SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
|X| Annual Report Pursuant to Section 13 or 15(D) of the Securities Exchange
Act of 1934
For the Fiscal Year ended December 31, 1996
|_| Transition Report Pursuant to Section 13 or 15(D) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission File Number 0-26284
Milestone Scientific Inc.
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(Name of Small Business Issuer in its Charter)
Delaware 11-309811
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
220 South Orange Avenue, Livingston Corporate Park, Livingston, NJ 07039
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(Address of Principal Executive Office) (Zip Code)
Issuer's telephone number (201) 535-2717
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange
Title of Each Class on Which Registered
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None
Securities Registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.001 per share
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(Title of class)
Check whether the issuer: (1) filed all reports required 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 |X| No _|
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Check if there is no disclosure of 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 the registrant's knowledge, in definitive proxy of
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |X|
For the year ended December 31, 1996, the revenues of the registrant were
$302,388.
The aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant, based on the closing price on the Nasdaq
SmallCap Market on March 27, 1997 was approximately $15,625,674.
As of March 27, 1997, the registrant has a total of 5,555,612 shares of
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
Item 1. Description of Business
All references in this report to the Company refer to Milestone Scientific
Inc. (formerly U.S. Opportunity Search, Inc.), its wholly owned subsidiaries,
Princeton PMC, Inc. ("Princeton PMC") and Sagacity I, Inc., doing business in
the United States as the Wisdom Toothbrush Co. ("Wisdom"), and its 65% owned
subsidiary, Spintech, Inc. ("Spintech"), unless the context otherwise indicates.
Forward-Looking Statements
Certain statements made in this Annual Report on Form 10-KSB are
"forward-looking statements" (within the meaning of the Private Securities
Litigation Reform Act of 1995) regarding the plans and objectives of management
for future operations. Such statements involve known and unknown risks,
uncertainties and other factors that may cause actual results, performance or
achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. The forward-looking statements included herein are based on current
expectations that involve numerous risks and uncertainties. The Company's plans
and objectives are based, in part, on assumptions involving the continued
expansion of business. Assumptions relating to the foregoing involve judgments
with respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. Although the Company believes that its assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the forward-looking
statements included in this Report will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, particularly in view of the Company's early stage operations, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the Company will be
achieved.
General
The Company develops, manufactures, markets and sells equipment and
related disposable or consumable items and other products for use primarily by
the dental practitioner. Company products focus on practitioner efficiency,
patient comfort, infection control and medical waste disposal. The principal
products of the Company include: (i) the Sharps Disposal System ("SDS"), a heat
activated sterilizer that, on-site, converts needles, syringes and other
"sharps" into sterile plastic blocks for disposal, which the Company began
selling in November 1996; (ii) "SplatrFree(TM)" disposable prophy angles and
related consumable products for use in dental prophylaxis procedures which the
Company began selling commercially in the first quarter of 1997; (iii) "The
Wand(TM)", a computer controlled "painless" injection system
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enabling the practitioner to more quickly and effectively anesthetize patients
in certain dental applications, which the Company plans to introduce at the Fall
1997 American Dental Association Trade Show; and (iv) clinically oriented dental
products, including the "Wisdom" line of toothbrushes, flosses and other
prophylaxis products, which the Company has been selling since the acquisition
of Wisdom in December 1996. The Company markets its products using a clinically
oriented catalog for the dentist practitioner, a dealer network and the Wisdom
distribution system, to approximately 15,500 dentists and 2,000 other accounts.
"The Wand(TM)" and SDS are covered by United States patents.
The Company was organized in August 1989 under the laws of Delaware. On
November 3, 1995, the Company completed a public offering of Common Stock for
aggregate proceeds of $6,000,000 (the "Offering") and consummated the
acquisition of 65% of the outstanding shares of common stock of Spintech for an
aggregate purchase price of $2,700,000. Spintech developed and owns the rights
to various products used by healthcare providers, including the SDS and its
predecessor, a thermal activated plastic sterilizer ("TAPS"), and has registered
various patents and trademarks related to these products. In March 1996, the
Company, together with Gregory Volok, the Company's Executive Vice President,
founded Princeton PMC as a marketing company. The Company acquired the
outstanding shares of Princeton PMC common stock owned by Mr. Volok in December
1996, making Princeton PMC a wholly owned subsidiary. In December 1996, the
Company acquired Wisdom and obtained United States distribution rights to the
Wisdom line of toothbrushes and prophylaxis products. On March 13, 1997, the
Company completed a private placement of units in which it received gross
proceeds of $4,022,500 (the "Private Placement"). The Company maintains its
executive offices at 220 South Orange Avenue, Livingston Corporate Park,
Livingston, New Jersey 07039, and its telephone number is (201) 535-2717.
Products
"The Wand,(TM)" Computer Controlled Anesthetic Injection System. "The
Wand(TM)" is a computer controlled local anesthetic injection delivery system
developed by the Company. The Company believes "The Wand(TM)" overcomes the
typical problems of conventional anesthetic injections. "The Wand's(TM)" slim
pencil-like shape is more functional to the user and less ominous in appearance
to the patient. The pencil grip provides a greater level of stability for the
user by preventing antagonistic movements between the patient and the
practitioner during needle placement, a positioning control not possible with
syringes currently in use. A computer driven infusion machine operated by the
standard air controlled foot pedal provides the precision flow necessary for
painless local anesthesia. "The Wand(TM)" provides a highly controlled rate of
emission of anesthetic solution in advance of the needle point. Since the
anesthetic numbs nerve cells immediately on contact, the controlled rate of
fluid emission deadens the path of the needle immediately ahead of the needle's
entry. The controlled rate substantially eliminates the so-called "bee sting"
effect, which is pain associated with the sudden build-up of pressure by the too
rapid flow rate of expelled fluids. Because "The Wand(TM)" uses a disposable
syringe and needle, the Company believes it will offer protection against
cross-contamination.
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In many procedures, "The Wand(TM)" more quickly anesthetizes by
eliminating the need for preliminary pain blocking injections and the waiting
time required to see if this injection has taken effect before further
anesthetic injections. The Company believes that "The Wand(TM)" will enable a
dentist to provide painless injections, increase productivity, be more sanitary
and will provide important competitive advantages for dentists trying to build
and maintain their practices. While designed for use in dentistry, "The
Wand(TM)" may also have uses in proctology, gynecology, urology and possibly
dermatology and plastic surgery. To date, the Company has focused its marketing
of "The Wand(TM)" exclusively on the dental market
Although many dentists sometimes give painless injections, it is almost
impossible for them to do so regularly using conventional techniques. Dentists
do not have a strong purchase point or fulcrum against which they may guide
their hand when inserting a needle or while making the injection. The resulting
uncontrolled movement of the needle frequently can be painful to the patient.
Although the dentist is taught to inject slowly, present devices also do not
allow full control of the rate of flow. Thus, the needle often enters tissue
which has not yet been anesthetized.
A pre-production prototype of "The Wand(TM)" has been clinically tested on
over 1,000 patients. Ninety-six percent of those tested report a "painless" or
significantly less painful procedure than standard procedures. The Company has
not produced production line models of "The Wand(TM)" or made arrangements for
its production. On July 12, 1996, the FDA cleared the "The Wand(TM)" for
marketing in the United States for dentistry.
Sharps Disposal System. The disposal of hypodermic and other needles,
scalpel blades and other cutting or puncturing devices ("sharps") and other
medical waste is subject to extensive regulation by OSHA under the "Blood Borne
Pathogen Standards" and by various federal and state environmental protection
agencies. Dental and medical practitioners and institutions now generally rely
on pick-up or mail-in services to satisfy the regulatory requirements. Despite
this reliance, they face growing concern and vulnerability because of the lack
of assurance as to the proper handling and processing of this waste by such
services. Stories of polluted beaches and other areas from improperly disposed
of syringes and needles have become regular news. Also, these methods force
clinicians to store potentially infectious or noisome material in their offices
until pick-up and to deal with the growing cost of these disposal services.
Additionally, both regulations and the threat of civil or criminal liability for
improper disposal mandate extensive record-keeping as to the methods used for
disposal and the identification of the disposed products. The Company's SDS
allows dental and medical practitioners and institutions to utilize a safe and
effective in-office method for disposing of sharps. Further, the Company
believes the SDS provides important protection against future liability from the
mishandling of sharps after removal from a dentist's premises by a waste hauler
and can reduce the time during which dentists keep sharps on their premises and
potential liability in connection therewith.
The principal component of the SDS is a heat processor which raises the
temperature of sharps to 410(degree)F, well above sterilization levels, while
transforming the syringes, plastic SDS
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sharps container and SDS indicator disk into an encapsulating bath of molten
plastic during a four-hour operating cycle. To provide added plastic fill
material required by users of the unit, the Company sells "SDS indicator disks:"
plastic disks that will not melt until temperatures well in excess of
sterilization levels are reached. The SDS processor can accommodate a sharps
container holding 30 to 40 typical syringes and needles. After processing, the
sharps emerge encapsulated in molten plastic in the shape of a solid cylindrical
block approximately one-fourth the original size of the sharps, syringes and
other material placed in the SDS processor. The EPA does not regulate the
processing unit and regulation of the medical waste stream is now at the state
level. EPA guidelines, adopted under the Medical Waste Tracking Act, require
that for medical waste to be discarded as ordinary trash it must: (a) be
sterilized, (b) offer visible proof of sterilization, (c) be unrecognizable, and
(d) be non-reusable. The Company believes that the SDS meets all these
guidelines, as well as similar guidelines in certain states, because of its heat
sterilization process, the verification thereof through the change in shape and
size of the indicator disc and sharps container and the syringes, becoming
unrecognizable and non-reusable as part of the waste stream emanating from the
SDS solid block. State, local and foreign regulation of medical waste and
processing units like the SDS are the subject of extensive, varying regulation.
Some of the state, local and foreign and regulatory schemes are similar to the
EPA guidelines. The Company believes the sale and use of the SDS unit and the
disposal of the medical waste after processing by the SDS unit can be made in
some states, localities and foreign jurisdictions. However, because of the
extensive regulation, some of which addresses the technology of SDS unit, the
user of the unit the processed waste and some or all of these aspects, no
assurance can be given that the SDS unit will be available for sale in a
particular jurisdiction or may be used by a purchaser, and no assurance can be
given that the Company will generate any significant revenues from this product
in the future.
The SDS is an outgrowth and improved version of the thermal activated
plastic sterilizer or TAPS unit initially developed by Spintech and sold in an
extensive "beta" testing program until the introduction of the SDS. When using
the TAPS the dentist filled a metal transporter with sharps and syringes, then
unlocked and removed a plastic safety cover on the transporter and finally
inserted the transporter in the processor. In the new system, sharps and
syringes are placed in plastic SDS containers (or other compatible sharps
containers), which containers are then inserted directly into the processor,
thus eliminating the need for the separate metal sharps transporter. The SDS
also operates at higher processing temperatures and is capable of handling
larger loads than the earlier TAPS units. Additionally, the SDS processor also
has a larger disposable filter and handles that remain cool during the heating
cycle. The SDS processor unit provides greater odor control, and reduces the
incidence of incomplete melt experienced with some TAPS units.
The Company has also done preliminary design work or developed prototypes
of modified SDS units to meet the special needs of certain market segments, for
example, the consumer and homecare market. The Company has not yet completed
market studies to determine whether demand justifies the cost of introducing any
of these special purpose SDS processors. In November 1996 the Company entered
into a contract to develop for Biotronix Laboratories, Inc. ("Biotronix"), a new
mini-waste disposal system for use by visiting nurses,
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diabetics, emergency service vehicles and others involved in a home health care
environment. Biotronix has agreed to pay for the development cost of this
product, up to a maximum of $125,000 of which $50,000 has been paid. Biotronix
has been granted a worldwide non-transferable license to make, use and sell this
product, for the life of the governing patent for a royalty of 6% of gross
sales.
"SplatrFree(TM)" Prophy Angles. Prophy angles are dental drill accessories
incorporating a cup-like tip moving at high rotational speeds which are used by
dentists and oral hygienists in teeth cleaning and other prophylaxis procedures.
Prophy angle tips frequently cause splattering of saliva, particulate matter and
possibly pathogens onto the dentist, hygienist, dental tools and surrounding
surfaces. The "SplatrFree(TM)" prophy angle has a unique tip design that
substantially eliminates splattering. The "SplatrFree(TM)" prophy angle is
available in disposable models. The Company believes that its prophy angle can
improve dental office infection control and hygiene by reducing the spread of
infection from patient to patient and from patient to dentist or hygienist. In
November 1995, 104 pre-production prototype exemplars of the prophy angle,
accompanied by a questionnaire, were distributed to 12 dentists and oral
hygienists for trials. In response to the questionnaire, all 12 dentists and
oral hygienists indicated that the prophy angles they currently use cause heavy
or moderate splattering. Three of those surveyed indicated that use of the
Company's prophy angle eliminated splattering, while seven of those surveyed
indicated that use of the prophy angle reduced splattering noticeably. One
dental practitioner surveyed indicated that the prophy angle reduced splattering
only slightly and another indicated that no reduction in splattering was
observed. On February 8, 1996 the FDA responded to the Company's 510(k)
Premarket Notification and issued an order clearing the prophy angle for
marketing in the United States.
Clinically Oriented Dental Products; "Wisdom(TM)". In addition to the
proprietary products of the Company, since December 1996 the Company has sold to
dentists a line of clinically oriented dental prophylaxis products which include
the Wisdom line of dentist distributed toothbrushes, flosses and other
prophylaxis products, hand instruments, fluoride treatment products and topical
anesthetics. The clinical line is designed for use in a wide variety of dental
prophylaxis and periodontal procedures. All of these products are manufactured
by other companies, and the Company acquires them for resale through a variety
of means, including acting as exclusive and non-exclusive marketing agent,
purchasing bulk product for resale, and purchasing standard products for private
labeling.
Manufacturing and Sources of Supply
All of the Company's SDS processing units have been manufactured by
Arbutus, Inc., ("Arbutus") a domestic manufacturer, in accordance with detailed
specifications provided by the Company. However, the Company has no on-going
agreement with Arbutus for the manufacture of its units. Based on its
relationship with Arbutus, the Company expects Arbutus to continue to remain
available for manufacture of the SDS processing units. Team Technologies, Inc.
("TTI") produces SDS indicator disks for the Company and Winfield Medical, Inc.
will produce SDS sharps plastic containers recommended and offered by the
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Company for use with the SDS. The Company has no on-going agreement regarding
these manufacturing arrangements with either TTI or Winfield Medical, Inc.
Termination of the Company's manufacturing relationship with Arbutus, or other
interruption or curtailment of the Company's supply of units could adversely
affect the Company.
All "SplatrFree(TM)" prophy angles have been produced for the Company by
TTI pursuant to an agreement entered into in July 1995. Prototype prophy angles
were produced in a single cavity mold purchased by the Company for $7,000.
Commercial quantities of prophy angles will be produced utilizing a 16-cavity
production mold capable of producing more than 30,000 prophy angles per day,
purchased by the Company at a cost of $72,000. Quality control problems
experienced at TTI on initial use of the production mold prevented it from
delivering commercially acceptable product to the Company through the end of
1996. Small modifications to TTI production molds, however, permitted commercial
delivery of prophy angles to begin in the first quarter of 1997.
In April 1996, Wisdom entered into an Exclusive Distributorship Agreement
(the "Distributorship Agreement") with Wisdom Toothbrushes Limited ("WTL")
appointing Wisdom as the exclusive distributor of the Wisdom line of dentist
distributed toothbrushes, flosses and other prophylaxis products in the United
States of America, various United States territories, Canada and certain other
smaller markets. The Distributorship Agreement may be terminated by either
party, commencing in April 1999, on twelve months prior written notice. The
Distributorship Agreement now covers approximately 32 products. WTL may
terminate the agreement if Wisdom fails to purchase certain specified minimums,
unless Wisdom reimburses WTL for its unrecovered overhead and profit margin in
the underage.
Marketing
The Company markets its products directly to users through a dealer
network of domestic and foreign independent sales agencies and persons and
manufacturer representatives, the Wisdom distribution system and a clinically
oriented catalog for the dentist practitioner. The Company promotes its products
using trade advertising, direct mail and attendance at dental trade shows. The
Company estimates that it sells through Wisdom to approximately 15,500 dentists
and 2,000 other accounts utilizing four salesmen. The Company intends to
introduce "The Wand(TM)" at the Fall 1997 American Dental Association Trade Show
and thereafter market it directly. The clinically oriented dental prophylaxis
products generally are sold using the Wisdom distribution system. The Company
plans to use Wisdom to help market the "SplatrFree(TM)" prophy angle, and in the
future it may use the Wisdom distribution system for marketing its other
proprietary products. The Company currently markets its products primarily in
the United States.
The SDS and its precursor, TAPS, is sold primarily to dentists for use in
their offices. The Company sells the SDS unit to independent distributors for
$450 to $600. For use with the SDS, the Company also sells supplies of the SDS
indicator disks and sharps containers. During the year ended December 31, 1996,
the Company's sales of TAPS and SDS units and
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related disposable items to Wisdom (before it was acquired by the Company)
accounted for 38.2% of the sales for the period. Wisdom was the only customer of
the Company which accounted for more than 10% of the Company's sales.
Competition
The Company faces intense competition from many companies in the medical
and dental device industry, including well-established academic institutions,
possessing substantially greater financial, marketing, personnel, and other
resources. Most of the Company's competitors have established reputations,
stemming from their success in the development, sale, and service of medical
products. Further, rapid technological change and extensive research and
development characterize the industry. Current or new competitors could, at any
time, introduce new or enhanced products with features that render the Company's
products less marketable, or even obsolete. Therefore, the Company must devote
substantial efforts and financial resources to enhance its existing products, to
bring its developmental products to market, and to develop new products for its
related markets. In order to compete successfully, the Company must establish an
effective distribution network. Several regulatory authorities must also approve
the Company's products before they may be marketed. There can be no assurance
that the Company will be able to compete successfully, that its competitors will
not develop technologies or products that render the Company's products less
marketable or obsolete, or that the Company will be able to successfully enhance
its existing products, effectively develop new products or obtain required
regulatory approvals therefor.
The primary competition for the SDS are the services provided by licensed
medical waste haulers. Except for the largest waste generators, pick-up is
generally made once per month which results in storage on premises of dangerous
and sometimes noisome medical waste. The Company believes that SDS will provide
most smaller waste generators a safer and lower risk means for disposal of
sharps. Various competitors offer devices for destruction of regulated medical
waste produced by hospitals and other generators of large volumes of waste.
These devices generally are significantly more expensive than the Company's
larger proposed SDS and do not always render the medical waste unrecognizable. A
competitor's grinding mechanism that reduces metal and glass in bulk and
encapsulates them in melted plastic provided by the waste is priced at more than
three times the price of the SDS unit and, management believes, is prevented by
the Company's patents from adding new plastic with a known melting point.
The Company's "SplatrFree(TM)" prophy angle competes with prophy angles
produced and distributed by a number of major manufacturers and distributors and
other producers or distributors of dental products, many of whom have
significant competitive advantages because of their size, strength in the
marketplace, financial and other resources and broad product lines. The Company
will compete on the basis of the superior, non-splattering performance of its
prophy angle and product quality.
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"The Wand(TM)" will compete with non-automated disposable and reusable
syringes and other local anesthetic delivery systems generally selling at
significantly lower prices and utilizing established and well understood
methodologies. "The Wand(TM)" will compete on the basis of its performance
characteristics.
Patents and Intellectual Property
The Company's patents are believed to be material to its business and
potential growth. The Company holds the following six United States patents:
U.S. Patent Date of
Description Number Issue
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SDS
Apparatus and Method for Sterilizing, Destroying and
Encapsulating Medical Implement Wastes 4,992,217 2/12/91
Apparatus and Method for Verifiably Sterilizing
Destroying and Encapsulating Regulated Medical Wastes 5,078.924 1/7/92
Apparatus and Method for Verifiably Sterilizing,
Destroying and Encapsulating Regulated Medical Wastes 5,401,444 3/28/95
"The Wand(TM)"
Hypodermic Anesthetic Injection Method 4,747,824 5/31/88
Hypodermic Anesthetic Injection Apparatus 5,180,371 1/19/93
OTHER
Hypodermic Syringe Needle Destroying and Sterilizing
Apparatus and Method 4,877,934 10/31/89
The Company has received from the United States Patent and Trademark
Office a first Office Action on the filing of a patent for the "SplatrFree(TM)"
prophy angle, and has responded to their request for appropriate information.
The Company has adopted the trademarks "SplatrFree(TM)," "The Wand(TM)"
and SDS but has not yet obtained registrations of these names.
The Company relies on a combination of patent, copyright, trade secret,
and trademark laws and employee and third-party nondisclosure agreements to
protect its intellectual property rights. Despite the precautions taken by the
Company to protect its products, unauthorized parties may attempt to reverse
engineer, copy, or obtain and use its products and other information the Company
regards as proprietary. Litigation may be necessary to protect the Company's
intellectual property rights and could result in substantial cost to, and
diversion of effort by, the Company with no guarantee of success. The failure of
the Company to protect
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its proprietary information, and the expenses of doing so, could have a material
adverse effect on the Company's operating results and financial condition.
While there are no current claims that the Company's products infringe on
the proprietary rights of third parties, there can be no assurance that third
parties will not assert infringement claims against the Company in the future
with respect to current or future products or that any such assertion may not
require the Company to cease selling such products, or to enter into
arrangements that require the Company to pay royalties, or to engage in costly
litigation. Although the Company has received no claims of infringement, it is
possible that infringement of existing or future patents or proprietary rights
of others may occur. In the event that the Company's products infringe patent or
proprietary rights of others, the Company may be required to modify its
processes or to obtain a license. There can be no assurance that the Company
would be able to do so in a timely manner, upon acceptable terms and conditions,
or at all. The failure to do so would have a material adverse effect on the
Company.
Government Regulation
The Company's "SplatrFree(TM)" prophy angles and "The Wand(TM)" were
approved for marketing in the United States by the FDA in April and July 1996,
respectively. Most of the products in the clinically oriented line of dental
products, including Wisdom toothbrushes, do not require FDA marketing approval.
Where such approval is required for the other products in this product line, it
is obtained by the manufacturer. The SDS does not require FDA marketing
approval. Any other new products may require approval.
The manufacture and sale of medical devices and other medical products,
such as the Company's "SplatrFree(TM)" prophy angle and "The Wand(TM)", are
subject to extensive regulation by the FDA pursuant to the FDC Act, and by other
federal, state and foreign authorities. Under the FDC Act, medical devices must
receive FDA clearance before they can be commercially marketed in the United
States. Some medical products must undergo rigorous pre-clinical and clinical
testing and an extensive FDA approval process before they can be marketed. These
processes can take a number of years and require the expenditure of substantial
resources. The time required for completing such testing and obtaining such
approvals is uncertain, and FDA clearance may never be obtained. Delays or
rejections may be encountered based upon changes in FDA policy during the period
of product development and FDA regulatory review of each product submitted.
Similar delays may also be encountered in other countries. Following the
enactment of the Medical Device Amendments to the FDC Act in May 1976, the FDA
classified medical devices in commercial distribution into one of three classes.
This classification is based on the controls necessary to reasonably ensure the
safety and effectiveness of the medical device. Class I devices are those
devices whose safety and effectiveness can reasonably be ensured through general
controls, such as adequate labeling, premarket notification, and adherence to
the FDA's GMP regulations. Some Class I devices are further exempted from some
of the general controls. Class II devices are those devices whose safety and
effectiveness can reasonably be ensured through the use of special
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controls, such as performance standards, post-market surveillance, patient
registries, and FDA guidelines. Class III devices are devices which must receive
premarket approval by the FDA to ensure their safety and effectiveness.
Generally, Class III devices are limited to life-sustaining, life-supporting or
implantable devices.
If a manufacturer or distributor can establish that a proposed device is
"substantially equivalent" to a legally marketed Class I or Class II medical
device or to a Class III medical device for which the FDA has not required
premarket approval, the manufacturer or distributor may seek FDA marketing
clearance for the device by filing a 510(k) Premarket Notification. The 510(k)
Premarket Notification and the claim of substantial equivalence may have to be
supported by various types of data and materials, including test results
indicating that the device is as safe and effective for its intended use as a
legally marketed predicate device. Following submission of the 510(k) Premarket
Notification, the manufacturer or distributor may not place the device into
commercial distribution until an order is issued by the FDA. By regulation, the
FDA has no specific time limit by which it must respond to a 510(k) Premarket
Notification. At this time, the FDA typically responds to the submission of a
510(k) Premarket Notification within 90 to 200 days. The FDA response may
declare that the device is substantially equivalent to another legally marketed
device and allow the proposed device to be marketed in the United States. The
FDA may, however, determine that the proposed device is not substantially
equivalent, or may require further information, such as additional test data,
before the FDA is able to make a determination regarding substantial
equivalence. Such determination or request for additional information could
delay the Company's market introduction of its products and could have a
material adverse effect on the Company. If a device that has obtained 510(k)
Premarket Notification clearance is changed or modified in design, components,
method of manufacture, or intended use, such that the safety or effectiveness or
the device could be significantly affected, separate 510(k) Premarket
Notification clearance must be obtained before the modified device can be
marketed in the United States.
If a manufacturer or distributor cannot establish that a proposed device
is substantially equivalent, whether or not the FDA has made a determination in
response to a 510(k) Premarket Notification, the manufacturer or distributor
will have to seek premarket approval of the proposed device. A premarket
approval application (a "PMA application") would be supported by extensive data,
including preclinical and human clinical trial data, as well as extensive
literature, to prove the safety and efficacy of the device. Upon receipt, the
FDA will conduct a preliminary review of the PMA application to determine
whether the submission is sufficiently complete to permit substantive review. If
sufficiently complete, the submission is declared acceptable for filing by the
FDA. By regulation, the FDA has 180 days to review a PMA application once it has
been declared acceptable for filing. While in the past the FDA has responded to
PMA applications within the allotted time period, more frequently PMA reviews
occur over a significantly protracted time period, and generally take
approximately two years or more from the date of filing to complete. A number of
devices for which FDA marketing clearance has been sought have never been
cleared for marketing.
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If human clinical trials of a proposed device are required and the device
presents "significant risk," the manufacturer or distributor of the device will
have to file an Investigational Device Exemption ("IDE") application with the
FDA prior to commencing human clinical trials. The IDE application must be
supported by data, typically including the results of animal and mechanical
testing. If the IDE application is approved, human clinical trials may begin at
the specific number of investigational sites and could include the number of
patients approved by the FDA.
Though the Company's "SplatrFree(TM)" prophy angle and "The Wand(TM)" have
received FDA clearance based on its 510(k) Premarket Notification, there can be
no assurance that any of the Company's other products under development will
obtain the required regulatory clearance on a timely basis, or at all. If
regulatory clearance of a product is granted, such clearance may entail
limitations on the indicated uses for which the product may be marketed. In
addition, modifications may be made to the Company's products to incorporate and
enhance their functionality and performance based upon new data and design
review. There can be no assurance that the FDA will not request additional
information relating to product improvements, that any such improvements would
not require further regulatory review thereby delaying the testing, approval and
commercialization of the Company's development products or that ultimately any
such improvements will receive FDA clearance.
Compliance with applicable regulatory requirements is subject to continual
review and will be monitored through periodic inspections by the FDA. Later
discovery of previously unknown problems with a product, manufacturer, or
facility may result in restrictions on such product or manufacturer, including
fines, delays or suspensions of regulatory clearances, seizures or recalls of
products, operating restrictions and criminal prosecution and could have a
material adverse effect on the Company.
The Company is subject to pervasive and continuing regulation by the FDA
regulations which requires manufacturers of medical devices to adhere to certain
"Good Manufacturing Practices" ("GMP") as defined by the FDC Act. GMP require
testing, quality control and documentation procedures. Failure to comply with
GMP can result in the suspension or termination of production, product recall or
fines and penalties. Products must also be manufactured in registered
establishments. In addition, labeling and promotional activities are subject to
scrutiny by the FDA and, in certain circumstances, by the Federal Trade
Commission. The export of devices is also subject to regulation in certain
instances.
The Medical Device Reporting ("MDR") regulation obligates the Company to
provide information to the FDA on product malfunctions or injuries alleged to
have been associated with the use of the product or in connection with certain
product failures which could cause serious injury. If, as a result of FDA
inspections, MDR reports or other information, the FDA believes that the Company
is not in compliance with the law, the FDA can institute proceedings to detain
or seize products, enjoin future violations, or assess civil and/or criminal
penalties against the Company, its officers or employees. Any action by the FDA
could result in disruption of the Company's operations for an undetermined time.
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In addition to the foregoing, numerous other federal and state agencies,
such as environmental, fire hazard control, working condition and other similar
regulators, have jurisdiction to take actions that could have a materially
adverse effect upon the Company's ability to do business. In addition, expansion
of the Company's operations into foreign markets will require the Company to
obtain additional approvals, permits or licenses and comply with additional
regulatory schemes to those of the United States. Amendments to existing
statutes and regulations, adoption of new statutes and regulations and expansion
of the Company's business could require the Company to alter methods of
operations at costs that could be substantial, which could have an adverse
effect on the Company. There can be no assurance that the Company will be able,
for financial or other reasons, to comply with applicable laws and regulations
and approval, permit or license requirements. Currently, the Company is in
compliance with all applicable statutes and regulations governing its operations
and business as currently conducted, including, without limitation, those in
respect of the SDS, "SplatrFree(TM)" prophy angles and "The Wand(TM)", and the
Company has all necessary approvals, permits and licenses that are applicable to
its business, operations and products and services.
Product Liability
Failure to use any of the Company's products in accordance with
recommended operating procedures could potentially result in subjecting users to
health hazards or injury. For example, insofar as the SDS unit is used
improperly, (i) premature removal of syringes and other materials before
completion of the melt cycle could subject users to puncture by contaminated
needles prior to their complete encapsulation, or (ii) the inclusion of
excessive amounts of blood soaked gauze or other material could cause the
release of noxious fumes from the sterilizer. In addition, the SDS unit heats
material at high temperatures. Misuse or malfunction of the SDS unit could
result in fire or shock. Any of the foregoing or other failures of the Company's
products to function properly could subject the Company to claims of liability.
The Company maintains liability insurance in the aggregate amount of $2,000,000
with a per-occurrence limit of $1,000,000 which the Company believes to be
adequate. Although no claims have been made against the Company or any of the
customers using its products, there can be no assurance that such claims will
not arise in the future or that the insurance coverage will be sufficient to pay
such claims. A partially or completely uninsured claim, if successful and of
significant magnitude, could have a material adverse effect on the Company.
Research and Development Activities
During the 1995 and 1996 fiscal years, the Company spent $24,777 and
$167,600, respectively, on research and development activities.
