<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 3, 1998.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DEOTEXIS, INC.
(Exact Name of Registrant as Specified in its Charter)
NEVADA
(State or other jurisdiction
of Incorporation or Organization)
------------------------------
2844975-1
(Primary Standard Industrial
Classification Code No.)
------------------------------
13-3666344
(I.R.S. Employer Identification No.)
------------------------------
885 THIRD AVENUE, SUITE 2900
NEW YORK, NEW YORK 10022-4834
(212) 829-5698
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
------------------------------
GEROLD TEBBE
PRESIDENT
DEOTEXIS, INC.
885 THIRD AVENUE, SUITE 2900
NEW YORK, NEW YORK 10022-4834
(212) 829-5698
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
------------------------------
COPIES TO:
DAVID S. SCHAEFER, ESQ.
LOEB & LOEB, LLP
345 PARK AVENUE
NEW YORK, NEW YORK 10154-0037
(212) 407-4000
(212) 407-4990 (FAX)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
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- --------------------------------------------------------------------------------
<PAGE>
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF CLASS OF
SECURITIES TO AMOUNT TO BE PROPOSED OFFERING PROPOSED AGGREGATE AMOUNT OF
REGISTERED REGISTERED PRICE PER SHARE(1) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 1,673,250 $32.00 $53,544,000 $15,795.48
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Amount assumes sale of all shares being registered hereunder.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
DEOTEXIS, INC.
CROSS REFERENCE SHEET
(SHOWING LOCATION IN THE PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS 1 THROUGH 12, PART I, OF FORM S-1)
<TABLE>
<CAPTION>
ITEM IN FORM S-1 PROSPECTUS CAPTION
------------------------------------------------------ ------------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Facing Page of Registration Statement; Outside Front
Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover Page of Prospectus; Outside Back
Cover Page of Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Prospectus Summary; Risk Factors; Selected Financial
Data
4. Use of Proceeds....................................... Use of Proceeds
5. Determination of Offering Price....................... Outside Front Cover Page of Prospectus; Risk Factors
6. Dilution.............................................. *
7. Selling Security Holders.............................. Selling Security Holders
8. Plan of Distribution.................................. Selling Security Holders
9. Description of Securities to be Registered............ Description of Securities
10. Interests of Named Experts and Counsel................ *
11. Information with Respect to the Registrant............ Common Stock Price Information; Selected Financial
Data; Plan of Operations; Business; Management;
Principal Shareholders; Certain Transactions
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Management--Indemnification of Officers and Directors
</TABLE>
- ------------------------
*Omitted as not applicable
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 3, 1998
PROSPECTUS
DEOTEXIS, INC.
1,673,250 SHARES OF COMMON STOCK
This Prospectus (the "Prospectus") relates to the registration by Deotexis,
Inc. (the "Company"), at its own expense for the account of Overton Holdings
Limited, a corporation formed under the laws of the Turks & Caicos Islands,
British West Indies ("OHL"), the majority stockholder of the Company, and the
additional stockholders of the Company listed on Schedule A hereto (each, along
with OHL, a "Selling Security Holder" and, collectively, the "Selling Security
Holders"), of 1,673,250 shares of the Company's Common Stock, $.001 par value
per share (the "Shares"). OHL acquired all of the Shares in a recent purchase
from the Company. (See "Certain Transactions--Stock Purchase Agreement.") OHL
then gifted Shares to each of the other Selling Security Holders listed on
Schedule A hereto, in the amounts set forth thereon opposite their respective
names. (See "Certain Transactions--Gift of Shares by OHL.") OHL is 100%
beneficially owned and controlled by Mr. Gerold Tebbe, President, Chief
Executive Officer, Secretary, Treasurer and a director of the Company. It is
currently anticipated that the public offering price of the securities offered
hereby will be $32.00 per share. See "Description of Securities."
Prior to this offering (the "Offering"), there has been no significant
public market for the Shares, and no assurance can be given that such a market
will exist upon completion of this Offering, or, if such a market develops, that
it will be sustained. The public offering price of the Shares has been
arbitrarily determined by the Selling Security Holders based upon their
evaluation of the potential commercial value of the Company's patents, patent
applications and related intellectual property and does not necessarily bear any
relationship to the Company's asset value, book value, net worth, results of
operations or any other generally accepted criteria of value. (See "Risk
Factors--Arbitrary Determination of Offering Price.") The Company's Common Stock
currently trades on the National Association of Securities Dealers, Inc.
("NASD") OTC Electronic Bulletin Board under the symbol DETX. The Company
anticipates, at some future date when it feels its level of operations warrants
it, applying for quotation of the Company's Common Stock on The Nasdaq SmallCap
Market ("Nasdaq"). There can be no assurance, however, that the Company's Common
Stock will ever be quoted on Nasdaq. In the event that application for quotation
of the Company's Common Stock on Nasdaq is never made, or, if made, is denied,
it is anticipated that the Company's Common Stock (and the Shares) will be
quoted on the NASD OTC Electronic Bulletin Board under the current trading
symbol. In such event, the liquidity of the Shares could be adversely affected
and the trading of the Shares could be subject to the so-called "penny stock"
rules. See "Risk Factors--No Assurance of Public Trading Market or Nasdaq
Inclusion," "-- Potential Continued Listing on the NASD OTC Electronic Bulletin
Board" and "--Risk of Low-Priced Securities."
(COVER CONTINUED ON NEXT PAGE)
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGES 11-20.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO
SELLING
UNDERWRITING DISCOUNTS OR SECURITY
PRICE TO PUBLIC COMMISSIONS(2) HOLDERS(3)
<S> <C> <C> <C>
Per Share of Common Stock............................... $ 32.00 N/A $ 32.00
Total................................................... $ 53,544,000(1) N/A $ 53,544,000
</TABLE>
(1) Amount assumes sale by the Selling Security Holders of all Shares being
offered hereby.
(2) No underwriting discounts or commissions will be paid in connection with the
registration of the Shares or the sale thereof for the account of the
Selling Security Holders pursuant to this Prospectus.
(3) All of the Shares being offered hereby and registered pursuant to the
registration statement relating thereto filed by the Company with the
Commission, of which this Prospectus forms a part, are being registered for
resale only, for the account of the Selling Security Holders, and the
Company shall receive no proceeds with respect thereto. All expenses of
issuance and distribution of the Shares, including registration fees,
transfer agent's fees, costs of printing and engraving, legal and accounting
fees, and any Federal or state taxes or fees will be paid by the Company.
These expenses are estimated to be approximately $283,300 in the aggregate.
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
(COVER CONTINUED FROM PREVIOUS PAGE)
The sale of the Shares is not being underwritten in this Offering and the
Company will not receive any proceeds from the sale of the Shares. (See
"Prospectus Summary--The Offering," "Selling Security Holders" and "Certain
Transactions--Stock Purchase Agreement.") The Shares being registered for the
account of the Selling Security Holders may be sold by the Selling Security
Holders or their transferees commencing on the date of this Prospectus. Sales of
the Shares by the Selling Security Holders or their transferees may depress the
price of the Common Stock in any market that may develop therefor.
The sale of the Selling Security Holders' Shares may be effected from time
to time in transactions (which may include block transactions by or for the
account of the Selling Security Holders) in the over-the-counter market or in
negotiated transactions, through the writing of options on the Selling Security
Holders' Shares, through a combination of such methods of sale, or otherwise.
Sales may be made at fixed prices which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. See "Selling Security
Holders."
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports and other information with the Securities and
Exchange Commission (the "Commission"). The reports and other information filed
by the Company with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
at 7 World Trade Center, 13th Floor, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material can also be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Room 1025, Washington, D.C. 20549, at
prescribed rates. Also, the Commission maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants (such as the Company) that file electronically with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company pursuant to
the Exchange Act are incorporated by reference in this Prospectus:
(1) The Company's Annual Report on Form 10-K for the year ended December 31,
1996;
(2) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997;
(3) The Company's Current Reports on Form 8-K dated March 6, 1997, August 4,
1997, October 22, 1997, January 28, 1998 and February 6, 1998;
(4) The Company's Information Statement on Schedule 14f-1, dated September
26, 1997; and
(5) The description of the Company's Common Stock included in the section
entitled "Description of Securities--Common Stock," contained in the
Company's Registration Statement No. 33-51194NY, as amended.
Where any document or part thereof is incorporated by reference into this
Prospectus but not delivered herewith, the Company undertakes to provide to each
person, including any beneficial owner, to whom this Prospectus is delivered,
upon written or oral request of such person, a copy of any and all information
that has been incorporated by reference into this Prospectus and the address and
telephone number to which such a request is to be directed.
All reports and definitive proxy or information statements filed by the
Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus shall be deemed to be incorporated by
reference into this Prospectus from the date of the filing of such documents.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
2
<PAGE>
(COVER CONTINUED FROM PREVIOUS PAGE)
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act of 1933, as amended,
with respect to the Shares offered hereby. This Prospectus is filed as a part of
the Registration Statement and does not contain certain information set forth in
or annexed as exhibits to the Registration Statement. Reference is made to such
exhibits to the Registration Statement for the complete text thereof. For
further information with respect to the Company and the Shares offered hereby,
reference is made to the Registration Statement and to the exhibits filed as
part thereof, which may be inspected at the office of the Commission without
charge, or copies thereof may be obtained therefrom upon payment of a fee
prescribed by the Commission. Statements contained in this Prospectus regarding
the contents of any contracts or other documents are not necessarily complete
and, in each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference.
ENFORCEABILITY OF CIVIL LIABILITIES
AGAINST FOREIGN PERSONS
Although the Company and a majority of its directors are domiciled within
the United States, certain directors and officers of the Company, including
Gerold Tebbe, President, Chief Executive Officer, Secretary, Treasurer and a
director of the Company, reside outside of the United States. In addition, if
the Company engages in certain corporate transactions it is currently
considering, a large part or substantially all of the Company's assets may be
located outside of the United States. There is, therefore, substantial doubt as
to the ability of investors to enforce judgments obtained in the United States
against those foreign persons, or to enforce in foreign courts judgments
obtained in United States courts, predicated on the civil liability provisions
of the United States Federal securities laws. See "Risk Factors --Persons
Located Outside the United States."
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUMMARY......................................................................................... 5
RISK FACTORS............................................................................................... 11
USE OF PROCEEDS............................................................................................ 21
CAPITALIZATION............................................................................................. 22
DIVIDEND POLICY............................................................................................ 22
COMMON STOCK PRICE INFORMATION............................................................................. 22
SELECTED FINANCIAL DATA.................................................................................... 23
PLAN OF OPERATIONS......................................................................................... 24
BUSINESS................................................................................................... 28
MANAGEMENT................................................................................................. 37
PRINCIPAL SHAREHOLDERS..................................................................................... 43
SELLING SECURITY HOLDERS................................................................................... 44
CERTAIN TRANSACTIONS....................................................................................... 45
DESCRIPTION OF SECURITIES.................................................................................. 48
SHARES AVAILABLE FOR FUTURE SALE........................................................................... 49
LEGAL MATTERS.............................................................................................. 50
EXPERTS.................................................................................................... 50
CHANGE IN ACCOUNTANTS...................................................................................... 50
ADDITIONAL INFORMATION..................................................................................... 50
FINANCIAL STATEMENTS....................................................................................... F-1
SCHEDULE A - LIST OF ADDITIONAL SELLING SECURITY HOLDERS................................................... S-1
</TABLE>
------------------------
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFERING OF THE SHARES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS CANNOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY OTHER PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE PURSUANT THERETO SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
4
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED BY, AND MUST BE READ IN CONJUNCTION WITH,
THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS SET FORTH ELSEWHERE IN
THIS PROSPECTUS. UNLESS OTHERWISE STATED, THIS PROSPECTUS ASSUMES THAT THE
PUBLIC OFFERING PRICE FOR THE SHARES WILL BE $32.00. UNLESS OTHERWISE STATED,
ALL DOLLAR AMOUNTS INCLUDED IN THIS PROSPECTUS ARE DENOMINATED IN UNITED STATES
DOLLARS.
THE COMPANY
Deotexis, Inc. (the "Company") was incorporated in Nevada on March 6, 1992,
has no operating history, has not generated or recognized any revenues, and is
in the development stage. The Company was originally organized with the sole
purpose of identifying a suitable candidate to acquire or with which to merge,
and its existence has been maintained since formation with that objective in
mind. On September 30, 1997, the Company, then known by its former name, Zeron
Acquisitions II, Inc. ("Zeron"), and Zeron's two controlling stockholders at the
time, entered into a Stock Purchase Agreement with Mr. Gerold Tebbe and Overton
Holdings Limited, a Turks & Caicos Islands corporation wholly beneficially owned
and controlled by Mr. Tebbe ("OHL"), pursuant to which OHL agreed to buy
4,183,125 newly-issued and non-registered shares of Common Stock, $.001 par
value per share, of the Company, in exchange for (i) $4,000,000 in cash from
OHL, and (ii) the contribution to the Company by Mr. Tebbe, or entities owned or
controlled by him, of certain patents, patent applications and associated
intellectual property, in return for nominal consideration and a reservation of
a 1% royalty by Mr. Tebbe on all net income recognized by the Company from the
commercial exploitation of such rights. (See "Certain Transactions--Stock
Purchase Agreement.") OHL then gifted Shares to each of the other Selling
Security Holders listed on Schedule A hereto, in the amounts set forth thereon
opposite their respective names. See "Certain Transactions--Gift of Shares by
OHL."
The creative and technical expertise behind the Company's business is
provided by Mr. Gerold Tebbe, who is a qualified textile designer with over
twenty-five years of experience in the German and international textile
industries. In 1970, Mr. Tebbe took over the management of his family's
privately-held textile company, and refocused its activities on providing
technical services to manufacturers of production machinery for woven and
knitted materials. Thereafter, he rapidly built up an international customer
base with sales in Europe, North America and Japan. His company became a leader
in the process of transferring complex designs from the artist's drawing board
onto high-volume production machines for the manufacture of patterned cloths.
This proprietary technology gave his company a unique position in its market. In
the 1980's, reacting to the competitive threat to the European textile industry
from inexpensive imports from Asia and other low labor cost regions, Mr. Tebbe
began to seek an alternative to his existing business. After experimenting with
textile-based controlled-release delivery systems, he developed the product line
the Company currently intends to market, which he started to test market on a
preliminary basis in the late 1980's. At that point, a dispute arose over the
validity of the patents and other intellectual property employed to produce the
products the Company currently intends to market. That patent dispute was
resolved in Mr. Tebbe's favor by the European Patent Office in late 1996. See
"Risk Factors-- Litigation and Disputes."
The Company intends to create an organization staffed by suitably qualified
executives to support Mr. Tebbe. Initially, the Company plans to generate
revenues by (1) using an acquired operating company in Europe or the United
States to supply product to prospective customers who do not have the ability to
license the technology and manufacture the Company's products themselves; and
(2) licensing the technology and processes required to manufacture the Company's
products to consumer products manufacturing and distribution companies in return
for a licensing fee. The Company plans to appoint Senior Product Managers to
take responsibility for sales and licensing agreements with potential customers.
The Company anticipates that the Product Managers will have experience in the
licensing business. In addition, the Company hopes to acquire an operating
company with a management team in place in Europe or the United States. The
Company anticipates that the Product Managers will either be employees of such
an
5
<PAGE>
acquired company or members of the newly-hired management the Company will put
in place as it proceeds to expand its operations following this Offering. (See
"Plan of Operations--Senior Management" and "--Manufacturing and Distribution,"
and "Business--Licensing" and "--Manufacturing and Distribution.") While the
Company has had preliminary discussions with several wholesale distributors and
potential licensees, there can be no assurance that licensing agreements will be
reached with those entities, or any others, on terms advantageous to the
Company, if at all. In addition, though the Company has had preliminary
discussions with a few operating companies that may be potential acquisition
candidates, there can be no assurance that the Company will be able to identify
a suitable company for acquisition in the United States, Europe, or any other
location or, if such an entity is identified, that the Company will be able to
complete such an acquisition on favorable terms. In the event the Company does
not succeed in entering into licensing agreements, and consummating an
acquisition, within its first six to twelve (6-12) months of operations, the
Company's ability to produce its products and introduce them into the market in
any significant way will be extremely limited. See "Risk Factors--'Licensing of
Patents, Trademarks and Other Rights," and "--Planned Acquisition" and "Plan of
Operations--Manufacturing and Distribution."
The Company is engaged in the business of developing and commercializing
certain patented textile-based controlled-release delivery systems for consumer
products in certain sectors of the toiletries, cosmetics, apparel, household
products and personal care products markets. The Company's goal is to build on
its patented "know-how" in research and development, and to acquire
manufacturing and marketing resources to become a profitable supplier of
textile-based, controlled-release delivery systems to a wide range of industry
sectors. The Company believes that its controlled-release delivery systems are
unique in the way they combine microencapsulation technology with flexible
fleece-type fabrics. The Company's first controlled-release delivery system was
developed by Mr. Tebbe in 1987, and he filed a patent application for the
technology relating thereto in that same year. The application was opposed in
the European patent courts by The Procter & Gamble Company, one of the world's
largest manufacturers and distributors of household and consumer products. In
late 1996, the European Patent Office dismissed Procter & Gamble's challenge in
favor of Mr. Tebbe's patent claims.
The Company's technology was developed by Mr. Tebbe in Europe, where several
products are now ready for further test-marketing and commercial launch by the
Company. These products include: (1) the "Deotexis Deodorant Patch," a small,
disposable adhesive patch which is designed for quick and easy attachment to any
type of clothing, for use as a controlled-release anti-perspirant and deodorant;
(2) the "Deotexis Perfume Patch," a small, disposable adhesive patch designed
for easy and unobtrusive attachment to the inner surface of clothes, for
controlled release of perfume; and (3) the "Deotexis Cold Scarf," a disposable
scarf impregnated with herbal substances for use by persons seeking relief from
the symptoms of colds and congestion. The Deotexis Deodorant Patch, the Deotexis
Perfume Patch and the Deotexis Cold Scarf will be referred to herein
collectively as the "Products." The Company anticipates, and its test production
and marketing support this intention, that the Products will be competitively
priced in relation to alternative products employing traditional delivery
systems. The Products will be sold as over-the-counter items and not as
prescription medications. The Company's research and development and marketing
strategy will be to avoid marketing any products requiring resource-intensive
Food and Drug Administration-type approvals. See "Risk Factors--Regulatory
Compliance and Governmental Approvals."
The Company believes that the Products address the problem of effectively
maintaining personal freshness for extended time periods. The Products are
intended to serve as substitutes for perfumes, toiletries, cosmetics,
deodorants, emollients, decongestants and other personal care products marketed
with traditional delivery systems. Products employing traditional delivery
systems (powders, roll-ons, creams, sprays, etc.), in the Company's view, can be
inconvenient to use and, after application, rapidly deteriorate and lose their
efficacy. The Company's Products are intended to provide for the controlled-
release of active substances in desired quantities over an extended period of
time, thereby providing a superior delivery system that avoids the "peak and
valley" effect resulting from use of traditional delivery
6
<PAGE>
systems currently on the market. The Company intends to market the Products as
an alternative to similar consumer products employing traditional delivery
systems, with the advantage of extended active substance effectiveness, and the
convenience of a no-mess, no-spill solution to their personal care needs.
Potential customers for the Company's products are consumers worldwide.
Test-marketing in Europe has shown significant interest in the Deotexis Cold
Scarf, based on its convenience, versatility and cost-effectiveness. The
Company's marketing and product strategy reflects Mr. Tebbe's considerable
experience with the test-marketing of the Company's Products and is designed to
be responsive to the requirements of consumers and the marketplace. To reach
consumer markets, the Company intends to sell its products through two separate
channels: (1) wholesale distributors to drugstores and pharmacies; and (2)
licensees, which are expected to be large and mid-sized corporations in the
toiletries, cosmetics, apparel, household products and personal care products
industries. The Company has had preliminary discussions with several major
companies in both categories and believes it will be in a position to conclude
sales and licensing agreements promptly after concluding its corporate
organization and staffing, though there can be no assurance that any such
contracts or agreements will be consummated. In addition, the Company is moving
towards execution of a formal agreement with the German distributor, KuW Hummel
Vertriebs GmbH ("Hummel"), that has been manufacturing and distributing the
Deotexis Cold Scarf during the test-marketing phase of operations, pursuant to
which Hummel will continue to manufacture and distribute the Deotexis Cold Scarf
in return for payment of licensing fees and royalties to the Company. The
Company anticipates that it will be able to conclude such an agreement with
Hummel in the forty-five to sixty (45-60) days following this Offering. (See
"Business--Agreement with KuW Hummel Vertriebs GmbH.") There can, however, be no
assurance that such an agreement will be executed in that time-frame, or at all.
The Company's marketing plan anticipates that some potential customers will
require products manufactured by the Company or a Company sub-contractor. The
Company therefore hopes to acquire an operating company with manufacturing
capabilities in Europe or the United States within the first six to twelve
(6-12) months of its operations, and thereafter use the Company's Products to
diversify and expand the acquired company's sales. The Company's marketing plan
further anticipates that other customers will enter into license agreements with
the Company, under which, in return for a sales-based royalty payment to the
Company, licensees will be entitled to the use of the Company's intellectual
property to manufacture and distribute the Products. See "Business--Licensing,"
and "--Manufacturing and Distribution."
The Company has also had indications that its proprietary technology may
have applications in the pharmaceutical industry, particularly in the areas of
controlled-release drug delivery systems and diagnostic systems. The Company
plans to follow developments in the pharmaceutical industry closely, and to
capitalize on any promising opportunities for the application or utilization of
its intellectual property, very likely by following a licensing strategy and
making its processes available to companies in this market in return for a
sales-based royalty payment. See "Business--Potential Pharmaceutical
Applications for the Company's Technology."
7
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered................ 1,673,250 shares of Common Stock of the Company. See
"Description of Securities."
Securities Registered for the
Selling Security Holders........ All 1,673,250 shares of Common Stock being registered
hereby are being registered for the account of Overton
Holdings Limited, a Turks & Caicos Islands corporation
("OHL"), the majority stockholder of the Company, and
for the additional stockholders of the Company listed on
Schedule A hereto (each, along with OHL, a "Selling
Security Holder" and, collectively, the "Selling
Security Holders.") The Selling Security Holders' Shares
are being registered for resale only, and the Company
will not receive any of the proceeds from any sales of
such Shares by the Selling Security Holders. See
"Certain Transactions--Stock Purchase Agreement" and
"--Gift of Shares by OHL."
Common Stock Outstanding
Prior to the Offering........... 4,546,875 shares
After the Offering.............. 4,546,875 shares (1)
Use of Proceeds................... All of the Shares offered hereby are being registered
for the account of the Selling Security Holders for
resale only, and the Company will not receive any of the
proceeds from any sales of the Shares by the Selling
Security Holders. See "Use of Proceeds."
</TABLE>
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(1) None of the Shares being offered hereby will be newly-issued shares; rather,
the Shares are being registered for the account of the Selling Security
Holders and are already outstanding. Therefore, the number of shares of the
Company's Common Stock outstanding both prior to and after the Offering will
be the same. This number does not take into account the as yet undetermined
amount of shares of Common Stock that will be reserved for issuance pursuant
to the Company's Director Stock Option Plan and Incentive Stock Option Plan.
8
<PAGE>
<TABLE>
<S> <C>
Risk Factors...................... The Company is a development stage company with no
operating history or revenues to date. The Company has
no manufacturing facilities or distribution network to
manufacture and distribute its consumer products; it is
dependent on the services and technical expertise of Mr.
Gerold Tebbe, who has no prior experience operating a
public company. The Company may face competition from
large, well-established and well-funded international
consumer products companies. The Company may have to
expend significant funds to ensure that its products do
not require Food and Drug Administration-type regulatory
approvals in the markets where they are intended to be
sold. The Company is beneficially controlled by Mr.
Tebbe, as sole beneficial owner of OHL. The Company has
not paid, and has no current intention of paying, any
dividends on its Common Stock. Sales generated by the
Company will, at least initially, be from foreign
markets and therefore will be subject to any risks
inherent in doing business in those foreign countries,
and to foreign currency fluctuations in general. Full
implementation of the Company's business plan is heavily
dependent upon the acquisition of a manufacturing entity
in the United States or Europe, and there can be no
assurance that such an acquisition will ever be
consummated. The Company's Common Stock is currently
traded on the NASD OTC Electronic Bulletin Board. While
the Company anticipates that at some future date it will
apply for listing of the Shares on Nasdaq when it feels
its level of operations warrants such an application,
there can be no assurance that such listing will be
obtained or maintained in the future. If the Shares are
not quoted on Nasdaq, trading in the Shares will be
subject to the Commission's so-called "penny stock"
rules. For these reasons, among others, this Offering
involves a high degree of risk and should be made only
by investors who can afford the loss of their entire
investment. See "Risk Factors."
NASD OTC Electronic Bulletin Board Common Stock--DETX
Symbol (2)......................
</TABLE>
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(2) The Company's Common Stock is currently quoted on the NASD OTC Electronic
Bulletin Board, under the symbol DETX. The Company anticipates that, at some
future date when it has achieved a sufficient level of operations such that
it will satisfy the initial and continued listing criteria of Nasdaq, the
Company will apply for listing and its Common Stock and the Shares will be
listed on Nasdaq. However, in the event that the initial listing of the
Common Stock and the Shares does not occur, or in the event that at some
time in the future after such initial listing, the Common Stock and the
Shares are delisted or no longer quoted on Nasdaq, it is anticipated that
the Common Stock and the Shares will be quoted on the NASD OTC Electronic
Bulletin Board. The inclusion of the Common Stock and the Shares on Nasdaq
or the NASD OTC Electronic Bulletin Board does not imply that an established
public trading market will develop therefor or, if such a market develops,
that such market will be sustained. See "Risk Factors--No Assurance of
Public Trading Market or Nasdaq Inclusion" and "-- Potential Continued
Listing on the NASD OTC Electronic Bulletin Board."
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<PAGE>
SUMMARY FINANCIAL INFORMATION
The Company is currently in the development stage. The summary financial
information presented below as of and for the year ended December 31, 1997 is
derived from the financial statements audited by M.R. Weiser & Co. LLP, and the
December 31, 1996 is derived from the financial statements audited by Mayer
Rispler & Company, P.C. The summary financial information for the period from
inception (March 6, 1992) to December 31, 1992 and for the years ended December
31, 1993, 1994, and 1995 are derived from the financial statements audited by
Nachum Blumenfrucht, CPA. The summary financial information should be read in
conjunction with "Plan of Operations" and the financial statements of the
Company, for the years 1995, 1996 and 1997, and for the period from inception,
March 6, 1992 to December 31, 1997, including the notes thereto, appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 6, 1992
MARCH 6, 1992 YEAR ENDED (DATE OF
(DATE OF INCEPTION) DECEMBER 31, INCEPTION)
TO DECEMBER 31, ------------------------------------------------------ TO DECEMBER 31,
1992 1993 1994 1995 1996 1997 1997
------------------- --------- --------- --------- --------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue - interest income..... $ 190 $ 147 $ 12,614 $ 16,268 $ 23,426 $ 38,753 $ 91,398
Expenses:
General and
administrative............ 252 1,913 39,798 51,273 67,163 278,654 439,053
------ --------- --------- --------- --------- ---------- -----------------
Net loss...................... $ (62) $ (1,766) $ (27,184) $ (35,005) $ (43,737) $ (239,901) $(347,655)
------ --------- --------- --------- --------- ---------- -----------------
------ --------- --------- --------- --------- ---------- -----------------
Basic loss per common share... $ (.35) $ (9.87) $ (.10) $ (.13) $ (.16) $ (.19)
------ --------- --------- --------- --------- ----------
------ --------- --------- --------- --------- ----------
Weighted average number of
shares outstanding........... 179 179 278,750 278,750 278,750 1,237,618
------ --------- --------- --------- --------- ----------
------ --------- --------- --------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1996 1997
--------- ---------
<S> <C> <C>
BALANCE SHEET DATA:
Current assets............................................................................ $ 532,668 $4,036,261
Working capital........................................................................... 517,368 3,812,377
Total assets.............................................................................. 532,685 4,036,261
Total liabilities......................................................................... 15,300 223,884
Stockholders' equity...................................................................... 517,385 3,812,377
</TABLE>
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RISK FACTORS
AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK
AND SHOULD BE MADE ONLY BY INVESTORS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. PROSPECTIVE INVESTORS, PRIOR TO MAKING AN INVESTMENT IN THE SHARES,
SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, AMONG OTHERS, RELATING TO
THE COMPANY AND THIS OFFERING.
DEVELOPMENT STAGE COMPANY; NO OPERATING HISTORY; UNPROVEN CONCEPT. The
Company was incorporated in Nevada on March 6, 1992, has no operating history,
has not generated or recognized any revenues, and is in the development stage.
The Company was originally organized with the sole purpose of identifying a
suitable candidate to acquire or with which to merge, and its existence has been
maintained since formation with that objective in mind. On September 30, 1997,
the Company, then known by its former name, Zeron Acquisitions II, Inc.
("Zeron"), and Zeron's two controlling stockholders at the time, entered into a
Stock Purchase Agreement with Mr. Mr. Gerold Tebbe and Overton Holdings Limited,
a Turks & Caicos Islands corporation wholly beneficially owned and controlled by
Mr. Tebbe ("OHL"), pursuant to which OHL agreed to buy 4,183,125 newly-issued
and non-registered shares of Common Stock, $.001 par value per share, of the
Company, in exchange for (i) $4,000,000 in cash from OHL, and (ii) the
contribution to the Company by Mr. Tebbe, or entities owned or controlled by
him, of certain patents, patent applications and associated intellectual
property, in return for nominal consideration and a reservation of a 1% royalty
by Mr. Tebbe on all net income recognized by the Company from the commercial
exploitation of such rights. The Company's prospects must be considered in light
of the risks, expenses, and difficulties frequently encountered in the
establishment of a new business in a highly competitive industry dominated by
competitors with substantially greater resources at their disposal. Such risks
may include, but not be limited to, unanticipated problems relating to lack of
experience, competition, dependence on key personnel, acquisition and retention
of talent, and the absence of manufacturing and distribution capabilities. While
it is anticipated that the Company will incur losses for at least the next three
to five (3-5) years, there can be no assurance that the Company will ever
generate sufficient revenues to meet expenses, or to operate profitably. See
"Plan of Operations" and "Business."
PLANNED ACQUISITION. Full implementation of the Company's current business
plan is dependent upon the acquisition of a manufacturing concern in the United
States or Europe, within the first six to twelve (6-12) months of its
operations, with the ability to produce Products for those prospective customers
of the Company unwilling or unable to do so themselves. Such an acquisition
would require the Company to secure substantial funds (currently estimated at
between $30-$50 million), either in the form of debt, equity, or a combination
of both. The Company has not as yet secured such funds or any commitments to
lend or invest such funds and therefore is not currently in a position to
consummate such an acquisition. In addition, assuming the Company has secured
the financial resources necessary to complete such an acquisition, there can be
no assurance that the Company will be able to identify a suitable company to
acquire in the United States, Europe, or any other location or, if such an
entity is identified, that the Company will be able to complete such an
acquisition. In the event the Company does not succeed in consummating an
acquisition, as described above, within its first six to twelve (6-12) months of
operations, the Company's ability to produce its products will be extremely
limited.
LITIGATION AND DISPUTES. The Company's core patent covering the
anti-perspirant patch (European Patent No. 0333773) was challenged by The
Procter & Gamble Company in 1988. The primary grounds for Procter & Gamble's
opposition was that the patent application was framed too broadly. Presumably,
the Company's patents employed technology that, in Procter & Gamble's opinion,
was similar to the processes used to manufacture a product or products Procter &
Gamble was considering introducing into the market. Procter & Gamble's case was
dismissed by the European Patent Office late in 1996 (European Patent Office
Boards of Appeal File Reference T 0035/95-3.2.4. dated October 1, 1996). While
no other lawsuits or disputes have arisen or have been threatened with respect
to the Company's patents, and other
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<PAGE>
intellectual property, and the Products manufactured employing such patents and
other intellectual property, the risk of an infringement lawsuit always exists.
In the event the Company is sued or threatened with an infringement suit, it may
have to expend significant funds to defend the suit and to protect its rights to
the patents and other intellectual property relating thereto utilized in the
manufacture of the Products.
LACK OF MANUFACTURING FACILITIES AND DISTRIBUTION NETWORK. The Company has
no manufacturing or distribution capabilities at present. During its first
thirty-six (36) months of operation, the Company intends to acquire an operating
company in Europe or the United States to manufacture or sub-contract for the
manufacture and distribution of its Products. Although the Company does not
perceive any obstacles to the acquisition of such a facility, commitments for
financing such an acquisition (currently estimated at between $30-$50 million)
have not been obtained, no such acquisition has been negotiated or entered into,
and there can be no assurance that such an acquisition will occur. The Company
is currently in discussions with several major distribution companies, including
drug and pharmaceutical wholesale distributors, to provide for the distribution
of the Company's Products once they are manufactured. While the Company believes
that it will successfully contract with a large distribution company to
distribute the Company's Products, there is no guarantee that such an agreement
will be reached, or if reached, that the terms will be advantageous to the
Company. See "Plan of Operations--Manufacturing and Distribution" and
"Business--Manufacturing and Distribution."
LICENSING OF PATENTS, TRADEMARKS AND OTHER RIGHTS. On behalf of the
Company, Mr. Tebbe has had discussions over the past year with several large
corporations in the cosmetics, toiletries, household products, personal care
products and apparel industries for the purpose of determining their level of
interest in licensing the use of the Company's patents, distribution rights,
manufacturing technology, and the "Deotexis" trademark. Although currently not a
party to any licensing agreements, the Company anticipates entering into
licensing agreements with many of its customers, under which it will receive
sales-based royalty payments. (See "Business--Licensing.") There are no
assurances that the Company's discussions with these, or any other, potential
licensees will result in executed licensing agreements, or if so concluded, that
the terms will be advantageous to the Company. The Company does not have the
resources or organizational infrastructure to mass produce and distribute its
Products and therefore the Company's failure to enter into licensing agreements
within its first six to twelve (6-12) months of operation would have a material
adverse effect on the ability of the Company to undertake full-scale operations
and to expand its operations thereafter. See "Plan of Operations--Manufacturing
and Distribution," "Business--Licensing" and "--Manufacturing and Distribution."
LICENSING AND ACQUISITION. Currently, the Company expects to use the
technology developed by Mr. Tebbe (see "Management--Background of Directors and
Executive Officer") to market its Products. The Company does not anticipate the
need to acquire rights or licenses from persons or entities other than Mr. Tebbe
to market its Products as currently proposed (see "Business--Patents"), and no
licenses or rights have been acquired by the Company from anyone other than Mr.
Tebbe to enable the Company to manufacture and market its Products. There can be
no assurance, however, that the Company will not be required in the future to
enter into agreements to license manufacturing and production technology from
persons or entities other than Mr. Tebbe. The Company has had preliminary
discussions with a few manufacturing companies with respect to the acquisition
of those companies' assets and operations, which the Company would use to
manufacture and distribute its Products to those prospective customers unable or
unwilling to license the Company's technology to manufacture and distribute the
Products themselves. While the Company has identified a few operating companies
it might have an interest in acquiring, it has not entered into an agreement to
effectuate such an acquisition. There can be no assurance that the Company will
be able to successfully complete an acquisition or, if it does, that the
acquisition will be on terms commercially favorable to the Company. See
"Business--Manufacturing and Distribution."
DEPENDENCE ON PRESIDENT AND CHIEF EXECUTIVE OFFICER. The Company is highly
dependent upon the services of Mr. Tebbe, who is the President and Chief
Executive Officer of the Company. Mr. Tebbe has
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<PAGE>
developed all the patents and the manufacturing technology necessary to produce
the Company's Products. Furthermore, unless and until the Company is able to
consummate an acquisition of an operating company with existing management, or
until the Company is able to hire experienced executives on its own, the Company
will remain heavily dependent on Mr. Tebbe's contacts and resources in the
cosmetics, toiletries, household products, personal care products and apparel
industries for the licensing and marketing of its Products. The loss or
unavailability of Mr. Tebbe would have a material adverse effect on the
operations of the Company. Mr. Tebbe does not have a written employment
agreement with the Company. He has, however, provided his expertise and services
to the Company on a full-time basis and has made a commitment to the Company to
continue to do so in the future. Mr. Tebbe has not received compensation for his
services to the Company and has no agreements with the Company to receive
compensation in the future, except for (1) fees for his services as a director
of the Company, and (2) royalties to be paid to Mr. Tebbe based on the Company's
net income resulting from the commercial exploitation of the Company's patents,
which were contributed to the Company by Mr. Tebbe. The Company intends to
secure "key man" life insurance on the life of Mr. Tebbe. See
"Business--Employees," "Management--Contingent Compensation" and "--Management
Employment Agreements; Key Employees."
LACK OF PRIOR CORPORATE EXPERIENCE; NEED FOR ADDITIONAL PERSONNEL. Although
Mr. Tebbe has no prior corporate experience in establishing and operating a
personal care products company, Mr. Tebbe has had experience in the invention,
development and promotion of personal care products. However, Mr. Tebbe has no
experience operating a public company. Further, the Company's ability to
successfully establish and operate a personal care products company will depend
upon the Company's hiring and retaining other senior level personnel experienced
in the operation of certain aspects of the business. The Company's failure to
hire such additional personnel could have a material adverse effect on the
ability of the Company to successfully undertake full-scale operations and to
expand its operations thereafter. See "Plan of Operations" and "Management."
INFRINGEMENT OF COMPANY'S PATENTS. Infringement of the Company's patents,
in the form of unauthorized use of the Company's patented technology and
production and sale of products similar to the Company's products, may occur. If
the Company achieves significant commercial success with one or more of its
products, the processes used to produce those products could become the target
of infringement by unauthorized manufacturers in violation of the Company's
patents. It is impossible to estimate the potential loss in sales that could
result from the infringement and subsequent unauthorized production and sale of
counterfeit products using the Company's technologies. The Company intends to
vigorously enforce against unlawful infringement all patents owned by it that
are material to its business. See "Business-- Patents."
COMPETITION. The markets in which the Company will compete are highly
competitive. The Company's Products are designed to be substitutes for personal
care and other products which employ traditional delivery systems. The Company
thus competes against (1) other suppliers of controlled-release delivery
systems, and (2) suppliers of traditional non-controlled-release delivery
systems, including sprays, roll-ons, creams and powders. The Company intends to
position itself as a supplier of textile-based controlled-release delivery
systems to selected sectors of the cosmetics, toiletries, household products,
personal care products and apparel industries. At present, there appear to be
few corporations other than the Company actually offering commercially viable
controlled-release systems in these market sectors. The Company knows of two
Japanese corporations with products similar to those of the Company, but at this
time, these corporations have not undertaken major marketing initiatives outside
the Japanese market. Suppliers of non-controlled-release delivery systems, to
the extent that they do not license the Company's technology, will compete
against the Company's Products with their traditional products. The cosmetics,
toiletries, personal care products, household products and apparel industries
are, and are expected to continue to be, highly competitive. Many of the
Company's competitors are very large, well-established multi-national
corporations, and have significantly greater financial and other resources than
the Company. They have all been in existence for a substantially longer time
than the Company, and enjoy a certain
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name recognition that will only accrue to the Company over time, if at all. Due
to the Company's relative lack of experience in the business, its limited
financial and other resources, and other factors relating to competition from
well-established multi-national companies, the Company may not be able to
compete successfully, if at all, with the other competitors in the field. See
"Business--Competition."
RISKS APPLICABLE TO FOREIGN COUNTRIES. Acquisition of an operating company
with substantial operations in European countries entails special considerations
and risks. If the Company is successful in acquiring an operating company
located in Europe, it will be subject to, and possibly adversely affected by,
general trends in the market for cosmetics, toiletries, household products,
personal care products and apparel in Europe and world-wide, and by certain
regulatory, economic and political factors including, but not limited to, the
following:
Currency Fluctuations. Because one of the Company's objectives is to
acquire an operating company located in Europe, and because substantially all
revenues and income from such company would initially be received in a foreign
currency such as Deutsche Marks, French Francs or Irish pounds, the dollar
equivalent of the Company's net assets and revenues, if any, would be adversely
affected by reductions in the value of the relevant foreign currency relative to
the dollar. Further, if foreign currencies appreciate in value against the
dollar prior to the completion of an acquisition, the cost of acquiring such a
company as measured in dollars will increase.
Country Risks. Any European operating company that is acquired by the
Company could be adversely affected by political, legal or economic developments
in Europe or elsewhere.
PERSONS LOCATED OUTSIDE THE UNITED STATES. Although the Company and certain
of its directors are domiciled in the United States, certain directors and
officers, including Gerold Tebbe, President, Chief Executive Officer, Secretary
and Treasurer of the Company, reside outside the United States and, in the event
the Company is able to acquire a manufacturing company, a large part or
substantially all of the Company's assets may be located outside of the United
States. It may therefore be difficult for investors in the United States to
enforce their legal rights, to effect service of process upon directors or
officers of the Company, or to enforce judgments of United States courts
predicated upon the civil liabilities of such directors or officers under the
United States Federal securities laws. The Company has been advised that there
is substantial doubt as to the enforceability in Europe of civil remedies and
criminal penalties afforded under the United States Federal securities laws.
