<PAGE> 1
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- - ------- ACT OF 1934
For the quarterly period ended May 31, 1996
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- - ------- ACT OF 1934
For the transition period from to
------------- ------------
COMMISSION FILE NUMBER 0-20866
WILSHIRE TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
CALIFORNIA 33-0433823
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5441 AVENIDA ENCINAS, STE. A
CARLSBAD, CALIFORNIA 92008
(Address of principal executive offices)
(619) 929-7200
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of the registrant's only class of
Common Stock, no par value, was 12,931,885 on June 30, 1996.
Transitional Small Business Disclosure Format, Yes No X
----- -----
================================================================================
<PAGE> 2
WILSHIRE TECHNOLOGIES, INC.
INDEX TO FORM 10-QSB
- - --------------------------------------------------------------------------------
PART 1 - FINANCIAL INFORMATION PAGE
- - --------------------------------------------------------------------------------
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of
May 31, 1996 and November 30, 1995 3
Condensed Consolidated Statements of Operations
for the Quarter Ended May 31, 1996 and
May 31, 1995 5
Condensed Consolidated Statements of Operations
for the Six Months Ended May 31, 1996 and
May 31, 1995 6
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended May 31, 1996 and
May 31, 1995 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis
or Plan of Operation 12
- - --------------------------------------------------------------------------------
PART II - OTHER INFORMATION
- - --------------------------------------------------------------------------------
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
WILSHIRE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, November 30,
1996 1995
---------- ----------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 90,000 $ 18,000
Accounts receivable trade, less allowance for doubtful
accounts of $4,000 and $49,000 at May 31,
1996 and November 30, 1995, respectively 391,000 675,000
Inventories (Note 2) 933,000 1,085,000
Net current assets of the discontinued business (Note 7) 440,000 --
Note Receivable from Advanced Materials, Inc.
plus accrued interest of $45,000 (Note 3) 1,235,000 --
Other current assets 198,000 259,000
---------- ----------
Total current assets 3,287,000 2,037,000
Property and equipment, less accumulated depreciation
of $626,000 and $903,000 at May 31, 1996 and
November 30, 1995, respectively 674,000 931,000
Note Receivable from Advanced Materials, Inc.,
net of $750,000 deferred gain (Note 3) -- 1,000,000
Note Receivable from the sale of discontinued business,
less current portion (Note 7) 369,000 --
License agreements -- 259,000
Goodwill, less accumulated amortization of $631,000
and $350,000 at May 31, 1996 and November 30,
1995, respectively 482,000 763,000
Other assets 147,000 310,000
---------- ----------
$4,959,000 $5,300,000
========== ==========
</TABLE>
Note: The condensed consolidated balance sheet at November 30, 1995 has been
derived from the audited financial statements at that date but does
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
See accompanying notes.
3
<PAGE> 4
WILSHIRE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, November 30,
1996 1995
------------ ------------
(Unaudited) (Note)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable $ 879,000 $ 915,000
Accrued expenses 815,000 1,030,000
Interest Payable 10,000 989,000
Line of Credit (Note 4) 1,000,000 --
Current portion of long-term debt (Note 4) -- 2,000
------------ ------------
Total current liabilities 2,704,000 2,936,000
Long-term debt, less current portion (Note 4) -- 7,637,000
Shareholders' equity (net capital deficiency)
Preferred stock, no par value, 2,000,000 shares authorized
and none issued and outstanding -- --
Common stock, no par value, 50,000,000 shares
authorized; 12,931,885 shares and 4,490,455 shares
issued and outstanding at May 31, 1996 and
November 30, 1995, respectively. 25,850,000 17,071,000
Common stock warrants 275,000 418,000
Deficit (23,870,000) (22,762,000)
------------ ------------
Total shareholders' equity (net capital deficiency) 2,255,000 (5,273,000)
------------ ------------
$ 4,959,000 $ 5,300,000
============ ============
</TABLE>
Note: The condensed consolidated balance sheet at November 30, 1995 has been
derived from the audited financial statements at that date but does
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
See accompanying notes.
4
<PAGE> 5
WILSHIRE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended May 31,
-------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Continuing operations:
Net sales $ 884,000 $ 820,000
Cost of sales 709,000 454,000
------------ ------------
Gross profit 175,000 366,000
Operating expenses:
Marketing and selling 153,000 154,000
General and administrative 508,000 462,000
Research and development 164,000 171,000
Loss from joint venture (Note 6) -- 59,000
------------ ------------
Total operating expenses 825,000 846,000
------------ ------------
Loss from operations (650,000) (480,000)
Other income 191,000 --
Interest income (expense), net 15,000 (185,000)
------------ ------------
Loss before provision
for state income taxes (444,000) (665,000)
Provision for state income taxes - current -- --
------------ ------------
Loss from continuing operations $ (444,000) $ (665,000)
Loss from discontinued operations (Note 7) (24,000) --
------------ ------------
Net loss $ (468,000) $ (665,000)
============ ============
Weighted average shares outstanding 12,931,885 4,490,455
============ ============
Loss per share:
Loss from continuing operations $ (0.03) $ (0.15)
Loss from discontinued operations -- --
------------ ------------
Net loss per share $ (0.03) $ (0.15)
============ ============
</TABLE>
See accompanying notes.
5
<PAGE> 6
WILSHIRE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended May 31,
-------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Continuing operations:
Net sales $ 1,722,000 $ 1,693,000
Cost of sales 1,473,000 1,069,000
------------ ------------
Gross profit 249,000 624,000
Operating expenses:
Marketing and selling 282,000 257,000
General and administrative 935,000 906,000
Research and development 257,000 340,000
Loss from joint venture (Note 6) -- 127,000
------------ ------------
Total operating expenses 1,474,000 1,630,000
------------ ------------
Loss from operations (1,225,000) (1,006,000)
Other income 192,000 1,000
Interest income (expense), net (68,000) (392,000)
------------ ------------
Loss before provision
for state income taxes (1,101,000) (1,397,000)
Provision for state income taxes - current 1,000 1,000
------------ ------------
Loss from continuing operations $ (1,102,000) $ (1,398,000)
Loss from discontinued operations (Note 7) (6,000) --
------------ ------------
Net loss $ (1,108,000) $ (1,398,000)
============ ============
Weighted average shares outstanding 11,271,276 4,490,455
============ ============
Loss per share:
Loss from continuing operations $ (0.10) $ (0.31)
Loss from discontinued operations -- --
------------ ------------
Net loss per share $ (0.10) $ (0.31)
============ ============
</TABLE>
See accompanying notes.
6
<PAGE> 7
WILSHIRE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended May 31,
-----------------------------
1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(1,108,000) $(1,398,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 175,000 322,000
Provision for loss on accounts receivable (25,000) --
Loss on sale of property and equipment -- 5,000
Loss on sale of discontinued operations 6,000 --
Net change in operating assets and liabilities:
Increase in accounts receivable (13,000) (313,000)
(Increase) decrease in inventories (160,000) 19,000
Decrease in other current assets 61,000 94,000
Increase (decrease) in accounts payable and
accrued expenses 9,000 (467,000)
Increase in interest payable 118,000 415,000
Decrease in amounts due to joint venture -- (11,000)
----------- -----------
Net cash used in operating activities (937,000) (1,334,000)
----------- -----------
INVESTING ACTIVITIES
Purchase of equipment (49,000) (3,000)
Proceeds from sale of property and equipment -- 5,000
Decrease in other assets 58,000 42,000
----------- -----------
Net cash provided by (used in) investing activities 9,000 44,000
----------- -----------
FINANCING ACTIVITIES
Proceeds from line of credit and long-term debt 1,000,000 1,700,000
Payments on notes payable and long-term debt -- (16,000)
----------- -----------
Net cash provided by financing activities 1,000,000 1,684,000
----------- -----------
NET INCREASE (DECREASE) IN CASH 72,000 394,000
CASH - BEGINNING OF PERIOD 18,000 75,000
----------- -----------
CASH - END OF PERIOD $ 90,000 $ 469,000
=========== ===========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
In January, 1996, the Company completed an Exchange Agreement with
Trilon Dominion Partners, LLC, pursuant to which the Company exchanged
long-term debt and accrued interest for common stock (See Note 4).
See accompanying notes.
7
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Wilshire Technologies, Inc. (the "Company") develops, manufactures and markets
engineered polymer products for industrial clean room use. The Company, based in
California and Texas, operates through three divisions - - Wilshire
Contamination Control ("WCC"), Wilshire Medical Products ("WMP"), Wilshire
Transdermal Products ("WTP"), and a wholly-owned subsidiary, Wilshire Gloves,
Ltd. ("WGL"). The Company has divested the Medical Products division, and will
focus primarily on products used in industrial clean rooms, such as gloves and
contamination control products.
The consolidated financial statements include the accounts of the Company's
three divisions and wholly-owned subsidiary. Significant intercompany amounts
and transactions have been eliminated.
BASIS OF PRESENTATION
The accompanying condensed consolidated unaudited financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB for quarterly
reports under Section 13 or 15(d) of the Securities Exchange Act of 1934.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the quarter ended May 31, 1996 are not necessarily
indicative of the results that may be expected for the fiscal year ending
November 30, 1996. For further information, refer to the financial statements
and footnotes thereto included in the Company's annual report on Form 10-KSB for
the fiscal year ended November 30, 1995.
The Company's financial statements have been presented on a going concern basis,
which contemplates the realization of assets and satisfaction of liabilities in
the normal course of business. The Company has incurred substantial losses since
its inception in 1990, including a loss of $468,000 for the quarter ended May
31, 1996. In addition, there exist unsettled claims related to the breast
implant litigation (see Note 5).
In March, 1996, the Board of Directors authorized management to proceed with the
sale of the assets of the Medical Products division which was completed on June
30, 1996, pursuant to a Purchase of Assets and Assumption of Sublease Agreement
with Acacia Laboratories of Texas, Inc. (See Note 7). The disposition of this
business has been accounted for as a discontinued operation. Accordingly, the
financial statements of all prior periods have been restated to exclude the
results of the Medical Products division from the results of continuing
operations.
8
<PAGE> 9
In addition to completing the above mentioned transaction, management is
attempting to raise additional capital to fund its ongoing operations. While
management believes it will be successful, there are no assurances that
sufficient funds will be available to meet the Company's requirements to fund
operations beyond November 30, 1996. The ultimate outcome of this uncertainty
cannot be determined and the accompanying consolidated financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
2. FINANCIAL STATEMENT INFORMATION
Inventories consist of the following:
<TABLE>
<CAPTION>
MAY 31, NOVEMBER 30,
1996 1995
------------------- -------------------
<S> <C> <C>
Raw materials $434,000 $411,000
Work in process 336,000 159,000
Finished goods 162,000 515,000
=================== ===================
$933,000 $1,085,000
=================== ===================
</TABLE>
3. NOTE RECEIVABLE
Pursuant to an Asset Purchase Agreement dated August 4, 1992 (the
"Divestiture"), the Company sold the assets of its foam products division to
Wilshire Advanced Materials, Inc. ("Advanced Materials"), assigned its Carson,
California and Dallas, Texas facilities to Advanced Materials, and subleased a
portion of the Dallas and Carson facilities back from Advanced Materials. In
connection with this purchase, Advanced Materials issued to the Company a
secured subordinated promissory note in the amount of $1.0 million requiring
quarterly payments of interest at prime plus 2% per annum with the principal due
in full on December 3, 1997.
Pursuant to a second Asset Purchase Agreement dated November 23, 1993, the
Company sold its OEM medical division to Advanced Materials for a purchase price
of approximately $2.3 million, of which approximately $1.6 million was payable
shortly following the transfer of the division and $750,000 was represented by
an amendment and restatement of the existing secured subordinated promissory
note to increase the principal amount from $1.0 million to $1.75 million. The
note bears interest at the rate of prime plus 2% per annum, with interest
payable quarterly and principal payable at maturity on December 3, 1997. The
payments aggregating approximately $1.6 million were received in the first and
second quarters of fiscal 1994.
On July 3, 1996, pursuant to a Release Agreement, Advanced Materials, Inc. paid
the Company $1,190,000 in full and final payment of all remaining principal and
interest on the amended and restated secured subordinated promissory note dated
November 23, 1993. Accordingly, the Company has released $190,000 of the reserve
against the note to state the note at its net realizable value, which is
included in other income in the accompanying statement of operations. The note
has been presented as a current asset on the accompanying balance sheet as of
May 31, 1996.
9
<PAGE> 10
4. LONG-TERM DEBT
On January 5, 1996, the Company and Trilon Dominion Partners, LLC ("Trilon
Dominion") entered an Exchange Agreement to exchange the note payable dated May
13, 1994, the note payable dated November 18, 1994 including the five
amendments, and the accrued interest on these notes, all of which totaled
approximately $8.8 million, for 8,441,430 shares of common stock valued at
$1.04 per share. In addition, Trilon Dominion surrendered the warrants dated
May 13, 1994 and November 18, 1994, entitling it to purchase 1,507,398 shares
(after dilution adjustments) of the Company's common stock.
Also, on January 5, 1996, the Company and Trilon Dominion entered into a Credit
Agreement (the "Agreement") for a credit line of $1 million secured by the
Company's assets. Under the terms of the Agreement, the principal is due on June
30, 1996 and the interest is payable monthly at a rate of prime plus 3.75%. In
connection with the loan, the Company issued Trilon Dominion a five-year warrant
that entitles Trilon Dominion to purchase 100,000 shares of the Company's
authorized but unissued common stock at an exercise price of $0.75 per share,
subject to adjustment to protect against dilution. The warrant is exercisable
immediately and expires on January 5, 2001. Also, under the terms of the
Agreement, the Company issued Trilon Dominion a second five-year warrant which
only becomes exercisable if the Company does not pay Trilon Dominion the
principal and interest due on June 30, 1996. The second warrant entitles Trilon
Dominion to purchase 25,000 shares of the Company's authorized but unissued
common stock at an exercise price equal to the closing price on June 30, 1996,
which was $1.75 per share and it expires on January 5, 2001. The holder of each
of such five-year warrants may, without payment to the Company, convert the
warrant in whole or in part into shares of the Company's common stock having a
market value equal to the difference between (x) the market value per share of
common stock multiplied by the number of warrants that are converted and (y) the
warrant exercise price, multiplied by the number of warrants that are converted.
Pursuant to the Agreement, the Company used part of the proceeds of the credit
line to repay the $400,000 borrowed from Trilon Dominion under the sixth
amendment to the November 18, 1994 Credit Agreement, plus the interest accrued
on that amount.
On June 30, 1996, the Company and Trilon Dominion entered into an Amendment to
the Agreement whereby the termination date was changed from June 30, 1996, to
December 31, 1996.
5. COMMITMENTS AND CONTINGENCIES
BREAST IMPLANT LITIGATION AND SHAREHOLDER LAWSUITS AND SEC INVESTIGATION
During the first six months of 1996, there have been no significant developments
in the breast implant litigation or the shareholder lawsuits and SEC
investigation. For information regarding these legal proceedings, refer to
the information contained in the Company's annual report on Form 10-KSB for the
fiscal year ended November 30, 1995 under Note 6 to the financial statements
included therein.
10
<PAGE> 11
LICENSE AGREEMENTS AND RELOCATION COSTS
In 1993, the Company entered into two ten year worldwide License Agreements for
a proprietary polyurethane material with Innovative Technologies, Ltd., ("IT") a
company based in the United Kingdom.
On April 18, 1996, the Company completed two additional Agreements with IT
related to the License Agreements noted above. Pursuant to these Agreements, the
Company transferred certain rights under the License Agreements back to IT, and
IT cancelled $642,000 in minimum royalties which the Company had accrued under
the License Agreements. As a consequence of these additional Agreements, the
Company has written off the net book value of the License Agreements, and has
deferred the gain against $450,000 of estimated relocation costs of the
developmental glove plant which will be relocated from the IT facility in
the U.K.
6. INVESTMENT IN JOINT VENTURE
On February 17, 1993 the Company and Intelligent Pharmaceuticals Corporation
("IPC") entered into an agreement forming Wilshire Transdermal Products, a 50/50
joint venture (the "JV"). The JV was established primarily to develop and
commercialize, on a worldwide basis, over-the-counter transdermal products in
the non-prescriptive market. In May, 1995, the JV received an approval from the
Mexican Ministry of Health for its first transdermal product, TrimPatch(TM).
TrimPatch(TM) is an appetite suppressant delivered through a transdermal patch
that has been in development for more than two years.
On October 31, 1995, the Company entered a buy-out agreement with IPC, whereby
the Company purchased all of IPC's interest in the joint venture. The purchase
price is equal to the amount of documented costs paid by IPC on behalf of the
joint venture, not to exceed $1,250,000. The total price will be paid as a
percentage of TrimPatch(TM) sales and such payments will be charged against the
results of operations. Through May 31, 1996, there have been no sales of
TrimPatch(TM).
11
<PAGE> 12
Prior to the purchase of IPC's interest and the consolidation of Wilshire
Transdermal Products, the Company used the equity method to record the profit
and loss of the JV operation. However, 100% of the JV losses, totaling
$3,506,000 since the formation of JV, including $59,000 in the quarter ended May
31, 1995, were recorded into the net loss of the Company due to the JV partner's
inability to fund its share of the JV losses.
7. DISCONTINUED OPERATIONS
On June 30, 1996, pursuant to a Purchase of Assets and Assumption of Sublease
Agreement, the Company sold certain assets of the Wilshire Medical Products
division ("WMP") to Acacia Laboratories of Texas, Inc. ("Acacia"), a
wholly-owned subsidiary of Acacia Laboratories, Inc., a California corporation,
that does business under the name of Horizon Medical, Inc. The assets sold
consisted of equipment, inventory, accounts receivable, patents, trademarks,
trade names, and regulatory approvals used in the Medical Products business. The
purchase price of $1,082,000 consisted of $200,000 cash at closing, $342,000 in
accounts receivable to be collected by the Company, and $540,000 in a secured,
fully amortized, 36 month promissory note in favor of the Company, bearing
interest at the rate of 5% per annum.
Sales of WMP for the second quarter and six months ended May 31, 1996, and 1995
were as follows:
<TABLE>
<CAPTION>
Three Months Ended May 31, Six Months Ended May 31,
------------------------------------ ------------------------------------
1996 1995 1996 1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net Sales $558,000 $417,000 $888,000 $716,000
</TABLE>
The effect on the results of operations from the sale of the WMP division was as
follows:
<TABLE>
<CAPTION>
Three Months Ended May Six Months Ended May
31, 1996 31, 1996
------------------------- -------------------------
<S> <C> <C>
Income from operations of discontinued $ -- $ 18,000
business
Loss on disposal of discontinued $(24,000) $(24,000)
business, net of estimated operating
results of $67,000 during phase-out
period.
------------------------- -------------------------
Total $(24,000) $ (6,000)
</TABLE>
Current assets of $706,000 and current liabilities of $266,000 related to WMP
are included in the balance sheet dated May 31, 1996, as net current assets of
the discontinued business.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
RESULTS OF OPERATIONS
NET SALES
WCC and WGL market their products directly to end users through an internal
sales force utilizing outside distributors. Revenue for all sales is recognized
when title transfers, generally when products are shipped. WTP did not record
sales in 1995, or the first six months of 1996.
Quarter
Net Sales increased by $64,000 (7.8%) to $884,000 in the second quarter of 1996
from $820,000 in the second quarter of 1995, primarily due to increased sales of
contamination control products.
Six Months
Net Sales increased by $29,000 (1.7%) to $1,722,000 in the first six months of
1996 from $1,693,000 in the first six months of 1995, primarily due to increased
shipments of contamination control products.
GROSS PROFIT
Quarter
Gross profit decreased by $191,000 to $175,000 in the second quarter of 1996
from $366,000 in the second quarter of 1995, primarily due to the start-up costs
of the developmental glove plant in the U.K. Gross profit margin as a percent of
sales decreased to 19.8% in the second quarter of 1996 from 44.6% in the second
quarter of 1995. Excluding the impact of the glove sales and the related cost of
sales on gross profit, the gross profit margin as a percent of sales decreased
to 38.9% in the second quarter of 1996 from 44.6% in the second quarter of 1995.
Six Months
Gross profit decreased $375,000 to $249,000 in the first six months of 1996 from
$624,000 in the first six months of 1995, reflecting the start-up costs of the
developmental glove plant in the U.K. Gross profit margin as a percent of sales
decreased to 14.5% in the first six months of 1996 from 36.9% in the first six
months of 1995. Excluding the impact of the glove sales and cost of sales on
gross profit, the gross profit margin as a percent of sales decreased to 35.7%
in the first six months of 1996 from 36.9% in the first six months of 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses include additional costs related to
the Company's marketing activities and administrative costs (such as executive
and office salaries, related payroll expenses, investor relations, professional
fees, supplies and utilities).
Quarter
Selling, general and administrative expenses increased $45,000 (7.3%) to
$661,000 in the second quarter of 1996 from $616,000 in the second quarter of
1995 primarily due to the accrual of relocation costs related to the move of the
developmental glove plant from the U.K. (See Note 5).
13
<PAGE> 14
Six Months
Selling, general and administrative expenses increased $54,000 (4.6%) to
$1,217,000 in the first six months of 1996 from $1,163,000 in the first six
months of 1995, primarily due to the accrual of relocation costs related to the
move of the developmental glove plant from the U.K. (See Note 5).
RESEARCH AND DEVELOPMENT
Quarter
Research and development expenses decreased $7,000 (4.1%) to $164,000 in the
second quarter of 1996 from $171,000 in the second quarter of 1995 primarily due
to reduced royalty expense. As a percentage of sales, research and development
expenses were 18.5% in the second quarter of 1996, compared to 20.9% in the
second quarter of 1995.
Six Months
Research and development expenses decreased $83,000 (24.4%) to $257,000 in the
first six months of 1996 from $340,000 in the first six months of 1995 due to
reduced royalty expense.
OTHER INCOME (EXPENSE), NET
The other income in the second quarter and first six months of 1996 was related
primarily to the gain from the payment of the note receivable by Advanced
Materials, Inc. (See Note 3).
INTEREST INCOME (EXPENSE), NET
The Company recognized interest income of $15,000 in the second quarter of 1996
versus interest expense of $185,000 in the second quarter of 1995. For the first
six months of 1996, the Company reported interest expense of $68,000 versus
interest expense of $392,000 in the first six months of 1995. The interest
expense was related primarily to the note payable and line of credit due to
Trilon Dominion Partners, LLC. (see Note 4).
INCOME TAXES
For the quarters ended May 31, 1996 and 1995, the Company sustained losses for
both financial reporting and income tax purposes. A tax provision of $1,000
related to state income taxes was recorded in the financial statements for 1996
and 1995.
LIQUIDITY AND CAPITAL RESOURCES
Management assesses the Company's liquidity by its ability to generate cash to
fund its operations. Significant factors in the management of liquidity are:
funds generated by operations; levels of accounts receivable, inventories,
accounts payable and capital expenditures; adequate lines of credit; and
financial flexibility to attract long-term capital on satisfactory terms.
During 1995 and the first six months of 1996, the Company has not generated
sufficient cash from operations to fund its working capital requirements. Net
cash used in operating activities was $937,000 in the first six months of 1996
versus $1,334,000 in the first six months of 1995. The decrease in the cash used
in operating activities was primarily due to reduced operating expenses.
14
<PAGE> 15
Net cash provided by investing activities was $9,000 in the first six months of
1996, versus net cash provided by investing activities of $44,000 in the first
six months of 1995.
Net cash provided by financing activities was $1,000,000 in the first six months
of 1996 versus $1,684,000 in the first six months of 1995. The debt financing in
1996 was obtained from Trilon Dominion Partners, LLC. The debt financing in 1995
was obtained from Dominion Capital, Inc.
On January 5, 1996, the Company and Trilon Dominion entered an Exchange
Agreement to exchange the note payable dated May 13, 1994, the note payable
dated November 18, 1994 including the five amendments, and the accrued interest
on these notes, all of which totaled approximately $8.8 million, for 8,441,430
shares of common stock valued at $1.04 per share. In addition, Trilon Dominion
surrendered the warrants dated May 13, 1994 and November 18, 1994, entitling it
to purchase 1,507,398 shares (after dilution adjustments) of the Company's
common stock.
Also, on January 5, 1996, the Company and Trilon Dominion entered into a Credit
Agreement (the "Agreement") for a credit line of $1 million secured by the
Company's assets. Under the terms of the Agreement, the principal is due on June
30, 1996 and the interest is payable monthly at a rate of prime plus 3.75%. In
connection with the loan, the Company issued Trilon Dominion a five-year warrant
that entitles Trilon Dominion to purchase 100,000 shares of the Company's
authorized but unissued common stock at an exercise price of $0.75 per share,
subject to adjustment to protect against dilution. The warrant is exercisable
immediately and expires on January 5, 2001. Also, under the terms of the
Agreement, the Company issued Trilon Dominion a second five-year warrant which
only becomes exercisable if the Company does not pay Trilon Dominion the
principal and interest due on June 30, 1996. The second warrant entitles Trilon
Dominion to purchase 25,000 shares of the Company's authorized but unissued
common stock at an exercise price equal to the closing price on June 30, 1996,
which was $1.75 per share, and it expires on January 5, 2001.
Pursuant to the Agreement, the Company used part of the proceeds of the credit
line to repay the $400,000 borrowed from Trilon Dominion under the sixth
amendment to the November 18, 1994 Credit Agreement, plus the interest accrued
on that amount. Also, the Company used an additional $400,000 of the credit line
in January 1996 to pay past due accounts payable.
On June 30, 1996, the Company and Trilon Dominion entered into an Amendment to
the Agreement whereby the termination date was changed from June 30, 1996, to
December 31, 1996.
On July 3, 1996, pursuant to a Release Agreement, Advanced Materials, Inc., paid
the Company $1,190,000 in full and final payment of all remaining principal and
interest on the amended and restated secured subordinated promissory note dated
November 23, 1993.
On June 30, 1996, pursuant to a Purchase of Assets and Assumption of Sublease
Agreement, the Company sold certain assets of the Wilshire Medical Products
division ("WMP") to Acacia Laboratories of Texas, Inc. The purchase price of
$1,082,000 consisted of $200,000 cash at closing, $342,000 in accounts
receivable to be collected by the Company, and $540,000 in a secured, fully
amortized, 36 month promissory note in favor of the Company, bearing interest at
the rate of 5% per annum.
In addition to completing the above mentioned transactions, management is
attempting to raise additional capital to fund its ongoing operations. While
management believes it will be successful, there are no assurances that
sufficient funds will be available to meet the Company's requirements to fund
operations beyond November 30, 1996. The ultimate outcome of this uncertainty
cannot be determined.
15
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
For information regarding legal proceedings, refer to the information
contained in the Company's annual report on Form 10-KSB for the fiscal
year ended November 30, 1995 under the heading, "Legal Proceedings"
and Note 5 to the financial statements herein.
ITEM 2. CHANGES IN SECURITIES:
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
The Company has solicited proxies pursuant to Regulation 14 of the
Securities Exchange Act (Proxy statement dated April 12, 1996) for its
Annual Meeting of Shareholders on May 20, 1996. There was no
solicitation in opposition to management's nominees for directors
listed in the Proxy Statement. All such nominees were elected by the
affirmative vote of 12,084,420 shares. The number of shares
outstanding and entitled to vote was 12,931,885.
Two other matters were voted upon:
1. A resolution to approve and adopt, and to ratify the action
of the Board of Directors of adopting, an Amendment of the
Articles of Incorporation to increase the authorized number
of shares of common stock from 20,000,000 to 50,000,000
shares. The vote for the proposal was 11,973,886; the vote
against was 105,330. The holders of 12,375 shares abstained
from voting on this resolution. The resolution was adopted.
