligations or securities of, or made any
management, consulting or similar fee arrangement with any officer, director,
employee or stockholder of COPE or any COPE Subsidiary (nor any spouse, child or
affiliate thereof), nor is COPE or any COPE Subsidiary a party to any agreement
oral or written with respect to any of the foregoing.
3.22 OTHER INFORMATION. None of the written information, documents
or memoranda furnished or to be furnished by COPE or the Majority Stockholders
to Harrier or any of their representatives is false or misleading in any
material respect or omits to state a material fact required to be stated therein
or necessary in order to make any of the statements therein, in the light of the
circumstances under which they were made, not misleading.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF HARRIER. Harrier
represents, warrants and covenants to and with COPE and the Selling Stockholders
as follows:
4.1 CORPORATE ORGANIZATION, ETC. Harrier and Glycosyn are
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware, and are duly qualified to do business and are in
good standing as foreign corporations under the laws of each jurisdiction in
which the character or location of the assets owned or leased by each of them
require qualification, except where the failure to so qualify would not
materially adversely affect the business or condition, financial or otherwise,
of Harrier on a consolidated basis. Harrier and Glycosyn have delivered or
prior to the Closing Date will deliver to COPE complete and correct copies of
their certificates of incorporation, as amended, and bylaws, as amended,
certified by their respective secretaries to be complete and correct. As of the
date of this Agreement, Harrier is the owner of 5,000,000 shares of the Glycosyn
Common Stock and a membership interest in DermaRay LLC, a California limited
liability company ("DermaRay"). Other than Glycosyn and DermaRay, Harrier has
no other subsidiaries or equity ownership in any other entity.
4.2 CAPITALIZATION. The authorized, issued, outstanding and reserved
capital stock of Harrier and Glycosyn is as recited in the recitals to this
Agreement. All issued and outstanding shares of capital stock of Harrier and
Glycosyn have been duly authorized and validly issued and are fully paid and
non-assessable and none of such issued and outstanding shares have been issued
in violation of the preemptive rights of any past or present stockholder.
Except as set forth in the recitals or the Harrier Disclosure Schedule attached
hereto as Schedule 2 ("Harrier Disclosure Schedule"), no warrants, options,
subscriptions, calls, commitments or other rights or agreements of any kind
issued, granted or
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entered into by Harrier or Glycosyn for the purchase, issuance or sale of, or
security exchangeable for or convertible into, any shares of such authorized
capital stock is outstanding or otherwise exists and no authorized unissued
shares of Harrier or Glycosyn are reserved for any purpose.
4.3 CORPORATE POWER AND AUTHORITY. Harrier and Glycosyn have all
requisite corporate power and authority to own or lease all of their respective
properties and assets, to operate their respective properties and assets and to
carry on their respective businesses as now conducted. Harrier has all
requisite corporate power and authority to enter into and to carry out all of
the terms of this Agreement. The execution, delivery and performance of this
Agreement has been or prior to the Closing will be duly authorized and approved
by vote of Harrier board of directors without dissent. All corporate action on
the part of Harrier, its officers, directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by Harrier
will have been taken prior to the Closing and no further corporate authorization
on the part of Harrier will be required to consummate the transactions provided
for in this Agreement. Harrier has furnished or on or before the Closing Date
will furnish COPE with certified copies of all corporate resolutions or consents
relating to the execution, delivery and performance of this Agreement. When
executed and delivered by Harrier, this Agreement shall constitute the valid and
legally binding obligation of Harrier enforceable in accordance with its terms
subject to the qualification and limitation that COPE and the Selling
Stockholders' procedural and remedial rights may be limited or rendered
unenforceable by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws, (ii) equitable principles now or hereafter in effect relating to
or affecting the enforcement of rights or remedies generally, or (iii) the
availability of equitable remedies. Neither the execution, delivery nor
performance of this Agreement by Harrier shall violate or result in a breach of
any provisions of Harrier's certificate of incorporation or bylaws. Except
where such violation or breach would not adversely affect the performance by
Harrier of its obligations hereunder and would not have a material adverse
affect on the business or condition, financial or otherwise, of Harrier on a
consolidated basis, neither the execution, delivery nor performance of this
Agreement by Harrier shall constitute a default or result in a breach of or
accelerate the performance required under any mortgage, deed of trust, lien,
lease, restriction or other contract or agreement to which Harrier or Glycosyn
or any of their properties or assets are bound or affected, or violate any
order, writ, injunction, decree, judgment or other restriction of any court,
administrative agency or governmental body.
4.4 FINANCIAL STATEMENTS; SEC REPORTS. Harrier has furnished to the
Selling Stockholders its consolidated balance sheet as of the end of its fiscal
year ended June 30, 1997 and its consolidated statements of earnings,
stockholders' equity and cash flows for the fiscal years ended June 30, 1997 and
1996. Prior to the Closing, Harrier shall deliver to COPE the aforementioned
financial statements, together with appropriate notes to such consolidated
financial statements, accompanied by reports thereon containing opinions without
comment or qualification, except as therein noted, by its independent certified
public accountants.
All of the foregoing consolidated financial statements (collectively, the
"Harrier Financial Statements"), including in each case the related notes, have
been prepared in conformity with generally accepted accounting principles
consistently applied and are correct and complete in all material respects and
such consolidated financial statements fairly present the financial position of
Harrier and the Glycosyn as of the dates of such balance sheets and the results
of operations for the respective periods indicated.
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Harrier has also furnished to the Selling Stockholders its Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1996, and all quarterly reports
on Form 10-QSB and current reports on Form 8-K which it has filed with the SEC
since June 30, 1996. Prior to the Closing, Harrier shall deliver to the Selling
Stockholders its Annual Report on Form 10-KSB for the fiscal year ended June 30,
1997. The above reports of Harrier to the SEC are sometimes collectively
referred to hereinafter as the "Harrier SEC Reports." The Harrier SEC Reports
contain all of the information required by the Exchange Act and the rules and
regulations thereunder and do not contain any untrue statements of a material
fact or omit 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.
4.5 ABSENCE OF UNDISCLOSED LIABILITIES. Harrier and Glycosyn have no
material liabilities, fixed or contingent, other than (i) liabilities fully
reflected in the Harrier Financial Statements, or (ii) liabilities incurred
since June 30, 1997 in the ordinary course of business or as contemplated or
permitted by this Agreement or referred to in the Harrier Disclosure Schedule,
all of which in the aggregate, taking into consideration all other changes in
the financial condition of Harrier and Glycosyn in the ordinary course of
business, have had no material adverse effect on the financial position or
results of operations of Harrier and Glycosyn, taken as a whole, or on the
conduct of its businesses.
4.6 ABSENCE OF ADVERSE CHANGES. Except as disclosed in the Harrier
Disclosure Schedule or Harrier Financial Statements, since June 30, 1997, there
has not been any material adverse change in the assets or liabilities or in the
condition, financial or otherwise, or business, properties, earnings or net
worth of Harrier and Glycosyn, taken as a whole, or (ii) any damage or
destruction in the nature of a casualty loss, whether covered by insurance or
not, materially and adversely affecting any property or business of Harrier or
Glycosyn which is material to the consolidated financial condition, operation or
business of Harrier and Glycosyn, taken as a whole.
4.7 CONTRACTS AND AGREEMENTS. Set forth in the Harrier Disclosure
Schedule is a list of all contracts and agreements (including loan agreements)
to which Harrier or Glycosyn is a party or by which it is bound, involving more
than $5,000. Except as set forth in the Harrier Disclosure Schedule, none of
the contracts and agreements will expire or be terminated or be subject to any
modification of terms or conditions upon the consummation of the transactions
contemplated by this Agreement. Except as set forth in the Harrier Disclosure
Schedule, neither Harrier nor Glycosyn is in default in any material respect
under the terms of any such contract or agreement nor in default in the payment
of any principal of or interest on any indebtedness for borrowed money nor has
any event occurred which, with the passage of time or giving of notice, would
constitute such a default by Harrier or Glycosyn and no other party to any such
contract or agreement is in default in any material respect thereunder nor has
any such event occurred with respect to such party.
4.8 NO VIOLATION OR LITIGATION. Except as set forth in the Harrier
Disclosure Schedule, neither Harrier nor Glycosyn is in violation of any law or
order, writ, injunction or decree of any court or other governmental department,
commission, board, bureau, agency or instrumentality, and there are no lawsuits,
proceedings, claims or governmental investigations pending or, to the knowledge
of any executive officer of Harrier, threatened against Harrier, Glycosyn or
against the properties or business of any of them, nor is there any reasonable
basis known to Harrier for any such action and there is no action, suit,
proceeding or investigation pending, threatened or, to the knowledge of Harrier,
contemplated which questions the legality, validity or propriety of the
transactions contemplated by this Agreement.
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4.9 ACCURACY OF PROXY STATEMENT. Harrier's notice of special meeting
and proxy statement ("Proxy Statement"), including any amendments or supplement
thereto, will, when the Proxy Statement is mailed to the stockholders of Harrier
as contemplated by Section 1.3 hereof, contain the information with respect to
Harrier and Glycosyn required by the Exchange Act and the rules and regulations
thereunder. The Proxy Statement will not, at the time of mailing, at the time
of the meeting of stockholders of Harrier or at the Closing, include any untrue
statement of a material fact or omit to state a material fact with respect to
Harrier or Glycosyn required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Harrier makes no representations as to statements or
omissions regarding information solely relating to COPE or the Selling
Stockholders, it being the agreement of the parties that responsibility for such
statements or omissions rests solely with the Selling Stockholders.
4.10 EMPLOYEE OR CONSULTING AGREEMENTS. The Harrier Disclosure
Schedule lists all plans, contracts, and arrangements, oral, implied or written,
included but not limited to union contracts, employment agreements, consulting
agreements, employee manuals, incentive payment plans and employee benefit
plans, whereunder Harrier or Glycosyn has any obligation (other than obligations
to make current wage or salary payments terminable on notice of 30 days or less)
to its officers or employees or other persons or their beneficiaries or
whereunder any of such persons owe money to Harrier or Glycosyn.