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Employees
The Company had 13 full-time and two part-time employees at December 31,
1996, consisting of four executive officers, four sales employees and seven
office and clerical employees. The Company also uses the services of certain
outside consultants for marketing and other activities.
Item 2. Description of Property
On March 20, 1997 Milestone opened new corporate headquarters and
administrative offices occupying approximately 2,693 square feet at 220 South
Orange Avenue, Livingston Corporate Park, Livingston, New Jersey. The Company
occupies this space under a five (5) year and one (1) month lease at a cost the
Company believes to be competitive. The new offices will allow the Company to
consolidate and more effectively coordinate administrative functions previously
conducted at various locations. The offices of Spintech in York, Pennsylvania,
have been closed. Spintech's principal executive offices have been moved to the
new corporate headquarters. Spintech's operational and accounting functions will
be located at and consolidated with those of Wisdom in Deerfield, Illinois.
Wisdom's corporate, administrative and distribution headquarters are
located in leased facilities at 151 S. Pfingsten Road, Deerfield, Illinois and
occupy approximately 4,607 square feet at that location. Wisdom occupies this
space under a lease terminating January 1, 1998 at a cost which the Company
believes to be competitive.
Beginning on January 1, 1994, Spintech has rented from Ronald Spinello,
DDS, on a month to month basis at the rate of $200 per month, shop space located
in the home of Dr. Spinello.
Item 3. Legal Proceedings
In November 1993 Spintech entered into a nonexclusive license agreement
(the "License Agreement") for products covered by certain of Spintech's patents
with Biotronix Manufacturing Corporation (the "Licensee"). Under the License
Agreement, Spintech received a $100,000 initial advance payment to be credited
against future royalties earned. To maintain its rights under the License
Agreement, the Licensee is required to generate a minimum amount of royalties
for any full quarterly period after the first full year the License Agreement is
in effect; otherwise, Spintech has the right to terminate the License Agreement
and keep the $100,000 advance. The Licensee has the right to maintain in effect
the License Agreement by paying to Spintech a minimum quarterly royalty of
$10,000. In February 1995 the Licensee did not meet the quarterly royalty
minimum, at which time Spintech terminated the License Agreement. Spintech
recorded $100,000 of royalty income in the first quarter of fiscal 1995. In
January 1996 the Licensee demanded the return of the initial $100,000 advance it
made to Spintech. On February 16, 1996 Spintech filed an Action for Declaratory
Judgment in The Court of Common Pleas of York County, Pennsylvania requesting
that the Court declare that Spintech is not obligated to return the initial
advance payment.
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On March 26, 1997, Milestone and Spintech commenced legal action in the
United States District court for New Jersey against Ronald Spinello, DDS,
Chairman and Director of Research of Spintech. In the complaint, plaintiffs seek
recovery of compensatory and punitive damages in excess of $4,000,000 for
extortion and tortious interference with existing and prospective contract and
business relationships, a declaratory judgment that Dr. Spinello has no personal
rights to certain technology developed while he was employed as Director of
Research of Spintech relating to the design and production of ancillary
components of its computer controlled local anesthetic delivery system, a
declaratory judgment that plaintiffs have not breached Dr. Spinello's employment
agreement or the agreement for the purchase by Milestone of a 65% equity
interest in Spintech and injunctive relief. No answer has yet been filed.
Milestone has been advised by its patent counsel that all technology
developed by Dr. Spinello while employed by Spintech is owned by Spintech. The
Company believes that ownership of the technology relating to these ancillary
components which are the subject of this litigation in no way prevents the
manufacture and sale of its anesthetic delivery system at economically viable
prices.
Item 4. Submission of Matters to a Vote of Security Holders
On October 18, 1996, an action by written consent was approved by a
majority of the then outstanding shares of Common Stock of the Company, which
majority included the Company's Chief Executive Officer and then majority
stockholder, to change the name of U.S. Opportunity Search, Inc. to Milestone
Scientific Inc.
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PART II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Market Information
The Company's Common Stock has been traded on The Nasdaq SmallCap Market
under the symbols "USOS" from November 3, 1995 through December 5, 1996 and
"WAND" since December 6, 1996.
The following table sets forth the high and low bid prices as quoted by
The Nasdaq SmallCap Market since the commencement of trading. Such quotations
reflect inter-dealer prices, without retail mark-up, markdown or commission and
may not necessarily represent actual transactions.
Bid Price
High Low
1995
Fourth Quarter (from November 3) $5.63 $4.44
1996
First Quarter $6.50 $4.75
Second Quarter $7.75 $5.38
Third Quarter $8.13 $6.00
Fourth Quarter $7.25 $4.63
(b) Holders
As of March 19, 1997, the number of record holders of the Common Stock of
the Company was 127. The Company believes that there are more than 600
beneficial holders of the Common Stock.
(c) Dividends
The holders of Common Stock are entitled to receive such dividends as may
be declared by the Company's Board of Directors. The Company has not paid and
does not expect to declare or pay any dividends in the foreseeable future.
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Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Fiscal year ended December 31, 1996 compared to fiscal year ended December 31,
1995.
Revenues increased from $3,473 in 1995 to $302,388 in 1996 reflecting,
primarily, increased sales of TAPS and SDS units and related disposables and the
commencement of sales in December 1996 of the "Wisdom" product line following
the acquisition of Wisdom.
Cost of sales increased from $7,459 in 1995 to $195,659 in 1996 as a
result of higher sales levels.
General and administrative expenses increased from $336,816 in 1995 to
$2,225,737 in 1996, an increase of $1,888,921 reflecting increased marketing,
selling and administrative expenses as the Company commenced operations and
geared up for expected higher levels of operations and amortization of deferred
compensation expense of $260,000.
Research and development costs increased from $24,777 in 1995 to $167,600
in 1996 reflecting, primarily increased activities in the development of "The
Wand(TM)".
Other income and expense changed from an expense of $254,252 to income of
$337,080 reflecting primarily interest income of $73,203, minority interest in
net loss of subsidiaries of $177,568, proceeds of a judgment obtained by
Spintech for costs incurred on its successful defense of a patent infringement
suit of $65,000 and income from licensing agreements of $19,000.
Liquidity and Capital Resources
At December 31, 1996 the Company's working capital was $933,256,
reflecting, primarily, the balance remaining of the net proceeds of $4,822,527
received on consummation of the Offering after the purchase for $2,700,000 of a
65% equity interest in Spintech. The Offering also allowed the Company to pay
its outstanding indebtedness and provided the capital resources necessary to
fund its operations.
On March 13, 1997, the Company completed a Private Placement to 76
investors, all of whom were accredited, through GKN Securities Corp., the
Placement Agent, of 852,262 Units, each Unit consisting of one share of Common
Stock and one Common Stock Purchase Warrant ("Warrant") to purchase one share of
Common Stock, exercisable through March 12, 2000. The per-Unit offering price
was $4.72 which is also the per-Warrant exercise price. The Company received
proceeds of $3,505,964 in the Private Placement after payment to the Placement
agent of (i) commissions ($402,250), (ii) a non-accountable expense allowance of
3% of the gross proceeds of the offering, net of $20,000 previously paid
($100,675), and (iii)
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expenses advanced by the Placement Agent for mailing ($3,361), and the payment
of blue sky fees and expenses. The Placement Agent also received warrants to
purchase 85,226 Units exercisable through March 12, 2002 at a per-Unit exercise
price of $4.72. The Company issued the 852,262 shares of Common Stock contained
in the Units pursuant to exemptions provided under Sections 4(2) and 4(6) of the
Securities Act of 1933, as amended, and Regulation D promulgated thereunder.
Item 7. Financial Statements
The financial statements of the Company required by this item are set
forth beginning on page F-1.
Item 8. Change in and Disagreements with Accountants on Accounting Financial
Disclosure
Disclosure called for by this item has been previously reported under the
Exchange Act of 1934, as amended, on a Form 8-K dated January 29, 1996.
17
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PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
Directors, Executive Officers and Key Employees:
Director
Name Age Position with the Company Since
Leonard Osser 49 President, Chief Executive and Chief 1991
Financial Officer and Director of the
Company and President, Chief
Executive Officer and a Director of
Spintech
Gregory Volok 47 Executive Vice President, Chief 1996
Operating Officer and a Director
of the Company and Executive Vice
President and Chief Operating Officer
of Spintech
Joel Warady 40 Vice President of the Company and
President of Wisdom
Michael J. McGeehan(2) 29 Vice President and Director of the 1995
Company and a Director of
Spintech
Ronald Spinello, DDS 60 Director of Research and Chairman of
Spintech
Giovanni Montoncello(1) 50 Director 1995
David Sultanik(2) 40 Director 1996
Stephen A. Zelnick(1)(2) 59 Director of the Company and a 1996
Director of Spintech
- --------
(1) Member of Compensation Committee
(2) Member of Audit Committee
Leonard Osser has been President, Chief Executive Officer, Chief Financial
Officer and a director of the Company since July 1991. From 1980 until the
consummation of the offering in November 1995, he had been primarily engaged as
the principal owner and Chief Executive of U.S. Asian Consulting Group, Inc., a
New Jersey based provider of consulting services in "work-out" and "turnaround"
situations for publicly and privately owned companies in financial difficulty.
During his career, Mr. Osser has provided consulting service for, or with
respect to, companies in such related industries as medical devices, resource
recovery and reprocessing and waste disposal and a wide variety of other
industries including fashion accessories, entertainment, telecommunications,
wood processing and
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securities. While consulting for, or serving as an executive in, the securities
industry, Mr. Osser structured and arranged for financing and evaluated a large
number of companies in diverse industries.
Gregory Volok has been Executive Vice President, Chief Operating Officer
and a director of the Company since December 1996. He initially joined the
Company in March 1996 as the President of Princeton PMC. For more than ten years
prior thereto, Mr. Volok served in various sales and marketing executive
positions of increasing responsibility with Dentsply International, Inc. (the
world's largest distributor of dental supplies and equipment), including serving
as the executive responsible for launching its caulk endodontics line and the
executive responsible for domestic sales of its Cavitron Division.
Joel Warady has been Vice President of the Company since January 1997 and
President of Wisdom for more than five years.
Ronald Spinello, DDS has been Chairman of Spintech since its founding in
1991, Director of Research of Spintech since December 1994 and acted as
President and CEO of Spintech from February 1995 until November 1995. He is the
inventor of all of Spintech's products. Previously, Dr. Spinello had been
engaged in the private practice of dentistry.
Giovanni Montoncello has been a director of the Company since June 1995.
He has been a self-employed Interior Designer in Milan, Italy for more than 5
years. He has also served during such period as a part-time instructor in
interior design at the G. Cova Art School in Milan, Italy.
Michael J McGeehan has been a Vice President of the Company since January
1997 and a director since June 1995. He was the Managing Director of Forefront
Information Strategies, a New Jersey based company specializing in business
process re-engineering and the design and implementation of computer database
systems, from July 1994 to date. In addition, from August 1994 to January 1995
he was a manager for American International Group, managing a staff of 12 data
base administrators. From January 1991 through July 1994, he held positions with
Microsoft Corporation, first as a database specialist and network systems
engineer and then as a product manager for Microsoft Access.
David Sultanik has been a director of the Company since January 1996. He
has been the managing/administrative partner of the Certified Public Accounting
firm Sultanik and Krumholz, LLC since June 1994. For more than five years prior
to that he was a principal at the accounting firm Perelson, Johnson & Rones,
P.C.
Stephen A. Zelnick has been a director of the Company since January 1996.
He has been a partner in the law firm Morse, Zelnick, Rose & Lander, LLP since
its inception in August 1995. For more than five years prior to that he was of
counsel to the law firm Dreyer and Traub, LLP and has been practicing law for
more than 30 years.
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All directors hold office until the next annual meeting of shareholders
and until their successors are duly elected and qualified. Officers are elected
to serve, subject to the discretion of the Board of Directors, until their
successors are appointed.
The Company's Board of Directors has established compensation and audit
committees. The Compensation Committee reviews and recommends to the Board of
Directors the compensation and benefits of all officers of the Company, reviews
general policy matters relating to compensation and benefits of employees of the
Company, and administers the issuance of stock options to the Company's
officers, employees, directors and consultants. The Company has agreed with the
placement agent in the Private Placement that until March 13, 2000, all
compensation arrangements between the Company and its directors, officers and
affiliates shall be reviewed by a compensation committee, the majority of which
is made up of independent directors. The Audit Committee meets with management
and the Company's independent auditors to determine the adequacy of internal
controls and other financial reporting matters.
Item 10. Executive Compensation
The following Summary Compensation Table sets forth all compensation
earned, in all capacities, during the fiscal years ended December 31, 1995 and
1996 by (i) the Company's Chief Executive Officer and (ii) any other of the four
most highly compensated executive officers earning more than $100,000.
Summary Compensation Table
Name and Principal
Position Year Salary ($)
Leonard Osser, 1996 265,719 (1)
President, CEO
and CFO 1995 35,257(2)
Ronald Spinello, DDS
Chairman of Spintech 1996 126,306
- ----------
(1) Includes $170,000 earned as President, Chief Executive Officer and Chief
Financial Officer of Milestone and $95,719 earned as President and Chief
Executive Officer of Spintech. Does not include $56,514 paid by the
Company to Marilyn Elson, a certified public accountant who was employed
by the Company to render accounting services. Ms. Elson is the wife of Mr.
Osser.
(2) Includes $22,885 earned as President, CEO and COO of Milestone and $12,372
earned as President and CEO of Spintech. Does not include $4,600 paid by
Milestone to Marilyn Elson for book keeping services rendered to as
Comptroller of Milestone and $4,000 paid by Milestone and $2,250 paid by
Spintech to the accounting firm of Sultanik and Krumholz, LLC, one of
whose partners was Ms. Elson.
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Compensation of Directors
Non-employee directors are granted, upon becoming a director, five-year
options to purchase 20,000 shares at fair market value on the date of grant.
They receive no cash compensation.
Employment Agreements
In March 1995, the Company entered into an employment agreement with Mr.
Osser which, as amended, provides for a term expiring in March 2000, with a
two-year non-competition period at the end of the term. Mr. Osser must devote
substantially all of his time to Company business. Under the employment
agreement Mr. Osser receives compensation at the annual rate of $170,000. Mr.
Osser's employment agreement permits him to assume executive positions with
subsidiaries or other entities in which the Company has invested and to receive
additional compensation from such other entity.
In November 1995, the Company entered into an employment agreement with
Ronald P. Spinello, D.D.S., providing for his employment as Chairman and
Director of Research of Spintech for a five-year term beginning November 10,
1995 at an initial salary of $110,000 per annum and increasing by 10% per year
for each succeeding year throughout the term. The agreement also provides for
the payment to him of up to a $500,000 bonus at the end of the employment term,
depending on the achievement of certain profit projections for each year of the
term.
In November 1996, the Company entered into a five-year employment
agreement with Gregory Volok, providing for his employment as Executive Vice
President. The agreement provides for an annual base salary of $120,000 and an
18-month non-competition period at the expiration of the term.
In November 1996, the Company entered into an employment agreement with
Joel D. Warady providing for his employment as President and Chief Operating
Officer of Wisdom for a three-year term at an annual base salary of $105,000. If
the net income before Federal income taxes meets certain levels in the year
1997, 1998, and 1999, Mr. Warady will receive stock bonuses of 5,000, 7,000 and
10,000 shares of the Common Stock of the Company. The agreement also provides
for non-competition at the end of the term for six months or one year, depending
upon the reason the employment has terminated.
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Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of March 28, 1997
regarding the ownership of Common Stock by each person known by the Company to
own 5% or more of the outstanding shares of Common Stock, each director of the
Company and all officers and directors of the Company as a group.
Number of Shares
Name and Address (1) Owned(2) Percent
- -------------------- --------------- -------
Leonard Osser 2,395,000(3) 43.1%
Gregory Volok 6,700(4) *%
Giovanni Montoncello 20,000(5) *%
Michael J. McGeehan 20,000(5) *%
David Sultanik 20,000(5) *%
Stephen A. Zelnick 125,000(6) 2.2%
All directors and officers
as a group (7 persons) 2,610,850 (7) 46.3%
- ----------
* Less than 1%.
(1) The addresses of the persons named in this table are as follows: Leonard
Osser, 44 Kean Road, Short Hills, New Jersey 07078; Gregory Volok, 172
Laurie Lane, Philadelphia, PA 19115; Giovanni Montoncello, Via Agostino
Bertani 2, Milan Italy 20154; Michael J. McGeehan, 125 Middlesex Avenue,
Piscataway, New Jersey 08854; David Sultanik, Sultanik and Krumholz, LLC,
154 South Livingston Avenue, Livingston, New Jersey 07039; Stephen A.
Zelnick, Morse, Zelnick, Rose & Lander, LLP, 450 Park Avenue, New York,
New York 10022.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the filing of this report upon
the exercise of options and warrants or conversion of convertible
securities. Each beneficial owner's percentage ownership is determined by
assuming that options, warrants and convertible securities that are held
by such person (but not held by any other person) and that are exercisable
or convertible within 60 days from the filing of this report have been
exercised or converted. Except as otherwise indicated, and subject to
applicable community property and similar laws, each of the persons named
has sole voting and investment power with respect to the shares shown as
beneficially owned.
(3) Consists of 1,586,000 held in the name of Leonard Osser, 800,000 shares
held in the name of U.S. Asian Consulting Group, Inc., an affiliate of Mr.
Osser, and 9,000 shares held by Guarantee and Trust Company for the
benefit of U.S. Asian Consulting Group, Inc.
(4) Consists of 4,000 shares held jointly with his wife and 2,700 shares held
personally or in an IRA account.
(5) Consists of 20,000 shares subject to stock options exercisable within 60
days of the date hereof at $5.375 per share.
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(6) Includes 20,000 shares subject to stock options exercisable within 60 days
of the date hereof at $5.375 per share and 100,000 shares as to which
beneficial ownership is shared with certain partners not affiliated with
the Company.
(7) Includes 80,000 shares subject to stock options exercisable within 60 days
of the date hereof at $5.375 per share.
Item 12. Certain Relationships and Related Transactions
During 1994 and 1995 Leonard Osser provided demand loans to the Company
amounting to $44,559 and $119,000, bearing interest at 6% per annum. All loans
were repaid in November 1995.
From April 1995 until February 28, 1997, Spintech leased its corporate
and administrative offices from LenRon Realty, Inc. ("LenRon"), pursuant to a
lease expiring March 31, 2000. The premises consisted of 1,500 sq. ft. on the
first and second floors of a two-story frame building. According to the terms of
the lease, annual rentals were to increase from $12,600 in the first year to
$28,000 in the year 2000 and Spintech was to pay increases in real estate taxes
and certain maintenance costs. Spintech leased additional warehouse and
manufacturing space from LenRon on a month-to-month basis at $1,000 per month.
Leonard Osser founded, is the President and since December 1996 the sole owner
of LenRon. On February 28, 1997, LenRon released Spintech from its continuing
obligations under the lease in anticipation of Spintech's relocation to the
Company's corporate headquarters in New Jersey.
In March 1966 the Company organized Princeton PMC to market and sell
dental products. Initially Princeton PMC was a joint venture between the Company
and Gregory Volok. In December 1996 it became a wholly owned subsidiary when the
Company acquired Mr. Volok's one-third interest in Princeton PMC in exchange for
100 shares of Common Stock and an earnout of up to an additional 159,900 shares
based on the Company's future earnings.
Beginning on January 1, 1994, Spintech has rented from Ronald Spinello,
DDS, on a month to month basis at the rate of $200 per month, shop space located
in the home of Dr. Spinello.
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Item 13. Exhibits and Reports on Form 8-K.
(a) Certain of the following exhibits were filed as Exhibits to the
registration statement on form SB-2, Registration No. 33-92324 and
amendments thereto (the "Registration Statement") filed by the Registrant
under the Securities Act of 1933, as amended, or the reports filed under
the Securities and Exchange Act of 1934, as amended, and are hereby
incorporated by reference.
Exhibit
No. Description
------- -----------
3.1 Certificate of Incorporation of the Company. (1)
3.2 Certificate of Amendment filed July 13, 1995. (2)
3.3 Certificate of Amendment filed October 31, 1996. (5)
3.4 By-laws of the Company. (1)
4.1 Specimen Stock Certificate. (2)
10.1 Lease dated November 25, 1996 between Livingston Corporate
Park Associates, L.L.C. and the Company. (5)
10.2 Employment Agreement between the Company and Leonard Osser.
(1)
10.3 Amendment to Employment Agreement between the Company and
Leonard Osser. (5)
10.4 Form of Underwriter's Warrant. (2)
10.5 Financial Advisory and Investment Banking Agreement entered
into July 1, 1996 between GKN Securities Corp. and the
Company. (5)
10.6 Form of Warrant dated June 30, 1996 granted to GKN
Securities Corp. and its designees for the purchase of an
aggregate of 250,000 shares of the Company's Common Stock.
(5)
10.7 Agreement between Spintech and Team Technologies, Inc.
dated July 13, 1995. (2)
10.8 Employment Agreement dated November 1, 1996 by and between
the Company and Gregory Volok. (5)
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10.9 Lease, as amended, dated November 6, 1991 between Raybec
Management Co. and Wisdom. (6)
10.10 Employment Agreement made as of December 23, 1996 by and
between Sagacity I, Inc. and Joel D. Warady. (5)
10.11 Employment Contract Terms Memorandum entered into by Ronald
P. Spinello and Milestone on September 21, 1994 and
Employment Agreement made as of November 10, 1995 among
Milestone, Spintech and Ronald P. Spinello. (5)
10.13 Agreement for SDS Product dated September 1, 1996 between
Spintech and Princeton PMC. (5)
10.14 Agreement for The Wand Product dated September 1, 1996
between Spintech and Princeton PMC. (5)
10.15 Technology License Agreement dated September 20, 1996,
between Spintech and Biotronix Laboratories, Inc. (5)
10.16 Exclusive Distributorship Agreement between Wisdom
Toothbrushes Limited and Sagacity I, Inc. (6)
10.18 Agreement between Milestone and Spintech dated September
21, 1994 and Amendment No. 1 thereto. (2)
16.1 Letter on Change in Certifying Accountant. (3)
21.1 Subsidiaries of the Registrant. (5)
----------
(1) Filed with the initial filing of the Company's Registration
Statement.
(2) Filed with Amendment No. 1 to the Registration Statement.
(3) Filed with Form 8-K dated January 29, 1996.
(4) Filed with the Company's Form 10-KSB for the year ended December
31, 1995.
(5) Filed herewith.
(6) In accordance with Rule 202 of Regulation S-T, this exhibit is
being filed herewith in paper pursuant to a continuing hardship
exemption.
(b) There were no reports on Form 8-K filed by the Registrant during the last
quarter of the period covered by this report.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
Milestone Scientific, Inc.
We have audited the accompanying consolidated balance sheet of Milestone
Scientific Inc. and Subsidiaries as of December 31, 1996, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the two years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Milestone
Scientific Inc. and Subsidiaries as of December 31, 1996, and the consolidated
results of their operations and their consolidated cash flows for the two years
then ended, in conformity with generally accepted accounting principles.
GRANT THORNTON LLP
New York, New York
February 5, 1997, except for
Notes J and P, as to
which the dates are
March 26 and March 20, 1997
F-1
<PAGE>
Milestone Scientific Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
December 31, 1996
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 779,359
Accounts receivable 323,746
Inventories 508,727
Prepaid expenses 20,788
-----------
Total current assets 1,632,620
PROPERTY AND EQUIPMENT, NET 281,378
PATENTS 2,039,816
DEFERRED FINANCING COSTS 635,000
OTHER ASSETS 68,132
-----------
$ 4,656,946
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit - bank $ 75,000
Accounts payable 483,537
Accrued expenses 102,310
Deferred revenue 38,517
-----------
Total current liabilities 699,364
-----------
STOCKHOLDERS' EQUITY
Common stock, par value $.001; authorized,
10,000,000 shares; issued and outstanding,
4,633,350 shares 4,633
Additional paid-in capital 6,819,341
Deficit (2,736,352)
Unearned compensation (130,040)
-----------
3,957,582
-----------
$ 4,656,946
===========
The accompanying notes are an integral part of this statement.
F-2
<PAGE>
Milestone Scientific Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
1995 1996
----------- -----------
Revenues $ 3,473 $ 302,388
Cost of sales 7,459 195,659
----------- -----------
Gross profit (loss) (3,986) 106,729
----------- -----------
General and administrative expense 336,816 2,225,737
Research and development expense 24,777 167,600
----------- -----------
361,593 2,393,337
----------- -----------
Loss from operations (365,579) (2,286,608)
----------- -----------
Other income and expense
Interest expense (294,096)
Interest income 10,495 73,203
Minority interest in net loss of
subsidiary 45,555 177,568
Other (16,206) 86,309
----------- -----------
(254,252) 337,080
----------- -----------
NET LOSS $ (619,831) $(1,949,528)
=========== ===========
Loss per share $ (.20) $ (.43)
=========== ===========
Weighted average shares outstanding 3,142,575 4,570,775
=========== ===========
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
Milestone Scientific Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 1995 and 1996
<TABLE>
<CAPTION>
Common stock Additional
----------------------- paid-in Unearned
Shares Amount capital Deficit compensation Total
------ ------ ------- ------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 2,792,500 $ 2,793 $ 284,740 $ (166,993) $ 120,540
Private placement of units 57,500 57 65,258 65,315
Proceeds from public offering, net
of $277,473 in offering costs 1,500,000 1,500 4,821,027 4,822,527
Shares issued to the Advisory
Committee 130,000 130 519,870 $ (520,000)
Compensation expense 129,960 129,960
Net loss for the year ended
December 31, 1995 (619,831) (619,831)
---------- ----------- ---------- ----------- --------- -----------
Balance, December 31, 1995 4,480,000 4,480 5,690,895 (786,824) (390,040) 4,518,511
Shares issued in connection with the
business combinations accounted
for as purchases 23,350 23 111,076 111,099
Shares issued to consultants 130,000 130 382,370 382,500
Compensation expense 260,000 260,000
Warrants issued to placement agent 635,000 635,000
Net loss for the year ended
December 31, 1996 (1,949,528) (1,949,528)
---------- ----------- ---------- ----------- --------- -----------
Balance, December 31, 1996 4,633,350 $ 4,633 $6,819,341 $(2,736,352) $(130,040) $ 3,957,582
========== =========== ========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
Milestone Scientific Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (619,831) $(1,949,528)
Adjustments to reconcile net loss to net cash used in
operating activities
Amortization of excess of purchase price over
tangible net assets 26,084 229,544
Amortization and depreciation 24,237 3,790
Loss applicable to minority interest 45,555 (211,326)
Loss on disposal of assets 16,206
Compensation expense 129,960 642,500
Interest expense resulting from debt discount 294,096
Bad debt expense 10,547
Changes in assets and liabilities, net of effects
from acquisition of businesses
Decrease in interest and other receivables 4,090
(Increase) decrease in accounts receivable 3,371 (64,174)
(Increase) in inventories (3,346) (63,495)
(Increase) decrease in prepaid expenses 2,822 (3,078)
(Increase) in other assets (61,640)
Increase (decrease) in accounts payable 54,320 (93,770)
Increase (decrease) in accrued expenses (33,724) 63,628
Increase in deferred revenue 38,517
----------- -----------
Net cash used in operating activities (56,160) (1,458,485)
----------- -----------
Cash flows from investing activities
Acquisition of businesses, net (2,354,320)
Issuance of note receivable (277,500)
Repayment of note receivable 632,500
Capital expenditures (3,000) (93,795)
----------- -----------
Net cash used in investing activities (2,002,320) (93,795)
----------- -----------
Cash flows from financing activities
Net proceeds from public offering 4,822,527
Net proceeds from issuance of common stock 65,315
Proceeds from issuance of debt 38,525
Costs of issuance of debt (5,609)
Repayment of debt (500,000)
Loans from stockholder 119,000
Repayment to stockholder (163,559)
Proceeds from promissory notes 200,000
Repayment of promissory notes (200,000)
----------- -----------
Net cash provided by financing activities 4,376,199
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,317,719 (1,552,280)
Cash and cash equivalents at beginning of year 13,920 2,331,639
----------- -----------
Cash and cash equivalents at end of year $ 2,331,639 $ 779,359
=========== ===========
</TABLE>
F-5
<PAGE>
Milestone Scientific Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Year ended December 31,
In 1996, Milestone Scientific Inc. acquired, in merger transactions,
substantially all of the business assets of Princeton PMC, Inc. and Sagacity I,
Inc., subject to certain liabilities, in exchange for 23,350 shares of
Milestone's common stock.
In 1996, the Company issued warrants to its placement agent. Those warrants have
been measured at fair value and were established as deferred financing costs
with a corresponding offset to additional paid-in capital.
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and 1996
NOTE A - ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Organization of Business
Milestone Scientific Inc. (formerly U.S. Opportunity Search, Inc.) (the
"Company") was incorporated in the State of Delaware in August 1989. The
Company develops, manufactures, markets and sells equipment and related
disposable or consumable items and other products for use primarily by the
dental practitioner in the United States.
In November 1995, the Company purchased 65% of the common stock of
Spintech, Inc. ("Spintech"). (See Note C.) Spintech was founded to perform
research and to develop patented products for use by health care
providers. Spintech has had only limited sales of its products. These
limited sales provide no assurance that Spintech will be able to
successfully market these products and that demand will be at the levels
at which Spintech can operate profitably.
In March 1996, the Company, together with one of its officers, founded
Princeton PMC, Inc. ("Princeton PMC") as a marketing company. The Company
acquired the remaining outstanding shares of Princeton PMC, Inc. common
stock owned by the officer in November 1996, making Princeton PMC, Inc. a
wholly-owned subsidiary. In December 1996, the Company acquired Sagacity
I, Inc., Doing Business in the United States as the Wisdom Toothbrush Co.
("Wisdom"), and obtained United States distribution rights to the Wisdom
line of toothbrushes and prophylaxis products (see Note C). Wisdom has an
exclusive three-year distributor agreement in the United States, Canada
and other areas with Wisdom Toothbrushes Limited.
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:
1. Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and all of its wholly-owned and majority-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated. The operating
results of Spintech have been included in the Company's consolidated
financial statements since November 1995, the date of acquisition; the
operating results of Princeton PMC have been included since its formation
in March 1996; and the operating results of Wisdom have been included
since December 1996, the date of acquisition.
F-7
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1996
NOTE A (continued)
2. Inventories
Inventories are valued at the lower of cost or market with cost
being determined by the first-in, first-out ("FIFO") method.
Inventories principally consist of finished goods.
3. Property and Equipment
Property and equipment are stated at cost and depreciated using
straight-line and accelerated methods over the estimated useful
lives of the assets.
4. Deferred Costs
Deferred costs included in other assets consist of costs related to
a 1997 private placement. The deferred private placement costs will
be charged against the equity raised through the 1997 private
placement.