Further, it is unclear if extradition treaties now in effect between the United
States and various European countries would permit effective enforcement of the
criminal penalties of the United States Federal securities laws.
PHARMACEUTICAL MARKETPLACE; REGULATORY APPROVAL OF PHARMACEUTICAL
APPLICATIONS AND LICENSED PHARMACEUTICAL PRODUCTS. The markets for
pharmaceutical products and drug delivery systems are distinct and different
from the apparel, cosmetics, toiletries, household products, and other personal
care products markets that the Company is targeting with its three core Products
and that are discussed elsewhere in this Prospectus. Drug delivery systems is a
very complex, highly regulated field in which thousands of patents have been
filed and issued. Hundreds of small, specialized companies are constantly
working on new approaches in this area, which they hope to license to the large
pharmaceutical concerns. There can be no assurance that any potential
applications of the Company's technology in the pharmaceutical area, if
developed, will be novel, or that any applications that are developed will prove
to be commercially feasible. Further, the Company plans to make the regulatory
approval of any products developed in this area utilizing the Company's
technology the responsibility of the licensee. Therefore, any prototype products
that are produced employing the Company's patents may not gain the required
regulatory approvals and may, therefore, never be marketed. Finally, there can
be no assurance that any products developed in the pharmaceutical field
employing the licensed technology of the Company, and which have received the
necessary regulatory approvals, will prove to be commercially successful or will
ever result in revenues to the Company.
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CONTROL OF COMPANY BY GEROLD TEBBE. Overton Holdings Limited, a corporation
formed under the laws of the Turks & Caicos Islands, British West Indies
("OHL"), currently owns 2,733,943 shares of Common Stock of the Company,
representing 60.13% of the issued and outstanding shares. The Company's current
shareholders, other than OHL, own 1,812,932 shares of Common Stock, representing
39.87% of the issued and outstanding shares. OHL is wholly beneficially owned
and controlled by Mr. Tebbe, President, Chief Executive Officer, Secretary,
Treasurer and a director of the Company. Accordingly, Mr. Tebbe, through OHL, is
able to elect a majority of the Company's directors and controls the direction
and affairs of the Company. (See "Management," "Principal Shareholders," and
"Description of Securities--Common Stock.") In the event the Selling Security
Holders sell all 1,673,250 Shares offered pursuant to this Prospectus,
representing 36.8% of the issued and outstanding shares of the Company's Common
Stock, Gerold Tebbe, through OHL, will continue to retain majority control over
the direction and affairs of the Company, with 2,509,875 shares of Common Stock,
or 55.2% of the Company's issued and outstanding shares.
NEED FOR ADDITIONAL FINANCING. The Company's cash requirements will be
significant. There can be no assurance, however, that the Company will have on
hand, or will be able to generate, sufficient funds to finance its operations,
as contemplated by its current business plan, particularly with respect to that
portion of its business plan calling for the acquisition of a manufacturing
facility, and the Company may have to engage in further financing activities
before it can implement its current business plan in any meaningful way.
The Company currently has cash on hand sufficient to finance the Company's
proposed business and operations, based on the Company's business plan, for the
one to three (1-3) years following this Offering, not taking into account the
costs associated with any acquisition called for by the Company's business plan.
Thereafter, the Company anticipates meeting its working capital needs through
internally-generated cash flow and by securing a working capital line of credit
to finance its operations. There can be no assurance that the Company will be
able to maintain its business and operations without additional financing during
the first one to three (1-3) years of operations or that, thereafter, it will be
able to generate sufficient cash flow, or secure a working capital line of
credit, sufficient to meet its anticipated financing needs. If the Company is
unable to generate sufficient cash flow and/or secure a working capital line of
credit large enough to finance its operations, additional sources of financing
would have to be found to enable the Company to continue operations.
REGULATORY COMPLIANCE AND GOVERNMENTAL APPROVALS. The Company has in the
past and will continue to have legal specialists and other experts evaluate the
products the Company intends to manufacture and market to ensure that the
products do not violate governmental regulations in each country where those
products are expected to be produced and sold. The legal specialists and other
experts will evaluate the products with respect to the types of products being
produced and marketed and the regulatory approvals required therefor, if any,
the advertisements to be used with respect thereto, and the product descriptions
therefor. Though ensuring that the Company's regulatory compliance will avoid
non-compliance fines, conducting such regulatory reviews could require
significant expenditures by the Company.
TEST-MARKETING COSTS. In order to determine whether there is a market for a
specific product developed by the Company, the Company will engage in
test-marketing. Test-marketing requires significant financial and other
resources for each product that is developed, and there can be no assurance
that, even once a product has been thoroughly test-marketed, that it will be a
commercial success. See "Business--Test-Marketing."
RISKS OF FINANCIAL LEVERAGE. The Company may borrow money to enable it to
acquire a manufacturing concern, or it may assume or refinance the indebtedness
of the acquired company if the Company's management deems it to be beneficial to
the Company. Among the possible adverse effects of any such financial leverage
are: (1) if the Company's operating revenues after the acquisition are
insufficient to service the debt incurred to affect the purchase, there would be
a risk of default and foreclosure on the
15
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Company's assets; (2) if the loan agreement governing any borrowings secured by
the Company to affect an acquisition contains covenants that require the
maintenance of certain financial ratios or reserves, and such covenants are
breached without a waiver or renegotiation of the terms of those covenants, the
lender could have the right to accelerate the payment of the indebtedness even
if the Company has previously made all principal and interest payments when due;
(3) if the loan to the Company to accomplish an acquisition was structured with
a floating interest rate, or the loan was payable on demand, the Company would
bear the risk of fluctuations in the interest rate, or risk a demand for payment
at a time when it is unable to repay the loan; and (4) if the terms of the loan
to the Company to finance an acquisition do not provide for amortization prior
to maturity of the full amount borrowed, and the "balloon" payment cannot be
refinanced at maturity on acceptable terms, the Company may be required to seek
additional financing and, to the extent that additional financing is not
available on acceptable terms, to liquidate its assets.
NO DIVIDENDS. The Company has paid no regular dividends since its inception
and does not intend to pay dividends in the foreseeable future. Any earnings
which the Company may realize in the foreseeable future will be retained to
finance the growth of the Company. See "Dividend Policy."
ARBITRARY DETERMINATION OF OFFERING PRICE. The public offering price of the
Shares offered by the Selling Security Holders pursuant hereto has been
arbitrarily determined by the Selling Security Holders and bears no relationship
to the Company's asset value, book value, net worth, results of operations or
any other generally accepted criteria of value. Among the factors considered in
determining the offering price were the Company's business, the potential
commercial value of its patents, patent applications and related intellectual
property, its operating history, prospects and business plan, and management. In
addition, the risks involved in the establishment of the Company's business were
also considered.
NO ASSURANCE OF PUBLIC TRADING MARKET OR NASDAQ INCLUSION. Prior to this
Offering, there has been no established trading market for the Company's
securities and there is no assurance that a regular trading market for the
Shares will develop after the completion of this Offering. If a trading market
does develop for the Shares offered hereby, there can be no assurance that it
will be sustained. The Company intends, at some future date when the Company
feels it is appropriate, based on the level of operations it has attained and
its ability to satisfy the initial and continued listing criteria, to apply for
listing of its Common Stock, including the Shares, on The Nasdaq SmallCap Market
("Nasdaq"). To qualify for an initial listing on Nasdaq, the Company, among
other criteria, must have at least $4,000,000 in net tangible assets, OR
$50,000,000 in market capitalization, OR $750,000 net income in its latest
fiscal year or two of its last three fiscal years, a public float of at least
1,000,000 shares having a market value of at least $5,000,000, and a minimum bid
price of $4. In addition, the Company must also have at least three market
makers, at least 300 shareholders of round lots (holders of 100 shares or more),
an operating history of one year OR market capitalization of at least
$50,000,000, and must observe the "corporate governance" requirements of Nasdaq
(i.e., distribution to shareholders of annual and interim reports; a minimum of
two independent directors; an independent audit committee; convening an annual
shareholders meeting; solicitation of proxies; etc). If for any reason, at some
future date, the Shares are not eligible for initial or continued listing on
Nasdaq or a public trading market for the Shares does not develop, purchasers of
the Shares may have difficulty selling their Shares. In order to qualify for
continued listing on Nasdaq, a company, among other things, must have at least
$2,000,000 in net tangible assets, OR $35,000,000 in market capitalization, OR
$500,000 net income in its latest fiscal year or two of its last three fiscal
years, a public float of at least 500,000 shares having a market value of at
least $1,000,000, and a minimum bid price of $1. In addition, a company must
also have at least two market makers, at least 300 shareholders of round lots
and must observe the "corporate governance" requirements of Nasdaq described
above. If at some time in the future the Company is unable to satisfy the
initial or continuing requirements for quotation on Nasdaq, of which there can
be no assurance, and until such time, the Common Stock and Shares offered hereby
will be quoted in the over-the-counter market on the National Association of
Securities Dealers ("NASD") OTC Electronic Bulletin Board under its approved
symbol. See "--Potential Continued Listing on the NASD OTC Electronic Bulletin
Board."
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<PAGE>
POTENTIAL CONTINUED LISTING ON THE NASD OTC ELECTRONIC BULLETIN BOARD. The
Company's Common Stock is currently quoted on the NASD OTC Electronic Bulletin
Board, a NASD sponsored and operated inter-dealer automated quotation system for
equity securities not quoted on Nasdaq, under the symbol DETX. The NASD OTC
Electronic Bulletin Board was introduced in 1993 as an alternative to National
Quotation Bureau ("NQB") "Pink Sheet" trading of over-the-counter securities.
Information such as volume and summary quotations are not currently provided
during the trading day on the NASD OTC Electronic Bulletin Board. There can be
no assurance that the NASD OTC Electronic Bulletin Board will be recognized by
the brokerage community as an acceptable alternative to quotation on Nasdaq or
in the NQB "Pink Sheets." The Company anticipates that, at some future date when
it has achieved a sufficient level of operations such that it will satisfy the
initial and continued listing criteria of Nasdaq, the Company will apply for
listing, and its Common Stock and the Shares will be listed on Nasdaq. However,
in the event that the initial listing of the Common Stock and the Shares does
not occur, or in the event that at some time in the future after such initial
listing, the Common Stock and the Shares are delisted or no longer quoted on
Nasdaq, it is anticipated that the Common Stock and the Shares will be quoted on
the NASD OTC Electronic Bulletin Board. In such event, and until such time as
the Company obtains a Nasdaq listing, of which there can be no assurance, the
prices and liquidity of the Shares could be adversely affected and the trading
of the Shares could be subject to the so-called "penny stock" rules. (See
"--Risk of Low-Priced Securities.") Further, the failure of the Company to apply
for or qualify for the initial listing of its Common Stock and the Shares on
Nasdaq, or the subsequent delisting of the Shares from Nasdaq, if and when
initial listing is attained, may cause the Company to experience difficulty in
raising subsequent financing, and may result in the loss of coverage of the
Shares by brokers and the financial press.
RISK OF LOW-PRICED SECURITIES. The Commission has adopted regulations which
generally define a "penny stock" to be any equity security that has a market
price (as defined) of less than $5.00 per share and that is not traded on a
national stock exchange, Nasdaq or The Nasdaq National Market System. If the
Shares offered hereby are not quoted on Nasdaq at some future date, or if such
Shares are initially quoted on Nasdaq, but are subsequently removed or delisted
from Nasdaq, the Shares may become subject to rules of the Commission that
impose additional sales practice requirements on broker-dealers effecting
transactions in penny stocks. In most instances, unless the purchaser is either
(i) an institutional accredited investor, (ii) the issuer, (iii) a director,
officer, general partner or beneficial owner of more than five percent (5%) of
any class of equity security of the issuer of the penny stock that is the
subject of the transaction, or (iv) an established customer of the
broker-dealer, the broker-dealer must make a special suitability determination
for the purchaser of such securities and have received the purchaser's prior
written consent to the transaction. Additionally, for any transaction involving
a penny stock, the rules of the Commission require, among other things, the
delivery, prior to the transaction, of a disclosure schedule prepared by the
Commission relating to the penny stock market and the risks associated
therewith. The broker-dealer also must disclose the commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities. Finally, among other requirements, monthly statements must be
sent to the purchaser of the penny stock disclosing recent price information for
the penny stock held in the purchaser's account and information on the limited
market in penny stocks. Consequently, the penny stock rules may restrict the
ability of broker-dealers to sell the Shares and may affect the ability of
purchasers in this Offering to sell the Shares in the secondary market.
AUTHORIZATION OF ADDITIONAL SECURITIES. The Company's Articles of
Incorporation authorize the issuance of 75,000,000 shares of Common Stock. Upon
completion of this offering there will be 70,453,125 authorized but unissued
shares of Common Stock available for issuance. The Company's Board of Directors
has the power to issue any or all of such shares without stockholder approval.
In addition, the Company has commitments as of the date of this Prospectus to
issue stock options to members of the Board of Directors as part of the Director
Stock Option Plan the Company intends to adopt, subject to shareholder approval,
in the next forty-five to sixty (45-60) days. Such stock options are intended to
provide compensation in addition to the cash compensation to be paid to the
directors for their service to the Company. The Company anticipates that it will
reserve several hundred thousand shares of Common
17
<PAGE>
Stock for issuance pursuant to the Director Stock Option Plan and several
hundred thousand more shares of Common Stock for issuance pursuant to the
Incentive Stock Option Plan the Company intends to adopt in the future to
compensate key executives to be retained by the Company. As of the date of this
Prospectus, no options have been granted pursuant to any stock option plan. In
the event that any stock options granted pursuant to the anticipated Director
Stock Option Plan, or the Incentive Stock Option Plan the Company intends to
adopt in the future, are exercised, dilution of the percentage ownership of
Common Stock held by the public investors will occur. (See
"Management--Directors Compensation-Stock Option Plan," "--Incentive Stock
Option Plan" and "Shares Available for Future Sale.") To the extent that
additional shares of Common Stock are issued, dilution to the interests of the
Company's stockholders will occur. Further, the public stockholders as a group
may not constitute a majority of the stockholders of the Company if the Company
acquires a manufacturing company and issues substantial equity to the acquired
company's owners in that transaction. The Company's Articles of Incorporation
also authorize the issuance of 15,000,000 "blank check" preferred shares
("Preferred Stock") with such designations, rights and preferences as may be
determined by the Board of Directors at the time of issuance. The Board of
Directors is empowered, without stockholder approval, to issue Preferred Stock
with dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of the
Company's Common Stock, including the Shares. In addition, the Preferred Stock
and Common Stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company.
Although the Company has no commitments as of the date of this Prospectus to
issue any shares of Preferred Stock, there can be no assurance that the Company
will not do so in the future.
INDEMNIFICATION OF OFFICERS AND DIRECTORS. Nevada law provides that
companies may adopt broad indemnification provisions with respect to the conduct
of officers and directors, and mandates that officers and directors be
indemnified against reasonable costs incurred with respect to any actions
brought against them because of their status as officers or directors if such
officer or director is successful, on the merits or otherwise, in defending any
such action. The Company's Articles of Incorporation provide that the Company
shall indemnify each officer and director to the fullest extent permitted by
Nevada law and the Company intends to enter into indemnification agreements with
its executive officers and directors to implement this charter provision. In
addition, the Company has secured $20 million of directors' and officers'
liability insurance to provide the Company's directors and officers protection
against certain liabilities to which they are exposed by virtue of their service
to the Company as officers or directors. The policy is structured as a "claims
made and reported" policy, which generally requires a claim to be made against
an officer or director, and that claim to be reported to the insurance companies
underwriting the policy, before reimbursement may be sought under the policy
(though the policy does provide for the advancement of defense costs prior to
the final resolution of any action.) The policy contains a $75,000 per claim
retention provision with respect to corporate reimbursement for covered claims,
to be paid by the Company, and a $175,000 retention in connection with each
claim involving alleged violation of state or United States Federal securities
laws. The approximate annual cost to the Company of this directors' and
officers' liability insurance is $145,000. The economic effect of the
above-described charter provision in the Company's Articles of Incorporation,
the indemnification agreements, and the directors' and officers' liability
insurance policy is to shift most of the financial and legal exposure associated
with being an officer or director of a public company from the directors and
officers to the Company.
BARRIERS TO TAKEOVER. Nevada's "Combination with Interested Stockholders
Statute" and "Control Share Acquisition Statute" may have the effect of delaying
or making it more difficult to effect a change in control of the Company.
The Combination with Interested Stockholders Statute prevents an "interested
stockholder" and an applicable Nevada corporation from entering into a
"combination," unless certain conditions are met. A "combination" includes,
among other transactions, any merger or consolidation with an "interested
stockholder," or any sale, lease, exchange, mortgage, pledge, transfer, or other
disposition, in one
18
<PAGE>
transaction or a series of transactions, with an "interested stockholder"
having: an aggregate market value equal to five percent (5%) or more of the
aggregate market value of the assets of a corporation; an aggregate market value
equal to five percent (5%) or more of the aggregate market value of all
outstanding shares of a corporation; or representing ten percent (10%) or more
of the earning power or net income of the corporation. An "interested
stockholder" means the beneficial owner of ten percent (10%) or more of the
voting shares of a corporation, or an affiliate or associate thereof. A
corporation may not engage in a "combination" within three years after the
interested stockholder acquired his shares, unless the combination or purchase
is approved by the board of directors before the interested stockholder acquired
such shares. If this approval is not obtained prior to such purchase, then after
the expiration of the three-year period, the business combination may be
consummated only if it was approved by the board of directors before the
stockholder became an interested stockholder, or such combination is approved by
a majority of the voting power held by the disinterested stockholders at a
meeting called not earlier than three (3) years after the date the interested
stockholder acquired his shares, or if the consideration to be paid by the
interested stockholder is at least equal to the highest of: the highest price
per share paid by the interested stockholder within the three (3) years
immediately preceding the date of the announcement of the combination, or in the
transaction in which he became an interested stockholder, whichever is higher
(as adjusted for interest and dividends); the market value per common share on
the date of announcement of the combination, or the date the interested
stockholder acquired the shares, whichever is higher (as adjusted for interest
and dividends); or if higher for the holders of shares of preferred stock, the
highest liquidation value for the shares of preferred stock.
Nevada's Control Share Acquisition Statute prohibits an acquiror, under
certain circumstances, from voting shares of a target corporation's stock after
crossing certain threshold ownership percentages, unless the acquiror obtains
the approval of the target corporation's disinterested stockholders. The Control
Share Acquisition Statute specifies three thresholds: one-fifth or more but less
than one-third, one-third but less than a majority, and a majority or more, of
the outstanding voting power of the target corporation. Once an acquiror crosses
one of the above thresholds in an offer or acquisition, those shares acquired
within 90 days become Control Shares (as defined in such statute), and such
Control Shares are deprived of the right to vote until the disinterested
stockholders restore the right. The Control Share Acquisition Statute also
provides that in the event Control Shares are accorded full voting rights and
the acquiring person has acquired a majority or more of all voting power, all
other stockholders who do not vote in favor of authorizing voting rights for the
Control Shares are entitled to demand payment for the fair value of their
shares. The board of directors is to notify the stockholders as soon as
practicable after such an event has occurred that they have the right to receive
the fair value of their shares in accordance with statutory procedures
established generally for dissenters' rights. This statute is applicable only to
Nevada corporations doing business in the state and that have at least 200
stockholders, at least 100 of whom are stockholders of record and residents of
Nevada. On July 31, 1997, the Company's Board of Directors, pursuant to the
authority granted in Section 78.378 of the Nevada Revised Statutes ("NRS"),
amended the Company's by-laws to provide that NRS Sections 78.378(2) through
78.3793, inclusive, shall not apply to the Company. The Board of Directors,
however, retains the right to again revise the Company's by-laws so that NRS
Sections 78.378(2) through 78.3793, inclusive, shall be applicable to the
Company.
SHARES AVAILABLE FOR FUTURE SALE. Upon completion of this Offering, there
will be 4,546,875 shares of Common Stock outstanding. Of these shares, 2,509,875
shares were sold outside the United States in accordance with Regulation S
promulgated by the Commission pursuant to the Securities Act of 1933, as amended
(the "Securities Act"), and may be resold in the United States only in
accordance with the provisions of Regulation S. Such shares are, however, freely
tradable outside the United States. In addition, after October 9, 1998, these
2,509,875 shares, plus an additional 85,000 shares issued to a consultant to the
Company in connection with the consummation of the Stock Purchase Agreement (see
"Certain Transactions--Stock Purchase Agreement"), will be eligible for sale in
the public market in the United States in reliance upon Rule 144 under the
Securities Act, subject to the volume limitations discussed below. In general,
under Rule 144 as currently in effect, a person is entitled to sell, within any
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<PAGE>
three-month period, a number of shares beneficially owned for at least one (1)
year that does not exceed the greater of (i) one percent (1%) of the then
outstanding shares of Common Stock or (ii) the average weekly trading volume in
the Common Stock in the four (4) calendar weeks preceding such sale. Sales under
Rule 144 are also subject to certain requirements as to the manner of sale,
notice and the availability of current public information about the Company.
However, a person who is not an affiliate of the Company and has beneficially
owned his shares for at least two (2) years is entitled to sell such shares
without regard to the volume of trading, manner of sale or notice requirements.
See "Shares Available for Future Sale."
Potential investors should be aware that sales of substantial amounts of
Common Stock in the public market after this Offering, or even the perception
that such sales could occur, may adversely affect prevailing market prices of
the Common Stock.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS. This Prospectus contains
forward-looking statements relating to future events or the projected future
financial performance of the Company. Such forward-looking statements are within
the meaning of that term in Section 27A of the Securities Act and Section 21E of
the Exchange Act. Such statements may include, but not be limited to,
projections of revenues, income or loss, capital expenditures, acquisitions,
plans for growth and future operations, financing needs, sources or potential
sources or capital, or plans or intentions relating to acquisitions by the
Company, as well as assumptions relating to the foregoing. Forward-looking
statements are inherently subject to risks and uncertainties, some of which
cannot be predicted or quantified. Future events and actual results could differ
materially from those assumptions and projections set forth in, contemplated by
or underlying the forward-looking statements.
20
<PAGE>
USE OF PROCEEDS
All of the Shares being offered hereby and registered pursuant to the
registration statement relating thereto filed by the Company with the
Commission, of which this Prospectus forms a part, are being registered for
resale only, for the account of the Selling Security Holders, and the Company
shall receive no proceeds with respect thereto.
21
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997. (See "Certain Transactions--Stock Purchase Agreement.") This
table should be read in conjunction with the financial statements of the
Company, including the notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Stockholders' equity:
Preferred Stock: par value $.001,
authorized 15,000,000 shares, no shares issued and outstanding............ $ 0
Common Stock: par value $.001,
authorized 75,000,000 shares; 4,546,875 shares issued and outstanding..... 4,547
Additional paid-in capital...................................................... 4,155,485
Deficit accumulated during the development stage................................ (347,655)
------------
Total stockholders' equity...................................................... 3,812,377
------------
Total capitalization........................................................ $3,812,377
------------
------------
</TABLE>
DIVIDEND POLICY
With the exception of an extraordinary, one-time distribution paid as a
return of capital to certain stockholders of the Company just prior to, and in
connection with, the Stock Purchase Agreement transaction referred to in
"Certain Transactions--Stock Purchase Agreement," the Company has not paid
dividends on its Common Stock since its inception and does not expect to pay any
cash or other dividends in the foreseeable future. Earnings of the Company, if
any, are expected to be retained for use in expanding the Company's business.
The payment of dividends is within the discretion of the Board of Directors of
the Company and will depend upon the Company's earnings, if any, capital
requirements, financial condition and such other factors considered relevant by
the Board of Directors.
COMMON STOCK PRICE INFORMATION
The following information sets forth the high and low sales price for the
Company's Common Stock on the NASD OTC Electronic Bulletin Board for 1996 and
1997. During the periods for which the information is presented, there was no
sustained public trading market for the Company's Common Stock.
<TABLE>
<CAPTION>
1996 1997
- ------------------------------------------------ --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1ST Q 2ND Q 3RD Q 4TH Q 1ST Q 2ND Q 3RD Q 4TH Q
- --------- ----------- ----------- ----------- ----- ----------- ----------- -----------
$ 2.4375(1) N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- ------------------------
(1) Price shown is high and low for quarter
N/A = no trading activity
22
<PAGE>
SELECTED FINANCIAL DATA
The Company is currently in the development stage. The selected financial
data presented below as of and for the year ended December 31, 1997 is derived
from the financial statements audited by M.R. Weiser & Co. LLP and December 31,
1996 is derived from the financial statements audited by Mayer Rispler &
Company, P.C. The selected financial data for the period from inception (March
6, 1992) to December 31, 1992 and for the years ended December 31, 1993, 1994
and 1995 are derived from the financial statements audited by Nachum
Blumenfrucht, CPA. The selected financial data should be read in conjunction
with "Plan of Operations" and the financial statements of the Company, for the
years 1995, 1996 and 1997, and for the period from inception, March 6, 1992 to
December 31, 1997, including the notes thereto, appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
MARCH 6, 1992
MARCH 6, 1992 (DATE OF
(DATE OF INCEPTION) YEAR ENDED DECEMBER 31, INCEPTION)
TO DECEMBER 31, ----------------------------------------------------- TO DECEMBER 31,
1992 1993 1994 1995 1996 1997 1997
------------------- --------- --------- --------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue-interest income........... $ 190 $ 147 $ 12,614 $ 16,268 $ 23,426 $ 38,753 $ 91,398
Expenses:
General and administrative.... 252 1,913 39,798 51,273 67,163 278,654 439,053
----- --------- --------- --------- --------- --------- -----------------
Net loss.......................... $ (62) $ (1,766) $ (27,184) $ (35,005) $ (43,737) $(239,901) $(347,655)
----- --------- --------- --------- --------- --------- -----------------
----- --------- --------- --------- --------- --------- -----------------
Basic loss per common share....... $ (.35) $ (9.87) $ (.10) $ (.13) $ (.16) $ (.19)
----- --------- --------- --------- --------- ---------
----- --------- --------- --------- --------- ---------
Weighted average number of shares
outstanding...................... 179 179 278,750 278,750 278,750 1,237,618
----- --------- --------- --------- --------- ---------
----- --------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1996 1997
----------- ---------
<S> <C> <C>
BALANCE SHEET DATA:
Current assets............................................................................. $ 532,668 $4,036,261
Working capital............................................................................ 517,368 3,812,377
Total assets............................................................................... 532,685 4,036,261
Total liabilities.......................................................................... 15,300 223,884
Stockholders' equity....................................................................... 517,385 3,812,377
</TABLE>
23
<PAGE>
PLAN OF OPERATIONS
The Company plans to engage in the business of developing and
commercializing certain patented, textile-based, controlled-release delivery
systems for consumer products in certain sectors of the toiletries, cosmetics,
apparel, household products and personal care products markets. The Company's
goal is to build on its patented "know-how" in research and development, and to
acquire manufacturing and marketing resources to become a profitable supplier of
textile-based controlled-release delivery systems to a wide range of industry
sectors. The Company currently has cash on hand sufficient to finance the
operation of its proposed personal care products business, based on the
Company's current business plan and excluding the costs of any planned
acquisitions, for one to three (1-3) years following this Offering. Thereafter,
the Company anticipates meeting its working capital needs through
internally-generated cash flow and a working capital line of credit to finance
its operations. There can be no assurance that the Company will be able to
maintain its business and operations without additional financing during the
first one to three (1-3) years of operations, or that, thereafter, the Company
will be able to generate sufficient cash flow, or secure a working capital line
of credit, in an amount sufficient to finance its anticipated needs or on
acceptable terms.
During its first three (3) years of operations, the Company anticipates that
it will (a) either hire additional senior management necessary to operate the
Company, or acquire an operating company with an existing management team, or
pursue a combination of these strategies (see "--Senior Management"), (b)
acquire an operating company in Europe or the United States to manufacture or to
oversee the sub-contracted manufacture and the distribution of its Products (see
"--Manufacturing and Distribution"), (c) enter into one or more distribution
agreements with one or more major drug and pharmaceutical wholesale distributors
(see "--Manufacturing and Distribution"), (d) enter into licensing agreements
providing for the use by licensees of the Company's patents and manufacturing
technology in exchange for a sales-based royalty payment to the Company (see
"--Manufacturing and Distribution" and "Business-- Licensing"), and (e) commence
an image building advertising and public relations campaign in the personal care
products industry (see "--Public Relations; Advertising"). There can be no
assurance that any or all of these goals will be achieved by the Company.
SENIOR MANAGEMENT
At the present time, seven directors have been appointed to the Company's
Board of Directors. Mr. Gerold Tebbe will serve as the President, Chief
Executive Officer and a director of the Company, with overall responsibility for
operations. Mr. Tebbe will also serve as the Company's Secretary and Treasurer
until such time as suitable personnel can be retained to serve in those
positions. Additional senior management of the Company to be recruited following
the completion of this Offering are:
HOLDING COMPANY STAFF. To support Mr. Tebbe, the Company expects to appoint
a seasoned financial executive who will be responsible at the holding company
level for accounting, consolidations, finance, cash management, regulatory and
securities law compliance, and other holding company functions.
MANAGEMENT OF TO-BE ACQUIRED OPERATING COMPANY. It is the Company's
intention, within the first six to twelve (6-12) months of its operations, to
acquire an operating company in Europe or the United States and employ the
management of that operating company. The Company anticipates that it will
employ most, if not all, of the members of the operating company's management
team. (See "--Manufacturing and Distribution.") If such an acquisition is
consummated, however, the Company reserves the right to replace some or all of
the personnel of the acquired company if, in the Company's opinion, better
qualified or differently qualified individuals are necessary or desirable to
manage the Company's operations.
PRODUCT MANAGERS. As stated above, the Company intends to acquire an
operating company with manufacturing capabilities in Europe or the United States
within the first six to twelve (6-12) months of its operations, and thereafter
use the Company's Products to diversify and expand the acquired company's
24
<PAGE>
sales. To manage sales of the Company's Products, the Company may either employ
the existing product and sales managers of the acquired company's management, or
hire new Product Managers, or both. It is anticipated that initially there will
be two (2) Senior Product Managers, based in Europe and the United States,
respectively, with responsibility for negotiating and completing sales and
licensing agreements with potential customers. The Product Managers will be
selected based on their experience in the areas of sales of consumer and
personal care products, and the licensing of technology and patents. The initial
salary range (including benefits) for these positions is expected to be
competitive with prevailing salaries for similar positions in the European and
the United States labor markets, respectively.
MANUFACTURING AND DISTRIBUTION
The Company's target markets are different and independent, and will require
separate licensing and distribution strategies. The Company believes it can most
effectively manufacture and distribute its controlled-release Products
(including products in development, which currently consist of consumer insect
repellent, treatment gloves and field dressings) by (i) acquiring an operating
company in Europe or the United States with a suitable production facility and
management, and transferring the Company's manufacturing technology and
intellectual property to this acquired entity; (ii) entering into agreements
with drug and pharmaceutical wholesale distributors to distribute the Company's
Products through those companies' distribution networks, specifically to
pharmacies and drugstores that purchase their over-the-counter products from the
wholesale distributors; and (iii) licensing the technology and the processes
required to manufacture the Company's Products to consumer products
manufacturing and distribution companies, in return for a licensing fee, which
companies would, in turn, manufacture and distribute the Company's Products. The
Company anticipates that it will be able to negotiate both an acquisition
agreement and at least one licensing or distribution agreement during its first
six to twelve (6-12) months of operations. While the Company has had preliminary
discussions with several wholesale distributors and potential licensees, and a
few operating companies that may be potential acquisition candidates, there can
be no assurance that such an acquisition will occur or such contemplated
agreements will be reached on terms advantageous to the Company, if at all. In
the event the Company does not succeed in entering into these licensing and
distribution agreements, and consummating an acquisition, within the time-frame
referred to above, the Company's ability to produce, distribute and market its
Products in any significant way will be extremely limited.
LICENSING
Until the Company is able to acquire an operating concern in Europe or the
United States, and for the foreseeable future if the Company is unable to
consummate such an acquisition, and to avoid the typically large costs of
advertising and promoting new consumer products, the Company plans to primarily
follow a licensing strategy to market and distribute its Products.
The Company anticipates that many of its customers will enter into license
agreements with the Company, in return for a sales-based royalty payment to the
Company. It is the Company's intention to grant five (5) year licenses
(extendable to ten (10) years), to large and mid-sized corporations in the
apparel, cosmetics, toiletries, household products and personal care products
industries. In return for the licensing fee paid to the Company, licensees will
be granted the right to use the Company's patents, patent applications and
related intellectual property necessary to manufacture and distribute the
Company's Products.
To provide the Company's Products with efficient and effective distribution
channels, and also to open up additional market penetration possibilities, the
Company anticipates that it will enter into agreements with drug and
pharmaceutical wholesale distributors to distribute the Company's Products
through those companies' distribution networks, specifically to pharmacies and
drugstores that purchase their over-the-counter products from the wholesale
distributors. The Company will pay these distributors a fee for the use
25
<PAGE>
of their distribution structure, either in the form of a flat fee per unit of
the Company's Products sold, or a fee based on a percentage of the Product's
wholesale price.
There can be no assurance that any license or distribution agreements will
be consummated on terms favorable to the Company, if at all. The Company's
failure to affect such arrangements to license and distribute its Products will
severely limit the Company's ability to produce and distribute its Products and
introduce them into the market in any significant way.
PUBLIC RELATIONS; ADVERTISING
Following the closing of the Offering and the employment of senior
management, the Company intends to begin a public relations campaign to build
the image of the Company in a number of its markets in Europe. The public
relations campaign will be designed to present the Company as a developer and
supplier of quality, innovative, economical controlled-release products. This
campaign, which the Company anticipates will utilize the services of independent
public relations firms selected by the Company, may include (i) the offering of
free introductory samples or gifts of the Company's Products through television,
radio and print ads; (ii) participation in trade fairs in a number of markets in
Europe; and (iii) placement of news articles and coverage in the media. The
Company estimates that the cost of this initial public relations campaign could
amount to a significant percentage of the Company's initial revenues.
The Company's advertising strategy includes corporate advertising,
advertorials, and tactical advertising efforts. The Company's advertisements
will highlight the convenience and economy of the Company's Products. The
Company intends to place its print advertisements in periodicals and newspapers
with readership demographics consistent with the Company's core consumer target
markets.
RESULTS OF OPERATIONS; LIQUIDITY AND CAPITAL RESOURCES
Since its incorporation on March 6, 1992, the Company has had no business
activity other than its capital raising activities, activities relating to its
corporate organization, and activities relating to the transfer to the Company
by Mr. Tebbe and/or entities owned and controlled by him, of the patents and
other intellectual property necessary to produce the Products. On December 31,
1997, the Company had $4,034,700 of liquid assets, working capital of $3,812,377
and shareholders' equity of $3,812,377. The Company has used part of the
proceeds of a sale to Overton Holdings Limited, a Turks and Caicos Islands
corporation ("OHL"), which is wholly beneficially owned by Gerold Tebbe, of
4,183,125 shares of newly issued and non-registered Common Stock of the Company,
to finance a portion of the costs associated with this Offering. (See "Certain
Transactions--Stock Purchase Agreement.") The Company has not manufactured or
licensed any of its Products since inception; however, the Company has arranged
for a manufacturing and distribution company based in Germany, KuW Hummel
Vertriebs GmbH ("Hummel"), to manufacture and distribute small quantities of the
Company's Products in connection with test-marketing and promotional activities,
and the Company is currently in the process of negotiating a formal written
agreement with Hummel to continue producing Products for the Company to meet
anticipated demand over the next six to twelve (6-12) months. (See
"Business--Agreement With KuW Hummel Vertriebs GmbH.") Prior to the acquisition
of control of the Company by Mr. Tebbe, the Company had an agreement with Mr.
Gary Takata, a former officer and director of the Company, to use office space
provided by Mr. Takata for Company business. In return for providing office
space to the Company, Mr. Takata was paid $15,000 annually by the Company. This
Agreement was terminated in October 1997, when Mr. Tebbe acquired control of the
Company. (See "Management--Executive Compensation" and "Certain
Transactions--Related Party Transactions-Agreement With Gary Takata.") The
Company currently maintains temporary offices in New York City, the annual cost
of which is immaterial. With the exception of the foregoing, the Company has
paid no rent since its inception (see "Business--Properties"), and has paid no
salaries. Within the thirty to sixty (30-60) days following the consummation of
this Offering, the Company expects to have secured permanent office space in New
Jersey, Connecticut or
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Westchester County, New York State to serve as its United States headquarters.
The annual cost of such office space is not expected to be material.
Following commencement of its operations, the Company's cash requirements
will be significant. While the Company currently has cash on hand sufficient to
finance its proposed business during the first one to three (1-3) years
following this Offering, excluding the costs of any potential acquisitions, the
Company is dependent on internally generated cash flow and upon securing a
working capital line of credit to implement its business plan thereafter. There
can be no assurance that the Company will be able to maintain its business and
operations without additional financing after the first one to three (1-3) years
of operations or that, thereafter, it will be able to generate sufficient cash
flow and/or secure sufficient borrowings to meet the Company's working capital
requirements.
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BUSINESS
GENERAL
Deotexis, Inc. (the "Company") was incorporated in Nevada on March 6, 1992,
has no operating history, has not generated or recognized any revenues, and is
in the development stage. The Company was originally organized with the sole
purpose of identifying a suitable candidate to acquire or with which to merge,
and its existence has been maintained since formation with that objective in
mind. On September 30, 1997, the Company, then known by its former name, Zeron
Acquisitions II, Inc. ("Zeron"), and Zeron's two controlling stockholders at the
time, entered into a Stock Purchase Agreement with Mr. Gerold Tebbe and Overton
Holdings Limited, a Turks & Caicos Islands corporation wholly beneficially owned
and controlled by Mr. Tebbe ("OHL"), pursuant to which OHL agreed to buy
4,183,125 newly-issued and non-registered shares of Common Stock, $.001 par
value per share, of the Company, in exchange for (i) $4,000,000 in cash from
OHL, and (ii) the contribution to the Company by Mr. Tebbe, or entities owned or
controlled by him, of certain patents, patent applications and associated
intellectual property, in return for nominal consideration and a reservation of
a 1% royalty by Mr. Tebbe on all net income recognized by the Company from the
commercial exploitation of such rights.
The creative and technical expertise behind the Company's business is
provided by Mr. Gerold Tebbe, who is a qualified textile designer with over
twenty-five years of experience in the German and international textile
industries. In 1970, Mr. Tebbe took over the management of his family's
privately-held textile company, and refocused its activities on providing
technical services to manufacturers of production machinery for woven and
knitted materials. Thereafter, he rapidly built up an international customer
base with sales in Europe, North America, and Japan. His company became a leader
in the process of transferring complex designs from the artist's drawing board
onto high-volume production machines for the manufacture of patterned cloths.
This proprietary technology gave his company a unique position in its market. In
the 1980s, reacting to the competitive threat to the European textile industry
from inexpensive imports from Asia and other low labor cost regions, Mr. Tebbe
began to seek an alternative to his existing business. After experimenting with
textile-based controlled-release delivery systems, he developed the product line
the Company currently intends to market, which he started to test-market on a
preliminary basis in the late 1980s. At that point, a dispute arose over the
validity of the patents and other intellectual property employed to produce the
products the Company currently intends to market. That patent dispute was
resolved in Mr. Tebbe's favor by the European Patent Office in late 1996.
The Company intends to create an organization staffed by suitably qualified
executives to support Mr. Tebbe. Initially, the Company plans to generate
revenues by (1) using an acquired operating company in Europe or the United
States to supply product to prospective customers who do not have the ability to
license the technology and manufacture the Company's products themselves; and
(2) licensing the technology and processes required to manufacture the Company's
products to consumer products manufacturing and distribution companies in return
for a licensing fee. The Company plans to appoint Senior Product Managers to
take responsibility for sales and licensing agreements with potential customers.
The Company anticipates that the Product Managers will have experience in the
licensing business. In addition, the Company hopes to acquire an operating
company with a management team in place in Europe or the United States. The
Company anticipates that the Product Managers will either be employees of such
an acquired company or members of the newly-hired management the Company will
put in place as it proceeds to expand its operations following this Offering.
While the Company has had preliminary discussions with several wholesale
distributors and potential licensees, there can be no assurance that licensing
agreements will be reached with those entities, or any others, on terms
advantageous to the Company, if at all. In addition, though the Company has had
preliminary discussions with a few operating companies that may be potential
acquisition candidates, there can be no assurance that the Company will be able
to identify a suitable company for acquisition in the United States, Europe, or
any other location or, if such an entity is identified, that the Company will be
able to complete such an acquisition on favorable terms. In the event the
Company does not succeed in entering into licensing agreements and
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consummating an acquisition within its first six to twelve (6-12) months of
operations, the Company's ability to produce and distribute its products and
introduce them into the market in any significant way will be extremely limited.