4.11 INSURANCE. Harrier and Glycosyn each maintain policies of fire
and casualty, liability and other forms of insurance in such amounts and against
such risks and losses as are reasonable for its businesses and properties, and
will keep such insurance in full force and effect through the Closing. A list
and brief description (including policy numbers, deductibles, potential loss
adjustments under retrospective policies, carriers and effective and termination
dates) of all policies of insurance, including insurance providing benefits for
employees, owned or held by Harrier or Glycosyn on the date hereof and of all
material performance bonds maintained by Harrier on the date hereof are set
forth in the Harrier Disclosure Schedule. Neither Harrier nor Glycosyn is
subject to any liabilities as a self-insurer of its business and property which
could have a material adverse impact on its business, properties or prospects,
taken as a whole, except as disclosed in the Harrier Disclosure Schedules.
4.12 TRADEMARKS AND PATENTS. Harrier and the Harrier Subsidiaries
have no material trademarks, trade names, copyrights, inventions, patents or
applications therefor which are owned, used, registered in the name of licensed
to Harrier or Glycosyn, except for those listed in the Harrier Disclosure
Schedule. Except as disclosed in the Harrier Disclosure Schedule, no
proceedings have been instituted or are pending or threatened or contemplated
which challenge the validity of the ownership by Harrier or Glycosyn of any such
trademark, trade name, copyright, invention or patent. Except as disclosed in
the Harrier Disclosure Schedule, neither Harrier nor Glycosyn has licensed
anyone to use any such trademark or any technical know how or other proprietary
rights of Harrier or Glycosyn.
4.13 PERMITS AND OTHER OPERATING RIGHTS. Except as disclosed in the
Harrier Disclosure Schedule, Harrier and Glycosyn currently possess all permits,
licenses, certificates and other authorizations from third parties, including,
without limitation, foreign and domestic governmental authorities, necessary or
required by applicable provisions of law and judicial decisions, and by the
property and contract rights of third parties, for it to own or lease its
properties and assets and to
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operate its business in the manner in which it is intended.
4.14 NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No order of
any court or administrative agency is in effect which restrains or prohibits
Harrier or Glycosyn from consummating the transactions contemplated hereby, and
no suit, action, investigation, inquiry or proceeding by any governmental body
or other person or legal or administrative proceeding has been instituted or
threatened which questions the validity or legality of Harrier's or Glycosyn's
consummation of the transactions contemplated hereby.
4.15 APPROVALS AND CONSENTS. Except as contemplated by Sections 1.3
and 5.6, there are no permits, consents, mandates or approvals of public
authorities, either U.S. or Swiss, federal, state or local, or of any third
party necessary for Harrier's consummation of the transactions contemplated
hereby.
4.16 BROKERAGE. No broker or finder has acted directly or indirectly
for Harrier in connection with this Agreement or the transactions contemplated
hereby, and no broker or finder is entitled to any brokerage or finder's fee or
other commission in respect thereof based in any way on agreements, arrangements
or understandings made by or on behalf of Harrier.
4.17 EMPLOYEE RETIREMENT INCOME SECURITY ACT. Neither Harrier nor
Glycosyn has an "employee pension benefit plan," as such term is defined in
Section 3 of the Employee Retirement Income Security Act of 1974. Neither
Harrier nor Glycosyn, nor any ERISA Affiliate of either of them, has ever
sponsored, maintained, or contributed to, or been required to sponsor, maintain
or contribute to, any single or multiemployer plan as defined in Section 4001 of
the Employee Retirement Security Act of 1974, as amended ("ERISA"). For
purposes of the foregoing, "ERISA Affiliate" shall mean any person (as defined
in Section 3(9) of ERISA), which together with Harrier, or Glycosyn would be
deemed to be a single employer plan (i) within the meaning of Section 414(b),
(c), (m) or (o) of the Internal Revenue Code of 1986, as amended, or (ii) as a
result of Harrier or Glycosyn being or having been a general partner of such
person.
4.18 PERSONAL PROPERTY, INVENTORIES AND TITLE TO PROPERTY. All
personal property owned, leased or used by Harrier and Glycosyn is reflected in
the Harrier Financial Statements, and is in good operating and working condition
and fit for operation in the usual course of business, ordinary wear and tear
excepted. Except as set forth in the Harrier Disclosure Schedule, Harrier and
Glycosyn have good and marketable title to all of its assets, and a good and
valid leasehold interest in all property leased by the corporation, free and
clear of all liens.
4.19 ENVIRONMENTAL MATTERS. There has been no manufacture, refining,
storage, disposal or treatment of Hazardous Substances (as hereinafter defined)
by Harrier or Glycosyn at any real property currently or in the past owned,
operated, used, leased or contracted for by Harrier or Glycosyn, or otherwise in
violation of any Environmental Laws (as hereinafter defined) or which would
require remedial action under any Environmental Law. During the past three
years neither Harrier nor Glycosyn has received (a) notice of any such violation
with respect to any Hazardous Substance at or by any of such real property, (b)
notice from any governmental agency that Harrier, or any present or former
owner, lessee or operator of such real property, is a potentially responsible
party for cleanup liability with respect to the emission, discharge or release
of any Hazardous Substance or for any other matter arising under the
Environmental Laws or in any litigation, administrative proceeding, finding,
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order, citation, notice, investigation or complaint under any Environmental Law,
or (c) notice of violation, citation, complaint, request for information, order,
directive, compliance schedule, notice of claim, proceeding or litigation from
any party concerning the corporation's compliance with any Environmental Law.
As used herein "Environmental Laws" means the Resource Conservation Recovery
Act, the Comprehensive Environmental Responsibility Compensation and Liability
Act, the Superfund Amendments and Reauthorization Act, the Toxic Substances
Control Act, the Hazardous Materials Transportation Act, the Clean Air Act, the
Clean Water Act, and other similar federal, state and local laws, as amended,
together with all regulations issued or promulgated thereunder, relating to
pollution, the protection of the environment or the health and safety of workers
or the general public. As used herein "Hazardous Substance" means any hazardous
substance, hazardous or toxic waste, hazardous material, pollutant or
contaminant, as those or similar terms are used in the Envronmental Laws,
including, without limitation, asbestos and asbestos-related products,
chlorofluorocarbons, oils or petroleum derived compounds, polychlorinated
biphenyl, pesticides and radon.
4.20 TAX MATTERS. Harrier and Glycosyn have timely filed all
federal, state and local tax returns and all information returns and reports
required to be filed by or with respect to it under the laws of the United
States or any state or other jurisdiction for all periods ending on or prior to
the date hereof and will timely file all such returns and reports required to be
filed from the date hereof through the Closing Date. All federal, state,
county, local, and foreign income, profits, franchise, sales, use, occupational,
property, excise, payroll, withholding and other taxes (including interest and
penalties) (collectively, "Taxes") required to have been paid or accrued by
Harrier or Glycosyn have been fully paid or are adequately provided for on
Harrier's consolidated balance sheet and any Taxes required to be paid or
accrued prior to the Closing Date will be fully paid or adequately provided for
on the books of Harrier or Glycosyn as the case may be. To the knowledge of
Harrier, no issues have been raised (and are currently pending) by the Internal
Revenue Service or any other taxing authority concerning the liability of
Harrier, Glycosyn or DermaRay for Taxes, and no waivers of statutes of
limitations have been given or requested with respect to Harrier, Glycosyn or
DermaRay. There is no tax lien of any kind outstanding against the assets,
property, or business of Harrier, Glycosyn or, to the knowledge of Harrier,
DermaRay. All deficiencies asserted or assessments (including interest and
penalties) made as a result of any examination by the Internal Revenue Service
or by appropriate state or departmental tax authorities of the federal, state or
local income tax, sales tax or franchise tax returns of or with respect to
Harrier, Glycosyn or, to the knowledge of Harrier, DermaRay have been fully paid
or are adequately provided for on Harrier's consolidated balance sheet and no
proposed (but unassessed) additional taxes, interest or penalties have been
asserted.
4.21 TRANSACTIONS WITH AFFILIATES. Except as set forth in the
Harrier SEC Reports or the notes to the Harrier Financial Statements, neither
Harrier nor Glycosyn has purchased, acquired or leased any property or services
from, or sold, transferred or leased any property or services to, or loaned or
advanced any money to, or borrowed any money from, or guaranteed or otherwise
become liable for any indebtedness or other obligations of, or acquired any
capital stock, obligations or securities of, or made any management, consulting
or similar fee arrangement with any officer, director, employee or stockholder
of Harrier or Glycosyn (nor any spouse, child or affiliate thereof), nor is
Harrier or Glycosyn a party to any agreement oral or written with respect to any
of the foregoing.
4.22 OTHER INFORMATION. None of the written information, documents
or memoranda furnished or to be furnished by Harrier to COPE or the Selling
Stockholders or any of their representatives is false or misleading in any
material respect or omits to state a material fact required to
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be stated therein or necessary in order to make any of the statements
therein, in the light of the circumstances under which they were made, not
misleading.
5. CERTAIN ADDITIONAL UNDERSTANDINGS AND AGREEMENTS.
5.1 APPROVALS AND CONSENTS.
(a) IN GENERAL. The parties hereto shall each use all
reasonable best efforts to obtain, and shall not take any action which
jeopardizes obtaining, the necessary approvals and consents of other persons and
governmental authorities required to be obtained to consummate the transactions
contemplated by this Agreement.
(b) COPE AND SELLING STOCKHOLDERS COMPLIANCE WITH SECURITIES
LAWS. COPE and each Selling Stockholder shall take such actions as shall be
required in order to exempt the offer and sale of the COPE Shares to Harrier
from the registration and prospectus delivery requirements under the Securities
Act and to register or qualify or exempt from registration and qualification
requirements the offer and sale of the COPE Shares to Harrier under applicable
foreign and state securities laws.