5. Revenue Recognition
The Company recognizes revenue from sales when title to merchandise
passes to customers, including distributors. Customers and
distributors do not have any right to return units, except a limited
right to return defective units.
Deferred revenue represents the amount received under a contract for
which the earnings process was not complete.
6. Financing Costs
Financing costs incurred in connection with the Company's 1995
Private Placement have been fully amortized in 1995.
Deferred financing costs at December 31, 1996 will be charged
against proceeds received from the 1997 Private Placement.
F-8
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1996
NOTE A (continued)
7. Discount on Notes Payable
Discount on notes payable was amortized over the term of the related
debt.
8. Research and Development
Research and development costs are expensed as incurred.
9. Offering Costs
Costs relating to the Company's Offering in 1995 have been offset
against the proceeds of the Offering.
10. Patents
The excess of the Company's cost over the tangible net assets of
Spintech has been allocated to patents and is being amortized over a
ten-year period using the straight-line method. The recoverability
of the carrying values of the patents will be evaluated on a
recurring basis.
11. Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers
all highly liquid investments purchased with a maturity of three
months or less to be cash equivalents. At December 31, 1996, cash
equivalents consisted of approximately $700,685 of United States
Treasury Bills.
12. Loss Per Share
Loss per share is computed based on the weighted average number of
shares of common stock outstanding. The effect on the loss per share
of warrants and options outstanding is antidilutive and has not been
included in the calculation of weighted average shares outstanding.
F-9
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1996
NOTE A (continued)
13. Stock Split
In July 1995, the Company effected a 10-for-1 stock split.
14. Use of Estimates in Financial Statements
In preparing financial statements in conformity with generally
accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
NOTE B - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 consist of the following:
Tooling and dies $185,062
Office equipment 88,468
Trade show displays 53,816
--------
327,346
Less accumulated depreciation (45,968)
--------
$281,378
========
NOTE C - ACQUISITIONS
Princeton PMC
In March 1996, the Company, together with one of its officers, entered
into a shareholder's agreement to form Princeton PMC, a corporation, to
engage in the marketing and sales of dental products. The Company
contributed $85,000 for 200 shares of this entity representing a
two-thirds ownership.
F-10
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1996
NOTE C (continued)
In November 1996, the Company purchased the remaining one-third of
Princeton PMC's outstanding stock for 100 shares of its common stock. The
acquisition has been recorded using the purchase method of accounting. The
purchase price approximated the net tangible assets acquired. The
operating results of Princeton PMC have been included in the Company's
consolidated financial statements as follows: two-thirds through October
1996 and 100% from November to December 1996.
In connection with the acquisition of Princeton PMC, additional shares of
common stock could be issued depending upon the Company's average earnings
over the next two years as defined. The Company is obligated to issue
159,900 shares of its common stock if certain income levels are achieved.
The fair value of the common stock would be classified as compensation
expense charged to the statement of operations.
Wisdom
In December 1996, the Company completed the purchase of Wisdom's
outstanding stock by issuing 23,250 shares of its common stock valued at
$110,437. The acquisition has been recorded using the purchase method of
accounting. The cost was less than the subsidiary's net assets at the date
of acquisition. The excess of net assets over cost has been applied to
reduce the amounts assigned to noncurrent assets of the subsidiary. The
operating results of Wisdom have been included in the Company's
consolidated financial statements since the date of acquisition.
The following unaudited consolidated pro forma results of operations
assume the acquisition occurred as of the inception date of Wisdom (April 9,
1996):
Pro forma
The Company Wisdom consolidated
------------ --------------- ------------
Year ended April 9, 1996 Year ended
December 31, to December 31, December 31,
1996 1996 Eliminations 1996
------------ --------------- ------------ ------------
Net revenues $ 302,388 $ 1,538,180 $ (115,592) $1,724,976
Net loss (1,959,528) (87,769) (2,037,297)
Loss per share $ (.43) $ (.02) $ (.45)
F-11
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1996
NOTE C (continued)
The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the purchase been
consummated as of the inception date, nor are they necessarily indicative
of future operating results.
Spintech
In November 1995, the Company completed the purchase of 65% of Spintech's
outstanding stock on a fully diluted basis for $2,700,000. The Company
paid $2,026,495, which represents the $2,700,000 less amounts advanced to
Spintech amounting to $632,500 plus interest of $41,005. The acquisition
has been recorded using the purchase method of accounting. The excess of
the aggregate purchase price over the net tangible assets acquired was
allocated to patents and is being amortized over ten years. The operating
results of Spintech have been included in the Company's consolidated
financial statements since the date of acquisition. The minority interest
has been valued at zero as of December 31, 1996.
The Company also holds a series of annual options to purchase, for a
nominal amount, an additional 3% of Spintech's outstanding shares
following each of the first five fiscal years commencing after the closing
of the stock purchase (or an aggregate of 15% of such shares if all of the
options are exercised). Each option is exercisable only if Spintech does
not achieve a specified pretax profit target as defined in the applicable
fiscal year. In addition, the Company had provided a one-year revolving
working capital line of credit for Spintech in the amount of $500,000
bearing interest at the rate of 8% per annum. The line expired in 1996 and
as of December 31, 1996, $510,000 was still outstanding. These advances
are due on demand with interest at 8%.
NOTE D - PRIVATE PLACEMENT
Commencing in November 1994, the Company sold an aggregate of 50 Bridge
Loan Units (the "Units") for $10,050 each. Each Unit consisted of a
$10,000 promissory note, bearing interest at 8% per annum, due and payable
at the earlier of the closing of the Offering or two years after issuance,
and 5,000 shares of the Company's common stock. Pursuant to Accounting
Principles Board Opinion No. 14, management allocated the gross proceeds
between equity and debt based upon their relative fair values. The net
proceeds of the private placement at December 31, 1994 and 1995 were
F-12
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1996
NOTE D (continued)
$306,621 (38.5 units) and $98,749 (11.5 units), respectively, ($405,730
cumulative). In connection with the sale of the Units, the Company
incurred costs of $80,304 through December 31, 1994 and an additional
$16,826 through December 31, 1995, which was allocated between the equity
and debt, based on their relative fair values. The portion allocated to
the notes of $26,768 and $5,608 at December 31, 1994 and 1995,
respectively, was included in deferred financing costs and with the
related debt discount was amortized over the term of the notes. During
November 1995, all notes were paid in full.
NOTE E - LOAN PAYABLE TO STOCKHOLDER
During 1995, the Chief Executive Officer provided demand loans to the
Company amounting to $119,000, bearing interest at 6% per annum. All loans
were repaid in November 1995.
NOTE F - LINE OF CREDIT - BANK
Wisdom has a $75,000 line of credit with a bank with interest at the
bank's prime rate plus 1%. The line is collateralized by substantially all
assets of Wisdom. Advances under the line are in the form of demand notes.
NOTE G - INCOME TAXES
At December 31, 1996, the Company has net operating loss carryforwards of
approximately $1,064,000. The net operating losses expire principally in
2010 and 2011. The net operating loss for 1995 and 1996 excludes the
minority interest loss in Spintech. Management has provided a full
valuation allowance for the tax benefit of the net operating losses due to
the uncertainty of its realization (approximately $362,000 at December 31,
1996). The valuation allowance increased by $123,000 in 1996. The
utilization of the loss carryforwards may be limited due to an ownership
change as defined by Section 382 of the Internal Revenue Code.
The Company and Spintech file separate Federal and State income tax
returns.
F-13
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1996
NOTE H - STOCKHOLDERS' EQUITY
In 1994, the Company issued 192,500 shares of common stock in conjunction
with its Private Placement.
In 1995, the Company issued 57,500 shares of common stock in conjunction
with its Private Placement.
In November 1995, the Company completed an offering of 1,500,000 shares of
its common stock at a price of $4.00 per share, resulting in net proceeds
of approximately $4,822,000.
Proceeds were used as follows:
Payment of balance due to Spintech $2,026,495
Repayment of
Bridge units 535,190
Promissory notes 208,000
Stockholder 120,411
----------
$2,890,096
==========
The remaining proceeds were to be used for general corporate purposes,
including making available a $500,000 line of credit to Spintech.
In conjunction with the offering, the Company has agreed to sell to the
underwriter, for nominal consideration, warrants to purchase from the
Company 50,000 shares of common stock at an exercise price of $6 per share
for a three-year period commencing two years from the effective date of
the Offering, November 3, 1995. The warrants include certain antidilution
provisions.
The Company borrowed $200,000 from two accredited investors pursuant to
promissory notes, bearing interest at 8% per annum, that were paid in full
in November 1995. In connection with these notes, the Company also issued
warrants to these investors to purchase 100,000 shares of common stock at
an exercise price of $6; such warrants to be in the form of and to be
identical in all other respects to the Underwriter's Warrants, for a
period of three years commencing two years from the effective date of the
Offering.
F-14
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1996
NOTE H (continued)
The Company has issued 130,000 shares to the Advisory Board in
consideration for their agreement to serve on the Advisory Board for at
least two years. If any member fails to serve his term, except because of
death or disability, his shares will be returned to the Company for
cancellation. The market value of the shares issued was $520,000. This
amount was recorded as unearned compensation and is shown as a separate
component of stockholder's equity. Unearned compensation is being
amortized to expense over a two-year period and amounted to approximately
$130,000 and $260,000 for the years ended December 31, 1995 and 1996,
respectively.
The Company has issued 130,000 shares to two consultants for services
provided to the Company. The agreement with one of the consultants
stipulates that if the consultant is permitted to sell and does sell the
shares issued to him and realizes from such sale net proceeds of less than
$5 per share, the Company shall supplement such proceeds up to $5 per
share, provided the Company's total obligation shall not exceed $105,000.
In 1996, the Company granted stock options to certain of its directors and
two consultants to purchase 135,000 shares of its common stock at prices
ranging from $5.375 to $6.50 per share. The options expire five years from
the date of grant, vest over one to three years and contain certain
antidilution provisions.
In July 1996, the Company issued a three-year warrant to purchase 250,000
shares of its common stock at an exercise price of $6.50 per share to its
placement agent and its designees. These warrants have been measured at
fair value and were established as deferred financing costs with a
corresponding offset to additional paid-in capital.
Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No.
25 ("APB No. 25"), "Accounting for Stock Issued to Employees", and related
interpretations in accounting for its stock options. Under APB No. 25,
because the exercise price of the Company's employee stock options equals
the market price of the underlying stock on the date of grant, no
compensation expense is recognized. However, SFAS No. 123, "Accounting for
Stock-Based Compensation," requires presentation of pro forma net income
and earnings per share as if the Company had accounted for its
F-15
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1996
NOTE H (continued)
employee stock options granted subsequent to December 31, 1994, under the
fair value method of that statement. For purposes of pro forma disclosure,
the estimated fair value of the options is amortized to expense over the
vesting period. Under the fair value method, the Company's net loss and
loss per share would have been increased as follows:
Net loss $247,000
Loss per share $ .04
Because SFAS No. 123 is applicable only to options granted subsequent to
December 31, 1994, and some options have a two- to three-year vesting
period, the pro forma effect will not be fully reflected until 1999.
The weighted-average fair value of the individual options granted during
1996 is estimated as $2.54 on the date of grant. The fair value for 1996
was determined using a Black-Scholes option-pricing model with the
following assumptions:
Dividend yield -
Volatility 48.80%
Risk-free interest rate 6.33
Forfeiture rate -
Expected life 3 years
F-16
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1996
NOTE H (continued)
Stock option activity during 1995 - 1996 is summarized below:
<TABLE>
<CAPTION>
Shares of common Weighted-average
stock attributable to exercise price of
options and warrants options and warrants
-------------------- --------------------
<S> <C> <C>
Unexercised at December 31, 1994 - $ -
Granted 150,000 6.000
Exercised - -
Forfeited - -
------------
Unexercised at December 31, 1995 150,000 -
Granted 385,000 5.8247
Exercised - -
Forfeited - -
------------
Unexercised at December 31, 1996 535,000 5.8738
=======
</TABLE>
The following table summarizes information concerning outstanding and
exercisable options at December 31, 1996:
Options and warrants outstanding Number of
------------------------------------- options
Number Remaining and warrants
Exercise prices outstanding contractual life exercisable
--------------- ----------- ---------------- -----------
$5.375 120,000 4.0466 60,000
6.00 150,000 3.8384 150,000
6.50 15,000 4.7890 5,000
6.50 250,000 2.4959 250,000
Shares exercisable at December 31, 1996 and 1995 were 465,000 and 150,000,
respectively.
F-17
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1996
NOTE I - LICENSE AGREEMENT
In November 1993, Spintech entered into a nonexclusive license agreement
for products covered by certain of Spintech's patents (the "License
Agreement"). The License Agreement was effective through the expiration of
the licensed patents. Spintech received a $100,000 initial advance payment
in conjunction with the License Agreement to be credited against future
earned royalties. In order to maintain the rights under the License
Agreement, after the first full year of the License Agreement, the
licensee was required to generate minimum royalties for any full quarterly
period; otherwise, Spintech had the right to terminate the License
Agreement and keep the $100,000 initial advance payment. The licensee had
the right to maintain the License Agreement by paying a minimum quarterly
royalty of $10,000. The License Agreement was voided by Spintech in
February 1995 due to the licensee not meeting the quarterly royalty
minimums. Spintech recorded $100,000 of royalty income in the first
quarter of fiscal 1995.
In January 1996, the licensee demanded the return of the initial advance
made to Spintech. Spintech filed an action in York County, Pennsylvania
requesting the court to declare that the Company is not liable to return
the advance. Management believes that the ultimate outcome of this matter
will not have a material adverse effect.
NOTE J - EMPLOYMENT CONTRACTS
Milestone
In March 1995, the Company entered into a five-year employment contract,
as amended, with the Company's President providing for annual compensation
of $170,000, which became effective upon consummation of the Offering on
November 3, 1995.
In November 1996, the Company entered into a five-year employment
agreement with the Company's Executive Vice-President providing for annual
compensation of $120,000. This agreement supersedes a consultant
agreement, dated March 12, 1996, that the two parties had previously
entered into.
F-18
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1996
NOTE J (continued)
Spintech
Spintech entered into an employment agreement with Spintech's Director of
Research for a five-year term beginning on November 10, 1995, at an
initial salary of $110,000 per annum and increasing by 10% per year for
each succeeding year throughout the term. The agreement also provides for
the payment of up to a $500,000 bonus at the end of the employment term
depending on the achievement of certain profit projections during his
employment term. The Director of Research has demanded certain revisions
to this agreement. The Company is engaged in ongoing discussions with him.
On March 26, 1997, the Company commenced legal action against Spintech's
Director of Research. The Company seeks recovery of damages for
interference with existing and prospective contract and business
relationships, a declaratory judgment that the Director of Research has no
personal rights to certain technology developed while he was employed by
Spintech and a declaratory judgment that the Company has not breached the
Director of Research's employment agreement or the agreement for the
purchase by the Company of a 65% equity interest in Spintech. No answer
has yet been filed.
Spintech also entered into a five-year employment agreement commencing on
November 10, 1995 with the Vice President of Operations at a salary of
$50,000 per year increasing by 10% per year for each succeeding year
throughout the term of his employment. His employment was terminated on
March 3, 1997.
Wisdom
In December 1996, Wisdom entered into a three-year employment agreement
with its President for annual compensation of $105,000. The parties can
elect to renew the term for additional one-year periods. In addition, the
agreement provides for stock bonuses in 1997, 1998 and 1999 of 5,000,
7,000 and 10,000 shares, respectively, of the Company's common stock if
Wisdom achieves certain net income levels as defined.
F-19
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1996
NOTE K - LITIGATION
In 1993, Spintech was named in a lawsuit by DOCC Inc. ("DOCC") for
infringement of certain patents related to the Company's "TAPS" product.
The Company successfully defended the litigation and received a final
judgment in its favor in August 1994. The final judgment awarded the
Company damages of approximately $260,000 representing certain costs and
expenses incurred in connection with the litigation (the "Award").
Subsequently, Spintech entered into a Stipulation of Settlement dated
February 1995 reducing the Award to $180,000 payable in three
installments. During 1996, $65,000 was received as full settlement of the
litigation. This amount was recognized as income in 1996 and is included
in Other on the consolidated statements of operations.
NOTE L - LEASE COMMITMENTS
Spintech
Commencing April 1, 1995, Spintech entered into a five-year lease for its
corporate headquarters from LenRon Realty, Inc. ("LenRon"). LenRon was
one-half owned by the Chief Executive Officer of the Company and the other
half by a stockholder of Spintech and, as of December 1996, wholly-owned
by the Chief Executive Officer. The lease terminated on March 13, 1997
when Spintech moved its operations to Wisdom's facilities.
Spintech also uses approximately 4,000 sq. ft. of storage and light
manufacturing space in a warehouse building contiguous to its corporate
and administrative offices. Under an informal rental arrangement with
LenRon, the Company pays approximately $1,000 per month for the use of
this facility. The informal arrangement terminated on April 30, 1996.
Effective January 1, 1994, Spintech leased shop space from a stockholder
and employee on a month-to-month basis at $200 per month and incurred a
total of $2,400 rent for the years ended December 31, 1996 and 1995,
respectively.
Milestone
On November 25, 1996, the Company signed a five-year-and-one-month lease
agreement for its corporate headquarters. The lease is scheduled to
commence on March 1, 1997 at a rate of $4,040 per month for months one
through thirty and $4,264 per month for months thirty-one through
sixty-one.
F-20
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1996
NOTE L (continued)
Wisdom
On July 31, 1994, Wisdom signed a lease addendum for its facilities
extending its original lease term three years with a monthly base rent of
$2,688 for the period January 1, 1995 through December 31, 1997.
The Company also leases equipment under operating leases.
The following represents approximate minimum rental payments under such
leases:
Year ending December 31,
1997 $ 97,000
1998 63,000
1999 54,000
2000 56,000
2001 54,000
2002 and thereafter 13,000
--------
$337,000
========
Rent expense was approximately $33,000 and $28,000, of which $23,800 and
$19,400 was paid to Len Ron for the years ended December 31, 1996 and
1995, respectively.
NOTE M - RELATED PARTY TRANSACTIONS
1. The Company incurred accounting fees of approximately $6,250 to an
accounting firm in which the wife of the Chief Executive Officer of
the Company was a partner, for the year ended December 31, 1995.
2. The Company paid $4,600 to the wife of the Chief Executive Officer
of the Company for bookkeeping services for the year ended December
31, 1995.
3. Spintech paid approximately $220,500 during 1996 to a company for
the manufacturing of its "TAPS" and "SDS" products. An official of
the company is on the Board of Directors of Spintech. Accounts
payable to this affiliate at December 31, 1996 were approximately
$12,000.
F-21
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1996
NOTE N - COMMITMENTS AND CONTINGENCIES
1. Failure to use Spintech's "TAPS" and "SDS" units in accordance with
recommended operating procedures could potentially result in
subjecting users to health hazards or injury. For example, premature
removal of syringes and other materials before completion of the
melt cycle could subject users to puncture with contaminated needles
prior to their complete encapsulation or inclusion of excessive
amounts of blood-soaked gauze or other material could result in the
release of noxious fumes from the sterilizer. In addition, the
sterilizer heats material to high temperatures and misuse or
malfunction of the unit could result in danger of fire or shock. Any
of the foregoing or other failures of the sterilizer to function
properly could subject Spintech to claims of liability. Spintech
carries product liability insurance in the amount of $1,000,000 per
occurrence and $1,000,000 overall.
2. In June 1996, the Company entered into a consulting agreement with a
dentist for $25,000 per annum for three years.
3. All of Spintech's "SDS" units are manufactured by a single domestic
contract manufacturer, Arbutus Electronics, Inc. ("Arbutus").
Spintech has no ongoing agreement for the manufacture of its "SDS"
products with Arbutus or any other manufacturer, although it expects
Arbutus to continue to manufacture such units. In July 1995, the
Company entered into an agreement with Team Technologies, Inc.
("TTI") for the production of "SplatrFree(TM)" prophy angles. The
Company believes that commercial delivery of the prophy angles will
begin during the first quarter of 1997. Termination of the
manufacturing relationship with Arbutus or TTI could significantly
and adversely affect the Company's ability to produce and sell its
"SDS" units and prophy angles, respectively. Though alternate
sources of supply exist and new manufacturing relationships could be
established by the Company for the "SDS" and prophy angle, the
Company would need to recover its existing tools and dies or have
new tools and dies produced. Establishment of new manufacturing
relationships could involve significant expense and delay. Any
curtailment or interruption of the supply of "SDS" units from
Arbutus, or prophy angles from TTI, whether or not as a result of
termination of the relationship, would adversely affect the Company.
Additionally, the Company has not established manufacturing
relationships for "The Wand(TM)," a proposed new product.
F-22
<PAGE>
Milestone Scientific Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1995 and 1996
NOTE O - CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade accounts
receivable. Concentrations of credit risk with respect to trade accounts
receivable are limited due to the large number of customers comprising the
Company's customer base, and their dispersion across different geographic
areas. The Company routinely assesses the financial strength of its
customers and, as a consequence, believes that its trade accounts
receivable credit risk exposure is limited. Generally, the Company does
not require collateral or other security to support customer receivables.
Spintech's largest customer was Wisdom. Revenues of approximately $115,600
were recognized for the year ended December 31, 1996 prior to the
acquisition.
No other customer accounted for more than 10% of revenues in 1996 or 1995.
NOTE P - SUBSEQUENT EVENTS
In March 1997, Spintech moved its executive and administrative offices to
Livingston, New Jersey, and its operations to Chicago, Illinois.
Private Placement
In March 1997, the Company sold, in a private placement, an aggregate of
852,262 units at $4.72 per unit for net proceeds of $3,505,964. Each unit
consisted of one share of common stock and one common stock purchase
warrant. Each warrant entitles the holder to purchase one share of common
stock for three years from the closing of the offering at an exercise
price of $4.72 per share. In addition, the placement agent received
warrants to purchase 85,226 units at $4.72 per unit. Deferred financing
costs at December 31, 1996 will be charged against the proceeds received
from this 1997 Private Placement.
F-23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Milestone Scientific Inc.
By: /S/ Leonard Osser
-----------------------------
Leonard Osser,
President, Chief Executive and
Chief Financial Officer
Date: March 28, 1996
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
Signature Date Title
--------- ---- -----
/s/ Leonard Osser March 28, 1997 President, Chief Executive
- ------------------------------- Officer, Chief Financial
Leonard Osser Officer and Director
/s/ Gregory Volok March 28, 1997 Executive Vice President
- ------------------------------- Chief Operating Officer and
Gregory Volok Director
/s/ Joel Warady March 28, 1997 Vice President
- -------------------------------
Joel Warady
- ------------------------------- _______________ Director
Giovanni Montoncello
/s/ Michael J. McGeehan March 28, 1997 Director
- -------------------------------
Michael J. McGeehan
- ------------------------------- _______________ Director
David Sultanik
/s/ Stephen A. Zelnick March 28, 1997 Director
- ------------------------------
Stephen A. Zelnick
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
U. S. OPPORTUNITY SEARCH, INC.
U. S. Opportunity Search , Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify:
The amendment to the Corporation's Certificate of Incorporation set
forth in the following resolution was duly approved by a majority of the
Corporation's Board of Directors and was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware:
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by striking Article FIRST in its entirety and replacing it with:
"FIRST: The name of the corporation (sometimes referred to herein as the
'Corporation') is Milestone Scientific Inc."
IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be signed by its duly authorized officer this 31st day of October, 1996.
U. S. OPPORTUNITY SEARCH, INC.
By: /s/ Leonard Osser
--------------------------------
Leonard Osser, President
EXHIBIT 10.1
LEASE AGREEMENT
This Agreement is made on the 25th day of November, 1996,
B E T W E E N : LIVINGSTON CORPORATE-PARK ASSOCIATES, L.L.C.
A Limited Liability Company of the State of New Jersey
820 Morris Turnpike, Suite 301
Short Hills, New Jersey 07078
(hereinafter referred to as "Landlord"),
A N D: U.S. OPPORTUNITY SEARCH, INC.
44 Kean Road
Short Hills, New Jersey 07078
(hereinafter referred to as "Tenant")
W I T N E S S E T H :
1. PREMISES, TERM AND USE. The Landlord does hereby lease to the Tenant, and the
Tenant does hereby rent from the Landlord the following described premises:
approximately 2,693 rentable square feet of first floor space as shown with
cross-hatching on the attached Exhibit A (the "Premises" or the "Demised
Premises"), in the office building located at 220 South Orange Avenue,
Livingston, New Jersey, (hereinafter the "Building") for a term of five (5)
years and one (1) month, commencing on the date (the "Commencement Date") which
is fourteen (14) days after substantial completion of Landlord's work as
described in Paragraph 42 herein and delivery of the Premises to Tenant, which
completion date is estimated to be on or about February 1, 1997, and ending five
(5) years and one (1) month: later, to be used and occupied only and for no
other purpose than general office space.
2. PAYMENT OF RENT. Commencing on the Commencement Date, Tenant covenants and
agrees to pay to the Landlord, as rent for and during the term hereof, the sum
of Two Hundred Fifty-Three Thousand Three Hundred Sixty-Six and 52/100
($253,366.52) Dollars, payable as follows:
(a) During the first, through, to and including the thirtieth month of the
initial term of this Lease, the sum of Four Thousand Thirty-Nine and
50/100 ($4,039.50) Dollars per month, due and payable on the first day of
each calendar month.
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<PAGE>
(b) During the thirty-first, through, to and including the sixty-first
month of the initial term of this Lease, the sum of Four Thousand Two
Hundred Sixty-Three and 92/100 ($4,263.92) Dollars per month, due and
payable on the first day of each calendar month.
Notwithstanding anything to the contrary contained herein, basic rent for the
first month of the initial term of this Lease shall be due and payable upon
execution of this Lease.
3. LATE PAYMENTS. In the event that payment of rent is not received by Landlord
by the tenth (l0th) day of each month, Tenant shall pay, as additional rent, a
late charge equal to five (5) percent of the late payment. Landlord shall be
entitled to same remedies for non-payment of late charges as for non-payment of
rent.
4. REPAIRS AND CARE. (a) Tenant has examined the premises and has entered into
this Lease without any representation on the part of Landlord as to the
condition thereof, except that Landlord represents and warrants to Tenant that
Landlord will duly and punctually perform the work referred to in Paragraph 42
hereof, in accordance with Exhibit B attached hereto, and that such work will be
free from defects in workmanship and materials, and suitable for the intended
purpose of making he Premises available for use by Tenant. Tenant shall take
good care of the Premises and shall, at the Tenant's own cost and expense, make
all non-structural repairs, including painting and decorating, and shall
maintain the Premises in good condition and state of repair. Tenant shall
neither encumber nor obstruct the sidewalks, driveways, yards, entrances,
hallways and stairs. Tenant shall not place a load per square foot area which it
was designed to carry and which is allowed by law. Landlord reserves the right
to prescribe the weight and position of all safes, business machines and
mechanical equipment.
(b) Not later than the last day of the term, Tenant shall, at Tenant's
expense, remove all Tenant's personal property and those improvements' made by
Tenant which have not become the property of Landlord, including, but not
limited to trade fixtures, moveable paneling and the like; repair all injury
done by or in connection with the installation or removal of said property and
improvements; and surrender the Premises in as good condition as they were at
the beginning of the term, excepting reasonable wear and damage by fire, the
elements, casualty, or other cause not due to the misuse or neglect by Tenant,
Tenant's agents, servants, visitors or licensees. All other property of Tenant
remaining on the Premises after the last day of the term or earlier termination
of this Lease shall be conclusively deemed abandoned and may be removed by
Landlord, and Tenant shall reimburse Landlord for the cost of such removal.
Landlord may have any such property stored at Tenant's risk and expense.
5. COMPLIANCE WITH LAWS. The Tenant shall promptly comply with all laws,
ordinances, rules, regulations, requirements and directives of the Federal,
State and Municipal Governments or Public Authorities and of all their
departments, bureaus and subdivisions, applicable to and affecting the use and
occupancy of the Premises, for the correction, prevention and abatement of
nuisances, violations or other grievances in, upon or connected with the use of
the Premises, during the term hereof; and shall promptly comply with all
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<PAGE>
orders, regulations, requirements and directives of the Board of Fire
Underwriters or similar authority affecting the use of the Premises and of any
insurance companies which have issued or are about to issue policies of
insurance covering the use of the Premises and its contents, for the prevention
of fire or other casualty, damage or injury, at the Tenant's own cost and
expense. Tenant shall observe and comply with the rules and regulations
hereinafter set forth in Exhibit C, attached hereto and made a part hereof by
this reference, and with such further reasonable rules and regulations as
Landlord may prescribe, upon written notice to Tenant, for the safety, care and
cleanliness of the Building and the comfort, quiet and convenience of other
occupants of the Building; provided, however, Landlord shall not enforce any
rules and regulations against Tenant unless and until it enforces such rules and
regulations against all of the other occupants of the Building.
6. ALTERATIONS AND IMPROVEMENTS. No structural alterations, additions or
improvements shall be made, and no climate regulating, air conditioning,
cooling, heating or sprinkler systems, television or radio antennas, heavy
equipment, apparatus and fixtures, shall be installed in or attached to the
leased premises, without the prior written consent of the Landlord, which
consent shall not be unreasonably withheld, delayed or conditioned. Unless
otherwise provided herein, all such alterations, additions or improvements and
systems, when made, installed in or attached to the said premises, shall belong
to and become the property of the Landlord and shall be surrendered with the
premises and as part thereof upon the expiration or sooner termination of this
Lease, without hindrance, molestation, injury or charge to Landlord.
7. TENANT'S LIABILITY INSURANCE. Tenant shall provide, at its own expense, and
keep in force during the term of this Lease and any renewal terms, general
comprehensive liability insurance with an insurance company licensed to do
business in the State of New Jersey, selected by Tenant and reasonably
acceptable to Landlord, and in an amount reasonably required by Landlord, but in
any event not less than $1,000,000.00 with respect to injury or death to any one
person and $3,000,000.00 with respect to injury or death to more than one person
in any one accident or other occurrence, and $1,000,000.00 with respect to
damage to property. Such policy or policies shall include Landlord and
Landlord's mortgagee, if any, as additional insiders. Tenant agrees to deliver
certificates evidencing such insurance to Landlord prior to the Commencement
Date of this Lease and within thirty (30) days after the date of renewal of the
policies. Such insurance shall not be cancelable without thirty (30) days prior
written notice to Landlord.
8. TENANT'S CASUALTY INSURANCE. During the term of this Lease, and any renewal
terms, Tenant shall cause its improvements to the Demised Premises to be insured
for the benefit of Landlord and Tenant, as their respective interests may
appear, against loss or damage by fire and customary extended coverage in an
amount equal to the replacement value thereof, if insurance in such amount is
available. Tenant agrees to deliver a certificate evidencing such insurance to
Landlord within thirty (30) days after the date of execution of this Lease.