The Company plans to engage in the business of developing and
commercializing certain patented textile-based controlled-release delivery
systems for consumer products in certain sectors of the toiletries, cosmetics,
apparel, household products and personal care products markets. The Company's
goal is to build on its patented "know-how" in research and development, and to
acquire manufacturing and marketing resources to become a profitable supplier of
textile-based, controlled-release delivery systems to a wide range of industry
sectors. The Company believes that its controlled-release delivery systems are
unique in the way they combine microencapsulation technology with flexible
fleece-type fabrics. The Company's first controlled-release delivery system was
developed by Mr. Tebbe in 1987, and he filed a patent application for the
technology relating thereto in that same year. The application was opposed in
the European patent courts by The Procter & Gamble Company, one of the world's
largest manufacturers and distributors of household and consumer products. In
late 1996, the European Patent Office dismissed Procter & Gamble's challenge in
favor of Mr. Tebbe's patent claims.
The Company's technology was developed by Mr. Tebbe in Europe, where several
products are now ready for further test-marketing and commercial launch by the
Company. These products include: (1) the "Deotexis Deodorant Patch," a small,
disposable adhesive patch which is designed for quick and easy attachment to any
type of clothing, for use as a controlled-release anti-perspirant and deodorant;
(2) the "Deotexis Perfume Patch," a small, disposable adhesive patch designed
for easy and unobtrusive attachment to the inner surface of clothes, for
controlled release of perfume; and (3) the "Deotexis Cold Scarf," a disposable
scarf impregnated with herbal substances for use by persons seeking relief from
the symptoms of colds and congestion. These three products are collectively
referred to herein as the "Products." The Company anticipates, and its test
production and marketing support this intention, that the Products will be
competitively priced in relation to alternative products employing traditional
delivery systems. The Products will be sold as over-the-counter items and not as
prescription medications. The Company's research and development and marketing
strategy will be to avoid marketing any products requiring resource-intensive
Food and Drug Administration-type approvals.
The Company believes that the Products address the problem of effectively
maintaining personal freshness for extended time periods. The Products are
intended to serve as substitutes for perfumes, toiletries, cosmetics,
deodorants, emollients, decongestants and other personal care products marketed
with traditional delivery systems. Products employing traditional delivery
systems (powders, roll-ons, creams, sprays, etc.), in the Company's view, can be
inconvenient to use and, after application, rapidly deteriorate and lose their
efficacy. The Company's Products are intended to provide for the controlled-
release of active substances in desired quantities over an extended period of
time, thereby providing a superior delivery system that avoids the "peak and
valley" effect resulting from use of traditional delivery systems currently on
the market. The Company intends to market the Products as an alternative to
similar consumer products employing traditional delivery systems, with the
advantage of extended active substance effectiveness, and the convenience of a
no-mess, no-spill solution to their personal care needs.
Potential customers for the Company's products are consumers worldwide.
Test-marketing in Europe has shown significant interest in the Deotexis Cold
Scarf, based on its convenience, versatility and cost-effectiveness. The
Company's marketing and product strategy reflects Mr. Tebbe's considerable
experience with the test-marketing of the Company's Products and is designed to
be responsive to the requirements of consumers and the marketplace. To reach its
target markets, the Company intends to focus on two categories of sales
channels: (1) wholesale distributors to drugstores and pharmacies; and (2)
licensees, which are expected to be large and mid-sized corporations in the
toiletries, cosmetics, apparel, household products and personal care products
industries. The Company has had preliminary discussions with several major
companies in both categories and believes it will be in a position to conclude
sales and licensing agreements promptly after concluding its corporate
organization and staffing, though there can be no
29
<PAGE>
assurance that any such contracts or agreements will be consummated. In
addition, the Company is moving towards execution of a formal agreement with the
German distributor, KuW Hummel Vertriebs GmbH ("Hummel"), that has been
manufacturing and distributing the Deotexis Cold Scarf during the test-marketing
phase of operations, pursuant to which Hummel will continue to manufacture and
distribute the Deotexis Cold Scarf in return for payment of licensing fees and
royalties to the Company. The Company anticipates that it will be able to
conclude such an agreement with Hummel in the forty-five to sixty (45-60) days
following this Offering, though there can be no assurance that such an agreement
will be executed in that time frame, or at all.
The Company's marketing plan anticipates that some potential customers will
require products manufactured by the Company or a Company sub-contractor. The
Company therefore hopes to acquire an operating company with manufacturing
capabilities in Europe or the United States within the first six to twelve
(6-12) months of its operations, and thereafter use the Company's Products to
diversify and expand the acquired company's sales. The Company's marketing plan
further anticipates that other customers will enter into licensing agreements
with the Company, under which, in return for a sales-based royalty payment to
the Company, licensees will be entitled to the use of the Company's intellectual
property to manufacture and distribute the Products.
The Company's temporary offices are currently located at 885 Third Avenue,
Suite 2900, New York, New York 10022-4834. The Company's telephone number is
(212) 829-5698. The Company expects to secure permanent office space in New
Jersey, Westchester County, New York or Connecticut, to serve as its United
States headquarters, within thirty to sixty (30-60) days following this
Offering.
STRATEGY
The Company is engaged in the development and commercialization of certain
patented, textile-based controlled-release delivery systems. The Company's
intention is to build on its patented technology in research and development,
and to acquire manufacturing and marketing resources to become a profitable
supplier of textile-based, controlled-release delivery systems to a wide range
of industry sectors. The Company's strategic objective is to establish Deotexis,
Inc. as the world's leading supplier of textile-based controlled-release
delivery systems and to achieve "institutional" status for the "Deotexis" brand.
The Company believes that highly-recognizable institutional brand names are
perceived as having well-known and recognized quality, performance, price and
product distinctiveness, which is supported by the perception of permanence
founded on a long history of excellence. The Company believes that, in general,
institutional brands, because of the quality perceptions that attach to their
products, are protected to a greater degree than non-institutional brands from
swings in customer tastes and preferences, competitive developments and economic
recessions. The Company has designed and will implement a competitive and
sophisticated marketing strategy, specifically focused on achieving
institutional status for the "Deotexis" brand.
TEST-MARKETING
Prior to this Offering, the Company's test-marketing effort has largely
focused on a single product (the Deotexis Cold Scarf). Test marketing has been
conducted on behalf of the Company by a German company, KuW Hummel Vertriebs
GmbH, Durmentingen, Germany ("Hummel"). Because of the ongoing Procter & Gamble
patent suit, the extent of the Hummel marketing effort and the use of
advertising were
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<PAGE>
extremely limited, and sales were confined to a small, select group of wholesale
distributors of pharmaceutical products. Despite these constraints, Deotexis
Cold Scarf sales have showed a steady underlying demand, as evidenced by the
following sales figures:
<TABLE>
<CAPTION>
YEAR SALES ($)
- ---------------------------------------------------------------------------------- -----------
<S> <C>
1991.............................................................................. 26,825
1992.............................................................................. 14,750
1993.............................................................................. 14,730
1994.............................................................................. 32,050
1995.............................................................................. 22,530
1996.............................................................................. 28,190
1997 (est.)....................................................................... 35,000
</TABLE>
Despite the ongoing Procter & Gamble dispute in the years 1988-1996, various
other actions were undertaken to measure consumer acceptance for the Company's
Products. The Deotexis Cold Scarf was exhibited at the trade fair for German
Pharmacists in Dusseldorf in 1990. On that occasion, some 1,500 pharmaceutical
distributors made inquiries about obtaining distribution rights for the product.
Particular interest was shown by the leading wholesale distributors of
pharmaceutical products in Germany, Austria and the Netherlands, together with
leading wholesalers from other markets. These expressions of interest could not
be followed up immediately because the Procter & Gamble patent suit created
doubts about the ultimate ownership of the Company's controlled-release delivery
technology. The Company is now moving to capitalize on these opportunities.
In 1993, the Deotexis Cold Scarf was supplied by Hummel to Andreae-Norris
Zahn AG, Frankfurt ("Zahn") Germany's third-largest wholesaler of pharmaceutical
products, and one of the 250 largest corporations in Germany. On this occasion,
Zahn purchased over 18,000 Cold Scarf three-packs and distributed them as
complimentary gifts to its retail customers as part of a major sales promotion.
The retailers' response was positive, and based on the success of this test,
Zahn is currently requesting a supply of five other Deotexis products for
further test-marketing. Parallel with this, and also through the agency of
Hummel, the Deotexis Cold Scarf was introduced into Luxembourg and Hungary,
where it has been sold since 1993 for use by persons seeking relief from the
symptoms of colds and congestion. Pending the outcome of the Procter & Gamble
patent suit, sales in Luxembourg were restricted to 25 pharmacies and no
advertising or any other form of sales promotion was undertaken. Despite these
restrictions, between 1,000 and 2,000 three-packs of the Deotexis Cold Scarf
have been sold each year in Luxembourg at an end-user price of DM 9.85 per pack.
In January 1996, the Deotexis Cold Scarf was exhibited at the PSI (trade
fair in Dusseldorf for suppliers of corporate gifts), where it generated
potential sales opportunities among representatives of the approximately 1,700
companies engaged in this industry in Germany. In October of 1996, a competition
related to the Deotexis Cold Scarf and advertised in the German mass media
elicited approximately 6,500 letters commending the product. Although the
test-marketing of the Deotexis Cold Scarf has been successful, there are no
assurances that consumers will purchase the product in greater quantities when
it is more widely distributed. Furthermore, certain expenses (to date borne
entirely by Mr. Tebbe personally) have been incurred in connection with the
test-marketing of the Deotexis Cold Scarf and additional expenditures (to be
borne by the Company) will be required to test-market each of the Company's
products before the Company can determine whether there is significant,
sustained consumer interest in such products. The results of the Company's
test-marketing to date should be viewed as a preliminary and tentative
indication of, rather a guarantee of, the potential success of each product.
LICENSING
Consumer markets for apparel, cosmetics, toiletries, household products and
personal care products, although very large, are also highly competitive.
Establishing and increasing brand recognition for a
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<PAGE>
product typically requires a significant expenditure on advertising. Therefore,
to avoid bearing the majority of this advertising outlay, the Company intends to
market its patents and patent rights, especially in the early stages of its
operations, primarily through licensing agreements.
The Company's believes that many of its customers will enter into license
agreements in return for a sales-based royalty payment to the Company. It is the
Company's intention to grant five (5) year licenses, extendable to ten (10)
years by mutual agreement between the Company and the licensee, to large and
mid-sized corporations in the apparel, cosmetics, toiletries, household products
and personal care products industries. The Company will receive sales-based
royalty payments in exchange for the license to use the Company's patents,
patent applications, and related intellectual property necessary to manufacture
and distribute the Company's Products. During the early phase of licensing
activities, the Company may contribute to the promotion and advertising of the
products to be sold by the licensees. Thereafter, the licensees will be
responsible for the continued marketing of the Company's Products, including
product promotions and advertisements. There can be no assurance that the
Company will be able to enter into licensing agreements with any potential
customers on terms advantageous to the Company, if at all. In the event the
Company is unsuccessful in entering into licensing agreements, it will be
required to expend significant funds (an estimated $15-20 million per product in
Germany alone) on advertising sufficient to gain name recognition in the
personal care products industry. Furthermore, the Company lacks the resources
and organizational support structure to mass market its Products, assuming that
there is a demand for the Company's Products, and therefore the Company is
dependent either on an acquisition of an operating company or on securing other
licensee corporations to manufacture and distribute its products.
The Company intends to attract licensees through (i) attendance and display
of the Company's products at trade fairs and through media exposure; (ii)
test-marketing the Company's products; (iii) Mr. Tebbe's personal contacts in
the apparel, cosmetics, toiletries, pharmaceutical and personal care products
industries; and (iv) word of month among satisfied customers. The Company has
identified, and in some cases has had preliminary meetings with, a number of
German corporations that desire to license the technology to produce the
Company's Products. The Company hopes to enter into a licensing agreement with
one corporation in each of the following market sectors: men's clothing, women's
clothing, sports clothes, shoes, women's perfumes, men's cosmetics, personal
hygiene and pharmaceutical wholesale distribution. It cannot be assumed,
however, that any preliminary discussions with corporations in these market
sectors will result in a definitive licensing agreement being consummated
between the parties.
The Company has identified potential markets for licensees in North America,
Japan and Southeast Asia; however, the Company plans to introduce its Products
in these countries after it has commenced operations and marketing in Europe.
There can be no assurance, however, that the Company's Products will ever be
sold successfully in the European, North American, Japanese or Southeast Asian
markets. See "--United States, Japan and Southeast Asia Markets."
The Company has entered into an agreement with the law firm of Drs. Axel
Meyer-Wolden, Unger, Duvinage ("Meyer-Wolden") in Munich, Germany, one of
Germany's leading firms in the areas of entertainment and intellectual property.
The agreement relates only to the worldwide patent for the Company's
anti-perspirant patch, and provides that Meyer-Wolden will introduce the Company
and its products to certain potential customers and will be responsible for
negotiation and administration of license agreements arising from those
introductions, in return for a fee equal to 10% of all income generated by the
licensing agreements resulting therefrom. Unless renewed by the parties thereto,
this agreement expires in January 2002. Any fees paid to Meyer-Wolden are paid
regardless of whether the Company is profitable. The Company hopes this
agreement with Meyer-Wolden will provide significant potential marketing
opportunities for the Company's Products.
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MANUFACTURING AND DISTRIBUTION
MANUFACTURING. The Company's marketing plan anticipates that some potential
customers will require products manufactured by the Company or a Company
sub-contractor. Mr. Gerold Tebbe, President, Chief Executive Officer, Secretary,
Treasurer and a director of the Company, has developed and tested a
manufacturing process for making the Company's Products in quantity at
competitive cost. Development of the prototype production machines required very
little money because Mr. Tebbe was able to make use of idle equipment provided
to him by business associates in the textile industry. The machines have
performed to specification in production test runs to date. In anticipation of
forcasted future demand, before the Company has received substantial purchase
orders from customers, the Company intends to acquire an operating company based
either in Europe or the United States with experienced management and production
capability. If possible, the Company plans to seek acquisition candidates in
countries which provide favorable tax and financing structures for such
transactions. Though the Company has had preliminary discussions with a few
operating companies that may be potential acquisition targets, the Company has
not entered into any acquisition agreements with any potential companies, and
currently has made no agreement or commitment to enter into such a transaction,
and the Company currently has no commitments to finance such an acquisition.
Ultimately, the Company's failure to consummate such an acquisition, will
significantly limit the Company's ability to fully implement its current sales
and marketing plan.
DISTRIBUTION. The Company believes it can best affect the distribution of
its products by (i) entering into agreements with drug and pharmaceutical
wholesale distributors to distribute the Company's Products through those
companies' distribution networks, and (ii) licensing the technology and the
processes required to manufacture the Company's products to consumer products
manufacturing and distribution companies, in return for a licensing fee, which
companies would, in turn, manufacture and distribute the Company's Products.
While the Company has had preliminary discussions with several wholesale
distributors and potential licensees, there can be no assurance that such
contemplated agreements will be reached on terms advantageous to the Company, if
at all. In the event the Company does not succeed in entering into these
licensing and distribution agreements within its first six to twelve (6-12)
months of operations, the Company's ability to produce and distribute its
products in the market in any significant way will be extremely limited.
AGREEMENT WITH KUW HUMMEL VERTRIEBS GMBH
Since 1993, the Company has had an informal oral agreement with KuW Hummel
Vertriebs GmbH ("Hummel"), a small manufacturing and distribution company in
Germany, to produce certain of the Company's Products, primarily the Deotexis
Cold Scarf, in the small quantities that have been required for test-marketing
and promotional purposes. The products have been manufactured on machinery the
development and customization of which has, to date, been financed by Mr. Tebbe.
Mr. Tebbe's wife currently owns a 49.02% interest in Hummel, and as a
substantial stockholder, is able to influence the direction and affairs of
Hummel's business. See "Certain Transactions--Related Party Transactions-
Agreement With Hummel."
The Company is now moving to formalize its arrangement with Hummel. The
Company anticipates that it will enter into a written License Agreement with
Hummel within the forty-five to sixty (45-60) days following the Offering, which
the Company anticipates will provide for the following basic terms. The Company
expects to grant to Hummel a non-exclusive license for Hummel to manufacture and
distribute certain of the Company's Products in the Federal Republic of Germany.
The license will grant to Hummel the right to use Company patents relating to
the Deotexis Cold Scarf and other products based on it, but licensing
arrangements between the Company and Hummel with respect to other Company
Products will be the subject of separate licensing agreements. Hummel will have
the right to use the Deotexis name in its selling efforts, and will be entitled
to receive, without payment of any additional fee, all improvements on existing
products and techniques developed by the Company that relate to the licensed
products. It is
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<PAGE>
anticipated that Hummel will agree to commit a certain amount of money to
promoting sales of the Company's Products in the first year of the license term.
Deotexis products manufactured and sold by Hummel will have to meet quality
standards specified by the Company, and the Company will have the right to
verify quality at all times. In return for the grant of the license to Hummel
described above, Hummel will agree to make the following payments to the
Company: (1) DM5,000, due on execution of the agreement, (2) an annual license
maintenance fee of DM10,000, payable on January 1 of each year, and credited
against any royalties due to the Company under (3) below, and (3) a royalty
equal to 8% of net sales of the licensed products (to be defined), which
percentage shall reduce to 5%, in steps, on sales of the licensed products in
excess of certain specified revenue amounts. Hummel will not be permitted to
assign its rights under the License Agreement. The Company intends that the
duration of the license shall be for one (1) year, renewable automatically for
an additional year unless either party gives the other ninety (90) days notice
of its intention not to renew, or unless a party has breached its obligations
under the agreement. It is anticipated that the License Agreement will be
governed by German law.
The Company intends that the License Agreement with Hummel will be
structured so as not to inhibit or restrict any future licensing of its
technology by the Company to other manufacturers, nor will any such agreement
restrict or prevent in any way the acquisition that the Company hopes to
accomplish of a manufacturing and distribution company located in the United
States or Europe. Of course, there can be no assurance that a licensing or any
other type of agreement between Hummel and the Company will be executed.
UNITED STATES, JAPAN AND SOUTHEAST ASIA MARKETS
The Company may in the future enter into distribution or licensing
agreements with one or more United States, Japanese or Southeast Asian
distributors for distribution of its products outside of Europe. Such agreements
will not be entered into unless the Company believes that one or more of its
products can be sold profitably in such markets, or that such distribution or
licensing positions the Company for future sales in those markets. The Company
has no present plans with respect to these markets, and there is no assurance
that the Company will develop or pursue any such plans in the future. The
Company has identified numerous direct and indirect competitors in target
markets in the United States, Japan and Southeast Asia. There are no assurances
that the Company will in the future expand its operations into the United
States, Japan or Southeast Asia markets. Furthermore, there can be no assurance
that any attempts by the Company to expand its operations in these countries
will be successful or profitable.
POTENTIAL PHARMACEUTICAL APPLICATIONS FOR THE COMPANY'S TECHNOLOGY
The Company's patented processes and proprietary technology (known as
"sustained," "programmed," "prolonged" or "timed" release systems in the
pharmaceutical industry), may have wide applications for new products in the
pharmaceutical industry, particularly in the areas of diagnostic and drug
delivery systems. Controlled-release drug delivery systems are designed to
reduce the required frequency of effective drug administration, decrease dosage
quantities, and permit concentrated treatment of a specific area or organ,
without the necessity of medicating the entire body. A study published in the
September 1996 issue of Med Pro Month, performed by Medical Data International,
Inc., an industry market research group, has forecasted worldwide sales of
controlled-release delivery systems for the pharmaceutical sector to rise from
$7.5 billion in 1995 to $27.6 billion in 2000.
Since the beginning of the development of the Company's technology, Mr.
Tebbe and the Company have followed developments in the pharmaceutical industry
for controlled-release delivery systems, and based upon informal consultations
with industry specialists in the European pharmaceutical market, the Company
believes its patents may cover areas and applications which are or may be of
considerable interest to several pharmaceutical companies. If these potential
applications appear promising, the Company intends to license its technology to
these companies for use in their controlled-release and diagnostic systems, in
return for a sales-based royalty payment. The Company continues to closely
follow
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<PAGE>
and assess developments in this field, and intends to capitalize on any
opportunities to incorporate the Company's technology into these systems. There
can, however, be no assurance that any applications for the Company's technology
in the pharmaceutical area will be developed, and if developed, that such
products will gain the necessary regulatory approvals. Moreover, even if any
products developed using the Company's technology gain the required regulatory
approvals, there can be no assurance that any such products will be marketed by
the pharmaceutical companies, and if marketed, will prove to be profitable.
PATENTS
The Company currently owns the patent and patent rights that were previously
owned by Mr. Tebbe, and/or entities owned and controlled by him, and were
transferred to the Company in connection with the consummation of the
transactions contemplated by the Stock Purchase Agreement. Such patents and
related intellectual property constitute all of the technology necessary to
manufacture the Company's Products. It is the Company's intention to
commercially exploit the patents through the introduction and sale of the
Company's Products, primarily into the European (and later, possibly in the
American, Japanese and Southeast Asian) market. In exchange for the transfer to
the Company of the patents, patent rights and related intellectual property, the
Company has agreed to pay Mr. Tebbe a 1% royalty per annum of all net revenues
recognized by the Company in connection with the commercial exploitation of the
patents and patent rights. (See "Management--Contingent Compensation.") There
are no assurances that the Company will ever achieve net revenues as a result of
such commercial exploitation. Furthermore, if the occasion arises, the Company
will have to defend against and/or institute patent infringement suits in order
to protect its proprietary rights to the patents. Prosecution of any type of
patent litigation or dispute may result in significant expenses for the Company.
In an attempt to mitigate the costs that may be associated with defending its
intellectual property from infringement, the Company intends to secure patent
infringement insurance in the future, in an as yet undetermined amount. The
approximate annual cost to the Company for such coverage is not known at this
time.
INDUSTRY OVERVIEW
Controlled-release microencapsulation has been a known technology for a
number of years in the pharmaceutical, biomedical, chemical, carbonless paper,
agricultural, pesticide and food industries. In these areas, 1996 sales of
products employing this technology were over $3 billion. In the form invented
and patented by Mr. Tebbe, and in the industries targeted by the Company, it is,
however, still in its infancy.
In Europe, according to an article in the January 1994 edition of the
scientific journal Textile Technology Digest, published by the Institute of
Textile Technology, Britain, research is taking place in the areas of controlled
release wound dressings and insect repellents, with commercial products expected
in the near future.
Textile-based controlled-release delivery systems are an emerging market.
According to an independent study entitled "Advanced Controlled Delivery
Technology in the U.S.," published by Business Communications Company, Inc., of
Norwalk, Connecticut, in March 1994, sales of microencapsulated products,
including cosmetics, toiletries and personal hygiene products, aggregated less
than $40 million in the United States in 1993. In the area of enhanced textiles,
sales were practically non-existent. Nevertheless, the study noted that in order
to remain viable, the stagnant textiles industry was experimenting with new
areas of fabric enhancement, and that: "one of the most promising areas is
microencapsulation, where tiny capsules bound onto textiles break and release
chemicals, including anti-bacterial compounds, insecticides, perfumes and
emollients. Some fragrances reportedly last for years, even after washing the
fabric 30 or more times."
The Company's existing Products, and products in development, seek to fill a
market niche in most of the "promising areas" identified in the independent
report.
35
<PAGE>
COMPETITION
On a broad scale, the Company believes that products utilizing the Company's
delivery system compete with cosmetics, toiletries and personal care products
utilizing conventional delivery systems (including sprays, creams, powders and
roll-on mechanisms). The Company believes that products within these markets
compete for selection and purchase by consumers who are making largely
non-discretionary expenditures. The Company further believes that products
purchased on a largely non-discretionary basis can differentiate themselves with
respect to, and produce sales as a result of, novelty, brand image, convenience
of use, effectiveness of the distribution channel utilized, and price
considerations.
On a more narrow scale, the Company's controlled-release technology competes
against other, traditional delivery systems (all of them non-controlled-release)
in the perfume, deodorant, hygiene, decongestant, emollient, bandage, and insect
repellent markets. Though the delivery system employed by the Company's Products
will compete with established brand-name products employing traditional delivery
systems, the novelty and convenience advantages possessed by to the Company's
products because of their delivery methodology will enable potential licensees
with established product brands to market the Company's Products as a
complementary form of the successful brand name products, eliminating the need
to invest large sums in generating new brand recognition, while at the same time
appealing to consumers' appetite for novelty.
On an even narrower scale, the Company's Products compete against the
products of other companies having proprietary textile-based controlled-release
delivery systems. To the best of the Company's knowledge, and in keeping with
the current small size of the market for "Deotexis-type" controlled-release
delivery systems, there appear to be few other corporations offering
commercially viable controlled-release systems in the market sectors targeted by
the Company. To date, the Company knows of only two such competitors, both of
which are based in Japan. Due to the Company's relative lack of experience in
the business, its limited financial and other resources, and other factors
relating to competition that may develop from well-established companies and
delivery system alternatives, the Company may not be able to compete
successfully, if at all, with other existing or new competitors in the
controlled-release technology field.
EMPLOYEES
As of the date of this Prospectus, the Company has no paid employees. Mr.
Gerold Tebbe is serving as President, Chief Executive Officer, Secretary and
Treasurer of the Company, and providing his services and expertise to the
Company, without compensation. By the end of the first year of operations, the
Company expects to have at least one (1) and possibly up to ten (10) full-time
employees, including product managers and a controller/accountant. The remaining
employees will be assistants and clerical employees. Should the Company complete
its intended acquisition of an operating company during this period, the number
of employees could be considerably in excess of this number. See "Management."
PROPERTIES
A search for suitable office space in Westchester County, New York, New
Jersey or Connecticut is currently underway. Upon or before completion of this
Offering, the Company plans to enter into a lease for the Company's United
States headquarters. Currently, the Company maintains temporary offices located
at 885 Third Avenue, Suite 2900, New York, New York 10022-4834, where it pays a
fee to maintain such temporary offices of $5,100 annually.
If the Company succeeds in completing its planned acquisition of an
operating company, it expects that at such time it will own or lease the
manufacturing facilities of such acquired entity, along with that Company's
other property, plant and equipment.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Company is a party.
36
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICER
Pursuant to the Company's By-laws, the following individuals (other than
Gerold Tebbe) were appointed by Gerold Tebbe, as sole director of the Company,
to serve on the Board of Directors until the next Annual Meeting of Stockholders
(currently scheduled for some time in April or May of 1998), at which time all
Directors will stand for re-election. There is currently only one executive
officer of the Company, Mr. Tebbe, who is President and Chief Executive Officer.
Mr. Tebbe will also serve as the Company's Secretary and Treasurer until such
time as suitable personnel can be retained to serve in those positions.
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Robert F. Wright.......................... 72 Chairman of the Board; Chairman, Executive Committee; Member,
Nominating Committee
Gerold Tebbe.............................. 48 Vice Chairman of the Board; Chief Executive Officer; President;
Secretary; Treasurer; Member, Executive Committee; Member,
Compensation Committee; Member, Nominating Committee
Aubrey L. Cole............................ 74 Director; Chairman, Audit Committee
David F. Bolger........................... 65 Director; Member, Audit Committee
Michael J. Rosenberg...................... 69 Director; Member, Audit Committee
Ira T. Wender............................. 71 Director; Chairman, Compensation Committee
Tony Kirk................................. 54 Director; Chairman, Nominating Committee; Member, Executive
Committee; Member, Compensation Committee
</TABLE>
BACKGROUND OF DIRECTORS AND EXECUTIVE OFFICER
ROBERT F. WRIGHT. Mr. Wright has been Chairman of the Company since January
1998. Mr. Wright is currently a director or Chairman of several national and
international financial and industrial companies, including Hanover Direct,
Inc., The Navigators Group, Inc., Norweb North America Corporation, Reliance
Standard Life Insurance Co., Rose Technology Group Limited, U.S. Timberlands,
L.P., and Williams Real Estate Co., Inc. Mr. Wright is also a member of several
charitable Boards, including New York University, Town Hall Foundation,
Greenwich House Settlement, and the Council of Governing Boards (of which he is
Chairman). Since 1988, Mr. Wright has managed his own investment and consulting
firm, Robert Wright Associates, Inc. From 1948 to 1988, Mr. Wright was employed
by Arthur Andersen LLP, with the position of Partner when he retired. He was
educated at Michigan State University and New York University.
GEROLD TEBBE. Mr. Tebbe has been a Director, President, Treasurer and
Secretary of the Company since October 1997, and has been Chief Executive
Officer of the Company since January 1998. Mr. Tebbe was born in
Langenenslingen, Germany, and has been self-employed as an inventor for the past
ten years, specializing in inventing, patenting and developing products
combining his controlled-release technology with textiles and other
applications. From 1970 to the late-1980s, Mr. Tebbe was President of Textil
Atelier K. Tebbe in Germany, a textile concern owned by his family specializing
in textile design for woven and knitted materials, and the servicing of certain
textile production equipment. Mr. Tebbe studied tailoring and passed the
examinations of the Chamber of Industry and Commerce (IHK) in Reutlingen,
Germany;
37
<PAGE>
subsequently, he qualified as master craftsman in textile design while employed
in Albstadt-Tailfingen, Germany.
AUBREY L. COLE. Mr. Cole has been a Director of the Company since January
1998. Since 1989, Mr. Cole has been a consultant for Aubrey Cole Associates, a
management consulting services and investment concern, and he is currently a
director of U.S. Timberlands, L.P. From 1986 to 1989, Mr. Cole was the Vice
Chairman of the Board of Directors of Champion International Corporation (a
publicly-traded forest products company), and from 1983 to 1993, Mr. Cole was
Chairman of Champion Realty Corporation (the land sales subsidiary of Champion
International). Mr. Cole holds a B.B.A. from the University of Texas and serves
on the Advisory Board of the University of Texas Business School.
DAVID F. BOLGER. Mr. Bolger has been a Director of the Company since
January 1998. Mr. Bolger is the President of Bolger & Co., Inc. Mr. Bolger
received his B.B.A. degree from the University of Pittsburgh in 1954. After
serving as a Contracting Officer in the U.S. Air Force, Mr. Bolger relocated to
New York, where he was employed as Executive Assistant to Thomas Mellon Evans
(H.K. Porter Co., Crane Co. and Evans & Company) from 1956 to 1961. From 1961 to
1963, Mr. Bolger served as Vice President and Director of Broadstone Realty
Corporation (a wholly-owned subsidiary of Stone & Webster Securities, Inc.) in
New York City. From 1963 to 1966, he was employed by New York Securities Co. and
its affiliate, New York Securities Co., Inc., serving as director, officer and
partner. In 1966, Mr. Bolger founded Bolger & Co., Inc., which for the past 32
years has been active in the financing of fixed assets for major corporations
and in various corporate activities, including leveraged buy-outs, Employee
Stock Option Plans, and investing in under-valued industrial corporations,
financial institutions and retail enterprises. He is a Director of Universal
Holdings Corp. (its affiliates include American Progressive Life and Health
Insurance Company of New York and American Pioneer Life Insurance Company of
Florida), and Chairman and Chief Executive Officer of FMB Holding Co., Inc.
(Farmers & Merchant State Bank, Boise, Idaho). In addition to his business
activities, Mr. Bolger is active in numerous charitable, philanthropic and
professional organizations.
MICHAEL J. ROSENBERG. Mr. Rosenberg has been a Director of the Company
since January 1998. From 1961 to 1996, Mr. Rosenberg was employed in various
capacities by Rosenthal & Rosenthal, Inc., New York City, where he ultimately
became Executive Vice President. Prior to this, from 1959 to 1961, Mr. Rosenberg
was employed by Sterling National Bank, New York, and, from 1958 to 1959, he
worked for A.J. Armstrong & Co., New York. From 1953 to 1958, Mr. Rosenberg was
employed by Meinhard & Co., New York. He is a member of the Board of Directors
of several United States corporations. He has been, and continues to be, active
in numerous charitable, philanthropic and professional organizations, including
serving on the Boards of New York University and the Town Hall Foundation. From
1951 to 1953, Mr. Rosenberg served as a First Lieutenant in the U.S. Army in
Korea, where he was decorated with the Silver Star and the Bronze Star. He
received his B.S. from Upsala College in 1951 and his MBA from New York
University in 1955.
IRA T. WENDER. Mr. Wender has been a Director of the Company since January
1998. Mr. Wender has been of counsel to, or a partner with, the New York law
firm of Patterson, Belknap, Webb and Tyler from 1986 to date. From 1971 to 1986,
he was a partner with the law firm of Wender, Murasc and White, New York, and
from 1959 to 1971, he was a partner with the law firm of Baker & McKenzie, New
York. From 1949 to 1952, and from 1954 to 1959, he was an associate at the law
firm of Lord Day & Lord, New York. In the years 1952 to 1954, he was Assistant
Director of the Harvard Law School International Program in Taxation. During the
years 1954 to 1958, Mr. Wender was a Lecturer in Taxation at the NYU School of
Law and co-authored "Foreign Investment and Taxation," which was published in
1955 by Prentice Hall. Mr. Wender received a B.A. degree from Swathmore College
in 1945, a J.D. degree from the University of Chicago Law School in 1948, and an
L.L.M. in Taxation from the New York University School of Law in 1951. From 1969
to 1974, Mr. Wender was Chairman of C. Brewer & Company Ltd., Honolulu, Hawaii
(sugar production and international agriculture), and from 1978 to 1982, he was
President and Chief
38
<PAGE>
Executive Officer of A.G. Becker--Warburg Paribas Becker, Inc. (investment
banking). From 1982 to 1986, he was Chairman of The Sussex Organization, Inc.
(investment banking). Mr. Wender is currently a director of The Dime Savings
Bank, New York.
TONY KIRK. Mr. Kirk has been a Director of the Company since January 1998.
Since August 1990, Mr. Kirk has been a partner in Kirk & Maeder, a management
consulting firm in Switzerland, providing advice on management buy-outs,
turn-arounds, acquisitions, divestitures, public offerings of stock and other
forms of venture capital primarily to family-owned industrial and financial
corporations. From 1987 to August 1990, Mr. Kirk was managing director of
Societe Financiere de Geneve, Geneva, Switzerland ("Sofigen"), a listed finance
company investing in privately-owned, medium-sized businesses in Europe and the
United States. From 1982 to 1987, Mr. Kirk served in several positions for
Thyssen Bornemisza N.V., a diversified family-owned industrial group of
companies based in Monaco and Amsterdam, including, from 1983, head of Corporate
Development, and from 1985, Senior Vice President and head of Mergers and
Acquisitions. In these capacities, Mr. Kirk was responsible for numerous
transactions with industrial companies. From 1978 to 1981, Mr. Kirk was a
manager of the Boston Consulting Group, an international consulting firm based
in Munich, Germany, where Mr. Kirk served as a management consultant to several
large German public corporations and privately-owned companies. Mr. Kirk
received a Ph.D. from Oxford University in 1973. He has been a director or
advisory board member of companies in Germany, Switzerland, Austria, Holland and
the United States. Mr. Kirk speaks fluent German, French and English.
EXECUTIVE COMPENSATION
From its incorporation on March 6, 1992 until the present, except for (1)
certain payments to a former officer and director of the Company for the use of
office space provided to the Company by that former officer and director, and
(2) certain payments to another former officer and director of the Company for
consulting services rendered to the Company by a firm affiliated with that
former officer and director, both of which agreements were terminated in October
1997, the Company has not paid any salary or other compensation to Mr. Tebbe,
any other officer or director of the Company, or any other person. Currently,
other than as described in "--Contingent Compensation" below, involving
contingent compensation to be paid to Mr. Tebbe in connection with his
contribution to the Company of patents, patent applications, and related
intellectual property, and other than as described in "--Directors Compensation"
below, relating to compensation to be paid to Mr. Tebbe in connection with his
service to the Company as a director, there is no agreement between the Company
and Mr. Tebbe to compensate Mr. Tebbe for his services to the Company.
CONTINGENT COMPENSATION
The Company has an agreement with Gerold Tebbe, the President, Chief
Executive Officer, Secretary, Treasurer and a director of the Company, to pay
Mr. Tebbe a royalty of 1% per annum of all net revenues recognized by the
Company in connection with the commercial exploitation of the Company's patents
and patent rights. The Company made this agreement with Mr. Tebbe when Mr.
Tebbe, prior to becoming a director and officer of the Company, agreed to
contribute his patents, patent rights and related intellectual property to the
Company in connection with the sale of 4,183,125 shares of the Company's Common
Stock to Overton Holdings Limited, a Turks and Caicos Islands corporation
("OHL"), of which Mr. Tebbe is the 100% beneficial owner. The Company has agreed
with Mr. Tebbe that royalty payments under this agreement will not accrue and be
payable to Mr. Tebbe unless and until the Company has recognized net income from
that patent or patent right during such year, as determined in accordance with
generally accepted accounting principles, as applied in the United States. The
Company expects to formalize this royalty agreement with Mr. Tebbe in the next
forty-five to sixty (45-60) days. The Company has agreed further that Mr. Tebbe
may renegotiate the terms of such royalty compensation, in the event the current
stockholders of the Company (other than OHL and other than those stockholders of
the Company
39
<PAGE>
receiving their shares of stock by gift from OHL (see "Certain
Transactions--Gift of Shares by OHL")) transfer a majority of their shares of
the Company's Common Stock to persons other than the current shareholders. There
can be no assurances that, in the event such transfers of the Common Stock of
the Company occur, the Company will be able to renegotiate the payment of the
royalty compensation to Mr. Tebbe on terms that are favorable to the Company.
Currently, the Company's agreement with Mr. Tebbe is independent of his
remaining in any of his positions as a director, President, Chief Executive
Officer, Secretary and Treasurer of the Company.
MANAGEMENT EMPLOYMENT AGREEMENTS; KEY EMPLOYEES
MANAGEMENT EMPLOYMENT AGREEMENTS. The Company expects to offer employment
agreements to members of senior management at the time such members are
recruited. (See "Plan of Operations-- Senior Management.") The terms of such
employment agreements will be the subject of negotiation at the time senior
management is retained.
KEY MAN LIFE INSURANCE. The Company intends to secure a "key man" life
insurance policy on the life of Mr. Tebbe in an amount of at least $1,000,000.
The Company anticipates that it will be the sole beneficiary under this life
insurance policy, and the Company expects to arrange for the policy to be issued
in the next forty-five to sixty (45-60) days.
DIRECTORS COMPENSATION
CASH COMPENSATION. Each member of the Board of Directors will receive
$20,000 annually in cash compensation for his services to the Company as a
director. In addition, the Company will reimburse its directors for reasonable
out-of-pocket expenses incurred in connection with attendance by the directors
at meetings of the Board or any committee thereof.
STOCK OPTION PLAN. Pursuant to the Director Stock Option Plan the Company
intends to adopt, subject to shareholder approval, in the next forty-five to
sixty (45-60) days, the Company has agreed to grant options for $20,000 worth of
the Company's Common Stock (valuation formula to be determined) annually to each
director. The Company anticipates that the Director Stock Option Plan will
provide for the annual grant of options to each director to be doubled to
$40,000 worth of the Company's Common Stock, provided the Company meets or
exceeds certain performance targets (to be determined). The amount of Common
Stock of the Company to be reserved for issuance pursuant to the Director Stock
Option Plan, and the vesting provisions thereof, have not yet been determined.
INCENTIVE STOCK OPTION PLAN
To provide additional compensation to senior executives upon their
retention, and possibly at specific times, or at regular intervals, thereafter,
the Company anticipates adopting, at the appropriate time and subject to
shareholder approval, an Incentive Stock Option Plan. The exact terms of the
Incentive Stock Option Plan have yet to be determined, but the Company expects
the plan to provide for the grant of some or all of the following: incentive
stock options, nonstatutory stock options, performance shares, stock
appreciation rights, and restricted stock awards. The vesting provisions of the
equity compensation granted pursuant to the plan will be governed by separate
Option Agreements to be executed by the Company and the optionee at the time of
grant. The amount of Common Stock of the Company to be reserved for issuance
pursuant to the Incentive Stock Option Plan has yet to be determined.
DIRECTORS COMMITTEES
The Company's Board of Directors has established the following committees:
Executive, Nominating, Audit, and Compensation. Membership of the committees and
a brief discussion of each of their functions follows.
40
<PAGE>
The Audit Committee will review the engagement of the Company's independent
accountants, will review and approve the scope of the annual audit undertaken by
the Company's independent accountants and will review the independence of the
accounting firm. The Audit Committee will also review the audit and non-audit
fees of the Company's independent accountants, and will review, evaluate and
monitor the adequacy of the Company's internal control procedures. The Audit
Committee is comprised of Aubrey L. Cole (Chairman), David F. Bolger, and
Michael J. Rosenberg.