(c) HARRIER COMPLIANCE WITH SECURITIES LAWS. Harrier shall
cooperate with the Selling Stockholders in taking such actions as shall be
required in order to exempt the offer and sale of the Harrier Shares to the
Selling Stockholders from the registration and prospectus delivery requirements
under the Securities Act and to register or qualify or exempt from registration
and qualification requirements the offer and sale of the Harrier Shares to the
Selling Stockholders under applicable foreign and state securities laws.
5.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) COPE AND MAJORITY STOCKHOLDERS. The representations and
warranties of COPE and the Majority Stockholders made herein shall not be
affected by any information furnished to, or investigations made by Harrier or
any of its employees or representatives in connection with the subject matter of
this Agreement. The representations and warranties of the Majority Stockholders
shall survive the execution and delivery of this Agreement and the consummation
of the transactions contemplated thereby for a period of four (4) years after
the Closing Date. The representations and warranties of COPE shall not survive
the Closing.
(b) HARRIER. The representations and warranties of Harrier made
herein shall not be affected by any information furnished to, or investigations
made by, COPE or the Majority Stockholders, or any of their employees or
representatives, in connection with the subject matter of this Agreement and
shall survive the execution and delivery of this Agreement and the consummation
of the transactions contemplated thereby for period of four (4) years after the
Closing Date.
5.3 CONDUCT OF BUSINESS PRIOR TO THE CLOSING DATE. From the date
hereof until the Closing Date, COPE and the Majority Stockholders, on the one
hand, and Harrier, on the other, shall each act as follows, except as otherwise
expressly consented to by the other in writing, which consent shall not be
unreasonably withheld, except such actions taken to consummate the transactions
in accordance with this Agreement as contemplated thereby:
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(a) NOTIFICATION. COPE and the Majority Stockholders and
Harrier shall each immediately notify the other of any material breaches of the
representations and warranties or any material nonfulfillment of the covenants,
agreements or obligations of it or of any developments which could materially
adversely affect the value of the COPE Shares or Harrier Shares. Without
limiting the foregoing, COPE and the Majority Stockholders and Harrier shall
each immediately notify the other of (1) any unexpected emergency or other
material change in the normal course of business or in the operation of its
properties, (2) the instigation of or any material development in any litigation
or regulatory proceedings, governmental complaints, investigations or hearings
(or communications indicating that the same may be contemplated) in which COPE
or Harrier is named as a party, and (3) budgets, capital expenditures and
material decisions involving its material properties or assets. COPE and the
Majority Stockholders and Harrier shall each keep the other fully informed of
such events and permit its representatives access to all materials prepared in
connection therewith.
(b) FORBEARANCE. From the effective date hereof to the Closing
Date, COPE and Harrier, or any of their subsidiaries, shall not, without the
prior written consent of the other, which consent shall not be unreasonably
withheld, except for such actions taken to consummate the transactions in
accordance with this Agreement as contemplated thereby: (1) amend its articles
of incorporation or bylaws; (2) issue any shares of capital stock or securities
convertible into any such securities or enter into any agreement or commitment
with respect to the issuance or purchase of any such securities; (3) declare,
pay or set aside for payment any dividend or distribution in respect to any
securities, or redeem, purchase or otherwise acquire any securities any options,
warrants or other rights to purchase or subscribe to any securities; (4) make or
contract for any capital investment, capital expenditure, capital addition or
capital improvement; (5) negotiate with any person other than the other
concerning any merger, disposition of all or substantially all of its business,
properties, or assets, any tender offer, acquisition or other business
combination, other than the transactions provided for in this Agreement;
(6) organize any new subsidiary, acquire any capital stock or other debt or
equity securities of any corporation, enter into any partnership or joint
venture or acquire any equity or ownership interest in any business; or (7) take
any action which would cause or constitute a material breach, or would, if it
had been taken prior to the date hereof, have caused a material breach of the
representations and warranties of it set forth herein.
5.4 ACCESS. Each of the parties hereto may, prior to the Closing
Date, through its respective representatives, make such reasonable investigation
as is permitted by the laws of its respective jurisdiction of organization of
the property, records and the financial condition of the other parties hereto as
it reasonably deems necessary or advisable to assure itself of the accuracy of
the representations and warranties of the other parties hereto and compliance by
the other parties hereto with all agreements and conditions to be satisfied by
them. Such investigation shall be done at reasonable times and under reasonable
circumstances. Each party shall each keep confidential in the same manner in
which it preserves its own confidential information any information so obtained
which is not otherwise publicly available or ascertainable and to which it has
been given access by another party, subject to applicable reporting and
disclosure requirements under applicable foreign, federal and state laws,
including without limitation securities laws. Nothing in this Section 5.4 shall
be deemed to constitute a waiver by any party, or an agreement of any party to
waive, with respect to any document, any claim of attorney-client privilege or
legal or contractual privilege or requirement of confidentiality; provided,
however, that the party claiming such privilege or requirement shall identify to
the extent it is legally permitted the subject matter thereof to the party
seeking such document.
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5.5 INDEMNIFICATION.
(a) INDEMNIFICATION BY HARRIER. Harrier agrees to indemnify,
defend and hold harmless the Selling Stockholders against and in respect of any
and all claims, demands, losses, costs, expenses, liabilities and damages,
including interest, penalties, and reasonable attorneys' fees, that the Selling
Stockholders shall incur or suffer which arise, result from or relate to any
material inaccuracy in or material breach or nonfulfillment of any of the
representations, warranties, covenants or agreements made by Harrier in this
Agreement, the schedules or exhibits hereto or in any other Document furnished
by Harrier under this Agreement.
(b) INDEMNIFICATION BY THE MAJORITY STOCKHOLDERS. Each Majority
Stockholder agrees to indemnify, defend and hold harmless Harrier against and in
respect of any and all claims, demands, losses, costs, expenses, liabilities and
damages, including interest, penalties, and reasonable attorneys' fees, that
Harrier shall incur or suffer which arise, result from or relate to any material
inaccuracy in or material breach of nonfulfillment of any of the
representations, warranties, covenants or agreements made by COPE or the
Majority Stockholder in this Agreement, the schedules or exhibits hereto or in
any other Document furnished by COPE or the Majority Stockholder under this
Agreement.
(c) PROCEDURES; RIGHTS TO SEPARATE COUNSEL. In the event any
party receives a complaint, claim or other notice of any loss, claim or damage,
liability or action, giving rise to a claim for indemnification under this
Section 5.5, the party claiming indemnification shall promptly notify the
indemnifying party of such complaint, notice, claim or action, and such
indemnifying party shall have the right to investigate and defend any such loss,
claim, damage, liability or action. The party claiming indemnification shall
have the right to employ separate counsel in any such action and to participate
in the defense thereof but the fees and expenses of such counsel shall not be at
the expense of the indemnifying party, unless the indemnifying party fails to
promptly defend, in which case the fees and expenses of such separate counsel
shall be borne by the indemnifying party. In no event shall an indemnifying
party be obligated to indemnify another party for any settlement of any claim or
action effected without the indemnifying party's prior written consent.
6. CONDITIONS TO THE OBLIGATIONS OF COPE AND THE MAJORITY STOCKHOLDERS.
The obligations of COPE and the Majority Stockholders, hereunder are subject to
the fulfillment at or before the Closing, of the following conditions (any of
which may be waived in writing by COPE and the Majority Stockholders):
6.1 REPRESENTATIONS AND WARRANTIES, ETC. The representations and
warranties of Harrier contained herein shall have been true and correct in all
material respects when made and as of the Closing, except as affected by actions
taken after the date hereof with the prior written consent of the Selling
Stockholders.
6.2 PERFORMANCE OF COVENANTS. Harrier shall have performed and
complied in all material respects with all covenants, agreements, terms and
conditions and executed all documents required by this Agreement to be
performed, complied with, or executed by it prior to the Closing.
-18-
<PAGE>
6.3 NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No order of
any court or administrative agency shall be in effect which restrains or
prohibits the transactions contemplated hereby, and no suit, action,
investigation, inquiry or proceeding by any governmental body or other person or
legal or administrative proceeding shall have been instituted or threatened
which questions the validity or legality of the transactions contemplated
hereby.
6.4 APPROVALS AND CONSENTS. All permits, consents or approvals of
applications to public authorities, federal, state or local, and all approvals
of any third persons, including without limitation all approvals or consents
under applicable federal or state securities laws, the granting of which are
necessary for the consummation of the transactions contemplated hereby shall
have been obtained.
6.5 HARRIER STOCKHOLDER APPROVAL. The holders of the outstanding
shares of the Harrier Common Stock shall have approved, in accordance with
Delaware General Corporation Law, (i) Harrier's issuance of Harrier Shares in
exchange for the COPE Shares, (ii) the Reverse Split; (iii) the Amendment to
Harrier's Certificate of Incorporation; (iv) the election of the COPE nominees
to Harrier's board of directors; and (v) Harrier's sale of Glycosyn common
shares in accordance with Section 6.15.
6.6 DELIVERY OF INSTRUMENTS OF TRANSFER. Harrier shall have
delivered to the Selling Stockholders or their representatives certificates
evidencing Harrier Shares.
6.7 CERTIFICATE. The President and Chief Financial Officer of
Harrier shall have delivered to the Selling Stockholders or their
representatives a certificate certifying as of the Closing Date the matters set
forth in Section 6.1 and 6.2.
6.8 DUE DILIGENCE. COPE's investigation of Harrier, Glycosyn and NCT
shall not have revealed any matters regarding the financial condition,
liabilities, operations or prospects of any of them which are not satisfactory
to COPE.
6.9 TAX CONSEQUENCES. COPE's analysis of the proposed ownership
structure of COPE following the Closing shall not have revealed any adverse
income tax consequences which are not acceptable to COPE in its reasonable
discretion.
