<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE , 1996
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ENAMELON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 8090 13-3669775
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
15 KIMBALL AVENUE, YONKERS, NY 10704 (914) 237-1308
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DR. STEVEN R. FOX, CHAIRMAN OF THE BOARD, ENAMELON, INC.
15 KIMBALL AVENUE, YONKERS, NY 10704 (914) 237-1308
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
------------------------
COPIES TO:
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<S> <C>
JACK BECKER, ESQ. STEPHEN H. KAY, ESQ.
SNOW BECKER KRAUSS P.C. SQUADRON, ELLENOFF, PLESENT &
605 THIRD AVENUE SHEINFELD, LLP
NEW YORK, NEW YORK 10158 551 FIFTH AVENUE
TEL: (212) 687-3860 NEW YORK, NEW YORK 10176
FAX: (212) 949-7052 TEL: (212) 661-6500
FAX: (212) 697-6686
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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- -----------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value....... 2,300,000 Shs. (2) $10.00 $23,000,000 $7,931.03
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Representative's Warrants(3)........ 200,000 Wts. $12.00 $ 2,400,000 $ 827.59
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Common Stock, $.001 par value....... 200,000 Shs. (4)(5) (6) (6) (6)
- -----------------------------------------------------------------------------------------------------------------
TOTAL.......................... $25,400,000 $8,758.62
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933, as
amended.
(2) Includes 300,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(3) Issued to the Representative of the Underwriters.
(4) Issuable upon exercise of the Representative's Warrants.
(5) Pursuant to Rule 416, this Registration Statement also covers such
indeterminable additional shares as may become issuable as a result of
anti-dilution adjustment in accordance with the terms of the
Representative's Warrants.
(6) Pursuant to Rule 457(g), no additional registration fee is required for
these shares.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
ENAMELON, INC.
CROSS REFERENCE SHEET
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<CAPTION>
ITEM NO.
CAPTION IN FORM S-1 LOCATION IN PROSPECTUS
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<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Outside Front Cover Page.
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front and Outside Back Cover Pages.
3. Summary Information, Risk Factors and Ratio
of Earnings To Fixed Charges............... Prospectus Summary; Risk Factors.
4. Use of Proceeds............................ Use of Proceeds.
5. Determination of Offering Price............ Underwriting.
6. Dilution................................... Dilution.
7. Selling Security Holders................... *
8. Plan of Distribution....................... Underwriting.
9. Description of Securities to be
Registered................................. Description of Securities.
10. Interest of Named Experts and Counsel...... Legal Matters; Experts.
11. Information with Respect to the
Registrant................................. Business; Business -- Properties;
Business -- Legal Proceedings; Financial
Statements; Selected Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operation; Management;
Management -- Executive Compensation;
Principal Stockholders; Certain
Transactions.
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Management -- Indemnification.
</TABLE>
- ---------------
* Not Applicable
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE , 1996
2,000,000 SHARES
ENAMELON, INC.
COMMON STOCK
All of the 2,000,000 shares of Common Stock offered hereby are being
offered by Enamelon, Inc. (the "Company").
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently anticipated that the initial offering
price will be between $8.00 and $10.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial offering
price. After the offering, the Company's current directors, executive officers
and principal stockholders will beneficially own approximately 52.1% of the
outstanding shares of voting stock of, and will continue to control, the
Company. Pending approval of its listing application, it is anticipated that the
Common Stock will be quoted on the Nasdaq National Market under the symbol
"ENML."
FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS THAT SHOULD BE CONSIDERED IN
CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" COMMENCING
ON PAGE 6 AND "DILUTION" COMMENCING ON PAGE 15.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<S> <C> <C> <C>
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- -------------------------------------------------------------------------------------------------
UNDERWRITING
PRICE DISCOUNTS AND PROCEEDS TO
TO PUBLIC COMMISSIONS(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------
Per Share......................... $ $ $
- -------------------------------------------------------------------------------------------------
Total(3).......................... $ $ $
- -------------------------------------------------------------------------------------------------
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</TABLE>
(1) Excludes five-year warrants to purchase a number of shares of Common Stock
equal to 10% of the number of shares of Common Stock purchased and sold by
the Underwriters (excluding over-allotments, if any), at an exercise price
equal to 120% of the initial public offering price. The Company has also
agreed to indemnify the Underwriters against certain liabilities, including
certain liabilities under the Securities Act of 1933, as amended. See
"Underwriting" for a description of the foregoing and certain other
arrangements between the Company and the Underwriters.
(2) Before deducting offering expenses estimated to be approximately
$ , payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
300,000 additional shares of Common Stock solely to cover over-allotments,
if any, on the same terms and conditions as the shares offered hereby. If
such option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of such
shares will be made at the offices of Rodman & Renshaw, Inc., New York, New
York, on or about , 1996.
------------------------
RODMAN & RENSHAW, INC.
The date of this Prospectus is , 1996.
<PAGE> 4
TWO DIAGRAMS OF A TOOTH DESCRIBING THE DEMINERALIZATION PROCESS AND
ENHANCED REMINERALIZATION RESULTING FROM USE OF ENAMELON FLUORIDE TOOTHPASTE.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
------------------------
Enamelon(TM) is a trademark of the Company. Certain other trademarks of the
Company and other companies, including ENAMELINE(TM), Crest(R), Colgate(R),
Aquafresh(R), Mentadent(R), Arm & Hammer Dental Care(R) and Sensodyne(R), are
used in this Prospectus.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements and notes thereto appearing
elsewhere in this Prospectus. Unless otherwise indicated, all share, per share
and financial information set forth herein assumes the automatic conversion of
558,399 shares of Series A Preferred Stock into 558,399 shares of Common Stock
upon completion of this offering and no exercise of the Underwriters'
over-allotment option. This Prospectus contains forward-looking statements that
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
Factors that might cause such differences include, but are not limited to, those
discussed in "Risk Factors."
THE COMPANY
Enamelon, Inc. is focused on developing and marketing over-the-counter oral
care products based on patented and patent pending technologies. The Company's
dental care products are intended to stop cavities before they begin and have
been proven scientifically to strengthen tooth enamel. The products are based on
the active ingredient sodium fluoride in a formulation that enhances tooth
"remineralization," whereby minerals, such as calcium and phosphate, are
reintroduced into tooth enamel. With toothpaste product development activities
nearing completion, the Company plans to introduce an all-family toothpaste into
test markets, consisting of approximately 5% of United States households, in the
early part of 1997. The Company currently expects to begin a national roll-out
of its toothpaste product in the first half of 1998.
On a daily basis, teeth lose small amounts of calcium and phosphate, the
major structural ingredients of tooth enamel. This "demineralization" process is
caused by plaque acids produced during the bacterial breakdown of sugars in the
mouth. These acids dissolve the enamel, producing lesions (porous areas and soft
spots in the tooth). As this process continues, the mineral structure gradually
is destroyed, eventually forming a dental cavity, which requires a dentist to
remove the decay and fill the cavity.
The Enamelon fluoride toothpaste simultaneously supplies the active
ingredient, sodium fluoride, and high concentrations of ions of the inactive
ingredients calcium and phosphate in soluble form while brushing. Under these
conditions, remineralization was shown in the Company's in vitro studies to be
enhanced with a higher level of fluoride uptake, and the tooth structure was
shown to be strengthened and hardened. This makes the tooth less soluble and
more resistant to attacks by acids from decay-causing bacteria. Additionally,
animal studies conducted by the Company have shown that enhanced
remineralization significantly reduced the incidence of lesions.
Based on such studies, the Company believes that with each application of
its proposed products, teeth will become stronger and more resistant to decay.
The Company believes that human clinical studies will show that its toothpaste
enhances the tooth remineralization process to a greater degree than currently
available products and that this will represent one of the most significant
advances in personal dental care since the introduction of mass-marketed
fluoride dental products in the early 1960's.
The worldwide toothpaste market is estimated to exceed $5 billion in annual
retail sales. Annual toothpaste sales in the United States are expected to be
$1.7 billion in 1996 and are projected to reach $2 billion by the turn of the
century. Over the last five years, the toothpaste market has become segmented as
new, premium-priced products offering benefits such as tartar control or
whitening or containing ingredients such as baking soda have steadily attracted
consumers away from older, mature products.
The Company holds licenses from the American Dental Association Health
Foundation (the "ADAHF") for patented and patent pending technologies (the
"ADAHF Patented Technology") relating to the prevention of tooth decay and
employing formulations that enhance the natural activity of fluoride. The ADAHF
has granted the Company (i) exclusive worldwide licenses to develop, manufacture
and market toothpaste, chewing gum, food and confectionery products and (ii) a
non-exclusive international license covering products not covered by the
Company's exclusive licenses (including oral spray, mouth rinse and professional
gel products). The Company's international license is co-extensive with a
non-exclusive
3
<PAGE> 6
international license granted to SmithKline Beecham Corp., which also obtained
from the ADAHF an exclusive United States license covering such products.
The Company has developed additional technologies relating to prevention of
tooth decay before it begins and has five United States patent applications
pending (the "Enamelon Patent Pending Technology").
The Company's objective is to become a leading niche marketer of a variety
of oral care, chewing gum, food and confectionery products based on the ADAHF
Patented Technology and/or the Enamelon Patent Pending Technology (together, the
"Enamelon Technologies"). The Company's strategic plan for accomplishing this
objective is to (i) develop and market its proposed toothpaste products with
sodium fluoride as the active ingredient, (ii) conduct further testing to
establish advertising and marketing claims, and for product improvement, (iii)
collaborate with corporate partners in certain product areas and international
markets and (iv) capitalize on additional commercial applications.
The Company was incorporated in Delaware in June 1992. The Company's
executive offices are located at 15 Kimball Avenue, Yonkers, New York, 10704,
and its telephone number is (914) 237-1308.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company................. 2,000,000 shares
Common Stock to be Outstanding after the Offering...
7,200,378 shares (1)
Use of Proceeds.....................................
For marketing, research and
development, purchase of manufacturing
equipment, working capital and general
corporate purposes.
Risk Factors and Dilution...........................
Prospective investors should carefully
consider the matters set forth under
the captions "Risk Factors" and
"Dilution." An investment in the shares
of Common Stock offered hereby involves
a high degree of risk and immediate and
substantial dilution.
Nasdaq National Market Symbol (Proposed)............
"ENML"
</TABLE>
- ---------------
(1) Excludes an aggregate of 2,510,652 shares of Common Stock reserved for
future issuance under the Company's 1993 Stock Option Plan (the "Plan") and
reserved for issuance pursuant to outstanding options and warrants. See
"Shares Eligible for Future Sale" and "Underwriting."
4
<PAGE> 7
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 9, 1992 THREE MONTHS
(INCEPTION) TO YEAR ENDED DECEMBER 31, ENDED MARCH 31,
DECEMBER 31, ------------------------- ---------------
1992 1993 1994 1995 1995 1996
-------------- ----- ----- ------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF OPERATIONS DATA:
Total expenses...................... $ 37 $ 311 $ 536 $ 1,081 $ 262 $ 552
Other income (expense).............. -- 14 (263) 20 1 35
----- ------ ------ -------- ------ ------
Net loss............................ $(37) $(297) $(799) $(1,061) $(261) $ (517)
===== ====== ====== ======== ====== ======
SELECTED PER SHARE DATA:
Net loss per share(1)............... $ (0.20) $(0.09)
------- ------
------- ------
Weighted average shares
outstanding...................... 5,401 5,563
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1996
-----------------------
AT DECEMBER 31, PRO FORMA AS
1995 ACTUAL ADJUSTED(2)
--------------- ------ ------------
<S> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Working capital...................................... $ 1,628 $2,758 $ 18,923
Total assets......................................... 2,041 3,525 19,690
Redeemable preferred stock........................... -- 1,879 --
Stockholders' equity................................. $ 1,867 $1,377 $ 19,421
</TABLE>
- ---------------
(1) Earnings per share are presented for 1995 and the three months ended March
31, 1996 on a pro forma basis to reflect the automatic conversion of 558,399
shares of Series A Preferred Stock as if it occurred on January 1, 1995.
Earnings per share are not presented for prior periods since the Company
does not believe historical earnings per share are meaningful as a result of
changes in the Company's capital structure following the completion of this
offering. See "Financial Statements."
(2) Gives pro forma effect to (i) the subsequent issuance of 6,894 shares of
Series A Preferred Stock for $25,000, (ii) the automatic conversion of
558,399 shares of Series A Preferred Stock and (iii) the consummation of
this offering and the application of the estimated net proceeds thereof. See
"Use of Proceeds" and "Capitalization."
5
<PAGE> 8
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk and immediate and substantial dilution and should only be made by
persons who can afford a loss of their entire investment. In evaluating an
investment in the Common Stock being offered hereby, investors should consider
carefully, among other matters, the following risk factors, as well as the other
information contained in this Prospectus.
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
projected in the forward-looking statements discussed herein. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in this section, as well as in the sections entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY
The Company has a limited history of operations, and has accumulated net
losses from inception in June 1992 through March 31, 1996, of approximately $2.7
million. Losses have resulted principally from costs incurred in research and
development of the Enamelon Technologies and from general and administrative
costs. To date, the Company has neither commenced any product commercialization
nor realized any operating revenues. The Company expects to continue to incur
operating losses at least through 1998, principally as a result of expenses of
ongoing clinical testing and anticipated marketing and manufacturing expenses
associated with the introduction of Enamelon toothpaste. There can be no
assurance that the Company will ever generate revenues or achieve profitability.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DEPENDENCE ON SUCCESSFUL DEVELOPMENT OF INITIAL PRODUCT
The Company is dependent to a large extent on the success of its proposed
toothpaste, which is being tested at a number of sites as well as at the
Company's laboratory. Results of in vitro and animal studies are not necessarily
indicative of results that will be obtained in human clinical trials. Adverse or
inconclusive clinical trial results concerning any of the Company's product
formulations could significantly delay the marketing of such products or result
in the limitation of the Company's potential product claims. In such event,
further studies may have to be conducted by the Company. There can be no
assurance that safe and effective commercially viable products can ever be
developed by the Company, or that if they are developed, they can be produced in
a timely manner, can be manufactured economically on a large scale, can be free
from governmental and competitive challenges, and can achieve and sustain market
acceptance. See "Use of Proceeds" and "Business -- Products."
UNCERTAINTY OF CONSUMER ACCEPTANCE OF ENAMELON PRODUCTS
The Company will be dependent upon consumer acceptance of the Enamelon
toothpaste as an alternative to current well known brand name toothpastes.
Market acceptance will depend, in part, on the Company's ability to demonstrate
to consumers the effectiveness of its products. There can be no assurance that
clinical studies will support the Company's anticipated advertising claims, that
the Company will be able to market its toothpaste successfully or that future
products, if any, will be accepted in the marketplace. See "Business --
Marketing."
UNCERTAINTIES RELATED TO DEVELOPMENT OF ADDITIONAL PRODUCTS
The Company has focused its product development efforts to date on
toothpaste using the Enamelon Technologies. Accordingly, the Company will
require significant additional efforts to develop other products utilizing the
Enamelon Technologies. Any such future product development efforts are subject
to certain risks and may not succeed. These risks include, but are not limited
to, the possibility that (i) new products will be found ineffective or unsafe,
(ii) even if safe and effective, they will be difficult to develop into
commercially
6
<PAGE> 9
viable products or to manufacture economically on a large scale, free of
governmental or competitive challenges and (iii) any such products will fail to
achieve and sustain market acceptance. Therefore, there is substantial risk that
the Company's product development efforts will not be successful. See
"Business -- Strategy" and "-- Products."
COMPETITION
Competition in toothpaste products, as well as in chewing gum, food and
confectionery products, is intense. The Company's primary competitors include
companies with substantially greater financial, technological, marketing,
personnel and research and development resources than those of the Company.
There can be no assurance that the Company will be able to compete successfully
in these markets. The Company's toothpaste products will compete with other
brand name toothpastes including Crest, Colgate, Aquafresh, Mentadent, Arm &
Hammer Dental Care and Sensodyne. Further, new products or future developments
by others may provide therapeutic or cost advantages over the Company's proposed
products. There can be no assurance that developments by others of similar or
more effective products will not render the Company's products or technologies
noncompetitive or obsolete or that competitors will not challenge the validity
of the Company's patent rights. Since the Company's proposed products will be
new to the market and sold in competition with the products of companies with
greater financial and other resources, there can be no assurance that a market
for the Company's proposed products will develop. See "Risk Factors -- Uncertain
Ability to Protect Patents" and "Business -- Competition."
COMPLIANCE WITH THE MONOGRAPH
The Company's products are subject to regulation by the Food and Drug
Administration (the "FDA"). The FDA has published a final monograph, Anticaries
Drug Products for Over-the-Counter Human Use (the "Monograph"), for
over-the-counter anticaries drug products, the category of non-prescription drug
products that includes the Company's proposed oral care products. The Monograph
establishes conditions under which over-the-counter drug products that aid in
the prevention of tooth decay generally are recognized as being safe and
effective and not misbranded. The Company's products may be lawfully marketed
without being required to file a New Drug Application (an "NDA") with the FDA if
they use as their sole active ingredient one of the active ingredients permitted
in the Monograph and make labeling claims permitted in the Monograph. However,
there can be no assurance that the Company's proposed products will meet all of
the conditions of the Monograph. The Company will be limited in the claims it
can make with respect to its products in order to remain in compliance with the
Monograph. The Company's inability to market its proposed toothpaste products
under the Monograph would have a material adverse effect on the Company. See
"Business -- Government Regulation."
In order to market its proposed products other than in compliance with the
Monograph, the Company would be required to file an NDA. An NDA would require
substantial testing procedures which are costly and time consuming. Accordingly,
the Company's ability to sell its proposed products in the United States could
be delayed for an indefinite period of time. Further, the Company may not have
sufficient financial or other resources available to complete the NDA process
and assuming such financial and other resources are available, there is no
assurance that the FDA would approve the Company's NDA, if one were necessary.
See "Business -- Government Regulation."
COMPLIANCE WITH OTHER GOVERNMENT REGULATION
The Company is subject to additional regulation under various federal and
state laws regarding, among other things, occupational safety, environmental
protection, hazardous substance control and product advertising and promotion.
In connection with its research and development activities, the Company is
subject to federal, state and local laws, rules, regulations and policies
governing the use, generation, storage, effluent discharge, handling and
disposal of certain materials and wastes.
Both the Company's products and their claims may be challenged by the
Company's competitors or by the FDA, the Federal Trade Commission (the "FTC") or
other governmental or private agencies. Such
7
<PAGE> 10
challenges may include an assertion that the products do not comply with the
Monograph (thus potentially requiring an NDA or a change in marketing) or that
the data obtained by the Company to substantiate the Company's claims may be
inadequate. There can be no assurance that the Company will successfully defend
any challenge in this area, or be able to modify its products or the claims with
respect thereto to such an extent that the products remain commercially viable.
The laws and regulations administered by governmental agencies, including
but not limited to the FDA, the FTC and the Environmental Protection Agency (the
"EPA"), are subject to change and varying interpretation. While the Company
intends to use its best efforts to comply with relevant laws and regulations, no
assurance can be given that an agency might not assert a claim of noncompliance
against the Company in the future. Unanticipated changes in laws or adverse
interpretations of regulations could materially jeopardize the Company's ability
to distribute its products or engage in its contemplated business activities.
The marketing of the Company's proposed products abroad will be subject to
significant regulation by foreign cosmetic and/or drug regulatory agencies. No
assurance can be given that the Company will be granted approval to market its
proposed products in foreign countries, and the failure to obtain such required
approvals would have a material adverse effect on the Company's ability to
market its products internationally.
Each domestic drug product manufacturing facility must be registered with
the FDA. Each manufacturer must inform the FDA of every drug product it has in
commercial distribution and keep such list updated. Domestic manufacturing
facilities are also subject to at least biannual inspection by the FDA for
compliance with Good Manufacturing Practice regulations promulgated by the FDA.
Compliance with Good Manufacturing Practice regulations is required at all times
during the manufacture and processing of drug products. Accordingly, to the
extent that the Company utilizes contract manufacturers, such manufacturers must
be in compliance with all FDA requirements. See "Business -- Manufacturing," "--
Government Regulation" and "Risk Factors -- Dependence on Others to
Manufacture."
DEPENDENCE ON LICENSING AGREEMENTS
The Company's license agreements with the ADAHF are material to the
Company's business. An adverse interpretation of the terms of either of such
agreements, the termination of the agreements or exclusivity thereunder, or the
inability of the Company to renew such agreements on the same or similar terms
would have a material adverse effect on the ability of the Company to develop,
manufacture and sell its products, or even to continue in business. See
"Business -- ADAHF Patents and Licenses."
UNCERTAIN ABILITY TO PROTECT PATENTS
The Company's ability to compete effectively depends on its success in
protecting its proprietary technology, both in the United States and abroad. No
assurance can be given that the Company's patent protection within and/or
outside of the United States is sufficient to deter others, legally or
otherwise, from developing or marketing competitive products utilizing the
Enamelon Technologies.
The United States patents and the pending United States and foreign patent
applications covering the ADAHF Patented Technology (the "ADAHF Patent Rights")
and the Enamelon Patent Pending Technology (the "Enamelon Patent Rights")
(collectively with the ADAHF Patent Rights, the "Patent Rights") are material to
the Company's business. No assurance can be given that any further patents will
be issued from the United States or foreign patent offices for the Patent Rights
or that the Company will receive any patents in the future based on its
continued development efforts. The Company believes that the protection afforded
by the Patent Rights is material to its future revenues and earnings. There can
be no assurance that any of the Patent Rights will be found to be valid or that
any of the Patent Rights will be enforceable or prevent others from developing
and marketing competitive products or methods. A successful challenge to the
validity of the Patent Rights would have a material adverse effect on the
Company, and could jeopardize its ability to engage in its contemplated
business. An infringement action on behalf of the Company may require the
diversion of substantial funds from the Company's operations and may require
management to expend efforts that might otherwise be devoted to the Company's
operations. Furthermore, there can be no assurance that the Company will be
successful in enforcing the Patent Rights. See "Risk Factors -- Competition."
8
<PAGE> 11
There can be no assurance that patent infringement claims in the United
States or in other countries will not be asserted against the Company by a
competitor or others, and if asserted, that the Company will be successful in
defending against such claims. In the event one of the Company's proposed
products is adjudged to infringe patents of others with the likely consequence
of a damage award, the Company or any sublicensee may be enjoined from using and
selling such product or be required to obtain a royalty-bearing license, if
available on acceptable terms. Alternatively, in the event a license is not
offered, the Company might be required to redesign those aspects of the product
held to infringe so as to avoid infringement. In such case, any redesign efforts
undertaken by the Company could require significant expense, necessitate an FDA
review, delay the introduction or the re-introduction of the Company's products
into certain markets, or be so significant as to be impractical. See
"Business -- ADAHF Patents and Licenses."
PROTECTION OF PROPRIETARY TECHNOLOGY AND INFORMATION
The Company also relies on trade secrets, know-how and continuing
technological advancement to maintain its competitive position. Although the
Company has entered into confidentiality and invention agreements with its
employees and consultants, no assurance can be given that such agreements will
be honored or that the Company will be able to effectively protect its rights to
its unpatented trade secrets and know-how. Moreover, no assurance can be given
that others will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to the Company's trade
secrets and know-how.
EVOLVING PRODUCT FORMULATIONS
The Company expects that its toothpaste and other product formulations will
be modified from time to time as a result of the Company's ongoing research and
product testing programs. As a result of such modifications, the Company's
current proposed products, and those which it produces in the future, may differ
from those which were the subject of earlier research and testing. Therefore,
the research studies conducted to date and relied upon by the Company for
efficacy and claims substantiation, as well as the Patent Rights obtained at
this time, might not necessarily be applicable to the Company's present or
future product formulations. See "Business -- Research and Development" and
"-- ADAHF Patents and Licenses."
LIMITED MARKETING CAPABILITY
The Company has limited marketing capabilities and resources. Achieving
market penetration will require significant efforts by the Company to create
awareness of, and demand for, its proposed products. Accordingly, the Company's
ability to build its customer base will be dependent on its marketing efforts,
including its ability to establish an effective internal sales organization or
establish strategic marketing arrangements with other companies. The failure by
the Company to develop successfully its marketing capabilities, both internally
and through wholesalers and brokers, would have a material adverse effect on the
Company's business. Further, there can be no assurance that the development of
such marketing capabilities will lead to sales of the Company's proposed
products. The Company will be limited in the claims it can make with respect to
its products in order to remain in compliance with the Monograph. See "Use of
Proceeds," "Business -- Marketing" and "Risk Factors -- Compliance with the
Monograph."
DEPENDENCE ON OTHERS TO MANUFACTURE
The Company currently has limited manufacturing capability. The Company
does not intend to manufacture its toothpaste products for the United States
market at the outset, but will instead utilize contract manufacturers. The
Company currently does not have a written contract with its pilot production
manufacturer or any other manufacturer in the United States, and no assurance
can be given that one will be entered into. For the balance of the worldwide
toothpaste markets, as well as for the Company's other proposed products, the
Company may seek to sublicense or enter into joint ventures or strategic
partnerships with major consumer product companies or other entities on either
an exclusive or non-exclusive basis. Manufacturing arrangements in these markets
are likely to be encompassed in any agreements establishing such relationships
and may place primary manufacturing responsibility on others. The Company has no
plan, agreement,
9
<PAGE> 12
understanding or arrangement with respect to such relationships, and no
assurance can be given that any will be entered into.
The Company's dependence upon others for the manufacture of its products
may adversely effect its future profit margins, if any, and may effect the
Company's ability to sell its proposed products on a timely and competitive
basis. See "Risk Factors -- Compliance with Other Government Regulation" and
"Business -- Manufacturing."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
The Company's cash requirements may vary materially from those now planned
depending on numerous factors, including the status of the Company's marketing
efforts, the Company's business development activities, the results of clinical
trials, the regulatory process and competition. The Company currently estimates
that the net proceeds of this offering, together with its projected cash flow
from operations, if any, will be sufficient to finance its working capital and
other requirements for a period of approximately 18 months from the date of this
Prospectus. Thereafter, or sooner if conditions make it necessary, the Company
may need to raise additional funds through public or private financings,
including equity financings which may be dilutive to stockholders. There can be
no assurance that the Company will be able to raise additional funds if its
capital resources are exhausted, or that funds will be available on terms
attractive to the Company or at all. If adequate funds are not available, the
Company may be required to delay, reduce the scope of, or eliminate the
commercial introduction of Enamelon toothpaste and otherwise reduce materially
its proposed operations. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
PRODUCT LIABILITY
The sale of any over-the-counter consumer product may result in claims of
adverse reactions by users. Although the Company has no intention of marketing
any product without reasonable belief in its safety and efficacy when used in
accordance with its instructions, misuse of the Company's products may result in
consumer injury. In addition, future developments, including possible adverse
medical studies and associated negative publicity, could have a material adverse
impact on the market for the Company's products and on its results of
operations. Further, the Company may be subject to certain consumer claims and
informal complaints relating to its products which are incidental and routine to
its business and for which the Company intends to maintain insurance coverage.
Product liability insurance coverage is expensive and subject to many
exclusions, and there can be no assurance that the Company will be able to
obtain such insurance coverage in sufficient amounts or on favorable terms.
Exclusions or damage limitations may render any insurance coverage obtained
insufficient to protect the Company adequately from the successful assertion of
a product liability claim. There can be no assurance that insurance coverage
will be sufficient to satisfy product liability claims, if any, made against the
Company with respect to injuries arising from the use of such products. In the
event of a successful product liability claim against the Company, the lack or
insufficiency of insurance coverage and the negative publicity from such a suit
could have a material adverse effect on the Company and jeopardize its ability
to engage in its contemplated business activities. See "Business -- Liability
Insurance."
DEPENDENCE ON KEY PERSONNEL
The success of the Company will be largely dependent upon the personal
efforts of Dr. Steven R. Fox, D. Brooks Cole, Norman Usen, and Anthony E.
Winston. The loss of the services of any of such persons could have a material
adverse effect on the Company's business and prospects. The Company has entered
into a five-year employment agreement with Dr. Fox as Chairman of the Board and
Chief Executive Officer. Notwithstanding, Dr. Fox currently continues to
practice dentistry on a part-time basis. The Company has entered into an
employment agreement with Mr. Cole as President and Chief Operating Officer
pursuant to which Mr. Cole serves at the pleasure of the Board of Directors.
Although the Company has entered into employment agreements with each of the
aforementioned individuals, there can be no assurance that the
10
<PAGE> 13
Company will be able to retain their services. The success of the Company will
also be dependent upon its ability to hire and retain additional qualified
management, marketing, and financial personnel, including a chief financial
officer. The Company will compete with other companies with greater financial
and other resources for such personnel. See "Management -- Employment and
Consulting Agreements."
CONTROL BY PRINCIPAL STOCKHOLDERS
After this offering, the Company's directors, executive officers and
principal stockholders will beneficially own approximately 52.1% of the
Company's Common Stock (approximately 50.3% if the Underwriters' over-allotment
option is exercised in full). Consequently, they will have the ability to elect
all of the Company's directors and to control the outcome of all other issues
submitted to the Company's stockholders and direction of the day-to-day affairs
of the Company. See "Principal Stockholders."
ABSENCE OF PRIOR PUBLIC MARKET; DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no public trading market for the
Common Stock, and there can be no assurance that an active public market for the
Common Stock will develop or continue following the offering. The initial public
offering price of the Common Stock will be determined by negotiation between the
Company and the Representative of the Underwriters and may not necessarily bear
any relationship to the Company's assets, book value, revenues or other
established criteria of value, and should not be considered indicative of the
price at which the Common Stock will trade after completion of the offering.
There can be no assurance that the market price of the Common Stock will not
decline below the initial public offering price. See "Underwriting."
POSSIBLE VOLATILITY OF STOCK PRICE
Trading volume and prices for the Common Stock could be subject to wide
fluctuations in response to quarterly variations in operations, financial
results, announcements with respect to sales and earnings, technological
innovations, new product developments, the sale or attempted sale of a large
amount of securities in the public market, and other events or factors which
cannot be foreseen or predicted by the Company. In addition, various factors
affecting consumer products companies, as well as price and volume volatility
affecting small and emerging growth companies generally, but not necessarily
related to their particular operating performance, may have a significant impact
on the market price of the Common Stock.
IMMEDIATE SUBSTANTIAL DILUTION
The Company's present stockholders acquired their shares of the Company's
Common Stock at costs substantially below the anticipated offering price of the
Common Stock to be sold in this offering. Therefore, investors purchasing Common
Stock in this offering will incur an immediate and substantial dilution in net
tangible book value per share of $6.35. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of shares of Common Stock by existing stockholders pursuant to
Rule 144 ("Rule 144") promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), or otherwise, could have an adverse effect on the price
of the shares of Common Stock. Upon completion of this offering, the Company
will have 7,200,378 shares of Common Stock outstanding (7,500,378 shares if the
Underwriters' over-allotment option is exercised in full). In addition, the
Company has reserved for issuance 1,203,355 shares upon exercise of options
granted under the Plan, 296,645 shares upon exercise of options to be granted
under the Plan, and 1,010,652 shares for issuance upon exercise of outstanding
warrants, including up to 200,000 shares for issuance upon exercise of the
warrants issued to the Representative.
The 2,000,000 shares of Common Stock offered hereby (2,300,000 if the
Underwriters' over-allotment option is exercised in full) will be freely
transferable without restriction or further registration under the Securities
Act except for any shares purchased by an "affiliate" of the Company within the
meaning of Rule 144. The remaining 5,200,378 outstanding shares of Common Stock
will be "restricted securities," as that
11
<PAGE> 14
term is defined in Rule 144, and may only be sold pursuant to a registration
statement under the Securities Act or an applicable exemption from registration
thereunder, including exemptions provided by Rule 144. Approximately 3,667,000
of such shares will be eligible for resale under Rule 144 commencing 90 days
following the completion of this offering. The remaining shares will become
eligible for resale under Rule 144 between October 1996 through January 1998. In
addition, the Company has granted to some security holders certain registration
rights. No prediction can be made as to the effect that future sales of Common
Stock, or the availability of shares of Common Stock for future sales, will have
on the market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock, or the perception that such sales could
occur, could adversely affect prevailing market prices for the Common Stock and
could impair the Company's ability to raise capital through the future sale of
its equity securities. The Company, its officers, directors and stockholders
beneficially owning 5% or more of the Common Stock holding an aggregate of
3,233,133 shares have agreed, for a period of 180 days from the date of this
Prospectus, not to offer, pledge, sell, contract to sell, grant any option for
the sale of, or otherwise dispose of, directly or indirectly, any securities of
the Company, without the prior written consent of the Representative. See
"Principal Stockholders," "Shares Eligible for Future Sale" and "Underwriting."
ISSUANCE OF PREFERRED STOCK; ANTITAKEOVER PROVISIONS OF DELAWARE LAW
The Company's Amended Certificate of Incorporation authorizes the issuance
of 5,000,000 shares of Preferred Stock with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without obtaining stockholder
approval, to issue Preferred Stock with dividend, liquidation, conversion,
voting or other rights that could adversely affect the voting power or other
rights of the holders of the Common Stock. In the event of issuance, the
Preferred Stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in the control of the Company.
Certain provisions of Delaware law may also discourage third party attempts to
acquire control of the Company. See "Description of Securities."
12
<PAGE> 15
USE OF PROCEEDS
The net proceeds to the Company from the sale of 2,000,000 shares of Common
Stock offered hereby are estimated to be approximately $16.1 million ($18.7
million if the Underwriters' over-allotment option is exercised in full) after
deducting underwriting discounts and commissions and estimated expenses of the
offering payable by the Company.
The Company intends to use approximately $4.0 million of the net proceeds
for the anticipated initial marketing costs of its proposed toothpaste products
and approximately $4.0 million to fund additional research and development to
improve the efficacy of, and provide claims substantiation for, the Company's
proposed products. An additional $4.0 million of the net proceeds will be used
to purchase manufacturing equipment for the production of the Company's patent
pending, split system toothpaste tube and for high speed tube filling equipment.
The balance of the net proceeds will be used for working capital and other
general corporate purposes including general and administrative expenses. If the
Underwriters exercise the over-allotment option in full, the Company will
realize additional net proceeds, which will be added to the Company's working
capital.
The foregoing represents the Company's best estimate of its allocation of
the net proceeds from the sale of the Common Stock offered hereby based upon the
current state of its business operations, its current plans and current economic
and industry conditions and is subject to reallocation among the categories
listed above or to new categories. The amounts and timing of actual expenditures
will depend on numerous factors, including the status of the Company's marketing
efforts, the Company's business development activities, the results of clinical
trials, the regulatory process and competition. Additionally, the Company
intends to review, from time to time, potential opportunities to acquire, or
enter into joint ventures or licensing relationships with respect to products
and businesses compatible with its existing business. The Company may,
therefore, use a portion of the net proceeds to make such acquisitions or to
fund such joint ventures, although the Company has no agreements or
understandings and is not involved in any negotiation with respect to any such
transactions.
The Company believes that the net proceeds of this offering together with
its projected cash flow from operations, if any, will be sufficient to finance
its working capital and other requirements for a period of approximately 18
months from the date of this Prospectus. Pending the aforementioned uses, the
net proceeds from this offering will be invested in interest-bearing government
securities or short-term, investment grade securities.
DIVIDEND POLICY
The Company has not paid any dividends on its Common Stock since its
inception and for the foreseeable future intends to follow a policy of retaining
all of its earnings, if any, to finance the development and continued expansion
of its business. There can be no assurance that dividends will ever be paid by
the Company. Any future determination as to payment of dividends will depend
upon the Company's financial condition, results of operations and such other
factors as the Board of Directors deems relevant.
13
<PAGE> 16
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1996, and the pro forma effect of (i) the subsequent issuance of 6,894
shares of Series A Preferred Stock for $25,000, (ii) the automatic conversion of
558,399 shares of Series A Preferred Stock and (iii) the consummation of this
offering and the application of the estimated net proceeds in the manner set
forth under the caption "Use of Proceeds" as if it occurred on March 31, 1996.
This table should be read in conjunction with the Financial Statements and the
related Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT MARCH 31, 1996
-----------------------
PRO FORMA
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Redeemable preferred stock:
$0.01 par value, 827,250 shares authorized; and 268,851 pro forma
as adjusted; 558,399 issued and outstanding; and no shares pro
forma as adjusted(1)............................................. $ 1,879 $ --
Stockholders' equity:
Preferred stock, $0.01 par value, 4,172,750 shares authorized; and
4,731,149 pro forma as adjusted; no shares issued and outstanding;
and no shares pro forma as adjusted............................... -- --
Common stock, $0.001 par value, 20,000,000 shares authorized;
4,641,979 issued and outstanding; 7,200,378 pro forma as
adjusted(2)....................................................... 5 7
Additional paid-in-capital........................................... 4,082 22,124
Accumulated deficit.................................................. (2,710) (2,710)
--------
--
-------- --
Total stockholders' equity............................................. 1,377 19,421
--------
--
-------- --
Total capitalization.............................................. $ 3,256 $19,421
========== ==========
</TABLE>
- ---------------
(1) See "Description of Securities."
(2) Excludes an aggregate of 2,510,652 shares, consisting of (i)1,203,355 shares
of Common Stock reserved for issuance upon exercise of outstanding options
under the Plan, (ii) 296,645 shares of Common Stock reserved for future
issuance under the Plan, (iii) 810,652 shares of Common Stock reserved for
issuance upon exercise of outstanding warrants and (iv) 200,000 shares of
Common Stock reserved for issuance upon exercise of warrants to be issued to
the Representative of the Underwriters upon completion of this offering. See
"Shares Eligible for Future Sale" and "Underwriting."