The Compensation Committee will advise the Board of Directors on issues of
executive and employee compensation, and will administer the Incentive Stock
Option Plan, once adopted and approved. The members of the Compensation
Committee are Ira T. Wender (Chairman), Tony Kirk, and Gerold Tebbe.
The Nominating Committee will advise the Board of Directors on issues
relating to hiring, retaining and promoting senior management, and other key
executives and personnel. The Nominating Committee consists of Tony Kirk
(Chairman), Gerold Tebbe, and Robert F. Wright.
The Executive Committee will advise the Board of Directors with respect to
the management and affairs of the Company and will review and analyze special
projects which may be assigned to it from time to time by the Board of
Directors. The members of the Executive Committee are Robert F. Wright
(Chairman), Tony Kirk, and Gerold Tebbe.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to its Articles of Incorporation and indemnification agreements to
be entered into between the Company and each of its directors and executive
officers, the Company is obligated to indemnify each of its directors and
executive officers to the fullest extent permitted by Nevada law with respect to
all liability and loss suffered, and reasonable expenses incurred, by such
persons in any action, suit or proceeding in connection with that person's
service as a director or executive officer of the Company. The Company could be
obligated to advance the reasonable expenses of indemnified directors or
executive officers in defending such proceedings if the indemnified party agrees
to repay all amounts advanced if it is ultimately determined that such person is
not entitled to indemnification.
The Nevada General Corporation Law (the "Nevada Act") authorizes Nevada
corporations to indemnify any person who was or is a party to any proceeding
(other than an action by, or in the right of, the corporation), by reason of the
fact that he or she is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation or other entity,
against liability incurred in connection with such proceeding, including any
appeal thereof, if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or on behalf of a corporation, indemnification may not be made if the
person seeking indemnification is adjudged liable, unless the court in which
such action was brought determines such person is fairly and reasonably entitled
to indemnification. The indemnification provisions of the Nevada Act require
indemnification if a director or officer has been successful on the merits or
otherwise in defense of any action, suit, or proceeding to which he or she was a
party by reason of the fact that he or she is or was a director or officer of
the corporation. The indemnification authorized under the Nevada Act is not
exclusive and is in addition to any other rights granted to officers and
directors under the Articles of Incorporation or By-laws of a corporation or any
agreement between officers and directors and the corporation. A corporation may
purchase and maintain insurance or furnish similar protection on behalf of any
officer or director against any liability asserted against the officer or
director and incurred by the officer or director in such capacity, or arising
out of the status of an officer or director of the corporation, whether or not
the corporation would have the power to indemnify him or her against such
liability under the Nevada Act.
Under provisions of the Company's Articles of Incorporation that are
authorized by the Nevada Act, and under provisions of the indemnification
agreements to be executed between each director and
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<PAGE>
executive officer, and the Company, a director will not be personally liable for
monetary damages to the Company or any other person for acts or omissions in his
or her capacity as a director or executive officer, except in certain limited
circumstances such as certain violations of criminal law and transactions in
which the director or executive officer derived an improper personal benefit. As
a result of these provisions, shareholders may be unable to recover monetary
damages against directors or executive officers for actions taken by them which
constitute negligence or gross negligence or which are in violation of their
fiduciary duties, although injunctive or other equitable relief may be
available.
In the indemnification agreements to be entered into with each of its
directors and executive officers, the Company anticipates the inclusion of
provisions pursuant to which it will be obligated to indemnify those persons to
the fullest extent authorized by the Nevada Act and to advance payments to cover
defense costs against an unsecured obligation to repay such advances if it is
ultimately determined that the recipient of the advance is not entitled to
indemnification. The Company will not be required to indemnify a director or
executive officer if the loss results from any of the following: (a) a violation
of Section 16(b) of the Securities and Exchange Act of 1934, as amended; (b) a
violation of criminal law; (c) a transaction from which the executive officer or
director received an improper personal benefit; (d) willful misconduct or a
conscious disregard for the Company's best interests; or (e) a transaction for
which the director is liable pursuant to Section 78.300.2 of the Nevada Act for
certain distributions from the corporation to its shareholders.
The foregoing provisions of the Nevada Act, the Company's Articles of
Incorporation, and the indemnification agreements to be executed in favor of the
Company's directors and executive officers, could have the effect of preventing
or delaying a person from acquiring or seeking to acquire a substantial equity
interest in, or control of, the Company.
The Company has secured directors' and officers' liability insurance, which
insurance provides for a maximum of $20 million of coverage, subject to
retentions of $75,000 ($175,000 for securities claims) per claim occurrence,
payable by the Company.
Any payments made by the Company, whether pursuant to an indemnification
agreement or pursuant to the Company's Articles of Incorporation, which are not
covered by an insurance policy, may have an adverse impact on the Company's
earnings.
DISCLOSURE OF THE COMMISSION'S POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions of the Company's
Articles of Incorporation, the Nevada Act, and/or the provisions of the
indemnification agreements to be executed between each director and executive
officer, and the Company, the Company has been informed that, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of March 2, 1998, with respect
to the beneficial ownership of the outstanding shares of Common Stock by (i)
each person known by the Company to be a beneficial owner of more than 5% of the
outstanding shares of Common Stock of the Company, (ii) each of the Company's
directors, (iii) each of the Company's executive officers and (iv) all directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
NAME AND ADDRESS NUMBER OF OF CLASS OF CLASS
OF BENEFICIAL OWNER (1) SHARES BEFORE OFFERING AFTER OFFERING (3)
- ------------------------------------------------------ ---------- ------------------- -------------------
<S> <C> <C> <C>
Overton Holdings Limited, a Turks and Caicos Islands
corporation, 100% beneficially owned by Gerold Tebbe
(2)................................................. 2,733,943 60.13% 55.2%
Address:
c/o The Chartered Trust Company
Towne Centre Mall
Butterfield Square
Providenciales, Turks & Caicos Islands
British West Indies
Deotexis AG, a Swiss corporation 100% beneficially
owned by Gerold Tebbe (2)........................... 50,000 1.01% -0-
Address:
Poststrasse 9
CH-6300
Zug, Switzerland
Tony Kirk
Address:
Kirk & Maeder
Sagenstrasse 14
6318 Walchwil
Switzerland........................................... 50,000 1.01% -0-
</TABLE>
- ------------------------
(1) Currently, other than Gerold Tebbe and Tony Kirk, none of the Company's
directors or executive officers is the beneficial owner of any Company
Common Stock.
(2) The aggregate beneficial ownership of Company Common Stock by Gerold Tebbe,
President, Chief Executive Officer, Secretary, Treasurer and a director of
the Company, through Overton Holdings Limited and Deotexis AG, each a
Selling Security Holder hereunder, is as follows: (a) shares beneficiary
owned (i) before Offering: 2,783,943; (ii) after offering: 2,509,875; (b)
percentage beneficiary owned (i) before Offering: 61.23%; (ii) after
Offering: 55.2%. The share amounts and percentage of total outstanding
shares shown above for after this Offering assume that all shares being
registered hereunder for the account of each of Overton Holdings Limited and
Deotexis AG are sold by them in this Offering.
(3) Assumes that all of the shares of the Company being registered for the
account of Overton Holdings Limited, Deotexis AG and Tony Kirk, each a
Selling Security Holder hereunder, are sold by them in this Offering.
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<PAGE>
SELLING SECURITY HOLDERS
An aggregate of 1,673,250 shares (the "Shares") of Common Stock are being
registered in this Offering for the account of Overton Holdings Limited, a Turks
& Caicos Islands corporation 100% owned and controlled by Gerold Tebbe, the
Company's majority stockholder, and the other Selling Security Holders listed on
Schedule A to this Prospectus. The Selling Security Holders' Shares are not
being underwritten in this Offering and the Company will not receive any
proceeds from the sale of the Selling Security Holders' Shares. The Shares of
Common Stock being registered for the account of the Selling Security Holders
may be sold by the Selling Security Holders or their transferees commencing on
the date of this Prospectus. Sales of such Shares of Common Stock by the Selling
Security Holders or their transferees may depress the price of the Common Stock
in any market that may develop for such Shares.
The following table, and Schedule A hereto, sets forth certain information
with respect to the individuals and entities for whom the Company is registering
the Shares for resale to the public. The Company will not receive any of the
proceeds from the sale of such Shares of Common Stock.
<TABLE>
<CAPTION>
AMOUNT OF SHARES AMOUNT OF SHARES
AMOUNT OF SHARES BEING OWNED AFTER
NAME OWNED(2) REGISTERED(3) OFFERING(4)
- --------------------------------------------------- ---------------- ------------------ ----------------------
<S> <C> <C> <C>
Overton Holdings Limited(1)........................ 2,733,943 224,068 2,509,875
</TABLE>
See Schedule A to this Prospectus for additional Selling Security Holders.
- ------------------------
(1) Overton Holdings Limited is a corporation formed under the laws of the Turks
and Caicos Islands, British West Indies ("OHL"), and is the majority
stockholder of the Company following its recent acquisition of 4,183,125
shares of Common Stock from the Company. (See "Certain Transactions-- Stock
Purchase Agreement.") OHL is 100% beneficially owned and controlled by Mr.
Gerold Tebbe, a director, President, Chief Executive Officer, Secretary and
Treasurer of the Company. Following the acquisition of the shares of Common
Stock of the Company referred to above, OHL gifted 1,449,182 of those shares
to the individuals and entities listed on Schedule A hereto.
(2) OHL currently owns 60.13% of the outstanding shares of Common Stock of the
Company.
(3) The amount of shares of Common Stock to be registered represents, in the
aggregate, 36.8% of the total outstanding shares of Common Stock of the
Company.
(4) Assumes that OHL sells all of the Shares being registered by the Company on
behalf of OHL pursuant hereto.
------------------------
The sale of the Selling Security Holders' Shares may be effected from time
to time in transactions (which may include block transactions by or for the
account of the Selling Security Holders) in the over-the-counter market or in
negotiated transactions, through the writing of options on the Selling Security
Holders' Shares, through a combination of such methods of sale, or otherwise.
Sales may be made at fixed prices which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. If the Selling Security
Holders sell the Shares pursuant to this Prospectus at a fixed price or at a
negotiated price which is, in either case, other than the prevailing market
price or in a block transaction to a purchaser who resells, or if there are any
arrangements either individually or in the aggregate that would constitute a
distribution of the Selling Security Holders' Shares, a post-effective amendment
to the Registration Statement of which this Prospectus is a part would need to
be filed and declared effective by the Commission before the Selling Security
Holders could make such sale, pay such compensation or make such a distribution.
The Company is under no obligation to file a post-effective amendment to the
Registration Statement of which this Prospectus is a part under such
circumstances.
The Selling Security Holders may effect transactions in the Shares by
selling their securities directly to purchasers or to broker-dealers who may
purchase the Selling Security Holders' Shares as principals and
44
<PAGE>
thereafter sell such Shares from time to time in the over-the-counter market, in
negotiated transactions, or otherwise. Such broker-dealers, if any, may receive
compensation in the form of discounts, concessions or commissions from the
Selling Security Holders and/or the purchasers for whom such broker-dealers may
act as agents or to whom they may sell as principals, or both.
The Selling Security Holders and broker-dealers, if any, acting in
connection with such sales, might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act and any commission received by
them and any profit on the resale of such securities might be deemed to be
underwriting discounts and commissions under the Securities Act.
CERTAIN TRANSACTIONS
STOCK PURCHASE AGREEMENT
On September 30, 1997, the Company, then known by its former name, Zeron
Acquisitions II, Inc. ("Zeron"), and Zeron's two controlling stockholders at the
time, entered into a Stock Purchase Agreement (the "Stock Purchase Agreement")
with Mr. Gerold Tebbe and Overton Holdings Limited, a Turks & Caicos Islands
corporation wholly beneficially owned and controlled by Mr. Tebbe ("OHL"),
pursuant to which OHL agreed to buy 4,183,125 newly-issued and non-registered
shares of Common Stock, $.001 par value per share, of the Company, in exchange
for (i) $4,000,000 in cash from OHL, and (ii) the contribution to the Company by
Mr. Tebbe, or entities owned or controlled by him, of certain patents, patent
applications and associated intellectual property, in return for nominal
consideration and a reservation of a 1% royalty by Mr. Tebbe on all net income
recognized by the Company from the commercial exploitation of such rights. The
Company has agreed with Mr. Tebbe that royalty payments under this agreement
will not accrue and be payable to Mr. Tebbe unless and until the Company has
recognized net income from that patent or patent right during such year, as
determined in accordance with generally accepted accounting principles, as
applied in the United States. The Company expects to formalize this royalty
agreement with Mr. Tebbe in the next forty-five to sixty (45-60) days. The
Company has agreed further that Mr. Tebbe may renegotiate the terms of such
royalty compensation, in the event the current shareholders of the Company
(other than OHL and other than those stockholders of the Company receiving their
shares of stock by gift from OHL (see "--Gift of Shares by OHL")) transfer a
majority of their shares of the Company's Common Stock to persons other than the
current shareholders. There can be no assurance that, in the event such
transfers of the Common Stock of the Company occur, the Company will be able to
renegotiate the payment of the royalty compensation to Mr. Tebbe on terms that
are favorable to the Company.
GIFT OF SHARES BY OHL
On February 24, 1998, Gerold Tebbe, the President, Chief Executive Officer,
Secretary, Treasurer and a director of the Company, to satisfy a commitment he
made to the individuals and entities listed on Schedule A hereto prior to his
acquiring beneficial majority control of the Company through OHL, caused OHL to
gift 1,449,182 shares of the Common Stock of the Company to the 486 individuals
and entities listed on Schedule A hereto, which individuals and entities are,
along with OHL, the Selling Security Holders hereunder. The gift of shares by
OHL included a gift of (i) 50,000 shares to Deotexis AG, a Swiss corporation
100% owned and controlled by Gerold Tebbe, and (ii) 50,000 shares to Tony Kirk,
a director of the Company. The 1,449,182 shares of Common Stock of the Company
gifted by OHL to the individuals and entities listed on Schedule A hereto
represented, at the time of the gift, 34.64% of the Common Stock of the Company
held by OHL, and 31.87% of the total outstanding shares of Common Stock of the
Company. Following the gift of shares described above, OHL continues to own
2,733,943 shares of Company Common Stock, or 60.13% of the total outstanding
shares of Common Stock of the Company. OHL is registering 224, 068 shares of
Common Stock of the Company owned by it for resale pursuant to this Prospectus.
Assuming OHL sells all of the shares being registered for its account for resale
in this Offering, it will continue to hold 2,509,875 shares of Company Common
Stock, or 55.2% of the total
45
<PAGE>
outstanding shares of Common Stock of the Company. Following the gift of shares
described above, Gerold Tebbe continues to beneficially own, through OHL and
Deotexis AG, 2,783,943 shares of Company Common Stock, or 61.23% of the total
outstanding shares of Common Stock of the Company. Assuming OHL and Deotexis AG
sell all of the shares being registered for their account for resale in this
Offering, Gerold Tebbe will continue to beneficially own, through OHL, 2,509,875
shares of Company Common Stock, or 55.2% of the total outstanding shares of
Common Stock of the Company.
PUT OPTION
All the holders of the Company's Common Stock of record as of just prior to
the closing of the Stock Purchase Agreement (excluding Mr. Mark Meller), which
excludes OHL and the other stockholders of the Company receiving their shares of
stock by gift from OHL, have the right to cause Mr. Tebbe to purchase, at $3 per
share, which price will be adjusted to give effect to stock splits, stock
dividends, recapitalizations, capital distributions, and similar events, of some
or all of their Common Stock (the "Put") for the six (6) month period following
the Measuring Period (defined below), if the Company's Common Stock does not
have a daily average closing bid price of $3 per share for 20 consecutive
trading days during the six (6) month period following October 10, 1997, the
closing date of the Stock Purchase Agreement (the "Measuring Period"). Certain
changes in the ownership of the Company's Common Stock from the ownership
thereof just prior to the closing of the Stock Purchase Agreement will void the
Put as to that Common Stock so transferred. The sum of $836,250 has been
deposited in escrow by Mr. Tebbe, who is the 100% beneficial owner of OHL, as a
fund to support exercise of the Put. The Put will fail to become effective, or
will terminate, as applicable, upon the earlier to occur of (i) the Company's
Common Stock having a daily average closing bid price of $3 per share for twenty
(20) consecutive trading days, or (ii) the one (1) year anniversary of the date
of closing of the Stock Purchase Agreement.
CALL OPTION
All of the shares of the Company's Common Stock issued and outstanding just
prior to the date of closing of the Stock Purchase Agreement held or controlled
by Mr. Gary Takata and Mr. Shigeru Masuda, or their respective affiliates, shall
be subject to a call option (the "Call") whereby the Company will have the
right, for a period of one (1) year following the date of closing of the Stock
Purchase Agreement, to purchase such shares at a price of $30 per share, which
price shall be adjusted to give effect to stock splits, stock dividends,
recapitalizations, capital distributions, and similar events, if the closing bid
price of a share of the Company's Common Stock rises to $30 or more.
RELATED PARTY TRANSACTIONS
TEBBE ROYALTY. As discussed above, the Company has an agreement in
principle with Gerold Tebbe, the President, Chief Executive Officer, Secretary,
Treasurer and a director of the Company, to pay Mr. Tebbe one percent (1%) per
annum of all net revenues recognized by the Company in connection with the
commercial exploitation of the Company's patents, patent rights and related
intellectual property. The Company entered into this arrangement with Mr. Tebbe
in connection with his contribution of those patents, patent rights and related
intellectual property pursuant to the closing of the Stock Purchase Agreement,
whereby OHL, wholly beneficially owned and controlled by Mr. Tebbe, purchased
4,183,125 shares of the Company's Common Stock, which shares represented, prior
to the gift by OHL to the individuals and entities listed on Schedule A hereto,
described above, ninety-two (92%) percent of the issued and outstanding Common
Stock of the Company. Following the gift of the Shares by OHL described above,
assuming OHL sells all of the shares of Company Common Stock being registered
for its account hereunder, OHL will continue to own 2,509,875 shares of Company
Common Stock, or 55.2% of the total outstanding shares of Common Stock of the
Company. The Company has agreed that Mr. Tebbe may renegotiate the terms of such
royalty compensation, in the event the current shareholders of the Company
(other than OHL and other than those stockholders of the Company receiving their
shares of
46
<PAGE>
stock by gift from OHL) transfer a majority of their shares of the Company's
Common Stock to persons other than the current shareholders. Because Mr. Tebbe
is the President and Chief Executive Officer of the Company, and because he
beneficially owns and controls OHL, the majority shareholder of the Company, he
effectively controls and can dictate the affairs of the Company, and it should
be recognized that any renegotiation of Mr. Tebbe's royalty arrangement with the
Company will not be on an arms-length basis and may be more or less favorable to
the Company than the agreement the Company could have negotiated had Mr. Tebbe
not been the Company's beneficial majority shareholder.
The royalty compensation arrangement between the Company and Mr. Tebbe
provides that no payments shall accrue and be payable to Mr. Tebbe unless and
until the Company has recognized net income from that specific patent or patent
right during a given fiscal year, as determined in accordance with generally
accepted accounting principles, as applied in the United States. To date, the
Company has not recognized any net income from any patent, patent right or
related intellectual property contributed to the Company by Mr. Tebbe, and Mr.
Tebbe has not received any royalty payments from the Company.
CONSULTING AGREEMENT WITH TONY KIRK. Upon the consummation of this
Offering, or soon thereafter, the Company expects to enter into a consulting
agreement with Tony Kirk, a director of the Company, pursuant to which Mr. Kirk
will consult with and advise the Company with respect to the potential
acquisition of an operating company in the United States or Europe. The exact
provisions of this agreement have yet to be negotiated, but the Company
anticipates that Mr. Kirk will be paid a fee for his consulting services, the
majority of which would be payable upon the successful consummation of such an
acquisition. Because of Mr. Kirk's relationship to the Company, the terms of his
consulting agreement to be negotiated with the Company may be more or less
favorable to the Company than the agreement the Company could have negotiated
with a consultant who is not a director of the Company.
CONSULTING FEES PAID TO TONY KIRK. During the period from approximately
October 10, 1997, the date on which OHL and Gerold Tebbe acquired majority
control of the Company, to December 31, 1997, Tony Kirk, who became a director
of the Company on January 19, 1998, performed consulting and other services for
the Company, for which the Company paid him $103,124. In addition, Mr. Kirk
continues to perform such services for the Company and may be paid additional
amounts for consulting and other services rendered to the Company for periods
subsequent to the time period described above, until the negotiation and
execution of the Consulting Agreement referred to above, at which time the
Consulting Agreement will control the relationship between Mr. Kirk and the
Company.
AGREEMENT WITH HUMMEL. Since 1993, the Company has had an informal oral
agreement with KuW Hummel Vertriebs GmbH ("Hummel"), a small manufacturing and
distribution company in Germany, to produce certain of the Company's Products,
primarily the Deotexis Cold Scarf, in the small quantities that have been
required for test-marketing and promotional purposes. The Company is now moving
to formalize its relationship with Hummel, and anticipates that it will enter
into a License Agreement with Hummel within the forty-five to sixty (45-60) days
following this Offering, to enable the Company to secure a larger quantity of
the Deotexis Cold Scarf to be able to meet the forecasted increase in demand for
that product. The Company anticipates that the License Agreement will grant to
Hummel the rights to use the Company's patents relating to the Deotexis Cold
Scarf, to manufacture and distribute that product on behalf of the Company, in
return for certain annual payments, and a sales-based royalty, to be paid to the
Company by Hummel. Mr. Tebbe's wife owns a 49.02% interest in Hummel, and as a
substantial stockholder, is able to influence the direction and affairs of
Hummel's business. Because of this relationship, the terms of the License
Agreement to be executed between the Company and Hummel may be more or less
favorable to the Company than could be negotiated by the Company at arms-length
with other manufacturers and distributors.
AGREEMENT WITH GARY TAKATA. Prior to the closing of the Stock Purchase
Agreement, the Company utilized the offices of its then President and director,
Mr. Gary Takata, for which Mr. Takata received an
47
<PAGE>
annual payment of $15,000. This arrangement with Mr. Takata was terminated upon
the closing of the Stock Purchase Agreement in October 1997.
AGREEMENT WITH THE ZERON GROUP, INC. Prior to the closing of the Stock
Purchase Agreement, the Company was party to a Consulting Agreement with The
Zeron Group, Inc. ("Zeron Group"), pursuant to which the Company paid Zeron
Group $15,000 annually for consulting services. The former Chairman of the Board
of the Company, Mr. Shigeru Masuda, is also the Chairman of Zeron Group. The
Consulting Agreement between the Company and Zeron Group was terminated upon the
closing of the Stock Purchase Agreement in October 1997.
DESCRIPTION OF SECURITIES
The authorized capital of the Company consists of (i) 75,000,000 shares of
Common Stock, $.001 par value, of which 4,546,875 shares are currently issued
and outstanding and held by approximately thirty-two (32) persons or entities
and (ii) 15,000,000 shares of Preferred Stock, $.001 par value, of which no
shares are currently issued and outstanding. There will be 4,546,875 shares of
Common Stock issued and outstanding after giving effect to the sale of the
Common Stock offered hereby.
COMMON STOCK
Each share of Common Stock is entitled to one vote, either in person or by
proxy, on all matters that may be voted upon by the owners thereof at a meeting
of the shareholders, including the election of directors. The holders of Common
Stock (i) have equal, ratable rights to dividends from funds legally available
therefor, when, as and if declared by the Board of Directors of the Company (the
Company has no present intention of paying dividends on its Common Stock); (ii)
are entitled to share ratably in all of the assets of the Company available for
distribution to holders of Common Stock upon the liquidation, dissolution or
winding up of the affairs of the Company; (iii) do not have pre-emptive or
redemption provisions applicable thereto; and (iv) are entitled to one
non-cumulative vote per share on all matters on which shareholders may vote at
all meetings of shareholders, including the election of directors.
All shares of Common Stock issued and outstanding, including the Shares
offered hereby, are fully-paid and nonassessable, with no personal liability
attaching to the ownership thereof.
NEVADA INTERESTED STOCKHOLDER AND CONTROL SHARE LAWS
Nevada's "Combination with Interested Stockholders Statute" and "Control
Share Acquisition Statute" may have the effect of delaying or making it more
difficult to effect a change in control of the Company.
The Combination with Interested Stockholders Statute prevents an "interested
stockholder" and an applicable Nevada corporation from entering into a
"combination," unless certain conditions are met. A "combination" includes,
among other transactions, any merger or consolidation with an "interested
stockholder," or any sale, lease, exchange, mortgage, pledge, transfer, or other
disposition, in one transaction or a series of transactions with an "interested
stockholder" having: an aggregate market value equal to 5% or more of the
aggregate market value of the assets of a corporation; an aggregate market value
equal to 5% or more of the aggregate market value of all outstanding shares of a
corporation; or representing 10% or more of the earning power or net income of
the corporation. An "interested stockholder" means the beneficial owner of 10%
or more of the voting shares of a corporation, or an affiliate or associate
thereof. A corporation may not engage in a "combination" within (3) three years
after the interested stockholder acquired his shares, unless the combination or
purchase is approved by the board of directors before the interested stockholder
acquired such shares. If this approval is not obtained prior to such purchase,
then after the expiration of the three-year period, the business combination may
be consummated only if it was approved by the board of directors before the
stockholder became an interested stockholder, or such combination is approved by
a majority of the voting power held by the
48
<PAGE>
disinterested stockholders at a meeting called not earlier than three (3) years
after the date the interested stockholder acquired his shares, or if the
consideration to be paid by the interested stockholder is at least equal to the
highest of: the highest price per share paid by the interested stockholder
within the three (3) years immediately preceding the date of the announcement of
the combination, or in the transaction in which he became an interested
stockholder, whichever is higher (as adjusted for interest and dividends); the
market value per common share on the date of announcement of the combination, or
the date the interested stockholder acquired the shares, whichever is higher (as
adjusted for interest and dividends); or if higher for the holders of shares of
preferred stock, the highest liquidation value for the shares of preferred
stock.
Nevada's Control Share Acquisition Statute prohibits an acquiror, under
certain circumstances, from voting shares of a target corporation's stock after
crossing certain threshold ownership percentages, unless the acquiror obtains
the approval of the target corporation's disinterested stockholders. The Control
Share Acquisition Statute specifies three thresholds: one-fifth or more but less
than one-third, one-third but less than a majority, and a majority or more, of
the outstanding voting power. Once an acquiror crosses one of the above
thresholds in an offer or acquisition, those shares acquired within 90 days
become Control Shares (as defined in such statute) and such Control Shares are
deprived of the right to vote until the disinterested stockholders restore the
right. The Control Share Acquisition Statute also provides that in the event
Control Shares are accorded full voting rights and the acquiring person has
acquired a majority or more of all voting power, all other stockholders who do
not vote in favor of authorizing voting rights to the Control Shares are
entitled to demand payment for the fair value of their shares. The board of
directors is to notify the stockholders as soon as practicable after such an
event has occurred that they have the right to receive the fair value of their
shares in accordance with statutory procedures established generally for
dissenters' rights. This statute is applicable only to Nevada corporations doing
business in the state and that have at least 200 stockholders, at least 100 of
whom are stockholders of record and residents of Nevada. On July 31, 1997, the
Company's Board of Directors, pursuant to the authority granted in Section
78.378 of the Nevada Revised Statutes ("NRS"), amended the Company's By-Laws to
provide that NRS Sections 78.378(2) through 78.3793, inclusive, shall not apply
to the Company. The Board of Directors, however, retains the right to again
revise the Company's By-Laws so that NRS Sections 78.378(2) through 78.3793,
inclusive, shall be applicable to the Company.
TRANSFER AGENT
The transfer agent and registrar for the Company's Common Stock is
Continental Stock Transfer and Trust Company.
SHARES AVAILABLE FOR FUTURE SALE
Upon completion of this Offering, there will be 4,546,875 shares of Common
Stock outstanding. Of these shares, 2,509,875 shares were sold outside the
United States in accordance with Regulation S promulgated by the Commission
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), and
may be resold in the United States only in accordance with the provisions of
Regulation S. Such shares are, however, freely tradeable outside the United
States. In addition, after October 9, 1998, these 2,509,875 shares, plus an
additional 85,000 shares issued to a consultant to the Company in connection
with the consummation of the Stock Purchase Agreement, will be eligible for sale
in the public market in the United States in reliance upon Rule 144 under the
Securities Act, subject to the volume limitations discussed below.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including persons who may be deemed to be
"affiliates" of the Company, as that term is defined under the Securities Act,
is entitled to sell, within any three-month period, a number of shares
beneficially owned for at least one (1) year that does not exceed the greater of
(i) one percent (1%) of the then outstanding shares of Common Stock or (ii) the
average weekly trading volume in the Common Stock during the four
49
<PAGE>
(4) calendar weeks preceding such sale. Sales under Rule 144 are also subject to
certain requirements as to the manner of sale, notice and the availability of
current public information about the Company. However, a person who is not an
affiliate of the Company and has beneficially owned his shares for at least two
(2) years is entitled to sell such shares without regard to the volume of
trading, manner of sale or notice requirements.
Prior to this Offering, though the Company's Common Stock is quoted on the
NASD's OTC Electronic Bulletin Board, there has been no sustained trading market
for the Shares. No predictions can be made as to the effect, if any, that sales
of shares under Rule 144 or the availability of shares for sale will have on the
market, if any, prevailing from time to time. Sales of substantial amounts of
the Common Stock pursuant to Rule 144 may adversely affect the market price of
the Common Stock offered hereby.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Loeb & Loeb LLP, New York, New York.
EXPERTS
The financial statements of the Company appearing in this Prospectus have
been examined by M.R. Weiser & Co. LLP certified public accountants, Mayer
Rispler & Company, P.C., independent certified public accountants and Nachum
Blumenfrucht, CPA, to the extent and for the periods indicated in their reports,
and have been included herein in reliance upon such reports given on the
authority of those firms as experts in accounting and auditing.
CHANGE IN ACCOUNTANTS
On January 21, 1998, the Company formally dismissed Mayer Rispler & Company,
P.C., Certified Public Accounts (the "Former Accountants"), as the Company's
certified public accountants and auditors. The Former Accountants' report on the
financial statements of the Company for the fiscal year ending December 31, 1996
did not contain an adverse opinion or disclaimer of opinion, nor was such report
qualified or modified as to uncertainty, audit scope or accounting principles.
In connection with the Former Accountants' audit of the Company for the fiscal
year ending December 31, 1996, and for the interim period through January 21,
1998, there have been no disagreements between the Company and the Former
Accountants with respect to any matters of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure. The decision to
dismiss the Former Accountants was approved by the Company's Board of Directors
on January 19, 1998.
On January 21, 1998, the Company engaged M.R. Weiser & Co. LLP, Certified
Public Accountants ("M.R. Weiser"), as the Company's certified public
accountants and auditors. Prior to its engagement, the Company had not consulted
M.R. Weiser regarding the application of accounting principles to any
transaction in which the Company was engaged or proposed to engage, or the type
of audit opinion that might be rendered on the Company's financial statements.
The decision to engage M.R. Weiser was approved by the Company's Board of
Directors on January 19, 1998.
ADDITIONAL INFORMATION
Reports filed by the Company with the Commission pursuant to the information
requirements of the Securities Exchange Act of 1934, as amended, may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549; and at
the following Regional Offices of the Commission: New York Regional Office, 7
World Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional
Office, Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Room 1025,
Washington, D.C. 20549, at prescribed rates.
50
<PAGE>
DEOTEXIS, INC.
(FORMERLY KNOWN AS ZERON ACQUISITIONS II, INC.)
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Reports.............................................................................. F-2
Balance Sheets at December 31, 1996 and 1997............................................................... F-5
Statements of Operations for the years ended December 31, 1995, 1996 and 1997 and cumulative since March 6,
1992 (inception) to December 31, 1997.................................................................... F-6
Statement of Stockholders' Equity for the period March 6, 1992 (inception) to December 31, 1994, and for
the years ended December 31, 1995, 1996 and 1997......................................................... F-7
Statements of Cash Flows for the years ended December 31, 1995, 1996 and 1997 and cumulative since March 6,
1992 (inception) to December 31, 1997.................................................................... F-8
Notes to Financial Statements.............................................................................. F-9
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Deotexis, Inc.
(formerly Zeron Acquisitions II, Inc.)
New York, New York
We have audited the accompanying balance sheet of Deotexis, Inc. (formerly Zeron
Acquisitions II, Inc.) as of December 31, 1997 and the related statements of
operations, stockholders' equity and cash flows for the year then ended and the
1997 amounts included in the cumulative period March 6, 1992 (inception) through
December 31, 1997. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Deotexis, Inc. (formerly Zeron
Acquisitions II, Inc.) as of December 31, 1997, and the results of its
operations and cash flows for the year then ended, in conformity with generally
accepted accounting principles.
M.R. Weiser & Co. LLP
Certified Public Accountants
New York, New York
February 24, 1998
F-2
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Deotexis, Inc.
(formerly Zeron Acquisitions II, Inc.)
New York, New York
We have audited the accompanying balance sheet of Deotexis, Inc. (formerly Zeron
Acquisitions II, Inc.) as of December 31, 1996 and the related statements of
operations, stockholders' equity and cash flows for the year then ended and the
1996 amounts included in the cumulative period March 6, 1992 (inception) through
December 31, 1996. 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 audit. The balance sheet of Deotexis, Inc.
(formerly Zeron Acquisitions II, Inc.) as of December 31, 1995 and the related
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1995 and 1994 and the March 6, 1992 (inception) through
December 31, 1995 amounts included in the cumulative period March 6, 1992
(inception) through December 31, 1996 were audited by another auditor whose
report dated February 27, 1996 expressed an unqualified opinion on those
statements.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Deotexis, Inc. (formerly Zeron
Acquisitions II, Inc.) as of December 31, 1996, and the results of its
operations and cash flows for the year then ended, in conformity with generally
accepted accounting principles.
Mayer Rispler & Company, P.C.
Certified Public Accountants
Brooklyn, New York
March 18, 1997
F-3
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors
Deotexis, Inc.
(formerly Zeron Acquisitions II, Inc.)
New York, New York
I have audited the accompanying statements of operations, stockholders' equity
and cash flows of Deotexis, Inc. (formerly Zeron Acquisitions II, Inc.) for the
year ended December 31, 1995 and the cumulative period March 6, 1992 (Inception)
through December 31, 1995. These financial statements are the responsibility of
the Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the results of operations and cash flows of Deotexis, Inc.
(formerly Zeron Acquisitions II, Inc.) for the year ended December 31, 1995, and
the cumulative period March 6, 1992 (Inception) through December 31, 1995, in
conformity with generally accepted accounting principles.
Nachum Blumenfrucht
Certified Public Accountant
Brooklyn, New York
February 27, 1996
F-4
<PAGE>
DEOTEXIS, INC.
(FORMERLY KNOWN AS ZERON ACQUISITIONS II, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
<S> <C> <C>
1996 1997
----------- ------------
ASSETS
Current assets:
Cash and equivalents................................................................. $ 530,337 $ 4,034,700
Loan receivable...................................................................... 2,331
Prepaid taxes........................................................................ 1,561
----------- ------------
Total current assets............................................................. 532,668 4,036,261
Organization costs, net of amortization................................................ 17
----------- ------------
Total assets..................................................................... $ 532,685 $ 4,036,261
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses................................................ $ 15,300 $ 73,097
Due to officer....................................................................... 150,787
----------- ------------
Total current liabilities........................................................ 15,300 223,884
----------- ------------
Commitments and other matters
Stockholders' equity:
Preferred stock, par value $.001; authorized 15,000,000 shares, none issued and
outstanding
Common stock, par value $.001; authorized 75,000,000 shares, issued and outstanding
278,750 and 4,546,875 shares in December 31, 1996 and 1997......................... 279 4,547
Additional paid-in capital........................................................... 624,860 4,155,485
Deficit accumulated during the development stage..................................... (107,754) (347,655)
----------- ------------
Total stockholders' equity....................................................... 517,385 3,812,377
----------- ------------
Total liabilities and stockholders' equity....................................... $ 532,685 $ 4,036,261
----------- ------------
----------- ------------
</TABLE>
See accompanying notes
F-5
<PAGE>
DEOTEXIS, INC.
(FORMERLY KNOWN AS ZERON ACQUISITIONS II, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
MARCH 6, 1992
YEARS ENDED DECEMBER 31, (DATE OF INCEPTION)
----------------------------------- TO
1995 1996 1997 DECEMBER 31,1997
---------- ---------- ----------- --------------------
<S> <C> <C> <C> <C>
Interest and other income.............................. $ 16,268 $ 23,426 $ 38,753 $ 91,398
---------- ---------- ----------- ----------
Expenses:
Consulting........................................... 15,000 15,000 (6,250) 38,125
Rent................................................. 15,000 15,000 (6,250) 38,125
Corporation franchise taxes.......................... 3,291 2,467 300 7,536
Filing fees.......................................... 3,996 4,244 10,164 21,283
Amortization......................................... 100 100 17 500
Bank charges......................................... 405 447 375 2,310
Office............................................... 500 16,312 18,152
Professional fees.................................... 12,981 29,905 263,986 313,022
---------- ---------- ----------- ----------
Total expenses................................... 51,273 67,163 278,654 439,053
---------- ---------- ----------- ----------
Net loss............................................... $ (35,005) $ (43,737) $ (239,901) $ (347,655)
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Basic loss per share................................... $ (.13) $ (.16) $ (.19)
---------- ---------- -----------
---------- ---------- -----------
Weighted average number of shares outstanding.......... 278,750 278,750 1,237,618
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See accompanying notes
F-6
<PAGE>
DEOTEXIS, INC.
(FORMERLY KNOWN AS ZERON ACQUISITIONS II, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DEFICIT
COMMON ACCUMULATED
STOCK ADDITIONAL DURING THE TOTAL
--------------------- PAID-IN DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT CAPITAL STAGE EQUITY
---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Issuance of 160,000 common shares on June 4,
1992 at par value ($.001 per share) for cash
($.01 per share).............................. 160,000 $ 160 $ 1,440 $ 1,600
Sale of 18,750 shares for cash in July 1992
($1.60 per share)............................. 18,750 19 29,981 30,000
Net loss inception to December 31, 1992......... $ (62) (62)
Net loss--December 31, 1993..................... (1,766) (1,766)
Sale of 100,000 shares--January 31, 1994 ($6.25
per share).................................... 100,000 100 624,900 625,000
Deferred offering costs charged to paid-in
capital....................................... (31,461) (31,461)
Net loss--December 31, 1994..................... (27,184) (27,184)
--------- ------------ ------------ ------------
Balance--December 31, 1994...................... 279 624,860 (29,012) 596,127
Net loss........................................ (35,005) (35,005)
--------- ------------ ------------ ------------
Balance--December 31, 1995...................... 279 624,860 (64,017) 561,122
Net loss........................................ (43,737) (43,737)
--------- ------------ ------------ ------------
Balance--December 31, 1996...................... 279 624,860 (107,754) 517,385
Distributions................................... (475,750) (475,750)
Sale of 4,183,125 shares for cash ($.96 per
share)........................................ 4,183,125 4,183 3,995,817 4,000,000
Issuance of 85,000 shares for services rendered
($.48 per share).............................. 85,000 85 (85) --
Capital contributed by principal stockholder.... 10,643 10,643
Net loss........................................ (239,901) (239,901)
---------- --------- ------------ ------------ ------------
Balance--December 31, 1997...................... 4,546,875 $ 4,547 $ 4,155,485 $ (347,655) $3,812,377
---------- --------- ------------ ------------ ------------
---------- --------- ------------ ------------ ------------
</TABLE>
See accompanying notes
F-7
<PAGE>
DEOTEXIS, INC.
(FORMERLY KNOWN AS ZERON ACQUISITIONS II, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
MARCH 6, 1992
YEARS ENDED DECEMBER 31, (INCEPTION)
------------------------------------ THROUGH
1995 1996 1997 DECEMBER 31, 1997
---------- ---------- ------------ ------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................. $ (35,005) $ (43,737) $ (239,901) $ (347,655)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization..................................... 100 100 17 500
Changes in operating assets and liabilities:
Loan receivable.................................. (2,331) 2,331
Prepaid taxes.................................... (1,561) (2,061)
Accounts payable and accrued expenses............ (1,650) 8,200 57,797 73,097
Due to officer................................... 150,787 150,787
---------- ---------- ------------ ------------------
Cash (used in) operations.............................. (36,555) (37,768) (30,530) (125,332)
---------- ---------- ------------ ------------------
Cash flows from financing activities:
Issuance of common stock--net of costs................. 4,000,000 4,625,139
Capital contributed by principal stockholder........... 10,643 10,643
Distributions.......................................... (475,750) (475,750)
---------- ---------- ------------ ------------------
Net increase (decrease) in cash and cash equivalents... (36,555) (37,768) 3,534,893 4,160,032
---------- ---------- ------------ ------------------
Cash and cash equivalents--beginning of year /
period............................................... 604,660 568,105 530,337 --
---------- ---------- ------------ ------------------
Cash and cash equivalents--end of year / period........ $ 568,105 $ 530,337 $ 4,034,700 $ 4,034,700
---------- ---------- ------------ ------------------
---------- ---------- ------------ ------------------
Non-cash financing activities:
The Company issued 85,000 shares to a consultant for
services rendered. The Company recorded the fair
market value of those securities at $.48 per
share.............................................. $ 40,800 $ 40,800
------------ ------------------
------------ ------------------
</TABLE>
See accompanying notes
F-8
<PAGE>
DEOTEXIS, INC.