6.10 RECAPITALIZATION AND CHARTER AMENDMENTS. Harrier will obtain
director and stockholder approval of: (a) this Agreement and the transactions
contemplated hereby; (b) the Reverse Split; (c) the change in the corporate name
of Harrier to "COPE, Inc." or such other mutually agreeable name as may be
available for use in the State of Delaware; (d) such amendments to the bylaws
and certificate of incorporation of Harrier as may be reasonably requested by
COPE; and (e) the election of a new board of directors of Harrier, including
Stephan Isenschmid, Adrian Knapp, Peter Koch, Markus Stalder and Kevin DeVito,
effective upon and subject to the Closing.
6.11 ASSIGNMENT AND ASSUMPTION. Harrier shall have assigned to
Glycosyn, and Glycosyn shall have assumed, all of Harrier's assets, liquidated
liabilities and indebtedness (including all threatened claims by American
Diagnostica Inc. ("ADI")) and contractual obligations pursuant to the form of
Assumption and Indemnification Agreement previously submitted to the Selling
Stockholders in connection herewith.
-19-
<PAGE>
6.12 RELEASE FROM HARRIER CREDITORS. Harrier shall have received
from its creditors documentation unconditionally and irrevocably releasing
Harrier from any further liability, claim or demand. In addition, Harrier shall
have received from each party to an executory contract with Harrier (including
ADI), documentation consenting to the assumption by Glycosyn and releasing
Harrier of any further obligation thereunder.
6.13 SALE OF GLYCOSYN. Harrier shall obtain all necessary director
and stockholder approval of, and shall carry out and effect, (i) the acquisition
by Glycosyn of a nineteen percent (19%) ownership interest in New Concept
Therapeutics, Inc., a North Carolina corporation ("NCT"), plus an option to
acquire at least up to fifty-one percent (51%) of the ownership of NCT; and (ii)
the sale of 2,850,000 shares of the common stock of Glycosyn presently owned by
Harrier to New Capital Investment Fund ("NCIF") in cancellation of all
indebtedness presently owed Harrier to NCIF, in each case pursuant to
documentation reasonably acceptable to COPE.
6.14 LEGAL OPINION. COPE and the Selling Stockholders shall have
received from Bruck & Perry, A Professional Corporation, counsel for Harrier, a
favorable opinion dated the Closing Date in form and substance reasonably
satisfactory to COPE and the Selling Stockholders and their counsel, to the
effect that:
(i) Harrier and Glycosyn are corporations duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and Harrier and Glycosyn have full corporate power and corporate authority to
own or lease its properties and carry on its business as now conducted and is
duly qualified to do business and is in good standing in each jurisdiction where
failure to so qualify would have a material adverse effect on the corporation.
Harrier and Glycosyn have the corporate power and corporate authority to
consummate the transactions as provided herein;
(ii) the authorized capital stock of Harrier consists of
30,000,000 shares of Harrier Common Stock and 5,000,000 shares of Harrier
Preferred Stock, of which 14,767,923 shares of Harrier Common Stock and no
shares of Harrier Preferred Stock are issued and outstanding. To such counsel's
knowledge, no options, warrants, convertible securities, rights of first refusal
or other rights to obtain shares of the capital stock of Harrier, whether on
conversion of other securities or otherwise, have been granted by Harrier, other
than as set forth in the Harrier Disclosure Schedule; no holder of shares of
Harrier's Common Stock has any preemptive rights with respect to any such shares
or any securities convertible into such shares from Harrier. All of the issued
and outstanding shares of Harrier's Common Stock on the Closing Date are validly
issued, fully paid and non-assessable; and there are no other corporations or
other entities in which Harrier owns, directly or indirectly, any equity
interest, except Glycosyn, DermaRay and NCT.
(iii) the Harrier Shares to be issued to the Selling
Stockholders at the Closing will be, when delivered to the Selling Stockholders
or their representatives, validly issued, fully paid and non-assessable shares
of Harrier's Common Stock free and clear of all pledges, security interests,
mortgages, liens, claims, charges, restrictions or encumbrances, except for
restrictions under applicable U.S. federal or state securities laws, and,
assuming the truth and accuracy of the Selling Stockholders' representations and
warranties set forth in Section 2 and the Subscription Agreements, the Harrier
Shares are exempt from the registration requirements of the Securities Act; and
-20-
<PAGE>
(iv) this Agreement and the transactions contemplated herein
have been duly approved by the Boards of Directors and by the stockholders of
Harrier and Glycosyn at meetings duly held in compliance with the Delaware Law
and in compliance with the Exchange Act and the applicable regulations
thereunder and this Agreement has been duly and validly executed and delivered
by Harrier; and the consummation of the transactions contemplated herein in
accordance with the terms of this Agreement is a valid and binding obligation of
Harrier, subject to the qualification and limitation that the procedural and
remedial rights of the other parties to this Agreement may be limited or
rendered unenforceable by (i) bankruptcy, insolvency, reorganization, moratorium
or other similar laws, (ii) legal or equitable principles now or hereafter in
effect relating to or affecting the enforcement of rights or remedies generally,
or (iii) the availability of equitable remedies.
The opinions set forth above may be expressly made subject to the
qualifications and limitations that are contained in the Third-Party Legal
Opinion Report (including the legal opinion accord) of the Section of Business
Law, American Bar Association approved August 11, 1991 (the "Accord"). In
giving such opinions, such counsel may rely, in accordance with the Accord, as
to matters of fact, upon certificates of officers of Harrier and governmental
agencies and Harrier's transfer agent and registrar, and as to matters of laws,
upon opinions of other counsel satisfactory to them, and shall deliver copies
thereof to COPE and the Selling Stockholders prior to the Closing Date. Such
opinion may state that such counsel's opinion is furnished, as counsel to
Harrier, to COPE and the Selling Stockholders and is solely for their benefit.
7. CONDITIONS TO THE OBLIGATIONS OF HARRIER. The obligations of Harrier
hereunder are subject to the fulfillment on or before the Closing, of the
following conditions (any of which may be waived in writing by Harrier):
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Selling Stockholders contained herein shall have been true and
correct in all material respects when made and shall be true and correct in all
material respects as of the Closing.
7.2 PERFORMANCE OF COVENANTS. The Majority Stockholders shall have
performed and complied in all material respects with all covenants, agreements,
terms and conditions and executed all documents required by this Agreement to be
performed, complied with or executed by them prior to or at the Closing. Each
stockholder other than the Selling Stockholders shall have executed a
Subscription Agreement.
7.3 INSTRUMENTS OF TRANSFER. The Selling Stockholders shall have
delivered to Harrier instruments of transfer for the COPE Shares in form and
substance reasonably satisfactory to Harrier and its counsel as shall be
necessary to effectively transfer all of the Selling Stockholders' right, title
and interest in the COPE Shares to Harrier.
7.4 NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No order of
any court or administrative agency shall be in effect which restrains or
prohibits the transactions contemplated hereby, and no suit, action,
investigation, inquiry or proceeding by any governmental body or other person or
legal or administrative proceeding shall have been instituted or threatened
which questions the validity or legality of the transactions contemplated
hereby.
-21-
<PAGE>
7.5 APPROVALS AND CONSENTS. All permits, consents or approvals of
applications to public authorities, federal, state or local, and all approvals
of any third persons, including without limitation all approvals or consents
under applicable federal or state securities laws, the granting of which are
necessary for the consummation of the transactions contemplated hereby shall
have been obtained.
7.6 HARRIER STOCKHOLDER APPROVAL. The holders of the outstanding
shares of the Harrier Common Stock shall have approved, in accordance with
Delaware General Corporation Law, (i) Harrier's issuance of Harrier Shares in
exchange for the COPE Shares, (ii) the Reverse Split; (iii) the Amendment to
Harrier's Certificate of Incorporation; (iv) the election of the COPE nominees
to Harrier's board of directors; and (v) Harrier's sale of Glycosyn common
shares in accordance with Section 6.13.
7.7 RECAPITALIZATION AND CHARTER AMENDMENTS. Harrier will obtain
director and stockholder approval of: (a) this Agreement and the transactions
contemplated hereby; (b) the Reverse Split; (c) the change in the corporate name
of Harrier to "COPE, Inc." or such other mutually agreeable name as may be
available for use in the State of Delaware; (d) such amendments to the bylaws
and certificate of incorporation of Harrier as may be reasonably requested by
COPE; and (e) the election of a new board of directors of Harrier, including
Stephan Isenschmid, Adrian Knapp, Peter Koch, Markus Stalder and Kevin DeVito,
effective upon and subject to the Closing.
7.8 ASSIGNMENT AND ASSUMPTION. Harrier shall have assigned to
Glycosyn, and Glycosyn shall have assumed, all of Harrier's assets, liquidated
liabilities and indebtedness (including all threatened claims by American
Diagnostica Inc. ("ADI")) and contractual obligations pursuant to the form of
Assumption and Indemnification Agreement previously submitted to the Selling
Stockholders in connection herewith.
7.9 RELEASE FROM HARRIER CREDITORS. Harrier shall have received from
its creditors documentation unconditionally and irrevocably releasing Harrier
from any further liability, claim or demand. In addition, Harrier shall have
received from each party to an executory contract with Harrier (including ADI),
documentation consenting to the assumption by Glycosyn and releasing Harrier of
any further obligation thereunder.
7.10 SALE OF GLYCOSYN. Harrier shall obtain all necessary director
and stockholder approval of, and shall carry out and effect, (i) the acquisition
of a nineteen percent (19%) ownership interest in New Concept Therapeutics,
Inc., a North Carolina corporation ("NCT"), plus an option to acquire at least
up to fifty-one percent (51%) of the ownership of NCT; and (ii) the sale of
2,850,000 shares of the common stock of Glycosyn presently owned by Harrier to
New Capital Investment Fund ("NCIF") in cancellation of all indebtedness
presently owed Harrier to NCIF.