-3-
<PAGE>
9. DAMAGE OR DESTRUCTION BY FIRE OR OTHER CASUALTY. (a) If the Building is
damaged by fire or other casualty to such extent that the cost of restoration,
as determined by an insurance adjuster licensed in the State of New Jersey, will
equal or exceed fifty (50) percent of the replacement value of the Building
(exclusive of foundations) just prior to the occurrence of the damage, then
either Landlord or Tenant may, within sixty (60) days from the date of the
damage, give the other party a written notice of election to terminate this
Lease, effective thirty (30) days from the date of such notice. However, in the
event that neither party terminates this Lease in such circumstance, then the
basic rent and additional rent -shall be abated, as of the date of such
casualty, in direct proportion to that amount of square footage in the Demised
Premises which cannot be used by Tenant for the purposes set forth in Paragraph
1 herein. In addition, Landlord shall be responsible for making restoration
within one hundred eighty (180) days after the date of the damage, subject to
Force Majeure. In the event that restoration is not made within said time
period, Tenant shall have the right to terminate this Lease, upon thirty (30)
days written notice to Landlord.
(b) If the Building is damaged by fire or other casualty to such extent
that the cost of restoration, as determined by an insurance adjuster licensed in
the State of New Jersey, will be less than fifty (50%) percent of the
replacement value of the Building (exclusive of foundations) just prior to the
occurrence of the damage, then Landlord may, within sixty (60) days from the
date of damage, give the Tenant written notice of election to terminate this
Lease, effective thirty (30) days from the date of such notice. However, in the
event that Landlord does not terminate this Lease in such circumstance, then the
basic rent and additional rent shall be abated, as of the date of such casualty,
in direct proportion to that amount of square' footage in the Demised Premises
which cannot be used by Tenant set forth in Paragraph 1 herein. In addition,
Landlord shall be responsible for making restoration within one hundred eighty
(180) days after the date of the damage, subject to Force Majuere. In the event
that restoration is not made within said time period, Tenant shall have the
right to terminate this Lease, upon thirty (30) days written notice to Landlord.
10. WAIVER OF SUBROGATION. Landlord and Tenant shall obtain, for each policy of
insurance secure by them regarding the Demised Premises, or any Property located
therein, whether required by this Lease, an appropriate clause therein
or-endorsement thereon, pursuant to which such insurance company waives
subrogation or consents to the waiver of the right of one party to recover
against the other.
11. INCREASE OF INSURANCE RATES. If for any reason it shall be impossible to
obtain fire and other hazard. insurance on the buildings and improvements on the
leased premises, in an amount and in the form and with insurance companies
acceptable to the Landlord, the Landlord may, if the Landlord so erects at any
time thereafter, terminate this Lease and the term hereof, upon giving to the
Tenant sixty (60) days notice in writing of the Landlord's intention to do so,
and upon the giving of such notice, this Lease and the term thereof shall
terminate. If by reason of the use to which the premises are put by the Tenant
or character of or the manner in which the Tenant's business is carried on, if
it is other than for general offices, the insurance rates for fire and other.
hazards shall be increased, the Tenant shall upon demand, pay to the Landlord,
as rent, the amounts by which the premiums for such
-4-
<PAGE>
insurance are increased. Such payment shall be paid with the next installment of
rent 'but in no case later than thirty (30) days after such demand, whichever
occurs sooner.
12. ASSIGNMENT AND SUBLEASE. Tenant may assign or sublease the within Lease to
any party subject to the following:
(a) In the event that Tenant desires to sublease the whole or any portion
of the Demised Premises or assign the within Lease to any other party, the terms
and conditions of such sublease or assignment shall be communicated to the
Landlord in writing prior to the effective date of any such sublease or
assignment
(b) Tenant may assign this Lease or sublet the whole or any portion of.
the Demised Premises, subject to Landlord's prior written consent, which consent
shall not be unreasonably withheld, conditioned or delayed, and subject to the
consent of any mortgagee, trust deed holder or ground lessor, on the basis of
the following terms and conditions:
(1) Tenant shall provide to Landlord the name and address of the
proposed assignee or sublessee.
(2) The. assignee or sublessee shall assume, by written instrument,
all of the obligations of this Lease, and a copy of such assumption agreement
shall be furnished to Landlord within ten (10) days after its execution. Any
sublease shall expressly acknowledge that said sublessee's rights against the
Landlord shall be no greater than those of the Tenant.
(3) The Tenant and each assignee shall be and remain liable for the
observance of all the covenants and provisions of this Lease, including, but not
limited to the payment of rent and additional rent reserved herein, through the
entire term of this Lease, as the same may be renewed, extended or otherwise
modified.
(4) The Tenant and any assignee shall promptly pay to Landlord: (i)
one-half (1/2) of any consideration received by Tenant for any assignment; or
(ii) one-half (1/2) of the rent, as and when received by Tenant, net of
expenses, in excess-of the rent required to be paid by Tenant to be paid by
Tenant to Landlord for the area sublet, computed on the basis of an average
square food rent for the gross square footage Tenant has leased.
(5) In any event, acceptance by Landlord of any rent from the
assignee, or from any of the subtenants, or the failure of Landlord to insist
upon a strict performance of any of the terms, conditions and convenants herein
shall not release Tenant herein, nor any assignee assuming this Lease, from any
and all of the obligations herein during and for the entire term of this Lease,
as the same may be renewed, extended or otherwise modified.
(6) Tenant shall be responsible for payment to Landlord of
Landlord's reasonable attorneys' fees and handling costs incurred for each
request for consent to any sublet or .assignment, in an amount not to exceed
$500.00, with such payment to be made
-5-
<PAGE>
within ten (10) business days of written notice from Landlord, but in no event
beyond the effective date of assignment.
(7) Tenant acknowledges and understands that its sole remedy with
respect to any assertion that Landlord's failure to consent to any sublet or
assignment is unreasonable shall be the remedy of specific performance, and
Tenant shall have no other claim or cause of action against Landlord as a result
of Landlord's actions in refusing to consent thereto.
(c) Notwithstanding anything to the contrary contained herein, Tenant
shall have the right to assign this Lease or sublet the Demised Premises, in
whole or in part, to any parent or subsidiary of Tenant or in connection with a
merger of Tenant provided that the surviving entity in a merger shall have a
tangible net worth (determined in accordance with generally accepted accounting
principles) not less than the net worth of Tenant and its guarantors, if any, as
of the date of commencement of this Lease.
(d) Without limiting any of the provisions of this Lease, if, pursuant to
the Federal Bankruptcy Code (hereinafter referred to as the "Code"), or any
similar law hereinafter enacted having the same general purpose, Tenant is
permitted to assign this Lease notwithstanding the restrictions contained in
this Lease, then adequate assurance of future performance by an assignee
expressly permitted under such Code shall be deemed to mean the deposit of cash
security in an amount equal to the sum of six (6) months basic rent plus an
amount equal to the additional rent for the calendar year preceding the year in
which such assignment is intended to become effective, which deposit shall be
held by Landlord for the balance of the term of the Lease, without interest, as
security for .the full performance of all of Tenant's obligations under this
Lease, to be held and applied in the manner specified for security in Paragraph
18.
(e) Except as specifically set forth above, no portion of the Demised
Premises or of Tenant's interest in this Lease may be acquired by any other
person or entity, whether by assignment, mortgage, sublease, transfer, operation
of .law or act of the Tenant, nor shall Tenant pledge its interest in this Lease
or in any security deposit required hereunder.
13. INSPECTION AND REPAIR. Tenant agrees that Landlord and Landlord's agents,
employees or other representatives, shall have the right to enter into and upon
the said premises or any part thereof, at all reasonable hours, for the purpose
of examining the same or making such repairs or alterations therein as may be
necessary for the safety and preservation thereof. Landlord shall make any such
repairs or alterations at such times and in such a manner as to minimize
interference with Tenant and its use of the Premises. This clause shall not be
deemed to be a covenant by the Landlord nor be construed to create an obligation
on the part of the Landlord to make such inspection or repairs.
14. GLASS AND OTHER DAMAGE REPAIRS. In case of the destruction of or any damage
to the glass in the Demised Premises, or the destruction of or damage of any
kind whatsoever to the said premises, caused by the carelessness, negligence or
improper conduct on the part of the Tenant or Tenant's agents, employees,
guests, licensees, invitees,
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<PAGE>
subtenants, assignees or successors, Tenant shall repair the said damage or
replace or restore any destroyed parts of the Premises, as speedily as possible,
at Tenant's own cost and expense.
15. SIGNS. Tenant shall not place nor allow to be placed any signs of any kind
whatsoever, upon, in or about the Premises or any part thereof' except of a
design and structure and in or at such places as may be indicated and consented
to by Landlord in writing, which consent shall not be unreasonably withheld,
delayed or conditioned. Landlord shall place Tenant's name, and those of
Tenant's affiliates: (i) on the directory in the lobby; and (ii) the outside
directory, if any. However, Tenant shall not be entitled to more than two (2)
lines on the Building directory. Tenant shall not have the right to have
additional names placed on the directories without Landlord's prior written
consent. In case Landlord or Landlord's agents, employees or representatives
shall deem it necessary to remove any such signs in order to paint or make any
repairs, alterations or improvements in or : upon the Premises or any part
thereof, they may be so removed, but shall be replaced at Landlord's expense
when the said repairs, alterations or improvements shall have been completed.
Any signs permitted by Landlord shall at all times conform with all municipal
ordinances or other laws, ordinances and regulations applicable thereto.
16. MORTGAGE PRIORITY. This Lease shall not be a lien against said premises in
respect to any mortgages that may herebefore or hereafter be placed upon the
Premises. The recording of such mortgage or mortgages shall have preference and
precedence and be superior and prior in lien to this Lease, irrespective of the
date of recording and Tenant agrees to execute any instruments, without cost,
which may be deemed necessary or desirable, to further effect the subordination
of this Lease to any such mortgage or mortgages. A wrongful refusal. by Tenant
to execute such instruments shall entitle Landlord to the option of canceling
this Lease and the term hereof is hereby expressly limited accordingly. Tenant
hereby appoints Landlord as its attorney-in-fact to execute any documents
requested by the mortgagee(s) to effectuate the intent of this Paragraph.
Anything herein contained the contrary notwithstanding, Tenant's peaceful use,
occupancy and enjoyment of the Premises shall not be disturbed or interfered
with by any mortgagee so long as Tenant duly and punctually performs its
obligations under this Lease.
17. NON-LIABILITY OF MORTGAGES. Tenant hereby agrees not to look to the
mortgagee, as mortgagee, mortgagee in possession, or successor in title to the
property, for accountability for any security deposit required by Landlord
hereunder, unless said sums have actually been received by said mortgagee as
security for Tenant's performance of this Lease.
18. SECURITY Tenant has this day deposited with Landlord the sum of $4,039.50 as
security for the payment of rent hereunder and the full and faithful performance
by Tenant of the covenants and conditions on the part of Tenant to be performed.
Said sum shall be returned to Tenant, without interest, after the expiration of
the term hereof, provided that Tenant has fully and faithfully performed all
such covenants and conditions and is not in arrears in rent. During the term
hereof, Landlord may, if Landlord so elects, have recourse. to such security, to
make good any default by Tenant, in which event Tenant shall, on demand,
promptly
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restore said security to its original amount. Liability to repay deemed to be
released by Tenant from all liability to return such security. This provision
shall be applicable to every alienation or change in title and shall in no wise
be deemed to permit the Landlord to retain the security after termination of the
Landlord's ownership of the reversion or title. Tenant shall not mortgage,
encumber or assign said security deposit without the written consent of
Landlord.
19. UTILITIES (a) Landlord shall provide Tenant with HVAC during the Building
Hours (Monday through Friday, 7:00 a.m. to 7:00 p.m. and Saturdays, 7:00 a.m. to
1:00 p.m.). If Tenant requests any or all of the above services outside of
Building Hours, the same shall be provided upon advance notice at a cost of
$50.00 per zone per hour.
(b) In the event that the Demised Premises are separately metered, Tenant
shall be responsible for payment for its electrical usage directly to the
utility company. In the event the Demised Premises are not separately metered,
Tenant shall reimburse Landlord for its electrical usage subject to an energy
audit, to be performed by an energy audit company chosen by Landlord. Until the
performance of the energy audit, Tenant's payment for electrical usage shall be
the sum of $1.25 per square foot per annum. If such energy audit indicates that
Tenant's actual electrical usage is less than $1.25 per square foot per annum,
Landlord shall reimburse Tenant for amounts paid in excess of its actual
electrical usage.
20. EVENTS OF DEFAULT; REMEDIES (a) If Tenant does not: (a) within ten (10) days
after the due date "hereof pay any installment of basic annual rent' additional
rent or any other monetary obligation; or (b) within thirty (30) days after
written notice from Landlord cure a default other than a default in the payment
of basic annual' rent or additional rent (provided, however, that such thirty
(30) day period shall be extended if the default is of such nature that it could
not reasonably be cured within such period of thirty (30) days and Tenant
promptly commences and thereafter diligently pursues the curing of such
default), then, in any such event, Tenant shall be deemed in default under this
Lease.
(b) If there should occur any default on the part of Tenant as set forth
in this Lease, or if during the term hereof the Premises or any part thereof
shall be or become totally abandoned or deserted, vacated or vacant, or should
Tenant be evicted by summary proceedings or otherwise, Landlord, in addition to
any other remedies herein contained or as may be permitted by law, may either,
by force or otherwise, without being liable for prosecution therefor or for
damages, re-enter the Demised Premises and the same have and again possess and
enjoy.
(c) At any time or from time to time after any such expiration or
termination Landlord may, as agent for the Tenant or otherwise, re-let :the
Premises, for such term or terms (which may be greater or less than the period
which would otherwise have constituted the balance of the term of this Lease)
and on such conditions (which may include concessions or free rent) as Landlord,
in its reasonable judgment, may determine, and receive the rents therefor,
applying the same: (i) to the payment of such expenses, reasonable attorney fees
and costs, as Landlord may have been put to in re-entering and repossessing the
same and in making such repairs and
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alterations as may be necessary; and (ii) to the part thereof, or for any
failure to collect any rent due upon any such reletting.
(d) Upon the occurrence of an event of default as set forth in this Lease,
or should Tenant be adjudicated a bankrupt, insolvent or placed in receivership,
or should proceedings be instituted by or against Tenant for bankruptcy,
insolvency, receivership, agreement of composition or assignment for the benefit
of creditors, or if this Lease or the estate of Tenant hereunder shall pass to
another by virtue of any court proceedings, writ of execution, levy, sale, or by
operation of law, Landlord may, if Landlord so elects, at anytime thereafter,
terminate this Lease and the term hereof, upon giving to Tenant or to any
trustee, receiver, assignee or other person in charge of or acting as custodian
of the assets or property of Tenant, five (5) days written notice of Landlord's
intention so to do. Upon the giving of such notice, this Lease and the term
hereof shall end on the date fixed in such notice as if the said date was the
date originally fixed in this Lease for the expiration hereof; and Landlord
shall have the right to remove all persons, goods, fixtures and chattels
therefrom, by force or otherwise, without liability for damages.
21. SURVIVAL OF COVENANTS No expiration or termination of this Lease shall
relieve Tenant of its liability and obligations under this Lease, and all
liability and obligations shall survive any expiration or termination. In the
event of an expiration or termination, whether or not the Demised Premises, or a
portion thereof, shall have been relet, Tenant shall pay: to Landlord the rent
up to the time .of such expiration or termination, and thereafter, Tenant, until
the expiration date as stated in Paragraph 1 herein, shall be liable to Landlord
for, and shall pay to Landlord, as and for liquidated and agreed current
damages, the difference, if any, between: (1) the basic annual rental and
additional rent as stated in this Lease; and (2) any rent and additional rent
received by Landlord from any new tenant in the Demised Premises, or a portion
thereof.
22. REIMBURSEMENT OF LANDLORD. If Tenant shall fail or refuse to comply with or
perform any conditions and covenants of the within Lease to be performed by
Tenant, Landlord may, if Landlord so elects, carry out and perform such
conditions and covenants, at the cost and expense of Tenant, and the said cost
and expense shall be payable on demand. At the option of Landlord the costs and
expenses shall be added to the installment of rent due immediately thereafter
but in no case later than thirty (30) days after such demand, whichever occurs
sooner, and shall be due and payable as such. This remedy shall be in addition
to such other remedies as Landlord may have hereunder by reason of the breach by
Tenant of any of the covenants and conditions in this Lease.
23. NON-PERFORMANCE BY LANDLORD. This Lease and the obligation of Tenant to pay
the rent hereunder and to comply with the covenants and conditions hereof, shall
not be affected, curtailed, impaired or excused because of Landlord's inability
to supply any service or material called for herein, by reason of any act of
God, riot, civil commotion, strikes, lock-out, acts, orders or regulations of
governmental authority, acts or failure to act of the other party, fire,
tornado, windstorm, adverse weather conditions, rule, order, regulation or
preemption by any governmental entity, authority, department, agency or
subdivision or for
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any delay which may arise by reason of negotiations for the adjustments of any
fire or other casualty loss or for any cause beyond the control of Landlord,
after the exercise of due diligence.
24. NON-PERFORMANCE BY LANDLORD. Landlord shall not be liable for any damage or
injury which may be sustained by Tenant or any other person, as a consequence of
the failure, breakage, leakage or obstruction of the water, plumbing, steam,
sewer, waste or soil pipes, roof, drains, leaders, gutters, valleys, downspouts
or the like or of the electrical, gas, power, conveyor, refrigeration,
sprinkler, air-conditioning or heating systems., elevators or hoisting equipment
without the negligence of Landlord; or by reason of the elements; or resulting
from the carelessness, negligence or improper conduct on the part of any other
Tenant or this Tenant or any other tenant's agents, employees, guests,
licensees, invitees, subtenants, assignees or successors; or attributable to any
interference with, interruption of or failure, beyond the control of Landlord,
after the exercise of due diligence, of any services to be furnished or supplied
by Landlord.
25. NON-WAIVER BY THE PARTIES. The various rights, remedies, options and
elections of either party, expressed herein, are cumulative, and the failure of
either party to enforce strict performance by the other party of the conditions
and covenants of this Lease or to exercise any election or option. or to resort
or have recourse to any remedy herein conferred or the acceptance by Landlord of
any installment of rent or the payment of rent by Tenant, in any one or more
instances, shall not be construed or deemed to be a waiver or a relinquishment
for the future by Landlord of any such conditions and covenants, options,
elections or remedies, but the same shall continue in full force and effect.
26. HAZARDOUS SUBSTANCES. (a) Tenant .agrees not to generate, store,
manufacture, refine, transport, treat, dispose of, or otherwise permit. to be
present on or about the Premises any Hazardous Substances, and Landlord
represents there are no Hazardous Substances now present on or about the
Premises. As used herein, Hazardous Substances shall be defined as any
"hazardous chemical," "hazardous substance" or similar term as defined in the
Comprehensive Environmental Responsibility Compensation and Liability Act, as
amended (42 U.S.C. 9601, et seq.), the New Jersey Industrial Site Recovery Act,
as amended (N.J.S.A. 13:1K-6 et seq.), the New Jersey Spill Compensation and
Control Act, as amended (N.J.S.A. 58:10-23.11b et seq), any rules or regulations
promulgated thereunder, or in any other applicable federal, state or local law,
rule or regulation dealing with environmental protection. It is understood and
agreed that the provisions contained' in this Paragraph shall be applicable
notwithstanding the fact that any substance shall not be .deemed to be a
Hazardous Substance at the time of its use by Tenant but shall thereafter be
deemed to be-a Hazardous Substance. Tenant agrees to indemnify and hold harmless
Landlord and each mortgagee of the Demised: Premises from and against any and
all liabilities, damages, claims, losses, judgments, causes of action, costs and
expenses (including reasonable attorneys' fees) which may be incurred by
Landlord or any such mortgagee or threatened against Landlord or such mortgagee,
relating to or arising out of any breach by Tenant of the terms of this
Paragraph, said indemnity to survive the expiration or earlier termination of
this Lease.
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(b) Within thirty (30) days after receiving a written request therefor by
Landlord, Tenant shall provide Landlord with: (i) its Standard. Industrial
Classification Number (said Standard Industrial Classification number to be
obtained by reference to the then current Standard Industrial Classification
Manual prepared and published by the Executive Office of the President, Office
of Management and Budget or the successor or such publications); and (ii) an
opinion letter from the DEP (or such other agency or body as shall then have
jurisdiction over ISRA matters) in a form reasonably satisfactory to Landlord's
counsel, stating the IRSA does not then apply to Tenant, Tenant's use and
occupancy of the Demised Premises, a Negative Declaration (as said term is
defined in ISRA) duly approved by DEP or such other agency or body as shall then
have jurisdiction over ISRA matters, or a Cleanup Plan (as said term is defined
in ISRA) duly approved by DEP or such other agency or body as shall then have
jurisdiction over ISRA matters.
27. REAL ESTATE TAXES. Commencing no earlier than the second year of the term
hereof, upon receipt of written notification, Tenant shall pay, as additional
rent, its proportionate share of the increased real estate taxes assessed or
imposed on the property over the base year (base year shall be defined as the
calendar year 1997). Such additional rent shall be paid with the same frequency
as real estate tax is paid by Landlord. Landlord shall be entitled to the same
remedies for non-payment of additional real estate taxes as for non-payment of
rent. Tenant's liability for such increase in real estate taxes shall be imposed
whether the increase is due to an increase in the tax rate or valuation or both.
Tenant's proportionate share shall be determined by dividing the area of the
Demised Premises by the total amount of leasable floor area in the building.
Tenant's proportionate share is hereby defined as 3.17%.
28. MAINTENANCE. Commencing no earlier than the second year of the term hereof,
upon receipt of written notification, Tenant shall. pay, as additional rent, its
proportionate share of the increase in operating expenses incurred by Landlord
over the base year (base year shall be defined as the calendar year 1997). Such
additional rent is to be paid quarterly, and shall be determined by dividing the
area of the Demised Premises by the total amount of area in the building.
Landlord represents that Tenant's proportionate share of space in the Building
is 3.17%. For purposes of this Lease, expenses for maintaining and operating the
building shall mean and include those expenses incurred in respect to the
operation and maintenance of the building (excluding real estate taxes) in
accordance with accepted principles of sound management and accounting practices
as applied to the operation and maintenance .of non-institutional, first class
office buildings, including, but not limited to, expenses for heat, water, snow
removal, landscaping, insurance and janitorial services.
29. CONDEMNATION AND EMINENT DOMAIN. (a) In the event of a taking for any public
or quasi-public use or purpose, by any lawful power or authority, by exercise of
the right of condemnation or eminent domain, or by agreement between Landlord
and those having the authority to exercise such right (hereinafter called a
"Taking") of the entire Demised Premises or such substantial portion thereof so
that the balance of the Demised Premises is not suitable for the conduct of
Tenant's normal business operations therein, then
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this Lease .and the terms hereof shall cease and expire on the date of transfer
of possession in connection with the Taking.
(b) In the event of a Taking of any portion of the Demised Premises as a
result of which this Lease is not terminated as provided above, or a Taking of
more than forty (40%) percent of the leasable space at the Building (whether or
not any portion of Demised Premises is included-in the Taking), or a permanent
denial or substantial impairment of adequate access to the Building and Demised
Premises, then, in such event, Landlord or Tenant may, at its option, terminate
this Lease by giving notice of termination to the other within sixty (60) days
after receipt by Tenant of notice that the Taking twill occur, such notice of
termination to be effective -as of the date of transfer of possession in
connection with the Taking.
(c) In the event this Lease is not terminated pursuant to the terms of
this Paragraph, then Landlord shall promptly commence and with due diligence
continue to restore the portion of the Building and the Demised Premises
remaining after the Taking to substantially the same condition and tenantability
as existed immediately preceding the Taking, to the extent such restoration may
be accomplished with the available net proceeds of the award or payment to
Landlord in connection with the Taking. During the period of restoration by
Landlord, if the Taking or such restoration shall cause a material adverse
impact on Tenant's business at Demised Premises, basic annual rent and
additional rent shall be abated and adjusted in an equitable fashion. Upon
completion of the restoration, basic annual rent and additional rent shall also
be abated and adjusted in such manner as shall be just and equitable. In the
event that Landlord shall fail to commence such restoration as hereinabove
required, or if such restoration shall not be completed within twelve (12)
months from and after the date of transfer of possession in connection with
Taking, then, in either such event, Tenant shall have the right, as its
exclusive remedy, to terminate this Lease by notice to Landlord, such notice to
specify the effective date of termination.
(d) Whether or not this Lease shall be terminated pursuant to the terms of
this Paragraph, Tenant shall have the right in connection with any Taking to
assert all claims available to it for loss of leasehold improvements, trade
fixtures and equipment, moving expenses and such other items of loss or damage
as Tenant shall suffer as a result of the Taking with respect to which Tenant
shall, from time to time under applicable law, be permitted to make an
independent claim, provided that such claim by Tenant will not reduce the award
or payment to Landlord in connection with the Taking.
(e) Notwithstanding any provision of this Paragraph, in no event shall
Landlord be obligated to expend, in connection with the repair or restoration of
the Demised Premises pursuant to this Paragraph, any amount in excess of the
award or payment in connection with the Taking. In the event that such award or
payment shall be insufficient for the repair or restoration or in the event that
Landlord's mortgagee shall apply all or any portion of such award of payment to
the reduction of the indebtedness secured by such mortgage, then to the extent
of such unavailable award or payment, Landlord shall be excused from the
performance of repair or restoration work hereunder.
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30. HOLDING OVER BY TENANT. If Tenant shall remain in possession of the Demised
Premises after the conclusion of the term of this Lease (and any renewal terms),
Tenant shall become a month-to-month tenant under the provisions herein
provided, but at a monthly basic annual rental equal to one and one-half (1 1/2)
times the basic annual rental as set forth in Paragraph 2 herein. However, the
amount due for additional rental shall remain as set forth in this Lease. Such
month-to-month tenancy shall then continue until terminated by either Landlord
or Tenant, upon sixty (60) days prior written notice to the other party, but, in
any event, such termination shall not occur on a date other than the last day of
a calendar month.
31. RIGHT TO EXHIBIT Tenant agrees to permit Landlord and Landlord's agents,
employees or other representatives to show the premises to persons wishing to
rent or purchase the same on and after six (6) months next preceding the
expiration of the term hereof.
32. BROKER'S COMMISSION. The parties hereto hereby agree that Jacobson, Goldfarb
& Tanzman Associates, L.L.C. acted as the broker in this matter. Landlord shall
be responsible for payment of the broker's commission to the above named broker.
Landlord hereby indemnifies and holds Tenant harmless for any and all claims by
other brokers in connection with this transaction, based on the claim by such
brokers that they dealt with Landlord in connection with this transaction.
Tenant hereby indemnifies and holds harmless Landlord for any and all claims by
other brokers that they dealt with Tenant in connection with this transaction.
33. OPTIONAL RENEWAL PERIOD. Tenant shall have the right to renew the within
Lease for one (1) term of five (5) years, consecutive with the term herein
provided, at 95% if the "fair market rent". Tenant shall give the Landlord no
less than twelve (12) months prior written notice by Certified Mail, Return
Receipt Requested, of Tenant's intention to exercise the option to renew.
34. OPTIONAL RENEWAL PERIOD - RENT. The "fair market rent" shall be determined
as' follows: Landlord shall notify Tenant of Landlord's opinion of the fair
market rent for the Renewal Period at least twelve (12) months prior to the end
of the then current term hereof. If Tenant disputes Landlord's opinion, Tenant
shall, within thirty (30) days after receiving Landlord's said notice, by
written notice to-Landlord, either withdraw its exercise of its renewal option
or notify Landlord that Tenant elects arbitration in accordance with then
prevailing Rules of Commercial Arbitration of the American Arbitration
Association. The said Association shall designate an appraiser familiar with
commercial buildings located in the Essex County, New Jersey area. The
arbitrator shall, after hearing testimony from the parties and their expert
witnesses, have the authority to fix and determine the fair market rent for the
Renewal Period. Each party shall pay the cost and expenses of it's own expert
witnesses and attorneys fees, and the cost of the arbitration shall be shared
equally by the parties.
35. ESTOPPEL CERTIFICATES. If, at any time after the commencement of the term
hereof, Landlord or Tenant shall make written request therefor, Landlord or
Tenant shall, within ten (10) days after such request, deliver to the other a
written instrument, duly executed
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by Landlord or Tenant, certifying, if such be the case: (i) that this Lease is
in force and effect; (ii) that this Lease has not been modified, amended or
supplemented or specifying the modification amendment or supplement; (iii) that
Tenant or Landlord, as the case may be, is not in default hereunder, or if it is
then in default, specifying the nature of the default and whether or not the
time period for curing same has expired; (iv) the date or dates through which
basic annual rent and additional. rent have been paid; and (v) that there are no
offsets or deductions against basic annual rent or additional rent, or if any
are claimed, specifying the amount thereof and the basis therefor.
36. GOVERNING LAW. This Lease, and the rights and obligations of the parties
thereto, shall be interpreted and construed in accordance with the laws of the
State of New Jersey.
37. PARTIAL INVALIDITY. If any provision of this Lease shall be determined by-a
court of competent jurisdiction to be invalid, such determination shall not
affect any of the other provisions of this Lease and such other provisions shall
remain in full force and effect. If any provision of this Lease shall be capable
of two construction, one of which would render the provision valid and the other
of which would 'render it invalid, then such provision shall have the
construction and meaning which would render it valid.
38. NOTICES. All notices required under the terms of this Lease shall be given
and shall be complete by mailing such notices by certified or registered mail,
return receipt requested, to the address of the parties as shown at the head of
this Lease, or to such other address as may be designated in writing, which
notice of change of address shall be given in the same manner.
39. TITLE AND QUIET ENJOYMENT. Landlord covenants and represents that Landlord
is the owner of the Premises herein leased and has the right and authority to
enter into, execute and deliver this Lease; and does further covenant that
Tenant on paying the rent and performing the conditions and covenants herein
contained, shall and may peaceably and quietly have, hold and enjoy the Premises
commencing when Landlord's Work as described in Paragraph 42 is completed, and
continuing for the term aforementioned.
40. ENTIRE CONTRACT. This Lease contains the entire contract between the
parties. No representative, agent or employee of Landlord has been authorized to
make any representations or promises with references to the within letting or to
vary, alter or modify the terms hereof. No additions, changes or modifications,
renewals or extensions hereof, shall be binding unless reduced to writing and
signed by Landlord and Tenant.
41. PARKING. Landlord shall provide Tenant with four (4) unreserved parking
spaces per 1,000 rentable square feet, which shall include visitor parking.
42. LANDLORD'S WORK. Landlord shall prepared the Demised Premises in accordance
with Exhibit B attached hereto, at Landlord's sole cost and expense.