(FORMERLY KNOWN AS ZERON ACQUISITIONS II, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY AND STOCKHOLDERS' EQUITY:
Background:
Deotexis, Inc. (formerly Zeron Acquisitions II, Inc.) (the "Company") was
organized under the laws of the State of Nevada on March 6, 1992. Its purpose is
to provide a vehicle to acquire or merge with another entity. Since the Company
has not yet begun operations, it is considered to be in the development stage.
On October 10, 1997, the Stock Purchase Agreement dated September 30, 1997
with Overton Holdings Limited, a corporation formed under the laws of the Turks
& Caicos Islands, British West Indies ("OHL"), Gary Takata, Shigeru Masuda and
Gerold Tebbe, closed. Pursuant to the terms of the Stock Purchase Agreement, the
Company issued 4,183,125 newly-issued and nonregistered shares of common stock,
$.001 par value (the "New Shares") to OHL, in return for a cash payment to the
Company of $4 million from OHL, and the transfer to the Company for nominal
consideration, plus future royalties tied to the revenues recognized by the
Company from the commercial exploitation thereof, of certain patents, patent
applications and related intellectual property owned by Gerold Tebbe or entities
owned and controlled by him. OHL is 100% beneficially owned by Gerold Tebbe. The
Company intends to develop and market these patents.
The New Shares account for 92% of the issued and outstanding common stock of
the Company and, accordingly, the Company is a subsidiary of OHL. Prior to the
closing of the Stock Purchase Agreement, Gary Takata, then President, Secretary
and a Director of the Company, and Shigeru Masuda, then Chairman of the Board of
Directors of the Company, together beneficially owned 55.2% of the common stock
of the Company and controlled the Company. Upon the closing of the Stock
Purchase Agreement and in accordance with the provisions thereof, Mr. Masuda
resigned as a Director of the Company, and Mr. Takata resigned his officerships
and directorship with the Company and appointed Gerold Tebbe sole director, who
then appointed himself President, Treasurer and Secretary of the Company.
On October 13, 1997, by action by written consent without a meeting, OHL, as
majority stockholder and parent of the Company, acted to amend the Company's
Articles of Incorporation to change the Company's corporate name to "Deotexis,
Inc." An amendment to the Company's Articles of Incorporation was prepared and
filed with the Secretary of State of Nevada on October 15, 1997.
2. SIGNIFICANT ACCOUNTING POLICIES:
Cash and Equivalents:
Cash and equivalents are stated at cost plus accrued interest. Cash
equivalents consist of short-term treasury bills. The Company considers all
highly liquid investments with a maturity date of three months or less to be
cash equivalents.
Concentration of Credit Risk:
At December 31, 1997 and 1996, the Company maintained all its cash in one
commercial bank. The institution is insured by the Federal Deposit Insurance
Corporation up to $100,000. The uninsured balance amounted to approximately
$150,000 at December 31, 1997.
Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
F-9
<PAGE>
DEOTEXIS, INC.
(FORMERLY KNOWN AS ZERON ACQUISITIONS II, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Organization Costs:
Organization costs are being amortized on the straight-line method over a
period of five years.
Patents:
In accordance with the Stock Purchase Agreement, the majority shareholder
sold certain patents, patent applications and associated intellectual property
to the Company for nominal consideration. The cost of patents acquired are not
being amortized as the consideration was nominal. These patents are for the
textile-based controlled-release delivery systems for toiletries, cosmetics,
apparel, household products and personal care products, and applications in the
pharmaceutical industry.
Earnings (loss) per common share:
Effective for financial statements for the year ended December 31, 1997, the
Company adopted SFAS No. 128, "Earnings per Share," which replaces the
presentation of primary earnings per share ("EPS") and fully diluted EPS with a
presentation of basic EPS and diluted EPS, respectively. Basic EPS excludes
dilution and is computed by dividing earnings available to common stockholders
by the weighted-average number of common shares outstanding for the period. The
adoption of this new accounting standard did not have any effect on the
Company's reported loss per share amounts, because there were no dilutive
securities outstanding during any of the periods.
3. STOCKHOLDERS' EQUITY:
The Company is authorized to issue 75,000,000 common shares with a par value
of $.001, and 15,000,000 blank check preferred shares with a par value of $.001.
On June 4, 1992, the Company issued a total of 160,000 shares of its common
stock to its officers for a total consideration of $1,600 ($.01 per share).
On June 4, 1992, the Board of Directors authorized the sale, through a self
underwriting, of a minimum of 100,000 common shares and a maximum of 200,000
common shares at $6.25 per share.
During the period of July 1, 1992 through July 15, 1992, the Company issued
a total of 18,750 shares of its common stock ($.001 par value) to various
individuals for a total consideration of $30,000 ($1.60 per share).
On January 14, 1994, the Company closed on the minimum of 100,000 shares for
a total consideration of $625,000.
In October 1997, the Company distributed $475,750 of which $454,000 or $4.54
per share was distributed to the holders of 100,000 common shares issued in
connection with the initial public offering, and $21,750 or $1.16 per share was
distributed to holders of 18,750 common shares issued prior to the initial
public offering.
On October 10, 1997, pursuant to the Stock Purchase Agreement dated
September 30, 1997, the Company issued 4,183,125 newly-issued and nonregistered
shares of common stock, $.001 par value, in exchange for a cash payment of $4
million and the transfer to the Company for nominal consideration, plus
F-10
<PAGE>
DEOTEXIS, INC.
(FORMERLY KNOWN AS ZERON ACQUISITIONS II, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. STOCKHOLDERS' EQUITY: (CONTINUED)
future royalties tied to the revenues of certain patents, patent applications
and related intellectual property. In addition, the principal stockholder
contributed capital in the amount of $10,643.
On October 10, 1997, the Company issued 85,000 shares of Common Stock to a
consultant, in connection with his work on behalf of the Company, in arranging
and facilitating the consummation of the Stock Purchase Agreement. The Company
recorded the estimated fair market value of those securities at $.48 per share
by a charge to additional paid-in capital.
4. DUE TO OFFICER:
An officer of the Company expended approximately $150,000 for professional
fees and travel expenses on behalf of the Company, which have been recorded as
expenses and amounts due to officer. The amounts due to officer have no
specified repayment terms or interest rate.
5. NET INCOME TAXES:
The Company has available at December 31, 1997 approximately $377,000 of
unused operating loss carryforwards that may be applied against future taxable
income, if any, and that expire in various years from 2007 to 2012.
6. COMMITMENTS AND OTHER MATTERS:
a. At December 31, 1997, the Company maintains an office facility on an
annual basis for $5,100 per annum.
b. Prior to occupying its new facility in October 1997, the Company
utilized the offices of its former President. Pursuant to an oral
agreement, these facilities were provided on an annual basis for $15,000
per year.
c. In prior years, the Company entered into a consulting agreement with the
Zeron Group, Inc., a New York corporation. The Company's former Chairman
of the Board of Directors, has been chairman of the Zeron Group, Inc.
since May 1989. The annual fee pursuant to the agreement was $15,000
commencing January 14, 1994, the closing of the Company's public
offering. Pursuant to the consulting agreement, the Zeron Group, Inc. was
to devote up to five hours per month in the search for and evaluation of
potential acquisitions.
d. In connection with the Stock Purchase Agreement, the agreements
regarding rent and consulting services rendered to the Company discussed
above have been terminated and all outstanding amounts payable for rent
and consulting have been canceled.
e. During the period from approximately October 10, 1997, the date on which
OHL and Gerold Tebbe acquired majority control of the Company, to
December 31, 1997, the Company paid Mr. Tony Kirk $103,124 for consulting
services. On January 19, 1998, Mr. Kirk was appointed a director of the
Company.
F-11
<PAGE>
SCHEDULE A
ADDITIONAL SELLING SECURITY HOLDERS
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF SHARES
AMOUNT OF SHARES BEING OWNED AFTER
NO. NAME SHARES OWNED REGISTERED OFFERING(1)
<C> <S> <C> <C> <C> <C>
--- -------------------------------------------------------- ------------- ------------ ---------------------
1 Abate Salvatore 1,286 1,286 0
2 Albinger Herbert 27,649 27,649 0
3 Albinger Helene 643 643 0
4 Allgeier Frank 482 482 0
5 Allgeier-Romer Annette 482 482 0
6 Altrogge Gunter 1,928 1,928 0
7 Ammann Wolfgang 482 482 0
8 Assmann Gerhard 3,374 3,374 0
9 Bader Herbert 2,879 2,879 0
10 Badstuber Hermann 1,919 1,919 0
11 Baer Andre 643 643 0
12 Baier Alfred and Sigrid 1,439 1,439 0
13 Bailer Berthold 627 627 0
14 Baldauf Jorg 9,913 9,913 0
15 Baldauf Rosemarie 479 479 0
16 Barkholz Winfried 479 479 0
17 Barth Ralf 480 480 0
18 Bartmann Jurgen 482 482 0
19 Barufke Christine 959 959 0
20 Baur Bernhard 95,559 95,559 0
21 Baur Florian 959 959 0
</TABLE>
<TABLE>
<C> <S> <C> <C> <C> <C>
22 Baur Wilfried 629 629 0
23 Baur Silvia 4,703 4,703 0
24 Becher Barbel 964 964 0
25 Becker Erio 7,192 7,192 0
26 Beckstein Rosemarie 1,104 1,104 0
27 Beer Holger 479 479 0
28 Beer Kerstin 239 239 0
29 Behringer Cilly 3,215 3,215 0
30 Benischka Simone 482 482 0
31 Bentele Roman 964 964 0
32 Berenbrink Michael 482 482 0
33 Berhorst Michael 964 964 0
34 Berle Gottfried 4,981 4,981 0
35 Berndt Magarete 3,176 3,176 0
36 Bernhard Stefan 2,250 2,250 0
37 Bertele Georg 959 959 0
38 Biggel Werner 2,769 2,769 0
39 Bihler Stefan 4,731 4,731 0
40 Birk Helmut 1,439 1,439 0
41 Birn Gerold 20,312 20,312 0
</TABLE>
- ------------------------
(1) Assumes sale by each Selling Security Holder of all shares registered
pursuant hereto for each such Selling Security Holder's account.
S-1
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF SHARES AMOUNT OF SHARES
SHARES BEING OWNED AFTER
NO. NAME OWNED REGISTERED OFFERING(1)
--- -------------------------------------------------------- ------------- ------------ ---------------------
<C> <S> <C> <C> <C> <C> <C>
42 Bisang Bruno 479 479 0
43 Blank Andreas 479 479 0
44 Bleicher-Schurer Gisela 479 479 0
45 Blume Hannelore 479 479 0
46 Blumtritt Stefan 2,079 2,079 0
47 Blust Fredy and Moni 2,410 2,410 0
48 Bogel Peter 1,286 1,286 0
49 Bogel Irmgard 1,286 1,286 0
50 Brandt Gerhard 2,572 2,572 0
51 Breher Reinhard 1,446 1,446 0
52 Breitbarth Markus 482 482 0
53 Broeg Franz 482 482 0
54 Broquere Jacqueline 603 603 0
55 Buck Manfred 480 480 0
56 Buck Rainer 482 482 0
57 Bucking Wolfram 1,901 1,901 0
58 Bucking Maria 1,250 1,250 0
59 Buff Wolfram 16,547 16,547 0
60 Buhmann Erika 1,437 1,437 0
61 Butz Elisabeth 1,261 1,261 0
62 Cacece Johannes 482 482 0
63 Chartline GmbH 19,290 19,290 0
64 Dahne Helga and Claus 1,875 1,875 0
65 De Marco Nicola 479 479 0
66 Degenkolb Marianne and Knut 239 239 0
67 Degwitz Stebastian 2,250 2,250 0
68 Deiring Andrea 482 482 0
69 Deiring Christiane 1,542 1,542 0
70 Denzinger Anton and Sabine 479 479 0
71 Deotexis AG(2) 50,000 50,000 0
</TABLE>
<TABLE>
<C> <S> <C> <C> <C> <C>
72 Detzel Daniela 479 479 0
73 Deuschle Friedrich-Martin 479 479 0
74 Deuschle Hilde 479 479 0
75 Diebold Anton 964 964 0
76 Diekmann Thomas 1,446 1,446 0
77 Diem Martina 627 627 0
78 Diener Petra 1,109 1,109 0
79 Doll Markus and Michaela 643 643 0
80 Drews Herbert 519 519 0
81 Dworzak Thomas 2,164 2,164 0
82 Eckart Hans-Peter 2,410 2,410 0
83 Eiermann Pascal 479 479 0
84 Eisele-Netzer Elisabeth 482 482 0
85 Engel Stefan 480 480 0
</TABLE>
- ------------------------
(1) Assumes sale by each Selling Security Holder of all shares registered
pursuant hereto for each such Selling Security Holder's account.
(2) Deotexis AG, a Swiss corporation, is wholly beneficially owned and
controlled by Gerold Tebbe, President, Chief Executive Officer, Secretary,
Treasurer and a director of the Company.
S-2
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF SHARES AMOUNT OF SHARES
SHARES BEING OWNED AFTER
NO. NAME OWNED REGISTERED OFFERING(1)
--- -------------------------------------------------------- ------------- ------------ ---------------------
<C> <S> <C> <C> <C> <C> <C>
86 Engel Thomas 482 482 0
87 Ennemoser Bettina 1,721 1,721 0
88 Eppelt Markus 16,092 16,092 0
89 Eppelt Susanne 627 627 0
90 Ernst Martin 240 240 0
91 Erstling Jorg 4,820 4,820 0
92 Esslinger Herbert junior 4,417 4,417 0
93 Esslinger Senior Herbert 6,278 6,278 0
94 Esslinger Elvira 2,505 2,505 0
95 Esslinger Roswitha 3,148 3,148 0
96 Fakler Elke 1,125 1,125 0
97 Farny Siegfried 1,286 1,286 0
98 Fehnl Robert 482 482 0
99 Fehr Adalbert 4,440 4,440 0
100 Fehr Helmut 1,768 1,768 0
101 Fehr Walter 4,424 4,424 0
102 Feistauer Wolfgang 1,929 1,929 0
103 Felder Martha 964 964 0
104 Fenzlein Siegfried 482 482 0
105 Feuerbacher Joachim 3,195 3,195 0
106 Feulner Kilian 1,768 1,768 0
107 Filser Werner 479 479 0
108 Finizio Rocco 1,440 1,440 0
109 Fischer Volker 1,439 1,439 0
110 Fischer Walter 482 482 0
111 Fister Heiko 964 964 0
112 Focke Hans-Jurgen 480 480 0
113 Fohrenbach Bernd 479 479 0
114 Forderkunz Gunther 630 630 0
</TABLE>
<TABLE>
<C> <S> <C> <C> <C> <C>
115 Forderkunz Robert 631 631 0
116 Forderkunz Stephan 631 631 0
117 Forstenhausler Ewald 482 482 0
118 Frey Claus 1,768 1,768 0
119 Frey Ursula 482 482 0
120 Fries Else 479 479 0
121 Fritschle Robert 964 964 0
122 Fuchs Gabi 643 643 0
123 Gabelein Norbert 479 479 0
124 Ganal Peter 643 643 0
125 Gaschler Jurgen 960 960 0
126 Gegenbauer Egon 479 479 0
127 Geiger Franz 627 627 0
128 Geiselmann Sabine and Horst 1,918 1,918 0
129 Geiler Stefan 482 482 0
130 Gemmeke Johannes 479 479 0
131 Gentner Cornelia 1,607 1,607 0
</TABLE>
- ------------------------
(1) Assumes sale by each Selling Security Holder of all shares registered
pursuant hereto for each such Selling Security Holder's account.
S-3
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF SHARES AMOUNT OF SHARES
SHARES BEING OWNED AFTER
NO. NAME OWNED REGISTERED OFFERING(1)
--- -------------------------------------------------------- ------------- ------------ ---------------------
<C> <S> <C> <C> <C> <C> <C>
132 Gessing Maxi 600 600 0
133 Gey Sigrid and Jurgen 964 964 0
134 Gilch Johannes 1,928 1,928 0
135 Gilch Josef 1,446 1,446 0
136 Gilch Michael 482 482 0
137 Gleich Herbert 3,215 3,215 0
138 Gleich Rita 482 482 0
139 Glossner Michael 482 482 0
140 Goser Salome and Georg 964 964 0
141 Goser Gunther 1,928 1,928 0
142 Gotz Mario 479 479 0
143 Grab Josef 482 482 0
144 Grab Wolfgang 1,446 1,446 0
145 Gradl Winfried 482 482 0
146 Graf Augustin 482 482 0
147 Grauhan Gisela 482 482 0
148 Gregorovius Ingmar 964 964 0
149 Grieb Alexander 482 482 0
150 Gross Winfried 15,953 15,953 0
151 Grot Hanne-Lore 479 479 0
152 Grover Hubert and Herta 5,276 5,276 0
153 Guntner Roswitha 482 482 0
154 Guntrum Konstantin 479 479 0
155 Gut Josef 482 482 0
156 Haase Harald 5,787 5,787 0
157 Haber Sigrid and Jochen 2,398 2,398 0
158 Haberle Stephan 479 479 0
</TABLE>
<TABLE>
<C> <S> <C> <C> <C> <C>
159 Hack Hermann 482 482 0
160 Hagele Gerlinde 479 479 0
161 Haiser Helmut 482 482 0
162 Haller Inge Maria 4,499 4,499 0
163 Hammers Hans-Georg 4,797 4,797 0
164 Hammers Bettina 2,399 2,399 0
165 Hanickel Helmut 482 482 0
166 Hanle Herbert 1,928 1,928 0
167 Hantzsch Uwe 479 479 0
168 Harnau Roland 241 241 0
169 Harscher Josef 479 479 0
170 Hartl Werner 482 482 0
171 Hartmann Inge 2,501 2,501 0
172 Haslach Fritz 597 597 0
173 Haubeil Claus 1,928 1,928 0
174 Heim Manfred 24,490 24,490 0
175 Heim Manfred 17,232 17,232 0
176 Heim Erika 1,554 1,554 0
177 Heimann Klaus 482 482 0
</TABLE>
- ------------------------
(1) Assumes sale by each Selling Security Holder of all shares registered
pursuant hereto for each such Selling Security Holder's account.
S-4
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF SHARES AMOUNT OF SHARES
SHARES BEING OWNED AFTER
NO. NAME OWNED REGISTERED OFFERING(1)
--- -------------------------------------------------------- ------------- ------------ ---------------------
<C> <S> <C> <C> <C> <C> <C>
178 Heinrichsruscher Renate 482 482 0
179 Helder Dorothea 960 960 0
180 Hele Rudolf 482 482 0
181 Hele Werner 482 482 0
182 Hermann Edeltraud 960 960 0
183 Hertnagel Ulrich 20,635 20,635 0
184 Hildebrand Johannes 479 479 0
185 Hillebrand Franz 482 482 0
186 Hintz Reinhard 10,931 10,931 0
187 Hintz Walter 79,200 79,200 0
188 Hirschauer Ernst 964 964 0
189 Hirschauer Saskia 1,439 1,439 0
190 Hobel Martin 964 964 0
191 Hocker Karin 1,120 1,120 0
192 Hocker Karin 191 191 0
193 Hofmann Margret 959 959 0
194 Hoischen Christoph 1,928 1,928 0
195 Holdgrewe Christian 2,410 2,410 0
196 Holnburger Josef 479 479 0
197 Hoyler Karl 1,286 1,286 0
198 Hubner Ottmar 964 964 0
199 Huchel Martin 3,633 3,633 0
200 Huchel Uschi 1,929 1,929 0
201 Hummel Wolfgang 482 482 0
202 Ibele Gerhard 7,072 7,072 0
203 Ibele Hubert 44,539 44,539 0
</TABLE>
<TABLE>
<C> <S> <C> <C> <C> <C>
204 Ilgen Fritz 959 959 0
205 Imhof Klaus 241 241 0
206 Immler Monika 1,252 1,252 0
207 Jahn Hans-Peter 3,697 3,697 0
208 Jahn Rosi 643 643 0
209 Jausovec Conny 2,823 2,823 0
210 Jehle Bernhard 479 479 0
211 Jehle Luitgard 964 964 0
212 Jehle-Diebold Isolde 2,410 2,410 0
213 Jocham Dietmar 479 479 0
214 Jocham Fidel 964 964 0
215 Jocham Hubert 2,089 2,089 0
216 Jocham Maria 643 643 0
217 Jordan Fides 964 964 0
218 Kalender Franz 2,892 2,892 0
219 Karg Ferdinand 643 643 0
220 Keller Rolf 480 480 0
221 Kemmler Klaus 479 479 0
222 Kempter Brigitte 627 627 0
223 Kensche Gisela and Ulrich 643 643 0
</TABLE>
- ------------------------
(1) Assumes sale by each Selling Security Holder of all shares registered
pursuant hereto for each such Selling Security Holder's account.
S-5
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF SHARES AMOUNT OF SHARES
SHARES BEING OWNED AFTER
NO. NAME OWNED REGISTERED OFFERING(1)
--- -------------------------------------------------------- ------------- ------------ ---------------------
<C> <S> <C> <C> <C> <C> <C>
224 Kensche Ulrich 1,286 1,286 0
225 Kensche Gisela 3,622 3,622 0
226 Kieninger Ute 1,446 1,446 0
227 Kienle Xaver 1,928 1,928 0
228 Kiermaier Axel 1,254 1,254 0
229 Kimmerle Gisela 1,446 1,446 0
230 Kirk Tony(2) 50,000 50,000 0
</TABLE>
<TABLE>
<C> <S> <C> <C> <C> <C>
231 Klinke Roswitha 964 964 0
232 Knab Thomas 624 624 0
233 Knab Wolfgang 480 480 0
234 Knobel Hubert 482 482 0
235 Knopp Helmut and Klara 1,439 1,439 0
236 Kohl Christian and Gerlinde 959 959 0
237 Kohl Detlef 479 479 0
238 Koller Manfred 479 479 0
239 Koller Jurgen 479 479 0
240 Kommandir Eva 1,438 1,438 0
241 Krafft Monika 626 626 0
242 Kramer Erich 19,300 19,300 0
243 Kraus Joachim 482 482 0
244 Krauter Sabine 482 482 0
245 Krieger Gabriele 964 964 0
246 Kruttwig Marianne 482 482 0
247 Kubler Roland 2,410 2,410 0
248 Kubler Roland 6,420 6,420 0
249 Kuchelmeister Rudolf 1,446 1,446 0
250 Kugler Johann 482 482 0
251 Kungl Georg 1,928 1,928 0
252 Kunz Martin 1,279 1,279 0
253 Kuttenberger Manfred 482 482 0
254 Lachmuth Michael 1,446 1,446 0
255 Langguth Bernd R. 482 482 0
256 Langguth Gernot 482 482 0
257 Langthaler Hildegard and Helmut 1,919 1,919 0
258 Lau Hans-Jurgen 5,786 5,786 0
259 Lau Margarete 3,215 3,215 0
260 Laubengeiger Stefanie 2,878 2,878 0
261 Lehmann Dagmar 5,904 5,904 0
262 Lemck Marisa 8,158 8,158 0
263 Leonhardt Uwe 8,688 8,688 0
264 Lichtner Claus 3,374 3,374 0
265 Liebing Heinz 2,505 2,505 0
266 Liersch Barbara 961 961 0
267 Linz Hans-Joachim 2,879 2,879 0
268 Locher Josef and Elfriede 6,749 6,749 0
</TABLE>
- ------------------------
(1) Assumes sale by each Selling Security Holder of all shares registered
pursuant hereto for each such Selling Security Holder's account.
(2) Tony Kirk has been a director of the Company since January 1998.
S-6
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF SHARES AMOUNT OF SHARES
SHARES BEING OWNED AFTER
NO. NAME OWNED REGISTERED OFFERING(1)
--- -------------------------------------------------------- ------------- ------------ ---------------------
<C> <S> <C> <C> <C> <C> <C>
269 Locher Marion 482 482 0
270 Loipersberger Sofie 479 479 0
271 Losch Ruth 519 519 0
272 Lubkowski Hans-Jurgen 480 480 0
273 Mader Heinz 1,686 1,686 0
274 Maier Hugo 627 627 0
275 Mang Dieter 479 479 0
276 Manz Anita 964 964 0
277 Martin Uwe 1,439 1,439 0
278 Mayer Bernd 964 964 0
279 Mayer Erwin 5,952 5,952 0
280 Mayer-Beraneck Claudia 479 479 0
281 Mayr Andreas 964 964 0
282 Mayr Hans 482 482 0
283 Mayrhofer Bertl 2,892 2,892 0
284 Merk Josef 964 964 0
</TABLE>
<TABLE>
<C> <S> <C> <C> <C> <C>
285 Merten Werner and Hannelore 240 240 0
286 Merz Lothar 2,878 2,878 0
287 Memer Jurgen 3,536 3,536 0
288 Messmer Lothar 1,446 1,446 0
289 Meusburger Anne and Roland 964 964 0
290 Meusburger Roland 643 643 0
291 Milz Alfred 482 482 0
292 Milz Hubert 11,680 11,680 0
293 Milz Anni 1,261 1,261 0
294 Milz Christine 6,126 6,126 0
295 Mohn Sigrid and Josef 1,438 1,438 0
296 Mueller Andreas 959 959 0
297 Muller Ernst 482 482 0
298 Munsterer Paul 482 482 0
299 Munsterer Paul 1,928 1,928 0
300 Neidhart Ursula 480 480 0
301 Neulinger Ralf 482 482 0
302 Neumann Christian 643 643 0
303 Noack Wolfgang 482 482 0
304 Noelle Claus 3,275 3,275 0
305 Nuber Rolf 1,589 1,589 0
306 Ochsenreiter Thomas 482 482 0
307 Ochsenreiter Sibylle 959 959 0
308 Offermann Ludwig and Gabi 482 482 0
309 Ohmayer Michael 482 482 0
310 Ostheimer Frank 4,982 4,982 0
311 Peller Helmut 2,411 2,411 0
312 Peller Wolfgang 1,768 1,768 0
313 Peltzer Karl Heinz 240 240 0
314 Peters Gabi 1,929 1,929 0
</TABLE>
- ------------------------
(1) Assumes sale by each Selling Security Holder of all shares registered
pursuant hereto for each such Selling Security Holder's account.
S-7
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF SHARES AMOUNT OF SHARES
SHARES BEING OWNED AFTER
NO. NAME OWNED REGISTERED OFFERING(1)
--- -------------------------------------------------------- ------------- ------------ ---------------------
<C> <S> <C> <C> <C> <C> <C>
315 Pfahl Reinhold 6,532 6,532 0
316 Pfahl Uwe 964 964 0
317 Pfeffer Mathilde 958 958 0
318 Pflug Erich 480 480 0
319 Pilz Lothar 1,929 1,929 0
320 Pinkl Monika 958 958 0
321 Pollath Helmut 1,446 1,446 0
322 Popp Mathias 480 480 0
323 Prawdzik Kathrin 482 482 0
324 Preu Siegfried 1,439 1,439 0
325 Rachbauer Vermogenstreuhand GmbH 2,410 2,410 0
326 Radanovic Elvira 964 964 0
327 Radler Alfred 3,803 3,803 0
328 Rauser Rolf 2,410 2,410 0
329 Redle Margot and Uwe 4,797 4,797 0
330 Rehse Carola 964 964 0
331 Reichard Rudolf 959 959 0
332 Reichle Hermine 2,536 2,536 0
333 Reichmann Andreas 479 479 0
334 Reissig Werner 480 480 0
335 Reithmeier Jorg 482 482 0
336 Renke Gertrud 5,017 5,017 0
337 Rennig Anna 959 959 0
338 Renz Jochen 479 479 0
339 Richter Heidi 482 482 0
340 Richter Marianne 482 482 0
341 Rie Annemaria and Hans-Reinhard 964 964 0
342 Rinderle Hans-Jorg 482 482 0
343 Rock Hermann 959 959 0
344 Rohde Peter 2,572 2,572 0
345 Romer Carsten 100,908 100,908 0
346 Romer Reinhard 482 482 0
347 Romer Willi 2,572 2,572 0
348 Romer Petra 482 482 0
349 Rosch Kirsten and Wolfgang 964 964 0
350 Roth Herta Johanna 1,446 1,446 0
351 Ruf Georg 482 482 0
352 Rupprecht Stefan and Anika 479 479 0
353 Ruther Klaus 480 480 0
354 Sailer Gerhard 964 964 0
355 Sam Thi Kim 2,572 2,572 0
356 Sauer Helmut 959 959 0
357 Sauter Hans 241 241 0
</TABLE>
<TABLE>
<C> <S> <C> <C> <C> <C>
358 Sauterleute Edgar 964 964 0
359 Schadle Rosemarie 479 479 0
360 Schafer Hannelore 3,297 3,297 0
</TABLE>
- ------------------------
(1) Assumes sale by each Selling Security Holder of all shares registered
pursuant hereto for each such Selling Security Holder's account.
S-8
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF SHARES AMOUNT OF SHARES
SHARES BEING OWNED AFTER
NO. NAME OWNED REGISTERED OFFERING(1)
--- -------------------------------------------------------- ------------- ------------ ---------------------
<C> <S> <C> <C> <C> <C> <C>
361 Schaufler Gunter 4,820 4,820 0
362 Schaufler Alwine 960 960 0
363 Schaufler Irmgard 964 964 0
364 Schaufler Monika 2,410 2,410 0
365 Scheurer Andreas 960 960 0
366 Schindler Maurizio 1,919 1,919 0
367 Schlosser Roman 482 482 0
368 Schmid Joachim 1,440 1,440 0
369 Schmid Markus 964 964 0
370 Schmid Michael 479 479 0
371 Schmid Robert 9,645 9,645 0
372 Schmid Martha 1,437 1,437 0
373 Schmidberger Hans-Jorg 964 964 0
374 Schmidberger Helmut 1,446 1,446 0
375 Schmidberger Johannes 7,873 7,873 0
376 Schmidberger Johannes 5,538 5,538 0
377 Schmidberger Brigitte 3,369 3,369 0
378 Schmidt Erhard 3,681 3,681 0
379 Schmidt Holger 479 479 0
380 Schneider Alfred 959 959 0
381 Schneider Armin 479 479 0
382 Schneider Franz 1,484 1,484 0
383 Schneider Ute 721 721 0
384 Schneider Karin 480 480 0
385 Schnetz Konrad 482 482 0
386 Schnetz Roman 964 964 0
387 Schnetz Margarete 482 482 0
388 Schnizer Heinrich 2,411 2,411 0
389 Schonberger Anton 1,879 1,879 0
390 Schraudolph Anita 7,198 7,198 0
391 Schreiber Monika 1,204 1,204 0
392 Schroter Manfred 479 479 0
393 Schultz-Friese Holger 482 482 0
394 Schultz-Friese Olaf 482 482 0
395 Schurer Eberhard 1,917 1,917 0
396 Schulbauer Harald 480 480 0
397 Schulbauer Wolfgang 240 240 0
398 Seitz & Partner 3,841 3,841 0
399 Seitz Franz-Josef 4,813 4,813 0
400 Seitz Heiko 482 482 0
401 Seitz Robert 4,799 4,799 0
</TABLE>
<TABLE>
<C> <S> <C> <C> <C> <C>
402 Sinz Gebhard 2,397 2,397 0
403 Sinz Gottfried 622 622 0
404 Sparrer Klaus 1,125 1,125 0
405 Specht Aurel 19,290 19,290 0
406 Srdanov Michael 5,759 5,759 0
</TABLE>
- ------------------------
(1) Assumes sale by each Selling Security Holder of all shares registered
pursuant hereto for each such Selling Security Holder's account.
S-9
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF SHARES AMOUNT OF SHARES
SHARES BEING OWNED AFTER
NO. NAME OWNED REGISTERED OFFERING(1)
--- -------------------------------------------------------- ------------- ------------ ---------------------
<C> <S> <C> <C> <C> <C> <C>
407 Srp Stefan 241 241 0
408 Staerk Josef jr. 1,253 1,253 0
409 Steinert Markus and Ursula 959 959 0
410 Straub Angela and Josef 2,410 2,410 0
411 Straub Irmgard 479 479 0
412 Straub Sabine 959 959 0
413 Strauss Anita and Karsten 479 479 0
414 Streeb Alexander 20,111 20,111 0
415 Streeb APEX GmbH 16,332 16,332 0
416 Streeb Wolfgang 482 482 0
417 Strenger Carsten 959 959 0
418 Strenger Gerhard 964 964 0
419 Strobel Siegfried 643 643 0
420 Strodel Georg 1,206 1,206 0
421 Strodel Helmut 3,466 3,466 0
422 Stub Verena 1,446 1,446 0
423 Styppa Petra 482 482 0
424 Sundermann Erhard 11,084 11,084 0
425 Sutter Reinhard 959 959 0
426 Szkwarek Piotr 1,439 1,439 0
427 Tausend Claudia 521 521 0
428 Tech Peter 480 480 0
429 Tiede Wolfgang 2,410 2,410 0
430 Trenkle Stefan 626 626 0
431 Uhde Dirk 482 482 0
432 Ummenhofer Josef 626 626 0
433 Unger Albrecht 610 610 0
434 Usenbenz Helmut and Susanne 1,928 1,928 0
435 Voelker Horst and Gertrud 482 482 0
436 Vogele Hans-Peter 482 482 0
437 Vopper Annemarie 1,928 1,928 0
438 Vosseler Michaela 482 482 0
439 Wagner Eberhard and Petra 960 960 0
440 Wagner Herbert 5,846 5,846 0
441 Wagner Thomas 2,410 2,410 0
</TABLE>
<TABLE>
<C> <S> <C> <C> <C> <C>
442 Walder Jurgen 3,359 3,359 0
443 Waldmann Hugo 479 479 0
444 Watzka Erich 960 960 0
445 Weber Heike and Dietmar 479 479 0
446 Weber Bernd 482 482 0
447 Weber Franz 482 482 0
448 Weber Hans 479 479 0
449 Weber Hubert 1,879 1,879 0
450 Weber Angelika 3,063 3,063 0
451 Weber Birgit 627 627 0
452 Weber Frieda 626 626 0
</TABLE>
- ------------------------
(1) Assumes sale by each Selling Security Holder of all shares registered
pursuant hereto for each such Selling Security Holder's account.
S-10
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF SHARES AMOUNT OF SHARES
SHARES BEING OWNED AFTER
NO. NAME OWNED REGISTERED OFFERING(1)
--- -------------------------------------------------------- ------------- ------------ ---------------------
<C> <S> <C> <C> <C> <C> <C>
453 Webinger Ernst 643 643 0
454 Weigelt Wolfgang 3,142 3,142 0
455 Weishaupt Evelin 479 479 0
456 Weissauer Andreas 960 960 0
457 Weithanner Liesbeth 482 482 0
458 Wellhauser Erich 2,877 2,877 0
459 Wenzel Henner 2,410 2,410 0
460 Wiechmann Ruth 960 960 0
461 Wiedemann Klaus 480 480 0
462 Wiedemann Markus 3,357 3,357 0
463 Wiedemeier Franz 482 482 0
464 Wiker Heinrich 1,927 1,927 0
465 Wildenauer Helmut and Elfriede 482 482 0
466 Winderl Beate and Hubert 479 479 0
467 Wipper Alois and Gabriele 479 479 0
468 Wipper Markus 479 479 0
469 Wisthal Bernd 482 482 0
470 Wittmann Klaus 480 480 0
471 Woelk Uwe and Gisela 479 479 0
472 Wohnhaas Alfons 480 480 0
473 Wohnhaas Monika 960 960 0
474 Wolff Kurt 479 479 0
475 Wucher Marike and Christian 964 964 0
476 Wunn Konrad 5,960 5,960 0
477 Wunn Ulrike 11,031 11,031 0
478 Wurth Brigitte 964 964 0
479 Wustholz Werner 2,410 2,410 0
480 Zahn Gabriele 1,919 1,919 0
481 Zepf Gunter 1,928 1,928 0
482 Zimmermann Rainer 482 482 0
483 Zinsmeister Colette and Paul 482 482 0
484 Zirn Gottfried 1,180 1,180 0
485 Zwisler Walter 1,446 1,446 0
486 Zysett Marcus 28,644 28,644 0
------------- ------------
Totals (Schedule A): 1,449,182 1,449,182 0
------------- ------------
------------- ------------
Grand totals (all Selling Security Holders): 1,673,250 1,673,250 0
------------- ------------
------------- ------------
</TABLE>
- ------------------------
(1) Assumes sale by each Selling Security Holder of all shares registered
pursuant hereto for each such Selling Security Holder's account.
S-11
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY THE COMMON STOCK
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................
Risk Factors...................................
Use of Proceeds................................
Capitalization.................................
Dividend Policy................................
Common Stock Price Information.................
Selected Financial Data........................
Plan of Operations.............................
Business.......................................
Management.....................................
Principal Shareholders.........................
Selling Security Holders.......................
Certain Transactions...........................
Description of Securities......................
Shares Available for Future Sale...............
Legal Matters..................................
Experts........................................
Change in Accountants..........................
Additional Information.........................
Financial Statements...........................
Schedule A--Additional Selling Security
Holders.......................................
</TABLE>
------------------------
UNTIL , 1998 [25 DAYS AFTER THE DATE OF THIS PROSPECTUS], ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
1,673,250 SHARES OF
COMMON STOCK
DEOTEXIS, INC.
----------------
PROSPECTUS
---------------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered hereby. All amounts are
estimated except the Securities and Exchange Commission registration fee.
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 15,800
Accounting fees and expenses...................................... $ 30,000
Legal fees and expenses........................................... $ 80,000
Printing and engraving expenses................................... $ 30,000
Consulting fees and expenses...................................... $ 120,000
Registrar and transfer agent's fees............................... $ 2,500
Miscellaneous fees and expenses................................... $ 5,000
---------
Total......................................................... $ 283,300
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to its Articles of Incorporation and indemnification agreements to
be entered into between the Company and each of its directors and executive
officers, the Company is obligated to indemnify each of its directors and
executive officers to the fullest extent permitted by Nevada law with respect to
all liability and loss suffered, and reasonable expenses incurred, by such
persons in any action, suit or proceeding, in connection with that person's
service as a director or executive officer of the Company. The Company could be
obligated to advance the reasonable expenses of indemnified directors or
executive officers in defending such proceedings if the indemnified party agrees
to repay all amounts advanced if it is ultimately determined that such person is
not entitled to indemnification.
The Nevada General Corporation Law (the "Nevada Act") authorizes Nevada
corporations to indemnify any person who was or is a party to any proceeding
(other than an action by, or in the right of, the corporation), by reason of the
fact that he or she is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation or other entity,
against liability incurred in connection with such proceeding, including any
appeal thereof, if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or on behalf of a corporation, indemnification may not be made if the
person seeking indemnification is adjudged liable, unless the court in which
such action was brought determines such person is fairly and reasonably entitled
to indemnification. The indemnification provisions of the Nevada Act require
indemnification if a director or officer has been successful on the merits or
otherwise in defense of any action, suit, or proceeding to which he or she was a
party by reason of the fact that he or she is or was a director or officer of
the corporation. The indemnification authorized under the Nevada Act is not
exclusive and is in addition to any other rights granted to officers and
directors under the Articles of Incorporation or By-Laws of a corporation or any
agreement between officers and directors and the corporation. A corporation may
purchase and maintain insurance or furnish similar protection on behalf of any
officer or director against any liability asserted against the officer or
director and incurred by the officer or director in such capacity, or arising
out of the status of officer or director of the corporation, whether or not the
corporation would have the power to indemnify him or her against such liability
under the Nevada Act.
II-1
<PAGE>
Under provisions of the Company's Articles of Incorporation that are
authorized by the Nevada Act, and under provisions of the indemnification
agreements to be executed between each director and executive officer, and the
Company, a director will not be personally liable for monetary damages to the
Company or any other person for acts or omissions in his or her capacity as a
director or executive officer, except in certain limited circumstances such as
certain violations of criminal law and transactions in which the director or
executive officer derived an improper personal benefit. As a result of these
provisions, shareholders may be unable to recover monetary damages against
directors or executive officer for actions taken by them which constitute
negligence or gross negligence or which are in violation of their fiduciary
duties, although injunctive or other equitable relief may be available.