2. A resolution to approve an Amendment of Section 2 of the
Wilshire Technologies, Inc. 1995 Stock Option Plan to
increase the number of shares that may be issued under such
Plan by 1,250,000 to 1,750,000 shares. The vote for the
proposal was 11,893,303; the vote against was 185,173; the
holders of 13,115 shares abstained from voting on the
resolution. The resolution was adopted.
ITEM 5. OTHER INFORMATION:
On June 30, 1996, pursuant to a Purchase of Assets and Assumption of
Sublease Agreement, the Company sold certain assets of the Wilshire
Medical Products division ("WMP") to Acacia Laboratories of Texas,
Inc., ("Acacia"), a wholly-owned subsidiary of Acacia Laboratories,
Inc., a California corporation, that does business under the name of
Horizon Medical, Inc. The assets sold consisted of equipment,
inventory, accounts receivable, patents, trademarks, trade names, and
regulatory approvals used in the Medical Products business. The
purchase price of $1,082,000 consisted of $200,000 cash at closing,
$342,000 in accounts receivable to be collected by the Company, and
$540,000 in a secured, fully amortized, 36 month promissory note in
favor of the Company, bearing interest at the rate of 5% per annum.
On July 3, 1996, pursuant to a Release Agreement, Advanced Materials,
Inc. paid the Company $1,190,000 in full and final payment of all
remaining principal and interest on
16
<PAGE> 17
the amended and restated secured subordinated promissory note dated
November 23, 1993. The amount of the payment was calculated as 70% of
$1,700,000, the principal due under the note. (See Note 3 to the
Financial Statements.)
The Company sub-contracts foam fabrication work to Advanced Materials.
In fiscal 1995 the Company purchased $1,156,000 of goods and services
from, and paid rents of $108,000 to Advanced Materials. Management
believes that prices and terms from Advanced Materials are competitive
with unrelated foam fabrication suppliers.
Mr. William Hopke, a director of the Company also is a director of
Advanced Materials and Executive Vice-President and the Chief
Operating Officer of Trilon Dominion Partners LLC. The Company has
been informed that Trilon Dominion Partners LLC, whose investments in
the Company are discussed in Note 3 to the Financial Statements, owns
2,340,000 shares of the common stock of Advanced Materials Group, Inc.
("AMG"), the parent company of Advanced Materials and has the right to
acquire an additional 840,000 such shares upon exercise of a warrant.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
10.74 Manufacturing and Supply Agreement dated April 11, 1996,
between Advanced Barrier Technologies, Inc., and the
Registrant.
10.75 Agreement dated April 15, 1996, between Dagal, Inc., and the
Registrant.
10.76 Agreement related to Wound Care Products, dated April 18,
1996, between Innovative Technologies Ltd. and the
Registrant.
10.77 Agreement related to Gloves, dated April 18, 1996, between
Innovative Technologies Ltd. and the Registrant.
10.78 Finder Agreement dated May 1, 1996, between Innovative
Research Associates, Inc., and the Registrant.
10.79 Product Rights Transfer Agreement, dated May 24, 1996,
between Advanced Materials, Inc., and the Registrant.
10.80 Release Agreement dated July 3, 1996, between Advanced
Materials, Inc., and the Registrant.
10.81 Purchase of Assets and Assumption of Sublease Agreement with
certain Exhibits dated June 30, 1996, between Acacia
Laboratories, Inc., (dba Horizon Medical, Inc.,) and the
Registrant.
10.82 Amendment dated June 30, 1996, to Credit Agreement and Grid
Promissory Note dated January 5, 1996, between Trilon
Dominion Partners, LLC, and the Registrant.
(b) REPORTS ON FORM 8-K: None
17
<PAGE> 18
SIGNATURES
In accordance with requirements of the Securities Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
WILSHIRE TECHNOLOGIES, INC.
Dated: July 10, 1996 By: /s/ James W. Klingler
---------------------------------
James W. Klingler
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
18
<PAGE> 19
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
COMMISSION FILE NUMBER 0-20866
WILSHIRE TECHNOLOGIES, INC.
EXHIBITS
TO
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED MAY 31, 1996
Under
The Securities Exchange Act of 1934
Exhibits
10.74, 10.75, 10.76, 10.77, 10.78, 10.79, 10.80, 10.81, 10.82
<PAGE> 20
EXHIBIT INDEX
Exhibit Sequentially
Number Description Numbered Page
10.74 Manufacturing and Supply Agreement dated April 11,
1996, between Advanced Barrier Technologies, Inc.,
and the Registrant.
10.75 Agreement dated April 15, 1996, between Dagal, Inc.,
and the Registrant.
10.76 Agreement related to Wound Care Products, dated
April 18, 1996, between Innovative Technologies Ltd.
and the Registrant.
10.77 Agreement related to Gloves, dated April 18, 1996,
between Innovative Technologies Ltd. and the Registrant.
10.78 Finder Agreement dated May 1, 1996, between
Innovative Research Associates, Inc., and the Registrant.
10.79 Product Rights Transfer Agreement, dated May 24, 1996,
between Advanced Materials, Inc., and the Registrant.
10.80 Release Agreement dated July 3, 1996, between
Advanced Materials, Inc., and the Registrant.
10.81 Purchase of Assets and Assumption of Sublease
Agreement with Exhibits dated June 30, 1996, between
Acacia Laboratories, Inc., (dba Horizon Medical, Inc.,)
and the Registrant.
10.82 Amendment dated June 30, 1996, to Credit Agreement and Grid
Promissory Note dated January 5, 1996 between Trilon Dominion
Partners, LLC, and the Registrant.
<PAGE> 1
EXHIBIT 10.74
MANUFACTURING AND SUPPLY AGREEMENT
This Manufacturing and Supply Agreement ("this Agreement") is made effective on
the 11th day of April, 1996 ("Effective Date") by and between Wilshire
Technologies, Inc. ("WTI"), a California corporation with a place of business at
5441 Avenida Encinas, Suite A, Carlsbad, California 92008 and Advanced Barrier
Technologies, Inc. ("ABT"), a California corporation with a place of business at
3709 Hillview Way, Oceanside, California, 92056.
RECITALS
WHEREAS, WTI is a manufacturer and supplier of polyurethane, breathable gloves
used for specialized applications in the electronics industry;
WHEREAS, ABT is a manufacturer with a production facility in Tijuana, Mexico;
WHEREAS, WTI desires to contract out certain of its glove production
requirements to ABT's Tijuana Facility;
WHEREAS, ABT wishes to utilize certain labor or manufacturing capacity at its
Tijuana Facility to produce WTI's requirements.
NOW THEREFORE, the parties hereto agree as follows:
1.0 DEFINITIONS.
1.1 Product shall mean WTI's proprietary breathable polyurethane glove
-------
manufactured by ABT for WTI pursuant to the terms of this Agreement, as
described in Exhibit B to this Agreement.
1.2 Tijuana Facility shall mean ABT's Tijuana, Mexico production
----------------
facility.
1.3 WTI Equipment shall mean the special production equipment listed on
-------------
Exhibit A attached hereto owned by WTI and installed at the Tijuana Facility for
the purpose of manufacturing the Product.
1.4 WTI Technology shall mean all inventions, intellectual property,
--------------
technical data and know-how of WTI, including any issued patent and patent
applications, and any extensions and reissues thereof, relating to the method
and process of manufacturing breathable polyurethane gloves.
2.0 TERM.
2.1 The term of the Agreement shall be for a period of three
(3) years commencing on the Effective Date above and ending automatically at the
expiration of this period.
2.2 If WTI and ABT expressly agree in writing to renew this
Agreement prior to the foregoing expiration date, this Agreement shall continue
in full force and effect for one or more successive one (1) year renewal
periods.
1
<PAGE> 2
3.0 EQUIPMENT SUPPLY, INSTALLATION AND MATERIALS.
3.1 WTI shall procure the WTI Equipment at its expense. WTI will pay
the WTI Equipment suppliers directly per the terms agreed between such suppliers
and WTI. WTI will maintain a petty cash fund for purchases of small parts needed
to install the WTI Equipment. WTI will pay ABT to install the WTI Equipment in
the Tijuana Facility in accordance with the terms of payment for Phase 1 in
Exhibit C to this Agreement. All title and ownership in the WTI Equipment shall
be retained by WTI, and ABT shall not permit any lien or third party claim to be
asserted with respect to the WTI Equipment. Further, ABT shall cooperate with
WTI to ensure that all WTI Equipment is clearly and conspicuously labeled
"Property of Wilshire Technologies, Inc."
3.2 ABT shall at its expense prepare the site for the WTI Equipment at
the Tijuana Facility consistent with the environmental and other specifications
provided by WTI. Further ABT shall provide at its expense all utilities and
assistance reasonably necessary to facilitate the successful installation and
operation of the WTI Equipment.
3.3 ABT shall ensure that the Tijuana Facility is fully insured against
all risk of loss or damage. WTI shall ensure that the WTI Equipment is fully
insured against all risk of loss or damage.
3.4 The purchase, supply and delivery of the raw materials (i.e.,
polymer resin to be processed by the WTI Equipment) shall be the responsibility
of WTI.
4.0 MANUFACTURING SERVICES AND PAYMENT.
4.1 ABT shall provide at its expense all skilled personnel and related
utilities required to (i) operate and maintain the WTI Equipment, and (ii) mix
the raw materials (together referred to as the "Manufacturing Services"). ABT
shall ensure that the annual rent, insurance and taxes for the Tijuana Facility
are paid on a timely basis. During the production phase, as defined in Exhibit C
to this Agreement, it is anticipated that the WTI Equipment will be operated at
least one work shift daily for a total hourly production cycle of at least forty
eight (48) hours per week but will ramp up to more than one work shift daily
over time.
4.2 The sole and exclusive compensation payable by WTI to ABT for the
Manufacturing Services will be as listed on Exhibit C to this Agreement.
5.0 STANDARD OF PERFORMANCE.
ABT shall ensure that all employees utilizing the WTI Equipment are
adequately trained in the operation and maintenance of the WTI Equipment and
shall use its best efforts to (i) produce the Products in compliance with the
WTI specifications set forth on Exhibit B attached hereto, and (ii) operate in
accordance with Good Manufacturing Practices ("GMP").
2
<PAGE> 3
6.0 PRODUCT DELIVERIES.
ABT shall pack all Products in containers approved by WTI and tender
such shipments to WTI's designated carrier at the Tijuana Facility or ABT's
Chula Vista facility, as designated by WTI. Thereafter, WTI shall be responsible
for the shipment and delivery of the Products.
7.0 COST REVIEW.
7.1 No later than six (6) months following the commencement of
commercial production of the Products (the "Six Month Review"), ABT and WTI
shall meet to evaluate all costs associated with the performance of this
Agreement. Thereafter, ABT and WTI shall renegotiate the fees to be paid ABT for
the Manufacturing Services following the Six Month Review.
7.2 In the event that ABT and WTI fail to agree on the fees to be paid
for the Manufacturing Services following the Six Month Review, the dispute shall
be resolved by an arbitrator pursuant to the provisions of Section 13.0 below.
8.0 ON-SITE PERSONNEL.
8.1 ABT acknowledges and agrees that WTI shall be entitled to locate
one or more of its employees at the Tijuana Site for the purpose of monitoring
the operation of the WTI Equipment and the manufacture of the Products.
8.2 ABT shall provide at its expense reasonable office area and related
services (except a telephone and fax line) to be used by such WTI employee(s)
during residence at the WTI Facility. ABT will assist WTI in installing a
telephone and fax line at WTI's expense.
9.0 EXCLUSIVITY.
During the term of this Agreement, and for a period of ten years after
the termination of this Agreement, ABT agrees that it will not manufacture or
produce breathable, polyurethane gloves on behalf of ABT or any third party.
Nothing in this agreement shall prevent ABT from manufacturing a polyurethane
coating for latex gloves for the medical market.
10.0 TECHNOLOGY OWNERSHIP.
ABT acknowledges that WTI holds the exclusive title and ownership in
the WTI Technology. It is further agreed between the parties that all title and
ownership of any inventions, which includes patents as well as know-how, made by
WTI or ABT arising out of or relating to the production of the Products shall
reside exclusively with WTI. ABT agrees to enter into any assignment agreements
with WTI which may be required to perfect such rights, only as it relates to the
production of the Products.
3
<PAGE> 4
11.0 CONFIDENTIAL INFORMATION.
11.1 To the extent that WTI and ABT must disclose confidential
information not generally known in the industry to each other as a consequence
of the performance of this Agreement, the parties shall clearly identify such
information upon disclosure. If such disclosure is made in writing, each page
thereof containing such information shall be marked with the legend
"Confidential Information" or similar designation. If such disclosure is made
orally or visually, each party shall identify the data or material disclosed as
"Confidential Information" or similar designation at the time of disclosure, and
such oral or visual disclosure shall be reduced to writing promptly by the
disclosing party no later than thirty (30) days after disclosure. Each party
shall use such Confidential Information only for the purposes of fulfilling its
obligations under this Agreement and shall take reasonable precautions to limit
the disclosure of Confidential Information. Such information shall be disclosed
only to those employees, agents, representatives and suppliers having a need to
know Confidential Information in connection with their performance of this
Agreement.
11.2 Neither WTI nor ABT shall be liable for disclosure or use of
Confidential Information if:
(i) the Information was known to a party prior to its
receipt of the Information from the other party;
(ii) the Information became known or available to a party
from an independent third party source under no obligation of secrecy with
respect thereto;
(iii) the Information became part of the public domain in
any way without breach of the Agreement; and
(iv) the Information was disclosed by a party in
accordance with the written approval of the other party.
12.0 TERMINATION.
Notwithstanding the provisions of Section 2, this Agreement may be
terminated immediately by written notice upon the occurrence of any of the
following events;
(a) by ABT or WTI in the event proceedings are instituted by
or against the other party in bankruptcy or under in solvency laws; or
(b) by ABT or WTI in the event of a breach of any material term of
the Agreement by the other party and failure to cure such breach within ninety
(90) days after such party's receipt of written notice detailing such breach.
4
<PAGE> 5
13.0 POST- TERMINATION.
In the event that this Agreement is terminated for any reason (or is
not renewed beyond its specified term), ABT shall (a) grant WTI access to the
Tijuana Facility for a period not to exceed ninety (90) days for the purpose of
dismantling and removing the WTI Equipment and any Products or raw materials,
and (b) promptly return to WTI all WTI Technology and related drawings and
documentation (and retain no copies or duplicates of these materials).
14.0 INDEMNIFICATION.
Each part shall defend and save the other harmless from and against and
shall indemnify the other from any liability, loss, cost, expense or damages
howsoever caused by reason of any "Indemnified Event" described below, and it
shall pay all sums to be paid or discharged in case of any claim, action or
proceeding.
(a) In the case of WTI, an Indemnified Event from which ABT shall be
required to indemnify and hold WTI harmless shall mean any liability arising out
of any ABT employee claim or injury.
(b) In the case of ABT, an Indemnified Event from which WTI shall be
required to indemnify and hold ABT harmless shall mean any liability arising out
the design (including the raw materials), sale or distribution of the Products
by WTI.
15.0 ARBITRATION.
Any and all controversies or disputes between the parties arising under
any Section of this Agreement shall be submitted to an arbitrator for final and
binding resolution in accordance with the commercial arbitration rules of the
American Arbitration Association. The site of the arbitration shall be at San
Diego, California and the law of the State of California shall be applied by the
arbitrators.
16.0 LIMITATION OF LIABILITY.
In no event shall WTI or ABT be liable to the other for any special,
indirect, incidental or consequential damages.
17.0 GENERAL.
17.1 Force Majeure. Neither ABT nor WTI shall be liable for failure to
-------------
perform or for delay in performance due to fire, flood, strike, act or God, act
of any governmental authority, embargo or other reasonably unforeseeable cause.
In the event of delay in performance due to any such cause, the date of delivery
or time for completion will be extended by a period of time reasonably necessary
to overcome the effect of such delay.
5
<PAGE> 6
17.2 Notices. All notices permitted or required under this Agreement
-------
shall be sent via facsimile, certified mail or courier to the signature parties
at the addresses set forth above.
17.3 Independent Contractor Status. Nothing contained in this Agreement
-----------------------------
shall be construed as creating a partnership or joint venture between the
parties. The relationship of ABT to WTI shall at all times be that of an
independent contractor. Neither party to this Agreement shall have any implied
or express rights or authority to assume or create any obligations on behalf of
or in the name of the other party.
17.4 Assignment. This Agreement and the mutual obligations and duties
----------
of the parties hereunder may not be assigned or transferred by either party
without the prior written consent of the other party to this Agreement.
17.5 Entire Agreement. This Agreement (including the referenced Exhibit
----------------
A) contains the complete understanding of the parties with respect to the
development, manufacture and sale of the Products. This Agreement supersedes all
previous agreements and understandings between the parties with respect to the
subject of the Agreement and may be amended or supplemented only by another
writing signed by the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
WILSHIRE TECHNOLOGIES, INC. ADVANCED BARRIER TECHNOLOGIES, INC.
By: /s/ Stephen P. Scibelli, Jr. By: /s/ Ralph M. Sias
---------------------------- --------------------------
Stephen P. Scibelli, Jr. Ralph M. Sias
Title: President & CEO Title: President
------------------------- -----------------------
Date: 4/11/96 Date: 4/11/96
------------------------- -----------------------
6
<PAGE> 7
MANUFACTURING AND SUPPLY AGREEMENT
BETWEEN WTI AND ABT DATED APRIL 11, 1996
EXHIBIT A
WTI Equipment
<TABLE>
<CAPTION>
Description: Quantity: Estimated Costs:
- - ------------ --------- ----------------
Per Unit Total
-------- -----
<S> <C> <C> <C>
DIP/ROTATE STATION 1 & 2
SS Tanks 2 $ 6,500 $ 13,000
Tank raise/lower 2 $ 15,000 $ 30,000
Pallet rotate 2 $ 8,500 $ 17,000
Dip recirculation system 2 $ 4,500 $ 9,000
Air circulation control 2 $ 3,700 $ 7,400
Structure/Cladding 2 $ 7,500 $ 15,000
DRY OVEN 4 BAYS EXPLOSION PROOF
Oven 1 $ 45,000 $ 45,000
Automated door 4 $ 850 $ 3,400
Tracks 4 $ 200 $ 800
DUAL TANK LEACH STATION
SS Tanks 2 $ 6,500 $ 13,000
Tank raise/lower 2 $ 7,500 $ 15,000
Water recirculation system 2 $ 4,500 $ 9,000
Structure/Cladding 1 $ 5,000 $ 5,000
WET STRIP MODULE
Structure/Tracks 1 $ 15,000 $ 15,000
FINAL DRY
Dryer 65Lb 1 $ 9,000 $ 9,000
CASSETTE BATCHING STATION
Structure 1 $ 7,500 $ 7,500
</TABLE>
7
<PAGE> 8
<TABLE>
<S> <C> <C> <C>
OTHER
Tracks (ft.) 150 $ 50 $ 7,500
Pallets 10 $ 2,200 $ 22,000
Bars 200 $ 150 $ 30,000
Control Panel 1 $ 15,000 $ 15,000
Misc. ducting, plumbing 1 $ 10,000 $ 10,000
Formers 1600 $ 18 $ 28,800
Former mounts 1600 $ 15 $ 24,000
Building Modifications 1 $ 20,000 $ 20,000
Engineering 750 $ 75 $ 56,250(A)
TOTAL MACHINE $427,650
AUXILIARY EQUIPMENT
Scrubber 1 $340,000 $340,000
Air Handler 1 $ 17,000 $ 17,000
Air Compressor 1 $ 5,000 $ 5,000
Hydraulic Powerpak 1 $ 12,000 $ 12,000
RO Water Treatment 1 $ 15,000 $ 15,000
Drum Roller 2 $ 750 $ 1,500
Mixer 2 $ 3,000 $ 6,000
Storage Tanks 2 $ 4,500 $ 9,000
TOTAL AUXILIARY $405,500
TOTAL PROJECT $833,150
</TABLE>
NOTE (A): Includes $30,000 in Milestone Payments and out-of-pocket
costs listed in Exhibit C, Phase 1.
8
<PAGE> 9
MANUFACTURING AND SUPPLY AGREEMENT
BETWEEN WTI AND ABT DATED APRIL 11, 1996
EXHIBIT B
Product Specifications (Attached)
Specification No. 13021 - Premium Glove, etc.
Specification No. 05513021 - Glove, Ambidextrous, etc.
9
<PAGE> 10
MANUFACTURING AND SUPPLY AGREEMENT
BETWEEN WTI AND ABT DATED APRIL 11, 1996
EXHIBIT C
MANUFACTURING SERVICES PAYMENTS
PHASE 1 - DESIGN, CONSTRUCTION, AND INSTALLATION OF EQUIPMENT
Term: From the Effective Date of this Agreement until the date that
the WTI Equipment has operated for one Shift. A "Shift" is
defined as 48 hours per week.
Payments: WTI will pay ABT the amounts listed below within 30 days of
accomplishment of the respective listed Milestones, except for
Milestone (1), which is payable within three (3) days of
accomplishment:
<TABLE>
<CAPTION>
Milestone Payment
--------- -------
<S> <C>
(1) WTI and ABT sign this Agreement. $ 5,000
(2) WTI approves the design of the WTI Equipment. $10,000
(3) WTI approves the installation of the WTI Equipment
in the Tijuana Facility. $ 5,000
(4) WTI approves the operation and production cycle time
of the WTI Equipment. $10,000
</TABLE>
WTI will reimburse ABT for out-of-pocket costs (eg., travel expenses,
engineering fees) which are approved by WTI in advance. The above Milestone
payments and out-of-pocket costs are included in the Engineering Costs listed on
Exhibit A.
PHASE 2 - VALIDATION
Term: From the date WTI approves the installation of the WTI
Equipment in the Tijuana Facility until the date that
the WTI Equipment produces an average of 62,400 Units of
the Product per Shift. A "Shift" is defined as 48 hours
per week. A "Unit" is defined as one glove.
Payments: WTI will pay ABT $1,000 per Shift plus $0.10 per Unit of the
Product produced. The total of the payments will not exceed
$4,080 per Shift.
10
<PAGE> 11
At the conclusion of each validation week, ABT shall forward
its invoice for such manufacturing service fees to WTI via
fax. WTI shall pay such invoices on a net 30 day basis from
the date of such invoice.
PHASE 3 - PRODUCTION
Term: From the date that the WTI Equipment produces an average of
62,400 Units of the Product per Shift until this Agreement
is terminated. A "Shift" is defined as 48 hours per week. A
"Unit" is defined as one glove.
Payments: WTI will pay ABT $0.065 per Unit of the Product produced by
the WTI Equipment.
At the conclusion of each production week, ABT shall forward
its invoice for such manufacturing service fees to WTI via
fax. WTI shall pay such invoices on a net 30 day basis from
the date of such invoice.
11
<PAGE> 1
EXHIBIT 10.75
AGREEMENT
This Agreement between Dagal, Inc., a California corporation
(hereinafter referred to as "Dagal") and Wilshire Technologies, Inc., a
California corporation (hereinafter referred to as "Wilshire") is made as of
April 15, 1996 with reference to the following
FACTS:
A. Wilshire Transdermal Products Limited and Dagal have heretofore
entered into the International Distribution Agreement (the "1993 Agreement")
dated August 11, 1993, the Agency Agreement (the "Agency Agreement") dated
April 19, 1994, and the International Distribution Agreement (the "1994
Agreement") dated as of September 20, 1994.
B. The 1993 Agreement and the Agency Agreement were superseded by the
1994 Agreement.
C. By entering into this Agreement, the parties wish to terminate the
1994 Agreement on the following terms and conditions.
1. TERMINATION OF AGREEMENTS.
Effective with the execution of this Agreement, the 1994 Agreement and,
to the extent not theretofore terminated, the 1993 Agreement and the
Agency Agreement, are terminated. Upon such termination, no party to
such agreements shall be liable to any other party thereto for any past,
present or future obligations thereunder.
2. AMOUNT OF CONSIDERATION FOR TERMINATIONS.
In full payment to Dagal by Wilshire Technologies, Inc. and Wilshire
Transdermal Products Ltd., Wilshire hereby agrees to pay Dagal U.S.
$0.10 for every transdermal patch for human weight loss manufactured by
or for Wilshire ("TrimPatch"), that is sold during the Royalty Period,
directly by Wilshire or indirectly through others (each a "Seller") to
purchasers in the following countries:
Belize, Colombia, Costa Rica, El Salvador, Guatemala, Honduras,
Mexico, Nicaragua and Panama
The aforesaid nine countries are hereinafter in the aggregate referred
to as the "Territory".
The Royalty Period is the two-year period commencing on the date of the
first sale of TrimPatch in the Territory.
<PAGE> 2
No amounts shall be due Dagal by Wilshire under this Agreement for
TrimPatch sales effected after the Royalty Period or for TrimPatch
Patches that are at any time returned to the Seller.
3. MANNER OF PAYMENT OF CONSIDERATION.
Wilshire is not obligated to make any payment to Dagal, and Dagal is
not entitled to any payment from Wilshire until thirty days after
Wilshire has received its part of the proceeds of the relevant sale.
Wilshire shall prepare and submit to Dagal periodically but not less
frequently than monthly reports showing the number of units sold in the
Territory, broken down by countries, the number of units for which
Wilshire has received payment and the amounts payable to Dagal under
this Agreement, based on such sales.
To enable Dagal to monitor compliance with Wilshire's obligations under
this Agreement, but for no other purposes, Wilshire hereby grants Dagal
or its authorized representative access, on reasonable notice, to
Wilshire's pertinent records concerning TrimPatch sales in the
Territory.
4. REPRESENTATIONS BY WILSHIRE.
Wilshire is presently seeking a distributor for the distribution of
TrimPatch in Mexico. There is no assurance that a distributorship
agreement will be concluded or that substantial sales of TrimPatch in
Mexico will be made thereunder.
Wilshire presently has no distributorship agreements or other
distribution arrangements for any of the other countries listed in
Section 2, and can not predict whether any will be entered into in the
foreseeable future.
5. DAGAL'S AGREEMENT NOT TO COMPETE.
Dagal hereby agrees that prior to the expiration of the Royalty Period,
it will not directly or indirectly engage in Product Business in any of
the nine countries mentioned in Section 2 where Wilshire, directly or
through distributors or agents is then conducting Product Business.
Without limiting the generality of the foregoing, "to engage in Product
Business" includes to be or become or agree to be or become, interested
in or associated with, in any capacity (whether as partner, shareholder,
owner, officer, director, employee, principal, agent, creditor, trustee,
consultant, co-venturer or otherwise), any Person engaged in the
manufacture, sale or servicing of Products; provided,
- 2 -
<PAGE> 3
however, that Dagal may own, solely as an investment, not more than 1%
of any class of securities of any publicly held corporation traded on
any national securities exchange or on the automated quotation system in
the United States of America; and "Products" means transdermal patches,
whether or not TrimPatch patches, designed for human weight loss
purposes.
6. ENTIRE AGREEMENT AND AMENDMENTS.
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreements
between the parties, whether written or oral, relating to the same
subject matter. No modification, amendments or supplements to this
Agreement shall be effective for any purpose unless in writing, signed
by each party. Approvals or consents hereunder of a party shall also be
in writing.