14
<PAGE> 17
DILUTION
The pro forma net tangible book value of the Company's Common Stock at
March 31, 1996, after giving effect to the issuance of 6,894 shares of Series A
Preferred Stock for $25,000 and the conversion of 558,399 shares of Series A
Preferred Stock, was approximately $2.9 million, or $0.56 per share of Common
Stock. Net tangible book value per share is equal to the total tangible assets
of the Company less total liabilities divided by the number of shares of Common
Stock outstanding. After giving effect to the sale of 2,000,000 shares of Common
Stock offered hereby (after deducting underwriting discounts and commissions and
estimated offering expenses), the adjusted pro forma net tangible book value of
the Company at March 31, 1996 would have been approximately $19.0 million, or
$2.65 per share, representing an immediate increase in net tangible book value
of $2.09 per share to existing stockholders and an immediate dilution in net
tangible book value of $6.35 per share, or 70.6% to investors purchasing shares
at the initial public offering price ("New Investors"). The following table
illustrates the per share dilution to New Investors:
<TABLE>
<S> <C> <C>
Initial public offering price per share.............................. $9.00
Pro forma net tangible book value per share before this offering..... $0.56
Increase in net tangible book value per share attributable to New
Investors.......................................................... 2.09
-----
As adjusted, net tangible book value per share as of March 31, 1996,
after this offering................................................ 2.65
-----
Dilution in net tangible book value to New Investors................. $6.35
=====
</TABLE>
If the Underwriters' over-allotment option is exercised in full, the net
tangible book value per share of Common Stock after this offering would be $2.88
per share, which would result in dilution to New Investors of $6.12 (or 68.0%)
per share of Common Stock.
The following table summarizes at March 31, 1996, the total consideration
paid and the average price paid per share of Common Stock by existing
stockholders and New Investors (before deducting the underwriting discount and
the other offering expenses payable by the Company):
<TABLE>
<CAPTION>
COMMON STOCK
ACQUIRED TOTAL CONSIDERATION AVERAGE
--------------------- ----------------------- SHARE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 5,200,378 72.2% $ 5,991,384 25.0% $1.15
New Investors................. 2,000,000 27.8 18,000,000 75.0 9.00
--------- ------ ----------- ------
Total....................... 7,200,378 100.0% $23,991,384 100.0%
========= ====== =========== ======
</TABLE>
The foregoing table excludes the exercise of all outstanding warrants and
stock options. To the extent that any existing warrants or options granted or to
be granted are exercised in the future below the offering price, there will be
further dilution to New Investors. See "Management -- Employee Benefit Plans."
15
<PAGE> 18
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Set forth below is selected financial data with respect to the statements
of operations of the Company for the period from June 9, 1992 (Inception) to
December 31, 1992, and for the twelve months ended December 31, 1993, 1994 and
1995, and the balance sheets of the Company at December 31, 1992, 1993, 1994 and
1995. Such data was derived from the Company's financial statements audited by
BDO Seidman, LLP, independent certified public accountants, certain of which are
included elsewhere in this Prospectus. Also set forth below is selected
financial data for the three months ended March 31, 1995 and 1996 and at March
31, 1996, which was derived from the unaudited financial statements of the
Company and includes, in the opinion of management, all adjustments (consisting
only of normal recurring adjustments) necessary to present fairly the financial
position and results of operations of the Company for such periods. The results
of operations for the three months ended March 31, 1995 and 1996 are not
necessarily indicative of results for a full fiscal year. The data should be
read in conjunction with the Financial Statements (including the Notes thereto)
and Management's Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 9, 1992 THREE MONTHS
(INCEPTION) TO YEAR ENDED DECEMBER 31, ENDED MARCH 31,
DECEMBER 31, ------------------------- ---------------
1992 1993 1994 1995 1995 1996
-------------- ----- ----- ------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF OPERATIONS DATA:
Total expenses....................... $ 37 $ 311 $ 536 $ 1,081 $ 262 $ 552
Other income (expense)............... -- 14 (263) 20 1 35
--------- ------ ------ -------- ------ -------
---- ---- ---- ---- ---
Net loss............................. $(37) $(297) $(799) $(1,061) $(261) $ (517)
========= ========== ========== ============ ==========
SELECTED PER SHARE DATA:
Net loss per share(1)................ $ (0.20) $(0.09)
======= ======
Weighted average shares
outstanding....................... 5,401 5,563
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------- AT MARCH 31,
1992 1993 1994 1995 1996
---- ---- ---- ------ ------------
<S> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Working capital (deficit).................... $ 55 $474 $(58) $1,628 $2,758
Total assets................................. 112 795 265 2,041 3,525
Redeemable preferred stock................... -- -- -- -- 1,879
Stockholders' equity......................... 108 744 151 1,867 1,377
</TABLE>
- ---------------
(1) Earnings per share are presented for 1995 and the three months ended March
31, 1996 on a pro forma basis to reflect the automatic conversion of 558,399
shares of Series A Preferred Stock as if it occurred on January 1, 1995.
Earnings per share are not presented for prior periods since the Company
does not believe historical earnings per share are meaningful as a result of
changes in the Company's capital structure following the completion of this
offering. See "Financial Statements."
16
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes thereto appearing elsewhere in this
Prospectus. Except for the historical information contained herein, the
following discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
projected in the forward-looking statements discussed herein. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in this section, as well as in the sections entitled "Risk Factors"
and "Business."
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31,
1995
Total expenses were approximately $552,000 for the quarter ended March 31,
1996, compared with total expenses of $261,000 for the same period in the prior
year, an increase of $291,000, or 111.5%. This increase was primarily the result
of higher payroll and benefits expenses of $160,000 and higher research and
testing expenses of $153,000.
The increase in the payroll and benefits expenses of 444.4%, from $36,000
to $196,000, primarily resulted from increased annual compensation for the
Company's Chief Executive Officer and its Vice-President of Product
Development/Operations, and the hiring of a new President.
The increase in research and testing expenses of 355.8%, from $43,000 to
$196,000, resulted from the expansion of the Company's research and development
program at its laboratory facility and the initiation of clinical testing at
various independent oral care research facilities in the United States. During
the quarter ended March 31, 1996, four in vitro studies, comparing approximately
50 potential formulations, were performed at Indiana University to aid the
Company in its efforts to define and optimize the levels of ingredients for its
toothpaste. Also during this period in 1996, an animal study was performed at
the University of Connecticut that demonstrated the ability of the Enamelon
Technologies to enhance remineralization.
These increases were offset in part by a $22,000 decrease in administrative
expenses.
The Company anticipates that total expenses will increase over the next few
years as the Company increases its product development, manufacturing and
marketing activities. Such increased business activities will require additional
personnel and payments to third parties.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Total expenses were approximately $1,081,000 for 1995, compared with total
expenses of $536,000 in 1994, an increase of $545,000, or 101.7%. The increase
was primarily attributable to a $234,000 increase in payroll and benefits
expenses as well as a $128,000 increase in research and testing expenses and a
$183,000 increase in administrative expenses.
The increase in payroll and benefits expenses of 174.6%, from $134,000 to
$368,000, was attributable to increased compensation for the Company's Chief
Executive Officer, Vice-President of Product Development/Operations and
Vice-President of Technology and Clinical Research.
The increase in research and testing expenses of 87.1%, from $147,000 to
$275,000, was the result of the expansion of the Company's research and
development program at its laboratory facility, additional laboratory supplies,
expansion of the in vitro studies and the initiation of in vivo studies at the
University of Connecticut.
During 1995, ten in vitro studies, comparing approximately 120 potential
formulations, were performed at Indiana University. Based on the data and the
results of in-house laboratory studies, the Company successfully transitioned
the science from a concept to a practical technology, which can be incorporated
into toothpaste. Results from animal studies at the University of Connecticut
provided the Company with the initial indication that the technology
successfully enhanced remineralization.
The increase in administrative and other expenses of 71.8%, from $255,000
to $438,000, was primarily attributable to increased legal and accounting fees
incurred in connection with the Company's efforts to secure additional
investment capital and the preparation of interim financial statements.
17
<PAGE> 20
The net loss in 1994 was increased by approximately $270,000 as a result of
the Company expensing deferred offering costs related to a proposed private
placement transaction that was not consummated. See "Financial Statements."
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
Total expenses were approximately $536,000 for 1994 compared with total
expenses of $310,000 in 1993, an increase of $226,000, or 72.9%. The increase
was attributable to a $35,000 increase in payroll expenses, a $55,000 increase
in research and testing expenses and $135,000 increase administrative expenses.
The increase in payroll and benefits expenses of 35.4%, from $99,000 to
$134,000, was primarily attributable to additional office and clerical salaries.
The increase in research and testing expenses of 59.8%, from $92,000 to
$147,000, corresponds with the expansion of the Company's research and
development program at its laboratory facility and research performed pursuant
to a consultant agreement.
The increase in administrative and other expenses of 112.5%, from $120,000
to $255,000, is primarily attributable to the consulting fees paid to the
Company's current Chief Operating Officer commencing July 1994 though December
1995, legal fees and rent expense related to the Company's laboratory facility
pursuant to a lease commencing January 1, 1994.
The net loss in 1994 was increased by approximately $270,000 as a result of
the Company expensing deferred offering costs related to a proposed private
placement transaction that was not consummated. See "Financial Statements."
LIQUIDITY AND CAPITAL RESOURCES
Since its inception in June 1992, the Company has financed its operations
primarily through private placements of Series A Preferred Stock and Common
Stock totaling approximately $5.6 million, net of expenses. At March 31, 1996,
the Company had cash and cash equivalents of approximately $3.0 million and
working capital of $2.8 million. The Company has no outstanding debt (other than
accounts payable and accrued expenses) or available lines of credit as of March
31, 1996.
Since its inception and through March 31, 1996, the Company has incurred
losses aggregating approximately $2.7 million and had available net operating
loss carryforwards as of December 31, 1995 of approximately $2.2 million. The
net operating loss carryforwards will expire if not used by the period from 2007
through 2010 and may be limited by United States federal tax law as a result of
future changes in ownership.
Through March 31, 1996, the Company has invested $150,000 in the purchase
of equipment and approximately $179,000 in costs associated with obtaining
patents, trademarks and license rights. The Company intends to use approximately
$4.0 million of the net proceeds of this offering to purchase additional
manufacturing equipment for the production of the Company's patent pending,
split system toothpaste tube and for high-speed tube filling equipment.
The Company's cash requirements may vary materially from those now planned
depending on numerous factors, including the status of the Company's marketing
efforts, the Company's business development activities, the results of clinical
trials, the regulatory process and competition. The Company currently estimates
that the net proceeds of this offering, together with its projected cash flow
from operations, if any, will be sufficient to finance its working capital and
other requirements for a period of approximately 18 months from the date of this
Prospectus. See "Use of Proceeds."
Recently issued accounting standards may affect the Company's Financial
Statements in the future. See "Financial Statements."
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BUSINESS
OVERVIEW
The Company is focused on developing and marketing over-the-counter oral
care products based on patented and patent pending technologies. The Company's
dental care products are intended to stop cavities before they begin and have
been proven scientifically to strengthen tooth enamel. The products are based on
the active ingredient sodium fluoride in a formulation that enhances tooth
"remineralization," whereby minerals, such as calcium and phosphate, are
reintroduced into tooth enamel. With toothpaste product development activities
nearing completion, the Company plans to introduce an all-family toothpaste into
test markets, consisting of approximately 5% of United States households, in the
early part of 1997. The Company currently expects to begin a national roll-out
of its toothpaste product in the first half of 1998.
The significant events in the Company's progress to date include the
following:
- In 1992, the Company was organized and received from the ADAHF
exclusive worldwide remineralization licenses covering toothpaste,
chewing gum, food and confectionery products, and a non-exclusive
international license covering products not covered by the exclusive
licenses (including oral spray, mouth rinse and professional gel
products). The Company's non-exclusive international license is
co-extensive with a non-exclusive international license granted to
SmithKline Beecham Corp.
- The Company conducted successful in vitro testing of toothpaste
utilizing the Enamelon Technologies at the Oral Health Research
Institute of Indiana University.
- The Company conducted animal studies of toothpaste utilizing the
Enamelon Technologies at the School of Dentistry of the University of
Connecticut.
- The Company has commenced small scale human clinical studies of its
toothpaste to establish marketing and advertising claims.
- The Company is finalizing the formulation of its toothpaste product
and is focusing on the commercialization and marketing of that
product.
MARKET OVERVIEW
The worldwide toothpaste market is estimated to exceed $5 billion in annual
retail sales. Annual toothpaste sales in the United States are expected to be
$1.7 billion in 1996 and are projected to reach $2 billion by the turn of the
century. Over the last five years, the toothpaste market has become segmented as
new, premium-priced products offering benefits such as tartar control or
whitening or containing ingredients such as baking soda have steadily attracted
consumers away from older, more mature products. For example, a brand of
toothpaste introduced in 1992, with baking soda, peroxide, and fluoride, has
quickly become the number three brand with estimated annual retail sales of $175
million in 1996 and a United States market share estimated to exceed 10%.
TECHNOLOGY
On a daily basis, teeth lose small amounts of calcium and phosphate, the
major structural ingredients of tooth enamel. This "demineralization" process is
caused by plaque acids produced from the bacterial breakdown of sugars from food
residues in the mouth. These acids dissolve the tooth enamel, producing lesions
(porous areas and soft spots in the tooth). As this process continues, the
mineral structure gradually is destroyed, eventually forming a dental cavity
which requires a dentist to remove the decay and fill the cavity.
In the 1950's, scientists at Indiana University discovered that the
inclusion of fluoride in toothpaste reduces the incidence of tooth decay. When
teeth are brushed with a fluoride-containing toothpaste, the fluoride diffuses
into the tooth along with minerals existing in saliva, including calcium and
phosphate. The process is limited by the low levels of calcium and phosphate
ions found in saliva as well as by the small amounts of fluoride absorbed into
the tooth as a result of brushing with currently available fluoride toothpastes.
This slow remineralization process can be overcome by demineralization cycles
resulting in the gradual destruction of the mineral structure of teeth.
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The Enamelon fluoride toothpaste simultaneously supplies the active
ingredient, sodium fluoride, and high concentrations of ions of the inactive
ingredients calcium and phosphate in soluble form while brushing. Under these
conditions, remineralization was shown in the Company's in vitro studies to be
enhanced with a higher level of fluoride uptake, and the tooth structure was
shown to be strengthened and hardened. This makes the tooth less soluble and
more resistant to attacks by acids from decay-causing bacteria. Additionally,
animal studies conducted by the Company have shown that enhanced
remineralization significantly reduced the incidence of lesions.
STRATEGY
The Company's objective is to develop a variety of oral care, chewing gum,
food and confectionery products based on the Enamelon Technologies. The Company
has developed a strategic plan to accomplish this goal. The Company's primary
strategies are to:
- Focus Initially on Toothpaste. The Company is focusing on completing
the development of its toothpaste products and packaging, along with
the necessary manufacturing processes required to achieve desired
production speeds while controlling manufacturing costs. The Company
will seek to establish distinctive brand identity emphasizing the
enhanced remineralization benefits of its products, which will be
communicated to both consumers and dental professionals.
- Conduct Further Testing. The Company believes that a heightened
understanding of the chemistry required for effective remineralization
of tooth enamel will lead to stronger protection from competition.
Further clinical testing is being conducted to establish efficacy and
marketing claims.
- Collaborate with Corporate Partners in Certain Product Areas and
International Markets. The Company intends to seek domestic and
international strategic alliances with consumer product companies that
will assist in the marketing and manufacturing of oral care products
outside of the United States.
- Capitalize on Additional Commercial Applications. The Company
believes that products such as gum, lozenges and mints may provide
benefits similar to those of its toothpaste and represent large
potential markets for the application of the Enamelon Technologies.
PRODUCTS
The Company plans to introduce toothpaste as its initial product line. The
Company also is exploring application of the Enamelon Technologies to oral
spray, mouth rinse, professional gel, chewing gum and food and confectionery
products, which it intends to develop after the successful commercialization of
its toothpaste. See "Risk Factors -- Dependence on Successful Development of
Initial Products," "-- Uncertainties Related to Development of Additional
Products" and "Business -- ADAHF Patents and Licenses."
Toothpastes
The Company's introductory product will be an all-family toothpaste
intended to enhance remineralization of tooth enamel and help stop cavities
before they begin by providing a source of fluoride in a formulation of soluble
calcium and phosphate. Full scale product development activities for Enamelon
toothpaste are nearing completion. The Company plans to introduce the all-family
toothpaste into test markets consisting of approximately 5% of United States
households in the early part of 1997. Upon the successful completion of test
marketing, the Company intends to begin a national roll-out of this product in
the first half of 1998.
The Company is planning to follow-up this introduction with a toothpaste
for sensitive teeth containing as active ingredients sodium fluoride and
potassium nitrate, the FDA-approved desensitizing agent. This toothpaste will
enhance remineralization of exposed dentin caused by receding gums and provide
cavity protection and pain relieving properties. Other entries such as tartar
control and gum care toothpastes also are anticipated as future product line
extensions. See "Risk Factors -- Uncertainties Related to Development of
Additional Products."
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In order to dispense its toothpaste products, the Company also has
developed a patent pending, split system toothpaste tube that simultaneously
dispenses two formulations. The split system tube has dual chambers, maintaining
separation between two-component formulations until they are dispensed onto a
toothbrush. Unlike presently used split system toothpaste dispensing systems,
which employ expensive pumps, the Company's tube was designed to be filled with
conventional high-speed tube filling equipment, thus making the cost lower than
other dual chamber toothpaste dispensing systems. See "Business --
Manufacturing."
Additional Potential Products
Chewing Gum. Chewing gum stimulates saliva which helps neutralize some of
the acids remaining in the mouth after eating. The Company believes that
providing greater levels of calcium and phosphate in chewing gum can have the
two-fold benefit of reducing demineralization through the increased stimulation
of saliva while increasing remineralization through the utilization of the
Enamelon Technologies. Accordingly, the Company believes that its proposed
chewing gum will be a beneficial supplement to brushing. Currently, the Company
does not have plans to develop and market independently a chewing gum.
Therefore, it may seek to sublicense or enter into joint ventures or strategic
partnerships with major chewing gum manufacturers or other entities that have
appropriate sales and marketing expertise to develop and market these products.
Oral Spray, Mouth Rinse and Professional Gels. The Company is pursuing the
development of other oral care products including oral sprays, mouthwash and
professional dental gels to be marketed outside of the United States.
Food and Confectionery. The Company believes that the addition of the
Enamelon Technologies to food and confectionery products, such as lozenges or
mints, can provide therapeutic effects similar to the Company's other proposed
products. The Company has not yet begun to evaluate the possible uses of the
Enamelon Technologies in these areas and intends to explore such applications
following the commercialization of its toothpastes.
To date, the Company has concentrated development efforts on its proposed
toothpaste products. Expansion of the Company's product development activities
with respect to other potential applications of the Enamelon Technologies will
require significant efforts. See "Risk Factors -- Uncertainties Related to
Development of Additional Products."
RESEARCH AND DEVELOPMENT
The Company's research programs commenced with in vitro testing conducted
at the Oral Health Research Institute of Indiana University and moved into
animal studies conducted at the University of Connecticut School of Dentistry.
Dr. Jason Michael Tanzer, a member of the Company's Scientific Advisory Board,
was the head of the division that conducted the Company's animal studies. The
research programs have now progressed to small scale human clinical studies
conducted at various leading independent oral care research facilities in the
United States. The overall objective of this research is to demonstrate the
efficacy of the Company's toothpaste formulations and to substantiate marketing
claims.
The in vitro testing measured enamel hardness, fluoride uptake and, through
x-ray microradiography, changes in human and bovine enamel before and after
using the Enamelon Technologies. In addition to demonstrating enhancement of
remineralization, these studies were utilized to assist the Company in
optimizing the efficacy of product formulations. The Company successfully
conducted animal studies that demonstrated the enhancement of remineralization
by the Enamelon Technologies to a significantly greater degree than the
prevailing industry standard. In addition, the Company currently is conducting a
series of small scale human clinical studies, which are intended to show benefit
in humans and begin to establish marketing claims. See "Risk
Factors -- Dependence Upon Successful Development of Initial Product."
The current focus of the Company's toothpaste development program is on
optimizing the dispensing characteristics and product aesthetics of an
all-family toothpaste, which include flavor, texture and overall mouth feel.
This will be followed by routine confirmatory stability and safety testing. The
formulations of the
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Company's proposed products constantly change as dictated by consumer testing
and research and development. See "Risk Factors -- Evolving Product
Formulations."
Since January 1994, the Company has centralized its internal research and
development activities at its research laboratory. The laboratory is responsible
for all technology, formulation, flavor, packaging and process development,
efficacy and stability testing, and quality control.
To date, the Company has expended approximately $710,000 on its research
and development activities, including $92,000 for the year ended December 31,
1993, $147,000 for the year ended December 31, 1994, $275,000 for the year ended
December 31, 1995 and $196,000 for the three months ended March 31, 1996. The
Company expects the level of its research and development expense to increase in
the future. The Company has allocated approximately $4.0 million of the net
proceeds for research and development activities. See "Use of Proceeds."
MANUFACTURING
The Company does not intend to manufacture its toothpaste products for the
United States market at the outset, but will instead utilize contract
manufacturers. For the balance of the worldwide toothpaste markets, as well as
for the Company's other proposed products, the Company may seek to sublicense or
enter into joint ventures or strategic partnerships with major consumer product
companies or other third parties on either an exclusive or non-exclusive basis.
Manufacturing arrangements in these markets are likely to be reflected in any
agreements establishing such relationships and may place primary manufacturing
responsibilities on others.
The Company possesses laboratory size batching and tube filling
capabilities, enabling it to produce small quantities of its proposed products
at Enamelon's laboratory facility. In connection with the commencement of a
pilot manufacturing program, the Company has established a working relationship
with an FDA-approved manufacturing facility capable of providing proper
batching, high speed filling and packaging, and quality production and inventory
controls according to the Company's specifications. The Company intends to use a
portion of the net proceeds of this offering to purchase manufacturing equipment
for the production of its patent pending, split system toothpaste tube and for
high speed tube filling. Such equipment will be owned by the Company for use by
the contract manufacturer. The Company believes that this will provide greater
long-term flexibility, permitting it to change manufacturers or even to commence
its own manufacturing operations. As demand for the Company's products
increases, it will be necessary to utilize other contract manufacturers. See
"Business -- Government Regulation," "Use of Proceeds," and "Risk
Factors -- Dependence on Others to Manufacture" and "-- Compliance with Other
Government Regulation."
MARKETING
The Company will focus its initial marketing activities on entering the
toothpaste market. The toothpaste market is highly competitive and constantly
changing as consumers continue to be receptive to product improvements, taste
enhancements and innovative packaging changes. The Company believes that cavity
prevention remains one of the most important product attributes to attract
consumers, and it intends to emphasize these qualities of its proposed
toothpaste product.
The Company anticipates that its evaluation and screening of consumer
acceptance of the final formula and packaging design for its all-family
toothpaste will be complete by the end of 1996. The Company currently estimates
that an additional three months will be needed to scale-up for manufacturing.
Introduction of a toothpaste product into several representative test markets,
consisting of approximately 5% of United States households, is expected to
commence in the early part of 1997. This test market introduction will allow the
Company to assess carefully all elements of the marketing mix and make desired
changes prior to launching its toothpaste nationally. Upon successful completion
of test marketing, the Company intends to initiate introduction of its
all-family toothpaste nationally in the first half of 1998. See "Risk
Factors -- Dependence on Successful Development of Initial Product" and
"-- Dependence on Consumer Acceptance of Enamelon Products."
The Company recognizes that the highly competitive nature of the toothpaste
market will require significant expenditures during the introductory phase of
marketing. However, the Company believes, based
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on management's experience in the over-the-counter consumer products industry,
that the efficacy claims of its proposed toothpastes may permit development of
unique product advertising, thus enabling it to gain market share. Achieving and
maintaining market penetration will require significant efforts by the Company
to create awareness of and demand for the Company's proposed products.
The Company's ability to build its customer base will be dependent on its
developing a successful marketing program. To the extent the Company
sublicenses, joint ventures or develops a strategic partnership with a
well-established company in international markets, its domestic marketing
capabilities may thereby be complemented and enhanced. See "Risk
Factors -- Limited Marketing Capability."
Professional Marketing
The Company presently anticipates establishing relationships with dental
professionals to create awareness and endorsements for its technology and
products. The Company's professional marketing activities are expected to
include placing advertisements and technical articles in professional journals
as well as attending professional conventions and distributing samples.
Consumer and Trade Marketing
The Company plans to build retail distribution and obtain retail shelf
space in food, drug and mass merchandisers through recruiting and supervising
experienced food and drug brokers who have strong regional ties with major
retailers. These efforts will be supported by competitive trade allowances,
television advertising and introductory trial promotions including sampling and
couponing.
Foreign Marketing
The Company will initially focus its marketing activities in the United
States. Accordingly, the Company has only preliminarily formulated plans for its
foreign marketing activities. However, the Company's role in marketing its
products in foreign countries will depend on the type of strategic relationships
it can develop with third-parties.
COMPETITION
The United States toothpaste industry is dominated by Procter & Gamble
Co.'s Crest, Colgate-Palmolive Company's Colgate, SmithKline Beecham Corp.'s
Aquafresh, Chesebrough-Pond's USA Co.'s Mentadent, Church & Dwight Co., Inc.'s
Arm & Hammer Dental Care, and Block Drug Co., Inc.'s Sensodyne. The industry is
led by Procter & Gamble Co. and its leading brand, Crest, which established its
position as a market leader when it received the seal of the American Dental
Association's Council on Dental Therapeutics for its use of fluoride in the
early 1960's.
Although the toothpaste market is mature, in recent years new products have
captured market share from established brands. Market share gains have been
achieved by higher priced, more therapeutically oriented new products with
unique marketing positions. Consequently, the Company believes that its proposed
toothpaste will capture consumer and professional interest because of its
ability to enhance remineralization of tooth enamel. See "Risk
Factors -- Dependence on Successful Development of Initial Products" and
"-- Competition."
If the Company attempts to develop a chewing gum using the Enamelon
Technologies, then it will be entering a highly competitive industry. The $2.5
billion per year chewing gum market in the United States is dominated by major
competitors including Wm. Wrigley Jr. Co., Warner-Lambert Company and RJR
Nabisco, Inc. The Company also intends to compete in the food and confectionery
industries. To the extent that the Company will sublicense or enter into joint
ventures or strategic partnerships with major consumer
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products companies, of which no assurance can be given, it may be aligning
itself with one or more of its major competitors instead of competing with them.
Addtionally, the Company is pursuing the development of its rights to
manufacture and market oral sprays, mouth rinses and professional gels outside
of the United States, in addition to its proposed toothpaste, chewing gum, food
and confectionery products. The Company's competition in markets outside the
United States will vary by product and from country to country. However, in
general, such markets tend to be highly competitive and dominated by large
multinational and domestic corporations.
ADAHF PATENTS AND LICENSES
The ADAHF Patent Rights licensed to the Company relate to four issued
patents and one United States pending patent application. Two of the issued
patents cover the following Amorphous Calcium Carbonate ("ACC") products:
Amorphous Calcium Phosphate ("ACP"); Amorphous Calcium Carbonate Phosphate
("ACCP"); and Amorphous Calcium Phosphate Fluoride ("ACPF"). The two other
patents and the United States pending patent application cover advanced
technology, including Amorphous Calcium Phosphate Carbonate Fluoride ("ACPCF")
and other technology not patented in the first two United States patents.
Foreign patent applications are pending with respect to one of the United States
pending applications in approximately 28 countries. The ADAHF patents may claim
the effectiveness of ingredients that do not fall under the Monograph. The
Company's products currently under development do not rely on those ingredients
as active ingredients, but rely only on sodium fluoride as the sole active
ingredient. See "Risk Factors -- Compliance with the Monograph" and
" -- Compliance with Other Government Regulation."
In June 1992, the Company entered into a License Agreement (the "License
Agreement") with the ADAHF. This License Agreement, as restated and amended,
grants the Company the exclusive United States license to manufacture and sell
toothpastes, chewing gum, food and confectionery products utilizing the ADAHF
Patented Technology. The License Agreement extends until three years after the
Company determines and thereafter notifies the ADAHF that the following two
conditions have been met: (i) the material claimed in the ADAHF patents and
patent application has been stabilized in the form to be used in toothpastes,
chewing gums, confections and foods to enable it to be stored and marketed in a
manner similar to other such products and (ii) a licensed product has received
the first FDA approval necessary, if any, for marketing to professionals or the
general public. The exclusive license under the License Agreement may be
extended by the Company in additional four-year increments as to each of the
product categories or as to all such product categories, provided that the
Company has complied with its royalty and other obligations under the License
Agreement and has, as to each relevant product category or categories, sold
products generating more than $17,000 in royalties in the last year of the
preceding exclusivity period. Unless the License Agreement is otherwise
terminated as provided therein, it will extend for the term of the last to
expire of any patent licensed under the License Agreement in the United States.
If the period of exclusivity under the License Agreement is not renewed, then
the license becomes non-exclusive for the remaining term of the agreement.
The License Agreement may not be assigned, transferred or sublicensed by
the Company without the prior written consent of the ADAHF, which consent may
not be unreasonably withheld. However, the License Agreement may be assigned to
another company in which the Company owns more than 50% of the voting stock
without the prior written consent of the ADAHF.
The License Agreement provides that improvements that are used with or that
require use of toothpastes, chewing gums, foods or confections that embody
material claimed in the ADAHF Patent Rights, as well as any improvements and
inventions that are made jointly by the Company and the ADAHF that do not relate
to remineralization or commercialization of such products or of the subject
matter of the ADAHF Patent Rights, will be owned by the ADAHF and licensed to
the Company. The Company has the right to veto the granting of licenses relating
to such improvements and inventions that are developed in part by the Company.
In November 1992, the Company entered into a Foreign License Agreement (the
"Foreign License Agreement"), which was subsequently restated and amended with
the ADAHF and grants the Company an exclusive license to manufacture and sell
toothpastes, chewing gum, food and confections using the inventions
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that are the subject matter of foreign patent applications filed by the ADAHF in
approximately 28 countries. In addition, the Foreign License Agreement grants
the Company the non-exclusive right to manufacture and sell other products in
such countries using inventions that are the subject of such foreign patent
applications, including oral sprays, mouth rinses and professional gels. The
Foreign License Agreement expires upon the earlier of the termination of the
License Agreement, except as to those countries for which the royalty paid per
country in the preceding year exceeded $7,000, or the expiration of the last to
expire of any foreign patent licensed under the Foreign License Agreement or the
abandonment or lapse of all foreign patents and applications.
The Company was notified in July 1995 that the ADAHF entered into a license
agreement with SmithKline Beecham Corp. for exclusive rights in the United
States for the fields of use other than toothpastes, chewing gum, food and
confections (including oral sprays, mouth rinses and professional gels)
utilizing the ADAHF Patented Technology. The Company's non-exclusive rights for
these additional applications outside of the United States are co-extensive with
the non-exclusive rights granted to SmithKline Beecham Corp. for these products
outside of the United States.
The License Agreement and Foreign License Agreement are both subject to (i)
licenses granted to the United States, which are not transferable by the
government and (ii) rights retained by the ADAHF to make and use its inventions
for research and testing, but not to sell or use them commercially in fields
licensed exclusively to the Company.
Under the Foreign License Agreement, as restated, the Company was also
granted an option and right of first refusal during the term of the Foreign
License Agreement, for a limited license under future patents and patent
applications for inventions and material covered by and claimed in the ADAHF's
foreign patent rights, for all territories not included within the United States
or licensed territories under the licenses, with respect to toothpastes, chewing
gum, food and confectionery products. Before granting such a license for a
territory to third-parties, the ADAHF must first notify the Company, which will
then have the right to obtain a license for that territory on terms consistent
with the Foreign License Agreement. To the extent the ADAHF has not granted a
license to a third-party notwithstanding the Company's failure to exercise its
right of first refusal, the Company has the additional option to receive a
license in any of such territories on terms consistent with the Foreign License
Agreement.
Under the License Agreement, the Company is required to make royalty
payments of 4% of net sales, subject to minimum royalty payments of $3,000 in
1992, $5,000 in 1993 and $7,000 in each subsequent year. Under the Foreign
License Agreement, the Company is required to pay 7% of net sales (4% if such
sales are made by an entity that joint ventures with the Company) and bear the
costs of prosecution of foreign patent applications. If the Company sublicenses
a foreign patent, it is required to pay to the ADAHF 25% of the gross income
resulting from such sublicense actually received by the Company.
The ADAHF has made no representation or warranty, express or implied, with
respect to the efficacy or possible commercial exploitation of the Company's
proposed products.
GOVERNMENT REGULATION
Under the federal Food, Drug, and Cosmetic Act, as amended, and the
implementing regulations promulgated by the FDA, a non-prescription
(over-the-counter) drug may be marketed in one of two ways. The FDA has
established a program to promulgate "monographs" determining the conditions
under which most non-prescription drugs may be marketed without the requirement
of an NDA. The monographs establish those active ingredients that are safe and
effective at specified levels and all aspects of the labeling that are permitted
for these products. The monographs establish all of the conditions for marketing
a non-prescription drug without the need for an NDA. Any non-prescription drug
that does not comply with the final monograph may lawfully be marketed only if
it has an approved NDA. Because it is time consuming and costly to obtain FDA
approval of an NDA, most non-prescription drugs (except those that have recently
been switched from prescription to non-prescription status) are marketed
pursuant to an FDA over-the-counter drug monograph.
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The FDA has published the Monograph for over-the-counter anticaries drug
products, the category of over-the-counter drug products covering the Company's
proposed oral care products. The Monograph establishes conditions under which
non-prescription drug products that aid in the prevention of dental caries or
cavities are generally recognized as being safe and effective and not
misbranded. The Company intends to rely on the advice of FDA counsel to satisfy
formulation and labeling requirements of the Monograph as they apply to the
Company's products. See "Risk Factors -- Compliance with the Monograph."
Although the Company intends to make only such packaging claims as are
permitted by the Monograph in order to avoid the substantial expense and time
required to receive FDA approval under an NDA, it may seek to file an NDA with
the FDA in order to make further claims not covered by the Monograph. If the
Company decides to or is required to make such additional claims, it may seek
strategic partners to assist in the financing of the NDA process. Further, the
Company may not have sufficient financing or other resources available to
complete the NDA process and assuming such financing and resources are
available, there is no assurance that the FDA will approve the NDA.
Each domestic drug product manufacturing facility must be registered with
the FDA. Each manufacturer must inform the FDA of every drug product it has in
commercial distribution and keep such list updated. Domestic manufacturing
facilities are also subject to at least biannual inspection by the FDA for
compliance with Good Manufacturing Practice regulations promulgated by the FDA.
Compliance with Good Manufacturing Practice regulations is required at all times
during the manufacture and processing of drug products. Accordingly, to the
extent that the Company utilizes contract manufacturers, such manufacturers must
be in compliance with all FDA requirements.
The Company is also subject to regulation under various federal and state
laws regarding, among other things, occupational safety, environmental
protection, hazardous substance control and product advertising and promotion.
In connection with its research and development activities, the Company is
subject to federal, state and local laws, rules, regulations and policies
governing the use, generation, storage, discharge, handling and disposal of
certain materials and wastes. The Company believes that it has complied with
these laws and regulations in all material respects and it has not been required
to take any action to correct any material noncompliance. The Company does not
currently anticipate that any material capital expenditures will be required in
order to comply with federal, state and local environmental laws or that
compliance with such laws will have a material effect on the financial condition
or competitive position of the Company. The Company may also be subject to
foreign government regulations regarding over-the-counter drug products.
Accordingly, the Company intends to submit applications to foreign regulatory
agencies, if necessary, to make therapeutic health claims for its products to be
marketed abroad. See "Risk Factors -- Compliance with Other Government
Regulation."
TRADEMARKS AND PROPRIETARY INFORMATION
Trademarks
The Company intends to protect the names of certain of its products and
formulations by registration of its trademarks, where appropriate, both in the
United States and in foreign countries.
The Company has filed applications in the United States Patent and
Trademark Office to register the word mark ENAMELON, on the Principal Register,
for toothpaste, chewing gum, certain confection products, and various oral care
products, such as medicated mouth washes and professional dental gels. The
applications covering toothpaste, chewing gum and confection have been allowed,
subject to use of the mark. The application for the oral care products has been
allowed, subject to publication for opposition and use of the mark. The Company
has also applied to register the ENAMELON mark for toothpaste, chewing gum and
certain confection products in eight foreign countries. It is possible that
prior registrations and/or uses of the mark (or a confusingly similar mark) may
exist in one or more countries, in which case the Company might thereby be
precluded from registering and/or using the ENAMELON mark in such countries.
Accordingly, other trademarks are being considered by the Company.
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The Company has also applied to register its stylized "E" logo in the
United States and Canada, for toothpaste, chewing gum, certain confection
products, and various oral care products. The United States application for the
first three types of goods has been approved, subject to use of the mark. The
United States application for oral care products, and the single Canada
application for all of such goods, have each been approved, subject to
publication for opposition and use of the mark.
The Company has also filed applications, in the United States and Canada,
to register the word mark FLUOREMIN for toothpaste. Each of such applications
has been allowed, subject to use of the mark.
In connection with its trademark protection and registration program, the
Company acquired from a third party its rights in and to the mark ENAMELINE, for
use in connection with chewing gum, including the United States registration for
such mark. The assignment was made on a quitclaim basis without any
representations or warranties as to the validity or subsistence of the rights
and registration so assigned, and the Company may or may not make use of the
mark ENAMELINE.
Proprietary Information
Much of the Company's technology is dependent upon the knowledge,
experience and skills of key scientific and technical personnel. To protect
rights to its proprietary know-how and technology, Company policy requires all
employees and consultants to execute confidentiality agreements that prohibit
the disclosure of confidential information to anyone outside the Company. These
agreements also require disclosure and assignment to the Company of discoveries
and inventions made by such persons while devoted to Company activities. There
can be no assurance that these agreements will not be breached, that the Company
will have adequate remedies for any such breach or that the Company's trade
secrets will not otherwise become known or be independently developed by
competitors. In addition, it is possible others may infringe the patent rights
of the Company. See "Risk Factors -- Protection of Proprietary Technology and
Information."