In the indemnification agreements to be entered into with each of its
directors and executive officers, the Company anticipates the inclusion of
provisions pursuant to which it will be obligated to indemnify those persons to
the fullest extent authorized by the Nevada Act and to advance payments to cover
defense costs against an unsecured obligation to repay such advances if it is
ultimately determined that the recipient of the advance is not entitled to
indemnification. The Company will not be required to indemnify a director or
executive officer if the loss results from any of the following: (a) a violation
of Section 16(b) of the Securities and Exchange Act of 1934, as amended; (b) a
violation of criminal law; (c) a transaction from which the executive officer or
director received an improper personal benefit; (d) willful misconduct or a
conscious disregard for the Company's best interests; or (e) a transaction for
which the director is liable pursuant to Section 78.300.2 of the Nevada Act for
certain distributions from the corporation to its shareholders.
The foregoing provisions of the Nevada Act, the Company's Articles of
Incorporation, and the indemnification agreements to be executed in favor of the
Company's directors and executive officers, could have the effect of preventing
or delaying a person from acquiring or seeking to acquire a substantial equity
interest in, or control of, the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On October 10, 1997, the Company issued the following shares of Common Stock
to the following persons for the consideration set forth opposite their
respective names below.
<TABLE>
<CAPTION>
NUMBER OF CONSIDERATION
SHARES PAID
---------- -------------
<S> <C> <C>
Overton Holdings Limited(1)....................................... 4,183,125 $ 4,000,000
Mark Meller....................................................... 85,000 $ 0(2)
</TABLE>
- ------------------------
(1) These shares were purchased for $4,000,000 and the transfer to the Company
by Gerold Tebbe of certain patents, patent applications and related
intellectual property for nominal consideration. No registration was
required with respect to the issuance of such shares pursuant to Regulation
S of the Securities Act. This transaction is exempt from registration by
virtue of Regulation S because the shares were issued exclusively to
purchasers outside of the United States.
(2) These shares were issued to a consultant to the Company, in lieu of cash
compensation, in connection with his work on behalf of the Company in
arranging and facilitating the consummation of the Stock Purchase Agreement
transaction. No registration was required with respect to the issuance of
such shares pursuant to Section 4(2) of the Securities Act as a transaction
by the Company not involving a public offering.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.1 Articles of Incorporation.
3.2 By-Laws of the Company.
4 Specimen certificate for shares of Common Stock.
5 *Opinion of Loeb & Loeb LLP.
10.1 Stock Purchase Agreement, dated September 30, 1997.
10.2 *License Agreement between the Company and KuW Hummel Vertriebs GmbH.
10.3 *Consulting Agreement between the Company and Tony Kirk.
10.4 *Directors Stock Option Plan.
10.5 *Incentive Stock Option Plan.
10.6 *Form of Indemnification Agreement to be entered into by the Company with each of its directors and
executive officers.
11 Statement of Computation of Per Share Earnings.
23.1 *Consent of Loeb & Loeb LLP (included in Exhibit 5).
23.2 Consent of Accountants.
24 Power of Attorney (contained on Page II-5).
27 Financial Data Schedule.
99.1 Schedule of Company-owned patents and patent applications.
99.2 Information Statement pursuant to Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1
thereunder.
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
(a) INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, offi-cers or controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(b) UNDERTAKINGS REQUIRED BY REGULATION S-K, ITEM 512:
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
II-3
<PAGE>
(ii) Reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof), which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) Include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
2. To treat each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at that time to be
the initial bona fide offering.
3. To file a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
4. For purposes of determining any liability under the Securities Act of
1933, each filing of the Company's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
5. To deliver or cause to be delivered with the prospectus, to each person
to whom the prospectus is sent or given, the latest annual report to
securityholders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3
under the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X is not set
forth in the prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus, to provide such
interim financial information.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in New York City, New York on March 3, 1998.
<TABLE>
<S> <C> <C>
DEOTEXIS, INC.
By: /s/ GEROLD TEBBE
-----------------------------------------
PRESIDENT, CHIEF EXECUTIVE OFFICER,
SECRETARY AND
TREASURER
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Gerold Tebbe and Tony Kirk, jointly and
severally, his attorneys-in-fact, each with the power of substitution, for him
in any and all capacities, to sign any amendments to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ ROBERT F. WRIGHT Chairman of the Board
- ------------------------------ March 3, 1998
Robert F. Wright
/s/ GEROLD TEBBE Director, President, Chief
- ------------------------------ Executive Officer,
Gerold Tebbe Secretary and Treasurer
(principal executive March 3, 1998
officer and principal
financial and accounting
officer)
/s/ DAVID F. BOLGER Director
- ------------------------------ March 3, 1998
David F. Bolger
/s/ AUBREY L. COLE Director
- ------------------------------ March 3, 1998
Aubrey L. Cole
/s/ TONY KIRK Director
- ------------------------------ March 3, 1998
Tony Kirk
/s/ MICHAEL J. ROSENBERG Director
- ------------------------------ March 3, 1998
Michael J. Rosenberg
/s/ IRA T. WENDER Director
- ------------------------------ March 3, 1998
Ira T. Wender
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ----------- ------------------------------------------------------------------------------------ -----------------------
<C> <S> <C>
3.1 Articles of Incorporation.
3.2 By-Laws of the Company.
4 Specimen certificate for shares of Common Stock.
5 *Opinion of Loeb & Loeb LLP.
10.1 Stock Purchase Agreement, dated September 30, 1997.
10.2 *License Agreement between the Company and KuW Hummel Vertriebs GmbH.
10.3 *Consulting Agreement between the Company and Tony Kirk.
10.4 *Directors Stock Option Plan.
10.5 *Incentive Stock Option Plan.
10.6 *Form of Indemnification Agreement to be entered into by the Company with each of
its directors and executive officers.
11 Statement of Computation of Per Share Earnings.
23.1 *Consent of Loeb & Loeb LLP (included in Exhibit 5).
23.2 Consent of Accountants.
24 Power of Attorney (contained on Page II-5).
27 Financial Data Schedule.
99.1 Schedule of Company-owned Patents and Patent Applications.
99.2 Information Statement pursuant to Section 14(f) of the Securities Exchange Act of
1934 and Rule 14f-1 thereunder.
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
ZERON ACQUISITIONS II, INC.
The undersigned, being of legal age, in order to form a corporation
under and pursuant to the laws of the State of Nevada, do hereby set forth as
follows:
FIRST: The name of the corporation is
ZERON ACQUISITIONS II, INC.
SECOND: The address of the initial registered and principal office of
this corporation in this state is c/o United Corporate Services, Inc., 841 East
2nd Street, in the City of Carson City, County of Carson City, State of Nevada
89702 and the name of the registered agent at said address is United Corporate
Services, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the corporation laws
of the State of Nevada.
FOURTH: (a) The corporation shall be authorized to issue the
following shares:
Class Number of Shares Par Value
- ------------------ ---------------- -----------------
COMMON 75,000,000 $.001
PREFERRED 15,000,000 $.001
<PAGE>
(b) The designations, powers, preferences, rights, and the
qualifications or restrictions thereof are as follows:
1. The holders of the Common shares shall be entitled to vote in all
matters requiring shareholder approval including the election of directors and
the holders of the Preferred shares shall have no voting rights whatsoever
except as are expressly required by law.
2. The Preferred shares shall be convertible into Common Shares
subject to the terms and conditions fixed by the Board of Directors.
3. The holders of the Preferred shares shall be entitled to receive
dividends, distributed ratably, before any dividends are declared and paid to
the holders of the Common shares.
4. The holders of the Preferred shares shall be entitled, upon
dissolution or liquidation of the corporation, to share in the assets of the
corporation, ratably, before any such distribution is made to the holders of the
Common shares.
FIFTH: The number of directors constituting the initial Board of
Directors is one (1); and the name and address of the person constituting the
initial Board of Directors, to serve until the first annual meeting of
shareholders, or until his successors are elected and qualify, is as follows:
NAME ADDRESS
- -------------------------- -----------------------------
Gary Takata 370 Lexington Avenue
New York, New York 10017
(This corporation has only one Shareholder.)
SIXTH: The names and addresses of the incorporators are as follows:
2
<PAGE>
NAME ADDRESS
- -------------------------- -----------------------------
Ray A. Barr 10 Bank Street
White Plains, New York 10606
Mark Skubicki 10 Bank Street
White Plains, New York 10606
SEVENTH: The period of duration of the corporation shall be
perpetual.
EIGHTH: The corporation may, to the fullest extent permitted by
Section 78.751 of the Nevada General Corporation Law, indemnify any and all
directors and officers whom it shall have power to indemnify under said section
from and against any and all of the expenses, liabilities or other matter
referred to in or covered by such section, and the indemnification provided for
herein shall not be deemed exclusive of any other rights to which the persons so
indemnified may be entitled under any By-Law, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity by holding office, and shall continue as to
a person who has ceased to be a director or officer and shall inure to the
benefits of the heirs, executors and administrators of such a person.
IN WITNESS WHEREOF, the undersigned hereby execute this document and
affirm that the facts set forth herein are
3
<PAGE>
true under the penalties of perjury this fifth day of March, 1992.
/s/ RAY A. BARR
---------------------------------
Ray A. Barr, Incorporator
/s/ MARK SKUBICKI
---------------------------------
Mark Skubicki, Incorporator
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
Be it remembered that on this fifth day of March, 1992, personally
came before me, a Notary Public in and for the County and State aforesaid, Ray
A. Barr, Mark Skubicki, parties to the foregoing document, known to me
personally to be such, and who, being by me first duly sworn, acknowledged the
said document to be their act and deed and that the facts therein stated are
true.
Given under my hand and seal of office the day and year aforesaid.
/s/ MARIA R. FISCHETTI
---------------------------------
Maria R. Fischetti, Notary Public
4
<PAGE>
ACCEPTANCE AS REGISTERED AGENT
OF
ZERON ACQUISITIONS II, INC.
Having been named to accept service of process for the above stated
corporation, at the place designated in this certificate, I hereby agree to act
in this capacity, and I further agree to comply with the provisions of all
status relative to the proper and complete performance of my duties.
Dated: March 5, 1992
UNITED CORPORATE SERVICES, INC.
/s/ RAY A. BARR
---------------------------------
Ray A. Barr, President
Registered Office Address:
841 East 2nd Street
Carson City, Nevada 89702
<PAGE>
Filing Fee: Receipt #
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock) Filed by:
ZERON ACQUISITIONS II, INC.
--------------------------------------------------------
I, Gerold Tebbe, the President and Secretary of Zeron Acquisitions II, Inc.
(the "Corporation") do hereby certify:
That the Board of Directors of the Corporation at a meeting duly convened,
held on the 13th day of October, 1997, adopted a resolution to amend the
original Articles of Incorporation as follows:
Article First is hereby amended to read as follows:
"FIRST: The name of the corporation is Deotexis, Inc."
The number of shares of the Corporation outstanding and entitled to vote on
an amendment to the Articles of Incorporation is 4,546,875; that the said change
and amendment have been consented to and approved by a majority vote of the
stockholders holding at least a majority of each class of stock outstanding and
entitled to vote thereon.
/s/ Gerold Tebbe
----------------------------
Gerold Tebbe
President and Secretary
<PAGE>
EXHIBIT 3.2
(AMENDED)
BY-LAWS
OF
ZERON ACQUISITIONS II, INC.
ARTICLE I - OFFICES
The office of the Corporation shall be located in any City and State
designated by the Board of Directors. The Corporation may also maintain other
offices at such other places within or without the United States as the Board of
Directors may, from time to time, determine.
ARTICLE II - STOCKHOLDERS
1. ANNUAL MEETING.
The annual meeting of the stockholders shall be held if called by the Board
of Directors within five months after the close of the fiscal year of the
Corporation, for the purpose of electing directors, and transacting such other
business as may properly come before the meeting.
2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the president or by the
directors, and shall be called by the president at the request of the holders of
not less than 10 per cent of all the outstanding shares of the corporation
entitled to vote at the meeting.
3. PLACE OF MEETING.
The directors may designate any place, either within or without the State
unless otherwise prescribed by statute, as the place of meeting for any annual
meeting or for any special meeting called by the directors. A waiver of notice
signed by all stockholders entitled to vote at a meeting may designate any
place, either within or without the state unless otherwise prescribed by
statute, as the place for holding such meeting. If no designation is made, or if
a special meeting be otherwise called, the place of meeting shall be the
principal office of the corporation.
<PAGE>
4. NOTICE OF MEETING.
Written or printed notice stating the place, day and hour of the meeting
and, in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than 10 nor more than 50 days before the
date of the meeting, either personally or by mail, by or at the direction of the
president, or the secretary, or the officer or persons calling the meeting, to
each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other proper purpose, the directors of the corporation
may provide that the stock transfer books shall be closed for a stated period
but not to exceed, in any case, 30 days. If the stock transfer books shall be
closed for the purpose of determining stockholders entitled to notice of or to
vote at a meeting of stockholders, such books shall be closed for at least 15
days immediately preceding such meeting. In lieu of closing the stock transfer
books, the directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than 45 days
and, in case of a meeting of stockholders, not less than 15 days prior to the
date on which the particular action requiring such determination of stockholders
is to be taken. If the stock transfer books are not closed and no record date
is fixed for the determination of stockholders entitled to notice of or to vote
at a meeting of stockholders, or stockholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the directors declaring such dividend is adopted, as the case
may be, shall be the record date for such determination of stockholders. When a
determination of stockholders entitled to vote at any meeting of stockholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof.
6. QUORUM.
At any meeting of stockholders 50% of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than said number of
the outstanding
2
<PAGE>
shares are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The stockholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
7. PROXIES.
At all meetings of stockholders, a stockholder may vote by proxy executed
in writing by the stockholder or by his duly authorized attorney in fact. Such
proxy shall be filed with the secretary of the corporation before or at the time
of the meeting.
8. VOTING.
Each stockholder entitled to vote in accordance with the terms and
provisions of the certificate of incorporation and these bylaws shall be
entitled to one vote, in person or by proxy, for each share of stock entitled to
vote held by such stockholders. Upon the demand of any stockholder, the vote
for directors and upon any question before the meeting shall be by ballot. All
elections for directors shall be decided by majority vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of this State.
ARTICLE III - BOARD OF DIRECTORS
1. GENERAL POWERS.
The business and affairs of the corporation shall be managed by its board
of directors. The directors shall in all cases act as a board, and they may
adopt such rules and regulations for the conduct of their meetings and the
management of the corporation, as they may deem proper, not inconsistent with
these bylaws and the laws of this State.
2. NUMBER, TENURE AND QUALIFICATIONS.
The number of directors shall be not less than one (1) nor more than seven
(7). All actions taken by the corporation requiring approval of the Board of
Directors, when the Board of Directors consists of only one director, shall be
valid. The directors shall be elected at the annual meeting of the stockholders
and each director shall be elected to serve until his successor shall be elected
and shall qualify. When the Board of Directors consists of only one director,
such direc-
3
<PAGE>
tor may accept his own resignation and appoint his successor. A director need
not be a stockholder.
3. REGULAR MEETINGS.
A regular meeting of the directors, shall be held without other notice than
this bylaw immediately after and at the same place as, the annual meeting of
stockholders. The directors may provide, by resolution, the time and place for
the holding of additional regular meetings without other notice than such
resolution.
4. SPECIAL MEETINGS.
Special meetings of the directors may be called by or at the request of the
president or any two directors. The person or persons authorized to call
special meetings of the directors may fix the place for holding any special
meeting of the directors called by them.
5. NOTICE.
Notice of any special meeting shall be given at least 3 days previously
thereto by written notice delivered personally, by telegram, telecopier or
mailed to each director at his business or home address. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail so
addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed delivered when the telegram is delivered to the telegraph
company. If notice be given by telecopier, such notice shall be deemed
delivered upon completion of the telecopier transmission. The attendance of a
director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened.
6. QUORUM.
At any meeting of the directors a majority of the directors shall
constitute a quorum for the transaction of business, but if less than said
number is present at a meeting, a majority of the directors present may adjourn
the meeting from time to time without further notice. In the event the
corporation has only two directors, then one director will constitute a quorum.
4
<PAGE>
7. MANNER OF ACTING.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the directors.
8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of
directors authorized by the board of directors or shareholders and vacancies
occurring in the board for any reason except the removal of directors without
cause may be filled by a vote of a majority of the directors then in office,
although less than a quorum exists. Vacancies occurring by reason of the
removal of directors without cause shall be filled by vote of the stockholders.
A director elected to fill a vacancy caused by resignation, increase in the
number of directors, death or removal shall be elected to hold office for the
unexpired term of his predecessor.
9. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause by vote of the
stockholders or by action of the board. Directors may be removed without cause
only by vote of the stockholders.
10. RESIGNATION.
A director may resign at any time by giving written notice to the board,
the president or the secretary of the corporation. Unless otherwise specified
in the notice, the resignation shall take effect upon receipt thereof by the
board of such officer, and the acceptance of the resignation shall not be
necessary to make it effective. With the consent of a majority of the other
members of the board of directors, or without such consent if there are no other
directors, any director tendering his resignation to the board of directors may
accept such resignation and appoint a successor to complete the term of the
resigning director.
11. COMPENSATION.
No compensation shall be paid to directors, as such, for their services,
but by resolution of the board a fixed sum and expenses for actual attendance at
each regular or special meeting of the board may be authorized. Nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefore.
5
<PAGE>
12. PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting of the directors
at which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
13. EXECUTIVE AND OTHER COMMITTEES.
The board, by resolution, may designate from among its members an executive
committee and other committees, each consisting of three or more directors.
Each such committee shall serve at the pleasure of the board.
ARTICLE IV - OFFICERS
1. NUMBER.
The officers of the corporation shall be a president, a vice-president, a
secretary and a treasurer, each of whom shall be elected by the directors. Such
other officers and assistant officers as may be deemed necessary may be elected
or appointed by the directors. Any two or more offices may be held by the same
person.
2. ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the directors shall be
elected at a meeting of the directors held when determined by the directors.
Each officer shall hold office until his successor shall have been duly elected
and shall have qualified or until his death or until he shall resign or shall
have been removed in the manner hereinafter provided.
3. REMOVAL.
Any officer or agent elected or appointed by the directors may be removed
by the directors whenever in their judgment the best interests of the
corporation would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
6
<PAGE>
4. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the directors for the unexpired
portion of the term.
5. SALARIES.
The salaries of the officers shall be fixed from time to time by the
directors and no officer shall be prevented from receiving such salary by reason
of the fact that he is also a director of the corporation.
ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS
1. CONTRACTS.
The directors may authorize any officer or officers, agent or agents, to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authority may be general or confined to
specific instances.
2. LOANS.
No loans shall be contracted on behalf of the corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution of
the directors. Such authority may be general or confined to specific instances.
3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the corporation, shall be signed
by such officer or officers, agent or agents of the corporation and in such
manner as shall from time to time be determined by resolution of the directors.
4. DEPOSITS.
All funds of the corporation not otherwise employed shall be deposited from
time to time to the credit of the corporation in such banks, trust companies or
other depositories as the directors may select.
ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER
1. CERTIFICATES FOR SHARES.
Certificates representing shares of the corporation shall be in such form
as shall be determined by the directors. Such
7
<PAGE>
certificates shall be signed by the president and by the secretary or by such
other officers authorized by law and by the directors. All certificates for
shares shall be consecutively numbered or otherwise identified. The name and
address of the stockholders, the number of shares and date of issue, shall be
entered on the stock transfer books of the corporation. All certificates
surrendered to the corporation for transfer shall be cancelled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and cancelled, except that in case of a lost,
destroyed or mutilated certificate a new one may be issued therefore upon such
terms and indemnity to the corporation as the directors may prescribe.
2. TRANSFERS OF SHARES.
(a) Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered on
the transfer book of the corporation which shall be kept at its principal
office.
(b) The corporation shall be entitled to treat the holder of record
of any share as the holder in fact thereof, and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such share on the
part of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of this state.
ARTICLE VII - FISCAL YEAR
The fiscal year of the corporation shall end on the 31st day of December in
each year.
ARTICLE VIII - DIVIDENDS
The directors may from time to time declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE IX - SEAL
The directors shall provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the corporation and the words,
"Corporate Seal."
8
<PAGE>
ARTICLE X - WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any stockholder or director of the corporation under the provisions of
these bylaws or under the provisions of the articles of incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE XI - AMENDMENTS
These bylaws may be altered, amended or repealed and new bylaws may be
adopted by a vote of the stockholders representing a majority of all the shares
issued and outstanding, at any annual stockholders' meeting or at any special
stockholders' meeting when the proposed amendment has been set out in the notice
of such meeting, or by a unanimous vote of the Board of Directors provided that
the amendment is not inconsistent with the powers provided the Board of
Directors by the Articles of Incorporation.
ARTICLE XII - ANTI-TAKEOVER STATUTES
Pursuant to the authority granted in Section 78.378 of the Nevada Revised
Statutes, the so-called "anti-takeover" statutes found in NRS Sections 78.378(2)
through 78.3793 inclusive shall not be applicable to the corporation.
9
<PAGE>
Exhibit 4
<TABLE>
<CAPTION>
[LOGO] [LOGO] [LOGO]
COMMON STOCK COMMON STOCK
PAR VALUE $.001 PAR VALUE $.001
<S> <C> <C>
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN
OF THE STATE OF NEVADA DEOTEXIS, INC. DEFINITIONS
AUTHORIZED STOCK 75,000,000 SHARES CUSIP 249507 10 4
</TABLE>
This certifies that ____________________________________________
is the owner of:
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
Deotexis, Inc. transferable on the books of the corporation by the holder
hereof, in person or by duly authorized attorney upon surrender of this
certificate properly endorsed.
This Certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
In Witness Whereof, the corporation has caused this certificate to be
signed by the facsimile signatures of its duly authorized officers and sealed
with the facsimile seal of the corporation.
Dated:
<TABLE>
<CAPTION>
Countersign and Registered
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT AND REGISTRAR [DEOTEXIS, INC.
SEAL]
By [SIGNATURE] [SIGNATURE]
<S> <S> <S> <S>
AUTHORIZED SIGNATURE CHAIRMAN VICE CHAIRMAN
</TABLE>
<PAGE>
DEOTEXIS, INC.
Explanation of Abbreviations
The following abbreviations when used in the form of ownership on the
face of this Certificate shall be construed as though they were written out
in full according to applicable laws or regulations. Abbreviations in addition
to those appearing below may be used.
<TABLE>
<CAPTION>
Phase Abbreviation Equivalent Phase Abbreviation Equivalent
<S> <C> <C> <C>
JT TEN As joint tenants, with right of TEN BY ENT As tenants by the entireties
survivorship and not as tenants
in common
TEN IN COM As tenants in common UNIF GIFT MIN ACT Uniform Gifts to Minors Act
</TABLE>
<TABLE>
<CAPTION>
Word Word Word
Abbreviation Equivalent Abbreviation Equivalent Abbreviation Equivalent
- ------------ ---------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ADM Administrator(s) EST Estate, Of estate of PAR Paragraph
Administratrix EX Executor(s), Executrix PL Public Law
AGMT Agreement FBO For the benefit of TR (As) trustee(s). for, of
ART Article FDN Foundation U Under
CH Chapter GDN Guardian(s) UA Under agreement
CUST Custodian for GDNSHP Guardianship UW Under will of, Of will of,
DEC Declaration MIN Minor(s) Under last will & testament
</TABLE>
For value received, ______________________ hereby sell, assign and transfer unto
________________________________________________________________________________
Please print or typewrite name and address of assignee
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Please insert Social Security or other identifying number of assignee
________________________________________________________________________________
_________________________________________________________________________ Shares
of the stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint
_____________________________________________________________________, Attorney.
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated _____________________________
X ______________________________________
(Sign here exactly as name(s) shown
on the face of this Certificate
without any change or alteration
whatever.)
Signature(s) Guaranteed:
By ____________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION, (BANKS, STOCKBROKERS,
SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad.-15.
<PAGE>
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is dated as
of September 30, 1997, by and between, on the one hand, Mr. Gerold Tebbe; and
Overton Holdings Limited, a corporation formed under the laws of the Turks and
Caicos Islands, British West Indies ("OHL"); and, on the other hand, Mr. Gary
Takata; Mr. Shigeru Masuda; and Zeron Acquisitions II, Inc., a Nevada
corporation ("ZERON"; Mr. Takata and Mr. Masuda shall be referred to herein as
the "CONTROLLING ZERON STOCKHOLDERS").
RECITALS:
WHEREAS, OHL desires to acquire 4,183,125 shares of newly-issued and non-
registered Common Stock, $.001 par value, of Zeron (the "NEW SHARES") in
exchange for $4,000,000 cash and the sale to Zeron by Mr. Tebbe or persons
controlled by him of certain patents and patent applications listed on SCHEDULE
1 hereto (the "PATENT RIGHTS"), and the Intangibles (as defined in Section 6.5
hereof), and Zeron desires to sell to OHL the New Shares, all on the terms and
conditions set forth herein;
WHEREAS, OHL and Mr. Tebbe have agreed that, following the purchase and
sale of the New Shares, certain stockholders of Zeron just prior to the Closing
(defined below) shall have, under certain circumstances, price support for their
Zeron Common Stock in the form of a put option established for such purpose;
WHEREAS, the Controlling Zeron Stockholders, who also are the sole
directors and officers of Zeron, have agreed that, upon the Closing, Mr. Masuda
shall resign his position as a Director of Zeron, and Mr. Takata shall appoint
Mr. Tebbe his successor as a Director of Zeron, and thereupon resign his
position as a Director and as an officer of Zeron;
WHEREAS, the parties hereto have agreed and intend for the New Shares to be
sold by Zeron and purchased by OHL in a transaction exempt from the registration
requirements of the U.S. securities laws pursuant to the exemption provided by
Regulation S promulgated by the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), and that the
certificates representing the New Shares shall bear the legend set forth on
SCHEDULE 3 hereto;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and in reliance upon the representations and warranties
hereinafter set forth, the parties hereto hereby agree as follows:
<PAGE>
1. PURCHASE OF NEW SHARES FROM, AND SALE OF PROPERTY TO ZERON
1.1. PURCHASE OF THE NEW SHARES. Subject to the terms and conditions
of this Agreement, and in reliance upon the representations and warranties of
OHL and Mr. Tebbe contained herein, Zeron shall, at the Closing (as defined in
Section 1.5 below), sell, assign, transfer and deliver to OHL, and OHL shall
purchase, acquire and accept from Zeron, all of the New Shares for the
consideration described herein.
1.2. CASH CONSIDERATION FOR THE NEW SHARES. Subject to the terms and
conditions of this Agreement, and in reliance upon the representations and
warranties of Zeron and the Controlling Zeron Stockholders contained herein, OHL
shall, at the Closing, contribute $4,000,000 to Zeron as cash consideration for
the New Shares.
1.3. SALE OF THE PATENT RIGHTS TO ZERON. Subject to the terms and
conditions of this Agreement, and in reliance upon the representations and
warranties of Zeron and the Controlling Zeron Stockholders contained herein, Mr.
Tebbe shall, on or before the six month anniversary of the Closing, cause the
completion of the transfer of the Patent Rights and the Intangibles (as defined
in Section 6.5 below), to Zeron, and execute all documentation necessary to sell
the Patent Rights, and all rights and privileges associated therewith, to Zeron
for one dollar each, plus certain Contingent Compensation (defined in Section
1.4 below). In the event Mr. Tebbe does not complete the transfer of the Patent
Rights within the time period provided for above, the Founding Stockholders
(defined in Section 1.4 below) shall be entitled to exercise the Put described
in Section 2 of this Agreement, notwithstanding the conditions described in
Sections 2.1(a) and 2.1(b). Upon the completion of the transfer of the Patent
Rights and Intangibles to Zeron, Mr. Tebbe shall so inform, in writing, the
Escrow Agent under the Escrow Agreement (defined in Section 3.3 hereof) and Mr.
Takata, as designated representative of the Founding Stockholders thereunder and
under the Put Agreement (defined in Section 2.1 hereof).
1.4. CONTINGENT COMPENSATION. For the purposes of this Agreement,
"CONTINGENT COMPENSATION" shall mean, for each year (or portion thereof) that
Zeron owns any of the Patent Rights, with respect to each Patent Right, 1% of
all net annual revenues recognized by Zeron in connection with the commercial
exploitation of each such Patent Right; PROVIDED, HOWEVER, that such
compensation shall not accrue and be payable with respect to any of the Patent
Rights unless Zeron has recognized net income from that Patent Right during such
year, as determined in accordance with generally accepted accounting principles,
as applied in the United States; PROVIDED, FURTHER, HOWEVER, that at such time
as a majority of the shares of Common Stock of Zeron held by the stockholders of
Zeron just prior to the Closing (excluding Mr. Mark Meller) (such stockholders,
excluding Mr. Meller, shall be referred to herein collectively as the "FOUNDING
STOCKHOLDERS"), as listed on SCHEDULE 2 hereto, are transferred to persons other
than
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<PAGE>
Founding Stockholders, Mr. Tebbe shall be free to renegotiate with Zeron the
Contingent Compensation payable to him with respect to each Patent Right.
1.5. CLOSING. Upon satisfaction of the conditions set forth in
Section 7 below, a review of the documentation provided for herein shall occur
at the pre-closing of the transactions contemplated by this Agreement, at the
offices of Loeb & Loeb LLP, 345 Park Avenue, New York, New York 10154, or such
other place as mutually agreed upon by the parties hereto, on or before October
15, 1997. Upon (a) satisfaction of all of the conditions set forth in Section 7
hereof, and no sooner than ten (10) days after Zeron's compliance with Rule
14f-1 promulgated by the SEC under the Securities Exchange Act of 1934, as
amended, (b) the payment to Zeron by OHL, by Deutsche Bank on behalf of OHL, or
by any other agent of OHL, for the New Shares, and (c) the delivery of the New
Shares by Zeron to OHL, the closing (the "CLOSING") of the transactions
contemplated by this Agreement shall be deemed to have occurred in the Turks and
Caicos Islands, British West Indies.
2. PUT OPTION
2.1. PUT OPTION FOR FOUNDING STOCKHOLDERS. Pursuant to the terms of
the Put Agreement, the form of which is attached as EXHIBIT A hereto, all of the
Founding Stockholders, whose holdings of Zeron Common Stock shall aggregate, as
of the Closing, 278,750 shares, shall have the right to cause the purchase, at
$3 per share, which price shall be adjusted to give effect to stock splits,
stock dividends, recapitalizations, capital distributions, and similar events,
out of the Put Support Funds described in Section 3.1 below, of up to all of
their Zeron Common Stock owned as of immediately prior to the Closing (the
"PUT"), on the following conditions:
(a) The Put will be effective only if, during the six-month period
following the Closing (the "MEASURING PERIOD"), the daily average closing bid
price of the Zeron Common Stock is not at least $3 per share for 20 consecutive
trading days, which price shall be adjusted to give effect to stock splits,
stock dividends, recapitalizations, capital distributions, and similar events;
and
(b) If the condition in (a) above is satisfied, the Put shall exist
for the six-month period following the end of the Measuring Period (the "PUT
PERIOD").
2.2. PUT RIGHT PERSONAL TO FOUNDING STOCKHOLDERS. The parties hereto
hereby agree that the Put right shall be a personal right granted to the
Founding Stockholders, and that if any Zeron Common Stock held by the Founding
Stockholders is transferred to a different beneficial owner, the transferee of
such stock shall have no right to avail itself of the Put. In accordance with
the foregoing, each of the Founding Stockholders shall have the right to put
some or all of his Zeron Common Stock to Zeron regardless of whether any other
Founding Stockholder avails himself of such right.
3
<PAGE>
3. PUT ESCROW FUND
3.1. PUT SUPPORT FUNDS. To fund the Put described in Section 2 above,
at the time of the Closing, Mr. Tebbe shall deposit with Loeb & Loeb LLP, as
Escrow Agent (the "ESCROW AGENT") $836,250, to be held by the Escrow Agent in a
separate account (the "PUT SUPPORT FUNDS").
3.2. RIGHT TO PUT. If the condition causing the Put to be effective
occurs, each Founding Stockholder shall have the right, during the Put Period,
to cause the purchase, out of the Put Support Funds, for $3 per share, which
price shall be adjusted to give effect to stock splits, stock dividends,
recapitalizations, capital distributions, and similar events, of the number of
shares of Zeron Common Stock held by each Founding Stockholder at the time just
prior to the Closing, as the number of such shares shall be adjusted to give
effect to stock splits, stock dividends, recapitalizations, capital
distributions, and similar events.
3.3. FAILURE OF PUT RIGHT; RETURN OF ESCROW. If, during the Measuring
Period, the daily average closing bid price of the Zeron Common Stock is at
least $3 per share for 20 consecutive trading days, which price shall be
adjusted to give effect to stock splits, stock dividends, recapitalizations,
capital distributions and similar events, then the Escrow Agent shall
immediately return to Mr. Tebbe all amounts on deposit constituting Put Support
Funds pursuant to the terms of the Escrow Agreement, the form of which is
attached as EXHIBIT B hereto. In any event, at the expiration of the Put
Period, all amounts remaining on deposit constituting Put Support Funds shall
immediately be returned to Mr. Tebbe by the Escrow Agent, or the L/C (defined in
Section 3.4 below) shall terminate and be of no further force or effect, as
applicable, with respect to those Put Support Funds for which no claim has been
made.
3.4. SUBSTITUTION OF L/C FOR CASH. Mr. Tebbe shall have the right,
during the Measuring Period and with the consent of Mr. Takata on behalf of the
Founding Stockholders, which consent shall not be unreasonably withheld, to
substitute for the Put Support Funds an irrevocable letter of credit, in the
face amount of $836,250, in favor of the Founding Stockholders, to be issued by
Deutsche Bank AG, New York Branch, or such other banking institution selected by
Mr. Tebbe and reasonably acceptable to Mr. Takata, as the designated
representative of the Founding Stockholders.
4. CALL OPTION AND RIGHT OF FIRST REFUSAL
4.1. CALL OPTION FOR ZERON FOLLOWING CLOSING ON NEW SHARES OF CERTAIN
FOUNDING STOCKHOLDERS. All of the shares of Zeron Common Stock issued and
outstanding just prior to the Closing held or controlled by Mr. Gary Takata and
Mr. Shigeru
4
<PAGE>
Masuda, or their respective affiliates, which currently aggregate 160,000
shares, shall be subject to a call option (the "CALL") whereby Zeron shall have
the right, for a period of one year following the Closing (the "CALL PERIOD"),
to purchase such shares at a price of $30 per share, which price shall be
adjusted to give effect to stock splits, stock dividends, recapitalizations,
capital distributions, and similar events, if the closing bid price of a share
of the Common Stock of Zeron rises to $30 or more.
4.2. ELIMINATION OF CALL RIGHT IN STOCK TRANSFERRED. The parties
hereto hereby agree that the Call right accruing to Zeron with respect to Mr.
Takata's and Mr. Masuda's shares of Zeron Common Stock issued and outstanding
just prior to the Closing shall operate only so long as those shares remain
owned, either of record or beneficially, by Mr. Takata or Mr. Masuda,
respectively, and that if any of those shares are transferred by such holders
during the Call Period so that they do not own them, either of record or
beneficially, the Call right in favor of Zeron with respect to such transferred
shares shall terminate and be of no further force or effect.
4.3. RIGHT OF FIRST REFUSAL. If the closing bid price of a share of
Zeron Common Stock rises to $30 or more, which price shall be adjusted to give
effect to stock splits, stock dividends, recapitalizations, capital
distributions, and similar events, and either Mr. Takata or Mr. Masuda desire to
sell any of their shares of Zeron Common Stock, the stockholder proposing to
sell some or all of his stock shall send a written notice to Zeron of his
intention to sell (a "PENDING SALE NOTICE"). Zeron shall respond to a Pending
Sale Notice within two business days, indicating to the applicable stockholder
Zeron's intention to either exercise the Call with respect to the shares
proposed to be sold, or to permit the proposed sale to an outside party to go
forward. If Zeron elects to exercise the Call with respect to the shares
proposed to be sold, it shall pay to such selling shareholder the call price of
$30 per share in cash, within 15 days of its election to exercise the Call.
This right of first refusal in favor of Zeron shall exist for a period of one
year following the Closing, and shall not be triggered by any transfer by Mr.
Takata or Mr. Masuda that does not change the beneficial ownership of their
respective shares of Zeron Common Stock.
5. REPRESENTATIONS AND WARRANTIES OF ZERON AND THE CONTROLLING ZERON
STOCKHOLDERS
Zeron and the Controlling Zeron Stockholders hereby jointly and severally
represent and warrant to each of OHL and Mr. Tebbe as follows:
5.1. ORGANIZATION. Zeron is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada, has the
corporate power and authority to carry on its business as presently conducted,
and is qualified to do business in all jurisdictions where the failure to be so
qualified would have a material adverse effect on the business of Zeron.
5
<PAGE>
5.2. CAPITALIZATION.
(a) All of the issued and outstanding shares of Zeron Common
Stock are duly authorized, validly issued, fully paid and nonassessable. The
New Shares to be sold to OHL pursuant to Section 1.1 will be newly-issued shares
of Common Stock. The issuance of the New Shares has been duly authorized by the
Board of Directors of Zeron, and the New Shares, when issued at Closing in
exchange for the consideration described in Section 1.2, shall be validly
issued, fully paid and non-assessable. Once issued, OHL shall have good and
clear title to the New Shares, free from any claims, liens or other encumbrances
of any nature whatsoever, except those created by OHL and except those that may
exist pursuant to the United States federal securities laws.
(b) There are no outstanding options, warrants, or rights to
purchase any securities or other equity interests of Zeron.
(c) Just prior to Closing, Zeron shall have 363,750 shares of
Common Stock issued and outstanding, and no shares of Preferred Stock issued and
outstanding. Once issued, the New Shares shall represent 92% of the issued and
outstanding Common Stock of Zeron. OHL shall have the ability, immediately upon
the issuance of the New Shares, to exercise all rights customarily appertaining
thereto, and the New Shares shall not be subject to any prohibition or
restriction contained in any Nevada "anti-takeover" statute, rule or regulation.
5.3. SUBSIDIARIES AND INVESTMENTS. Zeron does not own any capital
stock or have any interest in any corporation, partnership, or other form of
business organization.
5.4. FINANCIAL STATEMENTS. Zeron has provided to OHL and Mr. Tebbe
financial statements for Zeron consisting of (i) an unaudited Balance Sheet as
of June 30, 1997, (ii) an unaudited Statement of Operations for Zeron for the
six (6) month period ended June 30, 1997, (iii) an unaudited Statement of
Stockholder's Equity as of June 30, 1997, and (iv) an unaudited statement of
Cash Flows for the six (6) month period ended June 30, 1997 (collectively, the
"ZERON FINANCIAL STATEMENTS"). The Zeron Financial Statements (a) were prepared
in accordance with the books and records of Zeron; (b) were prepared in
accordance with generally accepted accounting principles consistently applied;
(c) are accurate and fairly present the financial condition and the results of
operations as of the relevant date thereof and for the period covered thereby;
(d) contain and reflect all necessary adjustments and accruals for a fair
presentation of the financial condition and the results of operations for the
period covered by said financial statements; and (e) contain and reflect
adequate provisions for all reasonably anticipated liabilities with respect to
the period then ended. The immediately preceding representation is qualified
only in that it is made to the best knowledge of the Controlling Zeron
Stockholders.
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5.5. ABSENCE OF MATERIAL CHANGES. Since June 30, 1997, there has not
been any material adverse change in the condition (financial or otherwise) of
the properties, assets, liabilities or business of Zeron, except changes in the
ordinary course of business which, individually and in the aggregate, have not
been materially adverse, and except for distributions of cash to the Founding
Stockholders, as permitted by the Letter of Intent dated August 1, 1997 (the
"LETTER OF INTENT"), among Mr. Tebbe, Zeron and the Controlling Zeron
Stockholders.
5.6. NO LIABILITIES. As of the time of the Closing, Zeron shall have
no liabilities, contingent or otherwise, other than (a) those imposed by this
Agreement, (b) liabilities incurred in the ordinary course of business,
excluding any legal and accounting fees, and (c) those liabilities otherwise
disclosed to Mr. Tebbe and OHL in writing on or prior to the Closing, provided
that the liabilities disclosed pursuant to this clause (c) in the aggregate
shall not exceed $5,000. At the Closing, Zeron shall possess not less than
$5,000 in cash or cash equivalents. Zeron has, and will have, no liabilities to
Global Business Alliance, Inc., contingent or otherwise. Any agreements between
Zeron and Global Business Alliance, Inc. have terminated and have no further
force or effect.
5.7. LITIGATION. There is no litigation, proceeding, or investigation
pending or, to the best knowledge of Zeron and the Controlling Zeron
Stockholders, threatened against Zeron, or affecting any of its properties or
assets, or against any officer, director, stockholder, or consultant of Zeron
that might result in, either in any case or in the aggregate, any material
adverse change in the business, operations, affairs, or financial condition of
Zeron or its properties or assets, or that might call into question the validity
of this Agreement, or any action taken or to be taken pursuant hereto.
5.8. CONTRACTS AND UNDERTAKINGS. Except for ordinary banking
relations and an oral agreement relating to the provision of services in the
ordinary course of business by its transfer agent, as of the Closing, there will
be no contracts, agreements, leases, licenses, arrangements, commitments or
other undertakings (collectively "CONTRACTS") to which Zeron shall be a party or
to which its property shall be subject, other than this Agreement.