7. ARBITRATION.
Any dispute, controversy or claim derived from this Agreement, or from
its interpretation, execution, compliance or termination, or with
regards to the respective rights and obligations of either party to this
Agreement shall be submitted to mandatory arbitration in accordance with
the regulations of Commercial Arbitration of the American Arbitration
Association and to its Supplemental International Commercial Arbitration
procedure in force on the date of this Agreement. Such Arbitration shall
take place in San Diego, California. The arbitration award may be
enforced by any competent authority.
8. OTHER MATTERS.
Applicable Law. This Agreement and the rights and obligations of the
parties shall be interpreted in accordance with and shall be governed by
the laws of the State of California, without giving effect to principles
of conflicts of laws.
Notices. All notices, demands, requests or other communications
provided for or permitted to be given pursuant to this Agreement shall
be in writing and shall be delivered by hand, by express courier, or
mailed by registered, certified or express mail, postage prepaid, return
receipt requested, and addressed as follows:
-3-
<PAGE> 4
If to Dagal, Inc. Dagal, Inc.
11770 Bernardo Plaza Court
Suite 305
San Diego, CA 92128
Attn: Mr. Alex Lemus,
President
If to Wilshire: Wilshire Technologies, Inc.
5441 Avenida Encinas, Suite A
Carlsbad, CA 92008
Attn: Mr. Stephen P. Scibelli, Jr.,
President
By giving to the other parties at least ten days written notice thereof,
each party and its respective successors and permitted assigns shall
have the right, from time to time and at any time during the term of
this Agreement, to specify any other address within the United States of
America.
Severability. If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid or unenforceable
to any extent, the remainder of this Agreement and the application of
such provisions to any other person or circumstance shall not be
affected thereby and shall be enforced to the greatest extent permitted
by law.
Gender. All personal pronouns used in this Agreement, whether used in
the masculine, feminine or neuter gender, shall include all other
genders; the singular shall include the plural and vice versa. Titles of
Sections are for convenience only and neither limit nor amplify the
provisions of the Agreement itself.
Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of
which together shall comprise but a single instrument.
Attorneys' Fees. If any action is brought to enforce or interpret this
Agreement, including arbitration pursuant to Section 7, the prevailing
party shall be entitled to
-4-
<PAGE> 5
recover its costs and reasonable attorneys' fees incurred in connection with
such action.
WILSHIRE TECHNOLOGIES, INC.
By /s/ STEPHEN P. SCIBELLI, JR.
-----------------------------------
Stephen P. Scibelli, Jr.
President
DAGAL, INC.
By /s/ ALEX LEMUS
-----------------------------------
Alex Lemus, President
-5-
<PAGE> 1
Exhibit 10.76
THIS AGREEMENT is made the 18th day of April 1996 BETWEEN:
(1) INNOVATIVE TECHNOLOGIES LIMITED, whose principal office is at Road Three,
Winsford Industrial Estate, Cheshire CW7 3PD ("IT"); and
(2) WILSHIRE TECHNOLOGIES INC., whose principal office is at 5441 Avenida
Encinas, Suite A, Carlsbad CA 92008, United States of America ("Wilshire").
WHEREAS:
(A) IT and Wilshire entered into a Product Development and Licence Agreement for
Wound Care Products on 25 May 1993 ("the Wound Care Agreement").
(B) IT and Wilshire have reached agreement on the following terms for the
purpose of termination of the Wound Care Agreement and for the transfer of
"HydroDERM" intellectual property rights by Wilshire to IT.
IT IS HEREBY AGREED as follows:-
1. DEFINITIONS
Terms used in this Agreement shall have the same meanings as given to them
in Clause 1 of the Wound Care Agreement. In addition, in this Agreement:-
"Glove Agreement" means the Product Development and Licence
Agreement for Gloves entered into by IT and
Wilshire on 20 June 1993;
"HydroDERM Know-how" means all Wilshire's technical information
(including that comprised in techniques,
manufacturing systems, control systems,
designs, specifications, drawings,
components, lists, manuals and instructions)
developed by Wilshire and which relates
solely to Wilshire's HydroDERM film delivery
system, together with Wilshire's customer
list concerning the sale of HydroDERM
products, provided that
<PAGE> 2
HydroDERM Know-how shall not include any
information which is confidential by reason of
agreement with third parties:
"HydroDERM Patent" means the patent short particulars of which
are set in Schedule 1, relating to Wilshire's
HydroDERM film delivery system;
"HydroDERM Trade Marks" means the trade mark registrations short
particulars of which are set out in Schedule
2;
"Related Agreement" means the Agreement between IT and Wilshire
of the same date as this Agreement, in respect
of certain matters concerning the Glove
Agreement dated 20 June 1993.
2. TERMINATION
In consideration of the parties' respective obligations in this Agreement
the parties agree that the Wound Care Agreement is hereby terminated with
immediate effect and each party acknowledges that it has and shall have no
claim against the other arising out of any breach or default in respect of
any of the provisions of the Wound Care Agreement and hereby waives and
releases the other party hereto from any claims, proceedings or demands
whatsoever of any nature, whether or not accrued at the date of this
Agreement, arising out of or in connection with the Wound Care Agreement.
The parties' mutual obligations under Clauses 3, 4 and 5 below are accepted
in full and final settlement of any rights or claims whatsoever which either
party may have arising out or in connection with the Wound Care Agreement.
For the avoidance of doubt the waiver and release by IT will include any
amounts which may be unpaid by Wilshire concerning the Wound Care Agreement,
including without limitation royalties and sums claimed for materials of
approximately [Pound Sterling] 9,935 as shown on Schedule 3 hereto.
3. IT PAYMENT
In consideration for the transfer of rights pursuant to Clause 4, IT will
pay to Wilshire the sum of [Pound Sterling] 60,000 (sixty thousand pounds
Sterling), by wire transfer to Wilshire's bank account in the US notified by
Wilshire, within 7 days of the signing hereof. The
2
<PAGE> 3
parties agree that this sum shall be treated as paid immediately by set off
against the payment of the same amount due from Wilshire to IT under the
Related Agreement.
4. RIGHTS TO HYDRODERM
4.1 Wilshire will sell and transfer absolutely to IT the HydroDERM
Know-how, the HydroDERM Patent and the HydroDERM Trade Marks, free
of any liens charges, encumbrances or third party interests, save
that in the case of the trademarks and applications indicated in
Schedule 2 as being in the name of a distributor (which for the
avoidance of doubt do not include HydroDERM Trade Marks in the USA
and Mexico which are owned by Wilshire and are subject to inclusion
in this sale and transfer) Wilshire's obligation shall be to use
best endeavours to so sell and transfer.
4.2 As soon as practicable after the date of this Agreement but in any
event within 90 days from the date of this Agreement, Wilshire will
execute formal assignments of each of the HydroDERM Patent and the
HydroDERM Trade Marks, in forms of assignment reasonably requested
by IT for the purpose of registration of IT as the proprietor of
the HydroDERM Patent and HydroDERM Trade Marks in their respective
countries of registration, save that in the case of the trademarks
and applications indicated in Schedule 2 as being in the name of a
distributor (which for the avoidance of doubt do not include the
HydroDERM Trade Marks in the USA and Mexico which are owned by
Wilshire and are subject to inclusion in this execution of formal
assignments) Wilshire's obligation shall be to use best endeavours
to execute such assignments or to procure the execution of such
assignments by the distributor directly in favour of IT.
4.3 Within 30 days from the date of this Agreement, Wilshire will
transfer to IT the HydroDERM Know-How by the transfer to IT of a
full set of documentation, manuals, instructions, designs,
specifications and drawings comprising the HydroDERM Know-How,
whether in written or machine readable form.
5. 510(K) APPROVAL AND INVENTORIES
5.1 As soon as practicable after the date of this Agreement but in any
event within 90 days from the date of this Agreement Wilshire will
use all reasonable
3
<PAGE> 4
efforts to transfer to IT the benefit of the Section 510(K)
approval for Wilshire's HydroDERM products to the extent
possible in accordance with the US Food and Drug Administration
(FDA) regulations. Each party shall cooperate in making the
necessary applications to the regulatory authorities for this
purpose.
6. CONFIDENTIAL INFORMATION
Termination of the Wound Care Agreement shall not affect the parties'
respective obligations under Clause 18 of the Wound Care Agreement in
respect of Confidential Information disclosed during the term of that
Agreement.
7. GENERAL
7.1 This Agreement is conditional on the Related Agreement being
executed and taking effect on the same date as this Agreement.
In the event that the Related Agreement is not excluded on the
same date as this Agreement, this Agreement shall be of no
effect.
7.2 This Agreement supersedes all prior agreements, understandings
and communications between the parties whether oral or in
writing in relation to the termination of the Wound Care
Agreement.
7.3 This Agreement shall be governed by and construed in accordance
with English Law.
7.4 This Agreement may be in any number of counterparts each of
which when executed and delivered shall be an original but
all the counterparts together shall constitute one and the same
instrument.
AS WITNESS the hands of the duly authorised representatives of IT and Wilshire
the day and year first above written.
4
<PAGE> 5
SIGNED by D.K. Gilding )
------------------------------ ) /s/ D.K. Gilding
on behalf of INNOVATIVE TECHNOLOGIES LIMITED )
SIGNED by Stephen Scibelli )
------------------------------ ) /s/ Stephen Scibelli
on behalf of WILSHIRE TECHNOLOGIES INC. )
5
<PAGE> 6
SCHEDULE 1
THE HYDRODERM PATENT
Method of Manufacturing a Wound Dressing Delivery System
US Patent No. 08/173,638
Filed, December 29, 1993
6
<PAGE> 7
SCHEDULE 2
THE HYDRODERM TRADE MARKS
<TABLE>
<CAPTION>
County Registration No. Filing Date
<S> <C> <C>
USA 1,874,486 July 2, 1992
Mexico 447,089 December 28, 1992
Benelux* 557,119 April 13, 1994
Denmark* VR 5617 1995 September 1, 1995
<CAPTION>
Application No. Filing Date
<S> <C> <C>
Norway* 94.2384 April 22, 1994
Sweden* 94-03-605 March 29, 1994
</TABLE>
* Trademark held/Application made in the name of Distributor: Wilshire is
making arrangements to transfer to Wilshire for assignment to IT.
7
<PAGE> 8
SCHEDULE 3
INVOICES -- WILSHIRE MEDICAL PRODUCTS
<TABLE>
<CAPTION>
[POUND STERLING]
<S> <C> <C>
2nd January 1994 B/F Balance 1505.00
11th January 1994 Invoice B.1204 1495.26
3rd February 1994 Invoice B.1227 3073.50
1st April 1994 Invoice B.1252 204.12
30th May 1995 Invoice B.1419 3657.60
-------
Total: 9935.48
-------
</TABLE>
8
<PAGE> 1
EXHIBIT 10.77
THIS AGREEMENT is made the 18th day of April 1996 BETWEEN:
(1) INNOVATIVE TECHNOLOGIES LIMITED, whose principal office is at Road Three,
Winsford Industrial Estate, Cheshire CW7 3PD ("IT"); and
(2) WILSHIRE TECHNOLOGIES INC., whose principal office is at 5441 Avenida
Encinas, Suite A, Carlsbad CA 92008, United States of America
("Wilshire").
WHEREAS:
(A) IT and Wilshire entered into a Product Development and Licence Agreement
for Gloves on 20 June 1993 ("the Glove Agreement").
(B) IT and Wilshire have agreed the following terms for the resolution of
certain issues between them concerning the Glove Agreement.
IT IS HEREBY AGREED as follows:-
1. DEFINITIONS
Terms used in this Agreement will have the same meanings as given to them
in Clause 1 of the Glove Agreement. In addition, in this Agreement:-
"Wound Care Agreement" means the Product Development and Licence
Agreement for Wound Care products entered
into by IT and Wilshire on 25 May 1993;
"Premises" means the premises occupied by Wilshire, at
the premises of IT at Winsford Industrial
Estate, Cheshire, which are the subject of an
occupational lease by Vale Royal Borough
Council to IT; and
"Related Agreement" means the Agreement between IT and Wilshire
of the same date as this Agreement, in respect
of certain matters concerning the Wound Care
Agreement dated 25 May 1993.
1
<PAGE> 2
2. WILSHIRE PAYMENT
In consideration for the provisions of Clause 4, Wilshire will pay to IT
the sum of (Pound Sterling)60,000 (sixty thousand pounds sterling), by
wire transfer to IT's bank account in the UK notified by IT, within 7
days of the date of this Agreement, which payment will constitute the
second instalment of the Up-Front Payment required under Clause 4.1 of
the Glove Agreement. The parties agree that this sum will be treated as
paid immediately by set off against the payment of the same amount due
from IT to Wilshire under the Related Agreement.
3. RENTAL FOR PREMISES
With immediate effect the payment arrangement for rent on the Premises
will be modified such that all future payments of rental by Wilshire
should be made quarterly in advance, the first payment to be due on this
basis, which shall be in respect of the second quarter of 1996, to be
received by IT on or before whichever is the later of 1 April 1996 and
the fifth working day following the date of this Agreement.
4. LICENSED COMPONENTS
4.1 The parties confirm the payment period stated in Clause 10.4 of
the Glove Agreement, which requires payment by Wilshire to be
made on a 30-day term. Wilshire agrees that, if at any time
payments which are due are not received by IT within 35 days of
the date of IT's invoice, future orders for Licensed Components
by Wilshire will require payment of cash with order. For these
purposes IT will not invoice Wilshire prior to despatch. After
30 days of any period of cash with order, IT and Wilshire will
use reasonable endeavours to agree on the requirements to be met
for reinstatement of 30 day terms.
4.2 IT acknowledges that Clause 4.1 will not apply to payments for
those Licensed Components which can be demonstrated by Wilshire
not to comply, at the time of delivery to Wilshire, with the
necessary specification or quality standards agreed between
Wilshire and IT for supply by IT. The parties recognise that it
is essential, as a proper basis for future operation of the
Glove Agreement, for there to be an agreed specification for
Licensed Components to reflect the continuing quality
requirements implicit in the Glove Agreement to enable
manufacture of gloves of consistent satisfactory quality. IT and
Wilshire will use all reasonable endeavours in good faith to
agree on such a specification for
2
<PAGE> 3
the current Licensed Components (i.e. IT 325) as soon as
practicable and to commence this process IT agrees to provide to
Wilshire a draft proposed detailed specification as soon as
practicable. Such specification will provide for a time limit after
delivery within which Wilshire should advise IT of noncompliance
with specification.
4.3 With effect from January 1st, 1996 the price of the current
Licensed Components will be [Pound Sterling] 3 per Kg FOB IT
Winsford. The parties agree that thereafter the prices of Licensed
Components will be subject to review on an annual basis with effect
from 1 January in each year when, if requested by either party, the
parties will use all reasonable endeavours in good faith to agree
on variations to the current prices to reflect demonstrated
increases or decreases over the preceding year in IT's fixed and
variable costs of manufacturing the material.
5. WAIVERS AND RELEASES
5.1 In consideration for the payment by Wilshire pursuant to Clause 2
and the other benefits to IT under this Agreement, IT hereby waives
and releases Wilshire from all obligations to pay royalties under
Clause 9 of the Glove Licence, minimum or otherwise, in respect of
the period (and in respect of sales within the period) up to 31
December 1996. This waiver and release will be conditional only on
the making by Wilshire of the payment due under Clause 2 and as
provided in Clause 7.1 below but otherwise will be final and
unconditional with immediate effect.
5.2 In addition, each party hereby acknowledges that it has and will
have no claim against the other arising out of any breach or
default in respect of any of the provisions of the Glove Agreement
prior to the date of this Agreement and hereby waives and releases
the other party hereto from any claims, proceedings, demands
whatsoever of any nature, whether or not accrued at the date of
this Agreement, arising out of or in connection with the Glove
Agreement prior to the date of this Agreement. The parties'
obligations under this Agreement are accepted in full and final
settlement of any rights or claims whatsoever which either party
may have arising out or in connection with the Glove Agreement in
respect of the period up to the date of this Agreement. These
waivers and releases will include without limitation the
cancellation and release by IT of Wilshire from the purported
Notice of Termination of the
3
<PAGE> 4
Glove Agreement issued by IT on 3 November 1995 and the waiver and
release of IT from any claims by Wilshire arising from supplies of
Licensed Components prior to the date of this Agreement.
6. SUBSISTENCE OF GLOVE AGREEMENT
Subject to the express provisions of this Agreement, the Glove Agreement
will remain in full force and effect.
7. GENERAL
7.1 This Agreement is conditional on the Related Agreement being
executed and taking effect on the same date as this Agreement.
In the event that the Related Agreement is not excluded on the
same date as this Agreement, this Agreement will be of no effect.
7.2 This Agreement supersedes all prior agreements, understandings and
communications between the parties whether oral or in writing in
relation to the termination of the Glove Agreement.
7.3 This Agreement will be governed by and construed in accordance with
English Law.
7.4 This Agreement may be in any number of counterparts each of which
when executed and delivered will be an original but all the
counterparts together will constitute one and the same instrument.
AS WITNESS the hands of the duly authorised representatives of IT and Wilshire
the day and year first above written.
SIGNED by D.K. GILDING )
) /s/ D.K. Gilding
on behalf of INNOVATIVE TECHNOLOGIES LIMITED )
SIGNED by STEPHEN P. SCIBELLI )
) /s/ Stephen P. Scibelli
on behalf of WILSHIRE TECHNOLOGIES INC. )
4
<PAGE> 1
EXHIBIT 10.78
[IRA LETTERHEAD]
1st May, 1996
Mr. Stephen P. Scibelli, Jr.
President and Chief Executive Officer
Wilshire Technologies, Inc.
5441 Avenida Encinas, Suite A
Carlsbad, CA 92008
Dear Steve:
Re: Private Placement
You have furnished me a copy of the March 31, 1995 private Placement
Memorandum, including the exhibits thereto (the "Memorandum") that Wilshire
Technologies, Inc. ("Wilshire") is using in connection with a private placement
(the "Offering") of up to five million shares of Wilshire's common stock.
Pursuant to our conversation of April 19, I would like to confirm the terms and
conditions discussed regarding our assistance in the Offering.
Innovative Research Associates, Inc. ("IRA"), which currently renders
consulting and investor relation services to Wilshire, will act as a finder of
investors in the offering, on a non-exclusive basis.
IRA hereby represents to Wilshire:
1. It will not contact any person who does not meet the investor suitability
standards set forth in the Memorandum.
2. It understands that Wilshire's common stock is being offered in reliance
upon an exemption under Section 4(2) of the Securities Act of 1933 from
registration under the Act. IRA will not distribute or disseminate (orally
or in writing) any offering materials to prospective investors other than
the Memorandum.
3. It has all permits, licenses and registrations, if any, that it needs to
legally discharge its obligations hereunder.
<PAGE> 2
Mr. Stephen Scibelli, Jr.
President and Chief Executive Officer
Wilshire Technologies, Inc.
1st May, 1996
Page 2
4. It understands that it has no right to make any commitment on behalf of
Wilshire to any potential investor.
5. It will keep and retain such records as may be necessary to identify any
potential investors whom IRA contacted.
Wilshire may terminate the Offering at any time. Wilshire has the right to
reject in whole or in part any offer to purchase its common stock or to allot
to any investor less than the amount offered to be purchased by such investor
and Wilshire's decision in respect thereof shall be binding on IRA.
In consideration for IRA's finder's services, Wilshire agrees to pay IRA 6
percent (the "Commission") of the sales proceeds collected from investors found
by IRA, who shall not include those listed on exhibit A hereto.
Wilshire shall pay one-third of the Commission on the closing date of the
Offering (the "Closing Date") in Wilshire common stock, issued at the same
price and on the same terms on which such stock is sold to the other investors
in the Offering.
Wilshire shall pay the remaining two-thirds of the Commission (the "Cash
Commission") in cash at any time or from time to time on or after the Closing
Date; provided that at least one-eighteenth of the Cash Commission shall be
paid on the Closing Date and provided further that the aggregate of all cash
Commissions paid by the last day of any month shall at no time be less than
one-eighteenth of the total Cash Commission times the number of 30-day periods
elapsed since the Closing Date. Unpaid Cash Commissions do not bear interest.
If the Offering does not close, no Commission or other payment is due. Wilshire
will not reimburse IRA for any expenses unless these are incurred pursuant to
Wilshire's written request to IRA.
IRA agrees to indemnify and hold harmless Wilshire, its directors, officers,
stockholders, agents and employees, to the full extent lawful, from and against
all losses, claims, damages, liabilities and expenses incurred by them
(including fees and disbursements of counsel) which are related to or arise out
of (a) IRA's activities under this letter agreement or (b) IRA's breach of its
representations herein. This indemnity survives the termination of this letter
agreement.
<PAGE> 3
Mr. Stephen Scibelli, Jr.
President and Chief Executive Officer
Wilshire Technologies, Inc.
1st May, 1996
Page 3
This letter agreement shall be governed by, and construed in accordance with,
the laws of the State of New York without regard to the conflict of laws
provisions thereof.
If Wilshire is in agreement with the aforementioned, kindly sign below.
Thank you for your interest and consideration. We look forward to working with
you.
INNOVATIVE RESEARCH ASSOCIATES, INC. WILSHIRE TECHNOLOGIES, INC.
/s/ Thomas M. Dean /s/ Stephen Scibelli
- - ------------------------------------ --------------------------------
BY: Thomas M. Dean BY:
President CEO
- - ------------------------------------ --------------------------------
TITLE TITLE
May 1, 1996 5-9-96
- - ------------------------------------ --------------------------------
Date Date
<PAGE> 1
EXHIBIT 10.79
PRODUCT RIGHTS TRANSFER AGREEMENT
The Product Rights Transfer Agreement ("Agreement"), is made and effective this
24th day of May, 1996 by and between Advanced Materials, Inc. ("Grantor"). a
California Corporation and Wilshire Technologies, Inc. (Grantee"), a California
Corporation.
Whereas, pursuant to an Asset Purchase Agreement dated November 23, 1993 (the
"Original Agreement"), the Grantee sold its OEM medical division to the Grantor;
and
Whereas, certain Products were included in that sale; and
Whereas, the Grantee wishes to purchase the rights to certain Products from the
Grantor;
NOW, THEREFORE, in consideration of the mutual agreements and promises set forth
herein, the parties agree as follows:
1. RIGHTS GRANTED.
Grantor hereby conveys to Grantee, its successors and permitted assigns
the exclusive right to manufacture, use, inventory, promote, market,
sell and/or resell such of the Grantor's Products as are defined in the
following section.
2. PRODUCTS.
As used in this Agreement, the term "Product" or "Products" will refer
exclusively to the following part numbers or derivative part numbers or
directly derivative Products:
NDM #5557 NDM #5631
NDM #5413 NDM #5432
3. PAYMENT.
As compensation for the rights granted by this Agreement, the Grantee
agrees to pay the Grantor the total amount of $50,000. The "Payment" is
calculated by multiplying (a) the number of units of the Product sold,
or estimated to be sold, by the Grantee during the period May 17, 1995
to May 16, 1998, by (b.) one and one half cent ($0.015) per unit. The
calculation of the Payment is attached as Exhibit A.
The payment shall be made as a reduction of $50,000 in the amount due
from Grantor to Grantee pursuant to the Promissory Note dated November
23, 1993.
4. RIGHTS TRANSFER.
Upon execution of this agreement and the completion of the Payment
under Section 3 by an amendment to the Promissory Note dated November
23, 1993, all rights, title and interest to the Products will pass to
the Grantee without further payment or obligation to the Grantor.
<PAGE> 2
5. REPRESENTATIONS, WARRANTIES AND IDEMNIFICATIONS.
5.1 By Grantor. Grantor represents and warrants that, except for
any matters disclosable by Grantee to Grantor pursuant to the
Original Agreement, and to the knowledge of Steve F. Scott and J.
Douglas Graven without independent inquiry, the exercise by Grantee of
the rights granted in Section 1 hereof will not infringe any valid
enforceable patent rights of third parties and will not violate any
other intellectual property rights of third parties. Grantor agrees to
protect Grantee and hold Grantee harmless from any loss, damage or
claim arising from the breach of the representation and warranty
contained in this paragraph.
Grantor specifically disclaims any liability and makes no warranty to
Grantee or others with respect to the Products, either express or
implied, including, without limitation, the implied warranties of
merchantability of fitness for a particular purpose.
5.2 By Grantee. Except as otherwise provided in Section 5.1, Grantee
agrees to protect Grantor and hold Grantor harmless from any loss,
damage or claim arising from the Grantee's exercise of any right
granted under this agreement. This indemnification includes any
representation or warranty made by grantee or its agents, employees or
representatives to customers, users or third party consumers of the
Products.
6. BINDING EFFECT.
All the terms and provisions of this Agreement shall be binding upon,
shall inure to the benefit of and shall be enforceable by the parties
hereto and their respective heirs, beneficiaries, legal representative,
successors and permitted assigns.
7. ASSIGNMENT.
Neither this Agreement nor any right or interest in the Agreement
may be assigned without the express written approval of the Grantor,
except that no approval is required for the assignment to Horizon
Medical, Inc. or its subsidiaries of the rights (except the rights
under Section 5.1) granted under this Agreement.
8. FINAL AGREEMENT.
With regard to the Products, this Agreement shall constitute the entire
understanding between the Grantor and Grantee and supersedes any
previous communications, representations or agreements, whether oral or
in writing.
9. CHANGES.
No change or modification of any term or condition herein shall be
valid or binding on Grantor or Grantee unless made in writing and
signed by each party.
2
<PAGE> 3
10. NOTICES.
Any notice required by this Agreement or given in connection with it,
shall be in writing and shall be give to the appropriate party as
follows:
IF TO GRANTOR:
Doug Graven
Advanced Materials, Inc.
20211 S. Susana Road
Dominquez Hills, CA 90221
(310) 537-5444
IT TO GRANTEE:
James Klingler
Wilshire Technologies Inc.
5441 Avenida Encinas, Suite A
Carlsbad, CA 92008
(619) 929-7200
11. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with the
laws of the State of California.
12. SEVERABILITY.
If any term of this Agreement is held by a court of competent
jurisdiction to be invalid or unenforceable, then this Agreement,
including all of the remaining terms, will remain in full force and
effect as if such invalid or unenforceable term had never been
included.
13. HEADINGS.
Headings used in this Agreement are provided for convenience only and
shall not be used to construe meaning or intent.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Grantor:
Advanced Materials, Inc.
By: /s/ Steve Scott Date: 5/24/96
____________________________ __________________
Title: President/CEO
_________________________
Grantee:
Wilshire Technologies, Inc.
By: /s/ James W. Klingler Date: 5/23/96
____________________________ __________________
Title: VP & Chief Financial Officer
_________________________
4
<PAGE> 1
EXHIBIT 10.80
RELEASE AGREEMENT
THIS RELEASE AGREEMENT ("Agreement") is made this 3rd day of July,
1996, between WILSHIRE TECHNOLOGIES, INC., a California corporation ("WT"), and
ADVANCED MATERIALS, INC., a California corporation ("AM").
RECITALS
A. On December 3, 1992, AM purchased certain assets from WT. A portion
of the purchase price was in the form of a $1,000,000 Secured Subordinated
Promissory Note ("Old Note").
B. The Old Note was secured by the purchased assets pursuant to a
Security Agreement dated December 3, 1992 ("Security Agreement").
C. On November 15, 1993, AM purchased additional assets from WT. A
portion of that purchase price was reflected in a $1,750,000 Amended and
Restated Secured Subordinated Promissory Note ("New Note") (the principal
amount of which was reduced to $1,700,000 by reason of a subsequent transfer by
AM to WT of rights in certain products), and in a $1,550,000 Secured
Promissory Note ("Secured Note" and collectively with the New Note, the
"Notes").