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43. The Landlord may pursue the relief or remedy sought in any invalid clause,
by conforming the said clause with the provisions of the statutes or the
regulations of any governmental agency in such case made and provided as if the
particular provisions of the applicable statutes or regulations were set forth
herein at length.
44. In all references herein to any parties, persons, entities or corporations
the use of any particular gender or the plural or singular number is intended to
include the appropriate gender or number as the text of the within instrument
may require. All the terms, covenants and conditions herein contained shall be
for and shall inure to the benefit of and shall bind the respective parties
hereto, and their heirs, executors, administrators, personal or legal
representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the day
and year first above written.
WITNESS: LIVINGSTON CORPORATE PARK ASSOCIATES, L.L.C. - LANDLORD
By: /s/ S. Fisch
----------------------------
S. Fisch, Member
U.S. OPPORTUNITY SEARCH, INC. -TENANT
By: /s/ Leonard Osser
----------------------------
LEONARD OSSER, PRESIDENT
Exhibit 10.3
AMENDMENT TO EMPLOYMENT AGREEMENT
The Employment Agreement dated as of March 31, 1995 between Leonard Osser
and Milestone Scientific Inc (formerly U.S. Opportunity Search, Inc.) (the
"Employment Agreement") shall be amended as set forth below. Capitalized terms
not defined herein shall have the meanings ascribed to them in the Employment
Agreement.
(1) ss. 1 "Term of Agreement" shall be deleted and be replaced with the
following paragraph:
"1. Term of Agreement. Subject to the terms and conditions hereof, the
Company employs Executive and Executive accepts such employment for the
period commencing on April 1, 1995 and, unless terminated as provided in
Section 6 herein, terminating March 31, 2000 (the "Employment Term")."
(2) The non-competition period at the end of the Employment Term shall be
extended by revising the first clause of ss.7(b) to read as follows:
"(b) During the Employment Terms and for a period of two years
thereafter..."
IN WITNESS WHEREOF, the parties have executed this Amendment on February
25, 1997.
MILESTONE SCIENTIFIC INC.
By: /s/ Leonard Osser & Stephen A. Zelnick
--------------------------------------
Leonard Osser & Stephen A. Zelnick
/s/ Leonard Osser
-----------------
LEONARD OSSER
EXHIBIT 10.5
FINANCIAL ADVISORY AND INVESTMENT BANKING AGREEMENT
This Agreement is made and entered into on the 1st day of July 1996
between GKN Securities Corp. ("GKN" or the "Consultant") and US Opportunity
Search, Inc. (the "Company").
In consideration of the mutual promises made herein and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. The Company hereby engages Consultant hereof to render financial
consulting and investment banking advice to the Company upon the terms and
conditions set forth herein.
2. This Agreement shall commence on July 1, 1996 and continue for a
term of twenty-four (24) months.
3. During the term of this Agreement, Consultant shall provide the
Company with such regular and customary financial consulting advice as is
reasonably requested by the Company, provided that Consultant shall not be
required to undertake duties not reasonably within the scope of this Agreement.
It is understood and acknowledged by the parties that the value of Consultant'
advice is not readily quantifiable, and that although Consultant shall be
obligated to render the advice contemplated by this Agreement upon the
reasonable request of the Company, in good faith, Consultant shall not be
obligated to spend any specific amount of time in so doing. Consultant' duties
may include, but will not necessarily be limited to, providing recommendations
concerning the following financial and related matters:
(a) Disseminating information about the Company to the investment
community at large;
(b) Rendering advice and assistance in connection with the
preparation of annual and interim reports and press releases;
(c) Assisting in the Company's financial public relations;
(d) Arranging, on behalf of the Company, at appropriate times,
meetings with securities analysts;
(e) Rendering advice with regard to internal operations,
including:
(i) the formation of corporate goals and their
implementation;
(ii) the Company's financial structure and its divisions or
subsidiaries;
(iii) securing, when and if necessary and possible, additional
financing through banks and/or insurance companies; and
(iv) corporate organization and personnel; and
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(f) Rendering advice with regard to any of the following corporate
finance matters:
(i) changes in the capitalization of the Company;
(ii) changes in the Company's corporate structure;
(iii) redistribution of shareholdings of the Company's stock;
(iv) offerings of securities in public and private
transactions;
(v) alternative uses of corporate assets;
(vi) structure and use of debt; and
(vii) sales of stock by insiders pursuant to Rule 144 or
otherwise.
In addition to the foregoing, upon Company's request, Consultant
agrees to furnish advice to the Company in connection with (A) the acquisition
of and/or merger with other companies, the sale of the Company itself, or any of
its assets, subsidiaries or affiliates, or similar type of transaction
(hereinafter referred to as a "Transaction"), and (B) financings from financial
institutions, including but not limited to lines of credit, performance bonds,
letters of credit, loans or other financings (hereinafter referred to as a "Bank
Financing").
Consultant shall also render such other financial consulting and/or
investment banking services ("Other Services") as may from time to time be
agreed upon by Consultant and the Company.
4. The Company shall pay Consultant the following compensation:
(a) upon execution of this Agreement, the Company is issuing to
GKN (or its designees) warrants ("Warrants") to purchase 250,000 shares of the
Company's Common Stock, exercisable for a period of three years commencing on
the date hereof at an exercise price of $6.50 per share. The Warrants are fully
earned by GKN as of the execution of this Agreement and may not be terminated by
the Company for any reason. The Warrants are evidenced by a warrant agreement(s)
in the form of Exhibit A hereto; and
(b) such fees as may be mutually agreed upon with respect to
Transactions, Bank Financings and Other Services.
5. Intentionally Omitted.
6. In addition to the fees payable hereunder, the Company shall
reimburse Consultant for all reasonable travel and out-of-pocket expenses
incurred in connection with the services performed by Consultant pursuant to
this Agreement, promptly after submission to the Company of appropriate evidence
of such expenditures; provided, however, that any single expense or group of
related expenses of more than $1,000 shall require prior written approval from
the Company.
7. (a) The Company acknowledges that all opinions and advice
(written or oral) given by Consultant to the Company in connection with
Consultant's engagement are intended solely for the benefit and use of the
Company in considering the transaction to which they relate, and the Company
agrees that no person or entity other than the Company shall be entitled to make
use of or rely upon the advice of Consultant to be given hereunder, and no such
opinion or advice shall be used for any manner or for any purpose, nor may the
Company make any public references to Consultant, or use the Consultant's name
in any annual reports or any other reports or releases of the Company, without
Consultant's prior written consent.
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(b) The Company acknowledges that Consultant makes no commitment
to make a market in the Company's securities, to recommend or advise its clients
to purchase the Company's securities, or to prepare research or corporate
finance reports.
8. Consultant will hold in confidence any confidential information
which the Company provides to Consultant pursuant to this Agreement which is
designated by an appropriate stamp or legend as being confidential.
Notwithstanding the foregoing, Consultant shall not be required to maintain
confidentiality with respect to information (i) which is or becomes part of the
public domain not due to the breach of this Agreement by Consultant; (ii) of
which it had independent knowledge prior to disclosure; (iii) which comes into
the possession of Consultant in the normal and routine course of its own
business from and through independent non-confidential sources; or (iv) which is
required to be disclosed by Consultant by laws, rules or regulators. If
Consultant is requested or required to disclose any confidential information
supplied to it by the Company, Consultant shall, unless prohibited by law,
promptly notify the Company of such request(s) so that the Company may seek an
appropriate protective order.
9. The Company acknowledges that Consultant or its affiliates are in
the business of providing financial services and consulting advice to others.
Nothing herein contained shall be construed to limit or restrict Consultant in
conducting such business with others, or in rendering such advice to others.
10. The Company recognizes and confirms that, in advising the
Company hereunder, Consultant will use and rely on data, material and other
information furnished to Consultant by the Company, without independently
verifying the accuracy, completeness or veracity of same.
11. The Company agrees to indemnify and hold harmless GKN, it
employees, agents, representatives and controlling persons from and against any
and all losses, claims, damages, liabilities, suits, actions, proceedings, costs
and expenses (collectively, "Damages"), including, without limitation,
reasonable attorney fees and expenses, as and when incurred, if such Damages
were directly or indirectly caused by, relating to, based upon or arising out of
the rendering by GKN of services pursuant to this Agreement, so long as GKN
shall not have engaged in intentional or willful misconduct, or shall have acted
grossly negligently, in connection with the services provided which form the
basis of the claim for indemnification. This paragraph shall survive the
termination of this Agreement.
12. Consultant shall perform its services hereunder as an
independent contractor and not as an employee or agent of the Company or any
affiliate thereof. Consultant shall have no authority to act for, represent or
bind the Company or any affiliate thereof in any manner, except as may be
expressly agreed to by the Company in writing from time to time.
13. This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof. No provision of this
Agreement may be amended, modified or waived, except in a writing signed by both
parties. This Agreement shall be binding upon and inure to the benefit of each
of the parties and their respective successors, legal representatives and
assigns. This Agreement may be executed in counterparts. In the event of any
dispute under this Agreement, then and in such event, each party agrees that the
same shall be submitted to the American Arbitration Association ("AAA") in the
City of New York, for its decision and determination in accordance with its
rules and regulations then in effect. Each of the parties agrees that the
decision and/or award made by the AAA may be entered as judgment of the Courts
or the State of New York, and shall be enforceable as such. This Agreement shall
be construed and enforced in accordance with the laws of the State of New York,
without giving effect to conflict of laws.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on the day and year first above written.
GKN SECURITIES CORP. US OPPORTUNITY SEARCH, INC.
By: /s/ Deborah Novick By: /s/ Leonard Osser
------------------ -------------------
Deborah S. Novick Leonard Osser
4
EXHIBIT 10.6
THE REGISTERED HOLDER OF THIS WARRANT, BY ITS ACCEPTANCE HEREOF,
AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN
THIS WARRANT EXCEPT AS HEREIN PROVIDED.
VOID AFTER 5:00 P.M. EASTERN TIME, JUNE 30, 1999
WARRANT
For the Purchase of
_________________ Shares of Common Stock
of
US OPPORTUNITY SEARCH, INC.
1. Warrant.
THIS CERTIFIES THAT, in consideration of $10.00 and other good and valuable
consideration, duly paid by or on behalf of __________________ ("Holder"), as
registered owner of this Warrant, to US Opportunity Search, Inc. ("Company"),
Holder is entitled, at any time or from time to time at or after July 1, 1996
("Commencement Date"), and at or before 5:00 p.m., Eastern Time June 30, 1999
("Expiration Date"), but not thereafter, to subscribe for, purchase and receive,
in whole or in part, up to _____________________________________ (_______)
shares of Common Stock of the Company ("Common Stock"). If the Expiration Date
is a day on which banking institutions are authorized by law to close, then this
Warrant may be exercised on the next succeeding day which is not such a day in
accordance with the terms herein. During the period ending on the Expiration
Date, the Company agrees not to take any action that would terminate the
Warrant. This Warrant is initially exercisable at $6.50 per share of Common
Stock purchased; provided, however, that upon the occurrence of any of the
events specified in Section 6 hereof, the rights granted by this Warrant,
including the exercise price and the number of shares of Common Stock to be
received upon such exercise, shall be adjusted as therein specified. The term
"Exercise Price" shall mean the initial exercise price or the adjusted exercise
price, depending on the context, of a share of Common Stock. The term
"Securities" shall mean the shares of Common Stock issuable upon exercise of
this Warrant.
2. Exercise.
2.1 Exercise Form. In order to exercise this Warrant, the exercise form
attached hereto must be duly executed and completed and delivered to the
Company, together with this Warrant
<PAGE>
and payment of the Exercise Price for the Securities being purchased. If the
subscription rights represented hereby shall not be exercised at or before 5:00
p.m., Eastern time, on the Expiration Date, this Warrant shall become and be
void without further force or effect, and all rights represented hereby shall
cease and expire.
2.2 Legend. Each certificate for Securities purchased under this Warrant
shall bear a legend as follows, unless such Securities have been registered
under the Securities Act of 1933, as amended ("Act"):
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended ("Act") or applicable state
law. The securities may not be offered for sale, sold or otherwise
transferred except pursuant to an effective registration statement under
the Act, or pursuant to an exemption from registration under the Act and
applicable state law."
2.3 Conversion Right.
2.3.1 Determination of Amount. In lieu of the payment of the Exercise Price
in cash, the Holder shall have the right (but not the obligation) to convert
this Warrant, in whole or in part, into Common Stock ("Conversion Right"), as
follows: upon exercise of the Conversion Right, the Company shall deliver to the
Holder (without payment by the Holder of any of the Exercise Price) that number
of shares of Common Stock equal to the quotient obtained by dividing (x) the
"Value" (as defined below) of the portion of the Warrant being converted at the
time the Conversion Right is exercised by (y) the Exercise Price. The "Value" of
the portion of the Warrant being converted shall equal the remainder derived
from subtracting (a) the Exercise Price multiplied by the number of shares of
Common Stock being converted from (b) the Market Price of the Common Stock
multiplied by the number of shares of Common Stock being converted. As used
herein, the term "Market Price" at any date shall be deemed to be the last
reported sale price of the Common Stock on such date, or, in case no such
reported sale takes place on such day, the average of the last reported sale
prices for the immediately preceding three trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or if any such exchange
on which the Common Stock is listed is not its principal trading market, the
last reported sale price as furnished by the National Association of Securities
Dealers, Inc. ("NASD") through the Nasdaq National Market or SmallCap Market,
or, if applicable, the OTC Bulletin Board, or if the Common Stock is not listed
or admitted to trading on any of the foregoing markets, or similar organization,
as determined in good faith by resolution of the Board of Directors of the
Company, based on the best information available to it.
2.3.2 Exercise of Conversion Right. The Conversion Right may be exercised
by the Holder on any business day on or after the Commencement Date and not
later than the Expiration Date by delivering the Warrant with a duly executed
exercise form attached hereto with the conversion section completed to the
Company, exercising the Conversion Right and specifying the total number of
shares of Common Stock the Holder will purchase pursuant to such conversion.
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<PAGE>
3. Transfer.
3.1 General Restrictions. The registered Holder of this Warrant, by its
acceptance hereof, agrees that it will not sell, transfer or assign or
hypothecate this Warrant to anyone except upon compliance with, or pursuant to
exemptions from, applicable securities laws. In order to make any permitted
assignment, the Holder must deliver to the Company the assignment form attached
hereto duly executed and completed, together with this Warrant and payment of
all transfer taxes, if any, payable in connection therewith. The Company shall
immediately transfer this Warrant on the books of the Company and shall execute
and deliver a new Warrant or Warrants of like tenor to the appropriate
assignee(s) expressly evidencing the right to purchase the aggregate number of
shares of Common Stock purchasable hereunder or such portion of such number as
shall be contemplated by any such assignment.
3.2 Restrictions Imposed by the Securities Act. This Warrant and the
Securities underlying this Warrant shall not be transferred unless and until (i)
the Company has received the opinion of counsel for the Holder that such
securities may be sold pursuant to an exemption from registration under the Act,
and applicable state law, the availability of which is established to the
reasonable satisfaction of the Company, or (ii) a registration statement
relating to such Securities has been filed by the Company and declared effective
by the Securities and Exchange Commission and compliance with applicable state
law.
4. New Warrants to be Issued.
4.1 Partial Exercise or Transfer. Subject to the restrictions in Section 3
hereof, this Warrant may be exercised or assigned in whole or in part. In the
event of the exercise or assignment hereof in part only, upon surrender of this
Warrant for cancellation, together with the duly executed exercise or assignment
form and funds (or conversion equivalent) sufficient to pay any Exercise Price
and/or transfer tax, the Company shall cause to be delivered to the Holder
without charge a new Warrant of like tenor to this Warrant in the name of the
Holder evidencing the right of the Holder to purchase the aggregate number of
shares of Common Stock and Warrants purchasable hereunder as to which this
Warrant has not been exercised or assigned.
4.2 Lost Certificate. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant and of
reasonably satisfactory indemnification, the Company shall execute and deliver a
new Warrant of like tenor and date. Any such new Warrant executed and delivered
as a result of such loss, theft, mutilation or destruction shall constitute a
substitute contractual obligation on the part of the Company.
5. Registration Rights.
5.1 "Piggy-Back" Registration.
5.1.1 Grant of Right. The Holders of this Warrant shall have the
right for a period of seven years from the Commencement Date to include all or
any number of the shares of Common Stock underlying this Warrant (collectively,
the "Registrable Securities") as part of any
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<PAGE>
registration of securities filed by the Company (other than in connection with a
transaction contemplated by Rule 145(a) promulgated under the Act or pursuant to
Form S-8 or any equivalent form); provided, however, that if, in the written
opinion of the Company's managing underwriter or underwriters, if any, for such
offering (the "Underwriter"), the inclusion of the Registrable Securities, when
added to the securities being registered by the Company or the selling
stockholder(s), will exceed the maximum amount of the Company's securities which
can be marketed (i) at a price reasonably related to their then current market
value, or (ii) without materially and adversely affecting the entire offering,
the Company shall nevertheless register all or any portion of the Registrable
Securities required to be so registered but such Registrable Securities shall
not be sold by the Holders until 90 days after the registration statement for
such offering has become effective; and provided further that, if any securities
are registered for sale on behalf of other stockholders in such offering and
such stockholders have not agreed to defer such sale until the expiration of
such 90 day period, the number of securities to be sold by all stockholders in
such public offering during such 90 day period shall be apportioned pro rata
among all such selling stockholders, including all holders of the Registrable
Securities, according to the total amount of securities of the Company proposed
to be sold by said selling stockholders, including all holders of the
Registrable Securities.
5.1.2 Terms. The Company shall bear all fees and expenses attendant
to registering the Registrable Securities, but the Holders shall pay any and all
underwriting commissions and the expenses of any legal counsel selected by the
Holders to represent them in connection with the sale of the Registrable
Securities. In the event of such a proposed registration, the Company shall
furnish the then Holders of outstanding Registrable Securities with not less
than thirty days written notice prior to the proposed date of filing of such
registration statement. Such notice to the Holders shall continue to be given
for each registration statement filed by the Company until such time as all of
the Registrable Securities have been sold by the Holder. The holders of the
Registrable Securities shall exercise the "piggy-back" rights provided for
herein by giving written notice, within twenty days of the receipt of the
Company's notice of its intention to file a registration statement. The Company
shall cause any registration statement filed pursuant to the above "piggyback"
rights to remain effective for at least nine months from the date that the
Holders of the Registrable Securities are first given the opportunity to sell
all of such securities. Nothing contained in this Warrant shall be construed as
requiring any Holder to exercise this Warrant or any part thereof prior to the
initial filing of any registration statement or the effectiveness thereof.
5.2 General Terms
5.2.1 Indemnification.
(a) The Company shall indemnify the Holder(s) of the Registrable
Securities to be sold pursuant to any registration statement hereunder and any
underwriter or person deemed to be an underwriter under the Act and each person,
if any, who controls such Holders or underwriters or persons deemed to be
underwriters within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), against all loss,
claim, damage, expense or liability (including all reasonable attorneys' fees
and other expenses reasonably incurred in investigating, preparing or defending
against any claim
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<PAGE>
whatsoever) to which any of them may become subject under the Act, the Exchange
Act or otherwise, arising from such registration statement. The Holder(s) of the
Registrable Securities to be sold pursuant to such registration statement, and
their successors and assigns, shall severally, and not jointly, indemnify the
Company, against all loss, claim, damage, expense or liability (including all
reasonable attorneys' fees and other expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished by or on behalf of such Holders, in writing, for
specific inclusion in such registration statement.
(b) If any action is brought against a party hereto, ("Indemnified
Party") in respect of which indemnity may be sought against the other party
("Indemnifying Party"), such Indemnified Party shall promptly notify
Indemnifying Party in writing of the institution of such action and Indemnifying
Party shall assume the defense of such action, including the employment and fees
of counsel reasonably satisfactory to the Indemnified Party. Such Indemnified
Party shall have the right to employ its or their own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party unless (i) the employment of such counsel shall have been
authorized in writing by Indemnifying Party in connection with the defense of
such action, or (ii) Indemnifying Party shall not have employed counsel to
defend such action, or (iii) such Indemnified Party shall have been advised by
counsel that there may be one or more legal defenses available to it which may
result in a conflict between the Indemnified Party and Indemnifying Party (in
which case Indemnifying Party shall not have the right to direct the defense of
such action on behalf of the Indemnified Party), in any of which events, the
reasonable fees and expenses of not more than one additional firm of attorneys
designated in writing by the Indemnified Party shall be borne by Indemnifying
Party. Notwithstanding anything to the contrary contained herein, if Indemnified
Party shall assume the defense of such action as provided above, Indemnifying
Party shall not be liable for any settlement of any such action effected without
its written consent.
(c) If the indemnification or reimbursement provided for hereunder
is finally judicially determined by a court of competent jurisdiction to be
unavailable to an Indemnified Party (other than as a consequence of a final
judicial determination of willful misconduct, bad faith or gross negligence of
such Indemnified Party), then Indemnifying Party agrees, in lieu of indemnifying
such Indemnified Party, to contribute to the amount paid or payable by such
Indemnified Party (i) in such proportion as is appropriate to reflect the
relative benefits received, or sought to be received, by Indemnifying Party on
the one hand and by such Indemnified Party on the other or (ii) if (but only if)
the allocation provided in clause (i) of this sentence is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in such clause (i) but also the relative fault of
Indemnifying Party and of such Indemnified Party; provided, however, that in no
event shall the aggregate amount contributed by a Holder exceed the profit, if
any, earned by such Holder as a result of the exercise by him of the Warrants
and the sale by him of the underlying shares of Common Stock.
(d) The rights accorded to Indemnified Parties hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise.
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<PAGE>
5.2.2 Exercise of Warrants. Nothing contained in this Warrant shall
be construed as requiring the Holder(s) to exercise their Warrants prior to or
after the initial filing of any registration statement or the effectiveness
thereof.
5.2.3 Documents Delivered to Holders. The Company shall furnish to
each Holder participating in any of the foregoing offerings and to each
Underwriter of any such offering, if any, a signed counterpart, addressed to
such Holder or Underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under any underwriting agreement related thereto), and (ii) a "cold
comfort" letter dated the effective date of such registration statement (and, if
such registration includes an underwritten public offering, a letter dated the
date of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities. The Company shall also deliver promptly to each Holder participating
in the offering requesting the correspondence and memoranda described below and
to the managing underwriter copies of all correspondence between the Commission
and the Company, its counsel or auditors and all memoranda relating to
discussions with the Commission or its staff with respect to the registration
statement and permit each Holder and underwriter to do such investigation, upon
reasonable advance notice, with respect to information contained in or omitted
from the registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the NASD. Such investigation shall
include access to books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times and as often as any such Holder
shall reasonably request.
6. Adjustments
6.1 Adjustments to Exercise Price and Number of Securities. The Exercise
Price and the number of shares of Common Stock underlying this Warrant shall be
subject to adjustment from time to time as hereinafter set forth:
6.1.1 Stock Dividends - Recapitalization, Reclassification,
Split-Ups. If, after the date hereof, and subject to the provisions of Section
6.2 below, the number of outstanding shares of Common Stock is increased by a
stock dividend on the Common Stock payable in shares of Common Stock or by a
split-up, recapitalization or reclassification of shares of Common Stock or
other similar event, then, on the effective date thereof, the number of shares
of Common Stock issuable on exercise of this Warrant shall be increased in
proportion to such increase in outstanding shares.
6.1.2 Aggregation of Shares. If after the date hereof, and subject
to the provisions of Section 6.3, the number of outstanding shares of Common
Stock is decreased by a
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<PAGE>
consolidation, combination or reclassification of shares of Common Stock or
other similar event, then, upon the effective date thereof, the number of shares
of Common Stock issuable on exercise of this Warrant shall be decreased in
proportion to such decrease in outstanding shares.
6.1.3 Adjustments in Exercise Price. Whenever the number of shares
of Common Stock purchasable upon the exercise of this Warrant is adjusted, as
provided in this Section 6.1, the Exercise Price shall be adjusted (to the
nearest cent) by multiplying such Exercise Price immediately prior to such
adjustment by a fraction (x) the numerator of which shall be the number of
shares of Common Stock purchasable upon the exercise of this Warrant immediately
prior to such adjustment, and (y) the denominator of which shall be the number
of shares of Common Stock so purchasable immediately thereafter.
6.1.4 Replacement of Securities upon Reorganization, etc. In case of
any reclassification or reorganization of the outstanding shares of Common Stock
other than a change covered by Section 6.1.1 hereof or which solely affects the
par value of such shares of Common Stock, or in the case of any merger or
consolidation of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification or reorganization of the
outstanding shares of Common Stock), or in the case of any sale or conveyance to
another corporation or entity of the property of the Company as an entirety or
substantially as an entirety in connection with which the Company is dissolved,
the Holder of this Warrant shall have the right thereafter (until the expiration
of the right of exercise of this Warrant) to receive upon the exercise hereof,
for the same aggregate Exercise Price payable hereunder immediately prior to
such event, the kind and amount of shares of stock or other securities or
property (including cash) receivable upon such reclassification, reorganization,
merger or consolidation, or upon a dissolution following any such sale or other
transfer, by a Holder of the number of shares of Common Stock of the Company
obtainable upon exercise of this Warrant immediately prior to such event; and if
any reclassification also results in a change in shares of Common Stock covered
by Sections 6.1.1 or 6.1.2, then such adjustment shall be made pursuant to
Sections 6.1.1, 6.1.2, 6.1.3 and this Section 6.1.4. The provisions of this
Section 6.1.4 shall similarly apply to successive reclassifications,
reorganizations, mergers or consolidations, sales or other transfers.
6.1.5 Changes in Form of Warrant. This form of Warrant need not be
changed because of any change pursuant to this Section, and Warrants issued
after such change may state the same Exercise Price and the same number of
shares of Common Stock and Warrants as are stated in the Warrants initially
issued pursuant to this Agreement. The acceptance by any Holder of the issuance
of new Warrants reflecting a required or permissive change shall not be deemed
to waive any rights to a prior adjustment or the computation thereof.
6.2 Elimination of Fractional Interests. The Company shall not be required
to issue certificates representing fractions of shares of Common Stock upon the
exercise of this Warrant, nor shall it be required to issue scrip or pay cash in
lieu of any fractional interests, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of shares of Common Stock or other securities, properties
or rights.
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7. Reservation and Listing. The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issuance upon exercise of this Warrant, such number of shares of Common Stock
or other securities, properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price therefor, all shares of Common Stock and other
securities issuable upon such exercise shall be duly and validly issued, fully
paid and non-assessable and not subject to preemptive rights of any stockholder.
As long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon exercise of the
Warrants to be listed (subject to official notice of issuance) on all securities
exchanges (or, if applicable on Nasdaq) on which the Common Stock is then listed
and/or quoted.
8. Certain Notice Requirements.
8.1 Holder's Right to Receive Notice. Nothing herein shall be construed as
conferring upon the Holders the right to vote or consent or to receive notice as
a stockholder for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the events
described in Section 8.2 shall occur, then, in one or more of said events, the
Company shall give written notice of such event at least fifteen days prior to
the date fixed as a record date or the date of closing the transfer books for
the determination of the stockholders entitled to such dividend, distribution,
conversion or exchange of securities or subscription rights, or entitled to vote
on such proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of the closing of the transfer books, as
the case may be.
8.2 Events Requiring Notice. The Company shall be required to give the
notice described in this Section 8 upon one or more of the following events: (i)
if the Company shall take a record of the holders of its shares of Common Stock
for the purpose of entitling them to receive a dividend or distribution payable
otherwise than in cash, or a cash dividend or distribution payable otherwise
than out of retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company, or (ii) the Company shall
offer to all the holders of its Common Stock any additional shares of capital
stock of the Company or securities convertible into or exchangeable for shares
of capital stock of the Company, or any option, right or warrant to subscribe
therefor, or (iii) a merger or reorganization in which the Company is not the
surviving party, or (iv) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business shall be proposed.
8.3 Notice of Change in Exercise Price. The Company shall, promptly after
an event requiring a change in the Exercise Price pursuant to Section 6 hereof,
send notice to the Holders of such event and change ("Price Notice"). The Price
Notice shall describe the event causing the change and the method of calculating
same and shall be certified as being true and accurate by the Company's
President and Chief Financial Officer.
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8.4 Transmittal of Notices. All notices, requests, consents and other
communications under this Warrant shall be in writing and shall be deemed to
have been duly made on the date of delivery if delivered personally or sent by
overnight courier, with acknowledgment of receipt by the party to which notice
is given, or on the fifth day after mailing if mailed to the party to whom
notice is to be given, by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as follows: (i) if to the
registered Holder of this Warrant, to the address of such Holder as shown on the
books of the Company, or (ii) if to the Company, to its principal executive
office.
9. Miscellaneous.
9.1 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Warrant.
9.2 Entire Agreement. This Warrant (together with the other agreements and
documents being delivered pursuant to or in connection with this Warrant)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter hereof.
9.3 Binding Effect. This Warrant shall inure solely to the benefit of and
shall be binding upon, the Holder and the Company and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Warrant or any provisions herein contained.
9.4 Governing Law; Submission to Jurisdiction. This Warrant shall be
governed by and construed and enforced in accordance with the law of the State
of New York, without giving effect to conflict of laws. The Company hereby
agrees that any action, proceeding or claim against it arising out of, or
relating in any way to this Warrant shall be brought and enforced in the courts
of the State of New York or of the United States of America for the Southern
District of New York, and irrevocably submits to such jurisdiction, which
jurisdiction shall be exclusive. The Company hereby waives any objection to such
exclusive jurisdiction and that such courts represent an inconvenient forum. Any
process or summons to be served upon the Company may be served by transmitting a
copy thereof by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 8 hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the
Company in any action, proceeding or claim. The Company agrees that the
prevailing party(ies) in any such action shall be entitled to recover from the
other party(ies) all of its reasonable attorneys' fees and expenses relating to
such action or proceeding and/or incurred in connection with the preparation
therefor.
9.5 Waiver, Etc. The failure of the Company or the Holder to at any time
enforce any of the provisions of this Warrant shall not be deemed or construed
to be a waiver of any such provision, nor to in any way affect the validity of
this Warrant or any provision hereof or the right
9
<PAGE>
of the Company or any Holder to thereafter enforce each and every provision of
this Warrant. No waiver of any breach, non-compliance or non-fulfillment of any
of the provisions of this Warrant shall be effective unless set forth in a
written instrument executed by the party or parties against whom or which
enforcement of such waiver is sought; and no waiver of any such breach,
non-compliance or non-fulfillment shall be construed or deemed to be a waiver of
any other or subsequent breach, non-compliance or non-fulfillment.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer as of the 1st day of July 1996.
US OPPORTUNITY SEARCH, INC.