7.11 LEGAL OPINION. Harrier shall have received from counsel for
COPE and the Selling Stockholders, a favorable opinion dated the Closing Date in
form and substance reasonably satisfactory to Harrier and its counsel, to that
effect that:
(i) COPE and each of the COPE Subsidiaries are corporations
duly incorporated, validly existing and in good standing under the laws of the
country of their organization, and COPE and each of the COPE Subsidiaries have
full corporate power and corporate authority to
-22-
<PAGE>
own or lease their properties and carry on their business as now conducted
and is duly qualified to do business and is in good standing in each
jurisdiction where failure to so qualify would have a material adverse effect
on the corporation. COPE and the Selling Stockholders each have the
corporate or individual power and authority to consummate the transactions as
provided herein;
(ii) the authorized capital stock of COPE consists of SFr
106,000 shares of COPE Capital Stock, of which 1,060 shares are issued and
outstanding. To such counsel's knowledge, no options, warrants, convertible
securities, rights of first refusal or other rights to obtain shares of the
capital stock of COPE or any COPE Subsidiary, whether on conversion of other
securities or otherwise, have been granted by COPE or any COPE Subsidiary, other
than as set forth in the COPE Disclosure Schedules; no holder of shares of COPE
Capital Stock has any preemptive rights with respect to any such shares or any
securities convertible into such shares from COPE; all of the issued and
outstanding shares of COPE Capital Stock on the Closing Date are validly issued,
fully paid and non-assessable; and there are no other corporations or other
entities in which COPE owns, directly or indirectly, any equity interest, except
for COPE GmbH, Ltd., COPE Handelsgmbh and Xpert, Inc.;
(iii) the COPE Shares to be transferred and assigned by the
Selling Stockholders to Harrier at the Closing will be, when delivered to
Harrier, validly issued, fully paid and non-assessable shares of COPE Common
Stock, and each Selling Stockholder has and will transfer to Harrier good and
marketable title to the COPE Shares which it owns as set forth on the
Stockholders List, free and clear of all pledges, security interests, mortgages,
liens, claims, charges, restrictions or encumbrances, except for restrictions
under applicable U.S. federal or state securities laws; and
(iv) this Agreement and the transactions contemplated herein
have been duly approved by the Selling Shareholders and managers and directors
and stockholders of COPE in compliance with the Swiss Law, and this Agreement
has been duly and validly executed and delivered by COPE and each Selling
Stockholder; and the consummation of the transactions contemplated herein in
accordance with the terms of this Agreement are the valid and binding obligation
of COPE and each Selling Stockholder, subject to the qualification and
limitation that the procedural and remedial rights of the other parties to this
Agreement may be limited or rendered unenforceable by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws, (ii) legal or
equitable principles now or hereafter in effect relating to or affecting the
enforcement of rights or remedies generally, or (iii) the availability of
equitable remedies.
The opinions set forth above may be expressly made subject to the
qualifications and limitations that are contained in the Third-Party Legal
Opinion Report (including the legal opinion accord) of the Section of Business
Law, American Bar Association approved August 11, 1991 (the "Accord"). In
giving such opinions, such counsel may rely, in accordance with the Accord, as
to matters of fact, upon certificates of directors and managers of COPE and
governmental agencies, and as to matters of laws, upon opinions of other
counsel satisfactory to them, and shall deliver copies thereof to Harrier prior
to the Closing Date. Such opinion may state that such counsel's opinion is
furnished, as counsel to COPE and the Selling Stockholders, to Harrier and is
solely for the benefit of Harrier.
-23-
<PAGE>
8. MISCELLANEOUS.
8.1 CUMULATIVE REMEDIES. Any Person having any rights under any
provision of this Agreement will be entitled to enforce such rights
specifically, to recover damages by reason of any breach of any provision of
this Agreement, and to exercise all other rights granted by law, which rights
may be exercised cumulative and not alternatively.
8.2 SUCCESSORS AND ASSIGNS. The rights and obligations of the
parties under this Agreement shall not be assignable without the written consent
of COPE and Harrier and any such purported assignment without their written
consent shall be void AB INITIO. Except as otherwise expressly provided herein,
all covenants and agreements contained in this Agreement by or on behalf of any
of the parties hereto will bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not.
8.3 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement or the other documents.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts when taken together will constitute one and the
same agreement.
8.5 NOTICES. Any approvals, consents or notices required or
permitted to be sent or given shall be delivered in writing personally or
mailed, certified mail, return receipt requested, to the following addresses and
shall be deemed to have been received within five days after such mailing:
If to COPE: COPE AG
Grundstrasse 14
CH-6343 Rotkreuz
Switzerland
Attn: Adrian Knapp, Chairman
With a copy to: Dechert, Price & Rhoads
30 Rockefeller Plaza
New York, New York 10112
Attn: Fredric J. Klink, Esq.
If to the Majority The Majority Stockholders
Stockholders: Address set forth on Exhibit A
with a copy to: Dechert, Price & Rhoads
30 Rockefeller Plaza
New York, New York 10112
Attn: Fredric Klink, Esq.
-24-
<PAGE>
If to Harrier: Harrier, Inc.
2200 Pacific Coast Highway, Suite 301
Hermosa Beach, California 90254
Attn: Kevin DeVito, President
with a copy to: Bruck & Perry
A Professional Corporation
500 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Daniel K. Donahue, Esq.
8.6 GOVERNING LAW; ARBITRATION. The validity, meaning and effect of
this Agreement shall be determined in accordance with the laws of the State of
California, U.S.A. applicable to contracts made and to be performed in that
state, without regard to its conflicts of laws rules; provided however that the
Federal Arbitration Act of the United States shall govern issues as to
arbitrability. If a dispute arises in connection with or relating to this
Agreement and the parties are unable to resolve it within forty-five (45) days
through direct negotiations, the dispute shall be referred to final and binding
arbitration to be held in Los Angeles, California, U.S.A. in accordance with the
rules of the American Arbitration Association for International Arbitration (as
they may be amended from time to time). The award of the arbitrator(s) shall be
final and binding upon the parties hereto and may be enforced by any court of
competent jurisdiction pursuant to the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, by which all parties agree to be bound.
8.7 SCHEDULES AND EXHIBITS. All schedules and exhibits are an
integral part of this Agreement.
8.8 LITIGATION COSTS. If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default, or misrepresentation in connection with any
of the provisions thereof, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it or they
may be entitled.
8.9 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties with respect to the subject matter
thereof, and supersedes all prior and contemporaneous agreements and
understandings.
-25-
<PAGE>
IN WITNESS WHEREOF, each of the parties to this Agreement has executed Or
caused this Agreement to be executed as of the date first above written.
"HARRIER"
Harrier, Inc.
a Delaware corporation
By: /s/ Kevin DeVito
------------------------------------------
Kevin DeVito, President
"COPE"
COPE AG,
a Swiss corporation
By: /s/ Adrian Knapp
------------------------------------------
Adrian Knapp, Chairman
"MAJORITY SHAREHOLDERS"
/s/ Stephan Isenschmid
----------------------------------------------
Stephan Isenschmid
/s/ Adrian Knapp
----------------------------------------------
Adrian Knapp
-26-
<PAGE>
EXHIBIT A
LIST OF SELLING STOCKHOLDERS
<TABLE>
<CAPTION>
Name and Address of Number of Shares of COPE
Selling Stockholder Capital Stock Owned by
Selling Stockholder
- -------------------------------- ---------------------------
<S> <C>
Stephan Isenschmid 480
Buchenweg 5
CH-6034 Inwil
SWITZERLAND
Adrian Knapp 480
Oberseeburg 45
6006 Luzern
SWITZERLAND
Ketts & Co. 20
4th Floor, 50 Hans Crescent
Knightsbridge, London
SW1 0NB, U.K.
Dr. Rudolf Fueter 10
Pilatusstrasse 141
6003 Luzern
SWITZERLAND
Gabriele Koch 10
Strahlerweg 123
76227 Karlsruhe
GERMANY
Bernd Rombach 10
Strahlerweg 16
76227 Karlsruhe
GERMANY
Maria Fischer 5
Bireggstr. 16
6003 Luzern
SWITZERLAND
Marco Scharer 5
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Number of Shares of COPE
Selling Stockholder Capital Stock Owned by
Selling Stockholder
- -------------------------------- ---------------------------
<S> <C>
Schoenbuehlstrand 19
6005 Luzern
SWITZERLAND
Verena Tritscheller 5
c/o Credit Suisse PB, Pde32
6002 Luzern
SWITZERLAND
Markus Vogel 4
Bergstrasse 21
6052 Hergiswil
SWITZERLAND
Hedwig Maters 3
c/o Alex Kolb
Alte Landstr. 124
8801 Thalwil
SWITZERLAND
Paul Wasescha 3
Stegenhalde 11
6048 Horw
SWITZERLAND
Finn Cederstroem 2
c/o Prime Invest
Usserhus 4
6023 Rothenburg
SWITZERLAND
Franz Knapp 2
Gartenheimstr. 5
6006 Luzern
SWITZERLAND
Peter Naf 2
c/o Prime Invest
Usserhus 4
6023 Rothenberg
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Number of Shares of COPE
Selling Stockholder Capital Stock Owned by
Selling Stockholder
- -------------------------------- ---------------------------
<S> <C>
Markus Zemp 2
Hofmatt
6142 Gettnau
SWITZERLAND
Hans Bitzi 1
c/o Credit Suisse PB, Pde32
6002 Luzern
SWITZERLAND
Reto Levy 1
St. Wendelin 8
6343 Holhausern
SWITZERLAND
Stefan Christen 1
Renggstrasse 29
6052 Hergiswil
SWITZERLAND
Klaus Eberle 1
Wieslocherstr. 4
69234 Dielheim
GERMANY
Hans Gerig 1
Zeughausgasse 20
6300 Zug
SWITZERLAND
August Harmeling 1
c/o Prime Invest
Usserhus 4
6023 Rothenburg
SWITZERLAND
Rene Heini 1
c/o Prime Invest
usserhus 4
6023 Rothenburg
SWITZERLAND
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Number of Shares of COPE
Selling Stockholder Capital Stock Owned by
Selling Stockholder
- -------------------------------- ---------------------------
<S> <C>
Karl-Ludwig Heldmann 1
c/o Credit Suisses PB, Pde32
6002 Luzern
SWITZERLAND
Bernadette Meier 1
Postfach 47
6032 Emmen
SWITZERLAND
Peter Muff 1
Schoenruetirain 5
6045 Meggen
SWITZERLAND
Alexander Schar 1
c/o Prime Invest
Usserhus 4
6023 Rothenburg
SWITZERLAND
Josy Schar 1
c/o Prime Invest
Usserhus 4
6023 Rothenburg
SWITZERLAND
Thomas Schar 1
c/o Prime Invest
Usserhus 4
6023 Rothenburg
SWITZERLAND
Ralph Schmid 1
Rueggisingerstrasse 141
6032 Emmen
SWITZERLAND
Eugen Stocker 1
</TABLE>
A-4
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Number of Shares of COPE
Selling Stockholder Capital Stock Owned by
Selling Stockholder
- -------------------------------- ---------------------------
<S> <C>
Talstrasse 8
6403 Kuessnacht
SWITZERLAND
Translex AG 1
Sihlbruggstr. 105
6340 Baar
SWITZERLAND
Esther Vogel-Felber 1
Bergstrasse 21
6052 Hergiswil
SWITZERLAND
</TABLE>
A-5
<PAGE>
SCHEDULE 1
COPE DISCLOSURE SCHEDULE
Section 2.2. OPTIONS, WARRANTS, SUBSCRIPTION CALLS
None.