D. The New Note and the Secured Note were secured by all of Debtor's
assets, including both those purchased on December 3, 1992, and those purchased
on November 23, 1993, by means of an Amendment dated November 23, 1993 to the
Security Agreement (the "Amendment to Security Agreement").
AGREEMENT
In consideration of the foregoing and of the mutual promises contained
in this Agreement, the parties agree as follows:
1. PAYMENT OF LIABILITIES. AM has previously repaid the Secured Note and
has, contemporaneously with the date hereof, paid $1,190,000 (which amount is
calculated as 70% of $1,700,000) in full and final payment of all remaining
principal and interest on the New Note, minus an additional $240,586.26 to bring
WT's open account balance with AM to thirty day terms, for an actual cash
payment to WT of $949,413.74, the receipt and sufficiency of which sum is hereby
acknowledged by WT.
2. MUTUAL RELEASES. Each of the parties, on behalf of itself and its
successors and assigns, hereby fully releases and discharges the other party
and its officers, directors, employees, agents, successors and assigns, from
any and all claims, liabilities, damages, demands or causes of action, whether
known or unknown, which exist on the date of this Agreement, which may have
existed in the past or which may exist in the future, and arise out of the
Notes. To the full extent of the releases set forth above, the parties hereby
waive the provisions of California Civil Code Section 1542, which provides:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor.
<PAGE> 2
at the time of executing the release, which if known by
him must have materially affected his settlement with the
debtor.
3. MISCELLANEOUS.
3.1 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties as to the subject matter hereof and supersedes any
and all prior or contemporaneous oral or written communications with respect to
the subject matter hereof, all of which are merged herein. This Agreement may
not be modified, amended or in any way altered except by an instrument in
writing signed by an authorized representative of each party. Each party
acknowledges that it is not entering into this Agreement on the basis of any
statement, warranty, representation or promise not expressly contained or
incorporated herein.
3.2 SEVERABILITY. If any term or provision of this Agreement
shall to any extent be invalid or unenforceable, the remainder of this
Agreement shall not be affected thereby, and each term of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
3.3 INTERPRETATION. Each party hereto acknowledges that it has
received independent legal advice regarding this Agreement and has had the
opportunity to negotiate modifications to the language of this Agreement.
Accordingly, each such party agrees that in any dispute regarding the
interpretation or construction of this Agreement, no presumption should operate
in favor of or against any party hereto by virtue of its role in drafting or
not drafting the terms and conditions set forth herein.
3.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument. This Agreement shall be
effective only when an authorized representative of each party has executed
this Agreement.
The parties have executed this Agreement as of the date first above
written.
WILSHIRE TECHNOLOGIES, INC.
By: /s/ James W. Klingler
------------------------------
James Klingler
Vice-President and Chief
Financial Officer
ADVANCED MATERIALS, INC.
By:
------------------------------
J. Douglas Graven
Vice-President and Chief
Financial Officer
2
<PAGE> 1
EXHIBIT 10.81
-----
PURCHASE OF ASSETS AND ASSUMPTION OF SUBLEASE AGREEMENT
THIS PURCHASE OF ASSETS AND ASSUMPTION OF SUBLEASE AGREEMENT (the
"Agreement") is effective as of the 31st day of May, 1996 (the "Effective
Date"), by and among the following:
WILSHIRE TECHNOLOGIES, INC. a California corporation
(hereinafter "Wilshire Tech");
ACACIA LABORATORIES, INC., a California corporation that also
does business under the name HORIZON MEDICAL, INC., (hereinafter
"Horizon Med"); and
ACACIA LABORATORIES OF TEXAS, INC., a Texas corporation
(hereinafter "Acacia Texas").
W I T N E S S E T H
WHEREAS, subject to the terms and conditions of this Agreement, Horizon
Med, Acacia Texas, and Wilshire Tech desire for Acacia Texas to purchase from
Wilshire Tech all of the assets used in or related to the wound care products
business presently being conducted by Wilshire Tech under the name "Wilshire
Medical Products," (the "Business") as well as under any and all other
fictitious business names utilized by Wilshire Tech in the conduct of the
Business of Wilshire Medical Products division ("Wilshire Med"), free and clear
of any liens or encumbrances except as specified in this Agreement; and
WHEREAS, subject to the terms and conditions of this Agreement, Horizon
Med, Acacia Texas, and Wilshire Tech desire for Acacia Texas to assume from
Wilshire Tech only such liabilities as relate to the Wilshire Med Sublease and
no other liabilities; and
WHEREAS, Horizon Med, Acacia Texas, and Wilshire Tech desire to provide
for certain undertakings, conditions, representations, warranties, and covenants
in connection with the transactions contemplated by this Agreement; and
WHEREAS, the respective Boards of Directors of Horizon Med, Acacia
Texas, and Wilshire Tech have approved and adopted this Agreement, subject to
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto do hereby agree as follows:
- 1 -
<PAGE> 2
SECTION 1
DEFINITIONS
1.1 "Acacia Texas," "Agreement," "Effective Date," "Horizon Med," and
"Wilshire Tech," respectively, shall have the meanings defined on the cover page
and in the foregoing preamble and recitals to this Agreement.
1.2 "Closing Date" shall mean 5:00 P.M., California time, June 30,
1996, at the offices of Arter & Hadden, 5 Park Plaza, Suite 1000, Irvine,
California 92714, the date on which the parties hereto shall close the
transactions contemplated herein.
1.3 "Wilshire Med Assets" shall mean all of the assets (except as
excluded pursuant to Section 1.4, below) that are used in, or relate to, the
Business, all as free and clear of any liens or encumbrances. All as attached to
the Agreement as Exhibit 1.3, Wilshire Med Assets at Closing shall include, but
not be limited to:
(a) Title to equipment, furniture, fixtures, supplies,
inventory, and all other tangible personal property owned by Wilshire
Tech in respect of the operations of Wilshire Med as listed on Exhibit
1.3-a attached to the Agreement, none of which is security for any
financing provided to Wilshire Tech by any third party lender;
(b) Accounts receivable, as of the Effective Date, standing in
the name of Wilshire Med or Wilshire Tech, each in respect of the
operations of Wilshire Med (the "Accounts Receivable"), as set forth on
Wilshire Med's pro forma financial statements for the year ended
November 30, 1995 (the "Pro Forma Financial Statements"), attached as
Exhibit 1.3-b to the Agreement, and as adjusted to the sum of three
hundred forty-two thousand dollars ($342,000) at the Effective Date;
(c) Wilshire Tech's rights to use the names "Wilshire Medical"
and any and all such other fictitious names and trade names to which
Wilshire Tech has the rights of use in respect of the operations of
Wilshire Med as listed on Exhibit 1.3-c attached to the Agreement;
(d) Such patents, trademarks, and copyrights owned by or
registered to Wilshire Tech in respect of the operations of Wilshire
Med or to which it has the rights of use as listed on Exhibit 1.3-d
attached to the Agreement (collectively, the "Intangible Property
Rights");
(e) All regulatory approvals, including all approved
applications made pursuant to Section 510(k) of the Federal Food, Drug
and Cosmetics Act (the "FD&C Act"), (and the information used to obtain
such approvals, the device master records, and the device history
files) owned by Wilshire Tech in respect of the products of Wilshire
Med, such approvals as listed on Exhibit 1.3-e attached to the
Agreement;
- 2 -
<PAGE> 3
(f) Such records as are necessary or useful to the continued
operations of the Business, including, without limitation, all customer
lists, vendor files, and financial and accounting records relating to
the Business;
(g) All material agreements with and information relating to
suppliers of Wilshire Tech in respect of the operations of Wilshire
Med, including, but not limited to, all claims and rights of Wilshire
Tech in respect of the operations of Wilshire Med under policies of
insurance, such agreements and policies of insurance as listed on
Exhibit 1.3-g attached to the Agreement (collectively, the "Assumed
Contracts").
1.4 Excluded Wilshire Med Assets. Notwithstanding anything to the
contrary contained herein, the Wilshire Med Assets shall not include (i) any
cash or cash equivalents standing in the name of Wilshire Med, Wilshire Tech, or
in respect of the operations of Wilshire Med or (ii) the license agreements as
listed on Exhibit 1.4 attached to the Agreement and the related benefits
thereof.
1.5 "Wilshire Med Sublease" shall mean the real property sublease, as
attached to the Agreement as Exhibit 4.9-a.
1.6 "Acacia Texas Sublease" shall mean the real property sublease, as
attached to the Agreement as Exhibit 2.2-g.
SECTION 2
AGREEMENT FOR PURCHASE OF ASSETS AND ASSUMPTION OF WILSHIRE MED SUBLEASE
2.1 Purchase Price for the Wilshire Med Assets. The purchase price
for the Wilshire Med Assets and the assumption of the Sublease (the "Purchase
Price") shall aggregate one million eighty-two thousand dollars ($1,082,000) and
shall be payable as follows:
(a) Two hundred thousand dollars ($200,000) paid on the
Closing Date;
(b) Three hundred forty-two thousand dollars ($342,000) to be
collected by, or on behalf of, Wilshire Tech from the Accounts
Receivable;
(c) Five hundred forty thousand dollars ($540,000) to be paid
in accordance with the terms and conditions of the secured, fully
amortized, thirty-six month promissory note in favor of Wilshire Tech,
which note bears interest at the rate of five percent per annum and is
in the form attached to the Agreement as Exhibit 2.1-c (the "Promissory
Note").
- 3 -
<PAGE> 4
2.2 Substantive Terms of the Purchase of the Wilshire Med Assets and
the Assumption of the Wilshire Med Sublease.
(a) At the Closing by delivering a Bill of Sale, Wilshire Tech
shall sell all, and not less than all, and Acacia Texas shall purchase
all, and not less than all, of the Wilshire Med Assets;
(b) At the Closing Date, Acacia Texas shall assume the
Wilshire Med Sublease and Advanced Materials, Inc., shall release
Wilshire Tech of all obligations thereunder;
(c) At the Closing Date, Acacia Texas shall deliver to
Wilshire Tech the sum two hundred thousand dollars ($200,000) in good
funds, by cashier's check, business check, or wire transfer;
(d) At the Closing Date, Acacia Texas shall deliver to Wilshire
Tech the executed Promissory Note;
(e) At the Closing Date, Acacia Texas shall deliver to Wilshire
Tech the executed Acacia Texas Security Agreement and related UCC-1
Financing Statements in the form attached to the Agreement as Exhibit
2.2-e;
(f) At the Closing Date (if required in accordance with the
provisions of Section 3.5, below), Horizon Med or Acacia Texas shall
cause to be delivered to Wilshire Tech the written consent of Union
Bank of California N.A. ("Union Bank") for the consummation of the
transactions contemplated hereby and its statement that, as of the
Closing Date, it does not have any security interest (perfected or
otherwise) in any of the assets of Acacia Texas that are subject to the
Acacia Texas Security Agreement;
(g) At the Closing Date, Wilshire Tech shall deliver to Acacia
Texas the Acacia Texas Sublease in the form attached to the Agreement
as Exhibit 2.2-g;
(h) At the Closing Date, Horizon Med shall deliver to Wilshire
Tech the executed Corporate Guaranty in the form attached to the
Agreement as Exhibit 2.2-h;
(i) At the Closing Date, Horizon Med shall deliver to Wilshire
Tech the executed Horizon Med Security Agreement and related UCC-1
Financing Statements in the form attached to the Agreement as Exhibit
2.2-i;
(j) At the Closing Date, or as soon thereafter as is
practicable for a diligent party, Wilshire Tech shall commence the
administrative processes to transfer to Acacia Texas Wilshire Tech's
rights to use the names "Wilshire Medical" and any and all such other
fictitious names and trade names to which Wilshire Tech has the rights
of use in respect of the operations of Wilshire Med as listed on
Exhibit 1.3-c attached to the Agreement;
- 4 -
<PAGE> 5
(k) At the Closing Date, or as soon thereafter as is
practicable for a diligent party, Wilshire Tech shall commence the
administrative processes to transfer to Acacia Texas the patents,
trademarks, and copyrights owned by or registered to Wilshire Tech in
respect of the operations of Wilshire Med or to which it has the rights
of use as listed on Exhibit 1.3-d attached to the Agreement;
(l) At the Closing Date, or as soon thereafter as is
practicable for a diligent party, Wilshire Tech shall commence the
administrative processes to transfer to Acacia Texas all regulatory
approvals, including all approved applications made pursuant to Section
510(k) of the FD&C Act, (and the information used to obtain such
approvals, the device master records, and the device history files)
owned by Wilshire Tech in respect of the products of Wilshire Med, such
approvals as listed on Exhibit 1.3-e attached to the Agreement;
(m) At the Closing Date, or as soon thereafter as is required
by Texas statute, Acacia Texas shall pay to the Texas Comptroller of
Public Accounts (i) such Sales or Use or analogous taxes as are due, if
any, by virtue of Acacia Texas' purchase of the Wilshire Med Assets and
(ii) the personal property taxes for Texas regarding the Wilshire Med
Assets for the period that commences on the Effective Date, the parties
to agree, at the Closing Date, or as soon thereafter as is practicable
for a diligent party, on allocation method in respect of such taxes;
(n) The parties hereto agree to allocate the Purchase Price
among the Wilshire Med Assets as set forth on Exhibit 2.2-n and to
report the same to each and every taxing authority upon such
authority's reasonable request therefor and in conjunction with any
relevant filing by the parties therewith; and
(o) During the 12-month period that commences as of the Closing
Date, Acacia Texas will make available to Wilshire Tech, at Acacia
Texas' facility or any other facility reasonably required, the services
of Mark Rasmussen (to a maximum of 80 hours during such period) to
assist Wilshire Tech with respect to its transdermal products or
products related thereto, subject to (i) Wilshire Tech's payment in the
ordinary course of any travel expenses incurred by Mr. Rasmussen or
Acacia Texas and any out-of-pocket expenses, i.e., direct labor,
payroll taxes, and benefits, of Acacia Texas in complying with this
subsection and (ii) Wilshire Tech providing reasonable notice to Acacia
Texas of the dates for which Mr. Rasmussen's services are required; and
(p) Prior to or immediately following the Closing Date,
Wilshire Tech will use its best efforts to obtain such approvals as may
be required in respect of the Wilshire Med Sublease and the Wilshire
Med Sublease Assignment Agreement.
2.3 Substantive Terms of Certain Post-Effective Date/Pre-Closing Date
Transactions.
(a) At the Closing Date, or as soon thereafter as is
practicable for a diligent party, Wilshire Tech shall provide to each
of Horizon Med and Acacia Texas a list of (i) expenditures made by
Wilshire Med on behalf of Acacia Texas in respect of the Business from
and after the Effective Date through and including the Closing Date,
the
- 5 -
<PAGE> 6
scope and nature of such expenditures set forth on Exhibit 2.3-a(i);
(ii) expenditures made by Wilshire Med on behalf of Acacia Texas in
respect of the Business prior to the Effective Date, but amortized for
the period from and after the Effective Date through and including the
Closing Date, the scope and nature of such expenditures set forth on
Exhibit 2.3-a(ii); (iii) inventory acquired in respect of the Business
from and after the Effective Date through and including the Closing
Date; and (iv) accounts receivable generated by the Business from and
after the Effective Date through and including the Closing Date, the
scope and nature of which are set forth on Exhibit 2.3-a(iv);
(b) At the Closing Date, or as soon thereafter as is
practicable for a diligent party, Acacia Texas shall deliver to
Wilshire Tech good funds, by cashier's check, business check, or wire
transfer, in the aggregate amount equivalent to the sum of the items to
be listed in accordance with Sections 2.3(a)(i), (ii), and (iii), less
an amount equivalent to the base rent for the month of June, 1996, as
set forth in the Wilshire Med Sublease; and
(c) At the Closing Date, or as soon thereafter as is
practicable for a diligent party, Wilshire Med shall deliver to Acacia
Texas documentation in respect of the accounts receivable generated by
the Business from and after the Effective Date through and including
the Closing Date referenced in Section 2.3(a)(iv).
SECTION 3
REPRESENTATIONS AND WARRANTIES OF HORIZON MED AND ACACIA TEXAS
Horizon Med and Acacia Texas, in order to induce Wilshire Tech to
execute this Agreement and to consummate the transactions contemplated herein,
jointly and severally represent and warrant to Wilshire Tech as follows:
3.1 Organization and Qualification. Horizon Med is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
California, with all requisite power and authority to own its property and to
carry on its business as it is now being conducted. Acacia Texas is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Texas, with all requisite power and authority to own its
property and to carry on its business as it is now being conducted.
3.2 Authorization and Validity. Each of Horizon Med and Acacia Texas
has the requisite power and is duly authorized to execute and deliver and to
carry out the terms of this Agreement. The respective Boards of Directors of
Horizon Med and Acacia Texas have taken necessary corporate action to authorize
the execution and delivery of this Agreement, the Promissory Note and related
Security Agreement and Corporate Guaranty, and the consummation of the
transactions contemplated hereby and thereby, subject to the satisfaction or
waiver of the conditions precedent set forth in Section 6 of this Agreement.
Assuming this Agreement has been approved by all action necessary on the part of
Wilshire Tech, this Agreement is a valid and binding agreement of each of
Horizon Med and Acacia Texas, except as may be limited by (i) bankruptcy,
insolvency, moratorium, or other similar laws affecting creditors'
- 6 -
<PAGE> 7
rights generally, and (ii) general principals of equity relating to the
availability of equitable remedies.
3.3 No Defaults. Neither Horizon Med nor Acacia Texas is in default
under or is in violation of any provision of their respective Articles of
Incorporation or Bylaws.
3.4 Litigation. To the best of each of Horizon Med's and Acacia
Texas' knowledge, there are no actions, suits, proceedings, orders,
investigations, or claims pending or threatened against or affecting either or
both of Horizon Med and Acacia Texas at law or in equity, or before or by any
governmental department, commission, board, bureau, agency, or instrumentality,
which, if adversely determined, would materially and adversely affect the
financial condition of either or both of Horizon Med of Acacia Texas or which
seek to prohibit, restrict, or delay the consummation of the Wilshire Med Assets
purchase and the Wilshire Med Sublease assumption, or either of them,
contemplated hereby. Each of Horizon Med and Acacia Texas is not operating under
or subject to, or in default with respect to, and neither the execution and
delivery nor the performance of this Agreement, will result in a default or
violation of, any order, writ, injunction, or decree of any court or federal,
state, municipal, or other governmental department, commission, board, agency,
or instrumentality to which each of Horizon Med and Acacia Texas is, to the best
of their several knowledge after due inquiry, bound.
3.5 Union Bank Financing Agreement. Neither the execution and
delivery, nor the performance of this Agreement, will result in a default or
violation of any financing or related agreement with Union Bank to which either
or both of Horizon Med or Acacia Texas is bound. The consent of Union Bank is
not required in order to consummate the transactions contemplated by this
Agreement. If the representations and warranties set forth in the immediately
preceding two sentences are false, Horizon Med or Acacia Texas will obtain, on
or before the Closing, the written consent of Union Bank for the consummation of
the transactions contemplated hereby and its statement that, as of the Closing
Date, it does not have any security interest (perfected or otherwise) in any of
the assets of Acacia Texas that are subject to the Acacia Texas Security
Agreement, which consent and statement, if so required, is attached to the
Agreement as Exhibit 3.5.
3.6 Due Diligence. Wilshire Tech has afforded Horizon Med and Acacia
Texas, and their counsel and accountants, full access during normal business
hours to all properties, personnel, and information of Wilshire Tech relating to
the Business, including, without limitation, financial statements and records,
leases, and agreements of Wilshire Tech in respect of the Business, and Horizon
Med and Acacia Texas have (i) determined that the purchase of Wilshire Med
Assets can be consummated in accordance with applicable statutes and
regulations,(ii) have exercised due diligence to verify the accuracy of the
representations and warranties made herein by Wilshire Tech, and (iii) have
fully investigated the affairs of the Business as fully as Horizon Med and
Acacia Texas desired. Wilshire Tech has furnished to Horizon Med and Acacia
Texas, and their representatives, such information and data concerning the
Wilshire Med Assets and the operation of Business as Horizon Med and Acacia
Texas, and any such representatives, reasonably requested.
- 7 -
<PAGE> 8
3.7 Documents. The copies of all agreements and other instruments
that have been delivered by each of Horizon Med or Acacia Texas to Wilshire Tech
are true, correct, and complete copies of such agreements and instruments and
include all amendments thereto.
3.8 Disclosure. The representations and warranties made by each of
Horizon Med and Acacia Texas herein and in any schedule, statement, exhibit, or
document furnished or to be furnished by each of Horizon Med or Acacia Texas to
Wilshire Tech pursuant to the provisions hereof or in connection with the
transactions contemplated hereby taken as a whole do not and will not as of
their respective dates contain any untrue statements of a material fact, or omit
to state a material fact necessary to make the statements made herein not
misleading.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF WILSHIRE TECH
Wilshire Tech, in order to induce each of Horizon Med and Acacia Texas
to execute this Agreement and to consummate the transactions contemplated
herein, represents and warrants to Horizon Med and Acacia Texas as follows:
4.1 Organization and Qualification. Wilshire Tech is a corporation
duly organized, validly existing, and in good standing under the laws of
California, with all requisite power and authority to own its property and
assets and to carry on its business as it is now being conducted. Wilshire Tech
is duly qualified as a foreign corporation and in good standing in each
jurisdiction where the ownership, lease, or operation of property or the conduct
of business requires such qualification except where the failure to be in good
standing or so qualified would not have a material, adverse effect on the
financial condition or business of Wilshire Tech taken as a whole.
4.2 Authorization and Validity. Wilshire Tech has the requisite power
and is duly authorized to execute and deliver and to carry out the terms of this
Agreement. The Board of Directors of Wilshire Tech has taken all action required
by law, Wilshire Tech's Articles of Incorporation and Bylaws, or otherwise to
authorize the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, subject to the satisfaction or waiver of
the conditions precedent set forth in Section 7 of this Agreement. Assuming this
Agreement has been approved by all action necessary on the part of each of
Horizon Med and Acacia Texas, this Agreement is a valid and binding agreement of
Wilshire Tech, except as may be limited by (i) bankruptcy, insolvency,
moratorium, or other similar laws affecting creditors' rights generally, and
(ii) general principals of equity relating to the availability of equitable
remedies.
4.3 Ordinary Course. From and after the date of the Pro Forma
Financial Statements, through and including the Closing Date, and except as set
forth in Exhibit 4.3 there has not been with respect to or affecting the
Business: (i) any amendment, termination, or revocation, or any threat known to
Wilshire Tech of any amendment, termination, or revocation, of any material
contract or agreement related to the Business to which Wilshire Tech is, or
during the fiscal year ended November 30, 1995, was, a party or of any license,
permit, or
- 8 -
<PAGE> 9
franchise required for the continued operation of the Business as it was
conducted during the fiscal year ended November 30, 1995; (ii) except for the
transactions contemplated hereby, any sale, transfer, mortgage, pledge, or
subjection to lien, charge, or encumbrance of any kind, of, on or affecting any
of the Wilshire Med Assets, except sales or utilization of inventory that have
been made in the ordinary course of the Business and consistent with past
practices, and liens for current taxes not yet due and payable; any damage,
destruction, or loss, whether or not covered by insurance, of any of the
Wilshire Med Assets; (iii) the execution by Wilshire Tech of any agreement or
contract that is, or could reasonably be expected to become, material to the
Business; or (iv) any material adverse change in the condition of the Wilshire
Med Assets or the Business, which change, either individually or in the
aggregate, or when combined with any other such change or changes, would have a
material adverse effect on the value of the Wilshire Med Assets.
4.4 Contracts and Leases. Except for the Assumed Contracts, Wilshire
Tech is not a party to any written or oral leases, commitments, or any other
agreements in respect of the operations of Wilshire Med. Each of the Assumed
Contracts is a valid and binding obligation of Wilshire Tech and the other
parties thereto, enforceable in accordance with its terms, except as may be
affected by bankruptcy, insolvency, moratorium, or similar laws affecting
creditors' rights generally and general principles of equity relating to the
availability of equitable remedies. There have not been any defaults by Wilshire
Tech or, to the best of Wilshire Tech's knowledge, defaults or any claims of
default or claims of unenforceability by the other party or parties which,
individually or in the aggregate, would have a material adverse effect on the
Business or any of the Wilshire Med Assets, and, to the best of Wilshire Tech's
knowledge, there are no facts or conditions that have occurred or that are
anticipated to occur which, through the passage of time or the giving of notice,
or both, would constitute a default by Wilshire Tech in respect of the Business,
or by the other party or parties, under any of such contracts, agreements,
leases, licenses, and instruments or would cause a creation of a lien, security
interest, or encumbrance upon any of the Wilshire Med Assets or otherwise
materially and adversely affect any of the Wilshire Med Assets or the Business.
4.5 Insurance. Wilshire Tech has provided to either Horizon Med or
Acacia Texas a copy of each insurance policy currently in effect that insures
Wilshire Tech against losses or damages and other risks in respect of the
operations of the Business. Wilshire Tech has not received any notice of
cancellation or material amendment of any such policies; no coverage thereunder
is being disputed; and all material claims thereunder have been filed in a
timely fashion.
4.6 Intellectual Property Rights. Except with respect to the license
agreements set forth on Exhibit 1.4 hereto, the Intangible Property Rights
constitute the only material intangible property used by Wilshire Tech in the
Business and, after the Closing Date, Acacia Texas shall have the exclusive
right to use all of the Intangible Property Rights in the Business consistent
with Wilshire Tech's use of the Intangible Property Rights in the Business.
Except as set forth on Exhibit 4.6 hereto, to the best of Wilshire Tech's
knowledge, Wilshire Tech owns, or holds adequate licenses, or other rights to
use, all of the Intangible Property Rights, such use does not conflict with,
infringe on, or otherwise violate any rights of any other person and Wilshire
Tech has taken all necessary or appropriate actions to protect the Intangible
Property Rights. Wilshire Tech has not granted, transferred, or assigned any
right, license, or
- 9 -
<PAGE> 10
interest in any of its Intangible Property Rights. To the best of Wilshire
Tech's knowledge after diligent inquiry, Wilshire Tech has not infringed, is not
now infringing, and has not received notice of any infringement, on any patent,
trade name, trademark, service mark, copyright, trade secret, trade dress,
design, invention, technology, know-how, process or other proprietary right
belonging to any other person, firm, or corporation, which infringement would
have an adverse effect on any of the Wilshire Med Assets or the Business. To the
best of Wilshire Tech's knowledge, there is no infringement by any other person
of any Intangible Property Right.
4.7 FDA Registered Facility; Good Manufacturing Practices. The
facility from which the Wilshire Med Business is conducted is registered with
the U.S. Food and Drug Administration ("FDA"), which facility manufactures
products relating to the Business in accordance with the FDA's current good
manufacturing practices ("GMP") requirements. Such facility was most recently
audited by the FDA in January of 1996 and did not receive a 483 inspection
report. Without limitation of the foregoing representation and warranty, in
respect of the Business, Wilshire Tech further represents and warrants as
follows that:
(a) It has properly filed pre-market notices under Section
510(k) of the FD&C Act for all products relating to the Business, which
have been commercially distributed or introduced into interstate
commerce for commercial distribution by Wilshire Tech and which require
the filing of such notices.
(b) Wilshire Tech has been, from and after January 1, 1994,
and is in material compliance with all applicable FDA GMP requirements.