By:__________________________________
Name:
Title:
10
<PAGE>
Form to be used to exercise Warrant:
- ----------------------------------
- ----------------------------------
- ----------------------------------
Date: _____________________, 19___
The undersigned hereby elects irrevocably to exercise the within
Warrant and to purchase ________ shares of Common Stock of
_________________________ and hereby makes payment of $____________ (at the rate
of $_________ per share of Common Stock) in payment of the Exercise Price
pursuant thereto. Please issue the Common Stock as to which this Warrant is
exercised in accordance with the instructions given below.
or
The undersigned hereby elects irrevocably to convert its right to
purchase ____________ shares of Common Stock purchasable under the within
Warrant into __________ shares of Common Stock of
__________________________________________ (based on a "Market Price" of
$________ per share of Common Stock). Please issue the Common Stock in
accordance with the instructions given below.
_________________________________
Signature
_________________________________
Signature Guaranteed
NOTICE: The signature to this form must correspond with the name as
written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name ________________________________________________________
(Print in Block Letters)
11
<PAGE>
Address ________________________________________________________
Form to be used to assign Warrant:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of the
within Warrant):
FOR VALUE RECEIVED, ________________________________ does hereby
sell, assign and transfer unto _________________________________ the right to
purchase _____________________ shares of Common Stock of
_________________________________ ("Company") evidenced by the within Warrant
and does hereby authorize the Company to transfer such right on the books of the
Company.
Dated:____________________, 19___
______________________________________
Signature
NOTICE: The signature to this form must correspond with the name as
written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever.
12
EMPLOYMENT AGREEMENT
AGREEMENT made this 1st day of November, 1996, by and between
U.S. Opportunity Search, Inc., a Delaware Corporation (the "Company"), and
Gregory Volok (the "Employee").
WHEREAS, the Company and Princeton PMC, Inc. ("PMC"), the Employee's
present employer, are parties to a consultant agreement dated March 12, 1996
(the "Consultant Agreement"), and they have agreed to terminate the Consultant
Agreement as of the date hereof; and
WHEREAS, the Company desires to employ the Employee as its most
senior executive officer other than the President of the Company, and the
Employee is willing to be employed, upon the terms and conditions herein set
forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
1. Positions and Responsibilities.
1.1 The Company shall employ the Employee, and the Employee
shall accept employment, as its Executive Vice-President, namely, the most
senior executive officer of the Company other than the President of the Company.
The Employee shall have overall responsibility for the operations of the Company
and power and authority over all employees other than the President of the
Company. The Employee shall report directly to the President and the Board of
Directors of the Company (the "Board") and shall perform such duties
commensurate with his position as Executive Vice-President of the Company and
the responsibilities set forth above as the President and the Board shall
direct. The Employee shall hold such positions with the Company's subsidiaries,
if any, to which, from time to time, he may be elected or appointed during the
<PAGE>
term of this Agreement. As used hereinafter, unless the context otherwise
requires, the term "Company" shall mean the Company and its subsidiaries.
1.2 The Employee shall devote his best efforts, and all of his
business time, to the business and affairs of the Company and to the promotion
of its interests.
1.3 The Company shall use its best efforts to cause the
Employee to be elected to the Board, but both parties recognize that nominations
and elections to the Board are decisions to be made by the stockholders or the
Board, as the case may be, and not by the Company.
2. Term of Employment.
2.1 The term of employment hereunder shall be five (5) years,
commencing on the date hereof (the "Term"), unless sooner terminated as provided
in this Agreement.
2.2 Notwithstanding the provisions of Section 2.1 hereof, the
Company shall have the right, on written notice to the Employee, to terminate
the Employee's employment for Cause, such termination to be effective as of the
date on which notice is given or as of such later date as may be otherwise
specified in the notice; provided, however, that the Company shall give the
Employee an opportunity to cure such Cause, if it is curable, on seven (7) days
written notice.
2.3 For purposes of this Agreement, the term "Cause" shall
mean any of the following actions by the Employee: (a) failure to comply with
any of the material terms of this Agreement; (b) engagement in grossly negligent
or willful misconduct injurious to the Company; (c)
-2-
<PAGE>
dishonesty or disloyalty to the Company; or (d) the Employee's conviction of a
felony or the Employee's plea of nolo contendere to a felony.
3. Compensation.
3.1 Subject to Section 3.2 hereof, the Employee shall receive
a salary at the rate of $120,000 per annum from the Company, payable in
installments of $10,000 at the end of each month. In addition, the Employee
shall be entitled to (a) medical and dental benefits at the same level as he
presently receives at his current employment, i.e., Pennsylvania Blue Cross and
Blue Shield - Personal Choice No. 5 and Delta Dental; and (b) the use of an
automobile owned or leased by the Company.
3.2 If and when the Board determines that the Employee's
performance equals or exceeds the Company's expectations and adds value to the
Company, as measured by the Company's net profits and other relevant criteria,
the Board shall grant the Employee incentive stock options under the Company's
stock option plan, the number of options and the terms thereof to be in the
Board's sole discretion.
3.3 The Employee shall be entitled to reimbursement for direct
out-of-pocket expenses (such as, for example, travel expenses, including coach
airfare, and moderately priced hotels) incurred by the Employee in performing
services for the Company by presenting to the Company receipts, vouchers or
other evidence of such expenses.
4. Death; Incapacity.
4.1 If, during the Term, because of illness or other
incapacity, the Employee shall fail for a period of sixty (60) consecutive days
to render the services contemplated hereunder, then the Company, at its option,
may
-3-
<PAGE>
terminate this Agreement by written notice to the Employee as hereinafter
provided. In the event of such termination, the Employee shall no longer be
entitled to his then current salary, but for a period of ninety (90) days after
such termination and, to the extent permitted by any applicable employee benefit
arrangement or plan (or otherwise required by law), the Company shall permit the
Employee to continue to participate for such period in any employee benefit
arrangement or Plan in which he is participating at the time of such
termination.
4.2 If the Employee dies during the Term, his employment shall
terminate effective as of the date of death.
5. Employee Not To Use Certain Information. The Employee has advised
the Company that he is subject to certain agreements or restrictions as follows:
(a) an agreement with Dentsply International ("Dentsply"), dated November 1,
1980; (b) a Dentsply International, Inc., Corporate Finance Manual of Policy and
Procedure effective May 1983; (c) A Dentsply Equipment Division Memorandum,
dated August 2, 1990 entitled "Conflict of Interest" and attachments; and (d) a
revised Conflict of Interest Memorandum dated June 14, 1991 (collectively
referred to as the "Dentsply Restrictions"). The Employee has further advised
the Company that none of the restrictions or limitations on his activities in
the Dentsply Restrictions apply to any rights, responsibilities, duties or
obligations of the Employee under this Agreement, and the Employee agrees and
warrants that he will not violate any of the restrictions or limitations
contained in the Dentsply Restrictions in performing his duties or obligations
under this Agreement, nor will the Employee use in such employment any of
Dentsply's unpublished, confidential, proprietary or secret information.
6. Other Activities During Employment.
-4-
<PAGE>
6.1 Except for his employment by the Company, the Employee
shall not during the Term undertake or engage in any other employment,
occupation or business enterprise to which the Employee devotes any time;
provided, however, that the foregoing shall not be deemed to prohibit the
Employee from investing in securities of any other company engaged in a business
which does not compete, directly or indirectly, with the Company so long as such
investment holdings do not, in the aggregate, constitute more than 90% of such
other company's securities.
6.2 During the Term, neither the Employee nor any entity in
which he may be interested as a partner, trustee, director, officer, employee,
shareholder, option holder, lender of money or guarantor, shall be engaged
directly or indirectly in any business competitive with that of the Company or
any subsidiary of the Company (whether or not the Employee renders service to
such subsidiary); provided, however, that the foregoing shall not be deemed to
prohibit the Employee from investing in securities of any other company engaged
in a business which does not compete, directly or indirectly, with the Company,
so long as such investment holdings do not, in the aggregate, constitute more
than 90% of such other company's securities.
6.3 The Employee shall not at any time during the Term or
after the termination hereof directly or indirectly divulge, furnish, use,
publish or make accessible to any person or entity any Confidential Information
(as hereinafter defined). Any records of Confidential Information prepared by
the Employee or which come into the Employee's possession during the Term are
and shall remain the property of the Company and upon termination of the
Employee's employment all such records and copies thereof shall be either left
with or returned to the Company.
6.4 The term "Confidential Information" shall mean information
disclosed to the Employee or known, learned, created or observed by him as a
consequence of or
-5-
<PAGE>
through his employment by the Company, not generally known in the relevant trade
or industry, about the Company's business activities, services and processes,
including but not limited to information concerning advertising, sales
promotion, publicity, sales data, research, printed matter, photographs, films,
reproductions, layout, finances, accounting, methods, processes, trade secrets,
business plans, client or supplier lists and records, potential client or
supplier lists, and client or supplier billing.
7. Post Employment Activities.
7.1 For a period of eighteen (18) months after termination of
his employment hereunder, regardless of the reason for such termination, neither
the Employee nor any entity in which he may be interested as a partner, trustee,
director, officer, employee, shareholder, option holder, lender or guarantor,
shall be engaged directly or indirectly in any business which is competitive
with the Company or any subsidiary of the Company (whether or not the Employee
renders service to such subsidiary); provided, however, that the foregoing shall
not be deemed to prevent the Employee from investing in securities of any other
company having a class of securities which is publicly traded, so long as such
investment holdings do not, in the aggregate, constitute more than 5% of any
class of such other company's securities.
7.2 The Employee acknowledges that he has been employed for
his special talents and that his leaving the employ of the Company would
seriously hamper the business of the Company. In addition to all remedies
permitted by law or in equity and without limiting any injunctive or other
relief to which the Company may be entitled in respect of any obligation of the
Employee, the Company shall be entitled to injunctive relief to enforce the
provisions of Sections 5 and 6 hereof.
-6-
<PAGE>
7.3 The Employee will not, during the period of eighteen (18)
months after termination of his employment, regardless of the reason for such
termination, either in the Employee's individual capacity or as agent for
another, hire or offer to hire or entice away any person who has been an
officer, employee, or agent of the Company at any time during the immediately
preceding year or in any other manner persuade or attempt to persuade any of
such persons to discontinue their relationship with the Company or any of its
subsidiaries nor divert or attempt to divert from the Company or any of its
subsidiaries any business whatsoever by influencing or attempting to influence
any customer or supplier of the Company or any of its subsidiaries to diminish
or discontinue its business with the Company or such subsidiary.
8. Assignment. This Agreement shall not be assignable by the Company
except (i) to a corporation or other entity controlling, controlled by or under
common control with the Company or (ii) to a successor to all or substantially
all of the business of the Company. This Agreement shall inure to the benefit of
and be binding upon the Company, its permitted successors and permitted assigns,
and upon the Employee and his heirs, executors, administrators and legal
representatives. This Agreement shall not be assignable by the Employee.
9. No Third Party Beneficiaries. This Agreement does not create,
and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement, except as provided in Section 7 hereof.
10. Headings. The headings of the sections hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor
to affect the meaning thereof.
11. Indemnification.
-7-
<PAGE>
11.1 The Company agrees to defend, indemnify and hold harmless
the Employee with respect to matters arising in connection with his employment
by the Company or his services as a director of the Company to the fullest
extent permitted by the Delaware General Corporation Law or, in the case of
subsidiaries of the Company, the corporation law of the applicable jurisdiction
of incorporation.
11.2 The Employee agrees to defend, indemnify and hold
harmless the Company with respect to any liability, damages or claim against the
Company that may arise as a result of any breach of any of the Employee's
agreements and warranties contained in Sections 5, 6 and 7 hereof, including
payment of all attorneys' fees and costs and expenses arising from any claim
against the Company concerning the subject matters of such agreements and
warranties; provided, however, that the Company shall be responsible for 30% of
its own attorneys' fees so incurred.
12. Interpretation. In case any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision were not contained herein. Moreover, if any one or more of the
provisions contained in this Agreement shall for any reason be held to be
excessively broad as to duration, geographical scope, activity or subject, it
shall be construed by limiting and reducing so as to be enforceable to the
extent compatible with the applicable law as in effect at the time.
13. Notices. All notices under this Agreement shall be in writing
and shall be deemed to have been given at the time when mailed by registered or
certified mail, addressed to the address below stated of the party to which
notice is given, or to such changed address as such party may have fixed by
notice:
-8-
<PAGE>
To the Company: 44 Kean Road
Short Hills, N.J. 07078
To the Employee: 172 Laurie Lane
Philadelphia, PA 19115
provided, however, that any notice of change of address shall be effective only
upon receipt.
14. Waivers. Either party may waive compliance with or breach of
any provision of this Agreement, and, in such event, such party shall not
thereby be deemed to have waived any other breach of any other provision of
this Agreement.
15. Complete Agreement; Amendments. This Agreement represents the
entire agreement of the parties with respect to the subject matter hereof and
may not be amended, supplemented, canceled or discharged except by written
instrument executed by both parties hereto.
16. Governing Law. This Agreement is to be governed by and
construed in accordance with the laws of the State of New Jersey, without
giving effect to principles of conflicts of law.
17. Submission To Jurisdiction. In the event any of the parties
hereto shall commence any legal proceeding with respect to this Agreement, each
of them agrees to submit themselves to the jurisdiction of the courts of the
State of New Jersey and the United States District Court for the District of New
Jersey for the resolution of any dispute in connection with or arising out of
this Agreement and the transactions contemplated hereunder.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
MILESTONE SCIENTIFIC INC.
By: /S/ Leonard Osser
-----------------------------------
Name: Leonard Osser
Title: President
/S/ Gregory Volok
---------------------------------------
Gregory Volok
-10-
EMPLOYMENT AGREEMENT
AGREEMENT made as of December 23, 1996 by and between Sagacity I,
Inc., a Delaware corporation, with executive offices at 151 South Pfingsten
Road, Deerfield, Illinois 60015 (the "Company"), and Joel D. Warady residing at
108 South Boulevard, Evanston, Illinois 60202 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company wishes to employ the Employee, and the Employee
wishes to remain in the employ of the Company, on the terms and conditions
hereinafter set forth,
NOW, THEREFORE, it is agreed as follows:
1. Employment.
(a) The Company hereby employs the Employee as its
President and chief operating officer, and the Employee hereby agrees to his
employment by the Company in such capacity on a full-time basis. The Employee
shall be responsible for the day-to-day operating control of the Company's
business, subject to the supervision and control of the Company's Board of
Directors and its chief executive officer. In addition, the Employee shall hold
such other positions in the Company or its subsidiaries, and shall perform such
other duties of a responsible nature for the Company or its subsidiaries as the
Company's Board of Directors or its chief executive officer may from time to
time reasonably determine. The Employee shall devote all of his business time,
attention and energy to his duties and to the business affairs of the Company,
and shall not engage, directly or indirectly, in any other business, employment
or occupation
(b) The Employee shall not be required to relocate
outside the greater Chicago metropolitan area, it being understood that nothing
herein contained shall prohibit the Company from requiring the Employee to
travel to suppliers and customers outside such area as and when necessary or
appropriate for business purposes.
2. Term. The term of this Agreement (the "Term") shall be for
a period of three (3) years, commencing on the date of this Agreement (the
"Commencement Date") and ending at the close of business immediately before the
third anniversary of the Commencement Date, unless the parties elect to renew
the Term for additional periods of one (1) year each.
<PAGE>
3. Salary, Fringe Benefits and Allowances.
(a) The Employee shall receive a salary at the annual
rate of $105,000 during the term of this Agreement. The salary hereunder shall
be payable at such regular times and intervals as the Company customarily pays
its employees from time to time, but no less frequently than twice a month.
(b) The Employee shall participate on the same basis as
other employees of the Company participate in its existing or future employee
benefit programs, if any.
(c) The Employee shall be entitled to a paid vacation of
not less than fifteen (15) work days for each year of the term of this
Agreement; provided, however, all vacations shall be taken at a time or times
that minimize any interference with the proper performance of the Employee's
duties for the Company. The Employee shall be entitled to the benefits of the
Company's personnel policies involving sick leave and holidays.
(d) The Company shall provide payment for the rental
expense of an automobile to be used by the Employee in the business of the
Company, not to exceed $500 per month, and for other ordinary and necessary
expenses incurred by him on behalf of the Company, as promptly as practical
after his presentation to the Company of receipts or other reasonable proof of
disbursements.
4. Stock Bonus. Within ninety (90) days after the end of each
calendar year commencing during the Term, the Company shall pay to the Employee
the stock bonus shown in the table below in shares of common stock of U.S.
Opportunity Search Inc. ("USOS"), based upon the Company's net income before
federal income taxes for such calendar year, determined in accordance with
generally accepted accounting principles consistently applied:
================================================================================
If the Company's Net Income Before Number of Shares of USOS that
Federal Taxes is will be Issuable to the Employee
- --------------------------------------------------------------------------------
$400,000 or more during 1997 5,000 shares
- --------------------------------------------------------------------------------
$400,000 or more during 1998 7,000 shares
- --------------------------------------------------------------------------------
$800,000 or more during 1999 10,000 shares
================================================================================
For the purpose of calculating the Company's net income, its revenue shall be
charged with state and local income or franchise taxes and the Company's pro
rata share of all overhead and indirect expenses borne by USOS for the Company's
account or for its benefit.
-2-
<PAGE>
5. Termination of Employment.
(a) If the Employee dies, becomes "permanently
disabled", resigns or is dismissed for "cause", his rights to salary, fringe
benefits and allowances as set forth in paragraph 3 hereof, and his rights to
the stock bonus in paragraph 4 hereof, shall automatically cease, except that
the Employee shall not forfeit the salary and fringe benefits accrued prior
thereto.
(b) As used herein, the term "cause" shall mean the
Employee's commission of a material act of fraud or dishonesty or a crime
involving money or other property of the Company, the Employee's conviction of a
felony involving moral turpitude or a plea of guilty or nolo contendere to a
felony indictment, the Employee's unauthorized or illegal use of narcotics,
illegal drugs or other controlled substances, a material breach by the Employee
of this Agreement and/or an additional act of insubordination by the Employee
following his receipt of notice that he has been insubordinate. As used herein,
the terms "permanently disabled" or "permanent disability" shall mean and refer
to the inability of the Employee to perform substantially all of the duties
required of him by this Agreement by reason of his physical or mental incapacity
for a period of one hundred eighty (180) or more days.
(c) If the Company dismisses the Employee for cause, it
shall give the Employee written notice of such dismissal and of the facts
constituting such cause. The Employee shall have the right to challenge such
dismissal by instituting a proceeding in arbitration before the American
Arbitration Association ("AAA") in New York City to determine the Company's
dismissal of the Employee for cause was warranted under the terms of this
Agreement. If the Company institutes the arbitration proceeding, it shall be
conducted before the AAA in Chicago. If the arbitrator determines that the
Employee was dismissed without cause, as defined in this Agreement, the Employee
shall be entitled to recover from the Company all salary and fringe benefits (if
any) and the stock bonus which would have been payable to him under this
Agreement, but were not paid to him following his dismissal, plus his legal fees
and the costs of the arbitration proceeding. If the arbitrator determines that
the Employee was dismissed for cause, as defined in the Agreement, the Employee
shall pay to the Company such damages as the Company incurred because of the
Employee's actions, plus its legal fees and the costs of the arbitration
proceeding.
-3-
<PAGE>
6. Company Property. Any written material, mailing list,
program, discovery, process, design, invention or improvement which the Employee
composes, compiles, makes or develops during his employment by the Company shall
belong to the Company and shall be promptly disclosed to the Company. During the
Employee's employment and thereafter, the Employee shall, without additional
compensation, execute and deliver to the Company any instruments of transfer and
take such other action as the Company may reasonably request to carry out the
provisions hereof, including filing, at the Company's expense, patent or
copyright applications for any invention or writing covered hereby and assigning
the applications to the Company.
7. Confidential Information. The Employee shall not, either
during the term of employment by the Company or thereafter, disclose to anyone
(except in the regular course of the Company's business), or use in competition
with the Company or its subsidiaries, any information acquired by the Employee
during the period of his employment by the Company, with respect to any
confidential, proprietary or secret aspect of the affairs of the Company or any
subsidiary of the Company, including but not limited to the requirements of and
terms of dealings with existing or potential suppliers, dealers and customers
and the methods of doing business, all of which the Employee acknowledges are
confidential and proprietary to the Company or its subsidiaries, as the case may
be.
8. Competition; Recruitment.
(a) The Employee shall not, at any time during his
employment or, to the extent described below, after the termination of his
employment,
(i) engage or become interested (as owner, stockholder,
partner, director, officer, employee, consultant or otherwise) in
any business which is competitive with the business conducted by the
Company or any of its divisions or subsidiaries at the time of the
termination of his employment, or
(ii) recruit, solicit for employment, hire or engage any
employee or consultant of the Company or any person who was an
employee or consultant of the Company within six (6) months prior to
the termination of the Employee's employment.
If the Employee's employment is terminated by the Company without cause, the
prohibitions herein contained shall continue as long as the Company continues to
pay his salary and fringe benefits hereunder. If the Employee's employment
terminates because the Company declined to renew the term of this Agreement, the
prohibitions herein contained shall continue for six (6) months after such
termination. If the Employee declined to renew the term of this Agreement or if
the Employee's employment is terminated for cause, the prohibitions herein
contained shall continue for one (1) year after such termination.
-4-
<PAGE>
(b) The Employee acknowledges that these provisions are
necessary for the Company's protection and are not unreasonable, since he would
be able to obtain employment with companies whose businesses are not competitive
with those of the Company, its divisions and its subsidiaries and he would be
able to recruit and hire personnel other than employees of the Company. The
duration and the scope of these restrictions on the Employee's activities are
divisible, so that if any provision of this paragraph is held or deemed to be
invalid, that provision shall be automatically modified to the extent necessary
to make it valid. Neither the ownership of less than 2% of the stock of a
publicly owned company nor the ownership of less than 25% of a privately owned
small business concern, as defined by the regulations of the Small Business
Administration shall be considered a violation of the provisions hereof;
provided such company or concern does not compete with the Company.
9. Notices. Any notice or other communication to a party under
this Agreement shall be in writing and shall be considered given when mailed by
certified mail, return receipt requested, to such party at his or its address
first above written (or at such other address as such party may specify by
written notice to the other party).
10. Binding Nature of Agreement. The Company may assign this
Agreement in connection with a sale or other transfer of its assets or business.
This Agreement shall, as a matter of law, become the obligation of any successor
of the Company by merger, consolidation or other corporate reorganization. In
any such case, this Agreement shall be binding on the successors and assigns of
the Company. A change in control of the Company shall not affect the obligations
of the Company hereunder. This Agreement shall also bind the heirs and personal
representatives of the Employee.
11. Miscellaneous.
(a) Since a breach of the provisions of this Agreement
would injure the Company irreparably, the Company may, in addition to its other
remedies, obtain an injunction or other comparable relief restraining any
violation or further violation of this Agreement, and no bond, security or other
undertaking shall be required of the Company in connection therewith.
(b) The provisions of this Agreement are separable, and
if any provision of this Agreement is invalid or unenforceable, the remaining
provisions shall continue in full force and effect.
(c) This Agreement constitutes the entire understanding
and agreement between the parties, supersedes all existing agreements between
them and cannot be changed or terminated orally.
-5-
<PAGE>
(d) This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, where it has been entered and
where it is to be performed. The headings in this Agreement are solely for
convenience of reference and shall not affect its interpretation.
(e) The failure of either party to insist on strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. For any waiver of a
provision of this Agreement to be effective, it must be in writing and signed by
the party against whom the waiver is claimed.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed as of the date first above written.
SAGACITY I, INC.
By: /S/ Leonard Osser
--------------------------------------------------
Leonard Osser,
Chairman of the Board and Chief Executive Officer
/S/ Joel D. Warady
--------------------------------------------------
Joel D. Warady
-6-
EXHIBIT 10.11
This will set forth the terms of an employment contract offered by U.S.
Opportunity Search, Inc. to Ronald P. Spinello, pursuant to Par 8 (b) (ii) of an
agreement between U.S. Opportunity Search, Inc. and Spintech, dated September
21, 1994.
EMPLOYMENT CONTRACT TERMS: Ronald P. Spinello
1. SALARY:
Starting salary beginning at closing of Bridge Financing:
Chairman & director of Research: $110,000
On-going yearly salary increases: 10% per year.
2. TERM:
Five years beginning at date of closing of Bridge Financing Contract to specify
that termination will be only for fraud or mental incompetence.
3. INCENTIVES:
Paid medical insurance policies and paid vacations are provided beginning at
closing of the Bridge Financing. Bonuses, profit sharing formulas, stock
options, retirement benefits and paid life insurance policies shall be phased in
at appropriate times, and at the discretion of the Board of Directors.
4. REIMBURSEMENT:
Short Term: Pay back of any short term loans made by Ronald Spinello to Spintech
during the interim period between July 27, 1994 and the date of closing shall be
paid back by the first round of money provided by the Bridge Financing. Pay back
of accrued wages owed Ronald Spinello from July 27, 1994 to date of closing to
be paid back by the first round of money provided by the Bridge Financing. Long
Term:
Pay back of accrued back pay, loans and interest owed by Spintech to Ronald
Spinello, Henry Thornton and Kevin Pollard to be paid back at the date of
closing of the final funding of $2.7 Mn.
5. BONUS:
A $500,000 bonus, payable five years from the date of closing of the final
funding of $2.7 Mn. shall be paid to Ronald Spinello if all bottom line pre-tax
profit projections for each year have been met according to the schedule
attached hereto.
U.S. OPPORTUNITY SEARCH, INC.
By: /s/ Leonard Osser
--------------------------------
Leonard Osser, President
Date: September 21, 1994
/s/ Ronald P. Spinello, D.D.S.
- -----------------------------------
Ronald P. Spinello, D.D.S
<PAGE>
EMPLOYMENT AGREEMENT made as of November 10, 1995 among U.S. Opportunity
Search, Inc. ("USOS"), Spintech, Inc. ("Spintech") and Ronald P. Spinello (the
"Executive").
WITNESSETH
WHEREAS, Executive and USOS have previously executed a memorandum entitled
"Employment Contract Terms" (the "Memorandum"); and
WHEREAS the parties wish to confirm that the Memorandum constitutes a
binding employment agreement to be assumed hereunder by Spintech and guaranteed
by USOS.
NOW, THEREFORE, the parties agree as follows:
1. Each of the parties hereby confirms that the Memorandum constitutes a
binding agreement of employment among the parties thereto and sets forth all of
the material terms and conditions of employment, except that the term of
employment shall be five years commencing on the date hereof and compensation
shall be at the annual rate of $121,000, $133,100, $146,410, $161,051 and
$177,156 for the 1st, 2nd, 3rd, 4th and 5th years of the term. The Memorandum is
hereby incorporated herein with the same force and effect as if set forth in
full. In addition, the Executive shall be entitled to the following additional
benefits:
(a) Four weeks of paid vacation during each year of the term.
(b) Paid holidays in accordance with the Company's usual holiday schedule
and one week of paid "sick pay".
(c) Paid medical insurance policies and disability coverage.
(d) To the extent the Executive qualifies, participation in, or benefits
under, any employee benefit plan, arrangement or perquisite generally made
available by the Company to its key executives.
(e) Bonuses, profit sharing formulas, stock options, retirement benefits
and paid life insurance policies, as phased in at appropriate times at the
discretion of the Board of Directors.
(f) A $500,000 bonus, payable five years from the date of closing of the
acquisition if aggregate pre-tax profits for such five years are at least
4,000,000.
2. Spintech hereby assumes all of the obligations and succeeds to all of
the rights of USOS under the Memorandum and the Executive agrees to work for
Spintech loyally and faithfully as a full-time employee; it being understood and
agreed that if at any time after January 1, 1998 Spintech has not paid the
benefits set forth in paragraph (e) above, or if at any time after the date
hereof Leonard Osser has ceased to be the controlling shareholder of USOS, then
nothing contianed in this paragraph shall preclude the Executive from engaging
in
<PAGE>
other non-competitive business activities, so long as such activities do not
impair his ability to continue to render essentially full-time services to
Spintech.
3. USOS hereby guarantees to the Executive the full performance of all
obligations of Spintech hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
U. S. OPPORTUNITY SEARCH, INC.
by:__ /s/ Leonard Osser
-----------------
Leonard Osser, President
SPINTECH, INC.
by:__/s/ Glenn R. Spinello
--------------------
Glenn R. Spinello, Vice President
/s/ Ronald P. Spinello
----------------------
Ronald P. Spinello
2
EXHIBIT 10.13
AGREEMENT FOR SDS PRODUCT
AGREEMENT, dated September 1, 1996, between SPINTECH, INC., a Delaware
corporation, with its principal offices at 218 Dew Drop Road, York, Pennsylvania
17402 ("Spintech") and PRINCETON PMC, INC., a Delaware corporation, with its
principal offices at 44 Kean Road, Short Hills, New Jersey 07078 ("Princeton").
Background
Spintech is engaged in the business of inventing, designing, and securing
manufacturing for products for the health care field, obtaining patent
protection and governmental approval for such products and insurance protection
services in relation to such products.
Princeton is engaged in the business of evaluating products for the health care
field, arranging for cost effective manufacturing of products, product
development, and distribution of such products and promoting and marketing
products through distributors, dealers and others to end-users in the health
care field on a worldwide basis.
Spintech is the owner of all rights, title and interest in and to certain rights
covering the SDS product, and Princeton desires to obtain from Spintech an
exclusive right to distribute the SDS product to end-users in the waste disposal
and health care fields in the Territory as defined below.
Agreement
In consideration of the foregoing background and the mutual promises and
covenants contained herein, and intending to be legally bound, the parties agree
as follows:
1. Definitions. As used herein, the term:
(a) "Authorized Channels" shall mean all channels of sale and distribution
to end-users in the waste disposal and health care fields, including but
not limited to distributors, dealers, health care organizations, health
care providers, clinics, conferences and mail order, except as may be
otherwise specified on Exhibit "A".
(b) "Exhibit A" shall mean the exhibit at the end of this Agreement.
(c) "Product" shall mean the SDS product described on Exhibit "A",
modifications and enhancements of such product, and any new products, if
they are based on the patent(s) of the existing product, and if and to the
extent this Agreement is modified in accordance with Paragraph 17 hereof.
(d) "Patent Rights" shall mean all patent(s), whether issued or assigned
in the Territory, issued or assigned to Spintech, with respect to the
Product, all corresponding Letters Patent as patents issue, and the patent
applications, all as listed on Exhibit "A", and the resulting patents
claiming priority from or based on such Letters Patent, and all divisions,
reissues, and extensions thereof now owned by Spintech or under which
Spintech now has the right to grant licenses, except that any Patent
Rights that also relate to new products may be included among the patent
rights granted to another distributor to support its distribution rights
for such new products, unless this Agreement is amended in accordance with
Paragraph 17 hereof, to include such new products as part of the Product
being distributed by Princeton.