Section 2.3. SELLING STOCKHOLDERS WHO ARE U.S. PERSONS
None
Section 3.5 Undisclosed Liabilities
None
Section 3.6 Material Adverse Changes
None
Section 3.7 Contracts and Agreements involving more than $50,000
CS Credit Suisse Lucern, Sfr. 1 Million Credit Contract
dated 9/3/96 BAWAG Wien, ATS 1 Million Credit Contract
renewed 9/9/97 Office Lease Rotkreuz, New Contract dated
9/9/97, $110,000 Take over Office Interior Rotkreuz,
Contract dated 9/9/97, $150,000.
Section 3.8 Court Orders, Proceedings
None
Section 3.10 Employment Agreements
Consulting Agreements:
1-1
<PAGE>
Section 3.11 Insurance Policy
Life Insurance Stephan Isenschmid 5/95 Termination Date $350,000
Adrian Knapp 5/96 Termination Date $350,000
Wolfgang Schallhorn 2/97 Termination Date $150,000
Liability Insurance Effective date 6/97, Termination date 6/2002 $3,500,000
Transport Insurance Effective date 2/97, Termination date 2/2002 $650,000
Fire/
Water Insurance Effective date 1/95, Termination date 1/2000 $650,000
Section 3.12 Trademarks and Patents
Trademark COPE, Organization Mondial de la Propriete Intellectuelle
International Registry No. 658047, covering Germany, Austria, Benelux,
France, Italy, Scandinavia
Section 3.16 Permits or Operating Rights not Obtained
None.
1-2
<PAGE>
SCHEDULE 2
HARRIER DISCLOSURE SCHEDULE
SECTION 4.2
Set forth below are the outstanding warrants and options to purchase
Harrier Common Stock responsive to Section 4.2:
<TABLE>
<CAPTION>
Number of Exercise Price
Underlying Shares (Pre-Split) Expiration Date
Name of Holder (Pre-Split)
- --------------------------- ------------------ ------------------ --------------
<S> <C> <C> <C>
O. Walter 30,000 $0.50 January 10, 1998
H. Maissen 50,000 $0.70 November 20, 1997
R. Stussi 100,000 $0.30 March 19, 1998
Hochstrasser 100,000 $0.30 March 19, 1998
Guignet 10,000 $0.22 March 10, 1998
DeVito 150,000 $0.50 May 22, 1998
Hollister 75,000 $0.50 May 22, 1998
Kehrli 75,000 $0.50 May 22, 1998
Beaver 75,000 $0.50 May 22, 1998
Bartik, Cordeiro & Assoc. 75,000 $0.50 May 22, 1998
Hans Maissen 1,000,000 $0.13 April 1, 2000
Daniel Huber 700,000 $0.13 April 23, 2000
Cornelia Cuniberti 100,000 $0.13 April 23, 1999
Annabella Schalchli 100,000 $0.13 April 23, 2000
A.S.
Neil Gibbons 100,000 $0.13 April 23, 2000
Daniel Huber 200,000 $0.13 September 2, 2000
Neil Gibbons 500,000 $0.13 September 2, 1999
</TABLE>
SECTION 4.7
Set forth below are the contracts and agreements of Harrier and Glycosyn
responsive to Section 4.7:
Research and Development Agreement dated May 1, 1993 between American
Diagnostica, Inc. and Harrier, Inc.
DermaRay International, L.L.C. Limited Liability Company Agreement dated
November 29, 1994 between Harrier, Inc. and Naturade, Inc.
2-1
<PAGE>
Asset Transfer Agreement and Plan of Liquidation and Dissolution dated June
30, 1997 by and among Harrier, Inc., Naturade, Inc. and DermaRay
International, L.L.C.
Technology Transfer Agreement dated January 31, 1996 between Harrier, Inc.
and Glycosyn Pharmaceuticals, Inc.
Letter Agreement dated September 30, 1997 between Glycosyn Pharmaceuticals,
Inc., New Concept Therapeutics, Inc., Gerald Head and David Spielvogel.
2-2
<PAGE>
GLYCOSYN PHARMACEUTICALS, INC.
2200 PACIFIC COAST HIGHWAY, SUITE 301
HERMOSA BEACH, CALIFORNIA 90254
October __, 1997
New Concept Therapeutics, Inc. Mr. Gerald Head
303-E East Durham Road 303-E East Durham Road
Cary, North Carolina 27513 Cary, North Carolina 27513
Mr. David Spielvogel
303-E East Durham Road
Cary, North Carolina 27513
Re: INVESTMENT IN NEW CONCEPT THERAPEUTICS, INC.
Gentlemen:
This Letter Agreement will confirm our recent discussions relating to a
proposed investment (the "Investment Transaction") whereby Glycosyn
Pharmaceuticals, Inc., a Delaware corporation ("Glycosyn"), will conduct an
equity investment in New Concept Therapeutics, Inc., a North Carolina
corporation ("NCT"), in accordance with the general terms described below. This
Letter Agreement assumes that NCT has 100 common shares issued and outstanding,
of which 51 common shares are owned by Gerald Head ("Head") and 49 common shares
are owned by David Spielvogel ("Spielvogel"). This Letter Agreement also
assumes that the authorized capital of Glycosyn consists of 10,000,000 of the
$.001 par value common stock ("Glycosyn Common Stock") of Glycosyn, of which
5,262,100 shares of Glycosyn Common Stock are issued and outstanding; and
5,000,000 shares of the $.001 par value preferred stock of Glycosyn, of which
250,000 shares (designated as "Series A Preferred Stock) are issued and
outstanding. This Letter Agreement further assumes that there are no
outstanding options, warrants or other rights to acquire any securities of NCT
or Glycosyn.
On the basis of our discussions, Glycosyn and each of you hereby confirm
our agreement to consummate the Investment Transaction on the following general
terms and conditions. We hereby confirm our intent to enter into a more formal
written agreement ("Definitive Agreement") concerning the Investment Transaction
as soon as possible. In the meantime, however, this Letter Agreement shall
constitute the binding agreement of the parties to all of the terms and
conditions contained herein.
1. STRUCTURE OF TRANSACTION. At the Closing (as defined below), NCT
shall issue into an escrow to be maintained by NCT's counsel, Roderick W.
O'Donoghue, Jr., Esq. ("Escrow Agent"), to be held in escrow for the benefit of
Glycosyn, 23 common shares ("NCT Shares") of NCT in consideration of Glycosyn's
issuance of an unsecured promissory note ("Note") to NCT in the original
principal amount of $250,000. The Note shall bear interest at the rate of ten
percent (10%) per annum. The Note shall require the payment of $50,000 of the
principal amount thereunder on or before December 31, 1997. The Note shall also
require the payment of the
<PAGE>
Page 2
remaining $200,000 principal amount and all accrued interest on the principal
amount on or before April 30, 1998, however Glycosyn shall use its best efforts
to prepay the principal amount of the Note as soon as practicable. The parties
hereby acknowledge that Glycosyn has advanced to date $20,000 under the Note.
Upon Glycosyn's payment in full of the Note in accordance with its terms, the
Escrow Agent shall release the NCT Shares to Glycosyn. In the event that
Glycosyn fails to pay the initial $50,000 of principal under the Note by
December 31, 1997 or the entire principal amount of the Note by April 30, 1998,
the Escrow Agent shall return the NCT Shares to NCT for cancellation and all
amounts paid by Glycosyn under the Note shall be repaid by NCT, with interest on
the unpaid principal amount at the rate of 10% per annum from the date of
advance by Glycosyn under the Note, in twelve (12) equal monthly installments
commencing May 31, 1998 and on the last day of each of the following 11 months
until paid in full. The terms of the escrow shall be set forth in a separate
Escrow Agreement by and among the Escrow Agent, Glycosyn, Head and Spielvogel.
2. OPTIONS. As an inducement to Glycosyn to conduct the investment
in NCT, and as additional consideration therefore, Head and Spielvogel each
hereby grant Glycosyn an option ("Option" or the "Options") to purchase all, but
not less than all, of their common shares of NCT (i.e., 51 common shares from
Head and 49 common shares from Spielvogel), at the exercise price of $7500.00
per share, for the period terminating two years from the Closing. Glycosyn
shall only be allowed to exercise the Options jointly and in their entirety.