LIABILITY INSURANCE
The Company's business involves exposure to potential product liability
risks that are inherent in manufacturing and marketing of pharmaceutical
products. Although the Company has not experienced any product liability claims
to date, any such claims could have a material adverse impact on the Company.
See "Risk Factors -- Product Liability." The Company currently has general
liability insurance with coverage limits of $1,000,000 per occurrence and
$2,000,000 on an annual aggregate basis and product liability insurance with
coverage limits of $1,000,000 per occurrence and $1,000,000 on an aggregate
basis. The Company intends to increase both its general liability insurance and
product liability insurance to coverage limits of $5,000,000 per occurrence and
$5,000,000 on an annual aggregate basis. While the Company's insurance polices
provide coverage on a claims made basis and are subject to annual renewal, there
can be no assurance that the Company will be able to maintain such insurance on
acceptable terms, that the Company will be able to secure increased coverage or
that any insurance will provide adequate protection against potential
liabilities.
PERSONNEL
The Company presently has seven full-time employees, Dr. Steven R. Fox,
Chairman of the Board and Chief Executive Officer, D. Brooks Cole, President and
Chief Operating Officer, Norman Usen, Vice President of Operations and Vice
President of Product Development, Anthony E. Winston, Vice President of
Technology and Clinical Research, an administrative assistant and two laboratory
technicians. The laboratory is also staffed by two part-time technicians. The
Company currently is seeking to hire a chief financial officer, a full-time
product development specialist and an additional part-time technician.
PROPERTIES
The Company currently subleases office facilities located at 15 Kimball
Avenue, Yonkers, New York from an affiliate. Commencing on January 1, 1996, the
Company obtained a one year lease of an additional 1,300 square feet of space at
its current address. See "Certain Transactions." The Company leases its
laboratory facilities in East Brunswick, New Jersey pursuant to a five year
lease expiring December 31, 1998. The leased premises are approximately 4,000
square feet.
27
<PAGE> 30
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding the Company's
directors and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------- --- -------------------------------------------------------------
<S> <C> <C>
Dr. Steven R. Fox............... 42 Chairman of the Board, Chief Executive Officer and Treasurer
D. Brooks Cole.................. 56 President and Chief Operating Officer
Norman Usen..................... 55 Vice President-Operations, Vice President-Product Development
and Secretary
Anthony E. Winston.............. 51 Vice President-Technology and Clinical Research
Dr. S.N. Bhaskar................ 72 Director
Dr. Bert D. Gaster.............. 68 Director
Richard A. Gotterer............. 33 Director
Eric D. Horodas, Esq............ 43 Director
</TABLE>
The business experience, principal occupations and employment, as well as
the periods of service, of each of the directors and executive officers of the
Company during at least the last five years are set forth below.
Steven R. Fox, D.D.S., F.I.C.D., F.A.C.D., is the founder of the Company,
and has been Chairman of the Board of Directors and Chief Executive Officer of
the Company since June 1992. From June 1992 through December 1995 and from June
1992 through June 1996, respectively, Dr. Fox was also the Company's President
and Treasurer. Dr. Fox is a member of the faculty of the Harvard School of
Dental Medicine. Since July 1978, Dr. Fox has been a practicing dentist and
currently practices dentistry on a part-time basis. Dr. Fox was an Assistant
Clinical Professor at New York University's College of Dentistry from 1979 to
1987. Dr. Fox has been active in various professional organizations, including
the International Dental Research Society, the American Dental Association and
the Ethics Committee of the Ninth District Dental Society.
D. Brooks Cole has been the President and Chief Operating Officer of the
Company since January 1996. Commencing in September 1993, Mr. Cole was retained
by the Company as a consultant. Mr. Cole has over twenty-five years of
experience in the marketing of over-the-counter drugs, oral care products and
cosmetics. Mr. Cole was employed by the Mentholatum Company, Inc., an
over-the-counter drug company, in various positions from 1980 to 1993, most
recently as President of the United States Division, and a member of the
Executive Committee and the Board of Directors from 1983 to 1993. He was
employed at Avon Products, Inc., a cosmetics company, in various positions from
1971 to 1980, most recently as a Vice President from 1976 to 1980. Mr. Cole was
employed at Vick Chemical Company, a consumer drug company, and served in
several sales, promotion and product marketing positions from 1961 to 1971. Mr.
Cole was a Vice President of the Non Prescription Drug Manufacturers Association
and served on its Board of Directors and Executive Committee from 1990 to 1993.
Norman Usen had been Vice President-Research and Development and Product
Development of the Company since July 1993. In May 1995, Mr. Usen became the
Company's Vice President-Product Development, Vice President-Operations and
Secretary. Mr. Usen is a consultant specializing in consumer product development
with thirty years' experience in product development, contract manufacturing and
consumer research. He had substantial responsibility for the development of Arm
& Hammer Toothpaste and Toothpowder for Church & Dwight Co., Inc. from 1982 to
1991. Since 1992, Mr. Usen, as President and sole stockholder of Nu-Products,
Inc. ("NP"), has been an independent consultant. From August 1993 through April
1995, NP was retained by the Company as a consultant on a part-time basis to
coordinate product development. See "Management -- Employment and Consulting
Agreements."
Anthony E. Winston has been the Vice President-Technology and Clinical
Research since January 1995. Mr. Winston has over 25 years of technology
development and clinical research experience most recently as Technical Director
for Church & Dwight Co., Inc. where he was responsible for technology
development, clinical research, ADA and FDA interface, claim substantiation and
patent protection for Arm & Hammer's baking soda toothpastes, including their
latest introduction: Peroxy Care(R). Mr. Winston is the holder or
28
<PAGE> 31
co-holder of more than 60 United States patents, of which 14 are for toothpaste
products, with two additional oral care patents pending.
S.N. Bhaskar, D.D.S., M.S., Ph.D., Major General U.S. Army (Ret.) has been
a director of the Company since August 1994 and the Chairman of the Scientific
Advisory Board since August 1992. Since 1981, Dr. Bhaskar has been in a private
dental practice in Monterey and Salinas, California. From January 1955 to
December 1980, Dr. Bhaskar was Major General, Dental Corps in the United States
Army, Assistant Surgeon General for Dental Services of the United States Army
and Chief of the United States Army Dental Corps. He is an Honorary Fellow of
the Academy of General Dentistry, a Diplomat to the American Board of Oral
Medicine and the American Board of Oral Pathology, and a member of the Dental
Research Advisory Committee to the United States Army. Dr. Bhaskar is a former
Vice Chairman of Atrix Laboratories, Inc. and a consultant to the Board of
Directors at Vipont, Inc., a publicly-traded company engaged in the development
and marketing of oral care products.
Bert D. Gaster, D.D.S., M.S.D. has been a director of the Company since
November 1992 and is a tenured Associate Professor at New York University's
College of Dentistry. Dr. Gaster has held various faculty positions with New
York University's College of Dentistry since 1972, including that of Clinic
(Module) Director for nine years. Dr. Gaster is a member of the American College
of Prosthodontics, has served on the Budget Policy Development Committee and
currently is a Director of the New York University Dental Alumni Association.
Dr. Gaster is currently an attending Prosthodontist with four hospitals in the
New York metropolitan area.
Richard A. Gotterer has been a director of the Company since November 1992
and has been a portfolio manager of fixed income securities at Schroder Wertheim
Investment Services, an investment banking firm since September 1993. Mr.
Gotterer was a private investor from June 1990 through August 1993. Mr. Gotterer
was the Vice President of Finance and Chief Financial Officer of Channel
American LPTV Holdings, Inc., an entertainment company, from February 1988 to
May 1990. He was a financial analyst with Oppenheimer & Co., Inc., an investment
banking firm, from October 1985 to October 1987.
Eric D. Horodas, Esq. has been a director of the Company since November
1992. Mr. Horodas is President of Markev Realty Corporation, and is Vice
President and Secretary of Baco Realty Corporation, both of which are actively
engaged in originating, managing and servicing commercial real estate and
mortgage investments. He has also been acting as a consultant to various
insurance regulators and insurance industry members in connection with the
restructuring and rehabilitation of financially troubled insurance companies
since October 1993. Mr. Horodas was a founding partner and member of the
Management Committee of the law firm of Rubinstein & Perry, from February 1988
until October 1993.
All directors hold office until the next annual meeting of stockholders or
until their successors are elected and qualify. Officers are elected annually
by, and serve at the discretion of, the Board of Directors.
SCIENTIFIC ADVISORY BOARD
The Company has established a five-member Scientific Advisory Board (the
"SAB"). Each member is a distinguished chemist or dental researcher chosen for
his continuing commitment to chemistry and dental science. The SAB provides
expertise and advice to the Company in several areas including guidance for the
ethical and scientific conduct of the scientific testing of the Company's
proposed products. The SAB also works in cooperation with the Company and the
scientists at the American Dental Association's Paffenbarger Research Center at
the United States Government's National Institute of Standards and Technology,
where the ADAHF Patented Technology was developed.
Consulting compensation at annual rates ranging from $5,000 to $15,000 are
paid to certain members of the SAB. In addition, the Company intends to grant,
from time to time, stock options to members of the SAB. See
"Management -- Employee Benefit Plans" for a description of options already
granted to certain SAB
29
<PAGE> 32
members. SAB members are elected annually by, and serve at the discretion of,
the Board of Directors. Currently, the members of the SAB are as follows:
S.N. Bhaskar, D.D.S., Ph.D., Major General United States Army (Ret.) serves
as the Chairman of the SAB and is also a member of the Company's Board of
Directors. See "Management -- Directors and Executive Officers."
Robert Bruce Merrifield, Ph.D. is the recipient of the 1984 Nobel Prize in
Chemistry as well as numerous other scientific honors, and has been the John D.
Rockefeller, Jr. Professor at The Rockefeller University since 1966. He has been
a member of the faculty at The Rockefeller Institute for Medical Research since
1963. Dr. Merrifield is an Associate Editor of The International Journal of
Peptide and Protein Research, on the Editorial Board of Analytical Biochemistry,
and a member of the American Chemical Society, American Society of Biological
Chemists, American Institute of Chemists and the National Academy of Sciences.
Dr. Merrifield has been the Nobel Guest Professor, Uppsala, Sweden.
Ming S. Tung, Ph.D. is the inventor of the ADAHF Patented Technology
licensed to the Company, and has been the Project Leader on the chemistry of
calcium phosphates, prevention of dental caries, and coatings of the tooth
research projects at the American Dental Association Health Foundation
Paffenbarger Research Center, National Institute of Standards and Technology,
since 1974. Dr. Tung was associated with Brown University and the University of
Maryland conducting research on biopolymers, self-association proteins and
allosteric proteins from 1965 to 1974.
Joseph L. Henry, D.D.S., M.S., Ph.D., F.A.C.D., F.R.S.H., F.I.C.D. has held
faculty positions at the Harvard School of Dental Medicine, including Interim
Dean for the Dental School and Associate Dean for Government and Community
Affairs, since 1975. In December 1994, Dr. Henry retired as Associate Dean at
the Harvard School of Dental Medicine, and Professor and Chairman of the
Department of Oral Diagnosis and Oral Radiology at the Harvard School of Dental
Medicine. Dr. Henry held various faculty positions at Howard University College
of Dentistry from 1953 to 1975, including Professor of Oral Medicine,
Superintendent and Director of Clinics, and served as Dean of the Dental College
for nine years.
Jason Michael Tanzer, D.M.D., Ph.D., F.A.C.D. has been a Professor and head
of the Division of Oral Medicine, Department of Oral Diagnosis, at the
University of Connecticut School of Dental Medicine since 1977, and a Professor,
Department of Laboratory Medicine, University of Connecticut School of Medicine
since 1979. Dr. Tanzer was the recipient of the Basic Research in Oral Science
Award in April 1973 and the Dental Caries Research Award in March 1985, both
from the International Association for Dental Research. Dr. Tanzer has also been
appointed Chairman of the Distinguished Scientist Awards Committee for the
International Association for Dental Research to serve from 1993 through 1998.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee, established in July 1993, currently consists of Dr.
Bhaskar and Mr. Gotterer (Chairman). The functions of the Audit Committee are to
recommend annually to the Board of Directors the appointment of the independent
public accountants of the Company, review the scope of their annual audit and
other services they are asked to perform, review the report on the Company's
financial statements following the audit, review the accounting and financial
policies of the Company and review management's procedures and policies with
respect to the Company's internal accounting controls.
The Compensation Committee, also established in July 1993, currently
consists of Dr. Gaster and Mr. Horodas (Chairman). The functions of the
Compensation Committee are to review and approve salaries, benefits and bonuses
for all executive officers of the Company, and to review and recommend to the
Board of Directors matters relating to employee compensation and employee
benefit plans. The Compensation Committee also administers the Plan. See
"Management -- Employee Benefit Plans."
30
<PAGE> 33
EXECUTIVE COMPENSATION
The table below summarizes the compensation received by the Company's Chief
Executive Officer and Vice President -- Technology and Clinical Research ("named
executive officers") for services rendered during the fiscal years ended
December 31, 1995, 1994 and 1993. No other executive officer of the Company
received compensation in excess of $100,000 during such years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
NAME AND ---------------------- UNDERLYING
PRINCIPAL POSITION(1) YEAR SALARY ($) BONUS ($) OPTION (#)
- ------------------------------------------------------- ---- ---------- --------- ------------
<S> <C> <C> <C> <C>
Steven R. Fox.......................................... 1995 $ 75,000 $10,000 450,000
Chairman of the 1994 75,000 -- --
Board, President, 1993 75,000 -- --
Chief Executive Officer and Treasurer(2)
Anthony E. Winston..................................... 1995 $ 129,875 -- 160,000
Vice President -- 1994 -- -- --
Technology and 1993 -- -- --
Clinical Research(3)
</TABLE>
- ---------------
(1) See "Management -- Employment and Consulting Agreements" for a description
of Dr. Fox's employment agreement with the Company as Chairman of the Board
and Chief Executive Officer which commenced on January 1, 1994; Anthony E.
Winston's employment agreement with the Company as the Company's Vice
President-Technology and Clinical Research which commenced on January 1,
1995; D. Brooks Cole's employment agreement with the Company whereby Mr.
Cole became the Company's President and Chief Operating Officer as of
January 1, 1996; and Norman Usen's employment agreement with the Company as
the Company's Vice President -- Research and Development and Vice
President -- Operations.
(2) Dr. Fox resigned as the Company's President effective on January 1, 1996.
(3) Mr. Winston became the Company's Vice President -- Technology and Clinical
Research as of January 24, 1995.
The following table sets forth the individual grants of stock options made
during the fiscal year ended December 31, 1995 to each of the named executive
officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
PERCENT VALUE
NUMBER OF OF TOTAL AT ASSUMED RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED EXERCISE FOR OPTION TERM(1)
OPTIONS TO EMPLOYEES OR BASE EXPIRATION -------------------------
NAME GRANTED(#) IN FISCAL YEAR PRICE ($/SH) DATE 5%($) 10%($)
- -------------------------- --------- -------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven R. Fox............. 450,000 48.0% $ 3.00 5/31/00 $3,532,823 $4,485,903
Anthony E. Winston........ 150,000 16.0 1.33 1/31/00 1,402,208 1,685,790
10,000 1.1 4.00 6/30/00 68,943 90,707
</TABLE>
- ---------------
(1) The potential realizable value through the expiration date of the options
has been determined on the basis of the anticipated initial public offering
price, compounded annually over the remaining term of the respective option,
net of exercise price. These values have been determined based upon assumed
rates of appreciation and are not intended to forecast the possible future
appreciation, if any, of the price or value of the Company's Common Stock.
31
<PAGE> 34
The following table sets forth the number of exercisable or vested and
unexercisable or unvested options during the fiscal year ended December 31, 1995
held by each of the named executive officers and the year-end value of such
unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS
FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- --------------------------------------------------------- -------------------- ---------------------
<S> <C> <C>
Steven R. Fox............................................ 450,000/0 $ 2,700,000/0
Anthony E. Winston....................................... 160,000/0 1,200,500/0
</TABLE>
COMPENSATION OF DIRECTORS.
Members of the Board of Directors presently receive no additional
remuneration for acting in that capacity. The Company anticipates that upon
completion of this offering, each non-employee director will receive $500 for
attendance at each meeting plus reimbursement for expenses for each meeting
attended. See "Management -- Employee Benefit Plans" and "-- Employment and
Consulting Agreements" for a description of options granted to members of the
Board of Directors. It is anticipated that each member of the Audit Committee
and the Compensation Committee will receive $250 for each meeting attended
together with reimbursement of expenses.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
Dr. Bert D. Gaster and Mr. Eric D. Horodas served as members of the
Company's compensation committee during the last completed fiscal year. There
are no compensation committee (or board of directors) interlock relationships
with respect to the Company.
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company has entered into an employment agreement with Dr. Steven R.
Fox, pursuant to which Dr. Fox is employed as Chairman of the Board of Directors
and Chief Executive Officer for a term of five years commencing on January 1,
1994. The agreement, as amended, provides that Dr. Fox shall devote such time to
the Company as necessary to perform his responsibilities thereunder, but no less
then forty hours per week, in consideration of an annual salary of $75,000,
which increased to $175,000 per year in January 1996. The employment agreement
acknowledges that Dr. Fox shall be entitled to maintain his dental practice and
see patients on a basis that does not interfere with the performance of his
duties thereunder. Dr. Fox continues to practice dentistry on a part-time basis.
Pursuant to the agreement, if Dr. Fox opposes a change of control of the
Company, as defined in the agreement, and thereafter elects to terminate his
employment with the Company, he is entitled to a one time payment of either (i)
two and nine-tenths (2.9) times the sum of Dr. Fox's current base annual salary
plus any amounts due to him under the Company's Incentive Compensation Plan if a
majority of the Company's Board of Directors opposed the change of control or
(ii) two and one-half (2.5) times the sum of Dr. Fox's current base annual
salary plus any amounts due to him under the Company's Incentive Compensation
Plan if a majority of the Company's Board of Directors voted in favor of the
change of control. However, such payment shall not exceed the maximum payment
permitted by Section 280G of the Internal Revenue Code of 1986, as amended.
Pursuant to the Company's Incentive Compensation Plan, Dr. Fox shall be entitled
to 50% of all amounts allocated to such plan. See "Management -- Employee
Benefit Plans."
The Company has entered into an employment agreement with D. Brooks Cole,
pursuant to which Mr. Cole is employed as President and Chief Operating Officer.
The agreement, as amended, provides that
32
<PAGE> 35
Mr. Cole shall devote all of his business time to the Company in consideration
of an annual salary of $150,000, subject to adjustment. In addition, Mr. Cole
shall be entitled to 15% of all amounts allocated to the Company's Incentive
Compensation Plan. Mr. Cole serves at the pleasure of the Board of Directors;
however, if the Company elects to terminate the agreement, Mr. Cole is entitled
to six months severance pay including all salary and benefits. Pursuant to the
employment agreement, Mr. Cole was granted a seven-year option to purchase
99,000 shares of Common Stock at an exercise price equal to $1.33 per share,
immediately exercisable from the date of the grant, and expiring seven years
thereafter. Prior to the commencement of this agreement, Mr. Cole had been
retained by the Company on a consulting basis at a rate of $3,000 per month,
plus, for the period from July 1994 through July 1995, 3,000 Common Stock
options per month at an exercise price of $1.33 per share. Effective November 1,
1995, the consulting fee was increased to $4,000 per month.
The Company has entered into an employment agreement with Norman Usen,
pursuant to which Mr. Usen is employed full-time as Vice President -- Product
Development and Vice President-Operations for a term of three years commencing
on May 1, 1995. The consulting agreement between the Company and NP terminated
upon the commencement of Mr. Usen's employment agreement. Pursuant to the
employment agreement, Mr. Usen will devote his full time to the Company in
consideration of an annual salary of $105,000 the first year of the term,
$115,000 the second year of the term, and $125,000 for the third year of the
term. If Mr. Usen is terminated from the Company without cause, as defined in
the agreement, then he shall be entitled to continue to receive his salary and
benefits until the end of the term of the agreement. As additional compensation,
Mr. Usen shall be entitled to 12.5% of all amounts allocated to the Company's
Incentive Compensation Plan. Pursuant to the employment agreement, Mr. Usen was
granted seven-year options to purchase an aggregate 90,000 shares of Common
Stock at an exercise price equal to $1.33 per share. The options previously
granted to NP were terminated and reissued to Mr. Usen. See "Certain
Transactions."
The Company has entered into an employment agreement with Anthony E.
Winston, pursuant to which Mr. Winston is employed full-time as Vice
President -- Technology and Clinical Research for a term of two years commencing
in January 1995. Pursuant to the employment agreement, Mr. Winston will devote
his full time to the Company in consideration of an annual salary of $135,000.
If Mr. Winston is terminated from the Company without cause, as defined in the
agreement, then he shall be entitled to continue to receive his salary and
benefits until the end of the term of the agreement. As additional compensation,
Mr. Winston shall be entitled to 5% of all amounts allocated to the Company's
Incentive Compensation Plan. Pursuant to the employment agreement, Mr. Winston
was granted ten-year options to purchase an aggregate 150,000 shares of Common
Stock at an exercise price equal to $1.33 per share.
EMPLOYEE BENEFIT PLANS
1993 Stock Option Plan
In July 1993, the Board of Directors adopted the Plan which was approved by
the Company's stockholders in September 1993. The Plan provides for the grant to
qualified employees (including officers and directors) of the Company of options
to purchase shares of Common Stock. A total of 1,500,000 shares of Common Stock
have been reserved for issuance upon exercise of stock options granted under the
Plan. The Plan is administered by the Board of Directors or a committee of the
Board of Directors (the "Committee") whose members are not entitled to receive
options under the Plan (excluding options granted exclusively for directors
fees). The Committee has complete discretion to select the optionee and to
establish the terms and conditions of each option, subject to the provisions of
the Plan. Options granted under the Plan may or may not be "incentive stock
options" as defined in Section 422 of the Internal Revenue Code ("Incentive
Options") depending upon the terms established by the Committee at the time of
grant, but the exercise price of options granted may not be less than 100% of
the fair market value of the Common Stock as of the date of grant (110% of the
fair market value if the grant is an Incentive Option granted to an employee who
owns more than 10% of the outstanding Common Stock). Options may not be
exercised more than 10 years after the grant (five years if the grant is an
Incentive Option to any employee who owns more than 10% of the outstanding
Common Stock). Options granted under the Plan are not transferable and may be
exercised only by the respective grantees during their lifetimes or by their
heirs, executors or administrators in the event of death. Under the Plan, shares
subject to canceled or terminated options are reserved for subsequently granted
33
<PAGE> 36
options. The number of options outstanding and the exercise price thereof are
subject to adjustment in the case of certain transactions such as mergers,
recapitalizations, stock splits or stock dividends.
As of the date of this Prospectus, the Company has granted options
exercisable for periods of three to ten years to purchase an aggregate of
1,203,355 shares of Common Stock, at an exercise price ranging from $1.33 to
$4.00 per share, to certain employees, officers and directors of the Company,
including options to purchase an aggregate of 450,000 shares granted to the
Company's Chairman of the Board at $3.00 per share, options to purchase an
aggregate of 130,515 shares granted to other members of the Company's Board of
Directors at prices ranging from $1.86 to $2.67 per share, and options to
purchase an aggregate of 41,628 shares granted to members of the Company's
Scientific Advisory Board other than members of the Company's Board of Directors
at $2.67 per share. See "Management -- Employment and Consulting Agreements" for
a description of options granted to an affiliate of an officer of the Company.
INCENTIVE COMPENSATION PLAN
The Company has established a five-year incentive compensation program to
award officers and key employees for their efforts on behalf of the Company as
measured by yearly increases in the net income (before income taxes and
extraordinary items) generated by the Company. The program provides for
incentive compensation utilizing an objective formula based upon guidelines in
accordance with the Company's goals. The Company will establish a yearly bonus
pool commencing with the closing date of the offering, equal to five percent of
its net income before income taxes including the amount provided for by the
incentive compensation plan, and extraordinary items ("ICP Income"), to be
distributed to officers and key employees. For the subsequent four fiscal years,
such bonus pool shall only be established in the event the Company's ICP Income
equals or exceeds by at least 5% the Company's ICP Income for the prior fiscal
year. Amounts remaining in the yearly bonus pool which are not distributed do
not carry over into the subsequent year's pool. The maximum amount an executive
or key employee may receive from the bonus pool is limited to two times such
person's salary.
INDEMNIFICATION
Pursuant to the Company's Certificate of Incorporation and By-laws,
officers and directors of the Company shall be indemnified by the Company to the
fullest extent allowed under Delaware law for claims brought against them in
their capacities as officers or directors. Indemnification is not allowed if the
officer or director does not act in good faith and in a manner reasonably
believed to be in the best interests of the Company, or if the officer or
director had no reasonable cause to believe his conduct was lawful. Accordingly,
indemnification may occur for liabilities arising under the Securities Act. The
Company and the Underwriters have agreed to indemnify each other (including
officers and directors) against certain liabilities, including liabilities under
the Securities Act. See "Underwriting." Insofar as indemnification for
liabilities arising under the Securities Act may be permitted for directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
34
<PAGE> 37
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of May 31, 1996, and as adjusted to
reflect the sale of 2,000,000 shares of Common Stock offered hereby, certain
information, with respect to the beneficial ownership of shares of Common Stock
by (i) each person known by the Company to be the owner of more than 5% of the
outstanding shares of Common Stock, (ii) each director, (iii) each named
executive officer and (iv) all directors and executive officers as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT AND OUTSTANDING SHARES OWNED
NATURE OF ---------------------------
NAME AND ADDRESS BENEFICIAL BEFORE AFTER
OF BENEFICIAL OWNERS OWNERSHIP(1) OFFERING(2) OFFERING(3)
- ------------------------------------------------------ ------------ ----------- -----------
<S> <C> <C> <C>
Dr. Steven R. Fox(4).................................. 3,543,240(5) 62.7% 46.3%
Dr. Bert Gaster....................................... 21,753(6) * *
Mr. Richard Gotterer.................................. 87,012(6) 1.7% 1.2%
Mr. Eric Horodas...................................... 105,762(6)(7) 2.0% 1.5%
Dr. S.N. Bhaskar...................................... 65,256(8) 1.2% *
Anthony E. Winston.................................... 160,000(9) 3.0% 2.2%
All directors and executive officers as a group (8
persons)............................................ 4,316,785(10) 68.7% 52.1%
</TABLE>
- ---------------
* Represents less than 1%.
(1) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within
60 days from the date hereof upon the exercise of warrants or options. Each
beneficial owner's percentage ownership is determined by assuming that
options or warrants that are held by such person (but not those held by any
other person) and which are exercisable within 60 days from the date hereof
have been exercised.
(2) Based on 5,200,378 shares issued and outstanding, after giving effect to
the automatic conversion of 558,399 shares of Series A Preferred Stock into
558,399 shares of Common Stock.
(3) Based on 7,200,378 shares issued and outstanding.
(4) The address of Mr. Fox is c/o Enamelon, Inc., 15 Kimball Avenue, Yonkers,
NY 10704.
(5) Includes 36,348 shares held in trust for the benefit of Dr. Fox's minor
children. Also includes 450,000 shares issuable upon exercise of currently
exercisable stock options.
(6) Includes 21,753 shares issuable upon exercise of currently exercisable
stock options.
(7) Includes 9,375 shares issuable upon exercise of warrants.
(8) Includes 65,256 shares issuable upon exercise of currently exercisable
stock options.
(9) Includes 160,000 shares issuable upon exercise of currently exercisable
stock options.
(10) Includes 1,074,277 shares issuable upon exercise of currently exercisable
stock options and 9,375 shares issuable upon exercise of currently
exercisable warrants.
By virtue of his ownership of shares of Common Stock and position with the
Company, Steven R. Fox may be deemed a "parent" and a "founder" of the Company
as such terms are defined under the federal securities laws.
CERTAIN TRANSACTIONS
The Company has subleased its office facilities without a written
agreement, since December 1, 1992, from Dr. Steven R. Fox, the Chairman of the
Board, at a rent of $600 per month. Commencing January 1, 1996 for a period of
one year, the Company entered into a lease with a relative of Dr. Fox for
additional office facilities at a rent of $2,500 per month. See
"Business -- Properties" for a description of such facilities.
35
<PAGE> 38
For information concerning employment and consulting agreements with, and
compensation of, the Company's executive officers and directors, see
"Management -- Executive Compensation," "-- Employment and Consulting
Agreements" and "-- Employee Benefit Plans."
The Company believes that the terms of each of the foregoing transactions
and those which will exist after the consummation of the offering are no less
favorable to the Company than could have been obtained from non-affiliated third
parties, although no independent appraisals were obtained. In the future, all
transactions between the Company and its affiliates will also be on terms which
the Company believes will continue to be no less favorable to the Company than
the Company could obtain from non-affiliated parties.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 20,000,000 shares of Common Stock,
$0.001 par value per share, of which 5,200,378 shares (assuming the automatic
conversion of 558,399 shares of Series A Preferred Stock into 558,399 shares of
Common Stock) are currently outstanding and held of record by approximately 225
holders. Holders of shares of Common Stock are entitled to one vote for each
share held of record on all matters to be voted on by stockholders. There are no
preemptive, subscription, conversion or redemption rights pertaining to the
shares of Common Stock. Holders of shares of Common Stock are entitled to
receive dividends when, as and if declared by the Board of Directors from funds
legally available therefor and to share ratably in the assets of the Company
available upon liquidation, dissolution or winding up. The holders of shares of
Common Stock do not have cumulative voting rights for the election of directors
and, accordingly, the holders of more than 50% of the shares of Common Stock are
able to elect all directors. If the officers and directors of the Company were
to exercise all of their presently exercisable warrants and options, they would
continue to control a majority of the votes following completion of the
offering. After the completion of this offering, they would be entitled to vote
52.1% of the shares of Common Stock, and, accordingly, in all likelihood they
will be able to elect all of the Company's directors. All of the outstanding
shares of Common Stock are duly authorized, validly issued, fully paid and
non-assessable.
PREFERRED STOCK
The Company is authorized by its Amended Certificate of Incorporation to
issue 5,000,000 shares of Preferred Stock, $0.01 par value per share. Pursuant
to the Company's Certificate of Designation, 827,250 shares have been designated
as Series A Preferred Stock, of which 558,399 shares were previously issued. By
their terms, all shares of Series A Preferred Stock then outstanding shall
automatically be converted into Common Stock upon (i) the consummation of a firm
underwritten public offering of the Company's Common Stock at a price of at
least $7.00 per share (ascribing no value to any warrants or other securities
sold if the Common Stock is sold in units), which results in aggregate gross
proceeds to the Company of not less than $10,000,000 or (ii) a merger,
consolidation or sale of all or substantially all of the assets of the Company,
which results in the Company or all of the holders of Common Stock receiving
consideration per share of Common Stock so owned of at least $7.00, at the
conversion price per share with respect to the Series A Preferred Stock then in
effect immediately prior to the consummation of such event. Therefore, all
558,399 issued and outstanding shares of Series A Preferred Stock will be
automatically converted into 558,399 shares of Common Stock upon consummation of
this offering. Accordingly, following the completion of the offering and the
automatic conversion of the outstanding shares of Series A Preferred Stock into
shares of Common Stock, there will be 268,851 shares of Series A Preferred Stock
authorized of which none shall be outstanding.
LIMITATIONS UPON TRANSACTIONS WITH "INTERESTED STOCKHOLDERS"
Section 203 of the Delaware General Corporation Law prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder unless (i)
prior to the date of the business combination, the transaction is approved by
the board of directors of the corporation, (ii) upon
36
<PAGE> 39
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owns at least 85% of the
outstanding voting stock or (iii) on or after such date the business combination
is approved by the board of directors and by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. A "business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the stockholder. An "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within three years, did own), 15% or more of the corporation's voting stock. The
restrictions of Section 203 do not apply, among other things, if a corporation,
by action of its stockholders, adopts an amendment to its certificate of
incorporation or by-laws expressly electing not to be governed by Section 203,
provided that, in addition to any other vote required by law, such amendment to
the certificate of incorporation or by-laws must be approved by the affirmative
vote of a majority of the shares entitled to vote. Moreover, an amendment so
adopted is not effective until twelve months after its adoption and does not
apply to any business combination between the corporation and any person who
became an interested stockholder of such corporation on or prior to such
adoption. The Company's Amended Certificate of Incorporation and By-laws do not
currently contain any provisions electing not to be governed by Section 203 of
the Delaware General Corporation Law. The provisions of Section 203 of the
Delaware General Corporation Law may have a depressive effect on the market
price of the Common Stock because they could impede any merger, consolidating
takeover or other business combination involving the Company or discourage a
potential acquirer from making a tender offer or otherwise attempting to obtain
control of the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is
____________________.
37
<PAGE> 40
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of shares by current stockholders could adversely affect the
price of the Company's Common Stock. Upon completion of this offering, the
Company will have 7,200,378 shares of Common Stock outstanding (7,500,378 shares
if the Underwriters' over-allotment option is exercised in full), of which
5,200,378 shares of Common Stock (72.2% of the shares to be outstanding) were
issued by the Company in private transactions. In addition, the Company has
reserved for issuance 1,203,355 shares upon exercise of options granted under
the Plan, 296,645 shares upon the exercise of options to be granted under the
Plan, 810,652 shares for issuance upon exercise of outstanding warrants and up
to 200,000 shares for issuance upon exercise of the Representative's Warrants.
Of the shares of Common Stock to be issued and outstanding after this offering,
the 2,000,000 shares of Common Stock sold in this offering will be freely
tradeable without restriction or further registration under the Securities Act,
except for any shares purchased by an "affiliate" of the Company within the
meaning of Rule 144. The remaining 5,193,484 outstanding shares of Common Stock
are "restricted securities," as that term is defined under Rule 144, and may not
be sold in the absence of registration under the Securities Act unless an
exemption from registration is available, including the exemption provided by
Rule 144. Approximately 3,667,000 of such shares will be eligible for sale under
Rule 144 commencing 90 days following the completion of this offering. The
remaining shares will be eligible for sale between October 1996 through January
1998.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including a person deemed to be an "affiliate" of
the Company, who has beneficially owned his or her shares for at least two years
is entitled to sell within any three-month period that number of restricted
securities that does not exceed the greater of one percent of the then
outstanding shares of Common Stock (72,004 shares based on the number of shares
to be outstanding after the offering), or the average weekly trading volume of
the Common Stock during the four calendar weeks immediately preceding such sale.
Sales under Rule 144 are further subject to certain restrictions relating to the
manner of sale, notice and the availability of current public information about
the Company. After three years have elapsed from the later of the issuance of
restricted securities by the Company or their acquisition from an affiliate,
such shares may be sold without limitations by persons who have not been
affiliates of the Company for at least three months.
Rule 701 under the Securities Act provides that, beginning 90 days after
the date of this Prospectus, shares of Common Stock acquired on the exercise of
outstanding employee options may be resold by persons other than affiliates
subject only to the manner of sale provisions of Rule 144, and by affiliates
subject to all provisions of Rule 144 except its two-year minimum holding
period. The Company intends to file one or more registration statements on Form
S-8 under the Securities Act to register shares of Common Stock subject to stock
options granted under the Plan.
The Company has agreed not to register, issue, sell or otherwise dispose of
any of its securities, subject to certain exceptions, for a period of 180 days
from the date of this Prospectus without the prior written consent of the
Representative. The Company's officers, directors and principal stockholders
have agreed (i) not to, directly or indirectly, issue, agree or offer publicly
to sell, grant an option for the purchase or sale of, assign, transfer, pledge,
hypothecate, distribute or otherwise encumber or dispose of, any shares of
Common Stock or other equity securities of the Company or other securities
convertible into or exercisable for such shares of Common Stock or other equity
securities for 180 days from the date of this Prospectus without the prior
written consent of the Representative, and (ii) not to register any shares held
by them for a period of 180 days from the date of this Prospectus.
REGISTRATION RIGHTS
The holders of 211,875 shares of Common Stock and warrants to purchase
152,814 shares of Common Stock of the Company at an exercise price $1.33 per
share have been granted certain incidental registration rights relating to the
underlying Common Stock. These securities were purchased in private transactions
with the Company in September 1994 and May 1995. The piggyback registration
rights expire on June 30, 1997 and do not apply to registrations relating to
initial public offerings, mergers, acquisitions or pursuant to Form S-8 (or any
successor form).
38
<PAGE> 41
At any time (subject to certain limitations) at least six months after the
Company completes an initial public offering, the holders of at least 40% of the
Common Stock issued or issuable upon conversion of the Series A Preferred Stock
have three "demand" registration rights for a period of five years after such
offering and unlimited demand registration rights for a filing on Form S-3,
provided the anticipated aggregate offering price in each such filing exceeds
$500,000, for a period of five years after the issuance of the Series A
Preferred Stock. The holders also have unlimited "piggy-back" registration
rights (subject to certain limitations) for a period of seven years after the
issuance of the Series A Preferred Stock.
Prior to this offering, there has been no public trading market for the
shares of Common Stock and there can be no assurance that a regular trading
market will develop after this offering, or that if developed it will be
sustained. In addition, no prediction can be made as to the effect, if any, that
market sales of shares of Common Stock or the availability of such shares for
sale will have on the market prices prevailing from time to time. Nevertheless,
the possibility that substantial amounts of shares of Common Stock may be sold
in the public market may adversely affect prevailing market prices for the
shares of Common Stock and could impair the Company's ability to raise capital
through the sale of its equity securities.
The Company intends to file a registration statement under the Securities
Act to register the shares of Common Stock issued and reserved for issuance in
compensatory arrangements and under its stock plan. Registration would permit
the resale of such shares by non-affiliates in the public market without
restriction under the Securities Act.