(c) Wilshire Tech registered with the FDA, to the extent such
registration is required by FDA regulations, and all of Wilshire Tech's
medical devices relating to the Business are listed with the FDA, to
the extent such listing is required by FDA regulations.
(d) Wilshire Tech has investigational device exemptions for
all products relating to the Business requiring such exemptions, and
such products have not been and are not being sold or distributed
outside the terms of such investigational device exemptions.
(e) To Wilshire Tech's knowledge, Wilshire Tech's marketed
devices (1) have not caused or contributed to a death or serious injury
or (2) malfunctioned such that the device would be likely to cause or
contribute to a death or serious injury.
4.8 Product Recalls. None of the products manufactured by or on
behalf of Wilshire Tech in respect of the operations of the Business has been
the subject of any recall. For purposes hereof, "recall" means, with respect to
any such product, that Wilshire Tech has, after reasonable determination, or
after request by the FDA or any other appropriate regulatory authority, ceased
the sale of such product and provided public notice requesting return to
Wilshire Tech of all quantities of such product sold by Wilshire Tech, directly
or indirectly, prior to the date of such public notice.
- 10 -
<PAGE> 11
4.9 Title to Properties. Except as set forth on Exhibit 1.3, Wilshire
Tech has good and marketable title to all of the Wilshire Med Assets, all of
which are free and clear of liens and encumbrances. All material leases pursuant
to which Wilshire Tech is a lessee of real or personal property in respect of
the operations of Wilshire Med are valid and binding. A copy of the Wilshire Med
Sublease, pursuant to which the Wilshire Med conducts its business is attached
to the Agreement as Exhibit 4.9-a. The form of assignment agreement among
Advanced Materials, Inc., as landlord, Wilshire Tech, as subtenant and assignor,
as Acacia Texas, as assignee, (the "Wilshire Med Sublease Assignment Agreement")
is attached to this Agreement as Exhibit 4.9-b. At the Closing Date, Wilshire
Tech will convey and transfer to Acacia Texas, good, complete, and marketable
title to all of the Wilshire Med Assets, free and clear of all mortgages, liens,
security interests, encumbrances, pledges, leases, equities, claims, charges,
restrictions, conditions, conditional sale contracts, and any other adverse
interests of any kind whatsoever. All of the Wilshire Med Assets are in the
exclusive possession and control of Wilshire Tech and Wilshire Tech has the
unencumbered right to use and sell to Acacia Texas all of the Wilshire Med
Assets without interference from others. The Wilshire Med Assets constitute all
of the assets, properties, rights, privileges, and interests that (i) Wilshire
Tech uses or holds for use exclusively in connection with the Business; and (ii)
are necessary for Acacia Texas to own and operate the Business following the
Closing Date substantially in the same manner as it has been conducted by
Wilshire Tech during the fiscal year ended November 30, 1995.
4.10 Litigation. In respect of the operations of the Business, there
are neither any actions, suits, proceedings, orders, investigations, or claims
(whether or not purportedly on behalf of Wilshire Tech) pending, or to the best
knowledge of Wilshire Tech, against or affecting Wilshire Tech at law or in
equity or before or by any federal, state, municipal, or other governmental
department, commission, board, agency, or instrumentality, domestic or foreign,
nor are any such actions, suits, proceedings, or investigations pending or, to
the best knowledge of Wilshire Tech, threatened (i) which seek to or could
prohibit, restrict, or delay the consummation of the Wilshire Med Asset purchase
and the Wilshire Med Sublease assumption, or either of them, contemplated
hereby, or (ii) which may in time become a claim against either Horizon Med or
Acacia Texas. In respect of the operations of the Business, Wilshire Tech is not
operating under or subject to, or in default with respect to, any order, writ,
injunction, or decree of any court or federal, state, municipal, or other
governmental department, commission, board, agency, or instrumentality.
4.11 No Defaults. Wilshire Tech is not in default under or in
violation of any provision of its Articles of Incorporation or Bylaws. Wilshire
Tech is not in violation of any statute, law, ordinance, order, judgment, rule,
regulation, permit, franchise, or other approval or authorization of any court
or governmental agency or body having jurisdiction over it or any of its
properties which, if enforced, would have a material, adverse effect on the
Business or the Wilshire Med Assets. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated herein, will
conflict with or result in a breach of or constitute a default under any of the
foregoing or result in the creation of any lien, mortgage, pledge, charge, or
encumbrance upon any of the Wilshire Med Assets, or will cause the cessation or
termination of any other business relationship or arrangement between Wilshire
Tech and any third party that is material to the Business or any of the Wilshire
Med Assets, and, except as set forth in Exhibit 4.11, no consents or waivers
thereunder are required to be
- 11 -
<PAGE> 12
obtained in connection therewith in order to consummate the transactions
contemplated by this Agreement.
4.12 Documents. The copies of all agreements and other instruments
that have been delivered by Wilshire Tech to either Horizon Med or Acacia Texas
are true, correct, and complete copies of such agreements and instruments and
include all amendments thereto.
4.13 Accounts Receivable. Wilshire Tech acknowledges that neither
Horizon Med nor Acacia Texas has made any representations or warranties to
Wilshire Tech regarding the collectibility or value of the Accounts Receivable
or the reasonableness of the allowance for doubtful accounts thereof. Subject to
full compliance by each of Horizon Med and Acacia Texas with their post-closing
undertakings set forth in Section 5.2(g), below, Wilshire Tech expressly assumes
the entire risk of collection of the Accounts Receivable.
4.14 Conduct of Business Pending the Closing Date. Except as
otherwise consented to by Acacia Texas in writing, for actions to be taken to
the contrary, between the Effective Date and the Closing Date, and until the
first to occur of the date on which Wilshire Tech first requests delivery of the
Promissory Note or termination of this Agreement pursuant to its terms,
whichever first occurs, Wilshire Tech shall:
(a) Operate and conduct the Business in the ordinary course of
business as presently conducted;
(b) Use its best efforts to retain the services of all
vendors, suppliers, manufacturers, agents, and consultants used in the
Business commensurate with the current requirements of the Business;
(c) Promptly notify Acacia Texas of, and diligently defend
against, all lawsuits, claims, proceedings, or investigations that are,
or which any officers of Wilshire Tech, as a result of events or
circumstances actually known to them, has reason to believe may be,
threatened, brought, asserted, or commenced against Wilshire Tech or
any of its shareholders, officers, or directors, involving or affecting
any way the Business, any of the Wilshire Med Assets, or the
transaction contemplated hereby; and not release, settle, compromise,
or relinquish any action or proceeding which would affect the Business
or any of the Wilshire Med Assets or the consummation of the
transactions contemplated hereby; and not unreasonably release, settle,
compromise, or relinquish any claims, causes of action, or rights
related to the Business which Wilshire Tech may have against any other
persons;
(d) Not sell or otherwise dispose, or enter into any agreement
for the sale, of any of the Wilshire Med Assets, except for sales of
inventory and obsolete equipment in the ordinary course of business and
consistent with past practices, and not permit or allow, or enter into
any agreements providing for or permitting, any of the Wilshire Med
Assets to be subjected to any mortgage, security interest, pledge,
option, lien, charge, or encumbrance other than liens or security
interests in existence on the date hereof which have been disclosed to
Acacia Texas, statutory liens to se-
- 12 -
<PAGE> 13
cure taxes that are not yet due and payable, and except for mortgages
and the like entered in the ordinary course of business and consistent
with past practices;
(e) Maintain in good working order and condition, ordinary
wear and tear excepted, and in compliance in all material respects with
all applicable laws and regulations, all of the Wilshire Med Assets
reasonably required to operate the Business consistent with past
practices;
(f) Observe and perform all terms, conditions, covenants, and
obligations contained in all existing agreements between Wilshire Tech
and third parties, the violation of which would have, individually or
in the aggregate, a material adverse effect on Business or any of the
Wilshire Med Assets; not take any action that would cause a breach or
violation of or default under any material agreement, lease, contract,
or other written instrument, commitment or arrangement, or under any
license or permit, judgment, writ, or order, applicable to or affecting
the Business or any of the Wilshire Med Assets, and promptly notify
Acacia Texas in writing of the occurrence of any such breach or
default; and not enter into any transaction related to the Business
with any shareholder, director, or officer or any person or entity
related to or affiliated with Wilshire Tech except to transactions
entered in the ordinary course of business and consistent with past
practices; and
(g) Except as otherwise provided herein, pay all federal,
state, local and foreign taxes assessed with respect to the Business or
any of the Wilshire Med Assets, when due, and in any event prior to the
imposition or assessment of any liens against the Business or any of
the Wilshire Med Assets.
4.15 Disclosure. The representations and warranties made by Wilshire
Tech herein and in any schedule, statement, exhibit, or document furnished or to
be furnished by Wilshire Tech to either Horizon Med or Acacia Texas pursuant to
the provisions hereof or in connection with the transactions contemplated hereby
taken as a whole do not and will not as of their respective dates contain any
untrue statements of a material fact, or omit to state a material fact necessary
to make the statements made herein not misleading.
SECTION 5
CLOSING AGREEMENTS AND POST-CLOSING
5.1 Closing Agreements. On the Closing Date, the following
activities shall occur, the following agreements shall be executed and
delivered, and the respective parties thereto shall have performed all acts that
are required by the terms of such activities and agreements to have been
performed simultaneously with the execution and delivery thereof as of the
Closing Date:
(a) Wilshire Tech shall have executed and delivered documents
to Acacia Texas sufficient then and there to transfer ownership of the
Wilshire Med Assets to Acacia Texas;
- 13 -
<PAGE> 14
(b) Acacia Texas shall have executed and delivered to Wilshire
Tech the Wilshire Med Sublease Assignment Agreement;
(c) Acacia Texas shall have delivered by cashier's check,
business check, or wire transfer to Wilshire Tech the sum of two
hundred thousand dollars ($200,000) in good funds;
(d) Acacia Texas shall have delivered to Wilshire Tech the
executed Promissory Note;
(e) Acacia Texas shall have delivered to Wilshire Tech the
executed Acacia Texas Security Agreement and related UCC-1 Financing
Statements;
(f) (If required in accordance with the provisions of Section
3.5, above), Horizon Med or Acacia Texas shall cause to have been
delivered to Wilshire Tech the written consent of Union Bank for the
consummation of the transactions contemplated hereby and its statement
that, as of the Closing Date, it does not have any security interest
(perfected or otherwise) in any of the assets of Acacia Texas that are
subject to the Acacia Texas Security Agreement;
(g) Wilshire Tech shall have delivered to Acacia Texas the
Acacia Texas Sublease;
(h) Horizon Med shall have delivered to Wilshire Tech the
executed Corporate Guaranty;
(i) Horizon Med shall have delivered to Wilshire Tech the
executed Horizon Med Security Agreement and related UCC-1 Financing
Statements;
5.2 Post-Closing.
(a) At the Closing Date, or as soon thereafter as is required
by Texas statute, Acacia Texas shall be responsible for the payment to
the Texas Comptroller of Public Accounts of (i) such Sales or Use or
analogous taxes, if any, as are due by virtue of Acacia Texas' purchase
of the Wilshire Med Assets and (ii) the personal property taxes for
Texas regarding the Wilshire Med Assets for the period that commences
on the Effective Date, the parties to agree, at the Closing Date, or as
soon thereafter as is practicable for a diligent party, on allocation
method in respect of such taxes;
(b) At the Closing Date, or as soon thereafter as is
practicable for a diligent party, Wilshire Tech shall cease using the
names "Wilshire Medical" and any and all such other names listed on
Exhibit 1.3-c, and shall commence the administrative processes to
transfer to Acacia Texas Wilshire Tech's rights to use the names
"Wilshire Medical" and any and all such other fictitious names and
trade names to which Wilshire Tech has the rights of use in respect of
the operations of Wilshire Med as listed on Exhibit 1.3-c attached to
the Agreement;
- 14 -
<PAGE> 15
(c) At the Closing Date, or as soon thereafter as is
practicable for a diligent party, Wilshire Tech shall commence the
administrative processes to transfer to Acacia Texas the patents,
trademarks, and copyrights owned by or registered to Wilshire Tech in
respect of the operations of Wilshire Med or to which it has the rights
of use as listed on Exhibit 1.3-d attached to the Agreement;
(d) At the Closing Date, or as soon thereafter as is
practicable for a diligent party, Wilshire Tech shall commence the
administrative processes to transfer to Acacia Texas all regulatory
approvals, including all approved applications made pursuant to Section
510(k) of the FD&C Act, (and the information used to obtain such
approvals, the device master records, and the device history files)
owned by Wilshire Tech in respect of the products of Wilshire Med, such
approvals as listed on Exhibit 1.3-e attached to the Agreement;
(e) Acacia Texas shall pay, or cause to be paid, the
obligations assumed pursuant to the terms of the Wilshire Med Sublease
Assignment Agreement in the ordinary course unless the terms thereof
are amended by Acacia Texas with the consent of Advanced Materials,
Inc.;
(f) From and after the Closing Date, neither Horizon Med nor
Acacia Texas shall undertake any actions that, directly or indirectly,
hinder or could hinder Wilshire Tech's efforts to collect the Accounts
Receivable in full, in accordance with their terms and conditions and
shall affirmatively assist Wilshire Tech's collection efforts upon its
periodic, reasonable requests therefor;
(g) During the 12-month period that commences as of the
Closing Date, Acacia Texas will make available to Wilshire Tech, at
Acacia Texas' facility or any other facility reasonably required, the
services of Mark Rasmussen (to a maximum of 80 hours during such
period) to assist Wilshire Tech with respect to its transdermal
products or products related thereto, subject to (i) Wilshire Tech's
payment in the ordinary course of any travel expenses incurred by Mr.
Rasmussen or Acacia Texas and any out-of-pocket expenses, i.e., direct
labor, payroll taxes, and benefits, of Acacia Texas in complying with
this Section and (ii) Wilshire Tech providing reasonable notice to
Acacia Texas of the dates for which Mr. Rasmussen's services are
required;
(h) Prior to or immediately following the Closing Date, Acacia
Texas may make offers of employment commencing on and after the Closing
Date on terms and conditions proposed by Acacia Texas in its sole
discretion to persons currently employed by Wilshire Tech in connection
with the Business. Acacia Texas shall not assume any responsibility for
any obligations to pay compensation and fringe benefits to any such
employees hired by Acacia Texas, which obligations arose in connection
with such employees' employment by Wilshire Tech;
(i) Prior to the Closing Date, or as soon thereafter as is
practicable for a diligent party, Wilshire Tech shall have obtained
such approvals as may be required in respect of the Wilshire Med
Sublease and the Wilshire Med Sublease Assignment Agreement;
- 15 -
<PAGE> 16
(j) At the Closing Date, or as soon thereafter as is
practicable for a diligent party, Wilshire Tech shall provide to each
of Horizon Med and Acacia Texas a list of (i) expenditures made by
Wilshire Med on behalf of Acacia Texas in respect of the Business from
and after the Effective Date through and including the Closing Date,
the scope and nature of such expenditures set forth on Exhibit
2.3-a(i); (ii) expenditures made by Wilshire Med on behalf of Acacia
Texas in respect of the Business prior to the Effective Date, but
amortized for the period from and after the Effective Date through and
including the Closing Date, the scope and nature of such expenditures
set forth on Exhibit 2.3-a(ii); (iii) inventory acquired in respect of
the Business from and after the Effective Date through and including
the Closing Date; and (iv) accounts receivable generated by the
Business from and after the Effective Date through and including the
Closing Date, the scope and nature of which are set forth on Exhibit
2.3-a(iv);
(k) At the Closing Date, or as soon thereafter as is
practicable for a diligent party, Acacia Texas shall deliver to
Wilshire Tech good funds, by cashier's check, business check, or wire
transfer, in the aggregate amount equivalent to the sum of the items to
be listed in accordance with Sections 2.3(a)(i), (ii), and (iii), less
an amount equivalent to the base rent for the month of June, 1996, as
set forth in the Wilshire Med Sublease; and
(l) At the Closing Date, or as soon thereafter as is
practicable for a diligent party, Wilshire Med shall deliver to Acacia
Texas documentation in respect of the accounts receivable generated by
the Business from and after the Effective Date through and including
the Closing Date referenced in Section 2.3(a)(iv).
SECTION 6
CONDITIONS PRECEDENT TO HORIZON MED'S AND ACACIA TEXAS' OBLIGATION TO CLOSE
The obligations of each of Horizon Med and Acacia Texas to consummate
this Agreement are subject to satisfaction on or prior to the Closing Date of
the following conditions:
6.1 Representations and Warranties. The representations and
warranties of Wilshire Tech contained in this Agreement shall be true and
correct in all material respects on the date hereof and remain true and correct
on and as of the Closing Date, and Wilshire Tech shall have performed in all
material respects all of its obligations hereunder theretofore to be performed.
6.2 Other Consents and Approvals. With the exception of those items
identified in Section 5.2, above, as post-closing items, and the consent and
statement of Union Bank, if required pursuant to Section 3.5, above, Horizon Med
and Acacia Texas shall have received all consents and approvals required for the
consummation of the transactions contemplated by this Agreement to permit Acacia
Texas to acquire all of the Wilshire Med Assets pursuant hereto, without thereby
violating any laws, government regulations, or agreements to which either Acacia
Texas or Horizon Med is subject or is a party, in form and substance acceptable
to Acacia Texas and Horizon Med.
- 16 -
<PAGE> 17
6.3 Other. The joint conditions precedent in Section 8 hereof shall
have been satisfied.
SECTION 7
CONDITIONS PRECEDENT TO WILSHIRE TECH'S OBLIGATIONS TO CLOSE
The obligation of Wilshire Tech to consummate this Agreement is subject
to the satisfaction on or prior to the Closing Date of the following conditions:
7.1 Representations and Warranties. The representations and
warranties of each of Horizon Med and Acacia Texas contained in this Agreement
shall be true and correct in all material respects on and as of the Closing
Date, and each of Horizon Med and Acacia Texas shall have performed in all
material respects all of its obligations hereunder theretofore to be performed.
7.2 Other Consents and Approvals. With the exception of those items
identified in Section 5.2, above, as post-closing items, and the consent and
statement of Union Bank, if required pursuant to Section 3.5, above, Wilshire
Tech shall have received all consents and approvals required for the
consummation of the transactions contemplated by this Agreement to permit Acacia
Texas to acquire all of the Wilshire Med Assets pursuant hereto, without thereby
violating any laws, government regulations, or agreements to which Wilshire Tech
is subject or is a party, in form and substance acceptable to Wilshire Tech.
7.3 Other. The joint conditions precedent in Section 8 hereof shall
have been satisfied.
SECTION 8
JOINT CONDITIONS PRECEDENT
The obligations of Horizon Med, Acacia Texas, and Wilshire Tech to
consummate this Agreement shall be subject to satisfaction or waiver in writing
by all parties of each and all of the following additional conditions precedent
at or prior to the Closing Date:
8.1 Other Agreements. All of the agreements contemplated by Section
5.1 of this Agreement shall have been executed and delivered, and all acts
required to be performed thereunder as of the Closing Date shall have been duly
performed.
8.2 Absence of Litigation. At the Closing Date, there shall be no
action, suit, or proceeding pending or threatened against any of the parties
hereto by any person, governmental agency, or subdivision thereof, nor shall
there be pending or threatened any action in any court or administrative
tribunal, any of which would have the effect of inhibiting the consummation of
the transactions contemplated herein.
- 17 -
<PAGE> 18
SECTION 9
TERMINATION AND WAIVER
9.1 Termination. This Agreement may be terminated and abandoned on
or prior to the Closing Date by:
(a) the mutual consent in writing of the parties hereto;
(b) the Board of Directors of either or both of Horizon Med
and Acacia Texas if the conditions precedent in Sections 6 and 8 of
this Agreement have not been satisfied or waived by the Closing Date;
or
(c) the Board of Directors of Wilshire Tech if the conditions
precedent in Sections 7 and 8 of this Agreement have not been satisfied
or waived by the Closing Date.
SECTION 10
INDEMNIFICATION
10.1 Wilshire Tech's Indemnified Obligations. In respect of the
Business, and subject to the limitations set forth in this Section 10, Wilshire
Tech shall indemnify and hold each of Horizon Med and Acacia Texas and their
respective officers, directors, employees, successors, and assigns, harmless
from and against the following (herein called "Wilshire Tech's Indemnified
Obligations"):
(a) any and all liabilities, losses, damages, claims, costs,
and expenses of Horizon Med and/or Acacia Texas and their respective
officers, directors, employees, successors, and assigns, of any nature,
whether absolute, contingent, or otherwise, that arise from or are in
connection with: (i) any breach of the representations or warranties of
Wilshire Tech contained in this Agreement or in any Exhibits or
Schedules hereto or any certificates or other documents delivered
hereunder by or on behalf of Wilshire Tech; (ii) any breach or default
by Wilshire Tech of any of its covenants or agreements contained in
this Agreement; and (iii) Wilshire Tech's ownership, manufacture, or
sale of the Wilshire Med Assets or its operation of the Business prior
to the Closing Date; and (iv) any obligation or liability of Wilshire
Tech other than under the Assumed Contracts or the Wilshire Med
Sublease accruing from and after the Closing Date.
(b) all losses which may be incurred by either or both of
Horizon Med and Acacia Texas as a result of non-compliance by Wilshire
Tech with any applicable Bulk Sales laws;
(c) any and all actions, suits, proceedings, demands,
assessments, or judgments, costs and expenses incident to any of the
foregoing.
- 18 -
<PAGE> 19
The liability of Wilshire Tech for Wilshire Tech's Indemnified Obligations shall
be subject to the following limitations:
(i) Wilshire Tech shall not be liable for Wilshire
Tech's Indemnified Obligations unless it has received written
notice of a claim asserted under Section 10.1 hereof on or
before the expiration of the 12th month following the Closing
Date.
(ii) No such claim shall be asserted unless the
aggregate of all claims for Wilshire Tech's Indemnified
Obligations shall exceed $10,000, whereupon Wilshire Tech
shall be liable for all amounts, including the threshold of
$10,000.
10.2 Horizon's Indemnified Obligations. Subject to the limitations
set forth in this Section 10, each of Horizon Med and Acacia Texas shall
indemnify and hold Wilshire Tech harmless from and against the following (herein
called "Horizon's Indemnified Obligations"):
(a) any and all liabilities, losses, damages, claims, costs,
and expenses of Wilshire Tech and its officers, directors, employees,
successors, and assigns, of any nature, whether absolute, contingent,
or otherwise, that arise from or are in connection with: (i) any breach
of the representations or warranties of either or both of Horizon Med
or Acacia Texas contained in this Agreement or in any Exhibits or
Schedules hereto or any certificates or other documents delivered
hereunder by or on behalf of either or both of Horizon Med or Acacia
Texas; (ii) any breach or default by either or both of Horizon Med or
Acacia Texas of any of their respective covenants or agreements
contained in this Agreement; and
(b) any and all actions, suits, proceedings, demands,
assessments, or judgments, costs and expenses incident to any of the
foregoing.
The liability of each of Horizon Med and Acacia Texas for Horizon's Indemnified
Obligations shall be subject to the following limitations:
(i) Each of Horizon Med and Acacia Texas shall not
be liable for Horizon's Indemnified Obligations unless either
has received written notice of a claim asserted under Section
10.2 hereof on or before the expiration of the 12th month
following the Closing Date.
(ii) No such claim shall be asserted unless the
aggregate of all claims for Horizon's Indemnified Obligations
shall exceed $10,000, whereupon Wilshire Tech shall be liable
for all amounts, including the threshold of $10,000.
10.3 Notification; Assumption of Defense. Any party entitled to
indemnification hereunder (the "Indemnified Party") shall promptly give written
notice to the indemnifying party (the "Indemnifying Party") after the
Indemnified Party has knowledge of any claim against the Indemnifying Party as
to which recovery may be sought against the Indemnified Party because of the
indemnity set forth Sections 10.1 and 10.2 hereunder, or of the commencement of
any
- 19 -
<PAGE> 20
legal proceedings against the Indemnified Party as to such claim after the
Indemnified Party has knowledge of such proceedings, whichever shall first
occur, and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting from such claim. Failure by the Indemnifying
Party to notify the Indemnified Party of its election to defend any such action
within 30 days after notice thereof shall have been given to the Indemnifying
Party shall be deemed a waiver by the Indemnifying Party of its right to defend
such action. If the Indemnifying Party assumes the defense of any such claim or
litigation resulting therefrom, the obligations of the Indemnifying Party
hereunder as to such claim shall be limited to taking all steps necessary in the
defense or settlement of such claim or litigation resulting therefrom and to
holding the Indemnified Party harmless from and against any and all losses,
damages, and liabilities caused by or arising out of any settlement approved by
the Indemnifying Party or any judgment in connection with such claim or
litigation resulting therefrom. The Indemnifying Party shall not, in the defense
of such claim or any litigation resulting therefrom, consent to entry of any
judgment except with the written consent of the Indemnified Party, or enter into
any settlement (except with the written consent of the Indemnified Party), which
does not include as an unconditional term thereof the giving by the claimant or
the plaintiff to the Indemnified Party of a release from all liability in
respect of such claim or litigation.
10.4 Failure to Assume. If the Indemnifying Party shall not assume
the defense of any such claim or litigation resulting therefrom, the Indemnified
Party may defend against such claim or litigation in such manner as it may deem
appropriate and unless the Indemnifying Party shall deposit with the Indemnified
Party a sum equivalent to the total amount demanded in such claim or litigation
plus the Indemnified Party's estimate of the cost of defending the same, the
Indemnified Party may settle such claim or litigation on such terms as it may
deem appropriate, in its reasonable judgment, and the Indemnifying Party shall
promptly reimburse the Indemnified Party for the amount of all expenses, legal
or otherwise, incurred by the Indemnified Party in connection with the defense
against or settlement of such claim or litigation. If no settlement of such
claim or litigation is made, the Indemnifying Party shall promptly reimburse the
Indemnified Party for the amount of any judgment rendered with respect to such
claim or in such litigation and of all expenses, legal or otherwise, incurred by
the Indemnified Party in the defense against such claim or litigation.
SECTION 11
MISCELLANEOUS
11.1 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if written and delivered in
person or sent by certified mail, postage prepaid, addressed as follows:
to Wilshire Tech: Wilshire Technologies, Inc.
Attention: President
5441 Avenida Encinas, Suite A
Carlsbad, California 92008
- 20 -
<PAGE> 21
with a copy to: Randolf W. Katz, Esq.
Arter & Hadden
5 Park Plaza, Suite 1000
Irvine, California 92714
to Horizon Med: Acacia Laboratories, Inc.
Attention: President
1719 S. Grand Avenue
Santa Ana, California 92705
to Acacia Texas: Acacia Laboratories of Texas, Inc.
Attention: President
11420 Mathis Drive
Farmers Branch, Texas 75234
with a copy to: K. C. Schaaf, Esq.
Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
or such other address as shall be furnished in writing by the appropriate
person, and any such notice or communication shall be deemed to have been given
as of the date so mailed.
11.2 Time of the Essence. Time shall be of the essence of this
Agreement.
11.3 Offers of Employment. For so long as any principal of the
Promissory Note remains outstanding and unpaid, Wilshire Tech covenants not to
offer to employ any individual who, as of the date five business days prior to
the Closing Date, was employed by Wilshire Med, subject to such individual
becoming an employee of Acacia Texas as of the Closing Date; provided, however,
that such covenant shall terminate upon the earlier of (i) an event of default
by Acacia Texas under the Promissory Note or (ii) with respect to any such
individual, the cessation of the employment relationship between such individual
and Acacia Texas, unless such cessation was prompted, directly or indirectly, by
Wilshire Tech. Notwithstanding the above, the parties agree that each may make
an offer of employment or continued employment to Sarah Casey and that her
acceptance of either offer or rejection of both offers is not contemplated by
the parties as a material term or condition of this Agreement and, therefore,
shall not be deemed to affect the transaction contemplated hereby.