5.9. NO CONFLICT. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not (i) conflict
with or result in a breach of any term or provision of, or constitute a default
under, the Certificate of Incorporation or By-Laws of Zeron, or any material
Contract to which Zeron or either Controlling Zeron Stockholder is a party or by
which it or any of their respective assets are bound, (ii) require any
authorization, consent or approval of, exemption or other action by, or notice
to, any third party, (iii) result in the creation or imposition of any lien or
other encumbrance upon any of Zeron's or either Controlling Zeron Stockholder's
assets, or (iv) violate or require any consent or notice under any law or order
to which Zeron, either Controlling Zeron Stockholder or any of their respective
assets are subject.
7
<PAGE>
5.10. AUTHORITY. Zeron and the Controlling Zeron Stockholders have
full power and authority to enter into this Agreement and to carry out the
transactions contemplated herein. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized and approved by the Board of Directors of Zeron, and no other
corporate proceedings on the part of Zeron are necessary to authorize this
Agreement and the transactions contemplated hereby.
5.11. DISCLOSURE. Neither this Agreement nor any other agreement,
document, certificate or written statement furnished to OHL or Mr. Tebbe by
Zeron, the Controlling Zeron Stockholders or any financial advisor or consultant
of Zeron in connection with the transactions contemplated hereby, contains any
untrue statement of a material fact or when taken as a whole omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading.
5.12. REGULATION S.
(a) Zeron and the Controlling Zeron Stockholders have not taken,
and will not take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in a manipulation of the price of the
New Shares (including making, or causing to be made, any short sales of Zeron's
Common Stock) in order to facilitate the sale or resale of the New Shares.
(b) Zeron and each Controlling Zeron Stockholder represents and
warrants that neither Zeron nor, to the best of their knowledge, any
distributor, if any, participating in the offering of the New Shares nor, to the
best of their knowledge, any person acting for Zeron or any such distributor has
(i) undertaken any activity for the purpose of, or which could reasonably be
expected to have the effect of, conditioning the United States market for the
New Shares, or (ii) conducted any "directed selling efforts" as that term is
defined in Regulation S. Such activity includes, without limitation, the
mailing of printed material to investors residing in the United States, the
holding of promotional seminars in the United States, the placement of
advertisements with radio or television stations broadcasting in the United
States or in publications with a general circulation in the United States, which
discuss the offering of the New Shares.
6. REPRESENTATIONS AND WARRANTIES OF OHL AND MR. TEBBE
OHL and Mr. Tebbe hereby jointly and severally represent and warrant to
Zeron and the Controlling Zeron Stockholders as follows:
8
<PAGE>
6.1. ORGANIZATION.
(a) OHL is a corporation duly organized, validly existing, and
in good standing under the laws of the Turks and Caicos Islands, British West
Indies, has the corporate power and authority to carry on its business as
presently conducted, and is qualified to do business in all jurisdictions where
the failure to be so qualified would have a material adverse effect on the
business of OHL.
(b) The copies of the Certificate of Incorporation of OHL, as
certified by the Registrar of Companies of Turks and Caicos Island, and the
Articles of Association of OHL, heretofore furnished to Zeron, are complete and
correct copies of the Certificate of Incorporation and the Articles of
Association of OHL, as in effect on the date hereof and as of the Closing.
(c) Mr. Tebbe is the sole beneficial shareholder of OHL.
Unicorn Management Limited is the sole director of OHL, acting as the director
representative of Mr. Tebbe and Unicorn Secretaries Limited is the Secretary of
OHL, acting as the officer representative of Mr. Tebbe.
6.2. AUTHORITY. Each of OHL and Mr. Tebbe has full power and
authority to enter into this Agreement and to carry out the transactions
contemplated herein. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
and approved by the Board of Directors of OHL, and no other corporate
proceedings on the part of OHL or any other entity are necessary to authorize
this Agreement and the transactions contemplated hereby.
6.3. REGULATION S.
(a) Mr. Tebbe and OHL certify that neither is a "U.S. Person,"
as defined in Rule 902(o) of Regulation S ("Regulation S") promulgated under the
Securities Act, and that the purchase of the New Shares by OHL is not taking
place within the "United States," as defined in Rule 902(p) of Regulation S, but
rather in an offshore transaction. Mr. Tebbe and OHL acknowledge that Zeron has
not solicited any offer to purchase the New Shares within the United States.
(b) Mr. Tebbe and OHL understand that the New Shares are not
registered under the Securities Act and, until so registered, may not be sold in
the United States unless an exemption from the registration requirements of the
Securities Act is available. Mr. Tebbe and OHL acknowledge that the New Shares
have not been registered under the laws of any other country or jurisdiction,
and Zeron takes no responsibility for complying with such laws. Furthermore,
the New Shares may be immediately resold only in compliance with the terms and
requirements of Regulation S in markets outside the United States to buyers who
are not U.S. Persons.
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<PAGE>
(c) Each of OHL and Mr. Tebbe shall not take any action in
relation to the New Shares unless the action is permissible under and does not
violate the Securities Act, including, without limitation, Regulation S and any
other securities laws or rules or regulations thereunder.
(d) Mr. Tebbe and OHL, collectively with their representatives,
have such knowledge and experience in financial, tax and other business matters
as to enable them to utilize the information made available by Zeron to evaluate
the merits and risks of and to make an informed investment decision with respect
to the purchase of the New Shares.
(e) OHL is purchasing the New Shares for its own account and
benefit and not as a nominee or for the account of any other person or entity.
OHL has sufficient financial resources to hold the New Shares for an indefinite
period of time.
(f) Mr. Tebbe and OHL have not taken, and will not take,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in a manipulation of the price of the New Shares
(including making, or causing to be made, any short sales of Zeron's Common
Stock) in order to facilitate the sale or resale of the New Shares.
(g) The transactions contemplated by this Agreement are not part
of a plan or scheme to evade the registration provisions of the Securities Act.
(h) To the best knowledge of Mr. Tebbe and OHL, without any
independent inquiry, neither Zeron nor any distributor, if any, participating in
the offering of the New Shares nor any person acting for Zeron or any such
distributor has (i) undertaken any activity for the purpose of, or which could
reasonably be expected to have the effect of, conditioning the United States
market for the New Shares, or (ii) conducted any "directed selling efforts" as
that term is defined in Regulation S. Such activity includes, without
limitation, the mailing of printed material to investors residing in the United
States, the holding of promotional seminars in the United States, the placement
of advertisements with radio or television stations broadcasting in the United
States or in publications with a general circulation in the United States, which
discuss the offering of the New Shares.
6.4. LITIGATION. There is no litigation, proceeding or investigation
pending or, to the knowledge of OHL or Mr. Tebbe, threatened, against OHL or Mr.
Tebbe affecting any of their respective properties or assets, or, to the
knowledge of OHL or Mr. Tebbe, against any officer, director, or stockholder of
OHL that might result in, either in any case or in the aggregate, any material
adverse change in the business, operations, affairs or condition of Mr. Tebbe or
OHL or any of his or its properties or assets, or that might call
10
<PAGE>
into question the validity of this Agreement, or any action taken or to be taken
pursuant hereto.
6.5. PATENT RIGHTS AND INTANGIBLES. Other than the Patent Rights, all
patents, patent applications, copyrights, registered and unregistered
trademarks, tradenames, and licenses (collectively "INTANGIBLES") directly or
indirectly owned by Mr. Tebbe and required for the commercial exploitation of
the Patent Rights, are set forth on SCHEDULE 1. To the best knowledge of Mr.
Tebbe and OHL, the Patent Rights and Intangibles do not infringe or conflict
with asserted rights of other parties in the jurisdictions in which such Patent
Rights and Intangibles are currently being employed or are reasonably
anticipated to be employed. The Patent Rights and Intangibles are free of
restrictions on or conditions to transfer or assignment. Mr. Tebbe, directly or
indirectly, has good and marketable title under the laws of the various
jurisdictions, as required, to the Patent Rights and Intangibles, free and clear
of all licenses, liens, encumbrances and claims. The sole remedy available to
Zeron and the Controlling Zeron Stockholders for the breach of certain
representations contained in this Section 6.5 and elsewhere in this Agreement
that are discussed in Section 8.1(f) shall be as provided for in Section 8.1(f).
6.6. EXCHANGE ACT FILINGS. If the Closing occurs, Mr. Tebbe and OHL
undertake to use their best efforts, from the Closing through the end of the Put
Period (referred to in Section 2.1(b)), to assist Zeron in the preparation and
timely filing of all filings required by the Securities Exchange Act of 1934 and
filings with any governmental agency required as a result of the transactions
described in this Agreement, including the preparation of certified financial
statements in form acceptable for filing with the Securities and Exchange
Commission pursuant to Regulation S-B, S-K or S-X, for particular inclusion in a
Form 8-K relating to the transactions described in this Agreement, and Form 10-K
and Form 10-Q filings. All such filings shall be made at Zeron's expense. Mr.
Tebbe and OHL are unaware of any fact relating to the Intangibles and Patent
Rights or themselves which would prevent compliance with the filing requirements
of United States Federal or State securities laws. However, no representation
or warranty is made as to any facts relating to Zeron or any other person or
entity that would prevent such compliance.
6.7. FOREIGN CORRUPT PRACTICES ACT. Mr. Tebbe and OHL have not
conducted their operations in connection with the Patent Rights and Intangibles
in any way which resulted or may result in a violation of the Foreign Corrupt
Practices Act.
6.8. BANKRUPTCY. Neither Mr. Tebbe nor OHL is insolvent or bankrupt
and there is no pending insolvency or bankruptcy proceeding of any kind
affecting them, the Patent Rights, the Intangibles or any of their assets,
properties or business.
6.9. NO CONFLICT. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not (i) conflict
with or result in
11
<PAGE>
a breach of any term or provision of, or constitute a default under, the
Certificate of Incorporation or Bylaws of OHL, or any material Contract to which
OHL or Mr. Tebbe is a party or by which it or any of their respective assets are
bound, (ii) require any authorization, consent or approval of, exemption or
other action by, or notice to, any third party, (iii) result in the creation or
imposition of any lien or other encumbrance upon any of OHL's or Mr. Tebbe's
assets or (iv) violate or require any consent or notice under any law or order
to which OHL, Mr. Tebbe or any of their respective assets are subject.
6.10. COMPLIANCE WITH LAW. OHL has in all material respects complied
with, and it is now in all material respects in compliance with, all federal and
state laws applicable to OHL.
6.11. SUBSIDIARIES AND INVESTMENTS. OHL does not own any capital stock
or have any interest in any corporation, partnership or other form of business
organization.
6.12. DISCLOSURE. Neither this Agreement nor any other agreement,
document, certificate or written statement furnished to Zeron or the Controlling
Zeron Stockholders by or on behalf of OHL or Mr. Tebbe in connection with the
transactions contemplated hereby, contains any untrue statement of material fact
or when taken as a whole omits to state a fact necessary in order to make the
statements contained herein or therein not misleading.
7. CONDITIONS TO CLOSING
7.1. CONDITIONS TO OBLIGATIONS OF OHL AND MR. TEBBE. The obligations
of OHL and Mr. Tebbe under this Agreement shall be subject to each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES OF ZERON TO BE TRUE. The
representations and warranties of Zeron and the Controlling Zeron Stockholders
herein contained shall be true in all material respects as of the time of the
Closing. Zeron and the Controlling Zeron Stockholders shall have performed in
all material respects all obligations and complied in all material respects with
all covenants and conditions required by this Agreement to be performed or
complied with by them at or prior to the Closing and OHL and Mr. Tebbe shall be
furnished with a certificate of the President of Zeron, in his corporate
capacity, dated the day of the Closing, certifying to the truth of such
representations and warranties as of the Closing and to the fulfillment of such
covenants and conditions.
(b) AGREEMENTS. All agreements and certificates referred to in
this Agreement, including the Escrow Agreement, the Put Agreement and any
investment certificates, shall have been executed and delivered.
12
<PAGE>
(c) NO LEGAL PROCEEDINGS. No injunction or restraining order
shall be in effect prohibiting this Agreement, and no action or proceeding shall
have been instituted and remain pending before the court to restrain or prohibit
the transactions contemplated by this Agreement.
(d) STATUTORY REQUIREMENTS. All statutory requirements for the
valid consummation by Zeron and the Controlling Zeron Stockholders of the
transactions contemplated by this Agreement shall have been fulfilled. All
authorizations, consents and approvals of all governments and other persons
required to be obtained in order to permit consummation by Zeron and the
Controlling Zeron Stockholders of the transactions contemplated by this
Agreement shall have been obtained.
(e) DIRECTOR RESIGNATION. Prior to the Closing, all of the
directors and officers of Zeron shall have submitted their contingent
resignations to Loeb & Loeb to be held in escrow and to become effective at the
Closing. All resignations shall contain a statement that each of such directors
and officers has no, and shall have no, claim whatsoever against Zeron. Before
the resignation of Mr. Takata shall take effect, Mr. Takata shall appoint Mr.
Tebbe the sole director of Zeron.
(f) INFORMATION STATEMENT. At least ten (10) days prior to the
Closing, an information statement, in accordance with SEC Rule 14f-1, shall have
been prepared by Zeron, filed with the SEC, and distributed to Zeron's
stockholders.
(g) REGULATION S LEGAL OPINION. Loeb & Loeb LLP shall have
delivered a legal opinion to Zeron to the effect that the sale of the New Shares
to OHL shall be exempt from the registration requirements under the Act, and
such New Shares shall be eligible for resale in markets outside the United
States to non-U.S. Persons pursuant to the provisions of Regulation S.
(h) EDGAR FILINGS. Zeron shall have made all delinquent EDGAR
filings relating to periodic and other reporting requirements imposed on Zeron,
under the Securities Exchange Act of 1934 or otherwise, via the EDGAR facility
prior to Closing, as required by the Letter of Intent.
(i) CONSENTS OF PRIOR ACCOUNTANTS. Zeron shall have delivered
to OHL the written consents of both (i) Nachum Blumenfrucht, CPA, and (ii) Mayer
Rispler & Company, P.C., CPAs, to the reliance by subsequent accountants for
Zeron upon prior financial statements prepared by each of the above, and to the
inclusion of such financial statements in any and all future filings by Zeron
with the SEC.
7.2. CONDITIONS TO OBLIGATIONS OF ZERON AND THE CONTROLLING ZERON
STOCKHOLDERS. The obligations of Zeron and the Controlling Zeron Stockholders
under this Agreement shall be subject to the following conditions:
13
<PAGE>
(a) REPRESENTATIONS AND WARRANTIES OF OHL AND MR. TEBBE TO BE
TRUE. The representations and warranties of OHL and Mr. Tebbe herein contained
shall be true in all material respects as of the time of the Closing. OHL and
Mr. Tebbe shall have performed in all material respects all obligations and
complied in all material respects with all covenants and conditions required by
this Agreement to be performed or complied with by them at or prior to the
Closing and Zeron and the Controlling Zeron Stockholders shall be furnished with
a certificate of Mr. Tebbe, on his behalf and for OHL, dated the day of the
Closing, certifying to the truth of such representations and warranties as of
the Closing and to the fulfillment of such covenants and conditions.
(b) AGREEMENTS. All agreements and certificates referred to in
this Agreement, including the Escrow Agreement, the Put Agreement and any
investment certificates shall have been executed and delivered.
(c) NO LEGAL PROCEEDINGS. No injunction or restraining order
shall be in effect, and no action or proceeding shall have been instituted and
remain pending before the court to restrain or prohibit the transactions
contemplated by this Agreement.
(d) STATUTORY REQUIREMENTS. All statutory requirements for the
valid consummation by OHL and Mr. Tebbe of the transactions contemplated by this
Agreement shall have been fulfilled. All authorizations, consents and approvals
of all governments and other persons required to be obtained in order to permit
consummation by OHL and Mr. Tebbe of the transactions contemplated by this
Agreement shall have been obtained.
(e) MR. TEBBE'S CONSENT TO SERVE AS ZERON DIRECTOR. Mr. Tebbe
shall have consented in writing to his appointment as director of Zeron.
(f) DELIVERY OF LEGAL OPINION. Loeb & Loeb LLP, counsel for Mr.
Tebbe and OHL, shall have delivered to Zeron the legal opinion referred to in
Section 7.1(g).
8. INDEMNIFICATION
8.1. (a) Mr. Tebbe and OHL agree to indemnify, hold harmless,
reimburse and defend Zeron and Controlling Zeron Stockholders against any claim,
costs, expense, liability, obligation, loss or damage (including legal fees) of
any nature, incurred by or imposed upon Zeron and the Controlling Zeron
Stockholders which results, arises out of or is based upon (a) any
misrepresentation by Mr. Tebbe and OHL or breach of any warranty by Mr. Tebbe
and OHL in this Agreement or in any Exhibits or Schedules attached hereto; or
(b) any breach or default in performance by Mr. Tebbe and OHL of any covenant or
undertaking to be performed by Mr. Tebbe and OHL hereunder.
14
<PAGE>
(b) In the event the Closing does not occur, Zeron and the
Controlling Zeron Stockholders agree to indemnify, hold harmless, reimburse and
defend Mr. Tebbe and OHL against any claim, costs, expense, liability,
obligation, loss or damage (including legal fees) of any nature, incurred by or
imposed upon Mr. Tebbe and OHL which results, arises out of or is based upon (a)
any misrepresentation by Zeron and Controlling Zeron Stockholders or breach of
any warranty by Zeron and Controlling Zeron Stockholders in this Agreement or in
any Exhibits or Schedules attached hereto; or (b) any breach or default in
performance by Zeron and Controlling Zeron Stockholders of any covenant or
undertaking to be performed by Zeron and Controlling Zeron Stockholders
hereunder.
(c) In the event the closing does occur, the Controlling Zeron
Stockholders agree to indemnify, hold harmless, reimburse and defend Mr. Tebbe
and OHL against any claim, costs, expense, liability, obligation, loss or damage
(including legal fees) of any nature, incurred by or imposed upon Mr. Tebbe and
OHL which results, arises out of or is based upon (a) any misrepresentation by
Zeron and Controlling Zeron Stockholders or breach of any warranty by Zeron and
Controlling Zeron Stockholders in this Agreement or in any Exhibits or Schedules
attached hereto; or (b) any breach or default in performance by Zeron and
Controlling Zeron Stockholders of any covenant or undertaking to be performed by
Zeron and Controlling Zeron Stockholders hereunder.
(d) Promptly after receipt by an indemnified party of notice of
any claim, loss, damage, liability, cost, expense or the commencement of any
action involving the subject matter of the foregoing indemnity provisions such
indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of said indemnity provisions,
promptly notify the indemnifying party thereof within thirty (30) days of the
indemnified party's receipt of such notice; but the omission to so notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under said indemnity provisions and shall
not relieve the indemnifying party from liability under said indemnity
provisions unless such indemnifying party is materially prejudiced by such
omission. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall assume and control the defense thereof, with counsel chosen by
indemnifying party but reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there is a conflict of interest which would prevent counsel for
the indemnifying party from assuming the defense on behalf of the indemnified
party, such indemnified parties shall have the right to select separate counsel
to participate in the defense of such action on behalf of such indemnified party
or parties. After notice from the indemnifying party to such indemnified party
of the indemnifying party's assumption of the defense thereof, the indemnifying
party will not be liable to such indemnified party pursuant to the provisions of
said indemnity provisions for any legal or other expense subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of
15
<PAGE>
investigation, unless (A) the indemnified party shall have employed counsel as a
result of such conflict of interest, or (B) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party. If the indemnifying party assumes such defense, the
indemnified party shall have the right, at its expense and with counsel of its
choice, to participate in such defense and in all events the indemnified party
shall cooperate fully with the indemnifying party. Neither party will
compromise or settle any such suit, proceeding, claim or demand without prior
written consent of the other, provided that in the event that the indemnifying
party proposes a monetary settlement the acceptance of which would release the
indemnified party from all claims asserted in such action, suit, proceeding or
demand and if the indemnified party withholds its consent to such settlement,
then the liability of the indemnifying party shall be limited to the total sum
representing the amount of the proposed compromise or settlement and the amount
of reasonable attorneys' fees incurred by the indemnified party up to the time
such approval is withheld.
(e) In the event the procedural requirements of Section 8.1(d)
are complied with, Mr. Tebbe and OHL, pursuant to Section 8.1(c) may, at Mr.
Tebbe's option, be indemnified pursuant to a compromise or settlement comprised
of additional shares of the Common Stock of Zeron in lieu of cash compensation
for such damages. For the purposes of this Section 8.1(e), the parties hereto
agree that the value of a share of Zeron Common Stock shall be $.8797, which
value shall be adjusted to give effect to stock splits, stock dividends,
recapitalizations, capital distributions, and similar events.
(f) The parties hereto understand and acknowledge the inherent
uncertainties in the process surrounding the registration and issuance of
patents, and also recognize that the patents listed on SCHEDULE 1 hereto may be
challenged by third parties, and that the patent applications listed on SCHEDULE
1 hereto may never result in the issuance of a patent registration covering the
invention relating thereto. In the event that there is a successful challenge
to any patent contained in the Patent Rights, or if one or more of the patent
applications contained in the Patent Rights fails to result in the issuance of a
patent registration, or in the event that all of the Patent Rights and
Intangibles are not transferred to Zeron in the time period provided in
Section 1.3 hereof, to the extent that any Founding Stockholder exercises the
Put with respect to his Zeron Common Stock, such exercise shall be the sole
remedy available to such Founding Stockholder with respect to any occurrence
outlined in this Section 8.1(f), and the Founding Stockholders shall not be
entitled to assert any other claim or receive any other damages with respect
thereto.
8.2. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS OF ZERON
AND THE CONTROLLING ZERON STOCKHOLDERS. Each representation, warranty, covenant
and agreement of Zeron and the Controlling Zeron Stockholders contained herein
or in any document, instrument or agreement delivered in connection herewith,
shall survive the
16
<PAGE>
execution and delivery of this Agreement and the Closing for a period of
eighteen (18) months following the Closing.
8.3. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS OF OHL AND
MR. TEBBE. Each representation, warranty, covenant and agreement of OHL and Mr.
Tebbe contained herein or in any document, instrument or agreement delivered in
connection herewith, shall survive the execution and delivery of this Agreement
and the Closing for a period of eighteen (18) months following the Closing.
9. MISCELLANEOUS
9.1. FURTHER ASSURANCES. From time to time, at the other party's
request and without further consideration, each of the parties hereto will
execute and deliver to the others such documents and take such action as such
other parties may reasonably request in order to consummate more effectively the
transactions contemplated hereby.
9.2. EXPENSES OF SALE. Except as otherwise provided herein, each
party hereto shall bear its own direct and indirect expenses incurred in
connection with the negotiation and preparation of this Agreement, and the
consummation and performance of the transactions contemplated herein. Without
limitation, such expenses shall include the fees and expenses of all attorneys,
brokers, investment bankers, accountants, agents and finders and other
professionals incurred in connection herewith, acting on behalf of such party.
9.3. USE AND CONFIDENTIALITY. All of the information, records, books,
and data to which the parties hereto are given access as set forth herein shall
be used by such parties solely for the purpose of confirming the representations
and warranties set forth herein. Subject to any obligation to comply with
(i) any law, (ii) any rule or regulation of any authority or securities
exchange, or (iii) any subpoena or other legal process to make information
available to the persons entitled thereto, and whether or not the transactions
contemplated herein shall be concluded, all information obtained by any party
about the others, and all of the terms and conditions of this Agreement, shall
be kept in confidence by each party, and each party shall cause its
shareholders, directors, trustees, officers, employees, agents and attorneys to
hold such information confidential. Such confidential information shall be
maintained to the same degree as each party maintains its own confidential
information, and shall be maintained until such time, if any, as any such data
or information either is, or becomes, published or a matter of public knowledge;
provided, however, that the foregoing shall not apply to any information
obtained by either party through its own independent investigations of the other
party or received by such party from a third party not under any obligation to
keep such information confidential, nor to any information obtained by such
party which is generally known to others engaged in the trade or business; and
provided, further, that from and after the Closing, OHL and Mr. Tebbe shall be
under no obligation to maintain confidential any information concerning Zeron or
either Controlling Zeron Stockholder (as such information relates to such
Controlling Zeron Stockholder's activities in connection with Zeron). If this
Agreement
17
<PAGE>
shall be terminated for any reason, each party shall return or cause to be
returned to the other all written data, information, files, records and copies
of documents, worksheets and other materials obtained by such party in
connection with the transactions contemplated herein.
9.4. NOTICES. All notices, requests and other communications
thereunder shall be in writing and shall be delivered by courier or other means
of personal service (including by means of a nationally recognized courier
service or professional messenger service), or sent by telex or telecopy or
mailed first class, postage prepaid, by certified mail, return receipt
requested, or by Federal Express or other reputable overnight delivery service,
in all cases, addressed to:
TO OHL AND MR. TEBBE:
Mr. Gerold Tebbe
Le Columbia Palace
11, avenue Princesse Grace
Monte Carlo
MC-98000, Monaco
Tel: 011-377-92-16-0089
Fax: 011-377-92-16-0091
WITH A COPY TO:
David S. Schaefer, Esq.
Loeb & Loeb LLP
345 Park Avenue
New York, New York 10154
Tel: (212) 407-4848
Fax: (212) 407-4990
TO EITHER CONTROLLING ZERON STOCKHOLDER:
c/o Mr. Gary Takata
370 Lexington Avenue
New York, New York 10017
Tel: (212) 687-4230
Fax: (212) 661-1617
18
<PAGE>
WITH A COPY TO:
Edward M. Grushko, Esq.
Grushko & Mittman
277 Broadway, Suite 801
New York, New York 10007
Tel: (212) 227-5865
Fax: (212) 766-4655
All notices, requests and other communications shall be deemed given on the date
of actual receipt or delivery as evidenced by written receipt, acknowledgment or
other evidence of actual receipt or delivery to the address noted above. In
case of service by telecopy, a copy of such notice shall be personally delivered
or sent by registered or certified mail, in the manner set forth above, within
three (3) business days thereafter. Either party hereto may from time to time
by notice in writing served as set forth above designate a different address or
a different or additional person to which all such notices or communications
thereafter are to be given.
9.5. PARTIES IN INTEREST. Except as otherwise expressly provided
herein, all the terms and provisions of this Agreement shall be binding upon,
shall inure to the benefit of and shall be enforceable by the respective heirs,
beneficiaries, personal and legal representatives, successors and assigns of the
parties hereto.
9.6. ENTIRE AGREEMENT, AMENDMENTS. This Agreement, including the
Schedules and other documents and writings referred to herein or delivered
pursuant hereto, which form a part hereof, contains the entire understanding of
the parties with respect to the subject matter hereof. There are no
restrictions, agreements, promises, warranties, covenants or undertakings other
than those expressly set forth herein or therein. This Agreement supersedes all
prior and contemporaneous agreements and understandings, express or implied,
oral or written, between the parties with respect to the subject matter hereof,
including, without limitation, the Letter of Intent. This Agreement may be
amended only by a written instrument duly executed by the parties or their
respective successors or assigns.
9.7. BROKERS. OHL, Mr. Tebbe, Zeron and the Controlling Zeron
Stockholders have not directly or indirectly dealt with anyone acting as a
broker, finder or in a similar capacity, and have not incurred any obligation
for any brokerage, finders' or similar fee or commission in connection with this
Agreement or any of the transactions contemplated hereby, except for Mark Meller
and Bristol Townsend & Co. The parties do hereby indemnify each other and hold
each other harmless from any other brokerage, finders' or similar fee or
commission claims arising out of their own actions. Zeron is responsible for
and prior to Closing will pay Bristol Townsend & Co. the commission earned
pursuant to an engagement letter between Zeron and Bristol Townsend & Co.
19
<PAGE>
9.8. HEADINGS, ETC. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretations of this Agreement.
9.9. PRONOUNS. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
9.10. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
9.11. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of New York. New York State shall be the exclusive venue for any
dispute or controversy arising under or in connection with this Agreement.
9.12. SUBMISSION TO JURISDICTION; SERVICE OF PROCESS. Each of OHL,
Zeron, each Controlling Zeron Stockholder and Mr. Tebbe irrevocably consents to
the exclusive jurisdiction of the courts of the State of New York and of any
federal court located in such State in connection with any action or proceeding
arising out of or relating to this Agreement, any document or instrument
delivered pursuant to, in connection with or simultaneously with this Agreement,
or a breach of this Agreement or any such document or instrument. In any such
action or proceeding, each of OHL, Zeron, each Controlling Zeron Stockholder and
Mr. Tebbe hereby waives personal service of any summons, complaint or other
process and agrees that service thereof may be made in accordance with this
Agreement.
20
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties hereto as of the date first above written.
Zeron Acquisitions II, Inc., a Nevada
corporation
By:/s/ Gary Takata
---------------------------------
Name: Gary Takata
Title: President
/s/ Gary Takata
------------------------------------
Mr. Gary Takata
/s/ SHIGERU MASUDA
------------------------------------
Mr. Shigeru Masuda
Overton Holdings Limited, a Turks and
Caicos Islands corporation
By:/s/ GEROLD TEBBE
---------------------------------
Name: Gerold Tebbe
Title: Attorney-in-Fact
/s/ GEROLD TEBBE
------------------------------------
Mr. Gerold Tebbe
21
<PAGE>
SCHEDULE 1
PATENT RIGHTS TO BE SOLD BY MR. TEBBE AND/OR ENTITIES
OWNED OR CONTROLLED BY MR. TEBBE
TO ZERON ACQUISITIONS II, INC.
<TABLE>
<CAPTION>
PATENT OR DATE
APPLICATION REGISTERED OR
JURISDICTION NUMBER DESCRIPTION APPLIED FOR
<S> <C> <C> <C>
*Europe 0333773 Anti-Perspirant Patch 1987
Worldwide PCT/EP87/00724 Anti-Perspirant Patch 1987
U.S.A. S.N. 363512 Anti-Perspirant Patch 1987
Japan 63-501129 Anti-Perspirant Patch 1987
Germany P 4007 275.4 Herbal Scarf 1990
Germany P 4000 920.3-26 Emollient Cloth 1990
Worldwide PCT/EP90/02303 Emollient Cloth 1990
Europe 91900807.8-2314 Emollient Cloth 1990
Germany P 43 18 141.4 Impregnated Scarf 1993
Germany 196 32 312.6-26 Glove/Mitten 1996
Germany 196 00 076.9 Glove/Mitten 1996
Europe EP 0782 869 A-1 Glove/Mitten 1996
U.S.A. 08/773 822 Micro-Capsule Coated 1996
Flexible Carrier Material
</TABLE>
__________________
*Patent now owned by Deotexis AG, a Swiss corporation 100% owned by Mr.
Tebbe. This European patent consists of several country-specific sub-patents,
as described on ANNEX A to SCHEDULE 1.
<PAGE>
ANNEX A
TO SCHEDULE 1
Specific Country Sub-Patents Under
European Patent No. 0333773
<TABLE>
<CAPTION>
PATENT DATE
JURISDICTION NUMBER DESCRIPTION OF GRANT
<S> <C> <C> <C>
Germany 37 80 470 Anti-Perspirant Patch 1992
Austria E 78 136 Anti-Perspirant Patch 1996
Switzerland EP 0 333 773 Anti-Perspirant Patch 1996
France EP 0 333 773 Anti-Perspirant Patch 1996
Belgium EP 0 333 773 Anti-Perspirant Patch 1996
United Kingdom EP 0 333 773 Anti-Perspirant Patch 1996
The Netherlands EP 0 333 773 Anti-Perspirant Patch 1996
Italy EP 0 333 773 Anti-Perspirant Patch 1996
Sweden EP 0 333 773 Anti-Perspirant Patch 1996
</TABLE>
<PAGE>
SCHEDULE 2
FOUNDING STOCKHOLDERS
NUMBER
NAME OF BENEFICIAL HOLDER OF SHARES
1. Auerbach, Morris - Custodian for Joshua Stern; UGMA 25
2. Auerbach, Morris - Custodian for Kara Stern* 25
3. Auerbach, Morris - Custodian for Lauren Stern* 25
4. Auerbach, Nellie - Custodian for Joshua Stern; UGMA 25
5. Auerbach, Nellie - Custodian for Kara Stern* 25
6. Auerbach, Nellie - Custodian for Lauren Stern* 25
7. Cook Capital Investments Ltd.* 52,302
8. Eisberg, James 100
9. Grace Church & Co., for Orix Corporation 49,677
10. Grushko, Judith 16
11. Grushko, Judith, Trustee FBO Ezra Yaakov Grushko 16
12. Grushko, Judith, Trustee FBO Zev Grushko 16
13. Isham, Ralph 100
14. Lau, Amy 16
15. Lau, Anna 8
16. Lau, Can-Tung 16
17. Lau, Dick 8
18. Lieberman, Larry 6,250
19. LJT Capital Corp.* 300
20. Mackay, Carlene* 100
21. Masuda, Shigeru 80,000
22. One World Asset Management* 9,125
23. Sanders, Steven A. - Custodian for Geoffrey Sanders 100
24. Stern, Eva* 25
25. Stern, Eva - Custodian for Joshua Stern 25
26. Stern, Eva - Custodian for Kara Stern* 25
27. Stern, Eva - Custodian for Lauren Stern* 25
28. Stern, Ronnie Auerbach* 6,250
29. Takata, Louise Jones* 34,100
30. Wong, Johann* 40,000
------
TOTAL: 278,750
-------
-------
________________
*Shares held in street name by Cede & Co., registered holder
<PAGE>
SCHEDULE 3
THE SECURITIES EVIDENCED BY THIS CERTIFICATE (A) HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("1933 ACT"), OR UNDER THE LAWS OF ANY
STATE OR OTHER JURISDICTION, (B) ARE BEING OFFERED AND SOLD IN RELIANCE ON AN
EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PURSUANT TO REGULATION S, AND (C)
MAY NOT BE OFFERED OR SOLD BY ANY PERSON IN THE UNITED STATES OR TO OR FOR THE
ACCOUNT OR BENEFIT OF ANY U.S. PERSON (AS THOSE TERMS ARE DEFINED IN REGULATION
S) UNLESS THE SECURITIES ARE REGISTERED UNDER THE 1933 ACT AND UNDER THE LAWS OF
THE STATES WHERE EACH SALE IS TO BE MADE, OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT IS AVAILABLE.
<PAGE>
EXHIBIT A
FORM OF PUT AGREEMENT
<PAGE>
EXHIBIT A
P-____
THE PUT OPTION EVIDENCED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
THE SECURITIES LAWS OF ANY OTHER JURISDICTION, AND ARE BEING ISSUED IN
RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH LAWS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
THIS PUT OPTION IS
NON-TRANSFERABLE
THIS PUT OPTION IS NOT EXERCISABLE
UNLESS THE "TRIGGERING EVENT"
AS DESCRIBED HEREIN
OCCURS OR IS DEEMED TO HAVE OCCURRED
PURSUANT TO THE PROVISIONS HEREOF
Put Option to Cause the Purchase of Shares of
Common Stock of Zeron Acquisitions
II, Inc., a Nevada corporation
(the "Company")
1. THIS CERTIFIES that, upon the terms and conditions set forth
herein, at any time following the Triggering Event (defined below) and before
5:00 P.M. on October 9, 1998 New York time (the "Exercise Period"), the holder
listed on the signature page hereof (the "Holder"), is entitled to cause the
purchase by Mr. Gerold Tebbe of the amount of shares of Common Stock, par value
$.001 per share of the Company (the "Put Shares"), set forth on the signature
page hereof, at a price of $3.00 per Put Share (the "Exercise Price"), for the
total amount set forth on the signature page hereof (the "Purchase Price"), such
Put Shares and Exercise Price subject to adjustment as provided for herein.
This Put Option, and any of the rights granted herein, may not be sold,
transferred, assigned or hypothecated, and any such sale, transfer, assignment
or hypothecation will void this Put Option; PROVIDED, HOWEVER, that a transfer
of the Put Shares to which this Put Option relates that does not result in the
Put Shares being owned by a different beneficial owner will not void this Put
Option.
<PAGE>
2. This Put Option shall be deemed effective if the Company's Common
Stock does not close at or above a daily average closing bid price of $3.00 per
share, which price shall be adjusted to give effect to stock splits, stock
dividends, recapitalizations, capital distributions and similar events, for 20
consecutive trading days during the six month period following the Closing of
that certain Stock Purchase Agreement, dated September 30, 1997 ("Stock Purchase
Agreement") by and between, on the one hand, Mr. Tebbe and Overton Holdings
Limited, a Turks and Caicos Islands corporation, and on the other hand, Mr. Gary
Takata, Mr. Shigeru Masuda and the Company (such failure to close at or above
the price specified above, for the amount of time provided for above, during the
time period referred to above, shall be referred to herein as the "Triggering
Event"). Notwithstanding the foregoing, for the purposes of this Put Option, in
the event that the transfer of the Patent Rights to the Company referred to in
Section 1.3 of the Stock Purchase Agreement is not completed in the time period
provided for therein, the Triggering Event will be deemed to have occurred.
3. Upon the occurrence of the Triggering Event, this Put Option may
be exercised during the Exercise Period, as to the total or any lesser number of
Put Shares, by giving written notice, in the form of the Election to Exercise
attached to this Put Option, to Loeb & Loeb LLP, 345 Park Avenue, New York, NY
10154, the Escrow Agent (the "Escrow Agent") under that certain Escrow
Agreement, dated October 10, 1997, between Mr. Tebbe, Mr. Gary Takata, as the
designated representative of the Holder of this Put Option under the Escrow
Agreement for the purposes described therein, and the Escrow Agent (the "Escrow
Agreement"), or at such other place as is designated in writing by Mr. Tebbe
(which other address shall be a New York State address), together with tender to
the Escrow Agent of the stock certificate representing the number of Put Shares
for which this Put Option is being exercised, properly endorsed in blank, and
tender to the Escrow Agent of this Put Option.
4. In the event that this Put Option is exercised by the Holder
hereof for less than his or its total number of Put Shares, upon Mr. Tebbe's
agreement that the Holder is entitled to receive the Purchase Price for the Put
Shares being so exercised, the Holder shall receive from the Escrow Agent, (a)
the Purchase Price for the Put Shares being so exercised, and (b) this Put
Option, with the number of Put Shares shown on the signature page hereof
adjusted to reflect the Holder's remaining Put Shares with respect to which this
Put Option has not been exercised. In the event that the Holder tenders to the
Escrow Agent a stock certificate representing a greater number of Put Shares
than the number of Put Shares with respect to which the Holder wishes to
exercise this Put Option, upon Mr. Tebbe's agreement that the Holder is entitled
to the Purchase Price for the Put Shares being so exercised, in addition to the
deliveries from the Escrow Agent referred to above, the Holder shall also
receive from the Company a stock certificate for the Company's Common Stock in
an amount of shares equal to the number of Put Shares reflected on the stock
certificate tendered to the Escrow Agent at the time of exercise,
2
<PAGE>
less the number of Put Shares with respect to which this Put Option has been
exercised by the Holder hereof.
5. Mr. Takata shall be the designated representative of the Holder
under this Put Option, for the purposes described in the Escrow Agreement, and
the Holder hereby consents to such designation as a condition to the acceptance
of the Escrow Agreement, this Put Option and any exercise of the rights provided
hereby. The Holder may change his or its address as shown on the signature page
hereof by notifying Mr. Takata in writing at 370 Lexington Avenue, New York, New
York 10017.
6. As soon as practicable after the Escrow Agent receives written
notification from the Holder, in the form of the Election to Exercise, of the
exercise of this Put Option, and the Holder's right to payment of the Purchase
Price for such Put Shares has been established pursuant to the provisions of
Section 3.1(b) of the Escrow Agreement and the Election to Exercise, the Escrow
Agent shall deliver to the Holder payment representing the Purchase Price. Such
payment shall be made out of escrow funds on deposit with the Escrow Agent
pursuant to the Escrow Agreement (such funds, the "Put Support Funds"). Upon
the exercise of the Holder's right to cause the purchase of Put Shares, and the
receipt by the Holder of payment out of the Put Support Funds for the Put
Shares, Mr. Tebbe shall be deemed to be the holder of record of the Put Shares
transferred upon such exercise, notwithstanding that the transfer books of the
Company shall then be closed or certificates representing such Put Shares shall
not then have been actually delivered to Mr. Tebbe.
7. This Put shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
8. Each of the Holder and Mr. Tebbe irrevocably consents to the
exclusive jurisdiction of the courts of the State of New York and of any federal
court located in such State in connection with any action or proceeding arising
out of or relating to this Put Option, any document or instrument delivered
pursuant to, in connection with or simultaneously with this Put Option, or a
breach of this Put Option or any such document or instrument. In any such
action or proceeding, each of the Holder and Mr. Tebbe waives personal service
of any summons, complaint or other process and agrees that service thereof may
be made in accordance with the Stock Purchase Agreement.