39
<PAGE> 42
UNDERWRITING
The Underwriters below, for whom Rodman & Renshaw, Inc. is acting as
Representative (the "Representative"), have severally agreed, subject to the
terms and conditions contained in the Underwriting Agreement, to purchase from
the Company the number of shares of Common Stock set forth below opposite their
respective names:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
--------------------------------------------------------------------- ----------------
<S> <C>
Rodman & Renshaw, Inc................................................
---------
Total...................................................... 2,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligations is such that they are committed to purchase and pay for all of the
above shares of Common Stock offered hereby if any are purchased.
The Underwriters, through the Representative, have advised the Company that
they propose to offer the shares of Common Stock initially at the public
offering price set forth on the cover page of this Prospectus; that the
Underwriters may allow to selected dealers a concession of $ per share
and that such dealers may reallow a concession of $ per share to
certain other dealers who are members of the National Association of Securities
Dealers, Inc. After the public offering, the offering price and other selling
terms may be changed by the Underwriters. Pending approval of its listing
application, it is anticipated that the Common Stock will be quoted on The
Nasdaq National Market.
The Company has granted to the Underwriters a 30-day over-allotment option
to purchase from the Company up to an aggregate of 300,000 additional shares of
Common Stock exercisable at the public offering price less the underwriting
discount. If the Underwriters exercise such over-allotment option, then each of
the Underwriters will have a firm commitment, subject to certain conditions, to
purchase approximately the same percentage thereof as the number of shares of
Common Stock to be purchased by it as shown in the above table bears to
2,000,000 shares of Common Stock offered hereby. The Underwriters may exercise
such option only to cover over-allotments made in connection with the sale of
the shares of Common Stock offered hereby.
In connection with this offering, the Company has agreed to sell to the
Representative, for nominal consideration, warrants to purchase a number of
shares of Common Stock equal to 10% of the shares of Common Stock sold in the
offering, exclusive of any shares of Common Stock sold pursuant to the
Underwriters' over-allotment option (the "Representative's Warrants"). The
Representative's Warrants are initially exercisable at a price of $ per
share of Common Stock (120% of the initial public offering price) for a period
of four years, commencing one year from the effective date of the offering and
are restricted from sale, transfer, assignment or hypothecation for a period of
12 months from the effective date of the offering, except to officers, partners
or successors of the Representative. The exercise price of the Representative's
Warrants and the number of shares of Common Stock issuable upon exercise thereof
are subject to adjustment under certain circumstances. The Representative's
Warrants grant to the holders thereof certain rights of registration for the
securities issuable upon exercise of the Representative's Warrants. The
Representative's Warrants are not redeemable by the Company, under any
circumstances.
In addition, the Representative has a right of first refusal to perform
services for the Company with respect to certain future transactions for a
period of two years after the effective date of the offering.
The holders of the Representative's Warrants will have no voting, dividend
or other rights as stockholders of the Company unless and until the exercise of
such warrants. The number of securities deliverable upon any exercise of the
Representative's Warrants and the exercise price of such warrants are subject to
adjustment to protect against any dilution upon the occurrence of certain
events.
40
<PAGE> 43
During the exercise period, the Representative and any transferee is given,
at nominal cost, the opportunity to profit from a rise in the market price for
the Company's Common Stock, if any, at the expense of the Company's then
stockholders. For the life of the Representative's Warrants, the Company may be
deprived of favorable opportunities to procure additional equity capital, if it
should be needed for the purpose of the business of the Company, and the holders
of the Representative's Warrants may be expected to exercise such Warrants at a
time when the Company would, in all likelihood, be able to obtain equity
capital, if then needed, by the sale of additional securities on terms more
favorable than those provided in the Representative's Warrants.
The executive officers, directors and principal stockholders of the Company
have agreed that they will not publicly sell or dispose of any shares of Common
Stock for a period of 180 days from the date of this Prospectus without the
prior written consent of the Representative. See "Shares Eligible for Future
Sale."
The Company has agreed to indemnify the Underwriters against certain
liabilities, losses and expenses, including liabilities under the Securities
Act, or to contribute to certain payments that the Underwriters may be required
to make in respect thereof.
The foregoing does not purport to be a complete statement of the terms and
conditions of the Underwriting Agreement and related documents, copies of which
are on file at the offices of the Representative, the Company and the Securities
and Exchange Commission, forms of which have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part.
Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price has been determined
through negotiations between the Company and the Representative. Such price was
based on a number of factors, including, without limitation, estimates of the
business potential and earnings prospects of the Company, the present state of
the Company's development, an assessment of the Company's management, the
consideration of the above factors in relation to market valuations of
comparable companies, and the current condition of the industry and the economy
as a whole.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Snow Becker Krauss P.C., New York, New York. Snow Becker Krauss P.C.
owns 27,264 shares of Common Stock and SBK Investment Partners, a partnership
consisting of members of Snow Becker Krauss P.C., owns 110,000 shares of Common
Stock and holds an option to purchase 32,628 shares of Common Stock. Certain
legal matters in connection with this offering will be passed upon for the
Underwriters by Squadron, Ellenoff, Plesent & Sheinfeld, LLP, New York, New
York.
EXPERTS
The financial statements included in this Prospectus have been audited by
BDO Seidman, LLP, independent certified public accountants, to the extent and
for the periods indicated in their report appearing elsewhere herein and are
included in reliance on such report given upon the authority of said firm as
experts in auditing and accounting.
41
<PAGE> 44
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 including all amendments
thereto (the "Registration Statement") under the Securities Act with respect to
the Common Stock offered by this Prospectus. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and this
offering, reference is made to the Registration Statement, including the
exhibits filed therewith. The Registration Statement may be inspected and copies
may be obtained from the Public Reference Section at the Commission's principal
office, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at
the Northeast Regional Office, 7 World Trade Center, 13th Floor, New York, New
York 10048 and the Chicago Regional Office, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661-2511, upon payment of the fees prescribed by the
Commission. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete and where the contract
or other document has been filed as an exhibit to the Registration Statement,
each such statement is qualified in all respects by such reference to the
applicable document filed with the Commission.
The Company intends to distribute to its stockholders annual reports
containing audited financial statements certified by its certified public
accountants and such other periodic reports as the Company may determine to be
appropriate or as may be required by law.
42
<PAGE> 45
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
<TABLE>
<S> <C>
Report of independent certified public accountants.................................... F-2
Financial statements:
Balance sheets................................................................... F-3
Statements of operations......................................................... F-4
Statements of stockholders' equity............................................... F-5
Statements of cash flows......................................................... F-6
Notes to financial statements.................................................... F-7
</TABLE>
F-1
<PAGE> 46
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Enamelon, Inc.
Yonkers, New York
We have audited the accompanying balance sheets of Enamelon, Inc. (a
development stage company) as of December 31, 1994 and 1995, and the related
statements of operations and cash flows for each of the years in the three-year
period ended December 31, 1995 and the statements of stockholders' equity for
the period from June 9, 1992 (inception) to December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Enamelon, Inc. as of
December 31, 1994 and 1995, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1995 in
conformity with generally accepted accounting principles.
New York, New York BDO Seidman, LLP
April 5, 1996
F-2
<PAGE> 47
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents (Note 1).................. $ 50,097 $ 1,790,666 $ 3,015,090
Prepaid expenses and other assets................... 6,714 11,077 11,911
----------- ----------- -----------
Total current assets............................. 56,811 1,801,743 3,027,001
Equipment, less accumulated depreciation of $7,897,
$20,545 and $26,028 (Note 1)........................ 41,776 58,077 123,972
Deferred costs, less accumulated amortization of
$12,383, $23,227 and $26,608 (Notes 1, 2 and 3)..... 155,495 172,157 365,548
Other assets -- security deposit...................... 11,098 8,939 8,939
----------- ----------- -----------
$ 265,180 $ 2,040,916 $ 3,525,460
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses.................................... $ 114,652 $ 173,939 $ 269,431
----------- ----------- -----------
Total current liabilities........................ 114,652 173,939 269,431
----------- ----------- -----------
Commitments (Notes 3, 6, 7 and 8)
Redeemable preferred stock, net of offering costs
(Notes 3 and 8)..................................... -- -- 1,879,000
----------- ----------- -----------
STOCKHOLDERS' EQUITY (NOTE 4):
Preferred stock, $0.01 par value -- shares
authorized 5,000,000; none issued or
outstanding...................................... -- -- --
Common stock, $0.001 par value -- shares authorized
20,000,000; issued and outstanding 3,784,800,
4,635,273 and 4,641,979.......................... 3,785 4,635 4,641
Additional paid-in capital.......................... 1,279,408 4,055,925 4,082,743
Accumulated deficit during the development stage.... (1,132,665) (2,193,583) (2,710,355)
----------- ----------- -----------
Total stockholders' equity....................... 150,528 1,866,977 1,377,029
----------- ----------- -----------
$ 265,180 $ 2,040,916 $ 3,525,460
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 48
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED JUNE 9, 1992
----------------------------------- MARCH 31, (INCEPTION) TO
1993 1994 1995 ------------------------- MARCH 31,
--------- --------- ----------- 1995 1996 1996
----------- ----------- --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Expenses:
Payroll and benefits..... $ 98,749 $ 133,714 $ 368,110 $ 36,454 $ 195,991 $ 804,361
Research and testing..... 92,059 147,412 274,864 42,718 195,603 709,938
Administrative and
other................. 119,688 255,154 437,607 182,269 160,613 1,002,335
--------- --------- ----------- --------- --------- -----------
Total expenses........ 310,496 536,280 1,080,581 261,441 552,207 2,516,634
Other charges (income):
Interest and dividends... (13,825) (7,325) (19,663) (716) (35,435) (76,248)
Write-off of deferred
offering costs (Note
1).................... -- 269,969 -- -- -- 269,969
--------- --------- ----------- --------- --------- -----------
Net loss................... $(296,671) $(798,924) $(1,060,918) $ (260,725) $ (516,772) $ (2,710,355)
========= ========= =========== ========= ========= ===========
Pro forma net loss per
common share (Note 1).... $(0.20) $(0.09)
========= =========
Pro forma weighted average
common shares
outstanding.............. 5,401,199 5,563,389
========= =========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 49
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (NOTE 4)
Period from June 9, 1992 (inception) to December 31, 1995
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL DEFICIT DURING TOTAL
---------------------- PAID-IN THE DEVELOPMENT STOCKHOLDERS'
SHARES PAR VALUE CAPITAL STAGE EQUITY
--------- --------- --------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock in June and December
1992.......................................... 3,331,458 $ 3,331 $ 111,684 $ -- $ 115,015
Issuance of common stock for legal services
rendered...................................... 9,792 10 29,960 -- 29,970
Net loss........................................ -- -- -- (37,070) (37,070)
--------- ------ ---------- ----------- -----------
BALANCE, DECEMBER 31, 1992...................... 3,341,250 3,341 141,644 (37,070) 107,915
Issuance of common stock at $3.06 per share in
private placement, net of costs............... 293,619 294 868,648 -- 868,942
Issuance of common stock for legal services
rendered...................................... 17,268 17 63,348 -- 63,365
Net loss........................................ -- -- -- (296,671) (296,671)
--------- ------ ---------- ----------- -----------
BALANCE, DECEMBER 31, 1993...................... 3,652,137 3,652 1,073,640 (333,741) 743,551
Issuance of common stock at $1.33 per share in
private placement, net of costs............... 118,125 118 141,783 -- 141,901
Issuance of common stock for legal services
rendered...................................... 14,538 15 63,985 -- 64,000
Net loss........................................ -- -- -- (798,924) (798,924)
--------- ------ ---------- ----------- -----------
BALANCE, DECEMBER 31, 1994...................... 3,784,800 3,785 1,279,408 (1,132,665) 150,528
Issuance of common stock at $1.33 per share in
private placement, net of costs............... 93,750 94 124,906 -- 125,000
Issuance of common stock at $4.00 per share in
private placement, net of costs............... 648,723 648 2,504,024 -- 2,504,672
Issuance of common stock for professional
services rendered............................. 108,000 108 147,587 -- 147,695
Net loss........................................ -- -- -- (1,060,918) (1,060,918)
--------- ------ ---------- ----------- -----------
BALANCE, DECEMBER 31, 1995...................... 4,635,273 4,635 4,055,925 (2,193,583) 1,866,977
Issuance of common stock for legal services
rendered (unaudited).......................... 6,706 6 26,818 -- 26,824
Net loss (unaudited)............................ -- -- -- (516,772) (516,772)
--------- ------ ---------- ----------- -----------
BALANCE, MARCH 31, 1996 (UNAUDITED)............. 4,641,979 $ 4,641 $ 4,082,743 $(2,710,355) $ 1,377,029
========= ====== ========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 50
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
------------------------------------- MARCH 31,
1993 1994 1995 -----------------------
--------- --------- ----------- 1995
---------
(UNAUDITED) PERIOD FROM
JUNE 9, 1992
(INCEPTION) TO
1996 MARCH 31, 1996
---------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................... $(296,671) $(798,924) $(1,060,918) $(260,725) $ (516,772) $ (2,710,355)
Adjustments to reconcile net loss to net
cash used in operating activities:
Write-off of deferred offering
costs.............................. -- 269,969 -- -- -- 269,969
Stock issued for services............. -- -- 147,695 -- 26,824 174,519
Depreciation and amortization......... 4,342 15,433 23,490 4,694 8,863 52,632
Increase in prepaid expenses and other
assets............................. (9,916) (7,896) (2,203) (1,388) (832) (20,847)
Increase in deferred costs............ -- -- -- -- -- (1,133)
Increase in accrued expenses.......... 47,086 63,633 59,287 210,752 95,491 269,430
--------- --------- ----------- --------- ---------- -----------
Net cash used in operating
activities......................... (255,159) (457,785) (832,649) (46,667) (386,426) (1,965,785)
--------- --------- ----------- --------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment..................... (9,437) (39,559) (28,949) -- (71,378) (150,000)
Patents, trademarks and licenses........... (72,863) (35,707) (27,505) (25,006) (31,772) (179,378)
--------- --------- ----------- --------- ---------- -----------
Net cash used in investing
activities......................... (82,300) (75,266) (56,454) (25,006) (103,150) (329,378)
--------- --------- ----------- --------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock......... 868,942 141,901 2,718,459 -- -- 3,844,317
Proceeds from sale of preferred stock...... -- -- -- -- 1,979,000 1,979,000
Offering costs............................. (73,958) (75,520) (88,787) -- (265,000) (513,064)
Proceeds from loans........................ -- -- -- 27,625 -- --
--------- --------- ----------- --------- ---------- -----------
Net cash provided by financing
activities......................... 794,984 66,381 2,629,672 27,625 1,714,000 5,310,253
--------- --------- ----------- --------- ---------- -----------
Net increase (decrease) in cash and cash
equivalents................................ 457,525 (466,670) 1,740,569 (44,048) 1,224,424 3,015,090
Cash and cash equivalents, beginning of
period..................................... 59,242 516,767 50,097 50,097 1,790,666 --
--------- --------- ----------- --------- ---------- -----------
Cash and cash equivalents, end of period..... $ 516,767 $ 50,097 $ 1,790,666 $ 6,049 $3,015,090 $ 3,015,090
========= ========= =========== ========= ========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING
ACTIVITIES:
The Company issued common stock for
professional services performed by
unrelated parties....................... $ 63,365 $ 64,000 $ 147,695 $ -- $ 26,824 $ 331,854
========= ========= =========== ========= ========== ===========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 51
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE PERIODS ENDED MARCH 31, 1995 AND
1996 IS UNAUDITED.)
1. ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES
Organization
Enamelon, Inc. (a development stage company) (the "Company"), a Delaware
corporation, was founded in June 1992 to take advantage of a technological
development by scientists at the American Dental Association Health Foundation
("ADAHF"), a not-for-profit research affiliate of the American Dental
Association. This technological development is the subject of four patents and
one patent pending application owned by the ADAHF and has been licensed to the
Company. The Company has developed additional technologies relating to the
prevention of tooth decay before it begins and has five United States patent
applications pending. The Company plans to develop and market dentifrices,
chewing gum, food and confectionery products, employing such patented and/or
patent pending technologies. To date, the Company has no material operations and
its activities have been limited to finalization of domestic and foreign patent
agreements, organizational and initial capitalization activities, and assisting
in the research and development of prototype dentifrice products. Once the
effectiveness of the initial toothpaste formulas are determined, full scale
development activities will commence to establish the commercial viability of
such products.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The carrying amounts of cash, prepaid expenses and accrued expenses
approximate fair value because of the short maturity of these items.
Cash and Cash Equivalents
Cash and cash equivalents are comprised of highly liquid debt instruments
with original maturities of three months or less, principally Treasury Bills and
money market accounts.
Equipment
Equipment is stated at cost. Depreciation is computed over the estimated
useful lives of the assets using the straight-line method.
Deferred Costs
Organization costs are amortized using the straight-line method over a
sixty-month period.
Licensing costs and patent rights are amortized using the straight-line
method over seventeen years, which is the term of the licensing agreements and
the estimated useful lives of the patents, respectively.
Trademarks are being amortized using the straight-line method over
seventeen years.
Deferred offering costs related to a proposed private placement had been
deferred until the proceeds of the private placement were raised. Since the
related private placement transaction did not occur as expected, these costs
were expensed in 1994.
F-7
<PAGE> 52
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Deferred offering costs related to a proposed public offering pending as of
March 31, 1996 will be charged against the proceeds of the offering. If the
offering is not consummated as expected, such costs will be expensed.
Income Taxes
Income taxes are computed in accordance with the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"), which requires, among other things, a liability approach to calculating
deferred income taxes. SFAS 109 requires a company to recognize deferred tax
liabilities and assets for the expected future tax consequences of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Deferred tax
assets must be reduced by a valuation allowance to amounts expected to be
realized.
Earnings Per Share
Earnings per share are presented for 1995 and the three months ended March
31, 1996 on a pro forma basis to give effect to the conversion of the redeemable
preferred stock as a result of the proposed public offering discussed in Note 8.
The calculation of earnings per share reflects the conversion of the preferred
stock as if it occurred on January 1, 1995. Earnings per share are not presented
for prior periods since the Company does not believe historical earnings per
share are meaningful as a result of changes in the Company's capital structure
contemplated by the proposed public offering.
The weighted average number of common shares outstanding used in computing
the pro forma net loss per common share for the year ended December 31, 1995 and
the three months ended March 31, 1996 was adjusted for the effects of the
application of Securities and Exchange Commission (SEC) Staff Accounting
Bulletin (SAB) No. 83. Pursuant to SAB No. 83, common stock issued by the
Company at a price less than the initial public offering price during the twelve
months immediately preceding the initial filing of the offering contemplated by
this Prospectus, together with common stock purchase warrants and options issued
during such period with an exercise price less than the initial public offering
price, are treated as outstanding for all periods presented. Earnings (loss) per
share are computed using a treasury stock method, under which the number of
shares outstanding reflects an assumed use of the proceeds from the issuance of
such shares and from the assumed exercise of such warrants and options, to
repurchase shares of the Company's common stock at the initial public offering
price.
Interim Financial Information
The financial statements as of March 31, 1996 and for the three months
ended March 31, 1996 and 1995 are unaudited but include all adjustments
(consisting of normal recurring adjustments) that the Company considers
necessary for a fair presentation of its financial position, results of
operations and cash flows for the interim periods. Results for the interim
period ended March 31, 1996 are not necessarily indicative of results for the
entire year.
Recent Accounting Standards
SFAS No. 121. In March 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which requires that certain long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. The adoption of this pronouncement is not expected to
have a significant effect on the Company's financial statements.
F-8
<PAGE> 53
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
SFAS No. 123. In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123, "Accounting for Stock-Based Compensation," which allows the
choice of either the intrinsic value method or the fair value method of
accounting for employee stock options. The Company has selected the option to
continue the use of the current intrinsic value method.
Presentation of Prior Year Data
Certain reclassifications have been made to conform prior year data with
the current presentation.
2. DEFERRED COSTS
Deferred costs are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1994 1995 1996
-------- -------- ---------
<S> <C> <C> <C>
Patent rights......................................... $107,201 $132,207 $ 162,281
Trademarks............................................ 40,582 43,082 44,780
Licensing costs....................................... 18,962 18,962 18,962
Organization costs.................................... 1,133 1,133 1,133
Offering costs........................................ -- -- 165,000
-------- -------- --------
167,878 195,384 392,156
Less: Accumulated amortization........................ 12,383 23,227 26,608
-------- -------- --------
$155,495 $172,157 $ 365,548
======== ======== ========
</TABLE>
3. REDEEMABLE PREFERRED STOCK
In January 1996, the Company issued 500,000 units at $4.00 per unit, each
consisting of 1.103 shares of 5% convertible preferred stock (the "Series A
Preferred Stock") and 1 common stock purchase warrant, exercisable at $5.75 per
share. The Company received proceeds of $1,879,000, net of expenses.
The Series A Preferred Stock may be redeemed by the holder of the shares on
the seventh anniversary of the issuance at a redemption price of $8.00 per
share. Each holder of the Series A Preferred Stock has the right to convert the
preferred shares into shares of common stock, on a stock-for-stock basis. The
Series A Preferred Stock becomes mandatorily converted into common stock upon
(i) the consummation of a public offering at a price of at least $7.00 per share
or, (ii) a merger, consolidation or sale of substantially all of the assets of
the Company, which results in the Company or its common stockholders receiving
consideration per share of at least $7.00 per share.
In connection with the placement of the transaction, the Company issued
warrants to purchase 100,000 shares at an exercise price of $4.80 and 23,750
shares at $3.60 per share, which expire January 23, 2003.
In April 1996, the Company issued an additional 6,250 units at $4.00 per
unit, each consisting of 1.103 shares of Series A Preferred Stock and 1 common
stock purchase warrant, exercisable at $5.75 per share. The Company received
proceeds of $25,000 related to this issuance.
4. STOCKHOLDERS' EQUITY
In November 1992, the Board of Directors amended the Company's Certificate
of Incorporation to increase the number of authorized common shares from 15,000
shares to 3,000,000 shares and effected a 100-for-one stock split. The Company
effectuated a 1.19688-for-one reverse stock split of its common stock in July
1993, a one-for-1.65068 stock split of its common stock in September 1994 and a
three-for-one stock split in
F-9
<PAGE> 54
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
June 1995. All common shares, common stock options and price per share
information disclosed in the financial statements and notes thereto have been
adjusted to give retroactive effect for these stock splits. The Board of
Directors amended the Company's Certificate of Incorporation to increase the
Company's authorized shares of common stock from 3,000,000 to 20,000,000.
In December 1992, 9,792 shares of stock were issued for services performed
by unrelated parties. In September 1993, November 1993 and January 1994, an
additional 4,545 shares, 12,723 shares and 14,538 shares, respectively, were
issued for services performed by unrelated parties. In May and June 1995, an
additional 105,000 shares and 3,000 shares, respectively, were issued for
services performed by unrelated parties. In January 1996, an additional 6,706
shares were issued for services performed by unrelated parties. Common stock
issued for services was valued at the estimated fair value of the stock issued.
In January 1993, the Company issued an aggregate 293,619 shares of its
common stock to private investors, officers and directors of the Company for the
aggregate consideration of $900,000.
In September 1994, the Company sold 118,125 shares of common stock and
warrants to purchase 59,064 shares of common stock at an exercise price of $1.33
per share for an aggregate amount of $157,500.
In May 1995, the Company issued an aggregate 93,750 shares of its common
stock and warrants to purchase 93,750 shares of common stock at an exercise
price of $1.33 per share to private investors, officers and directors of the
Company for an aggregate consideration of $125,000.
On various dates through December 31, 1995, the Company issued an aggregate
648,723 shares of its common stock pursuant to a private placement memorandum
dated June 20, 1995 to private investors, officers and directors of the Company
for an aggregate consideration of $2,504,672, net of expenses. In connection
with the private placement, the Company authorized the issuance of warrants to
purchase 26,276 shares of common stock at an exercise price of $4.00 per share,
and 1,562 shares of common stock at an exercise price of $3.60 per share, which
expire December 14, 2000, to representatives in the offering.
Stock Option Plan
In 1993, the Company adopted the 1993 Stock Option Plan (the "Option
Plan"). The Option Plan provides for the grant of options to qualified employees
(including officers and directors) of the Company to purchase an aggregate of
1,500,000 shares of common stock. The Option Plan is administered by the Board
of Directors or a committee of the Board of Directors (the "Compensation
Committee") whose members are not entitled to receive options under the Option
Plan (excluding options granted exclusively for directors' fees). Options
granted under the Plan may or may not be "incentive stock options" as defined in
the Internal Revenue Code ("Incentive Options") depending upon the terms
established by the Compensation Committee at the time of grant. The exercise
price shall not be less than the fair market value of the Company's common stock
as of the date of grant (110% of the fair market value if the grant is an
Incentive Option to an employee who owns more than 10% of the Company's
outstanding common stock). Options granted under the Plan are subject to a
maximum term of 10 years.
F-10
<PAGE> 55
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
A summary of activity for the Company's Plan, including those options
granted pursuant to the terms of certain employment and other agreements (see
Note 6), is as follows:
<TABLE>
<CAPTION>
EXERCISE PRICE
OPTION SHARES RANGE PER SHARE
------------- ---------------
<S> <C> <C>
Balance, December 31, 1992............................... -- --
Granted.................................................. 348,036 $1.86-$2.67
Exercised................................................ -- --
Cancelled................................................ -- --
--------- -----------
Balance, December 31, 1993............................... 348,036 $1.86-$2.67
Granted.................................................. 27,000 $1.33-$2.67
Exercised................................................ -- --
Cancelled................................................ -- --
--------- -----------
Balance, December 31, 1994............................... 375,036 $1.33-$2.67
Granted.................................................. 937,081 $1.33-$4.00
Exercised................................................ -- --
Cancelled................................................ (108,762) $1.86-$2.67
--------- -----------
Balance, December 31, 1995............................... 1,203,355 $1.33-$4.00
Granted.................................................. -- --
Exercised................................................ -- --
Cancelled................................................ -- --
--------- -----------
Balance, March 31, 1996.................................. 1,203,355 $1.33-$4.00
========= ===========
</TABLE>
All of the issued and outstanding options are exercisable.
5. INCOME TAXES
The Company's net operating loss carryforwards and deferred tax asset
account are summarized as follows:
<TABLE>
<CAPTION>
NET OPERATING LOSS DEFERRED TAX
CARRYFORWARD ASSET
------------------ ------------
<S> <C> <C>
1994.......................................................... $1,132,000 $453,000
1995.......................................................... 2,193,000 877,000
========== ========
</TABLE>
The deferred tax asset has been fully reserved by a valuation allowance of
the same amount.
The net operating loss carryforwards will expire if not used by the period
from 2007 through 2010 and may be limited by United States federal tax law as a
result of future changes in ownership.
6. COMMITMENTS
Leases
The Company leases office facilities in New York from a related party and
laboratory facilities in New Jersey. The lease for the laboratory facilities
includes provisions requiring the Company to pay a proportionate
F-11
<PAGE> 56
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
share of the increase in real estate taxes and operating expenses over base
period amounts. The minimum rents for the leased property for subsequent years
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
--------------------------------------------------------------------------
<S> <C>
1996...................................................................... $ 76,000
1997...................................................................... 49,000
1998...................................................................... 52,000
--------
$177,000
========
</TABLE>
Rent expense for the years ended December 31, 1994 and 1995 was $34,155 and
$35,500, respectively. For the three months ended March 31, 1995 and 1996, rent
expense was $8,265 and $20,500, respectively, and $97,955 for the period from
June 9, 1992 (inception) to March 31, 1996.
Patent License Agreements
In June 1992, the Company entered into a patent licensing agreement with
the ADAHF, the holder and/or the applicant for the patents for the Amorphous
Calcium Compounds ("ACC"). The agreement, as modified, grants the Company the
exclusive United States license to manufacture and sell dentifrices, chewing
gum, food and confection formulated according to the patented process in return
for royalty payments to the licensor. In November 1992, the Company entered into
an exclusive international patent licensing agreement which, as modified,
granted the Company patent license rights in Austria, Belgium, Canada, China,
Denmark, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, Monaco, the
Netherlands, Portugal, Spain, Sweden, Switzerland, Liechtenstein, Taiwan and the
United Kingdom. The grants extend to improvements in patent compounds and
utilities in dentifrices, chewing gum, food and confectionery products developed
by the ADAHF.
The exclusive United States license has been granted for an initial term
from the date of the agreement until three years following the physical and
chemical stabilization of the formula in a commercially viable product, and
following the first Food and Drug Administration ("FDA") approval necessary to
market any ACC products in their commercially viable form to professionals or
the general public. The foreign license expires upon the earlier of the
termination of the United States license or the expiration of the foreign
patents licensed thereunder. The licenses are renewable in four year increments
for the life of the ACC patents subject to minimum royalty payment terms, and
transferable under certain conditions with the prior written consent of the
licensor, which consent may not be unreasonably withheld. The licenses are
subject to cancellation in the event the Company fails to comply with its terms
and conditions, including payment of royalties and other amounts due thereunder.
The Company was also granted an option and right of first refusal, as
amended, for a limited license under future patents and patent applications for
ACC for all territories not included within the licensed territories under the
foreign patent license, with respect to dentifrices, chewing gum, food and
confection. Before granting such a license to third parties, the ADAHF must
first offer the license to the Company on the terms consistent with the foreign
license agreement. To the extent the ADAHF has not granted the license to a
third party due to the Company's failure to exercise its right of first refusal,
the Company has the option to receive a license in any of such territories with
the terms consistent with the foreign license agreement.
In consideration for the grant of the exclusive United States license, the
Company is required to make royalty payments of four percent of net sales,
subject to minimum royalty payments of $7,000 in 1994 and each subsequent year.
In consideration for the grant of foreign patent rights, the Company is required
to pay seven percent of net sales and four percent in a joint venture and bear
the costs of prosecution of foreign patent
F-12
<PAGE> 57
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
applications. However, to the extent the ADAHF grants a foreign license to a
third party to use ACC in products other than dentifrices, chewing gum, food and
confection, then such third party must share with the Company the costs
associated with the foreign patent applications. If the Company sublicenses a
foreign patent, it will pay to the ADAHF twenty-five percent of the gross income
resulting from such sublicense actually received by the Company.
7. EMPLOYMENT AND CONSULTING AGREEMENTS
The Company has entered into a five-year employment agreement for the
services of a Chairman of the Board of Directors and Chief Executive Officer
commencing January 1, 1994. The agreement, as amended, provides for an annual
salary of $75,000 (increasing to $175,000 upon the Company's attaining certain
levels of cash balances or earlier as mutually agreed upon), subject to
adjustment, as well as 50% of all amounts allocated by the Board of Directors to
the Company's Incentive Compensation Program, as defined below. The agreement
also provides for a lump-sum payment equal to either 2.9 or 2.5 times the
officer's annual base salary in the event of a change in control of the Company
that is opposed by the officer, depending on whether the change in control is
approved by a majority of the Board of Directors. The Company has granted this
officer an option to purchase 450,000 shares of common stock at an exercise
price of $3.00 per share.
The Company has entered into an employment agreement for the services of a
President and Chief Operating Officer commencing upon the Company achieving
certain levels of cash balances. The agreement provides for an annual salary of
$150,000, subject to adjustment, as well as 15% of all amounts allocated by the
Board of Directors to the Company's Incentive Compensation Program, as defined
below. In addition, the Company has granted this individual an option to
purchase 99,000 shares of common stock as of the commencement of the term of the
employment agreement at an exercise price of $3.00 per share which expires seven
years from the date of grant. If the Company elects to terminate the agreement,
six months' severance pay including all salary and benefits is due. Prior to the
commencement of the agreement, this individual was retained on a consulting
basis for $3,000 per month plus, for the period from July 1994 through July
1995, 3,000 options per month at an exercise price of $1.33 per share. Effective
November 1, 1995, the consulting fee was increased to $4,000 per month.
The Company entered into a one-year renewable consulting agreement (the
"Consulting Agreement") for assistance on all aspects of the testing and
development of the Company's products, and in obtaining all required approvals
by the FDA. During 1994 and 1995, the Company incurred fees and expenses of
approximately $69,000 and $37,000, respectively, for research and testing
performed pursuant to this agreement. In addition, the following nonqualified
stock options were issued pursuant to the Option Plan as part of the Consulting
Agreement: an option to purchase 54,381 shares of common stock effective July
22, 1993 and expiring July 21, 1998 at an exercise price of $1.86 per share and
an option to purchase 54,381 shares of common stock effective July 22, 1993 and
expiring July 21, 1998 at an exercise price of $2.67. In May 1995, the Company
entered into a three-year employment agreement with the sole owner of the entity
that holds the Consulting Agreement to become the Company's Vice President --
Product Development/Operations and Secretary. This agreement, which replaced the
Consulting Agreement, provides for annual compensation of $105,000 in the first
year, $115,000 in the second year and $125,000 in the third year, subject to
adjustment, as well as 12.5% of all amounts allocated by the Board of Directors
to the Company's Incentive Compensation Program, as defined below. The options
granted pursuant to the Consulting Agreement were cancelled pursuant to the
employment agreement and regranted to the officer at an exercise price of $1.33
per share. In addition, the Company has granted this individual an option to
purchase 90,000 shares of common stock as of the commencement of the term of the
employment agreement at an exercise price of $1.33 per share which expires seven
years from the date of grant.
F-13
<PAGE> 58
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
The Company has entered into a two-year employment agreement commencing
January 1995 for the services of a Vice-President of Technology and Clinical
Research. The agreement provides for an annual salary of $135,000, as well as 5%
of all amounts allocated by the Board of Directors to the Company's Incentive
Compensation Program. In addition, the Company has granted this individual an
option to purchase 150,000 shares of common stock at an exercise price of $1.33
per share, which expires ten years from the date of grant.
The Company has established a five-year incentive compensation program (the
"Incentive Compensation Program") for certain of its officers and key employees.
The Incentive Compensation Program provides for the establishment of a yearly
pool, commencing with the effective date of a proposed initial public offering,
equal to 5% of the Company's net income before expenses pursuant to the
Incentive Compensation Program, taxes and extraordinary items ("Plan Net
Income"). For the subsequent four fiscal years, such pool shall only be
established in the event that the Company's Plan Net Income equals or exceeds by
at least 5% the Company's Plan Net Income for the prior fiscal year.
8. SUBSEQUENT EVENT
In May 1996, the Company entered into an agreement with an underwriter in
connection with a proposed public offering of the Company's common stock. The
offering is expected to be consummated in the second or third quarter of 1996 at
a minimum offering price of $7.50 per share.
F-14
<PAGE> 59
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR SOLICITATION OF ANY OFFER TO BUY BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO, SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1996 ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 6
Use of Proceeds............................ 13
Dividend Policy............................ 13
Capitalization............................. 14
Dilution................................... 15
Selected Financial Data.................... 16
Management's Discussion and Analysis of
Financial Condition and Results
of Operations............................ 17
Business................................... 19
Management................................. 28
Principal Stockholders..................... 35
Certain Transactions....................... 35
Description of Securities.................. 36
Shares Eligible for Future Sale............ 38
Underwriting............................... 40
Legal Matters.............................. 41
Experts.................................... 41
Additional Information..................... 42
Index to Financial Statements.............. F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
[LOGO]
ENAMELON, INC.
2,000,000 SHARES
COMMON STOCK
--------------------
PROSPECTUS
--------------------
RODMAN & RENSHAW, INC.
JUNE , 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 60
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the issuance and distribution of the securities being registered hereunder.
All of the amounts shown are estimates (except for the SEC and the NASD filing
fees).
<TABLE>
<S> <C>
SEC filing fee................................................. $ 8,758.62
NASD, Inc. filing fee.......................................... 2,800.00
NASDAQ listing fee............................................. 20,000.00
Transfer agent's fee........................................... 5,000.00
Printing and engraving expenses................................ 125,000.00
Legal fees and expenses........................................ 250,000.00
Blue sky filing fees and expenses (including counsel fees)..... 30,000.00
Accounting fees and expenses................................... 100,000.00
Miscellaneous expenses......................................... 58,441.38
-----------
Total................................................ $600,000.00
===========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act"). The Registrant's Bylaws provide
that the Registrant will indemnify its directors, executive officers, other
officers, employees and agents to the fullest extent permitted by Delaware law.
The Registrant's Certificate of Incorporation provides for the elimination
of liability for monetary damages for breach of the directors' fiduciary duty of
care to the Registrant and its stockholders. These provisions do not eliminate
the directors' duty of care and, in appropriate circumstances, equitable
remedies such as injunctive or other forms of non-monetary relief will remain
available under Delaware law. In addition, each director will continue to be
subject to liability for breach of the director's duty of loyalty to the
Registrant, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any transaction from which the
director derived an improper personal benefit, and for payment of dividends or
approval of stock repurchases or redemptions that are unlawful under Delaware
law. The provision does not affect a director's responsibilities under any other
laws, such as the federal securities laws or state or federal environmental
laws.
Reference is made to Section 7 of the Underwriting Agreement (Exhibit 1.1
to this Registration Statement) which provides for indemnification by the
Underwriters and their controlling persons, on the one hand, and of the
Registrant and its controlling persons on the other hand, against certain civil
liabilities, including liabilities under the Securities Act.
The Registrant has applied for a director and officer liability insurance
policy, under which each director and certain officers of the Company would be
insured against certain liabilities.
ITEM 15. RECENT SALE OF UNREGISTERED SECURITIES.
Effective November 30, 1992, the Company effectuated a 100-for-one stock
split of its Common Stock. In July 1993, the Company effectuated a
1.19688-for-one stock split of its Common Stock. In September 1994, the Company
effectuated a one-for-1.65068 stock split of its Common Stock. In June 1995, the
Company effectuated a three-for-one stock split of its Common Stock. All of the
following information regarding the issuance of shares of the Company's Common
Stock has been adjusted, where appropriate, to
II-1
<PAGE> 61
reflect such stock splits. Since June 1992, the Registrant has sold the
following securities without registration under the Securities Act:
(1) In June 1992, the Registrant sold 3,132,408 shares of its Common
Stock in consideration of $14,400 ($.005 per share) to Dr. Steven R. Fox,
Chairman of the Board of Directors of the Registrant. In December 1992, the
Registrant sold an aggregate of 133,782 shares of its Common Stock to three
persons for the aggregate consideration of $615 ($.005 per share). Eric D.