11.4 Entire Agreement and Amendment. This Agreement and the documents
delivered at the Closing Date hereunder contain the entire agreement between the
parties hereto with respect to the transactions contemplated by this Agreement
and supersede all other agreements, written or oral, with respect thereto. This
Agreement may be amended or modified in whole or in part, and any rights
hereunder may be waived, only by an agreement in writing, duly and validly
executed in the same manner as this Agreement or by the party against whom the
waiver would be asserted. The waiver of any right hereunder shall be effective
only with respect to the matter specifically waived and shall not act as a
continuing waiver unless it so states by its terms.
- 21 -
<PAGE> 22
11.5 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed to constitute an original and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party.
11.6 Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of
California.
11.7 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, personal representatives, successors, and assigns as the case may be.
11.8 Captions. The captions appearing in this Agreement are inserted
for convenience of reference only and shall not affect the interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WILSHIRE TECHNOLOGIES, INC.
By: /s/ James W. Klingler
--------------------------------
James W. Klingler
Chief Financial Officer
ACACIA LABORATORIES, INC. ACACIA LABORATORIES OF TEXAS, INC.
By: /s/ William A. Goolsbee By: /s/ William A. Goolsbee
-------------------------------- ---------------------------------
William A. Goolsbee, President William A. Goolsbee, President
- 22 -
<PAGE> 23
TABLE OF CONTENTS TO EXHIBITS
(This Table of Contents is an Index of the Exhibits attached hereto and the
Summary Description herein does not purport to constitute a complete description
of the information required to be set forth in such Exhibits. Reference is made
to the Purchase of Assets and Assumption of Sublease Agreement for a detailed
description of information required to be set forth in such Exhibits.)
EXHIBIT SUMMARY DESCRIPTION
1.3 Wilshire Med Assets
1.3-a Equipment, furniture, fixtures, supplies, inventory, and all
other tangible personal property owned by Wilshire Med
1.3-b Wilshire Med's pro forma financial statements for the year ended
November 30, 1995
1.3-c Fictitious names and trade names to which Wilshire Tech has the
rights of use in respect of the operations of Wilshire Med
1.3-d Intangible Property Rights consisting of patents, trademarks,
and copyrights owned by or registered to Wilshire Tech in
respect of the operations of Wilshire Med or to which it has the
rights of use
1.3-e Regulatory approvals, including all approved applications made
pursuant to Section 510(k) of the FD&C Act
1.3-g Assumed Contracts consisting of material agreements and
policies of insurance
1.4 Certain license agreements
2.1-c Promissory Note
2.2-e Form of Acacia Texas Security Agreement and related UCC-1
Financing Statements
2.2-g Form of Acacia Texas Sublease
2.2-h Form of Corporate Guaranty
2.2-i Form of Horizon Med Security Agreement and related UCC-1
Financing Statements
2.2-o Allocation of the Purchase Price
<PAGE> 24
2.3-a(i) Expenditures of Wilshire Med between Effective Date and Closing
Date
2.3-a(ii) Amortised expenditures of Wilshire Med prior to Effective Date
2.3-a(iii) Inventory acquired by Wilshire Med between Effective Date and
Closing Date
2.3-a(iv) Accounts receivable generated by Wilshire Med between Effective
Date and Closing Date
3.5 Consent and statement by Union Bank
4.3 Ordinary course exceptions
4.6 Intellectual Property Rights exceptions
4.9-a Wilshire Med Sublease
4.9-b Form of Wilshire Med Sublease Assignment Agreement
4.11 Additional required consents or waivers
<PAGE> 25
EXHIBIT 2.1-c
-----
PROMISSORY NOTE
U.S. $540,000.00 Carlsbad, California
May 31, 1996
1. Promise to Pay. The undersigned, ACACIA LABORATORIES OF TEXAS, INC.,
a Texas corporation (the "Maker"), promises to pay WILSHIRE TECHNOLOGIES, INC.,
a California corporation (the "Holder"), the sum of Five Hundred Forty Thousand
and No/100 Dollars ($540,000.00) and interest thereon at a rate of five percent
(5%) per annum from the date hereof until this Note is fully paid.
2. Accrued Interest. Accrued Interest shall be payable monthly in
arrears commencing on July 31, 1996, with respect to interest accruing during
the preceding period, and continuing on the last day of each succeeding month
until all principal is paid in full. Interest hereunder is computed on the basis
of a year of three hundred sixty (360) days for the actual number of days
elapsed. Notwithstanding the above, interest shall commence to accrue hereunder
from and after the Closing Date (as that term is defined in the Purchase of
Assets and Assumption of Sublease Agreement (the "Asset Purchase Agreement").)
3. Manner of Payment. Principal and interest shall be payable in
thirty-six (36) equal monthly payments of Sixteen Thousand One Hundred
Eighty-four and 28/100 Dollars ($16,184.28) beginning July 31, 1996, and
continuing on the last day of each month thereafter. All remaining principal and
accrued but unpaid interest thereon shall be payable in full on June 30, 1999.
Both principal hereof and interest thereon are payable in lawful money of the
United States of America at the offices of Holder as indicated in the Asset
Purchase Agreement.
4. Late Charges. If any amount payable hereunder is not paid within
fifteen (15) days of the date it becomes due, Maker shall pay, at Holder's
option, a late or collection charge equal to five percent (5%) of the unpaid
amount. Further, any amount payable hereunder that is not paid when due shall
bear interest at the rate of ten percent (10%) per annum from the date such
amount became due.
5. Security. This Note is secured by a security agreement and by UCC-1
financing statements (together, the "Security Documents") of even date herewith,
encumbering the assets of Maker set forth in the aforementioned security
agreement. Holder's security interest in and to such assets of Maker acquired
pursuant to the terms and conditions of the Asset Purchase Agreement shall not
be subordinated to any other creditor of, or lender to Maker.
6. Optional Acceleration. Holder may, at its sole option, declare all
sums owing under this Note immediately due and payable upon the occurrence of a
default or breach under this Note, a breach of Sections 2.3, 3.5, 5.2(j), (k),
or (l), or 10 of the Asset Purchase Agreement, or a material breach under the
terms of the Security Documents, which breach under this Note or the terms of
the Security Documents remains uncured for a period of fifteen (15) days after
notice thereof has been given to Holder.
- 1 -
<PAGE> 26
7. Mandatory Acceleration. Upon the closing of a registered public
offering of any securities of Acacia Laboratories, Inc. a California corporation
that also does business under the name Horizon Medical, Inc., whether or not
such offering is underwritten, all sums owing under this Note shall be
immediately due and payable.
8. Affirmative Covenants. As long as any of Maker's obligations
hereunder remain outstanding or owing, Maker shall, unless Holder otherwise
consents in writing:
(a) Duly pay and discharge all other indebtedness and
obligations, except such as Maker may contest in good faith and for which
adequate provision is made for the payment thereof if it is found that the same
is an obligation of Maker.
(b) Maintain for itself and each of its subsidiaries (a)
insurance with responsible companies in such amounts and against such risks as
is usually carried by companies engaged in similar businesses and owning similar
properties in the same general areas in which Maker or the applicable subsidiary
operates and (b) insurance required by any governmental department, public body
or authority, commission, board, bureau, agency or instrumentality having
jurisdiction over Maker or any of its subsidiaries.
9. Waiver. No previous waiver and no failure or delay by Holder in
acting with respect to the terms of this Note shall constitute a waiver of any
breach, default, or failure of condition under this Note, the Security Documents
or the obligations secured thereby. A waiver of any term of this Note or the
Security Documents must be made in writing and shall be limited to the express
written terms of such waiver.
10. Attorney's Fees. If any attorney is engaged by Holder or Maker to
enforce or interpret any provision of this Note or the Security Documents as a
consequence of any default hereunder which remains uncured for a period of
fifteen (15) days after notice thereof has been given to Holder, with or without
the filing of any legal action or proceeding, then Maker or Holder (as
appropriate) shall immediately pay on demand all attorneys' fees and all other
costs incurred by Holder or Maker (as appropriate), together with interest
thereon from the date of such demand until paid at the rate of ten percent (10%)
per annum.
11. Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if written and delivered in person or
sent by certified mail, postage prepaid, addressed as follows:
to Holder: Wilshire Technologies, Inc.
Attention: President
5441 Avenida Encinas, Suite A
Carlsbad, California 92008
with a copy to: Arter & Hadden
Attention: Randolf W. Katz, Esq.
5 Park Plaza, Suite 1000
Irvine, California 92714
- 2 -
<PAGE> 27
to Maker: Acacia Laboratories of Texas, Inc.
Attention: President
11420 Mathis Drive
Farmers Branch, Texas 75234
with a copy to: Stradling, Yocca, Carlson & Rauth
Attention: K. C. Schaaf, Esq.
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
or such other address as shall be furnished in writing by the appropriate
person, and any such notice or communication shall be deemed to have been given
as of the date so mailed.
12. Miscellaneous. Maker waives presentment; demand; notice of
dishonor; notice of default or delinquency; notice of acceleration; notice of
protest and non-payment; notice of costs, expenses or losses and interest
thereon; notice of interest on interest and late charges; and diligence in
taking any action to collect any sums owing under this Note or in proceeding
against any of the rights or interests in or to properties securing payment of
this Note. Time is of the essence with respect to every provision hereof. This
Note shall be construed and enforced in accordance with the laws of the State of
California. If any provision of this Note shall be deemed by a court of
competent jurisdiction to be invalid, illegal, or unenforceable, that portion
shall be deemed severed from this Note and the remaining part shall remain in
full force as though the invalid, illegal or unenforceable portion had never
been part of this Note.
Maker:
ACACIA LABORATORIES OF TEXAS, INC.
a Texas corporation
By: /s/ William A. Goolsbee
------------------------------
William A. Goolsbee, President
- 3 -
<PAGE> 28
EXHIBIT 2.2-e
-----
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Security Agreement") is made and dated as
of May 31, 1996, between ACACIA LABORATORIES OF TEXAS, INC., a Texas corporation
(the "Debtor"), and WILSHIRE TECHNOLOGIES, INC., a California corporation (the
"Secured Party").
RECITALS
A. Pursuant to a Purchase of Assets and Assumption of Sublease
Agreement (the "Asset Purchase Agreement") of even date herewith, Secured Party
has sold those certain assets specified in the Asset Purchase Agreement to
Debtor for consideration that includes a promissory note (the "Note") in the
amount of Five Hundred Forty Thousand Dollars ($540,000.00).
B. Debtor's execution and delivery of this Security Agreement
constitutes one of the closing activities under the Asset Purchase Agreement.
1. Security Interest. Debtor hereby grants a security interest pursuant
to the Uniform Commercial Code to Secured Party in the assets of Debtor
described in Section 2, below ("Collateral"), to secure payment and performance
of Debtor's Obligations described at Paragraph 3 below.
2. Collateral. The Collateral of Debtor includes the following, and
shall be limited to such Collateral which has an aggregate value not less than
120% of the amounts owing under the Note at the time Secured Party's rights are
to be enforced hereunder:
(a) All inventory of Debtor, now owned or hereafter acquired,
and all raw materials, work in process, materials used or consumed in Debtor's
business and finished goods, together with all additions and accessions thereto
and replacements therefor, and products thereof;
(b) All equipment of Debtor, now owned or hereafter acquired,
including, without limitation, all machinery, tools, dies, blueprints,
catalogues, computer hardware and software, furniture, furnishings, and
fixtures;
(c) All documents and instruments now owned or hereafter
acquired, including, without limitation, securities and all new substituted and
additional documents and instruments issued with respect thereto, all voting or
other rights now or hereafter exercis- able and all cash and non-cash dividends
and all other property now or hereafter receivable with respect to any of the
foregoing;
(d) All now existing and hereafter acquired books and records
relating to the foregoing Collateral and all equipment containing such books and
records;
(e) All other property of Debtor now or hereafter in the
possession, custody or control of Secured Party and all property of Debtor in
which Secured Party now has or hereafter acquires a security interest; and
- 1 -
<PAGE> 29
(f) All proceeds of the foregoing Collateral. For purposes of
this Agreement, the term "proceeds" includes whatever is receivable or received
when Collateral or proceeds is sold, collected, exchanged or otherwise disposed
of, whether such disposition is voluntary or involuntary, and includes, without
limitation, all rights to payment, including return premiums, with respect to
any insurance relating thereto; provided, however, "proceeds" shall not include
any receivables to be paid to Debtor.
3. Obligations. The obligations ("Obligations") secured by this
Security Agreement shall consist of all obligations of Debtor under the Note and
Section 3.5 of the Asset Purchase Agreement and all reasonable sums and
expenses, including attorneys' fees advanced or incurred by Secured Party in
connection with Secured Party's collection thereof and enforcement hereof.
4. Collateral Agreements. As to Collateral, (a) Debtor will: (1) except
to the extent expressly permitted under the terms of the Note, keep it free of
all levies, liens, encumbrances and other security interests; (2) comply with
all laws, statutes and regulations pertaining to it, the non-compliance with
which would have an adverse effect on Secured Party's rights hereunder or under
the Note; (3) pay when due all taxes, licenses, charges and other impositions on
or for it, provided that Debtor may contest the same in good faith so long as in
conjunction therewith Debtor posts appropriate bond(s) or otherwise takes all
necessary and appropriate steps to fully protect Secured Party's interest in the
Collateral and to forestall and prevent foreclosure upon or realization of other
remedies against the Collateral in satisfaction of any such tax, license, charge
or other imposition; (4) execute, file and record such statements, notices and
agreements, take such action and obtain such certificates and documents, in
accordance with all applicable laws, statutes, and regulations, as may
reasonably be requested by Secured Party from time to time as may be reasonably
necessary to perfect, evidence and continue Secured Party's security interest in
it; (5) upon demand, give Secured Party such information as reasonably requested
concerning it and Debtor's business, and permit Secured Party to inspect and
copy the records thereof at Secured Party's expense, and subject to Secured
Party entering into a reasonable Confidentiality Agreement in a form provided by
Debtor; (6) keep or require any goods which are security for or represented by
it to be insured in amounts, on terms and with carriers comparable with those as
in existence on the date hereof; and (7) as appropriate, properly care for,
house, store and maintain it and any goods represented by it in good condition,
free of misuse, abuse, waste and deterioration, and prepare it for sale or
market according to approved methods, and promptly and duly observe and perform
any contract or agreement pertaining to or part of it; (b) Debtor will not,
without Secured Party's written consent: (1) exchange, lease, lend, use,
operate, demonstrate, sell or dispose of it or Debtor's rights therein other
than in the ordinary course of business or permit it to be or become so affixed
to realty as to be part of or become a fixture thereof; except that until
otherwise notified by Secured Party, equipment goods may be used in the regular
course of Debtor's business for their intended use only and replaced as
necessitated by reasonable wear and tear, and inventory goods or raw materials
may be used, and inventory goods held for sale may be sold, in the regular
course of Debtor's business; (2) as appropriate, remove it from or outside of
Debtor's chief place of business or other site on which Collateral has been
located only after prior written notice to Secured Party; or (3) permit anything
to be done that may impair, or fail to do anything reasonably necessary or
advisable to preserve, its value and the security and insurance coverage.
- 2 -
<PAGE> 30
5. Default. Upon the happening of any default in payment or performance
of Debtor's Obligations or the failure of Debtor to cure within fifteen (15)
days following the giving of notice thereof by Secured Party to Debtor, any
material breach of Debtor's covenants and agreements pursuant to this Security
Agreement; then Secured Party, at its election and in addition to all other
rights, powers and privileges, may (1) declare the unpaid balance, in whole or
in part, of Debtor's Obligations immediately due and payable without demand or
notice and proceed to collect same; (2) waive or remedy any default without
waiving it or any prior or subsequent default; (3) terminate any agreement for
financial accommodation, and (4) as appropriate, take possession of Collateral
with or without legal process or require Debtor to assemble it and make it
available to, and at a reasonably convenient place designated by, Secured Party
and, upon giving fifteen (15) days prior written notice to Debtor, sell it at
public sale upon commercially reasonable terms, in the county where located or
where this agreement was made or at private sale upon commercially reasonable
terms and whether or not Collateral is present at the place of sale.
6. No Subordination. The security interest granted herein shall not be
subordinated to any other creditor of, or lender to Debtor.
7. Termination.
(a) This Security Agreement and the security interest granted
to Secured Party by Debtor hereunder shall terminate when all of the Debtor's
Obligations are paid to Secured Party in full or otherwise satisfied or
terminated.
(b) Promptly upon termination of this Security Agreement,
Secured Party agrees to execute and file with the California Secretary of State
a termination statement on Form UCC-2 terminating Secured Party's security
interest in the Collateral. This subparagraph (b) is subject to specific
performance and injunctive relief for the benefit of Debtor in the event of a
failure by Secured Party to comply duly with a reasonable request for such
compliance.
8. General.
(a) Such care as Secured Party gives to the safekeeping of its
own property of like kinds shall constitute reasonable care of Collateral when
in Secured Party's possession, but Secured Party is not required to make
presentment, demand or protest, or give notice and need not take action to
preserve any rights against prior parties in connection with any obligation or
evidence of indebtedness held as Collateral.
(b) After the occurrence of a default under Section 6, Secured
Party, in its own or Debtor's name and at any time upon giving at least five (5)
days prior written notice to Debtor and at Debtor's reasonable expense, may, but
is not obligated to: (1) notify any obligor or account debtor on Collateral to
make payment to Secured Party; (2) collect by legal proceedings or otherwise and
endorse, receive and receipt for all dividends, interest, payments, proceeds and
other sums and property now or hereafter payable on or on account of Collateral;
(3) enter into any extension, reorganization, deposit, merger, consolidation or
other agreement pertaining to, or deposit, surrender, accept, hold or apply
other property in
- 3 -
<PAGE> 31
exchange for, Collateral; (4) insure, process and preserve Collateral; (5)
transfer Collateral to its own or its nominee's name; (6) make any compromise or
settlement, and take any action it deems advisable in its reasonable discretion,
and upon demand Debtor will pay the same to Secured Party together with any
deficiency or balance on Debtor's Obligations remaining after any sale or other
disposition of Collateral by Secured Party, with interest at 10% per annum or as
agreed, which interest shall only accrue ten (10) days after such payment is
due.
(c) Debtor will give Secured Party prior written notice of any
change of place of business and address thereof and all policies or certificates
of insurance required for Collateral.
(d) This is a continuing agreement and applies to all present
and future obligations of Debtor to Secured Party, and whether or not such
obligations continue, increase, decrease or create new indebtedness and
notwithstanding the bankruptcy of, or other event or proceedings affecting
Debtor.
(e) Time is of the essence. Acceptance of partial or
delinquent payments or failure to exercise any right, power or remedy shall not
waive any obligation of Debtor or modify this Agreement. Secured Party, its
successors and assigns, have all rights, powers and remedies herein and as
provided by law, including those of a secured party under the Uniform Commercial
Code, and may exercise the same and effect any set-off and proceed against
Collateral or other security for Debtor's Obligations at any time.
9. Cumulative Rights. The rights, powers and remedies of Secured Party
under this Security Agreement shall be in addition to all rights, powers and
remedies given to Secured Party by virtue of any statute or rule of law, or any
other agreement between Debtor and Secured Party or otherwise, all of which
rights, powers and remedies shall be cumulative and may be exercised
successively or concurrently without impairing Secured Party's security interest
in the Collateral.
10. Waiver. Any forbearance or failure or delay by Secured Party in
exercising any right, power or remedy shall not preclude the further exercise
thereof, and every right, power or remedy of Secured Party shall continue in
full force and effect until such right, power or remedy is specifically waived
in a writing executed by Secured Party. Debtor waives any right to require
Secured Party to proceed against any person or to exhaust any Collateral or to
pursue any remedy in Secured Party's power.
11. Binding Upon Successors. All rights of Secured Party under this
Security Agreement shall inure to the benefit of its successors and assigns, and
all obligations of Debtor shall bind its successors and assigns.
12. Entire Agreement; Severability. This Security Agreement contains
the entire agreement between Secured Party and Debtor with respect to the
subject matter hereof. If any of the provisions of this Security Agreement shall
be held invalid or unenforceable, this Security Agreement shall be construed as
if not containing those provisions and the rights and obligations of the parties
hereto shall be construed and enforced accordingly.
- 4 -
<PAGE> 32
13. Choice Of Law. This Security Agreement shall be construed in
accordance with and governed by the internal laws of the State of California,
and where applicable and except as otherwise defined herein, terms used herein
shall have the meanings given them in the California Uniform Commercial Code.
14. Notice. Any notices or other communications required or permitted
hereunder shall be sufficiently given if written and delivered in person or sent
by certified mail, postage prepaid, addressed as follows:
Secured Party: Wilshire Technologies, Inc.
Attention: President
5441 Avenida Encinas, Suite A
Carlsbad, California 92008
With a copy to: Arter & Hadden
Attention: Randolf W. Katz, Esq.
5 Park Plaza, Suite 1000
Irvine, California 92714
Debtor: Acacia Laboratories of Texas, Inc.
Attention: President
11420 Mathis Drive
Farmers Branch, Texas 75234
With a copy to: Stradling, Yocca, Carlson & Rauth
Attention: K. C. Schaaf, Esq.
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
or such other address as shall be furnished in writing by the appropriate
person, and any such notice or communication shall be deemed to have been given
as of the date so mailed.
15. Attorneys' Fees. In the event of any controversy, claim or dispute
between Debtor and Secured Party arising out of or relating to this Security
Agreement, or the breach hereof, the prevailing party shall be entitled to
recover from the losing party reasonable attorneys' fees, expenses and costs.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WILSHIRE TECHNOLOGIES, INC. ACACIA LABORATORIES OF TEXAS, INC.
By: /s/ James W. Klingler By: /s/ William A. Goolsbee
----------------------- ------------------------------
James W. Klingler, William A. Goolsbee, President
Chief Financial Officer
- 5 -
<PAGE> 33
EXHIBIT 2.2-h
CORPORATE GUARANTY
Carlsbad, California
May 31, 1996
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and to induce Wilshire Technologies, Inc., a
California corporation (the "Holder") to enter into that certain Purchase of
Assets and Assumption of Sublease Agreement of even date herewith among Holder,
Acacia Laboratories of Texas, Inc., a Texas corporation ("Acacia Texas"), and
Acacia Laboratories, Inc., a California corporation that also does business
under the name Horizon Medical, Inc. ("Horizon Med"), and all other
certificates, documents, agreements, or instruments executed and delivered in
connection therewith (the "Agreement"), and to make a loan to Acacia Texas, of
which Horizon Med is the sole shareholder, which loan is evidenced by that
certain promissory note (the "Note") of Acacia Texas, of even date herewith, in
the initial principal amount of Five Hundred Forty Thousand Dollars
($540,000.00), the undersigned, hereby absolutely and unconditionally,
guaranties to Holder the full and prompt payment when due, whether at maturity
or earlier by reason of acceleration or otherwise, of any and all present and
future debts, liabilities, and obligations owed by Acacia Texas to Holder
pursuant to the terms of the Note and the undersigned hereby acknowledges and
agrees with Holder that:
1. The debts, liabilities and obligations guarantied hereby
(collectively referred to herein as the "Indebtedness") shall include those
outstanding debts, liabilities, and obligations arising under and pursuant to or
in connection with Sections 2.3, 3.5 and 5.2(j), (k), and (l) of the Agreement
or the Note, including without limitation accrued but unpaid interest thereon
and all legal fees and other costs of collection, whether now existing or
hereafter arising, whether absolute or contingent, direct or indirect, primary
or secondary, sole, joint, several or joint and several, secured or unsecured,
due or not due, contractual, tortious or statutory, liquidated or unliquidated,
arising by agreement or imposed by law or otherwise.
2. No act or thing need occur to establish the liability of Horizon Med
hereunder, and no act or thing except full payment and discharge of all of the
Indebtedness, shall in any way exonerate Horizon Med hereunder or modify,
reduce, limit or release the liability of Horizon Med hereunder. This is an
absolute, unconditional and continuing guaranty of payment of the Indebtedness
and shall continue to be in force and be binding upon Horizon Med, until paid in
full.
3. The occurrence of any one of the following events shall constitute
an event of default under this Guaranty, and, upon the occurrence thereof and at
the election of Holder, upon notice or demand, the Indebtedness of Horizon Med
hereunder shall become immediately due, payable and enforceable against Horizon
Med, whether or not the Indebtedness is then due and payable: (1) the occurrence
of any event of default under the Note and the failure to pay upon demand the
obligation of the Guaranty; (2) the commencement of any bankruptcy, insolvency,
receivership, or similar proceeding by Horizon Med (or against Horizon Med if
not cured within 60 days after commencement); (3) the attempt by Horizon Med to
effect an assignment for the benefit of creditors or a composition with
creditors; (4) the insolvency of Horizon Med; or (5) the material breach of any
representation, warranty, cove-
- 1 -
<PAGE> 34
nant, or agreement on the part of Horizon Med under this Guaranty, which breach
remains uncured for a period of fifteen (15) days after notice thereof from
Holder has been given to the undersigned; provided, however, that for a breach
of Sections 2.3, 3.5, and 5.2(j), (k), and (l) of the Agreement, there shall be
no such cure period after notice of such breach has been given to the
undersigned.
4. Horizon Med hereby waives any right of subrogation Horizon Med may
now or hereafter have against Acacia Texas with respect to the Indebtedness. In
addition, Horizon Med hereby waives any defense based on a right to proceed
against Acacia Texas, now or hereafter, for contribution, indemnity,
reimbursement, and any other suretyship rights and claims, whether direct or
indirect, liquidated or contingent, whether arising under express or implied
contract, or by operation of law, which Horizon Med may now or hereafter have as
against Acacia Texas with respect to the Indebtedness. Horizon Med also hereby
waives any rights to recourse to or with respect to any asset of Acacia Texas.
The waivers set forth in this Section 4 shall continue in effect until the
Indebtedness has been paid in full. To the extent Horizon Med's waiver of these
rights of subrogation, reimbursement or contribution as set forth herein are
found by a court of competent jurisdiction to be void or voidable for any
reason, Horizon Med agrees that Horizon Med's right of subrogation and
reimbursement against Acacia Texas and Horizon Med's right of subrogation
against any collateral or security shall be junior and subordinate to Holder's
rights against Acacia Texas and to Holder's right, title and interest in such
collateral or security, and Horizon Med's right of contribution against any
other guarantor or pledgor shall be junior and subordinate to Holder's rights
against such other guarantor or pledgor.
5. Horizon Med will pay or reimburse Holder for all costs, expenses and
attorneys' fees reasonably paid or incurred by Holder in endeavoring to collect
and enforce the Indebtedness and in enforcing this Guaranty.