The Options shall be exercisable by Glycosyn upon and subject to its payment of
the entire principal amount of the Note and shall provide for the exercise of
the Option, and payment in full of the underlying shares, by Glycosyn's delivery
of shares ("Glycosyn Shares") of Glycosyn Common Stock to the optionor at the
rate of $0.30 per Glycosyn Share. The Options shall contain customary and
reasonable terms concerning investor representations necessary to substantiate
compliance with applicable federal and state securities laws and anti-dilution
adjustment, including "average-down" anti-dilution adjustment in the event of
Glycosyn's issuance of shares of its common stock for consideration of less than
$0.30 per share. At the request of Optionor, Glycosyn shall use its best
efforts to restructure the issuance of the Glycosyn Shares for the NCT common
shares as a tax-exempt statutory merger.
3. WARRANTIES, REPRESENTATIONS AND INDEMNITY. The parties will
provide usual and customary warranties, representations and indemnities to each
other by way of the Definitive Agreement, including, without limitation,
representations and warranties concerning liabilities (contingent or otherwise),
litigation (current or threatened), any investigation (past or present) by
regulatory bodies, and related significant events which might affect the
consummation of the Investment Transaction. Each party represents and warrants
that it has full and absolute right, power and authority and legal capacity to
execute, deliver and perform this Letter Agreement and all other agreements
contemplated hereby to be executed by the party and, upon such execution, this
Letter Agreement will be the valid and binding obligation of the party,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization and moratorium laws
<PAGE>
Page 3
and other laws of general application affecting enforcement of creditors
rights generally. Each party represents and warrants to the other that the
execution, delivery, and performance of this Letter Agreement by such party
does not and will not reach, violate, conflict with or permit the
cancellation of, any agreement to which they are a party or by which any of
its properties are bound.
4. DUE DILIGENCE/ACCESS. Until the Investment Transaction is
consummated or terminated, Glycosyn, on the one hand, and NCT, Head and
Spielvogel, on the other hand, will permit the officers, directors, employees,
agents, accountants and legal representatives of the other to investigate,
review and copy its business records and financial statements and inspect its
facilities.
5. CONFIDENTIALITY. Glycosyn, on the one hand, and NCT, Head and
Spielvogel, on the other hand, agree on behalf of itself and its employees,
agents, accountants, attorneys and other advisors, that they will not divulge
confidential information obtained from the other to third parties (other than
their employees, agents, accountants and attorneys). In the event the
Investment Transaction is abandoned, each party agrees to return to the other
party all copies of any documentary confidential information that the other
party has provided to it and any notes, memoranda or other documents generated
by it with respect to such confidential information. Glycosyn acknowledges and
agrees that all patents filed by Glycosyn or NCT relating to inventions by Head
or Spielvogel shall identify them as the inventors. Head and Spielvogel agree
that all inventions made by them in the course of their employment by NCT or
Glycosyn, including all patent rights, shall be assigned to NCT or Glycosyn as
the case may be. Head and Spielvogel agree to enter into with NCT, and Glycosyn
shall cause its principal officers and researchers to enter into with it, an
Employee Non-Disclosure and Invention Assignment Agreement in the form attached
hereto as Exhibit A.
6. ACQUISITION FOR INVESTMENT. Glycosyn, on the hand, and Head and
Spielvogel, on the other hand, are acquiring the NCT Shares (including the NCT
common shares underlying the Options) and the Glycosyn Shares, respectively, for
their own account, for investment purposes only and not with a view to, or for
sale in connection with, a distribution, as that term is used in Section 2(11)
of the Securities Act of 1933 ("1933 Act") thereof in a manner which would
require registration under the 1933 Act or any state securities laws. Glycosyn,
Head and Spielvogel understand that the securities to be acquired by each of
then hereunder cannot be sold or assigned without registration and/or
qualification under the 1933 Act and applicable state securities laws.
Glycosyn, Head and Spielvogel understand and acknowledge that the securities to
be acquired by each of them hereunder and the certificates evidencing such
securities will bear the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE
SECURITIES LAWS OF ANY STATE. THE
<PAGE>
Page 4
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION THEREOF UNDER THE SECURITIES ACT OF 1933 AND/OR
THE SECURITIES ACT OF ANY STATE HAVING JURISDICTION OR AN
OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR ACTS.
7. CONDUCT OF BUSINESS PRIOR TO AND AFTER CLOSING. Glycosyn, on the
one hand, and NCT, Head and Spielvogel, on the other hand, agree that prior to
closing or abandonment of the Investment Transaction, each entity will conduct
its business and operations in the ordinary course. NCT, Head and Spielvogel
agree that until Glycosyn defaults under the Note or the Options are exercised
in full or expire by their terms, NCT shall not enter into or consummate, nor
solicit or encourage any offers for NCT's involvement in, any of the following
transactions ("Prohibited Transactions"): (i) any merger, consolidation or sale
of assets outside the ordinary course of business by NCT or any affiliate of
NCT; or (ii) any issuance of the equity securities of NCT or any contracts or
rights for a third party's acquisition of the equity securities of NCT. Head
and Spielvogel each agree that until Glycosyn defaults under the Note or the
Options are exercised in full or expire by their terms, they will not enter into
or consummate, nor solicit or encourage any offers for, any transfer, sale,
assignment or hypothecation of their common shares of NCT.
8. EXPENSES. Whether or not the parties enter into a Definitive
Agreement, all costs and expenses incurred in connection with this Letter
Agreement and the proposed Investment Transaction shall be paid by the party
incurring such costs or expenses.
9. CLOSING. The parties shall use their best efforts and good faith
to promptly prepare and execute a Definitive Agreement satisfactory to all
parties and close the Investment Transaction no later than November 30, 1997
(the "Closing"). Either party may terminate this Agreement upon 30 days' prior
written notice in the event the other party either: (i) institutes proceedings
to be adjudicated a bankrupt or insolvent, (ii) consents to the institution of
bankruptcy or insolvency proceedings against it; (iii) files a petition or
answer or consent seeking reorganization or relief under the Federal Bankruptcy
Act or any other applicable federal or state law; or (iv) consents to the filing
of any such petition or to the appointment of a receiver, liquidator, assignee,
trustee or sequestrator (or other similar official) for it or any substantial
part of its property.
<PAGE>
Page 5
10. PRESS RELEASES. The parties agree to consult with one another
prior to dissemination of any press release or public disclosure of information
regarding the Investment Transaction contemplated between the parties.
11. BOARD REPRESENTATION. Subject to and concurrent with the
Closing, both Head and Spielvogel shall be appointed to the Board of Directors
of Glycosyn and Kevin DeVito shall be appointed to the Board of Directors of
NCT, and NCT and Glycosyn shall maintain such appointments until such time as
Glycosyn defaults under the Note or the options are exercised in full or expire
by their terms.
12. Miscellaneous. This Letter Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. The rights and obligation of either party to this Letter Agreement may
not be assigned by such party without the prior written consent of the other
party. This Letter Agreement and the exhibits contain the entire agreement of
the parties hereto and may not be modified, altered or changed in any manner
whatsoever, except by a written agreement signed by the parties hereto. This
Letter Agreement may be executed in two counterparts, each signed by one of the
parties and both of said counterparts together shall constitute one and the same
instrument. The parties agree that facsimile signatures may be relied upon by
each of the parties hereto as original signatures. This Letter Agreement shall
be construed and interpreted in accordance with and governed and enforced in all
respects by the laws of the State of North Carolina.
[Continued on next page]
<PAGE>
Page 6
As noted above, it is understood that this Letter Agreement represents the
binding agreements of the parties. If the matters set forth herein accurately
reflect the terms and conditions of the proposed Investment Transaction, please
execute a copy of this Letter Agreement in the location provided below and
return an executed copy to me. Thank you.
Very truly yours,
GLYCOSYN PHARMACEUTICALS, INC.
By: /s/ Kevin DeVito
------------------------------------
Kevin DeVito, President
ACKNOWLEDGED AND AGREED:
NEW CONCEPT THERAPEUTICS, INC.
By: /s/ Gerald Head, President October 31, 1997
----------------------------------
Gerald Head, President
/s/ Gerald Head October 31, 1997
- -------------------------------------
Gerald Head, an individual
/s/ David Spielvogel October 31, 1997
- -------------------------------------
David Spielvogel, an individual
<PAGE>
EXHIBIT "A"
EMPLOYEE NONDISCLOSURE
AND
INVENTION ASSIGNMENT AGREEMENT
In consideration of my employment or the continuation of my employment (it
being understood that this Agreement does not itself give me rights to
employment or continued employment) by ___________________________________, or
any of its predecessors, successors, assigns, affiliates or subsidiary companies
(each hereinafter referred to as the "Company"), I agree as follows:
I. TRADE SECRETS AND CONFIDENTIAL INFORMATION.
A. Confidentiality and Confidential Information.
I agree to regard and preserve as confidential all information
obtained by me relating or pertaining to (i) the Company's business, projects,
plans, products, services planned or proposed products or services, customers,
potential customers, trade secrets, and other confidential information
(including business and financial information, and any computer programs and
software or unpublished know-how, whether patented or unpatented), and to (ii)
all of my activities for or on behalf of the Company, and I agree not to publish
or disclose any part of such information to others or use the same for my own
purposes or the purposes of others, during the term of my employment by the
Company or thereafter. Any information of the Company which is not readily
available to the public shall be considered by me to be confidential information
and therefore within the scope of this Agreement, unless the Company advises me
otherwise in writing. I further agree to preserve as confidential the
confidential information of any third party to which I may have access and to
treat such information as though it were Company confidential information.
B. Prevention of Unauthorized Release of Company Confidential
Information.
I agree to promptly advise the Company of any knowledge which I may
have of any unauthorized release or use of any Company confidential information,
and shall take reasonable measures to prevent unauthorized persons or entities
from having access to, obtaining or being furnished with any Company
confidential information.
C. Confidential Information of Third Parties.
I agree not to disclose to the Company and not to use in any way in
connection with my employment by the Company any confidential information or
trade secrets of any kind, or any embodiments thereof, of any previous employer
or other third party. Specifically, and without limitation, I agree to use only
my general knowledge, experience and skill in connection with my employment with
the Company and acknowledge that this is the purpose for which I have been
A-1
<PAGE>
hired by the Company.