Horodas and Richard A. Gotterer, Directors of the Registrant, each acquired
65,259 shares of Common Stock.
(2) In December 1992, the Registrant sold an aggregate of 65,268
shares of its Common Stock to six unaffiliated persons in consideration for
$100,000 ($1.53 per share).
(3) In December 1992, the Registrant sold an aggregate of 9,792 shares
of its Common Stock to two unaffiliated persons in consideration for
services rendered to the Registrant valued at $29,970 ($3.06 per share).
(4) In January 1993, the Registrant sold an aggregate 293,619 shares
of its Common Stock to 58 persons for an aggregate consideration of
$900,000 ($3.06 per share). Albert M. Goldstein, formerly a director of the
Registrant, subscribed for and purchased 4,077 shares of the Registrant's
Common Stock in such transaction.
(5) In September 1993, the Registrant sold 4,545 shares of its Common
Stock to one unrelated person in consideration for services rendered to the
Registrant, valued at $16,680 ($3.66 per share).
(6) In November 1993, the Registrant sold 12,723 shares of its Common
Stock to Snow Becker Krauss P.C. in consideration for services rendered to
the Registrant, valued at $46,685 ($3.66 per share). In January 1994, the
Registrant sold 14,538 shares of its Common Stock to Snow Becker Krauss
P.C. in consideration for services rendered to the Registrant, valued at
$64,000 ($4.40 per share). In May 1995, the Registrant sold 105,000 shares
of its Common Stock to SBK Investment Partners, a partnership consisting of
members of Snow Becker Krauss P.C. in consideration for services rendered
to the Registrant, valued at $139,650 ($1.33 per share).
(7) In September 1994, the Registrant sold an aggregate of 118,125
shares of its Common Stock and Warrants to purchase 59,064 shares of Common
Stock at an exercise price of $1.33 a share to 6 unaffiliated persons, for
an aggregate consideration of $157,500 ($1.33 per share ascribing no value
to the Warrants).
(8) In May 1995, the Registrant sold an aggregate of 93,750 shares of
its Common Stock and Warrants to purchase 93,750 shares of Common Stock at
an exercise price of $1.33 a share to 8 persons, for an aggregate
consideration of $125,000 ($1.33 per share ascribing no value to the
Warrants). Eric Horodas, a Director of the Registrant, acquired 9,375
shares of Common Stock and 9,375 Warrants.
(9) In June 1995 the Registrant sold an aggregate of 3,000 shares of
its Common Stock to an unrelated party in consideration for services
rendered to the Registrant, valued at $8,045 ($2.68 per share).
(10) In August through December 1995, the Registrant sold an aggregate
of 648,723 shares of its Common Stock to an aggregate of 112 unaffiliated
persons, for an aggregate consideration of $2,594,892 ($4.00 per share).
(11) In connection with the offering in 15(10) above, the Registrant
authorized the issuance of warrants to purchase an aggregate of 26,276
shares of Common Stock at an exercise price of $4.00 per share, and 1,562
shares of Common Stock at an exercise price of $3.60 per share.
(12) In January 1996 the Registrant sold an aggregate of 6,706 shares
of its Common Stock to an unrelated party in consideration for services
rendered to the Registrant, valued at $26,824 ($4.00 per share).
II-2
<PAGE> 62
(13) In January 1996, the Registrant sold an aggregate of 500,000
Units to an aggregate of 19 unaffiliated persons, for an aggregate
consideration of $2,000,000 ($4.00 per Unit). Each Unit consisted of 1.103
shares of 5% Convertible Preferred Stock and 1 Common Stock Purchase
Warrant, exercisable at $5.75 per share.
(14) In connection with the placement of the offering in 15(13) above,
the Registrant authorized the issuance of warrants to purchase an aggregate
of 100,000 shares of Common Stock at an exercise price of $4.80 per share,
and 23,750 shares of Common Stock at an exercise price of $3.60 per share.
(15) In April 1996, the Registrant sold an aggregate of 6,250 Units to
an unrelated party, for an aggregate consideration of $25,000 ($4.00 per
Unit). Each Unit consisted of 1.103 shares of 5% Convertible Preferred
Stock and 1 Common Stock Purchase Warrant, exercisable at $5.75 per share.
The issuances described in paragraphs 15(1) to 15(3), 15(5) to 15(7),
15(9), 15(11) to 15(12), and 15(14) above were made in reliance upon the
exemption from the registration requirements of the Securities Act provided by
Section 4(2) of the Securities Act for transactions by an issuer not involving a
public offering. The issuances described in paragraphs 15(4), (8), (10), (13)
and (15) above were made in reliance upon the exemption from the registration
requirements of the Securities Act for transactions by an issuer not involving a
public offering provided by Section 4(6) of the Securities Act and Regulation D
promulgated thereunder. The recipients of the securities in each of the above
transactions represented their intentions to acquire the securities for
investment only and not with a view to or a sale in connection with any
distribution thereof. Allen & Company Incorporated acted as the placement agent
for the issuances described in paragraph 15(13) above and received a fee of
100,000 warrants described in 15(14). Claremont York Capital acted as a finder
in such transaction and received 23,750 warrants as described in 15(14). No
underwriter or underwriting discount or commission was involved in any other
issuance.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
The following Exhibits are filed herewith and made a part hereof.
<TABLE>
<S> <C>
1.1 -- Form of Underwriting Agreement.
3.1 -- Certificate of Incorporation of the Registrant, as amended.
3.2 -- Amended and Restated By-Laws of the Registrant.
4.1* -- Specimen Copy of Stock Certificate for shares of Common Stock.
4.2 -- Form of Warrant to be issued to the Representative.
4.3 -- Form of Registration Rights Agreement between the Registrant and certain
purchasers of Units.
5.1 -- Securities Opinion of Snow Becker Krauss P.C.
10.1 -- Restated Patent License Agreement by and between the Registrant and the
American Dental Association Health Foundation dated as of June 24, 1992.
10.2 -- Amendment Agreement by and between the Registrant and theAmerican Dental
Association Health Foundation dated as of June 12, 1995.
10.3 -- Restated Foreign Patent License Agreement by and between the Registrant
and the American Dental Association Health Foundation dated as of
November 18, 1992.
10.4 -- The Registrant's 1993 Stock Option Plan.
10.5 -- The Registrant's Incentive Compensation Plan.
10.6 -- Employment Agreement between the Registrant and Dr. Steven R. Fox, as
amended as of June 1, 1995.
10.7 -- Amended and Restated Employment Agreement between the Registrant and D.
Brooks Cole dated as of June 1, 1995.
10.8 -- Employment Agreement between the Registrant and Norman Usen dated as of
May 1, 1995.
10.9 -- Employment Agreement between the Registrant and Anthony E. Winston dated
as of January 17, 1995.
</TABLE>
II-3
<PAGE> 63
<TABLE>
<S> <C>
10.10 -- Lease Agreement with Elaine Fox dated December 19, 1995.
10.11 -- Lease Agreement with Unum Life Insurance Company of America dated
December 27, 1993.
10.12 -- Lease Agreement with East Brunswick Woods Associates, L.P. dated
November 1995.
23.1 -- The consent of Snow Becker Krauss P.C. is included in Exhibit 5.1.
23.2 -- The consent of BDO Seidman, LLP, independent certified public
accountants, is included in Part II of this Registration Statement.
24.1 -- Powers of Attorney (included on the signature page of this Registration
Statement).
</TABLE>
- ---------------
* To be filed by Amendment.
(b) Financial Statement Schedule
All other schedules have been omitted because the information to be set
forth therein is not applicable or is shown in the financial statements or the
notes thereto.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes (1) to file, during
any period in which it offers or sells securities, a post-effective
amendment to this registration statement to:
(i) include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information in the
registration statement;
(iii) include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required
by the underwriter to permit prompt delivery to each purchaser.
(c) Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a Director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-4
<PAGE> 64
(d) The undersigned Registrant hereby undertakes that (1) For purposes
of determining any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1), or (4) or 497(h) under
the Securities Act as part of this registration statement as of the time it
was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and that offering of such securities at that time shall be
deemed the initial bona fide offering thereof.
II-5
<PAGE> 65
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF YONKERS, STATE OF NEW
YORK, ON THE 19TH DAY OF JUNE 1996.
ENAMELON, INC.
By: /s/ DR. STEVEN R. FOX
--------------------------------------
(DR. STEVEN R. FOX,
CHAIRMAN OF THE BOARD OF DIRECTORS,
CHIEF EXECUTIVE OFFICER AND TREASURER)
POWER OF ATTORNEY
EACH OF THE UNDERSIGNED HEREBY AUTHORIZES DR. STEVEN R. FOX AS HIS
ATTORNEY-IN-FACT TO EXECUTE IN THE NAME OF EACH SUCH PERSON AND TO FILE SUCH
AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT
AS THE REGISTRANT DEEMS APPROPRIATE AND APPOINTS SUCH PERSON AS ATTORNEY-IN-FACT
TO SIGN ON HIS BEHALF INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW AND TO FILE
ALL AMENDMENTS, EXHIBITS, SUPPLEMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS
REGISTRATION STATEMENT.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES STATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------------
<C> <S> <C>
/s/ DR. STEVEN R. FOX Chairman of the Board of Directors, June 19, 1996
- ------------------------------------------ Chief Executive Officer and
(DR. STEVEN R. FOX) Treasurer (Principal Executive
Officer and Principal Financial and
Accounting Officer)
/s/ DR. BERT D. GASTER Director June 19, 1996
- ------------------------------------------
(DR. BERT D. GASTER)
/s/ RICHARD A. GOTTERER Director June 19, 1996
- ------------------------------------------
(RICHARD A. GOTTERER)
/s/ ERIC D. HORODAS Director June 19, 1996
- ------------------------------------------
(ERIC D. HORODAS)
/s/ DR. S.N. BHASKAR Director June 19, 1996
- ------------------------------------------
(DR. S.N. BHASKAR)
</TABLE>
II-6
<PAGE> 66
CONSENT OF COUNSEL
The consent of Snow Becker Krauss P.C. is contained in its opinion which
was filed as Exhibit 5.1 to this Registration Statement.
II-7
<PAGE> 67
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated April 5, 1996, relating to the
financial statements of Enamelon, Inc., which is contained in that Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO SEIDMAN, LLP
New York, New York
June 19, 1996
II-8
<PAGE> 68
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE
- ---------- -------------------------------------------------------------- ------------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement.
3.1 -- Certificate of Incorporation of the Registrant, as amended.
3.2 -- Amended and Restated By-Laws of the Registrant.
4.1* -- Specimen Copy of Stock Certificate for shares of Common Stock.
4.2 -- Form of Warrant to be issued to the Representative.
4.3 -- Form of Registration Rights Agreement between the Registrant
and certain purchasers of Units.
5.1 -- Securities Opinion of Snow Becker Krauss P.C.
10.1 -- Restated Patent License Agreement by and between the
Registrant and the American Dental Association Health
Foundation dated as of June 24, 1992.
10.2 -- Amendment Agreement by and between the Registrant and
theAmerican Dental Association Health Foundation dated as of
June 12, 1995.
10.3 -- Restated Foreign Patent License Agreement by and between the
Registrant and the American Dental Association Health
Foundation dated as of November 18, 1992.
10.4 -- The Registrant's 1993 Stock Option Plan.
10.5 -- The Registrant's Incentive Compensation Plan.
10.6 -- Employment Agreement between the Registrant and Dr. Steven R.
Fox, as amended as of June 1, 1995.
10.7 -- Amended and Restated Employment Agreement between the
Registrant and D. Brooks Cole dated as of June 1, 1995.
10.8 -- Employment Agreement between the Registrant and Norman Usen
dated as of May 1, 1995.
10.9 -- Employment Agreement between the Registrant and Anthony
Winston dated as of January 17, 1995.
10.10 -- Lease Agreement with Elaine Fox dated December 19, 1995.
10.11 -- Lease Agreement with Unum Life Insurance Company of America
dated December 27, 1993.
10.12 -- Lease Agreement with East Brunswick Woods Associates, L.P.
dated
November 1995.
23.1 -- The consent of Snow Becker Krauss P.C. is included in Exhibit
5.1.
23.2 -- The consent of BDO Seidman, LLP, independent certified public
accountants, is included in Part II of this Registration
Statement.
24.1 -- Powers of Attorney (included on the signature page of this
Registration Statement).
</TABLE>
- ---------------
* To be filed by Amendment.
<PAGE> 1
_____________ SHARES
ENAMELON, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
_____________, 1996
Rodman & Renshaw, Inc.
225 Liberty Street
2 World Financial Center
New York, New York 10281
On behalf of the Several Underwriters named in Schedule I attached hereto.
Ladies and Gentlemen:
Enamelon, Inc., a Delaware corporation (the "Company") proposes to sell
to you and the other underwriters named in Schedule I attached hereto (the
"Underwriters"), for whom you are acting as the representatives (the
"Representatives"), an aggregate of ____________ shares (the "Firm Shares") of
the Company's Common Stock, par value $______ per share (the "Common Stock") to
be issued and sold by the Company. In addition, the Company proposes to grant to
the Underwriters an option to purchase up to an additional _________ shares (the
"Option Shares"), of Common Stock for the purpose of covering over-allotments in
connection with the sale of the Firm Shares. The Firm Shares and the Option
Shares are together called the "Shares."
1. Sale and Purchase of the Shares. On the basis of the
representations, warranties and agreements contained in, and subject to the
terms and conditions of, this Agreement:
(a) The Company agrees to issue and sell the Shares to the
several Underwriters, and each of the Underwriters agrees, severally
and not jointly, to purchase at the purchase price per share of Common
Stock of $_____ (the "Initial Price"), the aggregate number of Firm
Shares set forth opposite such Underwriter's name in Schedule I
attached hereto. The Underwriters agree to offer the Firm Shares to the
public as set forth in the Prospectus.
(b) The Company grants to the several Underwriters an option
to purchase all or any part of the number of Option Shares at the
Initial Price. The number of Option Shares to be purchased by each
Underwriter
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<PAGE> 2
shall be the same percentage (adjusted by the Representatives to
eliminate fractions) of the total number of Option Shares to be
purchased by the Underwriters as such Underwriter is purchasing of the
Firm Shares. Such option may be exercised only to cover over-allotments
in the sales of the Firm Shares by the Underwriters and may be
exercised in whole or in part at any time on or before 12:00 noon, New
York City time, on the business day before the Firm Shares Closing Date
(as defined below), and from time to time thereafter within 30 days
after the date of this Agreement, upon written or telegraphic notice,
or verbal or telephonic notice confirmed by written or telegraphic
notice, by the Representatives to each of the Company no later than
12:00 noon, New York City time, on the business day before the Firm
Shares Closing Date or at least two business days before any Option
Shares Closing Date (as defined below), as the case may be, setting
forth the number of Option Shares to be purchased and the time and date
(if other than the Firm Shares Closing Date) of such purchase.
(c) On each Closing Date (as defined below), the Company shall
issue and sell to Rodman & Renshaw, Inc. ("Rodman"), individually and
not as a Representative of the Underwriters, for an aggregate purchase
price of $.001 per warrant, warrants representing the right of Rodman
to purchase a number of shares of Common Stock (the "Warrant Stock")
equal to 10.0% of the aggregate number of shares purchased in the
Offering, including the over-allotment option (which warrants shall be
evidenced in the form set forth as an exhibit to the Registration
Statement) (the "Representative's Warrants").
2. Delivery and Payment. Delivery by the Company of the Firm Shares to
the Representatives for the respective accounts of the Underwriters, and payment
of the purchase price by certified or official bank check or checks payable in
New York Clearing House (next day) funds to the Company, shall take place at the
offices of Rodman & Renshaw, Inc., at One Liberty Plaza, 165 Broadway, New York,
New York, 10006, at 10:00 a.m., New York City time, on the third business day
following the date on which the public offering of the Shares commences (unless
such date is postponed in accordance with the provisions of Section 10(b)), or
at such time and place on such other date, not later than 10 business days after
the date of this Agreement, as shall be agreed upon by the Company and the
Representatives (such time and date of delivery and payment are called the "Firm
Shares Closing Date"). The public offering of the Shares shall be deemed to have
commenced at the time, which is the earlier of (a) the time, after the
Registration Statement (as defined in Section 4 below) becomes effective, of the
release by you for publication of the first newspaper advertisement which is
subsequently published relating to the Shares or (b) the time, after the
Registration Statement becomes effective, when the Shares are first released by
you for offering by the Underwriters or dealers by letter or telegram.
In the event the option with respect to the Option Shares is exercised,
delivery by the Company of the Option Shares to the Representatives for the
respective accounts of the Underwriters and payment of the purchase price by
certified or official bank check or checks payable in New York Clearing House
(next day) funds to the Company shall take place at the offices of Rodman &
Renshaw, Inc. specified above at the time and on the date (which may be the same
date as, but in no event shall be earlier than, the Firm Shares Closing Date)
-2-
<PAGE> 3
specified in the notice referred to in Section 1(b) (such time and date of
delivery and payment is called the "Option Shares Closing Date"). The Firm
Shares Closing Date and the Option Shares Closing Dates are called,
individually, a "Closing Date" and, together, the "Closing Dates."
Certificates evidencing the Shares shall be registered in such names
and shall be in such denominations as the Representatives shall request at least
two full business days before the Firm Shares Closing Date or the Option Shares
Closing Date, as the case may be, and shall be made available to the
Representatives for checking and packaging, at such place as is designated by
the Representatives, on the full business day before the Firm Shares Closing
Date or the Option Shares Closing Date, as the case may be.
3. Public Offering. The Company understands that the Underwriters
propose to make a public offering of the Shares, as set forth in and pursuant to
the Prospectus (as defined in Section 4 below), as soon after the effective date
of the Registration Statement and the date of this Agreement as the
Representatives deem advisable. The Company hereby confirms that the
Underwriters and dealers have been authorized to distribute or cause to be
distributed each preliminary prospectus and are authorized to distribute the
Prospectus (as from time to time amended or supplemented if the Company
furnishes amendments or supplements thereto to the Underwriters).
4. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, the
several Underwriters that:
(i) The Company has filed with the Securities and
Exchange Commission (the "Commission") a registration
statement, and may have filed one or more amendments thereto,
on Form S-1 (Registration No. 333-_____), including in such
registration statement and each such amendment a related
preliminary prospectus (a "Preliminary Prospectus"), for the
registration of the Shares and the Option Shares, in
conformity with the requirements of the Securities Act of
1933, as amended (the "Act"). In addition, the Company has
filed or will promptly file a further amendment to such
registration statement, in the form heretofore delivered to
you. The Company may also file a related registration
statement with the Commission pursuant to Rule 462(b) under
the Act for the purpose of registering certain additional
Shares, which registration shall be effective upon filing with
the Commission. As used in this Agreement, the term "Original
Registration Statement" means such registration statement, as
amended, on file with the Commission at the time such
registration statement becomes effective (including the
prospectus, financial statements, exhibits, and all other
documents filed as a part thereof or incorporated by reference
directly or indirectly therein), provided that such
registration statement, at the time it becomes effective, may
omit such information as is permitted to be omitted from a
registration statement when it becomes effective pursuant to
Rule 430A of the General Rules and Regulations promulgated
under the Act (the "Regulations"), which information ("Rule
430 Information") shall be deemed to be included in such
registration statement when a final
-3-
<PAGE> 4
prospectus is filed with the Commission in accordance with
Rules 430A and 424(b)(1) or (4) of the Regulations; the term
"Rule 462(b) Registration Statement" means any registration
statement filed with the Commission pursuant to Rule 462(b)
under the Act (including the Original Registration Statement
and any Preliminary Prospectus or Prospectus incorporated
therein at the time the Original Registration Statement
becomes effective); the term "Registration Statement" includes
both the Original Registration Statement and any Rule 462(b)
Registration Statement; the term "Preliminary Prospectus"
means each prospectus included in the Registration Statement,
or any amendments thereto, before it becomes effective under
the Act, the form of prospectus omitting Rule 430A Information
included in the Registration Statement when it becomes
effective, if applicable (the "Rule 430A Prospectus"), and any
prospectus filed by the Company with your consent pursuant to
Rule 424(a) of the Regulations; and the term "Prospectus"
means the final prospectus included as part of the
Registration Statement, except that if the prospectus relating
to the securities covered by the Registration Statement in the
form first filed on behalf of the Company with the Commission
pursuant to Rule 424(b) of the Regulations shall differ from
such final prospectus, the term "Prospectus" shall mean the
prospectus as filed pursuant to Rule 424(b) from and after the
date on which it shall have first been used.
(ii) When the Registration Statement becomes
effective, and at all times subsequent thereto to and
including the Closing Dates, and during such longer period as
the Prospectus may be required to be delivered in connection
with sales by the Underwriters or a dealer, and during such
longer period until any post-effective amendment thereto shall
become effective, the Registration Statement (and any
post-effective amendment thereto) and the Prospectus (as
amended or as supplemented if the Company shall have filed
with the Commission any amendment or supplement to the
Registration Statement or the Prospectus) will contain all
statements which are required to be stated therein in
accordance with the Act and the Regulations, will comply with
the Act and the Regulations, and will not contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading, and no event will have
occurred which should have been set forth in an amendment or
supplement to the Registration Statement or the Prospectus
which has not then been set forth in such an amendment or
supplement; if a Rule 430A Prospectus is included in the
Registration Statement at the time it becomes effective, the
Prospectus filed pursuant to Rules 430A and 424(b)(1) or (4)
will contain all Rule 430A Information; and each Preliminary
Prospectus, as of the date filed with the Commission, did not
include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
except that no representation or warranty is made in this
Section 4(ii) with respect to statement or omissions made in
reliance upon and in conformity with written information
furnished to the Company as
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<PAGE> 5
stated in Section 7(b) with respect to any Underwriter by or
on behalf of such Underwriter through the Representatives
expressly for inclusion in any Preliminary Prospectus, the
Registration Statement, or the Prospectus, or any amendment or
supplement thereto.
(iii) If the Company has elected to rely on Rule
462(b) and the Rule 462(b) Registration Statement has not been
declared effective, then (i) the Company has filed a Rule
462(b) Registration Statement in compliance with and that is
effective upon filing pursuant to Rule 462(b) and has received
confirmation of its receipt and (ii) the Company has given
irrevocable instructions for transmission of the applicable
filing fee in connection with the filing of the Rule 462(b)
Registration Statement, in compliance with Rule 111
promulgated under the Act or the Commission has received
payment of such filing fee.
(iv) Neither the Commission nor the "blue sky" or
securities authority of any jurisdiction have issued an order
(a "Stop Order") suspending the effectiveness of the
Registration Statement, preventing or suspending the use of
any Preliminary Prospectus, the Prospectus, the Registration
Statement, or any amendment or supplement thereto, refusing to
permit the effectiveness of the Registration Statement, or
suspending the registration or qualification of the Firm
Shares or the Option Shares nor has any of such authorities
instituted or threatened to institute any proceedings with
respect to a Stop Order.
(v) Any contract, agreement, instrument, lease, or
license required to be described in the Registration Statement
or the Prospectus has been properly described therein. Any
contract agreement, instrument, lease, or license required to
be filed as an exhibit to the Registration Statement has been
filed with the Commission as an exhibit to or has been
incorporated as an exhibit by reference into the Registration
Statement.
(vi) The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Delaware, with full corporate power and authority,
and all necessary consents, authorizations, approvals, orders,
licenses, certificates, and permits of and from, and
declarations and filings with, all federal, state, local, and
other governmental authorities and all courts and other
tribunals, to own, lease, license, and use its properties and
assets and to carry on its business as now being conducted and
in the manner described in the Prospectus. The Company is duly
qualified to do business and is in good standing in each
jurisdiction in which its ownership, leasing, licensing, or
character, location or use of property and assets or the
conduct of its business makes such qualification necessary.
The Company does not own, lease or license any property or
conduct any business outside the United States of America. The
Company has no subsidiary or subsidiaries and does not
control, directly or indirectly, any corporation, partnership,
joint venture, association or other business organization,
except for those
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<PAGE> 6
permitted to be excluded pursuant to Item 601, Exhibit 21 of
Regulation S-K.
(vii) The authorized capital stock of the Company
consists of 20,000,000 shares of Common Stock, of which
5,190,360 shares are outstanding and 5,000,000 shares of
preferred stock of the Company, par value $.01 per share (the
"Preferred Stock"), none of which are outstanding. Each
outstanding share of Common Stock has been duly and validly
authorized and issued, fully paid, and non-assessable, without
any personal liability attaching to the ownership thereof and
has not been issued and is not owned or held in violation of
any preemptive rights of shareholders. There is no commitment,
plan, preemptive right or arrangement to issue, and no
outstanding option, warrant, or other right calling for the
issuance of, shares of capital stock of the Company or any
security or other instrument which by its terms is convertible
into, exercisable for, or exchangeable for capital stock of
the Company, except as may be properly described in the
Prospectus. There is outstanding no security or other
instrument which by its terms is convertible into or
exchangeable for capital stock of the Company, except as may
be properly described in the Prospectus.
(viii) The financial statements of the Company
included in the Registration Statement and the Prospectus
fairly present, with respect to the Company the financial
position, the results of operations, and the other information
purported to be shown therein at the respective dates and for
the respective periods to which they apply. Such financial
statements have been prepared in accordance with generally
accepted accounting principles (except to the extent that
certain footnote disclosures regarding any stub period may
have been omitted in accordance with the applicable rules of
the Commission under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) consistently applied throughout
the periods involved, are correct and complete, and are in
accordance with the books and records of the Company. The
accountants whose report on the audited financial statements
is filed with the Commission as a part of the Registration
Statement are, and during the periods covered by their
report(s) included in the Registration Statement and the
Prospectus were, independent certified public accountants with
respect to the Company within the meaning of the Act and the
Regulations. No other financial statements are required by
Form S-1 or otherwise to be included in the Registration
Statement or the Prospectus. There has at no time been a
material adverse change in the financial condition, results of
operations, business, properties, assets, liabilities, or
future prospects of the Company from the latest information
set forth in the Registration Statement or the Prospectus,
except as may be properly described in the Prospectus.
(ix) There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or
investigation before any court or before any public body or
board pending, threatened, or in prospect (or any basis
therefor) with respect to the Company, or any of its
operations, business,
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<PAGE> 7
properties, or assets, except as may be properly described in
the Prospectus or such as individually or in the aggregate do
not now have and will not in the future have a material
adverse effect upon the operations, business, properties,
assets or financial condition of the Company. The Company is
not involved in any labor dispute, nor is such dispute
threatened, which dispute would have a material adverse effect
upon the operations, business, properties, assets or financial
condition of the Company. The Company is not in violation of,
or in default with respect to, any law, rule, regulation,
order, judgment, or decree; nor is the Company required to
take any action in order to avoid any such violation or
default.
(x) The Company has good and marketable title in fee
simple absolute to all real properties and good title to all
other properties and assets which the Prospectus indicates are
owned by it, and has valid and enforceable leasehold interests
in each of such items, free and clear of all liens, security
interests, pledges, charges, encumbrances, and mortgages
(except as may be properly described in the Prospectus). No
real property owned, leased, licensed or used by the Company
lies in an area which is, or to the knowledge of the Company
will be, subject to zoning, use or building code restrictions
which would prohibit, and no state of facts relating to the
actions or inaction of another person or entity or his or its
ownership, leasing, licensing or use of any real or personal
property exists or will exist which would prevent, the
continued effective ownership, leasing, licensing or use of
such real property in the business of the Company as presently
conducted or as the Prospectus indicates it contemplates
conducting (except as may be properly described in the
Prospectus).
(xi) The Company, and to the knowledge of the
Company, any other party, is not now or is not expected by the
Company to be in violation or breach of, or in default with
respect to, complying with any term, obligation or provision
of any contract, agreement, instrument, lease, license,
indenture, mortgage, deed of trust, note, arrangement or
understanding which is material to the Company or by which any
of its properties or business may be bound or affected, and no
event has occurred which with notice or lapse of time or both
would constitute such a default, and each such contract,
agreement, instrument, lease, license, indenture, mortgage,
deed of trust, note, arrangement or understanding is in full
force and is the legal, valid and binding obligation of the
parties thereto and is enforceable as to them in accordance
with its terms. The Company enjoys peaceful and undisturbed
possession under all leases and licenses under which it is
operating. The Company is not a party to or bound by any
contract, agreement, instrument, lease, license, indenture,
mortgage, deed of trust, note, arrangement or understanding,
or subject to any charter or other restriction, which has had
or may in the future have a material adverse effect on the
financial condition, results of operations, business,
properties, assets, liabilities or future prospects of the
Company. The Company is not in violation or breach of, or in
default with respect to, any term of its certificate of
incorporation (or other charter document) or by-laws
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<PAGE> 8
or of any franchise, license, permit, judgment, decree, order,
statute, rule or regulation.
(xii) The Company has filed all federal, state, local
and foreign tax returns which are required to be filed through
the date hereof, or have received extensions thereof, and have
paid all taxes shown on such returns and all assessments
received by it to the extent that the same are material and
have become due.
(xiii) All patents, patent applications, trademarks,
trademark applications, trade names, service marks,
copyrights, copyright applications, franchises, and other
intangible properties and assets listed in the Registration
Statement under "Business-Patent License Agreements" (all of
the foregoing being collectively herein called "Intangibles")
that the Company owns, possesses or has pending, or under
which it is licensed, are in good standing and uncontested.
There is no right under any Intangible necessary to the
business of the Company as presently conducted or as the
Prospectus indicates the Company contemplates conducting
(except as may be so described in the Prospectus). The Company
has not infringed, is infringing, or has received any notice
of infringement with respect to asserted Intangibles of
others. To the knowledge of the Company, there is no
infringement by others of Intangibles of the Company. To the
knowledge of the Company, there is no Intangible of others
which has had or may in the future have a materially adverse
effect on the financial condition, results of operations,
business, properties, assets, liabilities or future prospects
of the Company.
(xiv) Neither the Company, any director, officer,
agent, employee or other person associated with or acting on
behalf of the Company has, directly or indirectly: used any
corporate funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to
political activity; made any unlawful payment to foreign or
domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds;
violated any provision of the Foreign Corrupt Practices Act of
1977, as amended; or made any bribe, rebate, payoff, influence
payment, kickback, or other unlawful payment. No transaction
has occurred between or among the Company and any of its
officers or directors or any affiliates or affiliates of any
such officer or director, except as described in the
Prospectus.
(xv) The Company has all requisite power and
authority to execute, deliver and perform each of this
Agreement and the Representative's Warrants (collectively, the
"Company Documents"). All necessary corporate proceedings of
the Company have been duly taken to authorize the execution,
delivery and performance of each of the Company Documents.
This Agreement has been duly authorized, executed, and
delivered by the Company, is the legal, valid and binding
obligation of the Company, and is enforceable as to the
Company in accordance with its terms and each of the other
Company Documents have been duly authorized and when executed
and delivered by the Company will be the legal, valid and
binding obligation of
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<PAGE> 9
the Company enforceable as to the Company in accordance with
its terms (subject to applicable bankruptcy, insolvency, and
other laws affecting the enforceability of creditors' rights
generally). No consent, authorization, approval, order,
license, certificate or permit of or from, or declaration or
filing with, any federal, state, local or other governmental
authority or any court or other tribunal is required by the
Company for the execution, delivery or performance by the
Company of the Company Documents (except filings under the Act
which have been or will be made before the applicable Closing
Date and such consents consisting only of consents under "blue
sky" or securities laws which have been obtained at or prior
to the date of this Agreement). No consent of any party to any
contract, agreement, instrument, lease, license, indenture,
mortgage, deed of trust, note, arrangement or understanding to
which the Company is a party, or to which any of its
respective properties or assets are subject, is required for
the execution, delivery or performance of the Company
Documents, and the execution, delivery and performance of the
Company Documents, will not violate, result in a breach of,
conflict with, accelerate the due date of any payments under,
or (with or without the giving of notice or the passage of
time or both) entitle any party to terminate or call a default
under any such contract, agreement, instrument, lease,
license, indenture, mortgage, deed of trust, note,
arrangement, or understanding, or violate or result in a
breach of any term of the certificate of incorporation (or
other charter document) or by-laws of the Company, or violate,
result in a breach of, or conflict with any law, rule,
regulation, order, judgment or decree binding on the Company
or to which any of its operations, business, properties or
assets are subject.
(xvi) The Firm Shares and the Option Shares are duly
and validly authorized. The Firm Shares and the Option Shares,
when delivered in accordance with this Agreement, will be duly
and validly issued, fully paid, and non-assessable, without
any personal liability attaching to the ownership thereof, and
will not be issued in violation of any preemptive rights of
shareholders, optionholders, warrantholders and any other
persons and the Underwriters will receive good title to the
Firm Shares and the Option Shares purchased by them,
respectively, free and clear of all liens, security interests,
pledges, charges, encumbrances, shareholders' agreements and
voting trusts.
(xvii) The Representative's Warrants are duly and
validly authorized and when delivered in accordance with this
Agreement, will be duly and validly issued, fully paid and
non-assessable, without any personal liability attaching to
the ownership thereof, and will not be issued in violation of
any preemptive rights of shareholders, optionholders,
warrantholders and any other persons and the holders of the
Representative's Warrants will receive good title to the
securities purchased by them, respectively, free and clear of
all liens, security interests, pledges, charges, encumbrances,
shareholders' agreements and voting trusts.
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<PAGE> 10
(xviii) The Warrant Stock is duly and validly
authorized and reserved for issuance and, when issued and
delivered upon exercise of the Representative's Warrants, will
be duly and validly issued, fully paid and non-assessable,
without any personal liability attaching to the ownership
thereof, and will not be issued in violation of any preemptive
rights of shareholders, optionholders, warrantholders and any
other persons and the holders of the Representative's Warrants
will receive good title to the securities purchased by them,
respectively, free and clear of all liens, security interests,
pledges, charges, encumbrances, shareholders' agreements and
voting trusts.
(xix) The Firm Shares, the Option Shares, the
Representative's Warrants, the Common Stock and the Preferred
Stock conform to all statements relating thereto contained in
the Registration Statement or the Prospectus.
(xx) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, and except as may otherwise be properly described
therein, there has not been any material adverse change in the
assets or properties, business or results of operations or
financial condition of the Company, whether or not arising
from transactions in the ordinary course of business; the
Company has not sustained any material loss or interference
with its business or properties from fire, explosion,
earthquake, flood or other calamity, whether or not covered by
insurance; since the date of the latest balance sheet included
in the Registration Statement and the Prospectus, except as
reflected therein, the Company has not undertaken any
liability or obligation, direct or contingent, except for
liabilities or obligations undertaken in the ordinary course
of business; and the Company has not (A) issued any securities
or incurred any liability or obligation, primary or
contingent, for borrowed money, (B) entered into any
transaction not in the ordinary course of business, or (C)
declared or paid any dividend or made any distribution on any
of its capital stock or redeemed, purchased or otherwise
acquired or agreed to redeem, purchase or otherwise acquire
any shares of its capital stock.
(xxi) Neither the Company nor any of its officers,
directors or affiliates (as defined in the Regulations), has
taken or will take, directly or indirectly, prior to the
termination of the underwriting syndicate contemplated by this
Agreement, any action designed to stabilize or manipulate the
price of any security of the Company, or which has caused or
resulted in, or which might in the future reasonably be
expected to cause or result in, stabilization or manipulation
of the price of any security of the Company, to facilitate the
sale or resale of any of the Firm Shares or the Option Shares.
(xxii) The Company has obtained from each of its
executive officers and directors and principal shareholders,
their enforceable written agreement, in form and substance
satisfactory to counsel for the Underwriters, that for a
period of 180 days from
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<PAGE> 11
the date on which the public offering of the Shares commences
they will not, without the prior written consent of Rodman, on
behalf of the Underwriters, offer, pledge, sell, contract to
sell, grant any option for the sale of, or otherwise dispose
of, directly or indirectly, any shares of Common Stock or
other securities of the Company (or any security or other
instrument which by its terms is convertible into, exercisable
for, or exchangeable for shares of Common Stock or other
securities of the Company, including, without limitation, any
shares of Common Stock issuable under any employee stock
options), beneficially owned by them.
(xxiii) The Company is not, and does not intend to
conduct its business in a manner in which it would be, an
"investment company" as defined in Section 3(a) of the
Investment Company Act of 1940 (the "Investment Company Act").
(xxiv) All offers and sales of the Company's capital
stock prior to the date hereof, were at all relevant times
exempt from the registration requirements of the Act, and were
the subject of an available exemption from the registration
requirements of all applicable state securities or blue sky
laws.
(xxv) No person or entity has the right to require
registration of shares of Common Stock or other securities of
the Company because of the filing or effectiveness of the
Registration Statement, except such person or entities from
whom written waivers of such rights have been received prior
to the date hereof.
(xxvi) Except as may be set forth in the Prospectus,
the Company has not incurred any liability for a fee,
commission or other compensation on account of the employment
of a broker or finder in connection with the transactions
contemplated by this Agreement.
(xxvii) No transaction has occurred between or among
the Company and any of its officers or directors or any
affiliates of any such officer or director, that is required
to be described in and is not described in the Registration
Statement and the Prospectus.
(xxviii) The Common Stock, including the Shares, are
authorized for quotation on the Nasdaq National Market.
(xxix) Neither the Company nor any of its affiliates
is presently doing business with the government of Cuba or
with any person or affiliate located in Cuba. If, at any time
after the date that the Registration Statement is declared
effective with the Commission or with the Florida Department
of Banking and Finance (the "Florida Department"), whichever
date is later, and prior to the end of the period referred to
in the first clause of Section 4(ii) hereof, the Company
commences engaging in business with the government of Cuba or
with any person or affiliate located in Cuba, the Company will
so inform the Florida Department within ninety days after such
commencement of business in Cuba, and during the
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<PAGE> 12
period referred to in Section 4(ii) hereof will inform the
Florida Department within ninety days after any change occurs
with respect to previously reported information.
5. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters under this Agreement are several and not joint. The respective
obligations of the Underwriters to purchase the Shares are subject, in the
Representatives' sole discretion, to each of the following terms and conditions:
(a) The Prospectus shall have been timely filed with the
Commission in accordance with Section 6(a)(i) of this Agreement; if the
Original Registration Statement or any amendment thereto filed prior to
the Firm Closing Date has not been declared effective as of the time of
execution hereof, the Original Registration Statement or such amendment
and, if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have been declared effective not
later than the earlier of (i) 11:00 a.m. New York time, on the date on
which the amendment to the registration statement originally filed with
respect to the Shares or to the Registration Statement, as the case may
be, containing information regarding the public offering price of the
Shares has been filed with the Commission, and (ii) the time
confirmations are sent or given as specified by Rule 462(b)(2) or, with
respect to the Original Registration Statement, such later time and
date as shall have been consented to by the Representatives.
(b) No order preventing or suspending the use of any
preliminary prospectus or the Prospectus shall have been or shall be in
effect and no order suspending the effectiveness of the Registration
Statement shall be in effect and no proceedings for such purpose shall
be pending before or threatened by the Commission, and any requests for
additional information on the part of the Commission (to be included in
the Registration Statement or the Prospectus or otherwise) shall have
been complied with to the satisfaction of the Representatives.
(c) The representations and warranties of the Company
contained in this Agreement and in the certificates delivered pursuant
to Section 5(d) shall be true and correct when made and on and as of
each Closing Date as if made on such date and the Company shall have
performed all covenants and agreements and satisfied all the conditions
contained in this Agreement required to be performed or satisfied by it
at or before such Closing Date.
(d) The Representatives shall have received on each Closing
Date a certificate, addressed to the Representatives and dated such
Closing Date, of the chief executive or chief operating officer and the
chief financial officer of the Company to the effect that the persons
executing such certificate have carefully examined the Registration
Statement, the Prospectus and this Agreement and that the
representations and warranties of the Company in this Agreement are
true and correct on and as of such Closing Date with the same effect as
if made on such Closing Date and the Company has performed all
covenants and agreements and satisfied all conditions contained in this
Agreement required to be performed or satisfied by it at or prior to
such Closing Date.
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<PAGE> 13
(e) The Representatives shall have received at the time this
Agreement is executed and on each Closing Date, signed letters from BDO
Seidman, LLP addressed to the Representatives and dated, respectively,
the date of this Agreement and each such Closing Date, in form and
scope reasonably satisfactory to the Representatives, with reproduced
copies or signed counterparts thereof for each of the Underwriters
confirming that they are independent accountants within the meaning of
the Act and the Regulations, that the response to Item 10 of the
Registration Statement is correct in so far as it relates to them and
stating in effect that:
(i) in its opinion the audited financial statements
and financial statement schedules included or incorporated by
reference in the Registration Statement and the Prospectus and
reported on by it comply as to form in all material respects
with the applicable accounting requirements of the Act, the
Exchange Act and the related published rules and regulations
thereunder;
(ii) on the basis of a reading of the amounts
included in the Registration Statement and the Prospectus
under the heading "Selected Financial Information" which would
not necessarily reveal matters of significance with respect to
the comments set forth in such letter, a reading of the
minutes of the meetings of the shareholders and directors of
the Company, and inquiries of certain officials of the Company
who have responsibility for financial and accounting matters
of the Company as to transactions and events subsequent to the
date of the latest audited financial statements, except as
disclosed in the Registration Statement and the Prospectus,
nothing came to its attention which caused it to believe that:
(A) the amounts in "Selected Financial
Information," and included in the Registration
Statement and the Prospectus do not agree with the
corresponding amounts in the audited financial
statements from which such amounts were derived; or
(B) with respect to the Company, there were,
at a specified date not more than five business days
prior to the date of the letter, any decreases in net
sales, income before income taxes and net income or
any increases in long-term debt of the Company or any
decreases in the capital stock, working capital or
the shareholders' equity in the Company, as compared
with the amounts shown on the Company's audited
Balance Sheet for the fiscal year ended December 31,
1995 included in the Registration Statement or the
audited Statement of Operations, for such year; and
(iii) it has performed certain other procedures as a
result of which it determined that information of an
accounting, financial or statistical nature (which is limited
to accounting, financial or statistical information derived
from the general accounting records of the Company) set forth
in the Registration Statement and the Prospectus and
reasonably specified by the Representatives agrees with the
accounting records of the Company.
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<PAGE> 14
References to the Registration Statement and the Prospectus in
this paragraph (e) are to such documents as amended and supplemented at
the date of such letter.
(f) The Representatives shall have received on each Closing
Date from Snow Becker & Krauss P.C., counsel for the Company, an
opinion, addressed to the Representatives and dated such Closing Date,
and in form and scope satisfactory to counsel for the Underwriters,
with reproduced copies or signed counterparts thereof for each of the
Underwriters, to the effect that:
(i) The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Delaware, with full corporate power and authority to
own, lease, license and use its properties and assets and to
conduct its business in the manner described in the
Prospectus. To the knowledge of such counsel, the Company has
all necessary consents, authorizations, approvals, orders,
certificates and permits of and from, and declarations and
filings with, all federal, state, local and other governmental
authorities and all courts and other tribunals, to own, lease,
license and use its properties and assets and to conduct its
business in the manner described in the Prospectus. The
Company is duly qualified to do business and is in good
standing, in each state where the failure to be so qualified
could have a material adverse effect on the operating
condition (financial and otherwise) or business of the
Company. The Company does not own, lease or license any
property or conduct any business outside the United States of
America. The Company has no subsidiary or subsidiaries and
does not control, directly or indirectly, any corporation,
partnership, joint venture, association or other business
organization, except for those permitted to be excluded
pursuant to Item 601, Exhibit 21 of Regulation S-K.
(ii) The Company has authorized, issued and
outstanding capital stock as set forth in the "actual" column
of the capitalization table under the caption "Capitalization"
in the Prospectus. The certificates evidencing the Shares are
in due and proper legal form. Each outstanding share of Common
Stock has been duly and validly authorized and issued, fully
paid, and non-assessable, without any personal liability
attaching to the ownership thereof, and has not been issued
and is not owned or held in violation of any preemptive right
of shareholders. To the knowledge of such counsel, there is no
commitment, plan, or arrangement to issue, and no outstanding
option, warrant, or other right calling for the issuance of,
any share of capital stock of the Company or any security or
other instrument which by its terms is convertible into,
exercisable for, or exchangeable for capital stock of the
Company, except as may be properly described in the
Prospectus. To the knowledge of such counsel, there is
outstanding no security or other instrument which by its terms
is convertible into, exercisable for or exchangeable for
capital stock of the Company, except as may be properly
described in the Prospectus.
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<PAGE> 15
(iii) To the knowledge of such counsel, there is no
litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation before any
court or before any public body or board pending, threatened,
or in prospect (or any basis therefor) with respect to the
Company, or any of its operations, businesses, properties,
assets, or financial condition except as may be properly
described in the Prospectus or such as individually or in the
aggregate do not now have and will not in the future have a
material adverse effect upon the operations, business,
properties, assets, or financial condition of the Company. To
the knowledge of such counsel, the Company is not involved in
any labor dispute, nor is such dispute threatened, which
dispute would have a material adverse effect upon the
operations, business, properties, assets or financial
condition of the Company. The Company is not in violation of,
or in default with respect to, any law, rule, regulation,
order, judgment, or decree, except as may be properly
described in the Prospectus or such as in the aggregate do not
now have and will not in the future have a material adverse
effect upon the operations, business, properties, assets, or
financial condition of the Company; nor is the Company
required to take any action in order to avoid any such
violation or default.
(iv) To the knowledge of such counsel, the Company,
nor any other party is now or is expected by the Company to be
in violation or breach of, or in default with respect to,
complying with any term, obligation or provision of any
contract, agreement, instrument, lease, license, indenture,
mortgage, deed of trust, note, arrangement or understanding
which is material to the Company or by which any of its
properties or businesses may be bound or affected and no event
has occurred which with notice or lapse of time or both would
constitute such a default.
(v) The Company is not in violation or breach of, or
in default with respect to, any term of its certificate of
incorporation (or other charter document) or by-laws.
(vi) The Company has all requisite power and
authority to execute, deliver and perform this Agreement, to
issue and sell the Shares and to issue the Representative's
Warrants. All necessary corporate proceedings of the Company
have been taken to authorize the execution, delivery and
performance by the Company of the Company Documents. Each of
the Company Documents has been duly authorized, executed and
delivered by the Company, is the legal, valid and binding
obligation of the Company and (subject to applicable
bankruptcy, insolvency, and other laws affecting the
enforceability of creditors' rights generally) is enforceable
as to the Company in accordance with its terms. No consent,
authorization, approval, order, license, certificate or permit
of or from, or declaration or filing with, any federal state,
local or other governmental authority or any court or other
tribunal is required by the Company, for the execution,
delivery or performance by the Company of the Company
Documents (except filings under the Act which have been made
prior to the Closing Date and consents
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<PAGE> 16
consisting only of consents under "blue sky" or securities
laws). To the knowledge of such counsel, no consent of any
party to any contract, agreement, instrument, lease, license,
indenture, mortgage, deed of trust, note, arrangement or
understanding to which the Company is a party, or to which any
of its properties or assets are subject, is required for the
execution, delivery or performance of the Company Documents;
and the execution, delivery and performance of the Company
Documents will not violate, result in a breach of, conflict
with, or (with or without the giving of notice or the passage
of time or both) entitle any party to terminate or call a
default under any such contract, agreement, instrument, lease,
license, indenture, mortgage, deed of trust, note, arrangement
or understanding, in each case known to such counsel, or
violate or result in a breach of any term of the certificate
of incorporation (or other charter document) or by-laws of the
Company, or violate, result in a breach of, or conflict with
any law, rule, regulation, order, judgment, or decree binding
on the Company or to which any of its operations, businesses,
properties or assets are subject.
(vii) The Firm Shares and the Option Shares are duly
and validly authorized. Such opinion delivered at each of the
Closing Dates shall state that each Share, as the case may be,
to be delivered on that date is duly and validly issued, fully
paid, and non-assessable, with no personal liability attaching
to the ownership thereof, and is not issued in violation of
any preemptive rights of shareholders, and the Underwriters
have received good title to the Shares purchased by them,
respectively, from the Company for the consideration
contemplated herein and in good faith and without notice of
any adverse claim within the meaning of the Uniform Commercial
Code, free and clear of any liens, security interests,
pledges, charges, encumbrances, shareholders' agreements,
voting trusts and other claims. The Common Stock, the
Preferred Stock, the Firm Shares and the Option Shares conform
to all statements relating thereto contained in the
Registration Statement or the Prospectus.
(viii) The Representative's Warrants have been duly
and validly authorized for issuance. Such opinion delivered at
the Firm Shares Closing Date shall state that the
Representative's Warrants to be delivered on that date have
been duly and validly issued, fully paid, and non-assessable,
with no personal liability attaching to the ownership thereof,
and will not have been issued in violation of any preemptive
rights of stockholders, optionholders, warrantholders and any
other persons, and the holders of the Representative's
Warrants will receive good title to the securities purchased
by them, respectively, from the Company, for the consideration
contemplated herein and in good faith and without notice of
any adverse claim within the meaning of the Uniform Commercial
Code, free and clear of any liens, security interests,
pledges, charges, encumbrances, stockholders' agreements,
voting trusts and other claims. The Representative's Warrants
conform to all statements relating thereto contained in the
Registration Statement or the Prospectus.
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<PAGE> 17
(ix) The Warrant Stock is duly and validly authorized
and reserved for issuance and, when issued and delivered upon
exercise of the Representative's Warrants, will be duly and
validly issued, fully paid and non-assessable, without any
personal liability attaching to the ownership thereof, and
will not be issued in violation of any preemptive rights of
stockholders, optionholders, warrantholders and any other
persons and the holders of the Representative's Warrants will
receive good title to the securities purchased by them,
respectively, from the Company, for the consideration
contemplated herein and in good faith and without notice of
any adverse claim within the meaning of the Uniform Commercial
Code, free and clear of all liens, security interests,
pledges, charges, encumbrances, stockholders' agreements and
voting trusts and other claims. The Warrant Stock conforms to
all statements relating thereto contained in the Registration
Statement or the Prospectus.
(x) To the knowledge of such counsel, any contract,
agreement, instrument, lease or license required to be
described in the Registration Statement or the Prospectus has
been properly described therein. To the knowledge of such
counsel, any contract, agreement, instrument, lease or license
required to be filed as an exhibit to the Registration
Statement has been filed with the Commission as an exhibit to
or has been incorporated as an exhibit by reference into the
Registration Statement.
(xi) Insofar as statements in the Prospectus purport
to summarize the status of litigation or the provisions of
laws, rules, regulations, orders, judgments, decrees,
contracts, agreements, instruments, leases or licenses, such
statements have been prepared or reviewed by such counsel and
to the knowledge of such counsel, accurately reflect the
status of such litigation and provisions purported to be
summarized and are correct in all material respects.
(xii) The Company is not an "investment company" as
defined in Section 3(a) of the Investment Company Act and, if
the Company conducts its business as set forth in the
Prospectus, will not become an "investment company" and will
not be required to be registered under the Investment Company
Act.
(xiii) To the knowledge of such counsel, no person or
entity has the right to require registration of shares of
Common Stock or other securities of the Company because of the
filing or effectiveness of the Registration Statement except
such persons or entities from whom written waivers of such
rights have been received prior to the Closing Date.
(xiv) The Registration Statement has become effective
under the Act. No Stop Order has been issued and no
proceedings for that purpose has been instituted or are
threatened, pending, or to such counsel's knowledge,
contemplated.
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<PAGE> 18
(xv) The Registration Statement, any Rule 430A
Prospectus, and the Prospectus, and any amendment or
supplement thereto (other than financial statements and other
financial data and schedules which are or should be contained
in any thereof, as to which such counsel need express no
opinion), comply as to form in all material respects with the
requirements of the Act and the Regulations. The conditions
for the use of Form S-1 have been satisfied with respect to
the Registration Statement.
(xvi) Such counsel has no reason to believe that any
of the Registration Statement, any Rule 430A Prospectus, or
the Prospectus, or any amendment or supplement thereto (other
than financial statements and other financial data and
schedules which are or should be contained in any thereof, as
to which such counsel need express no opinion), contains any
untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading.
(xvii) To the knowledge of such counsel, since the
effective date of the Registration Statement, no event has
occurred which should have been set forth in an amendment or
supplement to the Registration Statement or the Prospectus
which has not been set forth in such an amendment or
supplement.
(xviii) The agreement of each officer, director and
principal shareholder of the Company, stating that for a
period of 180 days from the date on which the public offering
of the Shares commences, such officer, director and principal
shareholder will not, without the prior written consent of
Rodman, on behalf of the Underwriters, offer, pledge, sell,
contract to sell, grant any option for the sale of, or
otherwise dispose of, directly or indirectly, any shares of
Common Stock (or any other securities of the Company or any
security or other instrument which by its terms is convertible
into, exercisable for, or exchangeable for shares of Common
Stock or other securities of the Company, including, without
limitation, any shares of Common Stock issuable under any
employee stock options), beneficially owned by such
individual, has been duly and validly authorized, executed and
delivered by such individual and constitutes the legal, valid
and binding obligation of such individual enforceable against
such individual in accordance with its terms.
In addition, such counsel shall state that such counsel has
participated in the preparation of the Registration Statement and the Prospectus
and in conferences with officers and other representatives of the Company,
representatives of the Representatives and representatives of the independent
accountants of the Company, at which conferences the contents of the
Registration Statement and the Prospectus and related matters were discussed
and, although such counsel has not independently verified and is not passing
upon and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and the
Prospectus (except as specified in the foregoing opinion), on the basis of the
foregoing and relying as to materiality upon the representations of executive
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<PAGE> 19
officers of the Company after conferring with such executive officers, no facts
have come to the attention of such counsel which lead such counsel to believe
that the Registration Statement at the time it became effective contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or that the Prospectus, except for the financial statements and other financial
and statistical data included therein as to which counsel need express no
opinion, as amended or supplemented on the date thereof contained any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
In rendering their opinion as aforesaid, counsel may rely upon
an opinion or opinions, each dated the Closing Date, of other counsel retained
by the Company as to laws of any jurisdiction other than the Federal laws of the
United States, the General Corporate Law of the states of Delaware and New York,
provided that (1) each such local counsel is reasonably acceptable to the
Representatives and (2) such reliance is expressly authorized by each opinion so
relied upon and a copy of each such opinion is addressed to the Representatives
and is in form and substance reasonably satisfactory to them and their counsel.
In addition, such counsel may rely, as to matters of fact, to the extent such
counsel deems proper, on certificates of responsible officers of the Company,
provided that executed copies of such certificates are provided to the
Representatives.
(g) The Representatives shall have received on each Closing
Date from Kenyon and Kenyon, patent counsel for the Company, an
opinion, addressed to the Representatives and dated such Closing Date,
and in form and scope satisfactory to counsel for the Representatives
with respect to such patent matters as the Representatives may
reasonably require.
(h) The Representatives shall have received on each Closing
Date from Covington & Burling, special regulatory counsel for the
Company, an opinion, addressed to the Representatives and dated such
Closing Date, and in form and scope satisfactory to counsel for the
Representatives with respect to such regulatory and compliance matters
as the Representatives may reasonably require.
(i) All proceedings taken in connection with the sale of the
Firm Shares and the Option Shares as herein contemplated shall be
satisfactory in form and substance to the Representatives and its
counsel, and the Underwriters shall have received from Squadron,
Ellenoff, Plesent & Sheinfeld, LLP, a favorable opinion, addressed to
the Representatives and dated such Closing Date, with respect to the
Shares, the Registration Statement and the Prospectus, and such other
related matters, as the Representatives may reasonably request, and the
Company shall have furnished to Squadron, Ellenoff, Plesent &
Sheinfeld, LLP, such documents as they may reasonably request for the
purpose of enabling them to pass upon such matters.
(j) On each Closing Date, the Company shall have issued to
Rodman, the Representative's Warrants equal to 10% of the shares of
Common Stock sold on each Closing Date.
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<PAGE> 20
6. Covenants of the Company.
(a) The Company covenants and agrees as follows:
(i) The Company shall use its best efforts to cause
the Registration Statement to become effective as promptly as
possible. If the Registration Statement has become or becomes
effective with a form of prospectus omitting Rule 430A
information, or filing of the Prospectus is otherwise required
under Rule 424(b), the Company will file the Prospectus,
properly completed, pursuant to Rule 424(b) within the time
period prescribed and will provide evidence satisfactory to
you of such timely filing. The Company shall notify you
immediately, and confirm such notice in writing, (A) when the
Registration Statement and any post-effective amendment
thereto become effective, (B) of the receipt of any comments
from the Commission or the "blue sky" or securities authority
of any jurisdiction regarding the Registration Statement, any
post-effective amendment thereto, the Prospectus, or any
amendment or supplement thereto, and (C) of the receipt of any
notification with respect to a Stop Order. The Company shall
not file any amendment of the Registration Statement or
supplement to the Prospectus unless the Company has furnished
the Representatives a copy for their review prior to filing
and shall not file any such proposed amendment or supplement
to which the Representatives reasonably object. The Company
shall use its best efforts to prevent the issuance of any Stop
Order and, if issued, to obtain as soon as possible the
withdrawal thereof.
(ii) During the time when a Prospectus relating to
the Shares is required to be delivered hereunder or under the
Act or the Regulations, comply so far as it is able with all
requirements imposed upon it by the Act, as now existing and
as hereafter amended, and by the Regulations, as from time to
time in force, so far as necessary to permit the continuance
of sales of or dealings in the Shares in accordance with the
provisions hereof and the Prospectus. If, at any time when a
prospectus relating to the Shares is required to be delivered
under the Act and the Regulations, any event as a result of
which the Prospectus as then amended or supplemented would
include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements
therein in the light of the circumstances under which they
were made not misleading, or if it shall be necessary to amend
or supplement the Prospectus to comply with the Act or the
Regulations, the Company promptly shall prepare and file with
the Commission, subject to the third sentence of paragraph (i)
of this Section 6(a), an amendment or supplement which shall
correct such statement or omission or an amendment which shall
effect such compliance.
(iii) The Company shall make generally available to
its security holders and to the Representatives as soon as
practicable, but not later than 45 days after the end of the
12-month period beginning at the end of the fiscal quarter of
the Company during which the Effective Date (or 90 days if
such 12-month period
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<PAGE> 21
coincides with the Company's fiscal year), an earnings
statement (which need not be audited) of the Company, covering
such 12-month period, which shall satisfy the provisions of
Section 11(a) of the Act or Rule 158 of the Regulations.
(iv) The Company shall furnish to the Representatives
and counsel for the Underwriters, without charge, signed
copies of the Registration Statement (including all exhibits
and amendments thereto) and to each other Underwriter a copy
of the Registration Statement (without exhibits thereto) and
all amendments thereof and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the
Act or the Regulations, as many copies of any preliminary
prospectus and the Prospectus and any amendments thereof and
supplements thereto as the Representatives may reasonably
request.
(v) The Company shall cooperate with the
Representatives and its counsel in endeavoring to qualify the
Shares for offer and sale under the laws of such jurisdictions
as the Representatives may designate and shall maintain such
qualifications in effect so long as required for the
distribution of the Shares; provided, however, that the
Company shall not be required in connection therewith, as a
condition thereof, to qualify as a foreign corporation or to
execute a general consent to service of process in any
jurisdiction or subject itself to taxation as doing business
in any jurisdiction.
(vi) For a period of five years after the date of
this Agreement, the Company shall supply to the
Representatives, and to each other Underwriter who may so
request in writing, copies of such financial statements and
other periodic and special reports as the Company may from
time to time distribute generally to the holders of any class
of its capital stock and to furnish to the Representatives a
copy of each annual or other report it shall be required to
file with the Commission.
(vii) Without the prior written consent of Rodman, on
behalf of the Underwriters, for a period of 180 days from the
date on which a public offering of the Shares commences, the
Company shall not issue, sell or register with the Commission
or otherwise dispose of, directly or indirectly, any
securities of the Company (or any securities convertible into
or exercisable or exchangeable for securities of the Company),
except for the issuance of the Shares pursuant to the
Registration Statement.
(viii) If the Company elects to rely on Rule 462(b),
the Company shall both file a Rule 462(b) Registration
Statement with the Commission in compliance with Rule 462(b)
and pay the applicable fees in accordance with Rule 111
promulgated under the Act by the earlier of (i) 10:00 p.m.
eastern time on the date of this Agreement and (ii) the time
confirmations are sent or given, as specified by Rule
462(b)(2).
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<PAGE> 22
(ix) On or before completion of this offering, the
Company shall make all filings required under applicable
securities laws and by the Nasdaq National Market.
(x) Prior to each Closing Date and for a period of 25
days thereafter, you shall be given reasonable written prior
notice of any press release or other direct or indirect
communication and of any press conference with respect to the
Company, the financial conditions, results of operations,
business, properties, assets, liabilities of the Company, or
this offering.
(xi) Until expiration of the Representative's
Warrants, the Company shall keep reserved sufficient shares of
Common Stock for issuance upon exercise thereof.
(xii) For a period of two years after the Firm Shares
Closing Date, the Company shall grant Rodman, individually and
not as representative of the Underwriters, a 30-day right of
first refusal to act as the Company's financial advisor or
managing underwriter or exclusive placement agent, as the case
may be, in connection with any sale of the Company (including
the sale of a majority or controlling minority interest in the
stock or assets of the Company), an acquisition or merger by
the Company, or the raising of additional financing through
either a public or private offering of securities, subject to
the approval of Rodman's Commitment Committee and the good
faith negotiation of customary and mutually agreeable terms.
If such transaction as is contemplated by this paragraph
6(a)(xii) is instituted by another investment banking firm,
then Rodman will act as a co-manager and receive economics
pari passu to the lead manager.
(b) The Company agrees to pay, or reimburse if paid by the
Representatives, whether or not the transactions contemplated hereby
are consummated or this Agreement is terminated, all costs and expenses
relating to the registration and public offering of the Shares
including those relating to: (i) the preparation, printing, filing and
distribution of the Registration Statement including all exhibits
thereto, each preliminary prospectus, the Prospectus, all amendments
and supplements to the Registration Statement and the Prospectus, and
any documents required to be delivered with any Preliminary Prospectus
or the Prospectus, and the printing, filing and distribution of the
Agreement Among Underwriters, this Agreement and related documents;
(ii) the preparation and delivery of certificates for the Shares to the
Underwriters; (iii) the registration or qualification of the Shares for
offer and sale under the securities or Blue Sky laws of the various
jurisdictions referred to in Section 6(a)(v), including the fees and
disbursements of counsel for the Underwriters in connection with such
registration and qualification and the preparation, printing,
distribution and shipment of preliminary and supplementary Blue Sky
memoranda; (iv) the furnishing (including costs of shipping and
mailing) to the Representatives and to the Underwriters of copies of
each preliminary prospectus, the Prospectus and all amendments or
supplements to the Prospectus, and of the several documents required by
this Section to be so furnished, as may be reasonably requested for use
in connection with the offering and sale of
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<PAGE> 23
the Shares by the Underwriters or by dealers to whom Shares may be
sold; (v) the filing fees of the National Association of Securities
Dealers, Inc. in connection with its review of the terms of the public
offering; (vi) the furnishing (including costs of shipping and mailing)
to the Representatives and to the Underwriters of copies of all reports
and information required by Section 6(a)(vi); (vii) inclusion of the
Shares for quotation on the NASDAQ National Market System; and (viii)
all transfer taxes, if any, with respect to the sale and delivery of
the Shares by the Company to the Underwriters. Except as otherwise
contemplated by Section 9 hereof, the Underwriters will pay their own
counsel fees and expenses to the extent not otherwise covered by clause
(iii) above, and their own travel and travel-related expenses in
connection with the distribution of the Shares. Without limiting the
Company's obligations set forth above, it agrees to pay all of its
other costs and expenses incident to the performance of its obligations
under this Agreement and the sale of the Shares by it hereunder.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any and all losses, claims, damages and
liabilities, joint or several (including any reasonable investigation,
legal and other expenses incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claim
asserted), to which they, or any of them, may become subject under the
Act, the Exchange Act or other Federal or state law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or
liabilities arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any
preliminary prospectus, the Registration Statement or the Prospectus or
any amendment thereof or supplement thereto, or arise out of or are
based upon any omission or alleged omission to state therein such fact
required to be stated therein or necessary to make such statements
therein not misleading. Such indemnity shall not inure to the benefit
of any Underwriter (or any person controlling such Underwriter) on
account of any losses, claims, damages or liabilities arising from the
sale of the Shares to any person by such Underwriter if such untrue
statement or omission or alleged untrue statement or omission was made
in such preliminary prospectus, the Registration Statement or the
Prospectus, or such amendment or supplement, in reliance upon and in
conformity with information furnished in writing to the Company by the
Representatives on behalf of any Underwriter specifically for use
therein. In no event shall the indemnification agreement contained in
this Section 7(a) inure to the benefit of any Underwriter on account of
any losses, claims, damages, liabilities or actions arising from the
sale of the Shares upon the public offering to any person by such
Underwriter if such losses, claims, damages, liabilities or actions
arise out of, or are based upon, a statement or omission or alleged
omission in a preliminary prospectus and if, in respect to such
statement, omission or alleged omission, the Prospectus differs in a
material respect from such preliminary prospectus, such that the
Prospectus does not contain such untrue statement or such omission or
alleged untrue statement or omission, and a copy of the Prospectus has
not been sent or given to such
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<PAGE> 24
person at or prior to the confirmation of such sale to such person.
This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, each person, if any, who
controls the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, each director of the Company, and each
officer of the Company who signs the Registration Statement, to the
same extent as the foregoing indemnity from the Company to each
Underwriter, but only insofar as such losses, claims, damages or
liabilities arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which was made in any
Preliminary Prospectus, any Rule 430A Prospectus, the Registration
Statement or the Prospectus, or any amendment thereof or supplement
thereto, which were made in reliance upon and in conformity with
information furnished in writing to the Company by the Representatives
on behalf of any Underwriter for specific use therein; provided,
however, that the obligation of each Underwriter to indemnify the
Company (including any controlling person, director or officer thereof)
shall be limited to the net proceeds received by the Company from such
Underwriter. For all purposes of this Agreement, the amounts of the
selling concession and reallowance set forth in the Prospectus
constitute the only information furnished in writing by or on behalf of
any Underwriter expressly for inclusion in any Preliminary Prospectus,
any Rule 430A Prospectus, the Registration Statement or the Prospectus
or any amendment or supplement thereto.
(c) Any party that proposes to assert the right to be
indemnified under this Section will, promptly after receipt of notice
of commencement of any action, suit or proceeding against such party in
respect of which a claim is to be made against an indemnifying party or
parties under this Section, notify each such indemnifying party of the
commencement of such action, suit or proceeding, enclosing a copy of
all papers served. No indemnification provided for in Section 7(a) or
7(b) shall be available to any party who shall fail to give notice as
provided in this Section 7(c) if the party to whom notice was not given
was unaware of the proceeding to which such notice would have related
and was prejudiced by the failure to give such notice but the omission
so to notify such indemnifying party of any such action, suit or
proceeding shall not relieve it from any liability that it may have to
any indemnified party for contribution or otherwise than under this
Section. In case any such action, suit or proceeding shall be brought
against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and
the approval by the indemnified party of such counsel, the indemnifying
party shall not be liable to such indemnified party for any legal or
other expenses, except as provided below and except for the reasonable
costs of investigation subsequently incurred by such indemnified party
in connection with the defense thereof. The indemnified party shall
have the right to employ its
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<PAGE> 25
counsel in any such action, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the
employment of counsel by such indemnified party has been authorized in
writing by the indemnifying parties, (ii) the indemnified party shall
have reasonably concluded that there may be a conflict of interest
between the indemnifying parties and the indemnified party in the
conduct of the defense of such action (in which case the indemnifying
parties shall not have the right to direct the defense of such action
on behalf of the indemnified party), or (iii) the indemnifying parties
shall not have employed counsel to assume the defense of such action
within a reasonable time after notice of the commencement thereof, in
each of which cases the reasonable fees and expenses of counsel shall
be at the expense of the indemnifying parties. An indemnifying party
shall not be liable for any settlement of any action, suit, proceeding
or claim effected without its written consent.
8. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Sections 7(a) and (b) is due in accordance with its terms but for any reason is
held to be unavailable from the Company or the Underwriters, the Company and the
Underwriters shall contribute to the aggregate losses, claims, damages and
liabilities (including any investigation, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claims asserted, but after deducting any contribution
received by the Company from persons other than the Underwriters, such as
persons who control the Company within the meaning of the Act, officers of the
Company who signed the Registration Statement and directors of the Company, who
may also be liable for contribution) to which the Company and one or more of the
Underwriters may be subject in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in Section 7
hereof, in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company on the one
hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Underwriters shall be deemed to be in
the same proportion as (x) the total proceeds from the Offering (net of
underwriting discounts but before deducting expenses) received by the Company
from the sale of the Shares, as set forth in the table on the cover page of the
Prospectus (but not taking into account the use of the proceeds of such sale of
Shares by the Company), bear to (y) the underwriting discount received by the
Underwriters, as set forth in the table on the cover page of the Prospectus. The
relative fault of the Company and the Underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact related to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 8 were determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
-25-
<PAGE> 26
considerations referred to above. Notwithstanding the provisions of this Section
8, (i) in no case shall any Underwriter (except as may be provided in the
Agreement Among Underwriters) be liable or responsible for any amount in excess
of the underwriting discount applicable to the Shares purchased by such
Underwriter hereunder and (ii) the Company shall be liable and responsible for
any amount in excess of the underwriting discount; provided, however (i) that no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 8,
each person, if any, who controls an Underwriter within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act shall have the same rights to
contribution as such Underwriter, and each person, if any, who controls the
Company within the meaning of the Section 15 of the Act or Section 20(a) of the
Exchange Act, each officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to clauses (i) and (ii) in the
immediately preceding sentence of this Section 8. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section,
notify such party or parties from whom contribution may be sought, but the
omission so to notify such party or parties from whom contribution may be sought
shall not relieve the party or parties from whom contribution may be sought from
any other obligation it or they may have hereunder or otherwise than under this
Section. No party shall be liable for contribution with respect to any action,
suit, proceeding or claim settled without its written consent. The Underwriters'
obligations to contribute pursuant to this Section 8 are several in proportion
to their respective underwriting commitments and not joint.
9. Termination. This Agreement may be terminated with respect to the
Shares to be purchased on any Closing Date by the Representatives by notifying
the Company at any time prior to the purchase of the Shares:
(a) in the absolute discretion of the Representatives at or
before any Closing Date: (i) if on or prior to such date, any domestic
or international event or act or occurrence has materially disrupted,
or in the opinion of the Representatives will in the future materially
disrupt, the securities markets; (ii) if there has occurred any new
outbreak or material escalation of hostilities or other calamity or
crisis the effect of which on the financial markets of the United
States is such as to make it, in the judgment of the Representatives,
inadvisable to proceed with the Offering; (iii) if there shall be such
a material adverse change in general financial, political or economic
conditions or the effect of international conditions on the financial
markets in the United States such as to make it, in the judgment of the
Representatives, inadvisable or impracticable to market the Shares;
(iv) if trading in the Shares has been suspended by the Commission or
trading generally on the New York Stock Exchange, Inc., the American
Stock Exchange, Inc. or the Nasdaq National Market System has been
suspended or limited, or minimum or maximum ranges for prices for
securities shall have been fixed, or maximum ranges for prices for
securities have been required, by said exchanges or by order of the
Commission, the National Association of Securities Dealers, Inc., or
any other governmental or regulatory
-26-
<PAGE> 27
authority; or (v) if a banking moratorium has been declared by any
state or federal authority, or
(b) at or before any Closing Date, if any of the conditions
specified in Section 5 shall not have been fulfilled when and as
required by this Agreement.
If this Agreement is terminated pursuant to any of its provisions, the
Company shall not be under any liability to any Underwriter, and no Underwriter
shall be under any liability to the Company, except that (y) if this Agreement
is terminated by the Representatives or the Underwriters because of any failure,
refusal or inability on the part of the Company or all of them to comply with
the terms or to fulfill any of the conditions of this Agreement, the Company
will reimburse the Underwriters for all out-of-pocket expenses (including the
fees and disbursements of their counsel) incurred by them in connection with the
proposed purchase and sale of the Shares or in contemplation of performing their
obligations hereunder and (z) no Underwriter who shall have failed or refused to
purchase the Shares agreed to be purchased by it under this Agreement, without
some reason sufficient hereunder to justify cancellation or termination of its
obligations under this Agreement, shall be relieved of liability to the Company
or to the other Underwriters for damages occasioned by its failure or refusal.
10. Substitution of Underwriters. If one or more of the Underwriters
shall fail (other than for a reason sufficient to justify the cancellation or
termination of this Agreement under Section 9) to purchase on any Closing Date
the Shares agreed to be purchased on such Closing Date by such Underwriter or
Underwriters, the Representatives may find one or more substitute underwriters
to purchase such Shares or make such other arrangements as the Representatives
may deem advisable or one or more of the remaining Underwriters may agree to
purchase such Shares in such proportions as may be approved by the
Representatives, in each case upon the terms set forth in this Agreement. If no
such arrangements have been made by the close of business on the business day
following such Closing Date:
(a) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall not exceed 10% of the Shares
that all the Underwriters are obligated to purchase on such Closing
Date, then each of the nondefaulting Underwriters shall be obligated to
purchase such Shares on the terms herein set forth in proportion to
their respective obligations hereunder; provided, that in no event
shall the maximum number of Shares that any Underwriter has agreed to
purchase pursuant to Section 1 be increased pursuant to this Section 10
by more than one-ninth of such number of Shares without the written
consent of such Underwriter, or
(b) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall exceed 10% of the Shares that
all the Underwriters are obligated to purchase on such Closing Date,
then the Company shall be entitled to an additional business day within
which it may, but is not obligated to, find one or more substitute
underwriters reasonably satisfactory to the Representatives to purchase
such Shares upon the terms set forth in this Agreement.
-27-
<PAGE> 28
In any such case, either the Representatives or the Company shall have
the right to postpone the applicable Closing Date for a period of not more than
five business days in order that necessary changes and arrangements (including
any necessary amendments or supplements to the Registration Statement or
Prospectus) may be effected by the Representatives and the Company. If the
number of Shares to be purchased on such Closing Date by such defaulting
Underwriter or Underwriters shall exceed 10% of the Shares that all the
Underwriters are obligated to purchase on such Closing Date, and none of the
nondefaulting Underwriters or the Company shall make arrangements pursuant to
this Section within the period stated for the purchase of the Shares that the
defaulting Underwriters agreed to purchase, this Agreement shall terminate with
respect to the Shares to be purchased on such Closing Date without liability on
the part of any nondefaulting Underwriter to the Company and without liability
on the part of the Company, except in both cases as provided in Sections 6(b),
7, 8 and 9. The provisions of this Section shall not in any way affect the
liability of any defaulting Underwriter to the Company or the nondefaulting
Underwriters arising out of such default. A substitute underwriter hereunder
shall become an Underwriter for all purposes of this Agreement.
11. Miscellaneous. The respective agreements, representations,
warranties, indemnities and other statements of the Company or its officers and
of the Underwriters set forth in or made pursuant to this Agreement shall remain
in full force and effect, regardless of any investigation made by or on behalf
of any Underwriter or the Company or any of the officers, directors or
controlling persons referred to in Sections 7 and 8 hereof, and shall survive
delivery of and payment for the Shares. The provisions of Sections 6(b), 7, 8
and 9 shall survive the termination or cancellation of this Agreement.