6. Whether or not any existing relationship between Horizon Med and
Acacia Texas has been changed or ended and whether or not this Guaranty has been
revoked, Holder may enter into transactions resulting in the continuance of the
Indebtedness and may otherwise agree, consent to, or suffer the continuance of
any of the Indebtedness, without any consent or approval by Horizon Med and
without any prior or subsequent notice to Horizon Med. The liability of Horizon
Med shall not be affected or impaired by any of the following acts or things
(which Holder is expressly authorized to do, omit, or suffer from time to time,
both before and after revocation of this Guaranty, without consent or approval
by or notice to Horizon Med): (a) any acceptance of collateral security,
guarantors, accommodation parties or sureties for any or all of the
Indebtedness; (b) one or more extensions or renewals of the Indebtedness
(whether or not for longer than the original period) or any modification of the
interest rate, maturity or other contractual terms applicable to the
Indebtedness or any amendment or modification of any of the terms or provisions
of the Note or Sections 2.3, 3.5, 5.2(j), (k), and (l) of the Agreement under
which the Indebtedness or any part thereof arose; (c) any waiver or indulgence
granted to Acacia Texas, any delay or lack of diligence in the enforcement of
the Indebtedness or any failure to institute proceedings, file a claim, give any
required notices or otherwise protect any of the Indebtedness; (d) any full or
partial release of, compromise or settlement with, or agreement not to sue,
Acacia Texas or any guarantor or other person liable in respect of any of the
Indebtedness; (e) any release, surrender, can-
- 2 -
<PAGE> 35
cellation or other discharge of any evidence of the Indebtedness or the
acceptance of any instrument in renewal or substitution therefor; (f) any
failure to obtain collateral security (including rights of setoff) for the
Indebtedness, or to see to the proper or sufficient creation and perfection
thereof, or to establish the priority thereof, or to preserve, protect, insure,
care for, exercise or enforce any collateral security; or any modification,
alteration, substitution, exchange, surrender, cancellation, termination,
release or other change, impairment, limitation, loss or discharge of any
collateral security; (g) any collection, sale, lease or disposition of, or any
other foreclosure or enforcement of or realization on, any collateral security;
(h) any assignment, pledge or other transfer of any of the Indebtedness or any
evidence thereof; and (i) any manner, order or method of application of any
payments or credits upon the Indebtedness. Horizon Med waives any and all
defenses and discharges available to a surety, guarantor, or accommodation
co-obligor.
7. Horizon Med expressly agrees that Horizon Med shall be and remain
liable for any deficiency remaining after foreclosure of any security interest
securing the Indebtedness, whether or not the liability of Acacia Texas or any
other obligor for such deficiency is discharged pursuant to statute or judicial
decision. The liability of Horizon Med shall not be affected or impaired by any
voluntary or involuntary liquidation, dissolution, sale or other disposition of
all or substantially all the assets, marshalling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment of, or other similar
event or proceeding affecting, Acacia Texas or any of its assets. Horizon Med
will not assert, plead or enforce against Holder any claim, defense or setoff
available to Horizon Med against Acacia Texas.
8. Holder shall not be required first to resort for payment of the
Indebtedness to Acacia Texas or other persons, or their properties, or first to
enforce, realize upon or exhaust any collateral security for the Indebtedness,
before enforcing this Guaranty.
9. If any payment applied by Holder to the Indebtedness is thereafter
set aside, recovered, rescinded, or required to be returned for any reason
(including, without limitation, the bankruptcy, insolvency or reorganization of
Acacia Texas or any other obligor), the Indebtedness to which such payment was
applied shall for the purpose of this Guaranty be deemed to have continued in
existence, notwithstanding such application, and this Guaranty shall be
enforceable as to such Indebtedness as fully as if such application had never
been made.
10. Horizon Med acknowledges and agrees that Holder (a) has not made
any representations or warranties with respect to, (b) does not assume any
responsibility to Horizon Med for, and (c) has no duty to provide information
to Horizon Med regarding the enforceability of any of the Indebtedness or the
financial condition of Acacia Texas or any guarantor. Horizon Med has
independently determined the creditworthiness of Acacia Texas and the
enforceability of the Indebtedness and until the Indebtedness is paid in full
will independently and without reliance on Holder continue to make such
determinations.
11. This Guaranty shall be effective upon delivery to Holder, without
further act, condition or acceptance by Holder, shall be binding upon Horizon
Med and its successors and assigns and shall inure to the benefit of Holder and
its successors and assigns. Any invalidity
- 3 -
<PAGE> 36
or unenforceability of any provision or application of this Guaranty shall not
affect other lawful provisions and applications thereof, and to this end the
provisions of this Guaranty are declared to be severable. This Guaranty may not
be waived, modified, amended, terminated, released, or otherwise changed except
by a writing signed by Horizon Med and Holder. This Guaranty shall be governed
by and interpreted and enforced in accordance with the internal laws of the
State of California, without giving effect to its conflicts-of-law provisions or
interpretations. Horizon Med waives notice of Holder's acceptance hereof.
Horizon Med irrevocably (a) agrees that any suit, action or other legal
proceeding arising out of or relating to this Guaranty may be brought in a court
of record in the State of California or in the Courts of the United States
located in such State, (b) consent to the jurisdiction of each such court in any
suit, action or proceeding, (c) waives any objection which he may have to the
venue of any such suit, action or proceeding in any such courts and any claim
that any such suit, action or proceeding has been brought in an inconvenient
forum, and (d) agrees that a final judgment in any such suit, action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
12. Horizon Med has had the opportunity to review the matters discussed
and contemplated by the Note, including the remedies Holder may pursue against
Acacia Texas in the event of a default under the Note, and Acacia Texas'
financial condition and ability to perform under the Note. Horizon Med further
agrees to keep itself fully informed on all aspects of Acacia Texas' financial
condition and the performance of Acacia Texas' obligations to Holder and that
Holder has no duty to disclose to Horizon Med any information pertaining to
Acacia Texas or any security or collateral.
13. The following provisions shall apply (but shall not be deemed to
limit in any respect the foregoing provisions of this Guaranty):
(a) Changes Do Not Affect Liability. Horizon Med hereby waives
the rights and benefits under California Civil Code ("CC") Section 2819, and
agrees that by doing so Horizon Med's liability shall continue even if Holder
alters any obligations under the Indebtedness in any respect or Holder's
remedies or rights against Acacia Texas are in any way impaired or suspended
without Horizon Med's consent.
(b) Guarantee of Payment and Performance. Horizon Med's
liability under this Guaranty is a guarantee of payment and performance of the
Note and not of collectibility, and is not conditioned or contingent upon the
genuineness, validity, regularity or enforceability of any of the Indebtedness,
and Horizon Med hereby waives any and all benefits and defenses under CC Section
2810 and agrees that by doing so Horizon Med is liable even if Acacia Texas had
no liability at the time of execution of the Note or thereafter ceases to be
liable. Horizon Med hereby waives any and all benefits and defenses under CC
Section 2809 and agrees that by doing so Horizon Med's liability may be larger
in amount and more burdensome than that of Acacia Texas. Horizon Med's liability
hereunder shall continue until all sums due under the Indebtedness have been
paid in full and shall not be limited or affected in any way by any impairment
or any diminution or loss of value of any security or collateral for the
Indebtedness, Holder's failure to perfect a security interest in it or any
disability or other defense of Acacia Texas or any other guarantor or pledgor.
- 4 -
<PAGE> 37
(c) Waivers of Certain Rights and Defenses. Horizon Med hereby
waives any and all benefits and defenses under CC Sections 2845, 2849, and 2850,
including, without limitation, the right to require Holder to (a) proceed
against Acacia Texas or any other guarantor or pledgor, (b) proceed against or
exhaust any security or collateral Holder may hold, or (c) pursue any other
right or remedy for Horizon Med's benefit, and agrees that Holder may proceed
against Horizon Med for the obligations guaranteed herein without taking any
action against Acacia Texas or any other guarantor or pledgor and without
proceeding against or exhausting any security or collateral Holder holds.
Horizon Med agrees that Holder may unqualifiedly exercise at his sole discretion
any or all rights and remedies available to him against Acacia Texas or any
other guarantor or pledgor without impairing Holder's rights and remedies in
enforcing this Guaranty, under which Horizon Med's liabilities shall remain
independent and unconditional. Horizon Med agrees that Holder's exercise of
certain of such rights or remedies may affect or eliminate Horizon Med's right
of subrogation or recovery against Acacia Texas and that Horizon Med may incur a
partially or totally nonreimbursable liability under this Guaranty.
(d) Subrogation, Reimbursement, and Contribution Rights.
Horizon Med hereby waives all benefits and defenses under CC Sections 2847, 2848
and 2849 and agrees that Horizon Med shall have no right of subrogation or
reimbursement against Acacia Texas, right of subrogation against any collateral
or security provided for in the Indebtedness and no right of contribution
against any other guarantor or pledgor unless and until all amounts due under
the Indebtedness have been paid in full and Holder has released, transferred or
disposed of all of his right, title and interest in any collateral or security.
To the extent Horizon Med's waiver of these rights of subrogation, reimbursement
or contribution as set forth herein are found by a court of competent
jurisdiction to be void or voidable for any reason, Horizon Med agrees that
Horizon Med's right of subrogation and reimbursement against Acacia Texas and
Horizon Med's right of subrogation against any collateral or security shall be
junior and subordinate to Holder's rights against Acacia Texas and to Holder's
right, title and interest in such collateral or security, and Horizon Med's
right of contribution against any other guarantor or pledgor shall be junior and
subordinate to Holder's rights against such other guarantor or pledgor.
14. Any notices or other communications required or permitted hereunder
shall be sufficiently given if written and delivered in person or sent by
certified mail, postage prepaid, addressed as follows:
to Holder: Wilshire Technologies, Inc.
Attention: President
5441 Avenida Encinas, Suite A
Carlsbad, California 92008
with a copy to: Randolf W. Katz, Esq.
Arter & Hadden
5 Park Plaza, Suite 1000
Irvine, California 92714
- 5 -
<PAGE> 38
to Horizon Med: Acacia Laboratories, Inc.
Attention: President
1719 S. Grand Avenue
Santa Ana, California 92705
with a copy to: K. C. Schaaf, Esq.
Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
or such other address as shall be furnished in writing by the appropriate
person, and any such notice or communication shall be deemed to have been given
as of the date so mailed.
IN WITNESS WHEREOF, this Guaranty has been duly executed by the
undersigned on the date first above written.
ACACIA LABORATORIES, INC.
By: /s/ William A. Goolsbee
------------------------------
William A. Goolsbee, President
- 6 -
<PAGE> 39
EXHIBIT 2.2-i
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Security Agreement") is made and dated as
of May 31, 1996, between ACACIA LABORATORIES, INC., a California corporation
that also does business under the name HORIZON MEDICAL, INC. (the "Guarantor"),
and WILSHIRE TECHNOLOGIES, INC., a California corporation (the "Secured Party").
RECITALS
A. Pursuant to a Purchase of Assets and Assumption of Sublease
Agreement (the "Asset Purchase Agreement") of even date herewith, Secured Party
has sold those certain assets specified in the Asset Purchase Agreement to
Guarantor's wholly-owned subsidiary, Acacia Laboratories of Texas, Inc. ("Acacia
Texas"), for consideration that includes a promissory note (the "Note") in the
amount of Five Hundred Forty Thousand Dollars ($540,000.00).
B. Guarantor's execution and delivery of the Corporate Guaranty and
of this Security Agreement constitutes certain of the closing activities under
the Asset Purchase Agreement.
1. Security Interest. Guarantor hereby grants a security interest
pursuant to the Uniform Commercial Code to Secured Party in the assets of
Guarantor described in Section 2, below ("Collateral"), to secure payment and
performance of Guarantor's Obligations described at Paragraph 3 below.
2. Collateral. The Collateral of Guarantor includes the following,
and shall be limited to such Collateral which has an aggregate value not less
than 120% of the difference between the amounts owing under the Note at the time
Secured Party's rights are to be enforced hereunder and the value of the
"Collateral" as defined in the Security Agreement of even date herewith between
Secured Party and Acacia Texas at the time Secured Party's rights are to be
enforced hereunder:
(a) All present and future accounts, general intangibles and
other rights of Guarantor to the payment of money no matter how evidenced, all
chattel paper, instruments and other writings evidencing any such right, and all
goods repossessed or returned in connection therewith;
(b) All inventory of Guarantor, now owned or hereafter
acquired, and all raw materials, work in process, materials used or consumed in
Guarantor's business and finished goods, together with all additions and
accessions thereto and replacements therefor, and products thereof;
(c) All equipment of Guarantor, now owned or hereafter
acquired, including, without limitation, all machinery, tools, dies, blueprints,
catalogues, computer hardware and software, furniture, furnishings and fixtures;
(d) All documents and instruments now owned or hereafter
acquired, including, without limitation, securities and all new substituted and
additional documents and
- 1 -
<PAGE> 40
instruments issued with respect thereto, all voting or other rights now or
hereafter exercisable and all cash and non-cash dividends and all other
property now or hereafter receivable with respect to any of the foregoing;
(e) All now existing and hereafter acquired books and records
relating to the foregoing Collateral and all equipment containing such books and
records;
(f) All other property of Guarantor now or hereafter in the
possession, custody or control of Secured Party and all property of Guarantor in
which Secured Party now has or hereafter acquires a security interest; and
(g) All proceeds of the foregoing Collateral. For purposes of
this Agreement, the term "proceeds" includes whatever is receivable or received
when Collateral or proceeds is sold, collected, exchanged or otherwise disposed
of, whether such disposition is voluntary or involuntary, and includes, without
limitation, all rights to payment, including return premiums, with respect to
any insurance relating thereto.
3. Obligations. The obligations ("Obligations") secured by this
Security Agreement shall consist of all obligations of Guarantor under the Note
and Sections 2.3, 3.5, and 5.2(j), (k), and (l) of the Asset Purchase Agreement
and all reasonable sums and expenses, including attorneys' fees advanced or
incurred by Secured Party in connection with Secured Party's collection thereof
and enforcement hereof.
4. Collateral Agreements. As to Collateral, (a) Guarantor will: (1)
except to the extent expressly permitted under the terms of its financing
arrangements with Union Bank of California N.A. ("Union Bank"), keep it free of
all levies, liens, encumbrances and other security interests; (2) comply with
all laws, statutes and regulations pertaining to it, the non-compliance with
which would have an adverse effect on Secured Party's rights hereunder or under
its financing arrangements with Union Bank; (3) pay when due all taxes,
licenses, charges and other impositions on or for it, provided that Guarantor
may contest the same in good faith so long as in conjunction therewith Guarantor
posts appropriate bond(s) or otherwise takes all necessary and appropriate steps
to fully protect Secured Party's interest in the Collateral and to forestall and
prevent foreclosure upon or realization of other remedies against the Collateral
in satisfaction of any such tax, license, charge or other imposition; (4)
execute, file and record such statements, notices and agreements, take such
action and obtain such certificates and documents, in accordance with all
applicable laws, statutes, and regulations, as may reasonably be requested by
Secured Party from time to time as may be reasonably necessary to perfect,
evidence and continue Secured Party's security interest in it; (5) upon demand,
give Secured Party such information as reasonably requested concerning it and
Guarantor's business, and permit Secured Party to inspect and copy the records
thereof at Secured Party's expense, and subject to Secured Party entering into a
reasonable Confidentiality Agreement in a form provided by Guarantor; (6) keep
or require any goods which are security for or represented by it to be insured
in amounts, on terms and with carriers comparable with those as in existence on
the date hereof; and (7) as appropriate, properly care for, house, store and
maintain it and any goods represented by it in good condition, free of misuse,
abuse, waste and deterioration, and prepare it for sale or market according to
approved methods, and promptly and duly observe and perform any contract or
agreement pertaining to or part of it;
- 2 -
<PAGE> 41
(b) Guarantor will not, without Secured Party's written consent: (1) exchange,
lease, lend, use, operate, demonstrate, sell or dispose of it or Guarantor's
rights therein other than in the ordinary course of business or permit it to be
or become so affixed to realty as to be part of or become a fixture thereof;
except that until otherwise notified by Secured Party, equipment goods may be
used in the regular course of Guarantor's business for their intended use only
and replaced as necessitated by reasonable wear and tear, and inventory goods or
raw materials may be used, and inventory goods held for sale may be sold, in the
regular course of Guarantor's business; (2) as appropriate, remove it from or
outside of Guarantor's chief place of business or other site on which Collateral
has been located only after prior written notice to Secured Party; or (3) permit
anything to be done that may impair, or fail to do anything reasonably necessary
or advisable to preserve, its value and the security and insurance coverage.
5. Default. Upon the happening of (i) any default in payment or
performance of Guarantor's Obligations, (ii) or the failure of Guarantor to cure
within fifteen (15) days following the giving of notice thereof by Secured Party
to Guarantor, any material breach of Guarantor's covenants and agreements
pursuant to this Security Agreement or (iii) a "Change-in-Control" (as defined
below), then Secured Party, at its election and in addition to all other rights,
powers and privileges, may (1) declare the unpaid balance, in whole or in part,
of Guarantor's Obligations immediately due and payable without demand or notice
and proceed to collect same; (2) waive or remedy any default without waiving it
or any prior or subsequent default; (3) terminate any agreement for financial
accommodation, and (4) as appropriate, take possession of Collateral with or
without legal process or require Guarantor to assemble it and make it available
to, and at a reasonably convenient place designated by, Secured Party and, upon
giving fifteen (15) days prior written notice to Guarantor, sell it at public
sale upon commercially reasonable terms, in the county where located or where
this agreement was made or at private sale upon commercially reasonable terms
and whether or not Collateral is present at the place of sale. For purposes of
this Section 5, a "Change-in-Control" shall occur when the Guarantor shall merge
or consolidate with, or sell, assign, lease, or otherwise dispose of or
voluntarily part with capital stock or substantially all of its assets (whether
now owned or hereinafter acquired) to any person or entity, except for sales or
other dispositions of assets in the ordinary course of the Guarantor's business
and except that the Guarantor may merge any person or entity into it or
otherwise acquire such person or entity so long as the Guarantor is the
surviving entity or the holders of voting stock of the Guarantor immediately
prior to such merger (or a series of such mergers) are the holders of more than
50% of the Guarantor immediately following such merger(s), without constituting
a "Change-in-Control."
6. No Subordination. The security interest granted herein shall not
be subordinated to any other creditor of, or lender to, Guarantor other than
Union Bank, or a successor bank.
- 3 -
<PAGE> 42
7. Termination.
(a) This Security Agreement and the security interest granted
to Secured Party by Guarantor hereunder shall terminate when all of the
Guarantor's Obligations are paid to Secured Party in full or otherwise satisfied
or terminated.
(b) Promptly upon termination of this Security Agreement,
Secured Party agrees to execute and file with the California Secretary of State
a termination statement on Form UCC-2 terminating Secured Party's security
interest in the Collateral. This subparagraph (b) is subject to specific
performance and injunctive relief for the benefit of Guarantor in the event of a
failure by Secured Party to comply duly with a reasonable request for such
compliance.
8. General.
(a) Such care as Secured Party gives to the safekeeping of its
own property of like kinds shall constitute reasonable care of Collateral when
in Secured Party's possession, but Secured Party is not required to make
presentment, demand or protest, or give notice and need not take action to
preserve any rights against prior parties in connection with any obligation or
evidence of indebtedness held as Collateral.
(b) After the occurrence of a default under Section 6, Secured
Party, in its own or Guarantor's name and at any time upon giving at least five
(5) days prior written notice to Guarantor and at Guarantor's reasonable
expense, may, but is not obligated to: (1) notify any obligor or account debtor
on Collateral to make payment to Secured Party; (2) collect by legal proceedings
or otherwise and endorse, receive and receipt for all dividends, interest,
payments, proceeds and other sums and property now or hereafter payable on or on
account of Collateral; (3) enter into any extension, reorganization, deposit,
merger, consolidation or other agreement pertaining to, or deposit, surrender,
accept, hold or apply other property in exchange for, Collateral; (4) insure,
process and preserve Collateral; (5) transfer Collateral to its own or its
nominee's name; (6) make any compromise or settlement, and take any action it
deems advisable in its reasonable discretion, and upon demand Guarantor will pay
the same to Secured Party together with any deficiency or balance on Guarantor's
Obligations remaining after any sale or other disposition of Collateral by
Secured Party, with interest at 10% per annum or as agreed, which interest shall
only accrue ten (10) days after such payment is due.
(c) Guarantor will give Secured Party prior written notice of
any change of place of business and address thereof and all policies or
certificates of insurance required for Collateral.
(d) This is a continuing agreement and applies to all present
and future obligations of Guarantor to Secured Party, and whether or not such
obligations continue, increase, decrease or create new indebtedness and
notwithstanding the bankruptcy of, or other event or proceedings affecting
Guarantor.
- 4 -
<PAGE> 43
(e) Time is of the essence. Acceptance of partial or delinquent
payments or failure to exercise any right, power or remedy shall not waive any
obligation of Guarantor or modify this Agreement. Secured Party, its successors
and assigns, have all rights, powers and remedies herein and as provided by law,
including those of a secured party under the Uniform Commercial Code, and may
exercise the same and effect any set-off and proceed against Collateral or other
security for Guarantor's Obligations at any time.
9. Cumulative Rights. The rights, powers and remedies of Secured
Party under this Security Agreement shall be in addition to all rights, powers
and remedies given to Secured Party by virtue of any statute or rule of law, or
any other agreement between Guarantor and Secured Party or otherwise, all of
which rights, powers and remedies shall be cumulative and may be exercised
successively or concurrently without impairing Secured Party's security interest
in the Collateral.
10. Waiver. Any forbearance or failure or delay by Secured Party in
exercising any right, power or remedy shall not preclude the further exercise
thereof, and every right, power or remedy of Secured Party shall continue in
full force and effect until such right, power or remedy is specifically waived
in a writing executed by Secured Party. Guarantor waives any right to require
Secured Party to proceed against any person or to exhaust any Collateral or to
pursue any remedy in Secured Party's power.
11. Binding Upon Successors. All rights of Secured Party under this
Security Agreement shall inure to the benefit of its successors and assigns, and
all obligations of Guarantor shall bind its successors and assigns.
12. Entire Agreement; Severability. This Security Agreement contains
the entire agreement between Secured Party and Guarantor with respect to the
subject matter hereof. If any of the provisions of this Security Agreement shall
be held invalid or unenforceable, this Security Agreement shall be construed as
if not containing those provisions and the rights and obligations of the parties
hereto shall be construed and enforced accordingly.
13. Choice Of Law. This Security Agreement shall be construed in
accordance with and governed by the internal laws of the State of California,
and where applicable and except as otherwise defined herein, terms used herein
shall have the meanings given them in the California Uniform Commercial Code.
14. Notice. Any notices or other communications required or
permitted hereunder shall be sufficiently given if written and delivered in
person or sent by certified mail, postage prepaid, addressed as follows:
Secured Party: Wilshire Technologies, Inc.
Attention: President
5441 Avenida Encinas, Suite A
Carlsbad, California 92008
- 5 -
<PAGE> 44
With a copy to: Arter & Hadden
Attention: Randolf W. Katz, Esq.
5 Park Plaza, Suite 1000
Irvine, California 92714
Guarantor: Acacia Laboratories, Inc.
Attention: President
1719 S. Grand Avenue
Santa Ana, California 92705
With a copy to: Stradling, Yocca, Carlson & Rauth
Attention: K. C. Schaaf, Esq.
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
or such other address as shall be furnished in writing by the appropriate
person, and any such notice or communication shall be deemed to have been given
as of the date so mailed.
15. Attorneys' Fees. In the event of any controversy, claim or
dispute between Guarantor and Secured Party arising out of or relating to this
Security Agreement, or the breach hereof, the prevailing party shall be entitled
to recover from the losing party reasonable attorneys' fees, expenses and costs.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WILSHIRE TECHNOLOGIES, INC. ACACIA LABORATORIES, INC.
By: /s/ James W. Klingler By: /s/ William A. Goolsbee
-------------------------------- --------------------------------
James W. Klingler William A. Goolsbee, President
Chief Financial Officer
- 6 -
<PAGE> 45
EXHIBIT 2.2-g
INDUSTRIAL SUBLEASE AGREEMENT
Between
ACACIA LABORATORIES OF TEXAS, INC.
As Landlord,
And
WILSHIRE TECHNOLOGIES, INC.,
As Tenant
PROJECT:
11420 MATHIS DRIVE
FARMERS BRANCH, TEXAS 75234
<PAGE> 46
INDUSTRIAL SUBLEASE AGREEMENT
1. BASIC SUBLEASE INFORMATION AND CERTAIN DEFINED TERMS.
Lease Date: May 31, 1996
Tenant: WILSHIRE TECHNOLOGIES, INC., a California
corporation
Tenant's Address: 5441 Avenida Encinas, Suite A
Carlsbad, California 92008
Contact: James W. Klingler
Landlord: ACACIA LABORATORIES OF TEXAS, INC., a Texas
corporation
Landlord's Address: 11420 Mathis Drive
Farmers Branch, Texas 75234
Guarantor(s): N/A
Project: 11420 Mathis Drive
Farmers Branch, Texas 75234.
Description: Approximately 16,500 square feet.
Premises: That portion of the cross-hatched area
(designated "Reduction Area" on Exhibit "A1"
attached to this Sublease, situated in the
building constituting a part of the Project
and shown on Exhibit "A2" (the "Building")
located on the land described on Exhibit "B"
attached to this lease (the "Land")) that
includes adequate warehouse, storage, and
inspection space and shipping dock as
reasonably required for the inventory of
Wilshire Contamination Control and Wilshire
Gloves. In addition, the Premises includes
office space, including use of phone, fax,
computer, copier, and other office machines
for Sarah Casey, Eric Luo, and Mark Peterson
during the Term and any option thereof.
Permitted Use: Warehousing and distribution (other than
retail) of foam and related products.
Term: 6 months, commencing June 1, 1996, and ending
at 5:00 p.m. Central time, November 30, 1996,
subject to adjustment and earlier termination
as provided in this Sublease.
Renewal Option: Landlord hereby grants to Tenant the right and
option to renew the Sublease on the same terms
and conditions as at the Commencement Date
- 1 -
<PAGE> 47
thereof (the "Renewal Option"), provided
Tenant is not then in material breach of any
term of this Sublease. If the Renewal Option
exercised, the Sublease will be renewed for
an additional six-month term as a result of
such exercise, with no further renewal
options unless expressly granted by Landlord
in writing. To exercise the Renewal Option,
Tenant must give Landlord written notice
thereof not later than August 31, 1996.
Base Rent:
<TABLE>
<CAPTION>
Months Monthly
------ -------
<S> <C>
1-6 $4,537.67
</TABLE>
Security Deposit: None
Tenant's Propor-
tionate Share: N/A
Base Year: N/A
Broker or Agent: N/A
Sublease: It is understood and agreed that this Lease is
in fact a sublease, and that Tenant accepts
this Lease subject to all of the terms and
conditions of the underlying lease dated as of
December 1, 1995, between New York Life and
Annuity Corporation, as landlord, and Advanced
Materials Group, Inc., as tenant (the "Under-
lying Lease"), a copy of which is attached
hereto and made a part hereof, under which
Landlord hereunder holds the leased premises
as tenant. Tenant herein covenants that it
will do no act or thing which would constitute
a violation by Landlord herein of its
obligations under such Underlying Lease.
Underlying Lease: The terms and conditions of Sections 2 through
36 of the Underlying Lease are incorporated
herein by this reference, with references to
any defined terms therein being deemed in all
cases to refer to such terms as defined
herein; provided, however, that Sections 4.C.,
5, 6, 7, 8.B., 12, 13.A., 15, 16, 18, 22,
35.H., and 36 are amended and restated in
their entirety herein.
- 2 -
<PAGE> 48
4. RENT, SECURITY DEPOSIT REIMBURSABLE EXPENSES AND ESCROW
PAYMENTS.
C. The Tenant shall not be responsible for Reimbursable
Expenses.
5. EXCESS COMMON AREA CHARGES. The Tenant shall not be
responsible for any Common Area Charges.
6. TAXES. The Tenant shall not be responsible for any
Taxes, Excess Taxes or Assessments.