(e) "Territory" shall mean (i) North American continent, plus (ii) the
rest of the entire world, other than those countries where Spintech has
heretofore granted distribution rights to other distributors ("excluded
countries") provided the rest of the world (other than excluded countries)
shall be included in the Territory only if the minimum amounts of the
Product to be purchased as described on Exhibit "A" are increased by an
amendment to this Agreement to appropriately reflect the world-wide market
for the Product, in which case Princeton may fulfill such increased
minimum amounts by purchasing the Product for sales anywhere within the
enlarged Territory. If a major customer of Princeton seeks sales rights
within an excluded country, Spintech will use commercially reasonable
efforts to include such country within the Territory, but such efforts
shall not require Spintech to violate existing agreements or law.
<PAGE>
2. Granting of Distribution Rights.
(a) Upon the terms and conditions set forth herein, Spintech hereby grants
to Princeton the exclusive right under the Patent Rights:
(i) to purchase, market and sell the Product through Authorized
Channels in the Territory;
(ii) to grant one or more subdistributorships of the Product
through one or more Authorized Channels within the Territory,
or any part thereof, as determined in Princeton's discretion.
(b) All subdistributorships shall include the restrictions on Princeton,
and the obligations of Princeton, contained in this Agreement and shall be
subject to Spintech's rights hereunder. Princeton shall promptly notify
Spintech in writing of any subdistributorship it signs or otherwise
authorizes and shall furnish Spintech with such information about its
subdistributorship, as Spintech may request. Spintech shall have the right
to reject any subdistributor or customer based on its credit worthiness
and such rejection shall not be capriciously exercised.
(c) This grant shall not be construed as a license, by implication or
otherwise, under any patent applications or patents owned by Spintech or
under which Spintech has or acquires the right to grant Licenses.
(d) This grant shall not be construed to create an agency or employment
relationship between Spintech and Princeton or any of its sublicensees,
each of whom is and shall remain an independent contractor.
3. Payments.
(a) In consideration for the rights herein granted and the exclusive right
to purchase, market and sell the Product, Princeton shall pay Spintech the
sums specified on Exhibit "A" with respect to each Product purchased by
Princeton from Spintech. The sums shall be paid within thirty (30) days of
the receipt by Princeton of Spintech's invoice for the Product purchased
by Princeton from Spintech.
(b) In consideration of the performance of Princeton's obligations
pursuant to Paragraph 4(a) below, Spintech shall reimburse Princeton for
all costs that Princeton reasonably incurs in performing such obligations,
provided that any costs in excess of $500 shall first be approved by
Spintech in writing.
(c) In consideration of Princeton's obligations pursuant to Paragraph 4
below, Spintech shall (i) pay Princeton a product management fee in the
amount of $3,000 per month, payable on the last day of each month of the
term of this Agreement, (ii) reimburse Princeton for the cost of a
technical service representative to be seconded to Princeton pursuant to
an arrangement with Arbutas to be negotiated during the term of this
Agreement, (iii) furnish Princeton with 200 units of the Product for
inventory in advance of actual orders from dealers and other customers,
and (iv) pay, or reimburse Princeton, for producing advertising materials
and a video presentation, once only, in an amount not to exceed $40,000;
(d) If any government with jurisdiction over any part of the Territory
imposes any taxes on any part of the payments required to be paid by
Princeton to Spintech hereunder and requires Princeton to withhold such
taxes from such payment, Princeton may deduct such taxes from such
payments. Tax receipts indicating payments or withholding of such taxes on
behalf of Spintech shall be promptly submitted to Spintech. Princeton
shall cooperate with Spintech in determining the propriety of imposition
of any such tax. This provision shall not apply to any franchise tax based
on or measured by Princeton's net income; such taxes are Princeton's
responsibility and payments to Spintech shall not in any event be reduced
by such taxes.
(e) If any government with jurisdiction over any part of the Territory
imposes any exchange restriction on the payments required under this
Agreement, an account in the name of Spintech shall be established in a
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<PAGE>
financial institution of Spintech's choice in the Territory and all moneys
due Spintech shall be paid into such account or at Spintech's election,
payment shall be made to any account designated by Spintech that complies
with such restriction.
4. Princeton's Marketing and Other Obligations.
(a) In addition to its obligations set forth in Paragraph 3 above,
Princeton shall use its best efforts to exploit the right hereby created
and to maximize sales of the Product. Such efforts shall include, but are
not limited to, reviewing the Products from a technological point of view
and ensuring that all aspects of mechanical, chemical, electrical,
industrial and other engineering disciplines have been applied for this
purpose; reviewing and evaluating all sources of raw materials, assemblies
and systems needed for the production of the Product; identifying and
selecting potential manufacturers to produce the Product in commercial
quantities and on acceptable terms and conditions; ascertaining the
interest of distributors, dealers, waste managers, health care
institutions and facilities and end-users, both professional and
paraprofessional, in the Product; and developing and implementing
advertising, marketing and sales strategies and generally promoting the
sale of the Products.
(b) Reviewing and evaluating clinical studies of the Product and arranging
for clinical lectures about the Product.
(c) Performing field services as, when and where required to support the
Product and the various entities within the Authorized Channels;
considering, evaluating and recommending design changes to improve Product
acceptance; furnishing services to customers, including warranty
replacements or repairs; representing Spintech in dealings with
contractors engaged by Spintech to produce, assemble, package and ship the
Product; and generally taking such steps and doing such things as
constitute Product management in the health care field.
(d) Spintech shall provide Princeton, at Spintech's cost, with a mutually
agreed upon quantity of the Product, to use as customer samples and to
perform Princeton's obligations, as set forth in subparagraph (a) above.
5. Confidential Information.
Each party agrees that all confidential information and documentation made
available or disclosed to it by the other party as a result of or related
to this Agreement, and all negotiations therefor if they are conspicuously
marked or transmitted with directions that identify them as "confidential"
or "secret", shall be received and treated by the receiving party on a
confidential and restricted basis. Such information and documentation
shall not be disclosed to others unless and until they enter the public
domain or are required to be disclosed to a government agency. In the
later case, the receiving party, shall use its best efforts to have such
agency protect such information and documentation from public disclosure
or access.
6. Marking; Use of Trade Name and Marks.
(a) Princeton shall affix to the Product and to the packages containing
the Product or to insertion slips placed inside each package with a
Product a legible notice stating, in effect, that the Product is patent
protected, in a form to be mutually agreed by the parties.
(b) If the laws of any jurisdiction within the Territory specify any
additional or other patent marking notices, Princeton shall cause the
Product or the related packaging to be so marked.
(c) This Agreement authorizes and approves the use by Princeton of
Spintech's trade name or trademark in connection with the manufacturing,
advertising, marketing or sale of the Product. Such authorization and
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<PAGE>
approval, however, is subject to Princeton submitting all written
materials containing such names and marks to Spintech for its consent as
to form, which shall not be unreasonably withheld.
(d) If Princeton wishes to market the Product under a trade name or
trademark of which it is the author and consents to the use of such name
or mark for such purpose, Princeton shall assign and set over to Spintech
all of its right, title and interest in and to such name and mark.
7. Duration and Termination or Cancellation.
(a) Unless otherwise terminated or canceled as hereinafter set forth, this
Agreement and the rights under Patent Rights shall continue in force for a
period of seven (7) years from the date of this Agreement.
(b) This Agreement and the rights granted herein may be extended on the
terms and conditions to be mutually agreed upon prior to the expiration of
this initial term. If no such agreement is reached, this Agreement and the
rights granted herein shall automatically terminate at the end of the
initial term or the extended term then in effect, as applicable.
(c) If at any time Princeton defaults in fulfilling any obligations hereof
and if such default is not cured within ten (10) days after written notice
thereof is given by Spintech to Princeton in the case of a monetary
default, or within thirty (30) days after written notice thereof is given
by Spintech to Princeton in any other cases, this Agreement and the rights
herein granted shall be canceled as of the end of the applicable notice
period, without any further notice or other action required to be taken by
Spintech. Princeton shall have the right to cure any such default up to,
but not after, the end of the applicable notice period.
(d) Spintech shall also have the right to cancel this Agreement by giving
written notice of cancellation to Princeton if any one of the following
events occurs, such cancellation being effective upon Princeton's receipt
of such notice or five (5) days after such notice is mailed, whichever is
earlier.
(i) liquidation of Princeton or an assignment by Princeton for
the benefit of its creditors;
(ii) insolvency or bankruptcy of Princeton, whether voluntary or
involuntary;
(iii) inability of Princeton (or to demonstrate, if requested by
Spintech, its ability) to meet its obligations hereunder;
(iv) failure of Princeton to satisfy any judgment against it; or
(v) appointment of a trustee or receiver for Princeton; or
(vi) failure of Princeton to purchase and pay for the minimum
amount of Product set forth on Exhibit "A".
(e) The waiver of any default under this Agreement by Spintech shall not
waive the right to cancel this Agreement for any subsequent or similar
default and the exercise of the right of cancellation shall not impose any
liability by reason of cancellation or have the effect of waiving any
damages to which Spintech might otherwise be entitled.
(f) The termination or cancellation of this Agreement shall not interfere
with, affect or prevent the collection by Spintech of any and all sums of
money due to it under this Agreement. Upon termination or cancellation of
this Agreement for any reason, the payments required by Paragraph 3 to be
made by Princeton, even if they are not yet due, shall become immediately
due and payable.
8. Notices.
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<PAGE>
All notices, requests, demands and other communications under this
Agreement or in connection therewith shall be given to or be made upon the
respective parties hereto at the addresses first written above.
9. Representations and Covenants of Princeton.
(a) Princeton represents and warrants to Spintech that it has the skills
and experience, capital and personnel to exploit the Product and to
perform its obligations under this Agreement.
(b) Princeton shall not sell the Product to anyone who it knows or has
reason to believe will resell or assign or lease the Product outside
Authorized Channels. Princeton shall report to Spintech any party (other
than a sublicensee or distributor or dealer authorized by Princeton) or a
sublicensee who Princeton learns or has reason to believe is selling or
leasing the Product in the Territory, notwithstanding the exclusivity of
the rights granted under this Agreement, provided, however, the receipt of
such report shall not imply any obligation on Spintech's part to enforce
or pursue any rights or remedies against such party.
10. Representations and Covenants of Spintech.
(a) Spintech represents and warrants to Princeton that it has the skills
and experience, capital and personnel to manufacture the minimum amounts
of the Product set forth on Exhibit "A" for the referenced time periods
and that it will make available for delivery to Princeton of any
reasonable quantities of the Product that Princeton orders from Spintech
within thirty (30) days of receipt by Spintech of a written order for such
quantities of the Product.
(b) Spintech shall not grant to any party, other than Princeton, the right
to purchase, market and/or sell the Product in the Territory.
(c) Spintech is the owner of all right, title and interest in and to
the Patent Rights in North America.
(d) Spintech has not made and will not make any agreement, commitment,
grant or assignment, which could or might interfere with or impair the
complete enjoyment of all the rights granted and the duties to be rendered
by Spintech to Princeton, including, without limitation, having entered
into any agreement, which would preclude or conflict the duties to be
rendered by Spintech hereunder.
(e) Spintech shall secure the manufacture of the Product and shall not
assign to any party the right to manufacture the Product without the prior
written consent of Princeton, which shall not be unreasonably withheld,
delayed or conditioned.
11. Limited Warranties and Liabilities; Indemnity.
(a) Spintech represents and warrants to Princeton and only to Princeton
that, to the best of its knowledge and belief, the Product and parts or
subassemblies thereof may be used or sold free of the patent rights or
proprietary rights of others, Spintech shall be liable for all loss,
damage or expense arising from any claim of infringement of any patent or
other proprietary rights based upon Princeton's use or sale of the Product
or its exercise of any rights granted under this Agreement.
(b) Spintech is a manufacturer with respect to the Product. Spintech
represents and warrants that the Product:
(i) conforms or will conform to the specifications and
descriptions of the Product in any plans or drawings furnished
by Spintech to Princeton;
(ii) will be free from defects in design, material or workmanship;
and
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<PAGE>
(iii) will be merchantable and fit for a particular purpose; and
Spintech will, at its option, replace or repair any Product
which does not conform to the forgoing warranties, if written
notice of such nonconformity is given to Spintech within
ninety (90) days after the sale of such Product to Princeton.
(c) Spintech shall defend Princeton against, and hold Princeton harmless
from, any claim by any customer, purchaser or user of the Product:
(i) for personal injuries (including death) and/or property damage
or loss based upon an allegation that any Product did not
conform to the description furnished with the product, was
defective or was not merchantable or fit for a particular
purpose; or
(ii) any and all claims arising by reason of or in connection with
Spintech's breach of or failure to comply with the terms,
representations, covenants or warranties of the Agreement;
(iii) any and all attorneys' fees, disbursements and court costs
incurred or paid by Princeton in connection with or arising
from Spintech's breach of the terms, representations,
covenants and warranties of the Agreement, provided, however,
that Princeton's rights and remedies hereunder are and shall
be limited to the proceeds from the insurance to be provided
by Spintech pursuant to Paragraph 12 hereof, and provided
further that Spintech shall not, in any event, be liable to
Princeton for any indirect, incidental, special, punitive or
consequential damages or losses whatsoever, including, but not
limited to, claims for lost opportunities, customers, revenues
or profits, whether or not losses might result from Product
failure.
12. Insurance.
Spintech shall obtain and maintain at its sole cost and expense throughout
the initial term and for a period of not less than two (2) years following
the termination thereof, standard comprehensive, general and products
liability insurance, the form of which must be reasonably acceptable to
Princeton, from a qualified insurance company licensed to do business in
the Territory, the policy for such insurance shall include Princeton as an
additional named insured, and shall provide protection against any and all
claims, demand and causes of action arising out of any defect or
performance failure, alleged or otherwise, in any of the Product or any
material used in connection therewith or any use thereof. The amount of
coverage shall be a minimum of Two Million Dollars ($2,000,000) combined
single limit for each single occurrence for bodily injury and Five Hundred
Thousand ($500,000) for property damage. Said policy, which may be a
blanket policy covering other insured items, shall provide for thirty (30)
days notice to Princeton from the insurer by registered or certified mail,
return receipt requested, in the event of any modification, cancellation
or termination of said policy. Spintech shall furnish to Princeton a
certified copy of said policy or a certificate of insurance (showing
Princeton as an additional named insured and providing for thirty (30)
days notice to Spintech and Princeton in the event of any modification,
cancellation or termination) providing such coverage with thirty (30) days
after the date of this Agreement.
13. Arbitration.
Unless otherwise settled by the parties within sixty (60) days after
notice or within a period mutually agreed to by the parties in writing,
any dispute, controversy or difference which may arise between the parties
out of or in connection with this Agreement or for the breach thereof,
shall be submitted for, and shall be
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<PAGE>
resolved by, arbitration in New York, New York. Such arbitration shall be
conducted in accordance with the Rules of the American Arbitration
Association, by which each party hereto is bound.
14. Government Approvals.
(a) Spintech shall be responsible for obtaining the approval or validation
by the United States Food and Drug Administration, if required, of the
right to manufacture and sell the Product.
(b) Princeton shall be responsible for obtaining all other approvals,
including the approval or validation of this Agreement by other cognizant
government authorities within the Territory if, as and when required by
the relevant laws of any jurisdiction within the Territory or any
subdivision of the Territory. Spintech shall assist and cooperate with
Princeton in Princeton's efforts to obtain such approval or validation.
15. Effective Date.
This Agreement shall come into force and effect on the date of this
Agreement. If the validity of this Agreement in any jurisdiction within
the Territory depends on the approval of any cognizant government
authority of such jurisdiction, this Agreement shall not become effective
in such jurisdiction unless and until such approval(s) is given in
accordance with the laws requiring such approval.
16. Modification.
This Agreement embodies all of the understanding and obligations between
the parties with respect to the subject matter hereof. No amendment or
modification of this Agreement shall be valid or binding upon the parties
unless:
(a) it is made in writing, signed on behalf of each of the parties by
their respective proper officers thereunto duly authorized, and
(b) if applicable, it is approved by the cognizant government
authorities of each jurisdiction within the Territory.
17. Amendment for New Products.
If Spintech develops a new product, based on the patents of the existing
Product, and the new product is not merely a modification or enhancement
of the existing Product, Spintech shall offer to Princeton a right of
first refusal to include such new product in the Product by inviting
Princeton to amend the terms and conditions of this Agreement so that they
are at least as favorable to Spintech as the terms and conditions that may
be offered by any other credible party seeking exclusive distribution
rights for such new product, as follows:
(a) Spintech shall submit the proposal from such other would-be
distributor to Princeton in writing, and Princeton shall have the right to
match or exceed such proposal by making a written offer to Spintech within
thirty (30) days after Princeton's receipt of such proposal;
(b) If Princeton matches or exceeds such proposal by making a written
offer to Spintech within such 30-day period, this Agreement shall be
deemed amended to incorporate the terms and provisions of Princeton's
offer.
(c) If Princeton fails to make a written offer to Spintech within such
30-day period or submits an offer within such 30-day period that Spintech
reasonably believes is less favorable to it than the proposal submitted by
such other would-be distributor, Spintech shall notify Princeton in
writing, and thereupon Spintech shall
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<PAGE>
be entitled to enter into and perform an exclusive distribution agreement
with such other distributor covering the new product and reflecting the
terms and conditions of the would-be distributor's proposal or terms and
conditions that are more favorable to Spintech than those set forth in
such proposal. In such event, Princeton shall have no rights hereunder
with respect to the marketing and/or distribution of the new product.
18. Compliance with Laws.
(a) Any payment which requires government approval or permission under a
foreign exchange control law or other law, if any, shall be made by
Princeton in accordance with such law.
(b) If applicable, Princeton shall comply with all provisions of the
Export Administration Regulations of the United States Department of
Commerce, as they currently exist and as they may be amended from time
to time.
19. Construction and Assignment.
(a) This Agreement shall be binding upon and inure to the benefit of
Spintech, its legal representatives, successors and assigns.
(b) This Agreement shall be binding upon and inure to the benefit of
Princeton, but subject to Paragraphs 2(a)(ii) and 2(b) hereof, this
Agreement shall not be transferable or assignable without the prior
written consent of Spintech.
(c) This Agreement shall be deemed to be a contract made under the laws of
the State of New York, United States of America, and for all purposes
shall be interpreted in its entirety in accordance with the laws of New
York. If this Agreement is translated into any language other than the
English language for any purpose, the English version shall be the
governing version.
(d) Nothing contained in this Agreement shall be construed as conferring
upon Princeton or its customers, directly or by implication, estoppel or
otherwise, any license under any trade secrets of Spintech, and no such
license or other rights shall arise from this Agreement or from any acts,
statements or dealings resulting in or related to the execution of this
Agreement.
IN WITNESS WHEREOF, the representatives hereunto duly authorized on behalf of
Spintech and Princeton have executed this Agreement the date first above
written.
Attest: SPINTECH, INC.
_______________________ By:/S/ Leonard Osser
-------------------------------
Leonard Osser, CEO
Attest: PRINCETON PMC, INC.
_______________________ By: /S/ Gregory Volok
-------------------------------
Greg Volok, President
EXHIBIT "A"
1. Name and Description of the Product: SDS (formerly known as TAPS) - a
sharps disposal system for encapsulating in plastic and disposing of
hypodermic needles and other sharps, each unit to include a disposable
disk (the "Disposadisk"), and a sharps container (the "Container"). The
Product does not include
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<PAGE>
Spintech's "Mini -TAPS" unit, a smaller needle disposal system which it
contemplates licensing to Biotronix Laboratories.
2. United States Patent applied for:
3. Payment per unit:
Each SDS unit - $300;
Each Disposadisk - $.35; and
Each Container - The costs incurred by Spintech to manufacture and
reimburse product management for the Container plus the lesser of
thirty percent (30%) of such costs or 50% of Princeton's gross
profit on its sales of each Container.
All sales, use or excise taxes, shall be paid directly or indirectly by
Princeton, and in calculating gross profits, deductions shall be allowed
for normal and customary trade discounts, returns and allowances. The
price of the Disposadisk shall be subject to customary and reasonable
increases during the term of the Agreement to which this Exhibit A is
attached.
4. Minimum number of units of the Product to be produced and purchased: 25%
of the following annual amounts each 3 months (excluding the first 3
months), starting from the date of the product introduction to the market.
First 15 months of the term - 2,400 units
Next 12 months of the term - 3,000 units
Next 12 months of the term - 4,000 units
Next 12 months of the term - 6,000 units
Each 12 months thereafter - 6,000 units plus an additional
eight percent (8%) each year (cumulative) of the term.
5. Additional Provisions:
The foregoing relates to the original SDS units only. If and when SDS II
is produced by Spintech, the parties will negotiate in good faith to
supplement this Exhibit "A" in order to cover purchases of SDS II units by
Princeton.
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EXHIBIT 10.14
AGREEMENT FOR THE WAND PRODUCT
AGREEMENT, dated September 1, 1996, between SPINTECH, INC., a Delaware
corporation, with its principal offices at 218 Dew Drop Road, York, Pennsylvania
17402 ("Spintech") and PRINCETON PMC, INC., a Delaware corporation, with its
principal offices at 44 Kean Road, Short Hills, New Jersey 07078 ("Princeton").
Background
Spintech is engaged in the business of inventing, designing, and securing
manufacturing for products for the health care field, obtaining patent
protection and governmental approval for such products and insurance protection
services in relation to such products.
Princeton is engaged in the business of evaluating products for the health care
field, arranging for the cost effective manufacturing, product development, and
distribution of such products and promoting and marketing such products through
distributors, dealers and others to end-users in the health care field on a
worldwide basis.
Spintech is the owner of all rights, title and interest in and to certain rights
covering the Wand product, and Princeton desires to obtain from Spintech an
exclusive right to distribute the Wand product in the Territory as defined
below.
Agreement
In consideration of the foregoing background and the mutual promises and
covenants contained herein, and intending to be legally bound, the parties agree
as follows:
1. Definitions. As used herein, the term:
(a) "Authorized Channels" shall mean all channels of sale and distribution
to end-users in the health care field, including but not limited to
distributors, dealers, health care organizations, health care providers,
clinics, conferences and mail order, except as may be otherwise specified
on Exhibit "A".
(b) "Exhibit A" shall mean the exhibit at the end of this Agreement.
(c) "Product" shall mean the Wand product described on Exhibit "A",
modifications and any new products, if they are based on the patent(s) of
the existing product, and if and to the extent this Agreement is modified
in accordance with Paragraph 17 hereof.
(d) "Patent Rights" shall mean all patent(s), whether issued or assigned
in the Territory, issued or assigned to Spintech, with respect to the
Product, all corresponding Letters Patent as patents issue, and the patent
applications, all as listed on Exhibit "A", and the resulting patents
claiming priority from or based on such Letters Patent, and all divisions,
reissues, and extensions thereof now owned by Spintech or under which
Spintech now has the right to grant licenses, except that any Patent
Rights that also relate to new products may be included among the patent
rights granted to another distributor to support its distribution rights
for such new products, unless this Agreement is amended in accordance with
Paragraph 17 hereof, to include such new products as part of the Product
being distributed by Princeton.
(e) "Territory" shall mean (i) North American continent, plus (ii) the
rest of the entire world, other than those countries where Spintech has
heretofore granted distribution rights to other distributors ("excluded
countries") provided the rest of the world (other than excluded countries)
shall be included in the Territory only if the minimum amounts of the
Product to be purchased as described on Exhibit "A" are increased by an
amendment to this Agreement to appropriately reflect the world-wide market
for the Product, in which case Princeton may fulfill such increased
minimum amounts by purchasing the Product for sales anywhere within the
enlarged Territory. If a major customer of Princeton seeks sales rights
within an excluded
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country, Spintech will use commercially reasonable efforts to include such
country within the Territory, but such efforts shall not require Spintech
to violate existing agreements or law.
2. Granting of Distribution Rights.
(a) Upon the terms and conditions set forth herein, Spintech hereby grants
to Princeton the exclusive right under the Patent Rights:
(i) to purchase, market and sell the Product through Authorized
Channels in the Territory;
(ii) to grant one or more subdistributorships of the Product
through one or more Authorized Channels within the Territory,
or any part thereof, as determined in Princeton's discretion.
(b) All subdistributorships shall include the restrictions on Princeton,
and the obligations of Princeton, contained in this Agreement and shall be
subject to Spintech's rights hereunder. Princeton shall promptly notify
Spintech in writing of any subdistributorship it signs or otherwise
authorizes and shall furnish Spintech with such information about its
subdistributorship, as Spintech may request. Spintech shall have the right
to reject any subdistributor or customer based on its credit worthiness
and such rejection shall not be capriciously exercised.
(c) This grant shall not be construed as a license, by implication or
otherwise, under any patent applications or patents owned by Spintech or
under which Spintech has or acquires the right to grant Licenses.
(d) This grant shall not be construed to create an agency or employment
relationship between Spintech and Princeton or any of its sublicensees,
each of whom is and shall remain an independent contractor.
3. Payments.
(a) In consideration for the rights herein granted and the exclusive right
to purchase, market and sell the Product, Princeton shall pay Spintech the
sums specified on Exhibit "A" with respect to each Product purchased by
Princeton from Spintech. The sums shall be paid within thirty (30) days of
the receipt by Princeton of Spintech's invoice for the Product purchased
by Princeton from Spintech.
(b) In consideration of the performance of Princeton's obligations
pursuant to Paragraph 4(a) below, Spintech shall reimburse Princeton for
all costs that Princeton reasonably incurs in performing such obligations,
provided that any costs in excess of $500 shall first be approved by
Spintech in writing.
(c) In consideration of the performance of Princeton's obligations
pursuant to Paragraph 4(c) below, Spintech shall pay Princeton a product
development, management and marketing fee in the amount of $3,000 per
month, payable on the last day of each month of the term of this
Agreement.
(d) If any government with jurisdiction over any part of the Territory
imposes any taxes on any part of the payments required to be paid by
Princeton to Spintech hereunder and requires Princeton to withhold such
taxes from such payment, Princeton may deduct such taxes from such
payments. Tax receipts indicating payments or withholding of such taxes on
behalf of Spintech shall be promptly submitted to Spintech. Princeton
shall cooperate with Spintech in determining the propriety of imposition
of any such tax. This provision shall not apply to any franchise tax based
on or measured by Princeton's net income; such taxes are Princeton's
responsibility and payments to Spintech shall not in any event be reduced
by such taxes.
(e) If any government with jurisdiction over any part of the Territory
imposes any exchange restriction on the payments required under this
Agreement, an account in the name of Spintech shall be established in a
financial institution of Spintech's choice in the Territory and all moneys
due Spintech shall be paid into such
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account or at Spintech's election, payment shall be made to any account
designated by Spintech that complies with such restriction.
4. Princeton's Marketing and Other Obligations.
(a) In addition to its obligations set forth in Paragraph 3 above,
Princeton shall use its best efforts to exploit the right hereby created
and to maximize sales of the Product. Such efforts shall include, but are
not limited to, reviewing the Products from a technological point of view
and ensuring that all aspects of mechanical, chemical, electrical,
industrial and other engineering disciplines have been applied for this
purpose; reviewing and evaluating all sources of raw materials, assemblies
and systems needed for the production of the Product; identifying and
selecting potential manufacturers to produce the Product in commercial
quantities and on acceptable terms and conditions; ascertaining the
interest of distributors, dealers, health care institutions and facilities
and end-users, both professional and paraprofessional, in the Product; and
developing and implementing advertising, marketing and sales strategies
and generally promoting the sale of the Products.
(b) Reviewing and evaluating clinical studies of the Product and arranging
for clinical lectures about the Product.
(c) Performing field services as, when and where required to support the
Product and the various entities within the Authorized Channels;
considering, evaluating and recommending design changes to improve Product
acceptance; furnishing services to customers, including warranty
replacements or repairs; representing Spintech in dealings with
contractors engaged by Spintech to produce, assemble, package and ship the
Product; assisting Spintech in the further development, evaluation and
marketing of the Product and recommending, based upon focus groups
organized by Princeton, changes in the size, configuration, color,
packaging and other characteristics of the Product to cater to the
requirements of customers and potential customers; and generally being
responsible for Product management.
(d) Spintech shall provide Princeton, at Spintech's cost, with a mutually
agreed upon quantity of the Product, to use as customer samples and to
perform Princeton's obligations, as set forth in subparagraph (a) above.
5. Confidential Information.
Each party agrees that all confidential information and documentation made
available or disclosed to it by the other party as a result of or related
to this Agreement, and all negotiations therefor if they are conspicuously
marked or transmitted with directions that identify them as "confidential"
or "secret", shall be received and treated by the receiving party on a
confidential and restricted basis. Such information and documentation
shall not be disclosed to others unless and until they enter the public
domain or are required to be disclosed to a government agency. In the
later case, the receiving party, shall use its best efforts to have such
agency protect such information and documentation from public disclosure
or access.
6. Marking; Use of Trade Name and Marks.
(a) Princeton shall affix to the Product and to the packages containing
the Product or to insertion slips placed inside each package with a
Product a legible notice stating, in effect, that the Product is patent
protected, in a form to be mutually agreed by the parties.
(b) If the laws of any jurisdiction within the Territory specify any
additional or other patent marking notices, Princeton shall cause the
Product or the related packaging to be so marked.
(c) This Agreement authorizes and approves the use by Princeton of
Spintech's trade name or trademark in connection with the manufacturing,
advertising, marketing or sale of the Product. Such authorization and
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approval, however, is subject to Princeton submitting all written
materials containing such names and marks to Spintech for its consent as
to form, which shall not be unreasonably withheld.
(d) If Princeton wishes to market the Product under a trade name or
trademark of which it is the author and consents to the use of such name
or mark for such purpose, Princeton shall assign and set over to Spintech
all of its right, title and interest in and to such name and mark.
7. Duration and Termination or Cancellation.
(a) Unless otherwise terminated or canceled as hereinafter set forth, this
Agreement and the rights under Patent Rights shall continue in force for a
period of seven (7) years from the date of this Agreement.
(b) This Agreement and the rights granted herein may be extended on the
terms and conditions to be mutually agreed upon prior to the expiration of
this initial term. If no such agreement is reached, this Agreement and the
rights granted herein shall automatically terminate at the end of the
initial term or the extended term then in effect, as applicable.
(c) If at any time Princeton defaults in fulfilling any obligations hereof
and if such default is not cured within ten (10) days after written notice
thereof is given by Spintech to Princeton in the case of a monetary
default, or within thirty (30) days after written notice thereof is given
by Spintech to Princeton in any other cases, this Agreement and the rights
herein granted shall be canceled as of the end of the applicable notice
period, without any further notice or other action required to be taken by
Spintech. Princeton shall have the right to cure any such default up to,
but not after, the end of the applicable notice period.