This Agreement has been and is made for the benefit of the
Underwriters, the Company and their respective successors and assigns and, to
the extent expressed herein, for the benefit of persons controlling any of the
Underwriters, or the Company, and directors and officers of the Company, and
their respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include any purchaser of Shares from any Underwriter merely
because of such purchase.
All notices and communications hereunder shall be in writing and mailed
or delivered, or by telefax or telegraph if subsequently confirmed by letter,
(a) if to the Representatives, to Rodman & Renshaw, Inc., One Liberty Plaza, 165
Broadway, New York, New York 10006, Attention: John J. Borer, III, Managing
Director, telecopy: (212) 416-7439 and (b) if to the Company, to the Company's
agent for service as such agent's address appears on the cover page of the
Registration Statement.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflict of
laws.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
-28-
<PAGE> 29
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, or neuter, singular or plural, as the identity of the
person or persons or entity or entities require.
All section headings herein are for convenience of reference only and
are not part of this Agreement, and no construction or inference shall be
derived therefrom.
Please confirm that the foregoing correctly sets forth the agreement
among us.
Very truly yours,
ENAMELON, INC.
By: _______________________________
Name:
Title:
-29-
<PAGE> 30
Confirmed on behalf of itself
and as the Representatives of the several Underwriters
named in Schedule I annexed hereto:
RODMAN & RENSHAW, INC.
By:______________________________
Name: John J. Borer III
Title: Managing Director
-30-
<PAGE> 31
SCHEDULE I
<TABLE>
<CAPTION>
Number of Firm
Shares to be
NAME OF UNDERWRITER Purchased
- ------------------- --------------
<S> <C>
Rodman & Renshaw, Inc.
Total...................................................... ___________
</TABLE>
-31-
<PAGE> 1
CERTIFICATE OF INCORPORATION STATE OF DELAWARE
A STOCK CORPORATION SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 06/09/1992
921615290 - 2300476
================================================================================
FIRST: The name of this Corporation is ENAMELON, INC.
SECOND: Its Registered Office in the State of Delaware is to be located at 231
South State Street in the City of Dover County of Kent Zip Code 19901. The
Registered Agent in charge thereof is Agents for Delaware Corporations, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Law of Delaware.
FOURTH: The amount of the total authorized capital stock of this corporation is
ZERO Dollars $0.00 divided into FIFTEEN THOUSAND shares of NO PAR Dollars, $0.00
each.
FIFTH: The name and mailing address of the incorporator are as follows
Name KARIN R. BARTLETT
Mailing Address P.O. Box 841
Dover, DE Zip Code 19901-0841
I, THE UNDERSIGNED, for the purpose of forming a corporation under the laws of
the State of Delaware do make, file and record this Certificate, and do certify
that the facts herein stated are true, and I have accordingly hereunto set my
hand this 9TH day of JUNE A.D. 1992.
/s/ KARIN R. BARTLETT
------------------------------
<PAGE> 2
State of Delaware
SEAL
Office of Secretary of State
--------------------------
I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "ENAMELON, INC." FILED IN THIS OFFICE ON THE NINTH DAY OF JUNE,
A.D. 1992, AT 9 O'CLOCK A.M.
* * * * * * * * * *
SEAL /s/ Michael Ratchford
--------------------------
921615290 Secretary of State
AUTHENTICATION: #3480673
DATE: 06/11/1992
<PAGE> 3
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 11:55 AM 12/04/1992
92345062 - 2300416
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
ENAMELON, INC.
Adopted in accordance with the provisions of
Sections 242 of the General Corporation Law
of the State of Delaware.
We, Steven R. Fox, President, and H. Kenneth Merritt, Jr., Assistant
Secretary, of Enamelon, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), do hereby certify as follows:
FIRST: That the certificate of Incorporation of the Corporation was filed
in the Office of the Secretary of State of the State of Delaware on June 9,
1992.
SECOND: The Certificate of Incorporation of the Corporation, Article
Fourth, is hereby amended to read as follows:
"FOURTH: The amount of the total authorized capital stock of this
Corporation is Thirty Thousand Dollars ($30,000) divided into
Three Million shares of One Cent ($.01) each."
THIRD: That such amendment has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE> 4
IN WITNESS WHEREOF, we have signed this Certificate and caused the
corporate seal of the Corporation to be affixed as of this 30th day of
November, 1992.
/s/ Steven R. Fox
------------------------------
Steven R. Fox, DDS, President
Attest:
/s/ E. Kenneth Merritt
- ---------------------------
E. Kenneth Merritt, Jr.
Assistant Secretary
2
<PAGE> 5
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
ENAMELON, INC.
Adopted in accordance with the provisions of
Section 242 of the General Corporation Law
of the State of Delaware.
We, Steven R. Fox, Chairman of the Board of Directors, and Norman Usen,
Secretary, of Enamelon, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), do hereby certify as follows:
FIRST: The Certificate of Incorporation of the Corporation was filed in the
Office of the Secretary of State of the State of Delaware on June 9, 1992.
SECOND: The Certificate of Incorporation of the Corporation, Article
FOURTH, is hereby amended to read as follows:
"FOURTH: The total number of shares of all classes of capital
stock which the Corporation shall have the authority to
issue is 25,000,000 shares, divided into two classes of
which 5,000,000 shares shall be designated Preferred Stock,
$.01 par value, and 20,000,000 shares shall be designated
Common Stock, $.01 par value.
The designations and the powers, preferences and rights
<PAGE> 6
of the shares of Preferred Stock and the shares of Common Stock, and the
qualifications, limitations or restrictions thereof are as follows:
A. Preferred Stock
1. Issuance in Series. The shares of Preferred Stock may be divided into and
issued in one or more series, and each series shall be so designated as to
distinguish the shares thereof from the shares of all other series. All shares
of Preferred Stock shall be of equal rank and identical except to the extent
that variations in the relative preferences and rights enumerated in
subparagraphs (a) through (g), inclusive, of Section 2 of paragraph A of this
Article FOURTH may be fixed and determined by the Board of Directors between
series hereafter established; and each share of a series shall be identical in
all respects with the other shares of such series.
2. Authority of the Board with Respect to Series. Authority is hereby expressly
granted to the Board of Directors, subject to the provisions of this Article
FOURTH, to divide the shares of Preferred Stock into one or more series, and
with respect to each such series, to fix and determine by resolution or
resolutions providing for the issue of such series the following relative
preferences and rights as to which there may be variations between the series so
established:
(a) The distinctive designation of such series and the number of shares
which shall constitute such series which number may be increased (except as
otherwise provided by the Board of Directors in creating such series) or
decreased (but not below the number of shares then outstanding) from time to
time by like action of the Board of Directors;
(b) The annual rate of dividends payable on shares of such series, the
conditions, if any, upon which and the dates when such dividends shall be
payable;
(c) The time or times when, if ever, and the price or prices at which
shares of such series shall be redeemable;
(d) The amount payable on shares of such series in the event of any
liquidation, dissolution or winding-up of the affairs of the Corporation;
(e) If the shares of such series are to be entitled
-2-
<PAGE> 7
to the benefit of a sinking or retirement fund to be applied to the purchase or
redemption of shares of such series, the amount of the fund and the manner of
its application, including the price or prices at which the shares may be
redeemed or purchased through the application of the fund;
(f) If the shares of such series are to be convertible into or exchangeable
for shares of Common Stock or shares of any other series of Preferred Stock, the
conversion price or prices of the rate or rates of exchange and the terms and
conditions of such conversion or exchange; and
(g) Such other powers, preferences and rights of shares of such series and
the qualifications, limitations or restrictions thereof as the Board of
Directors may deem advisable and as are not inconsistent with the provisions of
the Certificate of Incorporation.
3. Dividends. The holders of shares of Preferred Stock of each series shall be
entitled to receive, out of the assets of the Corporation which are by law
available for the payment of dividends, cash dividends in such amounts and
payable at such time or times as shall be fixed and determined by the Board of
Directors in any resolution providing for the issuance of any such series,
before any dividends on any class of capital stock of the Corporation ranking
junior to the Preferred Stock (other than dividends payable in shares of any
class of capital stock of the Corporation ranking junior to the preferred stock)
may be declared or paid or set apart for payment. The term "class of capital
stock of the Corporation ranking junior to the Preferred Stock" shall mean the
Common Stock and any other class of stock of the Corporation hereafter
authorized which ranks junior to the Preferred Stock as to payment of dividends
or the distribution of assets upon dissolution, liquidation, or winding-up.
4. Redemption. (a) The shares of Preferred Stock of any series then outstanding
shall be redeemable, in whole or in part, at the option of the Corporation, by
resolution of its Board of Directors at such price or prices and at such time or
times as may be fixed and determined by the Board of Directors in accordance
with any resolution providing for the issuance of any such series of Preferred
Stock. In case of redemption of only a part of the shares of Preferred Stock of
any series at the time outstanding, the redemption may be either pro rata or by
lot, as determined by the Board of Directors. Subject to the foregoing, the
Board of Directors shall have full authority and power to prescribe the manner
in which the drawing by lot or the
-3-
<PAGE> 8
pro rata redemption shall be conducted and the terms and conditions upon which
the shares of Preferred Stock shall be redeemed from time to time.
(b) Notice of every redemption of shares of Preferred Stock shall be given
by mailing such notice, postage prepaid, not less than 10 days prior to the date
fixed for such redemption to each holder of record of shares to be redeemed to
his address as the same shall appear on the books of the Corporation. Each such
notice shall specify the date fixed for redemption and the place where payment
of the redemption price is to be made upon surrender for cancellation of the
certificates representing shares called for redemption. Any notice which was
mailed in the manner herein provided shall be conclusively presumed to be duly
given whether or not the holder receives the notice.
(c) If notice of redemption shall have been duly given as hereinabove
provided, on and after the date fixed for redemption (unless the Corporation
shall default in making payment of the redemption price) all shares so called
for redemption shall no longer be deemed outstanding and all rights with respect
to such shares, including, but not limited to, the right to receive dividends
thereon, shall cease and terminate, notwithstanding that any certificate for
such shares so called for redemption shall not have been surrendered for
cancellation, and the holders of such shares so called for redemption shall
cease to be stockholders and shall have no interest in or claim against the
Corporation except the right to receive the redemption price upon surrender of
their certificates for cancellation. Any resolution of the Board of Directors
calling shares of any series of Preferred Stock for redemption may provide to
the extent permitted by applicable law that the shares so redeemed may have the
status of treasury stock.
5. Required Shares. Except as otherwise required by statute or provided for by
resolution or resolutions of the Board of Directors, shares of any series of
Preferred Stock which have been acquired by the Corporation, whether by purchase
or redemption or by their having been converted into or exchanged for other
shares of the Corporation shall upon their acquisition and without any other
action by the Corporation resume the status of authorized but unissued shares of
Preferred Stock and may be reissued as shares of the series of which they were
originally a part or may be issued as shares of a new series or as shares of any
other series.
6. Voting Rights. Except as otherwise required by statute or provided for by
resolution or resolutions of
-4-
<PAGE> 9
the Board of Directors, the holders of Preferred Stock, or of any series
thereof, of the Corporation, shall not be entitled to vote for the election of
directors or for any other corporate purposes. In addition, the Corporation may
increase or decrease (but not below the number of shares thereof then
outstanding) the number of authorized shares of any class of its capital stock
by the affirmative vote of the holders of a majority of the capital stock of the
Corporation entitled to vote.
7. Dissolution, Liquidation or Winding-Up. In the event of any dissolution,
liquidation or winding-up of the affairs of the Corporation, after payment or
provision for payment of the debts or other liabilities of the Corporation, the
holders of all then outstanding shares of Preferred Stock shall be entitled to
receive, out of the net assets of the Corporation, an amount in cash for each
share equal to the amount fixed and determined by the Board of Directors in any
resolution providing for the issuance of any such series of Preferred Stock. If
upon any dissolution, liquidation or winding-up of the affairs of the
Corporation, the net assets available for distribution shall be insufficient to
pay the holders of all outstanding shares of Preferred Stock in full amounts to
which they respectively shall be entitled, the holders of all outstanding shares
of Preferred Stock of all series shall share ratably in any distribution of
assets in accordance with the sums which would be payable upon such distribution
if all sums payable were paid in full. Neither the merger nor the consolidation
of the Corporation, nor the sale, lease or conveyance of all or a part of its
assets, shall be deemed to be a liquidation or winding-up of the affairs of the
Corporation within the meaning of this Article FOURTH.
B. Common Stock
1. Dividends. Subject to the preferential rights of the Preferred Stock, the
holders of shares of Common Stock shall be entitled to receive, when and if
declared by the Board of Directors, out of the assets of the Corporation which
are by law available therefor, dividends payable either in cash, in property, or
in shares of Common Stock."
THIRD: This amendment has been duly adopted in accordance with provisions
of Section 242 of the General Corporation Law of the State of Delaware.
-5-
<PAGE> 10
IN WITNESS WHEREOF, We have signed this Certificate and caused the
corporate seal of the corporation to be affixed as of this 7th day of October
1993.
/s/ Dr. Steven R. Fox
------------------------------
Dr. Steven R. Fox, Chairman of
the Board of Directors
Attest:
/s/ Norman Usen
- ------------------------------
Norman Usen, Secretary
-6-
<PAGE> 11
State of Delaware
Office of the Secretary of State
------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "ENAMELON, INC." FILED IN THIS OFFICE ON THE SEVENTH DAY OF
OCTOBER, A.D. 1993, AT 1 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO KENT COUNTY
RECORDER OF DEEDS ON THE SEVENTH DAY OF OCTOBER, A.D. 1993 FOR RECORDING.
* * * * * * * *
SEAL -----------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: #4092210
932805299 DATE: 10/07/1993
<PAGE> 12
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
ENAMELON, INC.
Adopted in accordance with the provisions of
Section 242 of the General Corporation Law
of the State of Delaware.
We, Steven R. Fox, Chairman of the Board of Directors, and Norman Usen,
Secretary, of Enamelon, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), do hereby certify as follows:
FIRST: The Certificate of Incorporation of the Corporation was filed in
the Office of the Secretary of State of the State of Delaware on June 9, 1992.
SECOND: The Certificate of Incorporation of the Corporation, Article
FOURTH, is hereby amended to read as follows:
"FOURTH: The total number of shares of all classes of capital
stock which the Corporation shall have the authority to
issue is 25,000,000 shares divided into two classes of which
5,000,000 shares shall be designated Preferred Stock, $.01
par value, and 20,000,000 shares shall be designated Common
Stock, $.01 par value.
The designations and the powers, preferences and rights
<PAGE> 13
of the shares of Preferred Stock and the shares of Common
Stock, and the qualifications, limitations or restrictions
thereof are as follows:
A. Preferred Stock
1. Issuance in Series. The shares of Preferred Stock may be
divided into and issued in one or more series, and such
series shall be so designated as to distinguish the shares
thereof from the shares of all other series. All shares of
Preferred Stock shall be of equal rank and identical except
to the extent that variations in the relative preferences
and rights enumerated in subparagraphs (a) through (g),
inclusive, of Section 2 of Paragraph A of this Article
FOURTH may be fixed and determined by the Board of Directors
between series hereafter established; and each share of a
series shall be identical in all respects with the other
shares of such series.
2. Authority of the Board with Respect to Series. Authority
is hereby expressly granted to the Board of Directors,
subject to the provisions of this Article FOURTH, to divide
the shares of Preferred Stock into one or more series, and
with respect to each such series, to fix and determine by
resolution or resolutions providing for the issue of such
series the following relative preferences and rights as to
which there may be variations between the series so
established:
(a) The distinctive designation of such series and the
number of shares which shall constitute such series which
number may be increased (except as otherwise provided by the
Board of Directors in creating such series) or decreased
(but not below the number of shares then outstanding) from
time to time by like action of the Board of Directors;
(b) The annual rate of dividends payable on shares of such
series, the conditions, if any, upon which and the dates
when such dividends shall be payable;
(c) The time or times when, if ever, and the price or prices
at which shares of such series shall be redeemable;
(d) The amount payable on shares of such series in the event
of any liquidation, dissolution or winding-up of the affairs
of the Corporation;
(e) If the shares of such series are to be entitled to
-2-
<PAGE> 14
the benefit of a sinking or retirement fund to be applied to
the purchase or redemption of shares of such series, the
amount of the fund and the manner of its application,
including the price or prices at which the shares may be
redeemed or purchased through the application of the fund;
(f) If the shares of such series are to be convertible into
or exchangeable for shares of Common Stock or shares of any
other series of Preferred Stock, the conversion price or
prices or the rate or rates of exchange and the terms and
conditions of such conversion or exchange; and
(g) Such other powers, preferences and rights of shares of
such series and the qualifications, limitations or
restrictions thereof as the Board of Directors may deem
advisable and as are not inconsistent with the provisions of
the Certificate of Incorporation.
3. Dividends. The holders of shares of Preferred Stock of
each series shall be entitled to receive, out of the assets
of the Corporation which are by law available for the
payment of dividends, cash dividends in such amounts and
payable at such time or times as shall be fixed and
determined by the Board of Directors in any resolution
providing for the issuance of any such series, before any
dividends on any class of capital stock of the Corporation
ranking junior to the Preferred Stock (other than dividends
payable in shares of any class of capital stock of the
Corporation ranking junior to the Preferred Stock) may be
declared or paid or set apart for payment. The term "class
of capital stock of the Corporation ranking junior to the
Preferred Stock" shall mean the Common Stock and any other
class of stock of the Corporation hereafter authorized which
ranks junior to the Preferred Stock as to payment of
dividends of the distribution of assets upon dissolution,
liquidation, or winding-up.
4. Redemption. (a) The shares of Preferred Stock of any
series then outstanding shall be redeemable, in whole or in
part, at the option of the Corporation, by resolution of its
Board of Directors at such price or prices and at such time
or times as may be fixed and determined by the Board of
Directors in accordance with any resolution providing for
the issuance of any such series or Preferred Stock. In case
of redemption of only a part of the shares of Preferred
Stock of any series at the time outstanding, the redemption
may be either pro rata or by lot, as determined by the Board
of Directors. Subject to the foregoing, the Board of
Directors shall have full authority and power to prescribe
the manner in which the drawing by lot or the
-3-
<PAGE> 15
pro rata redemption shall be conducted and the terms and
conditions upon which the shares of Preferred Stock shall be
redeemed from time to time.
(b) Notice of every redemption of shares of Preferred Stock
shall be given by mailing such notice, postage prepaid, not
less than 10 days prior to the date fixed for such
redemption to each holder of record of shares to be redeemed
to his address as the same shall appear on the books of the
Corporation. Each such notice shall specify the date fixed
for redemption and the place where payment of the redemption
price is to be made upon surrender for cancellation of the
certificates representing shares called for redemption. Any
notice which was mailed in the manner herein provided shall
be conclusively presumed to be duly given whether or not the
holder receives the notice.
(c) If notice of redemption shall have been duly given as
hereinabove provided, on and after the date fixed for
redemption (unless the corporation shall default in making
payment of the redemption price) all shares so called for
redemption shall no longer be deemed outstanding and all
rights with respect to such shares, including, but not
limited to, the right to receive dividends therein, shall
cease and terminate, notwithstanding that any certificate
for such shares so called for redemption shall not have been
surrendered for cancellation, and the holders of such shares
so called for redemption shall cease to be stockholders and
shall have no interest in or claim against the Corporation
except the right to receive the redemption price upon
surrender of their certificates for cancellation. Any
resolution of the Board of Directors calling shares of any
series of Preferred Stock for redemption may provide to the
extent permitted by applicable law that the shares so
redeemed may have the status of treasury stock.
5. Required Shares. Except as otherwise required by statute
or provided for by resolution or resolutions of the Board of
Directors, shares of any series of Preferred Stock which
have been acquired by the Corporation, whether by purchase
or redemption or by their having been converted into or
exchanged for other shares of the Corporation shall upon
their acquisition and without any other action by the
Corporation resume the status of authorized but unissued
shares of Preferred Stock and may be reissued as shares of
the series of which they were originally a part or may be
issued as shares of a new series or as shares of any other
series.
6. Voting Rights. Except as otherwise required by statue or
provided for by resolution or resolutions of
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<PAGE> 16
the Board of Directors, the holders of Preferred Stock, or
of any series thereof, of the Corporation, shall not be
entitled to vote for the election of directors or for any
other corporate purposes. In addition, the Corporation may
increase or decrease (but not below the number of shares
thereof then outstanding) the number of authorized shares of
any class of its capital stock by the affirmative vote of
the holders of a majority of the capital stock of the
Corporation entitled to Vote.
7. Dissolution, Liquidation or Winding-up. In the event of
any dissolution, liquidation or winding-up of the affairs of
the Corporation, after payment or provision for payment of
the debts or other liabilities of the Corporation, the
holders of all then outstanding shares of Preferred Stock
shall be entitled to receive, out of the net assets of the
Corporation, an amount in cash for each share equal to the
amount fixed and determined by the Board of Directors in any
resolution providing for the issuance of any such series of
Preferred Stock. If upon any dissolution, liquidation or
winding-up of the affairs of the Corporation, the net assets
available for distribution shall be insufficient to pay the
holders of all outstanding shares of Preferred Stock in full
amounts to which they respectively shall be entitled, the
holders of all outstanding shares of Preferred Stock of all
series shall share ratably in any distribution of assets in
accordance with the sums which would be payable upon such
distribution if all sums payable were paid in full. Neither
the merger nor the consolidation of the Corporation, nor the
sale, lease or conveyance of all or a part of its assets,
shall be deemed to be a liquidation or winding-up of the
affairs of the Corporation within the meaning of this
Article FOURTH.
B. Common Stock.
Subject to the preferential rights of the Preferred Stock,
the holders of shares of Common Stock shall be entitled to
receive, when and if declared by the Board of Directors, out
of the assets of the Corporation which are by law available
therefor, dividends payable either in cash, in property, or
in shares of Common Stock."
THIRD: This amendment has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
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<PAGE> 17
IN WITNESS WHEREOF, We have signed this Certificate and caused the
corporate seal of the Corporation to be affixed as of the 7th day of October
1993.
/s/ Dr. Steven R. Fox
------------------------------------
Dr. Steven R. Fox, Chairman of
the Board of Directors
Attest:
/s/ Norman Usen
- -----------------------------
Norman Usen, Secretary
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<PAGE> 18
State of Delaware
Office of the Secretary of State
------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "ENAMELON, INC." FILED IN THIS OFFICE ON THE SEVENTH DAY OF
OCTOBER, A.D. 1993, AT 1 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO KENT COUNTY
RECORDER OF DEEDS ON THE SEVENTH DAY OF OCTOBER, A.D. 1993 FOR RECORDING.
* * * * * * * * * *
SEAL /S/ William T. Quillen
--------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: 4092210
DATE: 10/07/1993
932805299
<PAGE> 19
ENAMELON, INC.
CERTIFICATE OF DESIGNATIONS, POWERS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER
SPECIAL RIGHTS AND RELATIVE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF THE PREFERRED STOCK
----------------------------------------------
Pursuant to Section 151
of the General Corporation Law of Delaware
----------------------------------------------
ENAMELON, INC., a Delaware corporation (the "Corporation"), acting pursuant
to Section 151 of the General Corporation Law of Delaware, does hereby certify
as follows:
FIRST: The Amended Certificate of Incorporation of the Corporation
authorizes the issuance of 5,000,000 shares of Preferred Stock, $.01 par value
per share, and further authorizes the Board of Directors of the Corporation, by
resolution or resolutions, at any time and from time to time, to divide and
establish any or all of the unissued shares of Preferred Stock not then
allocated to any series of Preferred Stock into one or more series, and without
limiting the generality of the foregoing, to fix and determine the designations
of each such series, the number of shares which shall constitute such series and
certain relative rights and preferences of the shares of each series so
established.
SECOND: The Board of Directors of the Corporation, by its unanimous written
consent dated the 12th day of January 1996, did duly adopt the following
resolutions authorizing the creation and issuance of a series of said Preferred
Stock to be known as Series A Convertible Preferred Stock:
RESOLVED, that the Board of Directors, pursuant to the authority
vested in it by the provisions of the Certificate of Incorporation of the
Corporation, as amended, hereby authorizes the issue of a series of the
Corporation's Preferred Stock, $.01 par value, of which 5,000,000 shares
are authorized to be issued under the Corporation's Certificate of
Incorporation (such 5,000,000 shares being hereafter called
<PAGE> 20
collectively, the "Authorized Preferred Stock" or the "Preferred
Stock") of the Corporation and hereby fixes the number, voting powers,
designations, preferences, rights and qualifications, limitations or
restrictions thereof in addition to those set forth in said Certificate of
Incorporation as follows:
1. Designations. Of the Authorized Preferred Stock of the Corporation,
827,250 shares are hereby constituted as a series of Preferred Stock designated
as "Series A Convertible Preferred Stock" (hereinafter called the "Series A
Preferred Stock").
2. Relative Seniority. The Series A Preferred Stock shall rank senior to
all shares of the Corporation's common stock, par value $.001 per share (the
"Common Stock") and any other securities of the Corporation as to dividends and
distributions upon liquidation, dissolution, or winding up of the Corporation.
3. Voting.
(a) General. Except as may be otherwise provided in these terms of the
Preferred Stock, or by law, the Series A Preferred Stock shall vote together
with the Common Stock and all other classes and series of Preferred Stock of the
Corporation so providing as a single class on all actions to be taken by the
stockholders of the Corporation. Each share of Series A Preferred Stock shall
entitle the holder thereof to such number of votes per share on each such action
as shall equal the number of shares of Common Stock (including fractions of a
share) into which each share of such Series A Preferred Stock is then
convertible.
(b) Board Seats. The holders of the Series A Preferred Stock, voting as a
separate class, shall be entitled to elect one (1) director of the Corporation
(the "Series A Designee") for as long as at least 413,625 shares of Series A
Preferred Stock, as adjusted for Recapitalization Events, as defined in Section
4(a) hereof, are authorized, issued and outstanding. In the event that the
number of shares of Series A Preferred Stock outstanding is less than 413,625, a
director previously elected by the holders of the Series A Preferred Stock
voting as a separate class shall be entitled to complete his term. Except as to
any board
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<PAGE> 21
representation specifically granted to a class or series of Preferred
Stock other than the Series A Preferred Stock, the holders of the Series A
Preferred Stock, the Common Stock and all other classes or series of Preferred
Stock so entitled to vote, voting together as a single class, shall be entitled
to elect the remaining directors of the Corporation.
In the event the Corporation fails to make payment on any redemption of
shares of Series A Preferred Stock pursuant to Section 8 hereof, the holders of
Series A Preferred Stock, voting as a separate class, shall have the exclusive
right, immediately upon the failure to make such payment, to elect a majority of
the Corporation's Board of Directors by electing such number of additional
directors ("Additional Series A Designees") necessary for the Series A Designee
and the Additional Series A Designees to constitute the lowest percentage of the
members of the Corporation's Board of Directors greater than 50% to serve for
such period as the Corporation fails to make the payment required pursuant to
Section 8 hereof. If the Corporation does not make payment on any redemption of
shares of Series A Preferred Stock pursuant to Section 8 hereof on the date due,
the Corporation shall on the date such payment is due, or such earlier date as
the Corporation in good faith believes it will not have the funds necessary to
make such payment at the due date, notify the holders of the Series A Preferred
Stock in writing that payment is not being made or anticipated to be made at the
time provided for in Section 8 hereof. Unless a majority in interest of the
holders of Series A Preferred Stock have otherwise designated Additional Series
A Designees prior to the sending of such notice, the Corporation shall as part
of the aforementioned notification, call for a meeting of the holders of the
Series A Preferred Stock to be held seven business days thereafter in order for
the holders of the Series A Preferred Stock to determine whether they wish to
appoint Additional Series A Designees, and if they so elect to appoint, to vote
for such additional directors.
At any meeting (or in a written consent in lieu thereof) held for the
purpose of electing directors, the presence in person or by proxy (or the
written consent) of the holders of a majority of the shares of (i) Series A
Preferred Stock then outstanding shall constitute a quorum of such series for
the election of the director
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<PAGE> 22
to be elected solely by the holders of such series and (ii) the Common Stock
then outstanding and the number of shares of Common Stock into which the Series
A Preferred Stock outstanding is then convertible shall constitute a quorum for
the election of the directors jointly by the holders of such series and the
Common Stock. A vacancy in any directorship elected by the holders of the Series
A Preferred Stock shall be filled only by vote or written consent of the holders
of such class and a vacancy in the directorship elected jointly by the holders
of the Series A Preferred Stock and the Common Stock shall be filled only by
vote or written consent of the Series A Preferred Stock and Common Stock as
provided above.
(c) Special Voting Requirements. The following corporate actions require
the affirmative vote of at least 60% of the outstanding Series A Preferred
Stock, voting together as a single class, until less than 413,625 shares of
Series A Preferred Stock, as adjusted for Recapitalization Events, are
authorized, issued and outstanding:
(i) Any sale by the Corporation of all or substantially all of its
assets;
(ii) Any merger of the Corporation with another entity;
(iii) Any liquidation or winding up of the Corporation; or
(iv) Any amendment of the Corporation's Certificate of Incorporation
or By-laws.
4. Dividend Rights.
(a) Subject to subsection 4(d) below, the holders of record of outstanding
shares of Series A Preferred Stock shall be entitled from the date of original
issuance thereof to receive a dividend at the annual rate per share of Twenty
Cents ($.20), in each case as adjusted for stock splits, recapitalizations,
reclassifications, and similar events effecting the number of shares of Series A
Preferred Stock outstanding (together hereinafter referred to as
"Recapitalization Events"). Such dividends shall be cumulative and
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<PAGE> 23
shall accrue whether or not they have been declared and whether or not there are
profits, surplus, or other funds legally available for the payment of dividends.
Other than as set forth in this Section 4(a), the holders of record of
outstanding shares of Series A Preferred Stock shall not be entitled to any
additional dividends with respect to such shares upon any distribution of a
dividend on Common Stock or any other class or series of capital stock ranking
as to dividends junior to or pari passu with the Series A Preferred Stock. If
not otherwise declared and paid by the Board of Directors, at the earlier of (i)
the redemption of the Series A Preferred Stock or (ii) the liquidation,
dissolution, winding up, sale of substantially all the assets of, consolidation
or merger of the Corporation where the Corporation is not the survivor and which
does not otherwise result in the conversion of the shares of Series A Preferred
Stock pursuant to subsection 6(a)(i)(Y) hereof, any accrued but undeclared or
unpaid dividends shall be paid to the holders of record of outstanding shares of
Series A Preferred Stock. All dividends per outstanding share on the Series A
Preferred Stock shall be declared and paid pro rata. As to dividends payable in
cash, should the Corporation not have sufficient funds legally available for
paying the full dividends specified herein for the Series A Preferred Stock,
then the entire funds of the Corporation legally available for such distribution
shall be distributed ratably among the holders of the Series A Preferred Stock
(based on the amount of accrued dividends owing to each holder of Series A
Preferred Stock).
(b) No cash dividend shall be paid, declared, or set apart on the Common
Stock or any other class or series of capital stock ranking as to dividends or
liquidation, junior to or pari passu with the Series A Preferred Stock if, on
the date of such declaration, all dividends or distributions on the Series A
Preferred Stock which have accrued for all past dividend periods and the then
current dividend period have not been paid in full unless otherwise waived as
provided in subsection 4(d) below, or a sum sufficient for the payment thereof
irrevocably set apart in trust for the holders of the Series A Preferred Stock.
(c) So long as at least 413,625 shares of Series A Preferred Stock are
outstanding, as adjusted for Recapitalization Events, the Corporation shall not
declare, make or set apart any distribution,
-5-
<PAGE> 24
of any kind, other than a dividend to the extent allowed by law, in respect of,
or purchase, redeem or otherwise acquire, the Common Stock or any other class or
series of capital stock ranking, as to dividends or liquidation, junior to or
pari passu with the Series A Preferred Stock under any circumstances, without
the prior written approval of at least a majority in interest of the then
outstanding shares of Series A Preferred Stock, and then, only if, on the date
of such distribution all of the following are met: (i) all dividends or
distributions on the Series A Preferred Stock which have accrued for all past
dividend periods and the then current dividend period have been paid in full or
a sum sufficient for the payment thereof irrevocably set apart in trust for the
holders of the Series A Preferred Stock; and (ii) the Corporation shall not be
in default under any of the terms of the Series A Preferred Stock; provided,
however, that nothing hereinabove shall prevent the Corporation from exercising
any rights it may have to purchase Common Stock from any employee, consultant,
officer or director of the Corporation upon termination of their employment with
the Corporation.
(d) Notwithstanding anything contained herein to the contrary, upon the
conversion of a share or shares of Series A Preferred Stock pursuant to Section
6 hereof, all accrued but unpaid dividends with respect to such share or shares
of Series A Preferred Stock so converted through the date of such conversion
shall be automatically and permanently waived.
5. Liquidation.
(a) Series A Preferred Stock. Upon any liquidation, dissolution or winding
up of the Corporation, the holders of shares of Series A Preferred Stock shall
then be entitled before any distribution or payment is made with respect to the
Common Stock or any other class or series of capital stock of the Corporation
ranking junior to or pari passu with the Series A Preferred Stock, to be paid an
amount equal to the higher of:
(i) $4.00 per share of Series A Preferred Stock each holder owns, as
adjusted for Recapitalization Events, plus an amount equal to all
accrued but
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<PAGE> 25
unpaid dividends thereon, computed to the date payment thereof is
made available; or
(ii) such amount per share of Series A Preferred Stock as would have
been payable to such person had each share been converted to
Common Stock immediately prior to such liquidation, dissolution
or winding up of the Corporation.
(b) Remaining Distributions. After distribution of the amounts set forth in
(i) or (ii) of subsection 5(a), then the remaining assets of the Corporation
available for distribution, if any, to the stockholders of the Corporation,
shall be distributed to the holders of the Common Stock, ratably on the basis of
their respective holdings.
(c) Notice. Written notice of such liquidation, dissolution or winding up,
stating a payment date and the place where said payments shall be made, shall be
given by mail, postage prepaid, or by telex to non-U.S. residents, not less than
20 days prior to the payment date stated therein, to the holders of record of
the Series A Preferred Stock, such notice to be addressed to each such holder at
its address as shown by the records of the Corporation.
(d) Deemed Liquidation. The sale or transfer by the Corporation of all or
substantially all its assets, shall be deemed to be a liquidation, dissolution
or winding up of the Corporation within the meaning of the provisions of this
subsection 5 unless such sale results in the automatic conversion of the Series
A Preferred Stock pursuant to subsection 6(a)(i)(Y) below.
6. Conversion. The holders of the Series A Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock shall be
convertible (i) automatically upon the consummation of (X) an underwritten
public offering of the Common Stock at a price of at least $7.00 per share
(ascribing no value to any warrants or other securities sold if the Common Stock
is sold in units), which results in aggregate gross proceeds to the Corporation
of not less than $10,000,000 or (Y) a merger, consolidation or sale of all or
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<PAGE> 26
substantially all of the assets of the Corporation which results in the
Corporation or all the holders of Common Stock receiving consideration per share
of Common Stock so owned of $7.00, or (ii) at the option of the holder thereof,
all or a portion of such holder's shares of Series A Preferred Stock shall be
convertible, but only in denominations of not less than 100 shares, at any time
and from time to time, into such number of fully paid and nonassessable shares
of Common Stock as is determined by dividing $4.00 by the conversion price in
effect at the time of conversion (the "Conversion Price"). The Conversion Price
at which shares of Common Stock shall be deliverable upon conversion of the
Series A Preferred Stock without the payment of additional consideration by the
holder thereof shall initially be $4.00. Such initial Conversion Price, and the
rate at which shares thereof may be converted into shares of Common Stock, shall
be subject to adjustment as provided below.
(b) Fractional Shares. No fractional shares of Common Stock shall be issued
upon conversion of the Series A Preferred Stock. The determination of fractional
shares shall be made on the basis of the total number of shares of Series A
Preferred Stock the holder at the time of conversion is converting divided by
the Conversion Price. In lieu of any fractional shares to which the holder would
otherwise be entitled, the Corporation shall pay cash equal to such fraction
multiplied by the Conversion Price immediately in effect prior to the event
which would result in the issuance of a fractional share of Common Stock.
(c) Mechanics of Conversion.
(i) Subject to (ii) below, in order for a holder of Series A Preferred
Stock to convert shares of Series A Preferred Stock into shares of Common Stock,
such holder shall surrender the certificate or certificates for such shares of
Series A Preferred Stock, at the office of the transfer agent for the Series A
Preferred Stock (or at the principal office of the Corporation if the
Corporation serves as its own transfer agent), together with written notice that
such holder elects to convert all or any number (but not less than 100 shares)
of the shares of the Series A Preferred Stock represented by such certificate or
certificates. Such notice shall state such holder's name or the names of the
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<PAGE> 27
nominee in which such holder wishes the certificate or certificates for shares
of Common Stock to be issued. If required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by a written
instrument or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or his or its attorney duly authorized in
writing. The date of receipt of such certificates and notice by the transfer
agent (or by the Corporation if the Corporation serves as its own transfer
agent) shall be the conversion date ("Conversion Date"). The Corporation shall,
as soon as practicable after the Conversion Date (and in any event within thirty
days after the Conversion Date), issue and deliver at such office to such holder
of Series A Preferred Stock, or to his or its nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled, together with cash in lieu of any fraction of a share.
(ii) In order for the Corporation to automatically cause the conversion
of the Series A Preferred Stock upon the happening of an event set forth in
subsection (a) (i) of Section 6 above, the Corporation must give written notice
to the holders of the Series A Preferred Stock within ten (10) business days
after the event which triggered the automatic conversion. The Conversion Date
for purposes of an automatic conversion is the date of the event which triggered
such conversion. Upon such triggering event, the Series A Preferred Stock shall
have been deemed surrendered for conversion. In order for the holder of Series A
Preferred Stock to receive certificates for shares of Common Stock, the holder
of Series A Preferred Stock must surrender its Series A Preferred Stock
certificate to the Corporation or the Transfer Agent.