7. LANDLORD'S REPAIRS. Landlord's maintenance, repair and
replacement obligations are limited to those set forth in this Paragraph 7. The
landlord under the Underlying Lease, at its own cost and expense, is responsible
for roof replacement and for repair and replacement of the foundation and the
structural members of the exterior walls of the Building, reasonable wear and
tear excluded. The terms "roof" and "walls" as used herein shall not include
skylights, windows, glass or plate glass, doors, special store fronts or office
entries. Tenant shall immediately give Landlord written notice of defect or need
for repairs after which Landlord shall have reasonable opportunity to demand the
landlord under the Underlying Lease repair same or cure such defect. Landlord
shall cause landlord under the Underlying Lease to maintain and repair the
common area in and about the Building in a reasonable and prudent manner
including any spur track, with the cost thereof being a part of the Common Area
Charges.
8. TENANT'S REPAIRS AND MAINTENANCE.
B. Except for those items caused by Tenant's
negligence, Tenant shall have no obligation to pay for costs, fees or expenses
related to the operations or maintenance of the Property.
12. UTILITIES. The landlord under the Underlying Lease has agreed
to provide normal water, sewer, gas and electricity service as same may be
available to the Premises. Tenant shall not be required to pay any utility
service charges as a result of the tenancy created by this sublease. Landlord
shall not be liable for any interruption or failure of utility service on the
Premises, unless such interruption or failure was caused, directly or
indirectly, by the action or inaction of Landlord. Tenant acknowledges that it
is aware of the type and quantity of utilities currently available to the
Premises and agrees that same is adequate for Tenant's purposes.
13. LANDLORD AND TENANT INSURANCE.
A. Tenant shall not be responsible for Excess Insurance
Expenses or any insurance premiums.
- 3 -
<PAGE> 49
15. FIRE AND CASUALTY DAMAGE.
A. If the Premises or the Building should be damaged or
destroyed by fire or other peril, this Lease shall terminate and the rent shall
be abated during the unexpired portion of this Lease, effective upon the date of
the occurrence of such damage.
B. If the Building of which the Premises are a part, should be
damaged by any peril covered by the insurance to be provided by the landlord
under the Underlying Lease, or effective upon the date of the occurrence of such
damage and ending upon substantial completion, if the Premises are untenantable
in whole or part during such period, the rent shall be reduced to such extent as
may be fair and reasonable under all of the circumstances.
C. Notwithstanding anything herein to the contrary, in the
event the holder of any indebtedness secured by a mortgage or deed of trust
covering the Premises requires that the insurance proceeds be applied to such
indebtedness, then Landlord shall have the right to terminate this Lease by
delivering written notice of termination to Tenant within fifteen (15) days
after such requirement is made known to Landlord, whereupon all rights and
obligations hereunder shall cease and terminate (except as expressly provided to
the contrary herein).
16. LIABILITY AND INDEMNIFICATION. Except for any claims, rights
of recovery and causes of action that Tenant has released, Landlord shall hold
Tenant harmless and defend Tenant against any and all claims or liability for
any injury or damage to any person in, on or about the Premises, when such
injury or damage shall be caused by an affirmative act of negligence by such
landlord, its agents, servants and employees (unless the indemnified loss is
caused wholly or in part by Tenant's or any other party's negligence, in which
event this indemnity shall not apply to the allocable share of such loss
resulting from Tenant's or such other party's negligence). Except for any
claims, rights of recovery and causes of action that Landlord has released,
Tenant shall indemnify, protect, hold harmless and defend Landlord, its agents,
employees, contractors, partners, directors, officers and any affiliates of the
above-mentioned parties (collectively the "Landlord Affiliates") from and
against any and all obligations, suits, losses, judgments, actions, damages,
claims or liability (including, without limitation, all costs, attorneys' fees,
and expenses incurred in connection therewith) in connection with any loss,
injury or damage (i) to any person or property whatsoever occurring in, on or
about the Project, when such injury or damage shall be caused by the act,
neglect, fault of, or omission of any duty with respect to the same by Tenant,
its agents, servants, employees, or invitees (ii) arising from the conduct of
management of any work done by or for Tenant in or about the Project, (iii)
arising from transactions of the Tenant, or (iv) arising from a breach,
violation or non-performance of any term, provision, covenant or agreement of
Tenant hereunder, or a breach or violation by Tenant of any court order or any
law, regulation, or ordinance
- 4 -
<PAGE> 50
of any federal, state or local authority (collectively, the "Losses"). If any
claim is made against Landlord or Landlord Affiliates, Tenant, at its sole cost
and expense, shall defend any such claim, suit or proceeding by or through
attorneys satisfactory to Landlord. The provisions of this Paragraph 16 shall
survive the expiration or termination of this Lease with respect to any claims
or liability occurring prior to such expiration or termination.
18. INSPECTION. Landlord and Landlord's agents and representatives
(including Landlord and its agents and affiliates under the Underlying Lease)
shall have the right to enter the Premises during business hours, upon prior
reasonable notice except in the event of an emergency, to (i) inspect the
Premises, (ii) make such repairs as may be required or permitted pursuant to
this Lease, and (iii) show the Premises to prospective purchasers of, or parties
who are anticipated to provide financing with respect to, the Building.
Notwithstanding the foregoing, Landlord and landlord under the Underlying Lease
shall have the right to enter the Premises at any time, without notice to
Tenant, in case of an emergency posing a threat to persons or property. Upon
telephonic notice to Tenant, Landlord and Landlord's representatives may enter
the Premises stating the Premises are available. Tenant shall notify Landlord in
writing at least fifteen (15) days prior to vacating the Premises and shall
arrange to meet with Landlord for a joint inspection of the Premises prior to
vacating. If Tenant fails to give such notice or to arrange for such inspection,
then Landlord's inspection of the Premises shall be deemed correct for the
purpose of determining Tenant's responsibility for repairs and restoration of
the Premises.
22. QUIET ENJOYMENT. This Lease is a sublease, and Tenant agrees
to take the Premises subject to the provisions of the prior leases. Landlord
represents that it has the authority to enter into this Lease and that so long
as Tenant pays all amounts due hereunder and performs all other covenants and
agreements herein set forth, Tenant shall peaceably and quietly have, hold and
enjoy the Premises for the Term hereof without hindrance or molestation from
Landlord subject to the terms and provisions of this Lease.
35. MISCELLANEOUS.
H. During the term of this Sublease, Tenant will provide
Landlord, without charge, the following services currently performed by Sarah
Casey: purchasing, materials management, cost accounting, and inventory control.
In return, Landlord will provide Tenant, without charge, the following
warehouse-related services: shipping, receiving, quality inspection based on
past practices, and inventory storage. Such services will be provided in a
commercially reasonable manner and the provision thereof, where relevant, shall
be consistent with past practice.
///
- 5 -
<PAGE> 51
36. ADDITIONAL PROVISIONS. Exhibits A-1, A-2, B, C, D, E, and F,
(there being no Exhibits G, H, J, or I) attached hereto are incorporated by
reference herein.
LANDLORD:
ACACIA LABORATORIES OF TEXAS, INC.
a Texas corporation
By: /s/ William A. Goolsbee
------------------------------
William A. Goolsbee, President
Date of Execution: May 31, 1996
TENANT:
WILSHIRE TECHNOLOGIES, INC.,
a California corporation
By: /s/ James W. Klingler
-----------------------
James W. Klingler
Chief Financial Officer
Date of Execution: May 31, 1996
- 6 -
<PAGE> 52
EXHIBIT 4.9-b
|
RECORDING REQUESTED BY AND |
WHEN RECORDED MAIL TO: |
|
|
|
|
|
|
ASSIGNMENT AND ASSUMPTION OF SUBLEASE
This ASSIGNMENT AND ASSUMPTION OF SUBLEASE ("Assignment") is made this
31st day of May, 1996, by WILSHIRE TECHNOLOGIES, INC., a California corporation
("Assignor") to ACACIA LABORATORIES OF TEXAS, INC. ("Assignee").
RECITALS
A. On or about December 1, 1995, New York Life Insurance and Annuity
Corporation ("New York Life"), as Landlord, and Advanced Materials, Inc.
("Advanced"), as Tenant, entered into an industrial lease agreement ("the
Lease"), attached hereto as Exhibit A and incorporated herein by reference
affecting that real property commonly known as 11420 Mathis Drive, Farmers
Branch, Texas 75234 ("the Property").
B. On or about December 1, 1995, Advanced, as Landlord, and Assignor,
as Tenant, entered into an industrial sublease agreement attached hereto as
Exhibit B and incorporated herein by reference whereby Wilshire Technologies,
Inc. subleased approximately one third of the Property ("the Sublease").
C. Assignee and Assignor, have entered into an agreement whereby
Assignor will sell certain assets to Assignee including its interest in the
Sublease ("the Purchase Agreement").
NOW THEREFORE, for good and adequate consideration, the receipt and
adequacy of which are acknowledged by the Assignee,
1. Assignment. Assignor hereby absolutely and
unconditionally sells, assigns, grants, and transfers to Assignee all right,
title and interest of Assignor, as Lessee, in the Sublease.
2. Assignor's Representations. Assignor represents and
warrants:
(a) that the Sublease is unmodified, and to the
best of its knowledge, is in full force and effect; that Assignor has not
previously sold, assigned, or pledged the rents, that any
<PAGE> 53
rents have not been collected in advance and have not otherwise been released,
discounted, or compromised;
(b) not to receive or collect any rents, nor
pledge, or assign future rents related to the Sublease.
3. Responsibility. Assignee shall not be liable for
any injury or damage to person or property sustained by any persons, in or about
the Property, before execution of this Assignment.
4. Conditions Precedent. This Assignment is expressly
made conditioned upon:
(a) Advanced's consent to this Assignment and
the terms contained in the Estoppel Certificate by its execution of the Estoppel
Certificate in the form attached hereto as Exhibit "C" and incorporated herein
by reference;
(b) Advanced's novation of the Sublease and
consent to the termination of Assignor's responsibility and obligations under
the Sublease by its execution of the Estoppel Certificate in the form attached
hereto as Exhibit "D";
(c) the consent of New York Life to this
Assignment and the terms contained in the Estoppel Certificate by its execution
of the Estoppel Certificate in the form attached hereto as Exhibit "E" and
incorporated herein by reference;
(d) the closing of the Purchase Agreement
between Assignor and Assignee; and
(e) receipt by Advanced of a payment from
Assignee in the aggregate sum of $18,151.10, representing payment of the first
month's rent following the effective date of the Assignment in the sum of
$9,075.55, and a security deposit in the sum of $9,075.55 to be held by
Advanced, without obligation for interest, as security for the performance of
Assignee's obligations under the Sublease, all as more particularly acknowledged
by Assignee in Section 6(f), below.
5. Assignee's Representations. Assignee represents and
warrants:
(a) it understands that neither Advanced nor New
York Life has made any express or implied warranties with respect to the
Sublease;
(b) it has had the opportunity to inspect the
Property;
(c) it has been provided with a copy of the
Lease and Sublease, has read the Lease and Sublease and fully understands its
obligations under the Lease and Sublease;
2
<PAGE> 54
(d) it understands that it is taking the
property AS IS without any representation or warranty from the Assignor
other than what is contained in this Assignment;
(e) it understands and agrees that (x) Advanced,
notwithstanding the terms of the Sublease, may charge it a late payment penalty
of five percent (5%) of the amount owed, should it fail to make payments when
due under the Sublease and the failure to pay such amount within five (5) days
after demand therefor shall be an additional event of default under the
Sublease; (y) such provision for such late charges shall be in addition to all
of Advanced's other rights and remedies; and (z) in addition, to the extent
allowed by law, rent that is more than 30 days past due shall bear interest at
the highest applicable rate of interest that may then be lawfully charged on
such past due amounts (after taking into account any late charges or other
amounts paid or payable hereunder if and to the extent they are held to
constitute interest) or, if there is no such higher rate, then at a rate equal
to eighteen percent (18%) per annum; and
(f) it understands and agrees that (x) it shall
deposit with Advanced on the date hereof the security deposit referenced in
Section 5(e), above, which shall be held by Advanced, without obligation for
interest, as security for the performance of Assignee's obligations under the
Sublease, it being expressly understood and agreed that such security deposit is
not an advance rental deposit or a measure of Advanced's damages in case of
Assignee's default; (y) upon each occurrence of an event of default under the
Sublease, Advanced may use all or part of such security deposit to pay past due
rent or other payments due Advanced under the Sublease, and the cost of any
other damage, injury, expense or liability caused by such event of default
without prejudice to any other remedy provided therein or provided by law; and
(z) that, on demand, it shall pay Advanced the amount that will restore such
security deposit to its original amount and that such security deposit shall be
deemed the property of Advanced, but any remaining balance of such security
deposit after payment and performance of all of Assignee's obligations under the
Sublease shall be returned to Assignee within 30 days of the end of the
Sublease.
6. Amendment. That Section of the Sublease entitled
"Renewal Option" shall be replaced by the following:
"Landlord hereby grants to Tenant the right and option to renew the
lease on the same terms and conditions as at each of the first three
(3) anniversaries of the Commencement Date (the "Renewal Option"),
provided Tenant is not then and has not at any time been in material
breach of any term of this Lease or an Event of Default has not
occurred or is continuing. If exercised, the Lease will be renewed for
an additional twelve (12) month term as a result of each of the first
two such exercises, and shall be renewed for an additional twenty-four
(24) month term as a result of the third such exercise with no further
renewal options unless expressly granted by Land-
3
<PAGE> 55
lord in writing. To exercise the Renewal Option, Tenant must give
Landlord written notice of its exercise at least ninety (90) days prior
to the respective anniversary date."
7. Further Cooperation. Assignor agrees to execute unto
Assignee, upon demand, any and all other instruments that Assignee may require
to carry out the intent of this Assignment.
8. No Waiver. Failure of Assignee to avail itself of any
provisions hereof shall not be a waiver of any of its rights.
9. Notice. Any notice, demand, or other communication
to be given to any party hereunder shall be in writing and sent by regular or
certified mail as follows:
To Assignor: Wilshire Technologies, Inc.
5441 Avenida Encinas
Suite A
Carlsbad, California 92008
To Assignee: Acacia Laboratories of Texas, Inc.
11420 Mathis Drive
Farmers Branch, Texas 75234
Unless otherwise provided herein, notice shall be deemed given
five (5) days after its deposit in the United States mail, postage prepaid,
addressed as set forth above. The addresses and addressees may be changed by
written notice thereof in the manner provided herein.
10. Successors and Assigns. The terms hereof shall run with
the land and shall inure to the benefit of all parties hereto and their
respective legal representatives, successors, and assigns, and all their tenants
and subtenants. In this Assignment, the masculine gender shall include the
others, the singular shall include the plural, and conversely, and the terms
"Lease" and "tenant", and the plurals thereof, shall mean "sublease" and
"subtenant" and "concessionaire," "concession," "Licensee" and "license," and
the plurals thereof. All obligations of each Assignor hereunder, if more than
one, shall be joint and several.
11. Choice of Law. This Assignment shall be governed by
and construed in accordance with the laws of the State of Texas. The invalidity
or unenforceability of any provision hereof shall not affect any other
provision.
12. Time is of the Essence. Time is strictly of the essence
hereof and of any amendment or modification hereto.
13. Modification. This Assignment may not be amended or
modified except in writing signed by Assignor or Assignee.
4
<PAGE> 56
IN WITNESS WHEREOF, this Assignment has been executed by Assignor as of
the date first written above.
Assignor:
WILSHIRE TECHNOLOGIES, INC.
A California Corporation
By: /s/ James W. Klingler
------------------------------
James W. Klingler
Chief Financial Officer
Assignee:
ACACIA LABORATORIES OF TEXAS, INC.
A Texas Corporation
By: /s/ William A. Goolsbee
------------------------------
William A. Goolsbee, President
5
<PAGE> 57
EXHIBIT "A"
THE LEASE
<PAGE> 58
EXHIBIT "B"
THE SUBLEASE
<PAGE> 59
EXHIBIT "C"
ESTOPPEL CERTIFICATE
TO: Acacia Laboratories of Texas, Inc.
RE: A Subleasehold as created by that certain Industrial Sublease Agreement
dated December 1, 1995, executed by Advanced Materials, Inc., as
Landlord, and Wilshire Technologies, Inc., a California corporation, as
Tenant ("the Sublease").
The said Subleasehold affects a portion of that certain real property
commonly known as 11420 Mathis Drive, Farmers Branch, Texas 75234 ("the
Premises").
The undersigned, as Landlord under the above referenced Sublease, hereby
certifies to Acacia Laboratories of Texas, Inc., that:
1. The Sublease referred to above is presently in full force and
effect, and unmodified.
2. There are no existing defaults by reason of any act or
omission of the Tenant.
3. The current monthly rent of the above referenced Sublease is $9,075.55
per month, which rent has been paid through __________, 1996.
4. The undersigned as of the date hereof has no charge, lien or
claim or offset under the Sublease, or otherwise.
5. The option to renew, for two successive one year periods, is
still in force and effect and unmodified.
6. The undersigned consents to the assignment of the Subleasehold
interest in the Premises to Acacia Laboratories of Texas, Inc.
7. The undersigned consents to the sublease of the Premises to
Wilshire Technologies, Inc. effective the date of the
assignment to Acacia Laboratories of Texas, Inc.
Dated: May 31, 1996 Landlord:
ADVANCED MATERIALS, INC.
By:
----------------------
Title:
----------------
<PAGE> 60
EXHIBIT "D"
ESTOPPEL CERTIFICATE
TO: Wilshire Technologies, Inc.
RE: A Subleasehold as created by that certain Industrial Sublease Agreement
dated December 1, 1995, executed by Advanced Materials, Inc., as
Landlord, and Wilshire Technologies, Inc., a California corporation, as
Tenant ("the Sublease").
The said Subleasehold affects a portion of that certain real property
commonly known as 11420 Mathis Drive, Farmers Branch, Texas 75234.
The undersigned, as Landlord under the above referenced Sublease,
hereby certifies to Wilshire Technologies, Inc. that:
1. It understands that Acacia Laboratories of Texas, Inc., is in the
process of purchasing certain assets of Wilshire Technologies, Inc.;
including, but not limited to the right, title and interest of Wilshire
Technologies, Inc. in the Sublease pursuant to the terms and conditions
of purchase and sale agreement ("the Purchase Agreement").
2. That effective upon the formal written assumption of Acacia
Laboratories of Texas, Inc., of the duties and obligations of
Wilshire Technologies, Inc. under the Lease and upon the close
of the Purchase Agreement, the undersigned shall terminate and
release Wilshire Technologies, Inc. from any and all claims,
duties or obligations it may have against Wilshire
Technologies, Inc. from all matters, transactions or claim
which occur after the close of the Purchase Agreement.
3. Notwithstanding Section 1542 of the California Civil Code which
provides that "[a] general release does not extend to claims which the
creditor does not know or suspect exists in his favor at the time of
executing the release which if known to him must have materially
affected his settlement with the debtor", this shall be a full release
of the rights, claims,
<PAGE> 61
actions, or causes of action, whether known or unknown after the date
referenced above. The parties hereto fully understand and acknowledge
the significance and consequence of such specific waiver of Section
1542.
Dated: May 31, 1996 Landlord:
ADVANCED MATERIALS, INC.
By:
---------------------
Title:
-------------
<PAGE> 62
EXHIBIT "E"
ESTOPPEL CERTIFICATE
TO: Acacia Laboratories of Texas, Inc.
RE: A Leasehold as created by that certain Industrial Sublease
Agreement dated December 1, 1995, executed by New York Life
Insurance and Annuity Corporation, as Lessor, and Wilshire
Technologies, Inc., a California corporation, as Lessee ("the
Lease").
The said Leasehold affects that certain real property commonly
known as 11420 Mathis Drive, Farmers Branch, Texas 75234.
The undersigned, as Lessor under the above referenced Lease, hereby
certifies to Acacia Laboratories of Texas, Inc., that:
1. The Lease referred to above is presently in full force and
effect, and unmodified.
2. There are no existing defaults.
3. The undersigned consents to allow the assignment of the
sublease interest Wilshire Technologies, Inc. has in the
Lease, by and through that certain Industrial Sublease
Agreement between Advanced Materials, Inc. and Wilshire
Technologies, Inc. ("the Sublease") to Acacia Laboratories of
Texas, Inc.
4. The undersigned consents to the sublease of the same property
affected by the Sublease to Wilshire Technologies, Inc.
beginning on the effective date of the assignment to Acacia
Laboratories of Texas, Inc.
Dated: May 31, 1996 Lessor:
NEW YORK LIFE INSURANCE &
ANNUITY CORPORATION
By:
---------------------
Title:
---------------
<PAGE> 1
EXHIBIT 10.82
AMENDMENT TO
CREDIT AGREEMENT
This Amendment to the Credit Agreement ("Amendment") is made and
entered into as of the June 30, 1996, by and between Trilon Dominion Partners
L.L.C. ("Trilon Dominion") and Wilshire Technologies, Inc. ("Borrower").
W I T N E S S E T H
WHEREAS, the parties hereto have entered into a Credit Agreement dated
as of January 5, 1996 (the "Agreement"): and
WHEREAS, the parties hereto wish to amend the Agreement as set forth in
this Amendment;
NOW THEREFORE, in consideration of the above premises and the mutual
covenants and agreements herein, the parties agree as follows:
1. Amendment. Section 1.7 of the Agreement is hereby amended by
replacing the phrase, "or, (ii) June 30, 1996" in the fifth line of such section
with the phrase, "or, (ii) December 31, 1996" Except as specifically set forth
in this Amendment the Agreement and all other documents and agreements entered
into in connection with the Agreement including without limitation the Warrants
and Springing Warrants shall remain unchanged and in full force and effect.
2. Governing Law. Except as otherwise expressly provided, this
Amendment shall be governed and construed in accordance with the laws of the
State of Delaware applicable to contracts made in such State and without regard
to conflicts of law doctrines.
3. Counterparts. This Amendment may be executed in one or more
counterparts and by different parties in separate counterparts. All of such
counterparts shall constitute one and the same agreement and shall become
effective when one or more counterparts have been signed by each party and
delivered to the other party.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first written above.
THE BORROWER: WILSHIRE TECHNOLOGIES, INC.
By: /s/ James W. Klingler
-------------------------------
Name: James W. Klingler
Title: Chief Financial Officer
THE LENDER: TRILON DOMINION PARTNERS, L.L.C.
By: VC Holdings, Inc., its
Managing Member
By: /s/ William P. Gendron
-------------------------------
Name: William P. Gendron
Title: Treasurer
<PAGE> 3
AMENDMENT TO
GRID PROMISSORY NOTE
This Amendment to the Grid Promissory Note ("Note") issued pursuant to the
Credit Agreement ("Agreement") is made and entered into as of the June 30, 1996,
by and between Trilon Dominion Partners L.L.C. ("Trilon Dominion") and Wilshire
Technologies, Inc. ("Borrower").
W I T N E S S E T H
WHEREAS, the parties hereto have entered into a Credit Agreement dated as
of January 5, 1996 (the "Agreement"): and pursuant to the Agreement Note was
issued.
WHEREAS, the parties hereto wish to amend the Note as set forth in this
Amendment;
NOW THEREFORE, in consideration of the above premises and the mutual
convenants and agreements herein, the parties agree as follows:
1. Amendment. Section 4 of the Note is hereby amended by replacing the
phrase, "or, (ii) June 30, 1996" in the fifth line of such section with the
phrase, "or, (ii) December 31, 1996" Except as specifically set forth in this
Note the Agreement and all other documents and agreements entered into in
connection with the Agreement shall remain unchanged and in full force and
effect.
2. Governing Law. Except as otherwise expressly provided, this Amendment
shall be governed and construed in accordance with the laws of the State of
Delaware applicable to contracts made in such State and without regard to
conflicts of law doctrines.
3. Counterparts. This Amendment may be executed in one or more
counterparts and by different parties in seperate counterparts. All of such
counterparts shall constitute one and the same agreement and shall become
effective when one or more counterparts have been signed by each party and
delivered to the other party.
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first written above.
THE BORROWER: WILSHIRE TECHNOLOGIES, INC.
By: /s/ James W. Klingler
-------------------------------
Name: James W. Klingler
Title: Chief Financial Officer
THE LENDER: TRILON DOMINION PARTNERS, L.L.C.
By: VC Holdings, Inc., its
Managing Member
By: /s/ William P. Gendron
-------------------------------
Name: William P. Gendron
Title: Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-KSB FOR THE YEAR ENDED NOVEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCES TO SUCH FORM 10-KSB AND THE ACCOMPANYING NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> NOV-30-1995
<EXCHANGE-RATE> 1
<CASH> 18
<SECURITIES> 0
<RECEIVABLES> 724
<ALLOWANCES> 49
<INVENTORY> 1,085
<CURRENT-ASSETS> 2,037
<PP&E> 1,834
<DEPRECIATION> 903
<TOTAL-ASSETS> 5,300
<CURRENT-LIABILITIES> 2,936
<BONDS> 7,637
0
0
<COMMON> 17,071
<OTHER-SE> (22,344)
<TOTAL-LIABILITY-AND-EQUITY> 5,300
<SALES> 4,340
<TOTAL-REVENUES> 4,340
<CGS> 3,733
<TOTAL-COSTS> 7,197
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 742
<INCOME-PRETAX> (3,599)
<INCOME-TAX> 1
<INCOME-CONTINUING> (3,600)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,600)
<EPS-PRIMARY> (0.80)
<EPS-DILUTED> (0.80)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FORM 10-QSB FOR THE PERIOD ENDED MAY 31, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB AND THE ACCOMPANYING NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> MAY-31-1996
<EXCHANGE-RATE> 1
<CASH> 90
<SECURITIES> 0
<RECEIVABLES> 395
<ALLOWANCES> 4
<INVENTORY> 933
<CURRENT-ASSETS> 3,287
<PP&E> 1,300
<DEPRECIATION> 626
<TOTAL-ASSETS> 4,959
<CURRENT-LIABILITIES> 2,704
<BONDS> 0
0
0
<COMMON> 25,850
<OTHER-SE> (23,595)
<TOTAL-LIABILITY-AND-EQUITY> 4,959
<SALES> 1,722
<TOTAL-REVENUES> 1,722
<CGS> 1,473
<TOTAL-COSTS> 2,947
<OTHER-EXPENSES> (192)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68
<INCOME-PRETAX> (1,101)
<INCOME-TAX> 1
<INCOME-CONTINUING> (1,102)
<DISCONTINUED> (6)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,108)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
UNAUDITED FORM 10-QSB FOR THE PERIOD ENDED MAY 31, 1995, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) FORM 10-QSB AND THE ACCOMPANYING NOTES
THERETO.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> MAY-31-1995
<EXCHANGE-RATE> 1
<CASH> 107
<SECURITIES> 0
<RECEIVABLES> 935
<ALLOWANCES> 144
<INVENTORY> 1316
<CURRENT-ASSETS> 2391
<PP&E> 1829
<DEPRECIATION> 730
<TOTAL-ASSETS> 5932
<CURRENT-LIABILITIES> 2257
<BONDS> 7108
0
0
<COMMON> 17071
<OTHER-SE> (20504)
<TOTAL-LIABILITY-AND-EQUITY> 5932
<SALES> 1693
<TOTAL-REVENUES> 1693
<CGS> 1069
<TOTAL-COSTS> 2699
<OTHER-EXPENSES> (1)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 392
<INCOME-PRETAX> (1397)
<INCOME-TAX> 1
<INCOME-CONTINUING> (1398)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1398)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> (0.31)
</TABLE>