D. Termination of Employment.
I agree that, upon termination of my employment with the Company
(voluntary or otherwise), I will return to the Company all things belonging to
the Company, and that all documents, records, notebooks and tangible articles
containing or embodying confidential information, including copies thereof, then
in my possession or control, whether prepared by me or others, will be left with
the Company. I recognize that the unauthorized taking of any of the Company's
trade secrets may be is a crime punishable by imprisonment in a state prison or
in a county jail. I further recognize that such unauthorized taking of the
Company's trade secrets may also result in civil liability.
E. Exit Interview.
In consideration of my employment with the Company, I agree that, upon
termination of my employment with the Company (voluntary or otherwise), I will
attend an exit interview and execute a Termination Certificate in a form
substantially the same as that attached hereto as Exhibit A.
II. INVENTIONS
A. Disclosure of Inventions.
I acknowledge and agree that, among my other duties for the Company, I
will be employed by the Company in a position which could provide the
opportunity for conceiving and/or reducing to practice inventions, programs,
codes, improvements, developments, ideas or discoveries, whether patentable or
unpatentable (collectively hereinafter referred to as "Inventions").
Accordingly, I agree to promptly disclose to the Company, in writing, all
Inventions conceived or reduced to practice by me while in the Company's employ,
either solely or jointly with others, and whether or not during regular working
hours. I further agree to maintain adequate and current written records of such
Inventions.
B. Company Inventions.
The assignment provisions in Paragraph II.C below shall apply only to
"Company Inventions" as defined herein. Company Inventions shall mean any
Invention that either:
1. relates, at the time of conception or reduction to practice of
the Invention, to:
a. the Company's business, projects, services or products, or
to the marketing or utilization thereof; or
b. the actual or demonstrably anticipated research or
development of
A-2
<PAGE>
the Company; or
2. results from any work performed directly or indirectly by me for
the Company; or
3. results, at least in part, from the use of the Company's time,
materials, facilities or trade secret information.
C. Assignment of Company Inventions.
I hereby assign, and agree to assign, to the Company all my right,
title and interest in and to all Company Inventions. Also, I hereby assign, and
agree to assign, to the Company all Inventions conceived or reduced to practice
by me within one year following my termination of employment with the Company
(voluntary or otherwise), if the Invention is a result of the Company's
information which was obtained by me during my employment with the Company.
D. Execution of Necessary Documents.
I agree that, upon request and without compensation therefor, but at
no expense to me, and whether during the term of my employment or thereafter, I
will do all lawful acts, including the execution of papers and lawful oaths and
the giving of testimony, that in the opinion of the Company, its successors and
assigns, may be necessary or desirable in obtaining, sustaining, reissuing,
extending and enforcing United States and foreign Letters Patent, including
design patents, on all of such Company Inventions, and for perfecting,
affirming, maintaining and recording the Company's complete ownership and title
thereto, and to otherwise cooperate in all proceedings and matters relating
thereto.
E. Exception.
I have listed below all unpatented, but potentially patentable, ideas
and inventions conceived prior to this employment (and which have not been
assigned to a former employer) and which are, therefore, excluded from the scope
of this Agreement:
III. COPYRIGHTS.
I agree that all right, title and interest in any and all copyrights,
copyright registrations and copyrightable subject matter which occur as a result
of my employment with the Company shall be the sole and exclusive property of
the Company, and agree that such works comprise works made for hire. I hereby
assign, and agree to assign, all right, title and interest in any and all
copyrights, copyright registration and copyrightable subject matter which occur
as a result of my employment to the Company. I hereby irrevocably appoint
Company as my attorney-in-fact for the purpose of executing any and all
documents and performing any and all other acts necessary to give effect and
legality to the provisions of this paragraph and paragraph II.D above.
A-3
<PAGE>
IV. UNFAIR COMPETITION.
A. During Employment.
I agree that during my employment with the Company I will not
interfere with the business of the Company in any manner. Particularly, but
without limitation, I agree to refrain from planning or organizing a competitive
business during my term of employment. I further agree that during my
employment with the Company, I will not have any proprietary interest in any
competitive business except for an interest of less than five percent (5%) of
the outstanding shares of a publicly-held corporation, meaning a corporation
whose outstanding shares are owned by one hundred (100) or more shareholders.
B. Following Termination (For One Year).
I agree that, for a period of one (1) year immediately following my
termination of employment with the Company (voluntarily or otherwise), I will
not interfere with the business of the Company in any manner. Particularly, but
without limitation, I agree to refrain from the following acts:
1. initiating contact with any employee, consultant or such other
independent contractor of the Company for the purpose of hiring away such
employee, consultant or other independent contractor, and
2. soliciting customers of the Company.
C. Non-Competition.
If permitted by the laws of the state or country where I reside or
where I reside following termination of my employment with the Company, I hereby
agree that for a period of one (1) year immediately following my employment, I
will not compete with the business, products or services of the Company in any
manner within the geographic areas in which such products or services are
distributed or in which such business is conducted.
V. GENERAL PROVISIONS.
A. If any portion of this Agreement is found to be void or unenforceable,
it shall be severed herefrom, leaving in force the remainder of this Agreement.
B. This Agreement will be binding upon my heirs, assigns, executors,
administrators or other legal representatives.
C. No waiver or modification of any of the terms or provisions of this
Agreement shall
A-4
<PAGE>
be valid unless contained in a single writing and signed by both myself and
the Company. No course of conduct or manner of dealing with the parties
shall constitute a waiver of any term or provision of this Agreement.
D. In the event that any legal action becomes necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled,
in addition to its court costs, to such reasonable attorney fees, expert witness
fees and legal expenses as shall be fixed by a court of competent jurisdiction.
Subject to the provision of paragraph IV(C), this Agreement shall be governed by
the laws of the State of North Carolina. The exclusive jurisdiction for any
legal proceeding regarding this Agreement shall be in the courts of said state,
and I hereby expressly submit to the jurisdiction of said courts.
E. Nothing in this Agreement shall limit the remedies available to the
Company. Specifically, and without limitation, wherever I have agreed to execute
assignment or other documents for the benefit of the Company, I hereby
irrevocably appoint the Company as my attorney-in-fact for the limited purpose
of executing any and all such documents and performing any and all other acts
necessary to give effect and legality to the provisions of this Agreement.
F. Wherever necessary to carry out the intent of the parties, certain
provisions of this Agreement, including, without limitation, Paragraphs I, II.A,
C, D; III; IV; and V, shall survive the termination of my employment with the
Company and shall continue in full force and effect.
G. I acknowledge that this Agreement is in consideration of my employment
with the Company, whether executed before, at, or following my initial
employment therewith. I further acknowledge that this Agreement does not create
any obligation for my continued employment by the Company.
H. This Agreement, including Exhibit A, contains the entire understanding
between myself and the Company with respect to the subject matter hereof, and
there are no representations, warranties, promises or undertakings other than
those contained in the provisions above.
I. This Agreement is executed by me at __________, _______________, this
__ day of October 1997.
WITNESS: EMPLOYEE:
- -------------------------------- --------------------------------------
(Please print) (Please print)
- -------------------------------- --------------------------------------
A-5
<PAGE>
(Signature) (Signature)
A-6
<PAGE>
EXHIBIT A-1
TERMINATION CERTIFICATE
This is to confirm that I have reviewed the Employee Nondisclosure and
Invention Assignment Agreement signed by me on (date) ____________________,
19__, and that I understand the terms of that Agreement and the continuing
obligations I have under that Agreement. During the course of my employment
with ____________________________ (the "Company"), I have had access to
information regarded by the Company as confidential. Confidential information
to which I have had access includes, but is not limited to, information
associated with the following subject matter:
.
I certify that I do not have in my possession or control, nor have I failed
to return, any specifications, drawings, blueprints, reproductions, prototypes,
sketches, notes, reports, proposals or copies thereof, or other documents or
materials, tools, equipment or other property belonging to the Company,
including any documents, records, notebooks and similar repositories of
confidential information, including copies thereof, whether prepared by me or
others.
I further certify that I have complied with and will continue to comply
with all of the terms of the Employee Nondisclosure and Invention Assignment
Agreement signed by me with the Company, including the reporting of any
inventions conceived or reduced to practice by me and covered by the Agreement.
I further agree that in compliance with the Employee Nondisclosure and Invention
Assignment Agreement, I will preserve as confidential all proprietary technical
and business information pertaining to the Company. During the course of my
employment with the Company, I have become familiar with its procedures for
protecting trade secrets and confidential information and agree that they are
reasonable under the circumstances to maintain the secrecy of such information.
Upon termination of my employment with the Company, I will be employed by
(name of new employer) _________________________ in the (division/department)
______________________________ and will be working in connection with the
projects (generally describe the projects):
.
A-1-1
<PAGE>
If requested by the Company, I agree to notify my new employer as to the
general nature or subject matter of the confidential and proprietary information
to which I had access while employed by the Company, and as to my obligations
with respect to such information.
Executed by me at _______________, _______________, this _____ day of
_______________, 19__.
WITNESS: EMPLOYEE:
- ----------------------------------- --------------------------------------
(Please print) (Please print)
- ----------------------------------- --------------------------------------
(Signature) (Signature)
A-1-2
<TABLE> <S> <C>
<PAGE>
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<S> <C>
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<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 18,018
<SECURITIES> 0
<RECEIVABLES> 29,600
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 47,693
<PP&E> 116,292
<DEPRECIATION> (99,043)
<TOTAL-ASSETS> 93,007
<CURRENT-LIABILITIES> 1,600,027
<BONDS> 0
0
0
<COMMON> 270
<OTHER-SE> 1,587,202
<TOTAL-LIABILITY-AND-EQUITY> 93,007
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 509,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 79,920
<INCOME-PRETAX> (792,942)
<INCOME-TAX> 1,020
<INCOME-CONTINUING> (793,962)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (793,962)
<EPS-PRIMARY> (3.07)
<EPS-DILUTED> (3.07)
</TABLE>