9. In the event that the Put Shares tendered to the Escrow Agent
pursuant to this Put Option are beneficially owned by a person other than the
record owner of such Put Shares on the books of the Company (I.E., are held in
"street name"), the tender of such Put Shares by the record owner thereof
pursuant to this Put Option shall serve as a certification by such record owner
to the Escrow Agent and Mr. Tebbe
3
<PAGE>
that the beneficial owner of such Put Shares has not changed on the books of the
record owner since the date of the Closing of the Stock Purchase Agreement.
10. All capitalized terms used herein without definition shall
have the meanings provided therefor in the Stock Purchase Agreement.
11. Each Put Option issued to a Holder in the form hereof shall
be consecutively numbered, e.g., "P-1", "P-2", etc.
Dated: October 10, 1997
PURCHASER:
________________________
Mr. Gerold Tebbe
Name of Holder:___________________________
Address:__________________________________
__________________________________________
__________________________________________
Number of Put Shares:_____________
Total Purchase Price:________________
(Number of Put Shares
@ $3.00 per Put Share)
4
<PAGE>
To: Loeb & Loeb LLP, as Escrow Agent
345 Park Avenue
New York, New York 10154
ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights to cause the
purchase of _______ Put Shares covered by the within Put Option and tenders the
stock certificate representing ______ shares of Common Stock of the Company,
$.001 par value, and request that the Purchase Price be delivered to:
____________________________________________________________
____________________________________________________________
____________________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)*
If such number of Put Shares shall not be all the Put Shares covered by the Put
Option, a new stock certificate for the balance of the Put Shares covered by the
Put Option shall be registered in the name of, and delivered to, the undersigned
at the address stated below, and the within Put Option shall be tendered by the
Holder to the Escrow Agent, to be amended on the signature page thereof to
reflect the appropriate number of Put Shares remaining after such partial
exercise.
The undersigned is entitled to exercise this Put Option with respect
to the Put Shares referred to above because (check appropriate space):
____ six months have elapsed since the Closing under the Stock
Purchase Agreement, and the "Triggering Event" referred to in this Put
Option has occurred; or
____ six months have elapsed since the Closing under the Stock
Purchase Agreement, and the transfer of the Patent Rights and
Intangibles to the Company has not been completed.
Dated:______________________ Name_________________________
(Print)
______________
*If SSN or TIN is not provided, amounts may be withheld from payment under
applicable laws and regulations of the Internal Revenue Service.
5
<PAGE>
Address:___________________________________________________
___________________________
(Signature)
6
<PAGE>
EXHIBIT B
ESCROW AGREEMENT
<PAGE>
EXHIBIT B
ESCROW AGREEMENT
This Agreement (this "AGREEMENT") dated as of the 10th day of October,
1997, among GEROLD TEBBE, the stockholders of ZERON ACQUISITIONS II, INC., a
Nevada corporation ("ZERON"), just prior to the closing of the transactions
described below (such stockholders, excluding Mr. Mark Meller, the "FOUNDING
STOCKHOLDERS"), and LOEB & LOEB LLP (the "ESCROW AGENT"):
W I T N E S S E T H:
WHEREAS, Mr. Tebbe has entered into a Stock Purchase Agreement dated as of
September 30, 1997 (the "STOCK PURCHASE AGREEMENT"), between, on the one hand,
Mr. Tebbe and Overton Holdings Limited, a Turks and Caicos Islands corporation
controlled by Mr. Tebbe ("OHL"), and, on the other hand, Zeron, Mr. Gary Takata
and Mr. Shigeru Masuda, majority stockholders of Zeron and also Zeron's sole
directors and officers, which Stock Purchase Agreement provides for the purchase
of 4,183,125 new shares of Zeron Common Stock by OHL from Zeron for $4,000,000
cash (the "NEW SHARES"), and the sale to Zeron by Mr. Tebbe of rights to certain
patents and patent applications as additional consideration for the New Shares;
WHEREAS, pursuant to Section 2 of the Stock Purchase Agreement, Mr. Tebbe
will, simultaneously with the Closing of the Stock Purchase Agreement, execute a
Put Agreement (the "PUT AGREEMENT"), in the form of Exhibit A attached to the
Stock Purchase Agreement, pursuant to which Mr. Tebbe will, under certain
circumstances, purchase from the Founding Stockholders some or all of their
Zeron Common Stock, all on the terms and subject to the conditions set forth in
the Put Agreement;
WHEREAS, pursuant to the requirements of Section 3 of the Stock Purchase
Agreement, upon the Closing of the Stock Purchase Agreement and upon the
execution and delivery of the Put Agreement, Mr. Tebbe is to establish an escrow
fund with the Escrow Agent, to provide liquidity for his obligation to purchase
the Zeron Common Stock of the Founding Stockholders under the Put Agreement;
WHEREAS, the Founding Stockholders have agreed that Mr. Gary Takata shall
be the designated representative of the Founding Stockholders for the purposes
of giving and receiving all notices concerning the Founding Stockholders' rights
under this Agreement and the Put Agreement;
WHEREAS, the Escrow Agent is willing to serve as escrow agent pursuant to
the terms and conditions of this Agreement;
NOW THEREFORE, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE I
INTERPRETATION
1.1 DEFINITIONS. Whenever used in this Agreement, the following terms
shall have the following respective meanings:
(a) "AGREEMENT" means this Agreement and all amendments made hereto.
(b) "ESCROW DEPOSIT" shall mean the Escrowed Payment, Mr. Takata's
Escrow Document and Mr. Tebbe's Escrow Documents.
(c) "ESCROWED PAYMENT" means the sum of $836,250 described in
Section 3.1 of the Stock Purchase Agreement to be deposited by Mr. Tebbe with
the Escrow Agent, which sum is to be held in escrow by the Escrow Agent pursuant
to the terms and subject to the conditions hereof.
(d) "MR. TAKATA'S ESCROW DOCUMENT" shall mean a Consent (the
"CONSENT") satisfactory to Mr. Tebbe and the Escrow Agent, signed by Mr. Takata,
evidencing his consent to his designation as the representative of each of the
Founding Stockholders for the purposes of the giving and receiving of all
notices under this Agreement. Mr. Takata shall have the right to designate a
substitute, satisfactory to Mr. Tebbe and the Escrow Agent, to serve as the
representative of the Founding Stockholders hereunder, and such substitute
individual shall execute a consent identical to the Consent at the time of his
or her appointment, which Consent shall be deposited with the Escrow Agent and
shall constitute part of the Escrow Deposit. If no separate Consent is executed
by Mr. Takata in connection with the execution and delivery of this Agreement,
then Mr. Takata's signature on the signature page hereof on behalf of the
Founding Stockholders shall constitute his consent to his designation as the
representative of each of the Founding Stockholders.
(e) "MR. TEBBE'S ESCROW DOCUMENTS" shall mean original Put
Agreements, bearing original signatures on behalf of Mr. Tebbe, for each of the
Founding Stockholders.
(f) All capitalized terms used herein without definition shall have
the meanings provided therefor in the Stock Purchase Agreement.
1.2 ENTIRE AGREEMENT. This Agreement, the Put Agreement and the Stock
Purchase Agreement constitute the entire agreement between the parties hereto
pertaining to the Escrow Deposit and supersede all prior agreements,
understandings, negotiations and discussions between the parties, whether oral
or written. There are no warranties,
2
<PAGE>
representations and other agreements made by the parties in connection with the
subject matter hereof except as specifically set forth in this Agreement.
1.3 EXTENDED MEANINGS. In this Agreement words importing the singular
number include the plural and vice versa; words importing the masculine gender
include the feminine and neuter genders. The word "person" includes an
individual, body corporate, partnership, trustee or trust or unincorporated
association, executor, administrator or legal representative.
1.4 WAIVERS AND AMENDMENTS. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by all parties, or, in the
case of a waiver, by the party waiving compliance. Except as expressly stated
herein, no delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any right, power or privilege hereunder preclude any
other or future exercise of any other right, power or privilege hereunder.
1.5 HEADINGS. The division of this Agreement into articles, sections,
subsections and paragraphs and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement.
1.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to
principles of conflict of laws.
1.7 CONSENTS TO SERVICE OF PROCESS. Mr. Tebbe and the Founding
Stockholders hereby irrevocably consent to the exclusive jurisdiction of the
courts of the State of New York and of any Federal Court located in the State of
New York, each as may have competent jurisdiction, in connection with any
action, suit or other proceeding arising out of or relating to this Agreement or
any action taken or omitted hereunder, and waive personal service of any
summons, complaint or other process and agree that the service thereof may be
made by certified or registered mail directed to such party at such party's
address for purpose of notice hereunder.
1.8 DESIGNATION OF FOUNDING STOCKHOLDERS' REPRESENTATIVE; CONSENT. Mr.
Takata is hereby designated the representative of each Founding Stockholder
under this Agreement, for the purposes described herein, and each Founding
Stockholder hereby consents to such designation as a condition to the acceptance
of the benefits conferred on each of them hereby, and as a condition to the
acceptance of such Founding Stockholder's Put Agreement and any exercise of the
rights provided thereby.
3
<PAGE>
ARTICLE II
DELIVERIES TO THE ESCROW AGENT
2.1 MR. TEBBE'S DELIVERIES. Mr. Tebbe has delivered to the Escrow Agent,
on the date hereof, the Escrowed Payment and Mr. Tebbe's Escrow Documents.
2.2 MR. TAKATA'S DELIVERIES. Mr. Takata has delivered to the Escrow
Agent, on the date hereof, Mr. Takata's Escrow Document.
2.3 INTENTION TO CREATE ESCROW OVER ESCROW DEPOSIT. The Founding
Stockholders and Mr. Tebbe intend that the Escrow Deposit shall be held in
escrow by the Escrow Agent pursuant to this Agreement for the benefit of the
Founding Stockholders and Mr. Tebbe, as set forth herein.
2.4 ESCROW AGENT TO HOLD ESCROW DEPOSIT. The Escrow Agent hereby
acknowledges receipt of and hereby agrees to hold and release the Escrow Deposit
only in accordance with the terms and conditions of this Agreement.
ARTICLE III
RELEASE OF ESCROW DEPOSIT
3.1 RELEASE OF ESCROW. Subject to the provisions of Section 4.2, the
Escrow Agent shall release the Escrow Deposit as follows:
(a) Upon receipt by the Escrow Agent of all components of the Escrow
Deposit, the Escrow Agent will simultaneously release a copy of Mr. Takata's
Escrow Document to Mr. Tebbe and Mr. Tebbe's Escrow Documents to Mr. Takata, and
Mr. Takata shall distribute an original of the appropriate Put Agreement to each
of the Founding Stockholders.
(b) Upon receipt by the Escrow Agent of a written notice from a
Founding Stockholder (an "EXERCISE NOTICE"), in the form of the Election to
Exercise attached to the Put Agreement, stating that such Founding Stockholder
desires to exercise his or its Put pursuant to the Put Agreement, stating the
number of Put Shares (as defined in the Put Agreement) with respect to which the
Founding Stockholder wishes to exercise such Put, and including evidence that
the Triggering Event (as defined in the Put Agreement) has occurred and
therefore the Founding Stockholder is entitled to receipt of that portion of the
Escrowed Payment representing the number of Put Shares multiplied by $3.00 per
share, in accordance with the provisions of the Put Agreement, and accompanied
by the Founding Stockholder's stock certificate representing such Put Shares,
properly endorsed in blank, and tender to the Escrow Agent of such Founding
4
<PAGE>
Stockholders Put Agreement, the Escrow Agent shall promptly send a copy of such
Exercise Notice to Mr. Tebbe. If the Escrow Agent does not receive within five
(5) business days from the date notice is given to Mr. Tebbe, a notice (a
"NOTICE OF OBJECTION") signed by Mr. Tebbe stating the reasons for such
objection, or if the Escrow Agent shall within such period receive a written
consent signed by Mr. Tebbe, then the Escrow Agent shall deliver the requested
portion of Escrowed Payment to such Founding Stockholder in accordance with the
Exercise Notice. In the event that the Founding Stockholder elects to exercise
his or its put for less than the total number of shares subject to the put, upon
Mr. Tebbe's agreement that the Founding Stockholder is entitled to receive the
Purchase Price (as defined in the Put Agreement) for the shares being put
pursuant to the Exercise Notice, the Founding Stockholder shall receive from the
Escrow Agent, (i) the Purchase Price for the shares being put pursuant to the
Exercise Notice, and (ii) such Founding Stockholder's Put Agreement, with the
number of Put Shares (as defined in the Put Agreement) shown on the signature
page thereof adjusted to reflect the Founding Stockholder's remaining Put Shares
with respect to which the put has not been exercised. In the event that the
Founding Stockholder tenders to the Escrow Agent a stock certificate
representing a greater number of Put Shares than the number of Put Shares with
respect to which the Founding Stockholder wishes to exercise the put, upon Mr.
Tebbe's agreement that the Founding Stockholder is entitled to the Purchase
Price for the Put Shares being so exercised, in addition to the deliveries from
the Escrow Agent referred to above, the Founding Stockholder shall also receive
from Zeron a stock certificate for Zeron Common Stock in an amount of shares
equal to the number of Put Shares reflected on the stock certificate tendered to
the Escrow Agent at the time of exercise of the put, less the number of Put
Shares with respect to which the put has been exercised by the Founding
Stockholder. If the Escrow Agent receives a Notice of Objection from Mr. Tebbe
within such five (5) day period stating the reason for the objection, then the
Escrow Agent shall continue to hold the Escrowed Payment until otherwise
authorized and directed to distribute the same pursuant to the provisions of
Sections 3.1(e) or 3.1(f).
(c) Any time prior to October 9, 1998, Mr. Tebbe shall be entitled to
present to the Escrow Agent a written notice stating that the rights of the
Founding Stockholders under the Put Agreement have not and cannot become
effective due to the impossibility of the occurrence of the Triggering Event (as
defined in the Put Agreement), or that such rights have expired due to the
passage of time (the "NOTICE OF NONEFFECTIVENESS OR EXPIRATION"). Such Notice
of Noneffectiveness or Expiration shall be signed by Mr. Tebbe, shall present
evidence demonstrating that the Triggering Event (as defined in the Put
Agreement) cannot occur or that the rights of the Founding Stockholders under
the Put Agreement have expired, and shall state that Mr. Tebbe is entitled to
receipt of the Escrowed Payment or any portion thereof remaining on deposit with
the Escrow Agent, in accordance with the provisions of the Put Agreement. Upon
receipt of the Notice of Noneffectiveness or Expiration, the Escrow Agent shall
promptly send a copy of such Notice to Mr. Takata, on behalf of the Founding
Stockholders. If
5
<PAGE>
the Escrow Agent does not receive within five (5) business days from the date
notice is given to Mr. Takata, a Notice of Objection signed by Mr. Takata, on
behalf of the Founding Stockholders, stating the reasons for such objection, or
if the Escrow Agent shall within such period receive a written consent signed by
Mr. Takata, on behalf of the Founding Stockholders, then the Escrow Agent shall
deliver the Escrowed Payment or such portion thereof remaining on deposit with
the Escrow Agent to Mr. Tebbe in accordance with the Notice of Noneffectiveness
or Expiration. If the Escrow Agent receives a Notice of Objection from
Mr. Takata, on behalf of the Founding Stockholders, within such five (5) day
period stating the reason for the objection, then the Escrow Agent shall
continue to hold the Escrowed Payment until otherwise authorized and directed to
distribute the same pursuant to the provisions of Sections 3.1(e) or 3.1(f).
(d) On October 10, 1998, the Escrow Agent shall pay over to Mr. Tebbe
all of the Escrowed Payment remaining on deposit and in its possession against
which a put has not yet been exercised, without the need for any notice to the
Escrow Agent by Mr. Tebbe or the consent to such payment by Mr. Takata, on
behalf of the Founding Stockholders.
(e) Upon receipt by the Escrow Agent of joint written instructions
("JOINT INSTRUCTIONS") signed by Mr. Tebbe and Mr. Takata, on behalf of the
Founding Stockholders, it shall deliver the Escrowed Payment in accordance with
the terms of the Joint Instructions.
(f) Upon receipt by the Escrow Agent of a final and non-appealable
judgment, order, decree or award of a court of competent jurisdiction (a "COURT
ORDER"), the Escrow Agent shall deliver the Escrowed Payment in accordance with
the Court Order. Any Court Order shall be accompanied by an opinion of counsel
for the party presenting the Court Order to the Escrow Agent (which opinion
shall be satisfactory to the Escrow Agent) to the effect that the court issuing
the Court Order has competent jurisdiction and that the Court Order is final and
non-appealable.
3.2 ACKNOWLEDGEMENT OF MR. TEBBE AND MR. TAKATA; DISPUTES. Mr. Tebbe and
Mr. Takata, on behalf of the Founding Stockholders, acknowledge that the only
terms and conditions upon which the Escrowed Payment is to be released are set
forth in Sections 3 and 4 of this Agreement. Mr. Tebbe and Mr. Takata, on
behalf of the Founding Stockholders, reaffirm their agreement to abide by the
terms and conditions of this Agreement with respect to the release of the
Escrowed Payment. Any dispute with respect to the release of the Escrowed
Payment shall be resolved pursuant to Section 4.2 or by agreement between Mr.
Tebbe, Mr. Takata, on behalf of the Founding Stockholders, and the Escrow Agent.
6
<PAGE>
ARTICLE IV
CONCERNING THE ESCROW AGENT
4.1 DUTIES AND RESPONSIBILITIES OF THE ESCROW AGENT. The Escrow Agent's
duties and responsibilities shall be subject to the following terms and
conditions:
(a) Mr. Takata, on behalf of the Founding Stockholders, and Mr. Tebbe
acknowledge and agree that the Escrow Agent (i) shall not be responsible for or
bound by, and shall not be required to inquire into whether the Founding
Stockholders or Mr. Tebbe is entitled to receipt of the Escrowed Payment or any
portion thereof pursuant to any other agreement or otherwise; (ii) shall be
obligated only for the performance of such duties as are specifically assumed by
the Escrow Agent pursuant to this Agreement; (iii) may rely on and shall be
protected in acting or refraining from acting upon any written notice,
instruction, instrument, statement, request or document furnished to it
hereunder and believed by the Escrow Agent in good faith to be genuine and to
have been signed or presented by the proper person or party, without being
required to determine the authenticity or correctness of any fact stated therein
or the propriety or validity or the service thereof; (iv) may assume that any
person purporting to give notice or make any statement or execute any document
in connection with the provisions hereof has been duly authorized to do so; (v)
shall not be under any duty to give the property held by the Escrow Agent
hereunder any greater degree of care than given to the Escrow Agent's own
similar property; and (vi) may consult counsel satisfactory to the Escrow Agent
(and the Escrow Agent may serve as its own counsel), the opinion of such counsel
to be full and complete authorization and protection in respect of any action
taken, suffered or omitted by the Escrow Agent hereunder in good faith and in
accordance with the opinion of such counsel.
(b) Mr. Takata, on behalf of the Founding Stockholders, and Mr. Tebbe
acknowledge that the Escrow Agent is acting solely as a stakeholder at their
request and that the Escrow Agent shall not be liable for any action taken by it
in good faith and believed by it to be authorized or within the rights or powers
conferred upon it by this Agreement. Mr. Takata, on behalf of the Founding
Stockholders, and Mr. Tebbe, jointly and severally, agree to indemnify and hold
harmless the Escrow Agent and any of its partners, employees, agents and
representatives for any action taken or omitted to be taken by it or any of them
hereunder, including the fees of outside counsel and other costs and expenses of
defending itself against any claim or liability under this Agreement, except in
the case of gross negligence or willful misconduct on its part committed in its
capacity as Escrow Agent under this Agreement. The Escrow Agent shall owe a
duty only to the Founding Stockholders and Mr. Tebbe under this Agreement and to
no other person.
7
<PAGE>
(c) Zeron hereby agrees to reimburse the Escrow Agent for its
reasonable out-of-pocket expenses (including counsel fees) incurred in
connection with the performance of its duties and responsibilities hereunder.
(d) The Escrow Agent may at any time resign as Escrow Agent hereunder
by giving five (5) days prior written notice of resignation to Mr. Takata, on
behalf of the Founding Stockholders, and Mr. Tebbe. Prior to the effective date
of the resignation as specified in such notice, Mr. Takata, on behalf of the
Founding Stockholders, and Mr. Tebbe will issue to the Escrow Agent a Joint
Instruction authorizing delivery of the Escrowed Payment to a substitute Escrow
Agent selected by Mr. Takata, on behalf of the Founding Stockholders, and Mr.
Tebbe. If no successor Escrow Agent is named by Mr. Takata, on behalf of the
Founding Stockholders, and Mr. Tebbe, the Escrow Agent may apply to a court of
competent jurisdiction in the State of New York for appointment of a successor
Escrow Agent, and to deposit the Escrowed Payment with the clerk of any such
court.
(e) The Escrow Agent does not have and will not have any interest in
the Escrow Deposit, but is serving only as escrow holder, having only possession
thereof. The Escrow Agent shall not be liable for any loss resulting from the
making or retention of any investment in accordance with this Escrow Agreement.
(f) This Agreement sets forth exclusively the duties of the Escrow
Agent with respect to any and all matters pertinent thereto and no implied
duties or obligations shall be read into this Agreement.
(g) The Escrow Agent shall be permitted to act as counsel for Mr.
Tebbe in any dispute as to the disbursement of the Escrowed Payment, in any
other dispute between Mr. Tebbe, on the one hand, and any of the Founding
Stockholders or Zeron, on the other hand, whether the Escrow Agent is then
holding the Escrow Deposit or any of its components and continues to act as the
Escrow Agent hereunder, and the Escrow Agent shall be permitted, in any event,
to be retained to and/or continue to represent Mr. Tebbe and any of his
affiliates with respect to any matter.
(h) The provisions of this Section 4.1 shall survive the resignation
of the Escrow Agent or the termination of this Agreement.
4.2 DISPUTE RESOLUTION: JUDGMENTS. Resolution of disputes arising under
this Agreement shall be subject to the following terms and conditions:
(a) If any dispute shall arise with respect to the delivery,
ownership, right of possession or disposition of the Escrow Deposit, or if the
Escrow Agent shall in good faith be uncertain as to its duties or rights
hereunder, the Escrow Agent shall be authorized, without liability to anyone, to
(i) refrain from taking any action other than
8
<PAGE>
to continue to hold the Escrow Deposit pending receipt of a Joint Instruction
from Mr. Takata, on behalf of the Founding Stockholders, and Mr. Tebbe, or (ii)
deposit the Escrow Deposit with any court of competent jurisdiction in the State
of New York, in which event the Escrow Agent shall give written notice thereof
to Mr. Takata, on behalf of the Founding Stockholders, and Mr. Tebbe and shall
thereupon be relieved and discharged from all further obligations pursuant to
this Agreement. The Escrow Agent may, but shall be under no duty to, institute
or defend any legal proceedings which relate to the Escrow Deposit. The Escrow
Agent shall have the right to retain counsel or act as its own counsel if it
becomes involved in any disagreement, dispute or litigation on account of this
Agreement or otherwise determines that it is necessary to consult counsel.
(b) The Escrow Agent is hereby expressly authorized to comply with
and obey any Court Order. In case the Escrow Agent obeys or complies with a
Court Order, the Escrow Agent shall not be liable to any Founding Stockholder or
Mr. Tebbe or to any other person, firm, corporation or entity by reason of such
compliance.
ARTICLE V
GENERAL MATTERS
5.1 TERMINATION. This escrow shall terminate upon the release of the
Escrow Deposit or at any time upon the agreement in writing of Mr. Takata, on
behalf of the Founding Stockholders, and Mr. Tebbe.
5.2 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given one (1) day after being sent by telecopy (with copy delivered by
overnight courier):
(a) If to Mr. Tebbe, to:
Mr. Gerold Tebbe
c/o Loeb & Loeb LLP
345 Park Avenue
New York, New York 10154-0037
Attention: David S. Schaefer, Esq.
(212) 407-4990 (telecopier)
(212) 407-4000 (telephone)
9
<PAGE>
(b) If to Zeron, to:
Zeron Acquisitions II, Inc.
c/o Loeb & Loeb LLP
345 Park Avenue
New York, New York 10154-0037
Attn: David S. Schaefer, Esq.
(212) 407-4990 (telecopier)
(212) 407-4000 (telephone)
(c) If to any of the Founding Stockholders, to:
Mr. Gary Takata
370 Lexington Avenue
Suite 1808
New York, New York 10017
(212) 661-1617 (telecopier)
(212) 687-4230 (telephone)
with a copy to:
Edward M. Grushko, Esq.
Grushko & Mittman
277 Broadway, Suite 801
New York, New York 10007
(212) 227-5865 (telecopier)
(212) 766-4655 (telephone)
(d) If to the Escrow Agent, to:
Loeb & Loeb LLP
345 Park Avenue
New York, New York 10154
Attention: David S. Schaefer, Esq.
(212) 407-4990 (telecopier)
(212) 407-4000 (telephone)
or to such other address as any of them shall give to the others by notice made
pursuant to this Section 5.2.
5.3 INTEREST. The Escrowed Payment shall be held in an interest-bearing
account, and all interest accruing on the Escrowed Payment shall be for the
account of and shall be payable to Mr. Tebbe on or after October 10, 1998.
10
<PAGE>
5.4 ASSIGNMENT; BINDING AGREEMENT. Neither this Agreement nor any right
or obligation hereunder shall be assignable by any party hereto without the
prior written consent of the other parties hereto. This Agreement shall enure
to the benefit of and be binding upon the parties hereto and their respective
legal representatives, successors and assigns.
5.5 INVALIDITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal, or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
5.6 AGREEMENT. Each of the undersigned states that he has read the
foregoing Escrow Agreement and understands and agrees to it.
/s/ Gerold Tebbe
--------------------------------
GEROLD TEBBE
FOUNDING STOCKHOLDERS,
by Mr. Gary Takata,
as their designated representative
/s/ Gary Takata
--------------------------------
GARY TAKATA
LOEB & LOEB LLP, as Escrow Agent
/s/ David S. Schaefer
--------------------------------
A Partner
11
<PAGE>
EX-11
DEOTEXIS, INC.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Earnings:
Net loss.............................................................. $ (35,005) $ (43,737) $ (239,901)
------------ ------------ ------------
------------ ------------ ------------
Shares:
Weighted average number of shares outstanding......................... 278,750 278,750 1,237,618
------------ ------------ ------------
------------ ------------ ------------
Loss per common share:................................................ $(.13) $(.16) $(.19)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
<PAGE>
Exhibit 23.2
N. BLUMENFRUCHT
CERTIFIED PUBLIC ACCOUNTANT
1040 EAST 22ND STREET
BROOKLYN, NEW YORK 11210
__________________
(718) 692-2743
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
I consent to the reference to myself under the captions "Summary
Financial Information", "Selected Financial Data" and "Experts" and to the use
of my report dated February 27, 1996 relating to the 1994 and 1995 financial
statements of Deotexis, Inc. (formerly Zeron Acquisitions II, Inc.) included in
the Registration Statement (Form S-1) and the related Prospectus for the
registration of shares of its common stock.
/s/ Nachum Blumenfrucht
-----------------------
Nachum Blumenfrucht
Certified Public Accountant
Brooklyn, New York
February 26, 1998
<PAGE>
Exhibit 23.2
MAYER RISPLER & COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
MAYER RISPLER, C.P.A. 18 HEYWARD STREET
MICHAEL FRIEDMAN, C.P.A. BROOKLYN, NEW YORK 11211
(718) 852-9200
FAX (718) 596-3968
To Whom it May Concern:
We consent to the reference to our firm under the captions "Summary
Financial Information", "Selected Financial Data" and "Experts" and to the use
of our report dated March 18, 1997 relating to the 1996 financial statements of
Deotexis, Inc. (formerly Zeron Acquisitions II, Inc.) included in the
Registration Statement (Form S-1) and related Prospectus for the registration of
shares of its common stock.
/s/ Mayer Rispler & Co., P.C.
- -----------------------------
Mayer Rispler & Company, P.C.
Brooklyn, New York
February 26, 1998
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference of our firm under the captions "Summary Financial
Information", "Selected Financial Data" and "Experts" and to the use of our
report dated February 24, 1998 relating to the 1997 financial statements of
Deotexis, Inc. (formerly Zeron Acquisitions II, Inc.) included in the
Registration Statement (Form S-1) and related Prospectus for the registration of
1,673,250 shares of its common stock.
_______________________________
M.R.Weiser&Co.LLP
New York, New York
February 27, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Deotexis
Inc. financial statements for the year ended December 31, 1997 and is qualified
in its entirety by reference to such Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,034,700
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,036,261
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,036,261
<CURRENT-LIABILITIES> 223,884
<BONDS> 0
0
0
<COMMON> 4,547
<OTHER-SE> 3,807,830
<TOTAL-LIABILITY-AND-EQUITY> 4,036,261
<SALES> 0
<TOTAL-REVENUES> 38,753
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 278,654
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (239,901)
<INCOME-TAX> 0
<INCOME-CONTINUING> (239,901)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (239,901)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99.1
Patents and Patent Applications
Owned by Deotexis, Inc.
<TABLE>
<CAPTION>
Patent or Date
Application Registered or Issue
Jurisdiction Number Description Applied For Date
- ------------ ------------ ----------- -------------- ----
<S> <C> <C> <C> <C>
*Europe 0333773 Anti-Perspirant Patch 1987 1992
Worldwide PCT/EP87/00724 Anti-Perspirant Patch 1987
U.S.A. 07/363,512 Anti-Perspirant Patch 1989
Japan 2590375 Anti-Perspirant Patch 1987 1996
Germany P 4007 275.4 Herbal Scarf 1990
Germany P 4000 920.3-26 Emollient Cloth 1990
Worldwide PCT/EP90/02303 Emollient Cloth 1990
Europe 91900807.8-2314 Cloth Impregnated With 1990
an Active Substance
Germany P 43 18 141.4 Impregnated Scarf 1993
Germany 196 32 312.6-26 Glove/Mitten 1996
Germany 196 00 076.9 Glove/Mitten 1996
Europe 96118 660.8 Glove/Mitten 1996
U.S.A. 08/773 822 Micro-Capsule Coated 1996
Flexible Carrier Material
</TABLE>
- ------------------
*This European patent consists of several country-specific sub-patents, as
described on the following page.
<PAGE>
EXHIBIT 99
(Cont.)
Specific Country Sub-Patents Under
European Patent No. 0333773
<TABLE>
<CAPTION>
Patent Date
Jurisdiction Number Description of Grant
- ------------ ------ ----------- --------
<S> <C> <C> <C>
Germany 37 80 470 Anti-Perspirant Patch 1992
Austria E 78 136 Anti-Perspirant Patch 1996
Switzerland EP 0 333 773 Anti-Perspirant Patch 1996
France EP 0 333 773 Anti-Perspirant Patch 1996
Belgium EP 0 333 773 Anti-Perspirant Patch 1996
United Kingdom EP 0 333 773 Anti-Perspirant Patch 1996
The Netherlands EP 0 333 773 Anti-Perspirant Patch 1996
Italy EP 0 333 773 Anti-Perspirant Patch 1996
Sweden EP 0 333 773 Anti-Perspirant Patch 1996
</TABLE>
<PAGE>
EXHIBIT 99.2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14F-1
INFORMATION STATEMENT
Pursuant to Section 14(f) of
the Securities Exchange Act of 1934
and Rule 14f-1 thereunder
ZERON ACQUISITIONS II, INC.
---------------------------
(Exact name of registrant as specified in its charter)
NEVADA
------
(State or other jurisdiction of incorporation)
33-51194-NY 13-3666344
----------- ----------
(Commission File Number) (IRS Employer Identification No.)
370 Lexington Avenue, Suite 1808, New York, New York 10017
----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 687-4230
<PAGE>
INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF
THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
This Information Statement is being furnished pursuant to Section 14(f) of
the Securities Exchange Act of 1934 and Rule 14f-1 thereunder, in connection
with a change in the majority of the members of the Board of Directors of Zeron
Acquisitions II, Inc. (the "Company") which will come about as a result of the
closing (the "Closing") of the Stock Purchase Agreement (the "Agreement")
between on the one hand, Gerold Tebbe; and Overton Holdings Limited, a
corporation formed under the laws of the Turks and Caicos Islands, British West
Indies ("OHL"); and, on the other hand, Gary Takata; Shigeru Masuda; and the
Company (Mr. Takata and Mr. Masuda shall be referred to herein as the
"Controlling Zeron Stockholders"). The Agreement provides, among other things,
that the entire Board of Directors of the Company will resign and will be
replaced by Gerold Tebbe.
NO ACTION IS REQUIRED BY THE SHAREHOLDERS OF THE COMPANY IN CONNECTION
WITH THE RESIGNATION OF THE CURRENT DIRECTORS AND THE ELECTION OF MR. TEBBE AS
THE SOLE DIRECTOR OF THE BOARD. However, Section 14(f) of the Act requires the
mailing to the Company's shareholders of the information set forth in this
Information Statement at least ten (10) days prior to a change in the majority
of the Directors of the Company. The Company therefore intends for this
Information Statement to serve as notice to its shareholders that the Company
intends to proceed with a Closing of the Agreement after ten days have elapsed
from the time this Information Statement is mailed to its shareholders and the
Company notifies the Securities and Exchange Commission of the change in control
by filing a Current Report on Form 8-K incorporating this Information Statement.
The Stock Purchase Agreement
On August 1, 1997, a Letter of Intent was entered into, which provides for
OHL to acquire, upon satisfaction of the conditions for Closing, 4,183,125
shares of newly-issued and non-registered Common Stock, $.001 par value, of the
Company in exchange for $4,000,000 cash and the agreement to sell to the Company
by Mr. Tebbe or persons controlled by Mr. Tebbe certain patents and patent
applications for nominal cash consideration and contingent royalty payments. Mr.
Tebbe is the sole beneficial shareholder of OHL. Unicorn Management Limited is
the sole director of OHL, as the director representative of Mr. Tebbe, and
Unicorn Secretaries Limited is the sole officer of OHL, as the officer
representative of Mr. Tebbe.
2
<PAGE>
Pursuant to the Agreement, the Company will accept the resignation of all
of the current members of the Board of Directors, as of Closing, consisting of
Gary Takata and Shigeru Masuda, and the appointment of Gerold Tebbe, to serve on
the Company's Board of Directors. Upon Mr. Tebbe's assumption of the office, he
will be the sole director of the Company.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
General
The outstanding voting securities of the Company as of September 25, 1997
consisted of 278,750 shares of Common Stock. Each share of Common Stock is
entitled to one vote in the election of directors and in all other matters
requiring a shareholder vote.
Security Ownership of Certain Beneficial Owners
The following table sets forth the information as to beneficial ownership
of shares of the Company's Common Stock by each person known to the Company to
own 5% or more of the shares of the Company's Common Stock as of September 25,
1997 based upon the shares of Common Stock outstanding on such date plus shares
deemed outstanding pursuant to Securities and Exchange Commission Rule
13d-3(d)(1).
Name and Address Amount & Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
- ------------------- -------------------- --------
Shigeru Masuda 80,000 28.70%
117 East 57th Street
New York, New York 10022
Louise Jones Takata 74,000 26.55%
370 Lexington Avenue, #1808
New York, New York 10017
Security Ownership of Management
The following table sets forth the information as to beneficial ownership
of shares of the Company's Common Stock by (i) each person who has been
designated to become a director of the Company upon the Closing of the
Agreement, (ii) each named executive, and (iii) all such persons as of September
25, 1997, based upon shares of Common Stock outstanding on such date plus shares
deemed outstanding pursuant to Securities and Exchange Commission Rule 13d-3(d)
(1). The following table assumes the
3
<PAGE>
issuance of 4,183,125 shares to OHL, and 85,000 shares to a finder upon the
Closing of the Agreement.
Name and Position Amount & Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
- ------------------- -------------------- --------
Overton Holdings Limited 4,183,125 92%
Le Columbia Palace
11, avenue Princesse Grace
Monte Carlo
MC-98000, Monaco
Change of Control
Upon the Closing, the Company will accept the resignations of the Board of
Directors consisting of Gary Takata and Shigeru Masuda, and Gerold Tebbe will be
appointed to serve on the Company's Board of Directors effective immediately
upon Closing.
Put Option
All the holders of the Company's Common Stock as of immediately prior to
Closing shall have the right to cause the purchase at $3 per share, which price
shall be adjusted to give effect to stock splits, stock dividends,
recapitalizations, capital distributions, and similar events, of some or all of
their Common Stock (the "Put") for the six-month period following the Measuring
Period (defined below), if the Company's Common Stock does not have a daily
average closing bid price of $3 per share for 20 consecutive trading days during
the six month period following the Closing (the "Measuring Period"). Certain
changes in the ownership of the Company's Common Stock on the date of the
Closing will void the Put as to that Common Stock so transferred. The sum of
$836,250 will be deposited in escrow by Gerold Tebbe as a fund to support
exercise of the Put. The Put will fail to become effective, or will terminate,
as applicable, upon the earlier to occur of (i) the Company's Common Stock
having a daily average closing bid price of $3 per share for 20 consecutive
trading days, or (ii) the one year anniversary of the Closing.
Call Option
All of the shares of the Company's Common Stock issued and outstanding
just prior to the Closing held or controlled by Mr. Gary Takata and Mr. Shigeru
Masuda, or their respective affiliates, shall be subject to a call option (the
"Call"), whereby the Company will have the right, for a period of one year
following the Closing, to purchase such shares at a price of $30 per share,
which price shall be adjusted to give effect to stock splits, stock dividends,
recapitalizations, capital distributions, and similar
4
<PAGE>
events, if the closing bid price of a share of Common Stock rises to $30 or
more.
Right of First Refusal
If the closing bid price of a share of the Company's Common Stock rises to
$30 or more, which price shall be adjusted to give effect to stock splits, stock
dividends, recapitalizations, capital distributions, and similar events, and
either Mr. Takata or Mr. Masuda desires to sell any of the shares of Common
stock of the Company held or controlled by them prior to Closing, then the
shareholder proposing to sell some or all of his stock has agreed to notify the
Company accordingly and has granted the Company the right of first refusal to
purchase such shares at a price of $30 per share. The right of first refusal
expires with respect to their respective shares upon transfer of beneficial
ownership of the Common Stock by Mr. Takata or Mr. Masuda, as applicable.
DIRECTORS AND EXECUTIVE OFFICERS
Effective upon the Closing under the Agreement, the Company's current
directors will resign. The following individual will become the sole director of
the Company:
Name Age Position to be Held
- ---- --- -------------------
Gerold Tebbe 48 President, Secretary-
Treasurer and Director
Gerold Tebbe will become President, Secretary-Treasurer and Director
following the Closing under the Agreement. Mr. Tebbe was born in
Langenenslingen, Kreis Biberach, BW, Germany. From 1990 to the present, Mr.
Tebbe has been self-employed as an inventor, specializing in inventing and
developing products combining his patented controlled release technology with a
variety of textile delivery systems. From 1970 to 1990, Mr. Tebbe was president
of Textil Atelier K. Tebbe, Baden-Wurtteburg, Germany, a privately-held textile
concern specializing in textile design for woven and knitted materials, and the
servicing of certain textile production equipment. Mr. Tebbe studied tailoring
and passed the examinations of the Chamber of Industry and Commerce (IHK) in
Reutlingen, Germany; subsequently, he qualified as master craftsman in textile
design while employed in Albstadt-Tailfingen, Germany.
The directors of the Company are elected to hold office until the next
Annual Meeting of Shareholders and until their respective successors have been
elected and qualified. The officers of the Company are elected by the Board of
Directors and hold office until successors are duly elected and qualified. There
are no audit, nominating or compensation committees of the Board of Directors,
or
5
<PAGE>
committees performing similar functions.
Since July 1, 1996, the board of directors met not less than four times.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
None of the Company's officers or directors currently receives any salary
from the Company. Directors do not receive compensation for their services as
directors and are not reimbursed for expenses incurred in attending board
meetings.
The Company has entered into a Consulting Agreement with The Zeron Group,
Inc., a New York corporation. Shigeru Masuda, the Company's Chairman of the
Board of Directors, is also chairman of The Zeron Group Inc. Mr. Masuda provided
consulting services on behalf of The Zeron Group Inc. to the Company. The annual
fee for the consulting services is $15,000, which commenced upon the closing of
the Company's initial public offering. The consulting arrangement will terminate
effective as of the Closing under the Agreement. The Company does not anticipate
entering into employment agreements with any of its officers or directors in the
near future.
Following the Closing under the Agreement, Mr. Tebbe will not receive a
salary for his services to the Company as an officer or director of the Company.
However, Mr. Tebbe will receive royalties of 1% of all net annual revenues
recognized by the Company in connection with the commercial exploitation of the
patent rights being conveyed to the Company by Mr. Tebbe and/or persons
controlled by Mr. Tebbe pursuant to the Agreement. The compensation referred to
above will not accrue and be payable unless the Company has recognized net
income from that patent right during such year.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned herunto duly authorized.
ZERON ACQUISITIONS II, INC.
---------------------------
(Registrant)
By: /s/ Gary Takata
---------------------------
Gary Takata
President and Director
Dated: September 26, 1997