(d) Spintech shall also have the right to cancel this Agreement by giving
written notice of cancellation to Princeton if any one of the following
events occurs, such cancellation being effective upon Princeton's receipt
of such notice or five (5) days after such notice is mailed, whichever is
earlier.
(i) liquidation of Princeton or an assignment by Princeton for the
benefit of its creditors;
(ii) insolvency or bankruptcy of Princeton, whether voluntary or
involuntary;
(iii) inability of Princeton (or to demonstrate, if requested by
Spintech, its ability) to meet its obligations hereunder;
(iv) failure of Princeton to satisfy any judgment against it; or
(v) appointment of a trustee or receiver for Princeton; or
(vi) failure of Princeton to purchase and pay for the minimum
amount of Product set forth on Exhibit "A".
(e) The waiver of any default under this Agreement by Spintech shall not
waive the right to cancel this Agreement for any subsequent or similar
default and the exercise of the right of cancellation shall not impose any
liability by reason of cancellation or have the effect of waiving any
damages to which Spintech might otherwise be entitled.
(f) The termination or cancellation of this Agreement shall not interfere
with, affect or prevent the collection by Spintech of any and all sums of
money due to it under this Agreement. Upon termination or cancellation of
this Agreement for any reason, the payments required by Paragraph 3 to be
made by Princeton, even if they are not yet due, shall become immediately
due and payable.
8. Notices.
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All notices, requests, demands and other communications under this
Agreement or in connection therewith shall be given to or be made upon the
respective parties hereto at the addresses first written above.
9. Representations and Covenants of Princeton.
(a) Princeton represents and warrants to Spintech that it has the skills
and experience, capital and personnel to exploit the Product and to
perform its obligations under this Agreement.
(b) Princeton shall not sell the Product to anyone who it knows or has
reason to believe will resell or assign or lease the Product outside
Authorized Channels. Princeton shall report to Spintech any party (other
than a sublicensee or distributor or dealer authorized by Princeton) or a
sublicensee who Princeton learns or has reason to believe is selling or
leasing the Product in the Territory, notwithstanding the exclusivity of
the rights granted under this Agreement, provided, however, the receipt of
such report shall not imply any obligation on Spintech's part to enforce
or pursue any rights or remedies against such party.
10. Representations and Covenants of Spintech.
(a) Spintech represents and warrants to Princeton that it has the skills
and experience, capital and personnel, to manufacture the minimum amounts
of the Product set forth on Exhibit "A" for the referenced time periods
and that it will make available for delivery to Princeton of any
reasonable quantities of the Product that Princeton orders from Spintech
within thirty (30) days of receipt by Spintech of a written order for such
quantities of the Product.
(b) Spintech shall not grant to any party, other than Princeton, the right
to purchase, market and/or sell the Product in the Territory.
(c) Spintech is the owner of all right, title and interest in and to the
Patent Rights in North America.
(d) Spintech has not made and will not make any agreement, commitment,
grant or assignment, which could or might interfere with or impair the
complete enjoyment of all the rights granted and the duties to be rendered
by Spintech to Princeton, including, without limitation, having entered
into any agreement, which would preclude or conflict the duties to be
rendered by Spintech hereunder.
(e) Spintech shall secure the manufacture of the Product and shall not
assign to any party the right to manufacture the Product without the prior
written consent of Princeton, which shall not be unreasonably withheld,
delayed or conditioned.
11. Limited Warranties and Liabilities; Indemnity.
(a) Spintech represents and warrants to Princeton and only to Princeton
that, to the best of its knowledge and belief, the Product and parts or
subassemblies thereof may be used or sold free of the patent rights or
proprietary rights of others, Spintech shall be liable for all loss,
damage or expense arising from any claim of infringement of any patent or
other proprietary rights based upon Princeton's use or sale of the Product
or its exercise of any rights granted under this Agreement.
(b) Spintech is a manufacturer with respect to the Product. Spintech
represents and warrants that the Product:
(i) conforms or will conform to the specifications and
descriptions of the Product in any plans or drawings furnished
by Spintech to Princeton;
(ii) will be free from defects in design, material or workmanship;
and
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(iii) will be merchantable and fit for a particular purpose; and
Spintech will, at its option, replace or repair any Product
which does not conform to the forgoing warranties, if written
notice of such nonconformity is given to Spintech within
ninety (90) days after the sale of such Product to Princeton.
(c) Spintech shall defend Princeton against, and hold Princeton harmless
from, any claim by any customer, purchaser or user of the Product:
(i) for personal injuries (including death) and/or property damage
or loss based upon an allegation that any Product did not
conform to the description furnished with the product, was
defective or was not merchantable or fit for a particular
purpose; or
(ii) any and all claims arising by reason of or in connection with
Spintech's breach of or failure to comply with the terms,
representations, covenants or warranties of the Agreement;
(iii) any and all attorneys' fees, disbursements and court costs
incurred or paid by Princeton in connection with or arising
from Spintech's breach of the terms, representations,
covenants and warranties of the Agreement, provided, however,
that Princeton's rights and remedies hereunder are and shall
be limited to the proceeds from the insurance to be provided
by Spintech pursuant to Paragraph 12 hereof, and provided
further that Spintech shall not, in any event, be liable to
Princeton for any indirect, incidental, special, punitive or
consequential damages or losses whatsoever, including, but not
limited to, claims for lost opportunities, customers, revenues
or profits, whether or not losses might result from Product
failure.
12. Insurance.
Spintech shall obtain and maintain at its sole cost and expense throughout
the initial term and for a period of not less than two (2) years following
the termination thereof, standard comprehensive, general and products
liability insurance, the form of which must be reasonably acceptable to
Princeton, from a qualified insurance company licensed to do business in
the Territory, the policy for such insurance shall include Princeton as an
additional named insured, and shall provide protection against any and all
claims, demand and causes of action arising out of any defect or
performance failure, alleged or otherwise, in any of the Product or any
material used in connection therewith or any use thereof. The amount of
coverage shall be a minimum of Two Million Dollars ($2,000,000) combined
single limit for each single occurrence for bodily injury and Five Hundred
Thousand ($500,000) for property damage. Said policy, which may be a
blanket policy covering other insured items, shall provide for thirty (30)
days notice to Princeton from the insurer by registered or certified mail,
return receipt requested, in the event of any modification, cancellation
or termination of said policy. Spintech shall furnish to Princeton a
certified copy of said policy or a certificate of insurance (showing
Princeton as an additional named insured and providing for thirty (30)
days notice to Spintech and Princeton in the event of any modification,
cancellation or termination) providing such coverage with thirty (30) days
after the date of this Agreement.
13. Arbitration.
Unless otherwise settled by the parties within sixty (60) days after
notice or within a period mutually agreed to by the parties in writing,
any dispute, controversy or difference which may arise between the parties
out of or in connection with this Agreement or for the breach thereof,
shall be submitted for, and shall be resolved by, arbitration in New York,
New York. Such arbitration shall be conducted in accordance with the Rules
of the American Arbitration Association, by which each party hereto is
bound.
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14. Government Approvals.
(a) Spintech shall be responsible for obtaining the approval or validation
by the United States Food and Drug Administration, if required, of the
right to manufacture and sell the Product.
(b) Princeton shall be responsible for obtaining all other approvals,
including the approval or validation of this Agreement by other cognizant
government authorities within the Territory if, as and when required by
the relevant laws of any jurisdiction within the Territory or any
subdivision of the Territory. Spintech shall assist and cooperate with
Princeton in Princeton's efforts to obtain such approval or validation.
15. Effective Date.
This Agreement shall come into force and effect on the date of this
Agreement. If the validity of this Agreement in any jurisdiction within
the Territory depends on the approval of any cognizant government
authority of such jurisdiction, this Agreement shall not become effective
in such jurisdiction unless and until such approval(s) is given in
accordance with the laws requiring such approval.
16. Modification.
This Agreement embodies all of the understanding and obligations between
the parties with respect to the subject matter hereof. No amendment or
modification of this Agreement shall be valid or binding upon the parties
unless:
(a) it is made in writing, signed on behalf of each of the parties by
their respective proper officers thereunto duly authorized, and
(b) if applicable, it is approved by the cognizant government authorities
of each jurisdiction within the Territory.
17. Amendment for New Products.
If Spintech develops a new product, based on the patents of the existing
Product, and the new product is not merely a modification or enhancement
of the existing Product, Spintech shall offer to Princeton a right of
first refusal to include such new product in the Product by inviting
Princeton to amend the terms and conditions of this Agreement so that they
are at least as favorable to Spintech as the terms and conditions that may
be offered by any other credible party seeking exclusive distribution
rights for such new product, as follows:
(a) Spintech shall submit the proposal from such other would-be
distributor to Princeton in writing, and Princeton shall have the right to
match or exceed such proposal by making a written offer to Spintech within
thirty (30) days after Princeton's receipt of such proposal;
(b) If Princeton matches or exceeds such proposal by making a written
offer to Spintech within such 30-day period, this Agreement shall be
deemed amended to incorporate the terms and provisions of Princeton's
offer.
(c) If Princeton fails to make a written offer to Spintech within such
30-day period or submits an offer within such 30-day period that Spintech
reasonably believes is less favorable to it than the proposal submitted by
such other would-be distributor, Spintech shall notify Princeton in
writing, and thereupon Spintech shall be entitled to enter into and
perform an exclusive distribution agreement with such other distributor
covering the new product and reflecting the terms and conditions of the
would-be distributor's proposal or terms and conditions that are more
favorable to Spintech than those set forth in such proposal. In such
event, Princeton shall have no rights hereunder with respect to the
marketing and/or distribution of the new product.
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18. Compliance with Laws.
(a) Any payment which requires government approval or permission under a
foreign exchange control law or other law, if any, shall be made by
Princeton in accordance with such law.
(b) If applicable, Princeton shall comply with all provisions of the
Export Administration Regulations of the United States Department of
Commerce, as they currently exist and as they may be amended from time
to time.
19. Construction and Assignment.
(a) This Agreement shall be binding upon and inure to the benefit of
Spintech, its legal representatives, successors and assigns.
(b) This Agreement shall be binding upon and inure to the benefit of
Princeton, but subject to Paragraphs 2(a)(ii) and 2(b) hereof, this
Agreement shall not be transferable or assignable without the prior
written consent of Spintech.
(c) This Agreement shall be deemed to be a contract made under the laws of
the State of New York, United States of America, and for all purposes
shall be interpreted in its entirety in accordance with the laws of New
York. If this Agreement is translated into any language other than the
English language for any purpose, the English version shall be the
governing version.
(d) Nothing contained in this Agreement shall be construed as conferring
upon Princeton or its customers, directly or by implication, estoppel or
otherwise, any license under any trade secrets of Spintech, and no such
license or other rights shall arise from this Agreement or from any acts,
statements or dealings resulting in or related to the execution of this
Agreement.
IN WITNESS WHEREOF, the representatives hereunto duly authorized on behalf of
Spintech and Princeton have executed this Agreement the date first above
written.
Attest: SPINTECH, INC.
__________________ By: /S/ Leonard Osser
-----------------------------
Leonard Osser, CEO
Attest: PRINCETON PMC, INC.
__________________ By: /S/ Gregory Volok
-----------------------------
Greg Volok, President
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EXHIBIT "A"
1. Name and Description of the Product: The "Wand" - a computer-directed
local anesthetic injection system, each unit of the Wand consisting of a
plunger equipment component (the "Plunger") and a disposable syringe kit
and needle component (the "Needle").
2. United States Patent applied for: Hypodermic anesthetic injection method:
U.S. Patent Number: 4,747,824
Hypodermic anesthetic injection
apparatus:
U.S. Patent Number 5,180,371
3. Payment per unit of the Product:
(a) The cost incurred by Spintech to manufacture and to reimburse
product management for each Plunger plus thirty- five percent (35%)
thereof, or $70.00 per Plunger, whichever is greater.
(b) The cost incurred by Spintech to manufacture and to reimburse
product management for each Needle, plus thirty-five percent (35%)
thereof, or fifty percent (50%) of the gross profit of Spintech from the
sale of each Needle, whichever is less.
(c) All sales, use or excise taxes shall be paid directly or
indirectly by Princeton; and in calculating gross profits, deductions
shall be allowed for normal and customary trade discounts, returns and
allowances.
4. Number of Free Product Samples to be furnished to Princeton: 250 Plungers
and 50,000 Needles.
5. Minimum number of units of the Product to be produced and purchased: 25%
of the following annual amounts each 3 months (excluding the first 3
months), starting from the date of the product introduction to the market.
First 15 months of the term - 5,000 units
Next 12 months of the term - 15,000 units
Next 12 months of the term - 20,000 units
Each 12 months thereafter - 20,000 units plus an additional
eight percent (8%) each year (cumulative) of the term.
6. In addition to the payments prescribed by paragraph 3 above, Princeton
shall pay to Spintech not later than ninety (90) days after the end of
each period described in paragraph 4 above, an amount equal to fifty
percent (50%) of Princeton's pre-tax net profits from its sales of the
Product in excess of the amount to be negotiated by Spintech and Princeton
in good faith not later than December 31, 1996. As used herein, "pre-tax
net profits" means net profits calculated in accordance with generally
accepted accounting principles consistently applied, before payment or
provision for payment of federal, state and local, if any, income taxes
and without deduction for any management or similar fee paid or payable by
Princeton to Spintech.
EXHIBIT 10.15
TECHNOLOGY LICENSE AGREEMENT
between
SPINTECH, INC.
and
BIOTRONIX LABORATORIES, INC.
This Agreement (the "Agreement") is entered into as of this 20th day of
September, 1996, by and between Spintech, Inc., a Delaware corporation, which
has a principal business address of 218 Dew Drop Road, York, Pennsylvania 17402
("Spintech") and Biotronix Laboratories, Inc., a Delaware corporation which has
a principal place of business at 3235 Fairfield Avenue, St. Petersburg, Florida
33712 ("Licensee").
WHEREAS, Spintech owns the right to the MINI-TAPS UNIT (the "Product")
as set forth in U.S. Patent No. 5512730 dated April 30, 1996 and certain
corresponding foreign patents and related know-how and technology
(collectively the "Intellectual Property Rights") and
WHEREAS, Spintech desires to grant to Licensee, and Licensee desires to
accept a license for the use of the Intellectual Property Rights to manufacture
and market the Product in accordance with the terms set forth below.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements herein, the parties agree as follows:
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1. License Grants.
(a) Spintech hereby grants to Licensee, and Licensee hereby accepts, a
non-transferable, worldwide license to make, use and sell the Product which
utilizes the Intellectual Property Rights and which, in the absence of this
license, would infringe on Spintech's rights therein. The license shall be
exclusive worldwide for the balance of the term.
1.1 Sublicensing. Licensee shall not have the right to sublicense under
this Agreement without the prior written consent of Licensor which consent shall
not be unreasonably withheld. Licensee agrees that any such sublicense shall be
in writing and in terms consistent with the terms of this Agreement, and that
Licensee shall remain primarily liable to Spintech for performance by any
manufacturing sublicensees of Licensee's obligations under this Agreement.
Licensee shall forward to Spintech for its approval, not to be unreasonably
withheld, a complete copy of each proposed sublicense prior to its execution.
Anything herein to the contrary notwithstanding, L.G. Group Technologies, Inc.
("LG"), or any newly formed corporation in which LG has a controlling interest,
is hereby approved by Spintech as a sublicensee or assignee of Licensee's rights
hereunder. Licensee agrees to bind any sublicensee to an obligation to maintain
the confidentiality of proprietary information of Spintech.
1.2 Corporate affiliates; change in control. The license granted herein
may be assigned or sublicensed by Licensee to its corporate parent or any other
corporate affiliate now existing or hereafter formed provided Licensee
guarantees the obligations of such assignee or sublicensee. Changes in the
ownership or control of Licensee shall not constitute an assignment or
sublicensing of the Intellectual Property Rights in violation of this Agreement.
Merger or acquisition of Licensee shall not constitute an assignment or
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sublicensing in violation of this Agreement, provided the surviving company of
such merger or the acquirer of Licensee assumes the obligations of this
Agreement. Anything herein to the contrary notwithstanding, LG or any newly
formed corporation n which LG has a controlling interest is hereby approved by
Spintech as a sublicensee or assignee of Licensee's rights hereunder.
2. Research and Development. Spintech is presently engaged in the research
and development of a "mini-TAPS" unit utilizing the Intellectual Property
Rights. Spintech estimates but does not guarantee that, with appropriate
funding, research and development of the unit can be completed within
approximately six months. In partial consideration for the granting of this
exclusive license, Licensee agrees to pay up to $125,000, as a research and
development fund only, to Spintech to enable it to complete research and
development of the Product and thereafter to pay royalties as provided below.
2.1 Payment of Costs by Licensee. Within twenty-one (21) days of the date of
signing of this Agreement, Licensee shall pay Spintech the initial sum of
$50,000. Subsequent payments shall be made by Licensee to Spintech within ten
business days of each call by Spintech, provided however that, apart from the
initial sum of $50,000, Licensee shall be required to advance an amount of no
more than $25,000 within any given thirty (30) day period unless it elects to do
so. Spintech shall act in a commercially reasonable manner in an attempt to
complete research and development of the Product for less than $125,000. If
Spintech is able to complete research and development of the Product for less
than $125,000, Licensee shall be required to pay only that lesser amount.
2.2. Payment of Excess Costs by Spintech. In the event that research and
development of the Product cannot be completed for $125,000, and Spintech elects
to
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proceed with further research and development of the Product, Spintech shall
bear all costs in excess thereof Subject to Section 3 hereof, Spintech shall
furnish Licensee with such reports as to the progress of research and
development as Licensee may reasonably request. Spintech shall act in a
commercially reasonable manner to complete research and development of the
Product as soon as reasonably possible.
3. Termination of Project. In the event that Spintech reasonably believes that
the potential value of a fully researched and developed product does not warrant
additional expenditures for research and development of the Product beyond
$125,000 of which Spintech shall be the sole judge, it shall have the right to
terminate the project after a thirty (30) day written notification to Licensee.
Licensee shall then have the right to complete development, manufacture, and
sell the Product, at its sole cost and risk, or to terminate its rights and
obligations under this Agreement. In that event, Licensee shall not be subject
to any minimum sales figures provided in Section 4(a) hereof but shall be liable
for paying royalties based upon actual Net Sales pursuant to Section 4(a)
hereof.
4. Royalties.
(a) Licensee will pay Spintech royalties at the rate of 6% on world-wide gross
sales, less returns ("Net Sales") of the Product utilizing the Intellectual
Property Rights. No obligation to pay royalties shall accrue until the Product
is available for a sales and marketing effort to commence. For the first year
following commencement of sales, Licensee shall pay royalties calculated on
minimum Net Sales of $100,000 or actual Net Sales, whichever is greater. During
the following six month period, Licensee shall pay royalties calculated on
minimum Net Sales of $200,000 or actual Net Sales, whichever is . For the one
year period thereafter, Licensee shall pay royalties based on minimum annual Net
Sales of $1,000,000 or actual Net Sales, whichever is greater. The
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<PAGE>
minimum annual Net Sales figure used to calculate minimum royalty payments shall
increase by $250,000 for each succeeding year throughout the duration of this
Agreement, until the minimum annual Net Sales figure reaches $4,000,000 and
thereafter the minimum annual Net Sales figure used to calculate minimum
royalties shall be $4,000,000 for each succeeding year.
(b) Licensee shall provide Spintech with Net Sales figures with respect to each
product utilizing the Intellectual Property Rights for each calendar quarter
within twenty-one (21) days after the end of each quarter and with such other
details as Spintech may reasonably request. Within twenty-one (21) days after
the end of each quarter, Licensee shall pay to Spintech the amount of royalties
for such period based on such figures or based on the minimum Net Sales of the
Product pursuant to subparagraph (a), whichever is greater.
(c) Promotional units, in an amount not to exceed ten (10%) percent of the
number of units of the Product sold during the first year following commencement
of Sales, which means units given away without charge, shall be excluded from
Net Sales during such year and shall not earn royalties.
5. Term. The license granted herein shall be for a term commencing as of the
date of this Agreement and ending on the expiration of the last patent for which
rights are granted hereunder. Notwithstanding the foregoing, the license and
this Agreement may be terminated by Spintech (a) if Licensee defaults on
advances payable pursuant to Section 2.1 hereof, (b) if Licensee defaults on
paying royalties and fails to cure such default within ten (10) days after
receipt of written notice of default; or (c) upon thirty (30) days written
notice upon the default by Licensee of any other material provision hereunder;
provided such default has not been remedied within such thirty (30)` days. At
any time
-5-
<PAGE>
during the term of this Agreement, upon ninety (90) days written notice, in its
absolute discretion, Licensee may terminate this Agreement by giving notice
thereof and, upon payment of all royalties owed and submission of all required
sales reports through the date of termination, be relieved and discharged of all
further obligations and liability hereunder.
5.1 Automatic Termination. If the $50,000 payment, required by Section 2.1
of this Agreement, is not paid by Licensee to Spintech by 5:00 p.m. (EST) on
October 11, 1996, this Agreement shall terminate and shall be of no force and
effect without notice or any other claim by Spintech.
6. Spintech's Representations and Warranties. Spintech represents and warrants
to Licensee that as of the effective date hereof:
(a) Spintech is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) Spintech owns the Intellectual Property Rights hereunder.
(c) The execution and delivery of this Agreement have been duly authorized, and
as of the effective date hereof this Agreement will be a legal, valid and
binding obligation of Spintech enforceable against it in accordance with its
terms, and does not violate any provisions of any agreement to which Spintech is
a party or to which it is subject.
(d) Spintech shall maintain the licensed patents during the term of this
Agreement, by timely paying all fees and costs required by 35 U.S.C. ss.41 (b)
and similar regulations.
(e) Spintech has no knowledge of the existence of any patent right other than
the Intellectual Property Rights which would prevent Licensee from making,
selling or distributing the Product.
-6-
<PAGE>
(f) Spintech will make available to Licensee any scientific documentation or
data concerning the Intellectual Property Rights and the Product that Spintech
in its discretion believes may assist Licensee in making, selling or
distributing the Product.
7. Spintech's Disclaimer. Spintech disclaims any representation regarding 510K
approval or obligation to obtain such approval, and Licensee assumes the
responsibility for obtaining and maintaining such approval.
8. Licensee's Representations and Warranties. Licensee represents and warrants
to Spintech that as of the effective date hereof:
(a) Licensee is a corporation duly organized, existing and in good standing
under the laws of Delaware.
(b) The execution and delivery of this Agreement have been duly authorized and
as of the effective date hereof, will be a legal, valid and binding obligation
of Licensee enforceable against it in accordance with its terms, and does not
violate any provisions of any agreement to which Licensee is a party or to which
it is subject.
9. Confidentiality Obligation. Spintech and Licensee acknowledge that the
proprietary information of both parties which shall be disclosed under this
Agreement is a valuable property right to each disclosing party and shall only
be disclosed with the understanding that the proprietary information is
confidential and shall not, under any circumstance, except as stated in this
Agreement, be disclosed to any third parties without the prior written consent
of the party to be affected by such disclosure. Both parties agree to keep
secret and confidential all proprietary information which is supplied to each
other and which is designated as confidential, and both parties agree not to use
such proprietary information except as contemplated by and appropriate under
this Agreement. The obligation of confidentiality imposed by this Section shall
survive for five (5) years after
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<PAGE>
the expiration or termination of this Agreement. Information which Is designated
as confidential proprietary information shall not be deemed confidential, if
such information was: (a) publicly known prior to or are disclosure hereunder
other than through acts or omissions attributable to a party, or (b) already
known to a party at the time of disclosure hereunder, or (c) disclosed in good
faith to a party by a third party having a lawful right to do so.
9.1 Licensee's Subcontractors. Licensee is permitted under this Agreement to
engage in the services of subcontractors to assist Licensee to manufacture the
Product to be sold under this Agreement. Licensee hereby agrees that, in all
instances of such engagement of subcontractors, Licensee shall bind such
subcontractors to an obligation of confidentiality, designed to protect the
confidentiality of Spintech's proprietary information, which utilizes standards
of confidentiality which are at least equivalent to those applicable to the
parties hereunder.
GENERAL PROVISIONS
10. Entire Agreement of Parties. This Agreement contains the entire agreement
between the parties hereto with respect to the subject matter hereof, supersedes
any and all prior and/or contemporaneous agreements, representations, and
understandings of the parties whether written or oral relating to the subject
matter hereof.
11. Amendments. The parties of this Agreement understand and agree that this
Agreement may not be altered, amended, modified or otherwise changed in any
respect or particular whatsoever except by a writing duly executed by the
parties and/or their duly authorized representatives.
12. Severability. The parties agree that if any part, term, or provision of this
Agreement shall be found illegal or in conflict with any valid controlling law,
the validity
-8-
<PAGE>
of the remaining provisions shall not be affected thereby. In any event the
legality of any provision of this Agreement is brought into question because of
a decision by a court of competent jurisdiction of any country in which this
Agreement applies, Spintech, by written notice to Licensee, may revise the
provision in question or may delete it entirely so as to comply with the
decision of said court.
13. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall be deemed to
be and constitute one and the same instrument.
14. Force Majeure. Neither party shall be responsible for failure or delay in
the performance of any of its obligations hereunder due to force majeure, which
shall mean any circumstances which, due to an event beyond the party's
reasonable control, delay or prevent the performance when due of the obligations
of any party hereunder, such as but not limited to, acts of God, acts,
regulations or laws of any government, wars, civil commotions, destruction of
production facilities or materials by fires, earthquakes or storms, labor
disturbances, shortages of public utilities, common carriers or raw materials,
or any other causes of similar effect. During any such occurrence of force
majeure, this Agreement shall not be terminated or expire, but shall only be
suspended and the party claiming force majeure shall continue to perform its
obligations as soon as such cause of force majeure is removed or alleviated.
15. Notices. Any notice that may or shall be delivered to either party hereunder
shall be considered delivered and effective (a) when personally delivered, (b)
when received by facsimile, or (c) when received by courier or postal service
delivery at the following addresses:
If to Spintech: Spintech, Inc.
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<PAGE>
218 Dew Drop Road
York, Pennsylvania 17402
Attn.: Leonard Osser, President
If to Licensee: Biotronix Laboratories, Inc.
Fairfield Avenue
Petersburg, Florida 33712
S. Jack Descent, CEO
16. Attorney's Fees. In the event any action, suit, arbitration or other
proceeding is brought, in law or equity, to enforce or interpret any of the
provisions of this Agreement, the prevailing party shall be entitled to recover,
in addition to any other relief to which it is entitled, reasonable attorneys'
fees and other costs.
17. Binding on Successors and Assigns. Each and all of the covenants, terms,
provisions and agreements contained in this Agreement shall be binding on, and
inure to the benefit of, the successors, executors heirs, representatives,
administrators, and assigns of the parties hereto; provided that any assignment
shall be made only with the consent of the non-assigning party, which consent
shall not be unreasonably withheld.
18. No Waiver. No failure to exercise, and no delay in exercising any right,
power or privilege hereunder shall operate as a waiver thereof No waiver of any
breach of any provisions shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision. No extension of time or
performance of any obligations or other act hereunder shall be deemed to be an
extension of time for performance of any other obligation or any other act
hereunder.
19. Independent Contractors. The relationship between Spintech and Licensee
established by this Agreement is that of independent entities, and nothing in
this Agreement shall be construed: (a) to give either party the right or power
to direct or control the daily activities of the other party; (b) to constitute
the parties as principal and
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<PAGE>
agent, principal and distributor, employer and employee, partners, joint
ventures, co-owners or otherwise as participants in a joint undertaking; or (c)
to allow either party to create or assume any obligation on behalf of the other
party for any purpose whatsoever except as may be specifically permitted
hereunder; or (d) to allow either party to represent to any person or entity
that such party has any right or power to enter into any binding obligation on
the other party's behalf except as may be specifically permitted hereunder.
20. Governing Law. This Agreement shall be governed by and intended in
accordance with the laws of the State of New York.
21. Litigation. Licensee shall notify Spintech of any suspected infringement of
Spintech's patents. The primary right to institute a suit for infringement rests
with Spintech. Should Spintech fail to institute an infringement action in the
case of a bona fide infringement, as determined in good faith by and within the
sole discretion of Spintech, within thirty (30) days after notice by Licensee of
the confirmed infringement or if Spintech gives notice to Licensee that Spintech
will not institute an infringement action in the relevant instance, then
Licensee shall have the right to bring an action for infringement at its cost
and risk. Both parties agree to cooperate with the other party in all reasonable
respects, to have any of Spintech's or Licensee's employees testify when
requested by the other party, and to make available any records, papers,
information, specimens and the like reasonably necessary to prosecution of the
infringement action. Any recovery received pursuant to such infringement action
shall be retained by the party or parties bringing the infringement action, with
allowances to the cooperating party for expenses incurred in supporting the
infringement action.
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<PAGE>
During the term of this Agreement, Licensee shall bring to Spintech's
attention any prior art or other information known to Licensee which is relevant
to the patentability or validity of any of the relevant patents and which might
cause a court to deem any of the patents wholly or partly inoperative or
invalid. Licensee shall particularly specify such prior art or other information
to Spintech at the time it learns thereof and not less than ninety (90) days
prior to bringing any action against Spintech asserting the invalidity of any of
the patents.
IN WITNESS WHEREOF, this Agreement is executed by the duly authorized
officers effective as of the day and year first written above.
SPINTECH, INC.
By: /s/ Leonard Osser
---------------------------------
Leonard Osser
CEO and President
BIOTRONIX LABORATORIES, INC.
By: /s/ S. Jack Descent
---------------------------------
S. Jack Descent
Chairman and CEO
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EXHIBIT 21.1
SUBSIDIARIES OF MILESTONE SCIENTIFIC INC.
Princeton PMC, Inc.
Incorporated under the laws of the State of Delaware
Doing business under the name Princeton PMC, Inc.
Sagacity I, Inc.
Incorporated under the laws of the State of Delaware
Doing business under the name The Wisdom Toothbrush Co.
Spintech, Inc.
Incorporated under the laws of the State of Delaware
Doing business under the name Spintech, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated financial statements for the fiscal year ended
December 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 779,359
<SECURITIES> 0
<RECEIVABLES> 323,746
<ALLOWANCES> 0
<INVENTORY> 508,727
<CURRENT-ASSETS> 1,632,620
<PP&E> 281,378
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,656,946
<CURRENT-LIABILITIES> 699,364
<BONDS> 0
0
0
<COMMON> 4,633
<OTHER-SE> 3,952,949
<TOTAL-LIABILITY-AND-EQUITY> 4,656,946
<SALES> 0
<TOTAL-REVENUES> 302,388
<CGS> 195,659
<TOTAL-COSTS> 195,659
<OTHER-EXPENSES> 2,393,337
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73,203
<INCOME-PRETAX> (1,949,528)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,949,528)
<EPS-PRIMARY> ($.43)
<EPS-DILUTED> 0
</TABLE>