(iii) The Corporation shall, at all times when Series A Preferred Stock
shall be outstanding, reserve and keep available out of its authorized but
unissued stock, for the purpose of effecting the conversion of Series A
Preferred Stock, such number of its duly authorized shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series A Preferred Stock. Before taking any action which
would cause an adjustment reducing the Conversion Price below the then par value
of the shares of Common Stock issuable upon conversion of the Series A Preferred
Stock, the Corporation will
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<PAGE> 28
take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Corporation may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Conversion Price.
(iv) All shares of Series A Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer be deemed to be
outstanding and all rights with respect to such shares, including the rights, if
any, to receive notices and to vote, shall immediately cease and terminate on
the Conversion Date, except only the right of the holders thereof to receive
shares of Common Stock in exchange therefor. Such conversion shall be deemed to
have been made at the close of business on the Conversion Date, and the person
entitled to receive the shares of Common Stock shall be treated for all purposes
as having become the record holder of such shares of Common Stock at such time.
(d) Adjustments to Conversion Price for Diluting Issues. Except as provided
in subsections 6(e) through 6(i) below, if and whenever, until the seventh
anniversary of the issuance of the Series A Preferred Stock, the Corporation
shall issue or sell, or is deemed to have issued or sold, at any time, whether
in a public or private offering or sale or otherwise, any share of Common Stock
("Additional Shares of Common Stock"), other than shares of Common Stock issued
or issuable upon (A) the conversion of shares of Series A Preferred Stock; (B)
the initial grant, regrant, issuance, reissuance, exercise or conversion of any
derivative securities of the Corporation outstanding on or prior to January 16,
1996 [the date of the Initial Closing] or derivative securities or securities
issued concurrently with the issuance of the Series A Preferred Stock,
including, but not limited to, any options or warrants; (C) the initial grant,
regrant, issuance, reissuance, exercise or conversion of any securities and/or
derivative securities of the Corporation granted to any underwriter or
representative of any underwriter in connection with a private offering of any
securities of the Corporation; or (D) the initial grant, regrant or exercise of
options under stock option plans of the Corporation adopted by the Board of
Directors of the Corporation to officers, directors and employees of the
Corporation, for a consideration per share less than the Conversion Price then
in effect immediately before the issue or sale, then, forthwith upon such issue
or sale (such
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<PAGE> 29
amount, however, being appropriately adjusted to reflect the occurrence of any
Recapitalization Event), the Conversion Price shall be reduced concurrently with
such issue, to a price (calculated to the nearest cent) equal to the
consideration per share for which such Additional Shares of Common Stock are
issued (but, in no event below the then par value per share of Common Stock).
For purposes of applying the foregoing provisions of this Section 6(d), the
following subparagraphs (i) through (iii) shall be applicable.
(i) Issue of Securities Deemed Issue of Additional Shares of Common Stock.
For purposes of this Section 6(d), if the Corporation at any time or from time
to time after the date hereof shall issue any rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities (as defined below) of the Company ("Options") or any evidence of
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock ("Convertible Securities") not otherwise
specifically excluded above, or shall fix a record date for the determination of
holders of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares of Common Stock (as
set forth in the instrument relating thereto without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the close of
business on such record date; provided, that shares of Common Stock shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to Section 6(d)(ii) hereof) of such Additional Shares of Common Stock
would be less than the Conversion Price in effect on the date of and immediately
prior to such issue, or such record date, as the case may be; provided, further,
that in any such case in which Additional Shares of Common Stock are deemed to
be issued:
(A) No further adjustment in the Conversion Price shall be made upon the
subsequent issue of Convertible Securities or
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<PAGE> 30
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(B) If such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the consideration
payable to the Corporation, or decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof, the Conversion
Price computed upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be recomputed to
reflect such increase or decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible Securities;
(C) No readjustment pursuant to clause (B) above shall have the effect
of increasing the Conversion Price to an amount which exceeds the Conversion
Price on the original adjustment date; and
(D) Notwithstanding clause (B) above, but subject to clause (C) above,
upon the expiration or termination of any unexercised Options or any rights of
conversion or exchange under such outstanding Convertible Securities, the
Conversion Price shall be readjusted only upon the earlier to occur of: (a) the
next adjustment of the Conversion Price required pursuant to the terms of the
Series A Preferred Stock or (b) immediately prior to the conversion of shares of
Series A Preferred Stock.
(ii) Determination of Consideration. For purposes of this Section 6, the
consideration received by the Corporation for the issue of any Additional Shares
of Common Stock or otherwise shall be computed as follows:
(A) Cash and Property: Such consideration shall:
(I) insofar as it consists of cash, be computed at the aggregate of
cash received by the Corporation, excluding amounts paid or payable for accrued
interest or accrued dividends;
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<PAGE> 31
(II) insofar as it consists of property other than cash, be computed
at the fair market value thereof at the time of such issue, as determined in
good faith by the Board of Directors; and
(III) in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets of the Corporation for
consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (I) and (II) above, as determined in
good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per share
received by the Corporation for Additional Shares of Common Stock deemed to have
been issued pursuant to Section 6(d)(i), relating to Options and Convertible
Securities, shall be determined by dividing:
(x) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(y) the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such number) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities, or, in the
case of Options for Convertible Securities, the conversion or exchange of such
Convertible Securities.
(iii) Stock Dividends, Stock Distributions and Subdivisions. In the event
the Corporation at any time or from time to time after the date hereof shall
declare or pay any
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dividend or make any other distribution on the Common Stock payable in Common
Stock, or effect a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in Common Stock),
then and in any such event, Additional Shares of Common Stock shall be deemed to
have been issued:
(A) In the case of any such dividend or distribution, immediately after
the close of business on the record date for the determination of holders of any
class of securities entitled to receive such dividend or distribution, or
(B) In the case of any such subdivision, at the close of business on the
date immediately prior to the date upon which such corporate action becomes
effective.
If such record date shall have been fixed and such dividend shall not have
been fully paid on the date fixed therefor, the adjustment previously made in
the Conversion Price which became effective on such record date shall be
canceled as of the close of business on such record date, and thereafter the
Conversion Price shall be adjusted pursuant to this Section 6(d) and Section
6(f) below, as of the time of actual payment of such dividend.
(e) Adjustment for Stock Splits and Combinations. If the Corporation shall
at any time or from time to time effect subdivision of the outstanding Common
Stock, the Conversion Price then in effect immediately before the subdivision
shall be proportionately decreased. If the Corporation shall at any time or from
time to time combine or consolidate the outstanding shares of Common Stock, by a
reclassification or otherwise into a lesser number of shares of Common Stock,
the Conversion Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this paragraph shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(f) Adjustment for Certain Dividends and Distributions. In the event the
Corporation at any time, or from time to time, shall issue Additional Shares of
Common Stock pursuant to Section 6(d)(iii) above, in a stock dividend, stock
distribution or
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subdivision, then and in each such event the Conversion Price then in effect
shall be proportionately decreased concurrently with the effectiveness of such
issuance.
(g) Adjustment for Reclassification Exchange or Substitution. If the Common
Stock issuable upon the conversion of the Series A Preferred Stock shall be
changed into the same or a different number of shares of any class or classes of
stock, whether by capital reorganization, reclassification, or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation, or sale of assets provided
for below), then and in each such event the holder of each such share of Series
A Preferred Stock shall have the right thereafter to convert such share into the
kind and amount of shares of stock and other securities and property receivable
upon such reorganization, reclassification, or other change, by holders of the
number of shares of Common Stock into which such shares of Series A Preferred
Stock were convertible immediately prior to such reorganization,
reclassification, or change, all subject to further adjustment as provided
herein.
(h) Adjustment for Consolidation. In case of any consolidation of the
Corporation with another corporation, each share of Series A Preferred Stock
shall thereafter be convertible for the kind and amount of shares of stock or
other securities or property to which a holder of the number of shares of Common
Stock of the Corporation deliverable upon conversion of such class of Series A
Preferred Stock would have been entitled upon such consolidation.
(i) No Impairment. The Corporation will not, by Amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 6 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Series A Preferred Stock against impairment.
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(j) Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Conversion Price pursuant to this Section 6, the
Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms thereof and furnish to each holder of
Series A Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price then in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which then
would be received upon the conversion of such Series A Preferred Stock.
(k) Notice of Record Date. In the event:
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or
other securities of the Corporation;
(ii) that the Corporation subdivides or combines its outstanding
shares of Common Stock;
(iii) of any reclassification of the Common Stock of the Corporation
(other than a subdivision or combination of its outstanding
shares of Common Stock or a stock dividend or stock distribution
thereof) or of any consolidation or merger of the Corporation
into or with another corporation, or of the sale of all or
substantially all of the assets of the Corporation; or
(iv) of the involuntary or voluntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series A
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<PAGE> 35
Preferred Stock, and shall cause to be mailed to the holders of the Series A
Preferred Stock at their last addresses as shown on the records of the
Corporation or such transfer agent, at least fifteen days prior to the record
date specified in (A) below or thirty days before the date specified in (B)
below, a notice stating
(A) the record date of such dividend, distribution, subdivision
or combination, or, if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to
such dividend, distribution, subdivision or combination are to be
determined; or
(B) the date on which such reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up is expected
to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger,
sale, dissolution or winding up.
(l) Notwithstanding anything contained in subsection (d) of Section 6 to
the contrary, the applicable Conversion Price shall not be so reduced at such
time if the amount of such reduction would be an amount less than $.25, but any
such amount shall be carried forward and reduction with respect thereto made at
the time of and together with any subsequent reduction which, together with such
amount and any other amount or amounts so carried forward, shall aggregate $.25
or more.
7. Redemption.
(a) Right of Redemption. On the seventh anniversary of the issuance of the
Series A Preferred Stock, the Corporation shall (unless otherwise prevented by
law) offer to redeem all of the issued and outstanding shares of Series A
Preferred Stock, and any holder thereof may, but shall not be obligated to,
accept such redemption offer in whole or in part.
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<PAGE> 36
(b) Redemption Price. The amount per share at which the shares of Series A
Preferred Stock are to be redeemed pursuant to this Section 7(a) shall be an
amount equal to $8.00 per share of Series A Preferred Stock, as adjusted for
Recapitalization Events, plus an amount equal to the sum of all accrued but
unpaid dividends thereon, computed to the date payment thereof is made.
(c) Cancellation of Redeemed Stock. So long as any shares of Series A
Preferred Stock are outstanding, any shares of Series A Preferred Stock,
redeemed pursuant to this Section 7 or otherwise acquired by the Corporation in
any manner whatsoever shall be cancelled and shall not under any circumstances
be reissued; and the Corporation may from time to time take such appropriate
corporate action as may be necessary to reduce accordingly the number of
authorized shares of Series A Preferred Stock.
8. Amendments. No provision of these terms of the Series A Preferred Stock
may be amended, modified or waived without the written consent or affirmative
vote of the holders of at least a majority in interest of the then outstanding
shares of Series A Preferred Stock and the Corporation. Notwithstanding the
above, no amendment may be approved which, to the best knowledge of the holders
of the Series A Preferred Stock, adversely impacts only a minority holder of
such series.
9. Transfer of Preferred Stock. The shares of Preferred Stock have not and
will not be registered under the Securities Act of 1933 (the "Act") and cannot
be sold or offered for sale except pursuant to an exemption therefrom, the
availability of which is to be established to the reasonable satisfaction of the
Corporation. A legend stating this restriction shall be placed on each
certificate representing shares of the Preferred Stock.
10. Identical Rights. Each share of the series of Series A Preferred Stock
shall have the same relative rights and preferences as, and shall be identical
in all respects with, all other shares of the same series of Preferred Stock.
11. Certificates. So long as any shares of the Series A Preferred Stock are
outstanding, there shall be set forth on the face or back of each stock
certificate issued by the Corporation a
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statement that the Corporation shall furnish without charge to each Holder who
so requests, a copy of the documents or documents setting for the powers,
preferences and rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences or such rights.
AND FURTHER RESOLVED, that, before the Corporation shall issue any shares
of the Series A Convertible Preferred Stock a certificate pursuant to Section
151 of the General Corporation Law of the State of Delaware shall be made,
executed, acknowledged, filed and recorded in accordance with the provisions of
said Section 151, and the proper officers of the Corporation are hereby
authorized and directed to do all acts and things which may be necessary or
proper in their opinion to carry into effect the purposes of and intent of this
and the foregoing resolutions.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed by its Chairman of the Board of Directors and attested to by its
Assistant Secretary this 15th day of January 1996.
ENAMELON, INC.
By: /s/ Steven R. Fox
--------------------------------
Name:Dr. Steven R. Fox
Title: Chairman of the Board
of Directors
ATTEST:
/s/ Alice Piro
- -------------------------------------
Name: Alice Piro
Title: Assistant Secretary
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<PAGE> 38
State of Delaware
Office of the Secretary of State
-------------------
I, EDWARD, J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "ENAMELON, INC.", FILED IN THIS OFFICE ON THE SIXTEENTH DAY OF
JANUARY, A.D. 1996, AT 1:30 0'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
SEAL -------------------------------
Edward J. Freel, Secretary of State
2300476 8100 AUTHENTICATION: 7790546
960012774 DATE: 01-16-96
<PAGE> 1
AMENDED AND RESTATED
BY-LAWS
ENAMELON, INC.
(A Delaware Corporation)
ARTICLE I
Offices
SECTION 1. Registered Office. The registered office of the Corporation
within the State of Delaware shall be in the City of Dover, County of Kent.
SECTION 2. Other Offices. The Corporation may also have an office or
offices other than said registered office at such place or places, either within
or without the State of Delaware, as the Board of Directors shall from time to
time determine or the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 1. Place of Meetings. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at any such place,
either within or without the State of Delaware, as shall be designated from time
to time by the Board of Directors and stated in the notice of meeting or in a
duly executed waiver thereof.
SECTION 2. Annual Meeting. The annual meeting of the stockholders shall
be held at such place, either within or without the State of Delaware and at
such date and time as shall be designated by the Board of Directors from time to
time subsequent to the year of incorporation and stated in the notice of meeting
or in a duly executed waiver thereof. At such annual meeting, the stockholders
shall elect, by a plurality vote, a Board of Directors and may transact such
other business as may properly be brought before the meeting.
SECTION 3. Special Meetings. Special meetings of the stockholders,
unless otherwise, prescribed by statute, may be called at any time by the Board
of Directors or the Chairman of the Board, if one shall have been elected, or
the President.
SECTION 4. Notice of Meetings. Except as otherwise expressly required by
statute, written notice of each annual and special meeting of the stockholders
stating the date, place and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be given
to each stockholder of record entitled to vote thereat
<PAGE> 2
not less than ten (10) or more than sixty (60) days before the date of the
meeting. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice. Notice shall be given personally
or by mail and, if by mail, shall be sent in a postage prepaid envelope,
addressed to the stockholder at his address as it appears on the records of the
Corporation. Notice by mail shall be deemed given at the time when the same
shall be deposited in the United States mail, postage prepaid. Notice of any
meeting shall not be required to be given to any person who attends such
meeting, except when such person attends the meeting in person or by proxy for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened, or who, either before or after the meeting, shall submit a signed
written waiver of notice, in person or by proxy. Neither the business to be
transacted at, nor the purpose of, an annual or special meeting of stockholders
need be specified in any written waiver of notice.
SECTION 5. List of Stockholders. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before each
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, showing the address of and the
number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city, town or village where
the meeting is to be held, which place shall be specified in the notice of
meeting, or, if not specified, at the place where the meeting is to be held. The
list shall be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
SECTION 6. Quorum, Adjournments. The holders of a majority of the voting
power of the issued and outstanding stock of the Corporation entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at all meetings of stockholders, except as
otherwise provided by statute or by the Certificate of Incorporation. If,
however, such quorum shall not be present or represented by proxy at any meeting
of stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented by proxy. At such adjourned meeting at which a
quorum shall be present or represented by proxy, any business may be transacted
which might have been transacted at the meeting as originally called. If the
adjournment is for more than thirty days, or, if after adjournment a new record
date is set, a notice of the adjourned meeting shall be given to each
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stockholder of record entitled to vote at the meeting.
SECTION 7. Organization. At each meeting of the stockholders, the
Chairman of the Board, if one shall have been elected, or in his absence or if
one shall not have been elected, the President shall act as chairman of the
meeting. The Secretary, or in his absence or inability to act, the person whom
the chairman of the meeting shall appoint secretary of the meeting, shall act as
secretary of the meeting and keep the minutes thereof.
SECTION 8. Order of Business. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.
SECTION 9. Voting. Except as otherwise provided by statute or the
Certificate of Incorporation, each stockholder of the Corporation shall be
entitled at each meeting of the stockholders to one vote for each share of
capital stock of the Corporation standing in his name on the record of
stockholders of the Corporation:
(a) on the date fixed pursuant to the provisions of Section 6 of Article
V of these By-Laws as the record date for the determination of the stockholders
who shall be entitled to notice of and to vote at such meeting; or
(b) if no such record date shall have been so fixed, then at the close of
business on the date next preceding the day on which notice thereof shall be
given, or, if notice is waived, at the close of business on the date next
preceding the day on which the meeting is held.
Each stockholder entitled to vote at any meeting of the stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact but no proxy shall be voted after three
years from its date, unless the proxy provides for a longer period. Any such
proxy shall be delivered to the secretary of the meeting at or prior to the time
designated in the order of business for so delivering such proxies. When a
quorum is present at any meeting, the vote of the holders of a majority of the
voting power of the issued and outstanding stock of the Corporation entitled to
vote thereon, present in person or represented by proxy, shall decide any
question brought before such meeting, unless the question is one upon which by
express provision of statute or of the Certificate of Incorporation or of these
By-Laws, a different vote is required, in which case such express provision
shall govern and control the decision of such question. Unless required by
statute, or determined by the chairman of the meeting to be advisable, the vote
on any question need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
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<PAGE> 4
SECTION 10. Inspectors. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If any of the inspectors so appointed shall fail to
appear, the chairman of the meeting shall, or if inspectors shall not have been
appointed, the chairman of the meeting may, appoint one or more inspectors to
act at the meeting. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability. The inspectors shall determine the number of shares of capital
stock of the Corporation outstanding and the voting power of each, the number of
shares represented at the meeting, the existence of a quorum, the validity and
effect of proxies, and shall receive and count and tabulate all votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, determine the results, and do such acts as
are proper to conduct the election or vote with fairness to all stockholders.
The inspectors shall determine and retain for a reasonable period of time a
record of the disposition of any challenges made to any determination by the
inspectors. The inspectors shall certify their determination as to the number of
shares represented at the meeting, and their count of all votes and ballots.
Inspectors need not be stockholders.
SECTION 11. Action by Consent. Whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken for or in connection with
any corporate action, by any provision of any applicable statute or pursuant to
or in accordance with the Corporation's Certificate of Incorporation or of these
By-Laws, the meeting and vote of stockholders may be dispensed with, and the
action taken without such a meeting, without prior notice and without a vote, if
a consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares of stock of the Corporation entitled to vote thereon
were present and voted.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors. The Board
of Directors may exercise all such authority and powers of the Corporation and
do all such lawful acts and things as are not by statute or the Certificate of
Incorporation directed or required to be exercised or done by the stockholders.
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<PAGE> 5
SECTION 2. Number, Qualifications, Election and Term of Office. The
number of directors constituting the initial Board of Directors shall be no less
than three (3). Thereafter, the number of directors may be fixed, from time to
time, by the affirmative vote of a majority of the entire Board of Directors or
by action of the stockholders of the Corporation. Any decrease in the number of
directors shall be effective at the time of the next succeeding annual meeting
of the stockholders unless there shall be vacancies in the Board of Directors,
in which case such decrease may become effective at any time prior to the next
succeeding annual meeting to the extent of the number of such vacancies.
Directors need not be stockholders. Except as otherwise provided by statute or
these By-Laws, the directors (other than members of the initial Board of
Directors) shall be elected at the annual meeting of the stockholders. Each
director shall hold office until his successor shall have been elected and
qualified, or until his death, or until he shall have resigned, or have been
removed, as hereinafter provided in these By-Laws.
SECTION 3. Place of Meetings. Meetings of the Board of Directors shall be
held at such place or places, within or without the State of Delaware, as the
Board of Directors may from time to time determine or as shall be specified in
the notice of any such meeting.
SECTION 4. Annual Meeting. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of such
other business, as soon as practicable after each annual meeting of the
stockholders, on the same day and at the same place where such annual meeting
shall be held. Notice of such meeting need not be given. In the event such
annual meeting is not so held, the annual meeting of the Board of Directors may
be held at such other time or place (within or without the State of Delaware) as
shall be specified in a notice thereof given as hereinafter provided in Section
7 of this Article III.
SECTION 5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such time and place as the Board of Directors may fix. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting which would otherwise be held on that
day shall be held at the same hour on the next succeeding business day. Notice
of regular meetings of the Board of Directors need not, be given except as
otherwise required by statute or these By-Laws.
SECTION 6. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, if one shall have been elected, or
by two or more directors of the Corporation or by the President.
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<PAGE> 6
SECTION 7. Notice of Meetings. Notice of each special meeting of the
Board of Directors (and of each regular meeting for which notice shall be
required) shall be given by the Secretary as hereinafter provided in this
Section 7, in which notice shall be stated the time and place of the meeting.
Except as otherwise required by these By-Laws, such notice need not state the
purpose of such meeting. Notice of each such meeting shall be mailed, postage
prepaid, to each director, addressed to him at his residence or usual place of
business, by first-class mail, at least two days before the day on which such
meeting is to be held, or shall be sent addressed to him at such place by
telegraph, cable, telex, telecopier or other similar means, or be delivered to
him personally or be given to him by telephone, or other similar means, at least
twenty-four hours before the time at which such meeting is to be held. Notice of
any such meeting need not be given to any director who shall, either before or
after the meeting, submit a signed waiver of notice or who shall attend such
meeting, except when he shall attend for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfullY called or convened.
SECTION 8. Quorum and Manner of Acting. A majority of the entire Board of
Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, and, except as otherwise expressly required
by statute or the Certificate of Incorporation or these By-Laws, the act of a
majority of the directors present at any meeting at which a quorum is present,
shall be the act of the Board of Directors. In the absence of a quorum at any
meeting of the Board of Directors, a majority of the directors present thereat
may adjourn such meeting to another time and place. Notice of the time and place
of any such adjourned meeting shall be given to the directors unless such time
and place were announced at the meeting at which the adjournment was taken, in
which case such notice shall only be given to the directors who were not present
thereat. At any adjourned meeting at which a quorum is present, any business may
be transacted which might have been transacted at the meeting as originally
called. The directors shall act only as a Board and the individual directors
shall have no power as such.
SECTION 9. Organization. At each meeting of the Board of Directors, the
Chairman of the Board, if one shall have been elected, or, in the absence of the
Chairman of the Board or if one shall not have been elected, the President (or,
in his absence, another director chosen by a majority of the directors present)
shall act as chairman of the meeting and preside thereat. The Secretary, or, in
his absence, any person appointed by the chairman shall act as secretary of the
meeting and keep the minutes thereof.
SECTION 10. Resignations. Any director of the Corporation may resign at
any time by giving written notice of his resignation to the Corporation. Any
such resignation shall
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<PAGE> 7
take effect at the time specified or, if the time when it shall become effective
shall not be specified therein, immediately upon its receipt. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 11. Vacancies. Any vacancy in the Board of Directors, whether
arising from death, resignation, removal (with or without cause), an increase in
the number of directors or any other cause, may be filled by the vote of a
majority of the directors then in office, though less than a quorum, or the sole
remaining director or by the stockholders at the next annual meeting thereof or
at a special meeting thereof. Each director so elected shall hold office until
his successor shall have been elected and qualified.
SECTION 12. Removal of Directors. Except as otherwise provided by
statute, any director may be removed, either with or without cause, at any time
by the holders of a majority of the voting power of the issued and outstanding
capital stock of the Corporation entitled to vote at an election of Directors.
Except as otherwise provided by statute, any director may be removed for cause
by the Board of Directors at a special meeting thereof.
SECTION 13. Committees. The Board of Directors may, by resolution passed
by a majority of the entire Board of Directors, designate one or more
committees, including any executive committee, each committee to consist of one
or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent member at any meeting of the committee. Except to the extent
restricted by statute or the Certificate of Incorporation, each such committee,
to the extent provided in the resolution creating it, shall have and may
exercise all the authority of the Board of Directors. Each such committee shall
serve at the pleasure of the Board of Directors and have such name as may be
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors.
SECTION 14. Action by Consent. Unless restricted by the Certificate of
Incorporation, any action required or permitted to be taken by the Board of
Directors or any committee thereof may be taken without a meeting if all members
of the Board of Directors or such committee consent in writing to the adoption
of a resolution authorizing the action. The resolution and the written consents
thereto by the members of the Board of Directors or such committee shall be
filed with the minutes of the proceedings of the Board of Directors or such
committee.
SECTION 15. Telephonic Meeting. Unless restricted by the Certificate of
Incorporation, any one or more members of the Board of Directors or any
committee thereof may participate
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in a meeting of the Board of Directors or such committee by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
ARTICLE IV
Officers
SECTION 1. Number and Qualifications. The officers of the Corporation
shall be elected by the Board of Directors and shall include the Chief Executive
Officer, President, one or more Vice-Presidents, the Secretary, the Treasurer,
and the Chairman of the Board of Directors. If the Board of Directors wishes it
may also elect other officers (including one or more Assistant Treasurers and
one or more Assistant secretaries), as may be necessary or desirable for the
business of the Corporation. Any two or more offices may be held by the same
person. Each officer shall hold office until the first meeting of the Board of
Directors following the next annual meeting of the stockholders, and until his
successors shall have been elected and shall have qualified, or until his death,
or until he shall have resigned or have been removed, as hereinafter provided in
these By-Laws.
SECTION 2. Resignations. Any officer of the Corporation may resign at any
time by giving written notice of his resignation to the Board of Directors or
the Chairman of the Board or the President or the Chief Executive Officer or the
Secretary. Any such resignation shall take effect at the time specified therein
or, if the time when it shall become effective shall not be specified therein,
immediately upon its receipt. Unless otherwise specified therein, the acceptance
of any such resignation shall not be necessary to make it effective.
SECTION 3. Removal. Any officer of the Corporation may be removed, either
with or without cause, at any time, by the Board of Directors at any meeting
thereof.
SECTION 4. Chairman of the Board. The Chairman of the Board, if one shall
have been elected, shall be a member of the Board, an officer of the Corporation
and, if present, shall preside at each meeting of the Board of Directors or of
the stockholders. He shall advise and counsel with the President, and in his
absence with other executives of the Corporation, and shall perform such other
duties as may from time to time be assigned to him by the Board of Directors.
SECTION 5. The President. The President shall be the chief operating
officer of the Corporation. He shall, in the absence of the Chairman of the
Board or if a Chairman of the Board shall not have been elected, preside at each
meeting of
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the Board of Directors or the stockholders. He shall perform all duties incident
to the office of President and chief executive officer and such other duties as
may from time to time be assigned to him by the Board of Directors.
SECTION 6. Chief Executive Officer. The Chief Executive Officer shall be
a principal executive officer of the Corporation with overall responsibility for
all of the Corporation's activities. He shall perform all duties incident to the
office of Chief Executive Officer and such other duties as may from time to time
be assigned to him by the Board of Directors.
SECTION 7. Vice-Presidents. Each Vice-President shall perform all such
duties as from time to time may be assigned to him by the Board of Directors,
the Chief Executive Officer or the President. At the request of the Chief
Executive Officer or President or in their absence or in the event of their
inability or refusal to act, the Vice-President, or if there shall be more than
one, the Vice-Presidents in the order determined by the Board of Directors (or
if there be no such determination, then the Vice-Presidents in the order of
their election), shall perform the duties of the President, and, when so acting,
shall have the powers of and be subject to the restrictions placed upon the
President in respect of the performance of such duties.
SECTION 8. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the funds
and securities of the Corporation;
(b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;
(c) deposit all moneys and other valuables to the credit of the
Corporation in such depositories as may be designated by the Board of
Directors or pursuant to its direction:
(d) receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investments of its funds, taking proper vouchers therefor;
(f) render to the Board of Directors, whenever the Board of Directors
may require, an account of the financial condition of the Corporation; and
(g) in general, perform all duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by the
Board of Directors.
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SECTION 9. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, the
committees of the Board of Directors and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law:
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all certificates for shares of the Corporation
(unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all
other documents to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him by the
Board of Directors.
SECTION 10. The Assistant Treasurer. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties as from time to time may be
assigned by the Board of Directors.
SECTION 11. The Assistant Secretary. The Assistant Secretary, or if there
shall be more than one, the Assistant Secretaries in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties as from time to time may be
assigned by the Board of Directors.
SECTION 12. Compensation. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board of Directors. An officer of the Corporation shall not be prevented
from receiving compensation by reason of the fact that he in also a director of
the Corporation.
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ARTICLE V
Stock Certificates and their Transfer
SECTION 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled to have a certificate, in such form as shall be approved by
the Board of Directors, certifying the number of shares of the Corporation owned
by him. The certificates representing shares shall be signed in the name of the
Corporation by the Chairman of the Board or the President or a Vice-President
and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant
Treasurer and sealed with the seal of the Corporation (which seal may be a
facsimile, engraved or printed); provided, however, that where any such
certificate is countersigned by a transfer agent, or is registered by a
registrar (other than the Corporation or one of its employees), the signatures
of the Chairman of the Board, President, Vice President, Secretary, Assistant
Secretary, Treasurer or Assistant Treasurer upon such certificates may be
facsimiles, engraved or printed. In case any officer who shall have signed any
such certificate shall have ceased to be such officer before such certificate
shall be issued, it may nevertheless be issued by the Corporation with the same
effect as if such officer were still in office at the date of their issue.
SECTION 2. Books of Account and Record of Stockholders. There shall be kept
correct and complete books and records of account of all the business and
transactions of the Corporation. There shall also be kept, at the office of the
Corporation or at the office of its transfer agent, a record containing the
names and addresses of all stockholders of the Corporation, the number of shares
of stock held by each, and the dates when they became the holders of record
thereof.
SECTION 3. Transfer of Shares. Transfer of shares of the Corporation
shall be made on the records of the Corporation only upon authorization by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent,
and on surrender of the certificate or certificates for such shares properly
endorsed or accompanied by a duly executed stock transfer power and the payment
of all taxes thereon. The person in whose names shares shall stand on the record
of stockholders of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation. Whenever any transfer of shares shall be
made for collateral security and not absolutely and written notice thereof shall
be given to the Secretary or to a transfer agent, such fact shall be noted on
the records of the Corporation.
SECTION 4. Transfer Agents and Registrars. The Board of Directors may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars and may require all certificates for shares of
stock
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to bear the signature of any of them.
SECTION 5. Regulations. The Board of Director. may make such additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of the Corporation.
SECTION 6. Fixing of Record Date. The Board of Directors may fix, in
advance, a date not more than sixty (60) nor less than ten (10) days before the
date then fixed for the holding of any meeting of the stockholders, and all
persons who were stockholders of record of voting shares of stock at such time,
and no others, shall be entitled to notice of and to vote at such meeting. The
Board of Directors may fix, in advance, a date not more than sixty (60) days
preceding the date fixed for the payment of any dividend or the making of any
distribution or the allotment of any rights in respect of any change, conversion
or exchange of stock, as the record date for the determination of the
stockholders entitled to receive any such dividend, distribution, or allotment,
and in such case only the stockholders of record at the time so fixed shall be
entitled to receive such dividend, distribution, or allotment.
SECTION 7. Losts, Destroyed or Mutilated Certificates. The holder of any
certificate representing shares of the Corporation shall immediately notify the
Corporation of any loss, destruction or mutilation of such certificate, and the
Corporation may issue a new certificate in the place of any certificate
theretofore issued by it which the owner thereof shall allege to have been lost
or destroyed or which shall have been mutilated. The Board of Directors may, in
its discretion, require such owner or his legal representatives to give to the
Corporation a bond in such sum, limited or unlimited, and in such form and with
such surety or sureties as the Board of Directors in its absolute discretion
shall determine, to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss of destruction of any such
certificate, or the issuance of such new certificate.
ARTICLE VI
Indemnification
SECTION 1. General. The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director,
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<PAGE> 13
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 2. Derivative Actions. The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
SECTION 3. Prepayment of Expenses. The Corporation shall pay the expenses
incurred in defending any proceeding in advance of its final disposition,
provided, however, that the payment of expenses incurred by a director or
officer in advance of the final disposition of the proceeding shall be made only
upon receipt of an undertaking by the director or officer to repay all amounts
advanced if it should be ultimately determined that the director or officer is
not entitled to be indemnified under this Article or otherwise.
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<PAGE> 14
SECTION 4. Non-Exclusivity of Rights. The rights conferred on any person
by this Article VI shall not be exclusive of any other rights which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
directors or otherwise.
SECTION 5. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article VI shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
SECTION 6. Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article VI.
ARTICLE VII
General Provisions
SECTION 1. Seal. The seal of the Corporation shall bear the name of the
Corporation and shall be in such form as shall be approved by the Board of
Directors.
SECTION 2. Fiscal Year. The fiscal year of the Corporation shall commence
January 1, but may thereafter be changed by resolution of the Board of
Directors.
SECTION 3. Checks, Notes, Drafts, Etc. All checks, notes, drafts or other
orders for the payment of money of the Corporation shall be signed, endorsed or
accepted in the name of the Corporation by such officer, officers, person or
persons as from time to time may be designated by the Board of Directors or by
an officer or officers authorized by the Board of Directors to make such
designation.
SECTION 4. Execution of Contracts, Deeds, Etc. The Board of Directors may
authorize any officer or officers, agent or agents, in the name and on behalf of
the Corporation to enter into or execute and deliver any and all deeds, bonds,
mortgages, contracts and other obligations or instruments, and such authority
may be general or confined to specific instances.
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<PAGE> 15
ARTICLE VIII
Amendments
These By-Laws may be amended or repealed or new By-Laws adopted (a) by
action of the stockholders entitled to vote thereon at any regular or special
meeting of stockholders or (b) by action of the Board of Directors at a regular
or special meeting thereof. Any By-Law made by the Board of Directors may be
amended or repealed by action of the stockholders at any annual or special
meeting of stockholders.
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<PAGE> 1
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS
RESTRICTED AS DESCRIBED HEREIN.
ENAMELON, INC.
Warrant for the Purchase of Shares of Common Stock,
par value $.001 per Share
No. R-1 [__________] Shares
THIS CERTIFIES that, for receipt in hand of [$______] [$0.001
per share of underlying Common Stock] and other value received, Rodman &
Renshaw, Inc. (the "Holder"), is entitled to subscribe for and purchase from
ENAMELON, INC., a Delaware corporation (the "Company"), upon the terms and
conditions set forth herein, at any time or from time to time after one year
after the effective date, and before 5:00 P.M. on five years after the effective
date, New York time (the "Exercise Period"), [________] shares of the Company's
Common Stock, par value $.001 per share ("Common Stock"), at a price of $_____
per Share [120% of the Offering price] (the "Exercise Price"). This Warrant is
the warrant or one of the warrants (collectively, including any warrants issued
upon the exercise or transfer of any such warrants, in whole or in part, the
"Warrants") issued pursuant to the Underwriting Agreement, dated __________,
1996, between Rodman & Renshaw, Inc. and ___________________, as representatives
of the several Underwriters named therein, and the Company. This Warrant may not
be sold, transferred, assigned or hypothecated until [one year after the
effective date] except that it may be transferred, in whole or in part, to (i)
one or more officers or partners of Rodman & Renshaw, Inc. (or the officers or
partners of any such partner); (ii) any other underwriting firm or member of the
selling group which participated in the public offering of Common Stock (the
"Offering") which commenced on [effective date] (or the officers or partners of
any such firm); (iii) a successor to Rodman & Renshaw, Inc., or the officers or
partners of such successor; (iv) a purchaser of substantially all of the assets
of Rodman & Renshaw, Inc.; or (v) by operation of law; and the term the "Holder"
as used herein shall include any transferee to whom this Warrant has been
transferred in accordance with the above.
The number of shares of Common Stock issuable upon exercise of
the Warrants (the "Warrant Shares") and the Exercise Price may be adjusted from
time to time as hereinafter set forth.
<PAGE> 2
1. This Warrant may be exercised during the Exercise Period,
as to the whole or any lesser number of whole Warrant Shares, by the surrender
of this Warrant (with the election at the end hereof duly executed) to the
Company at its office at 15 Kimball Avenue, Yonkers, New York 10704, or at such
other place as is designated in writing by the Company, together with a
certified or bank cashier's check payable to the order of the Company in an
amount equal to the Exercise Price multiplied by the number of Warrant Shares
for which this Warrant is being exercised (the "Stock Purchase Price").
2. (a) In lieu of the payment of the Stock Purchase Price, the
Holder shall have the right (but not the obligation), to require the Company to
convert this Warrant, in whole or in part, into shares of Common Stock (the
"Conversion Right") as provided for in this Section 2. Upon exercise of the
Conversion Right, the Company shall deliver to the Holder (without payment by
the Holder of any of the Stock Purchase Price) that number of shares of Common
Stock (the "Conversion Shares") equal to the quotient obtained by dividing (x)
the value of this Warrant (or portion thereof as to which the Conversion Right
is being exercised if the Conversion Right is being exercised in part) at the
time the Conversion Right is exercised (determined by subtracting the aggregate
Stock Purchase Price of the shares of Common Stock as to which the Conversion
Right is being exercised in effect immediately prior to the exercise of the
Conversion Right from the aggregate Current Market Price (as defined in Section
6(c) hereof) of the shares of Common Stock as to which the Conversion Right is
being exercised immediately prior to the exercise of the Conversion Right) by
(y) the Current Market Price of one share of Common Stock immediately prior to
the exercise of the Conversion Right.
(b) The Conversion Rights provided under this Section 2 may
be exercised in whole or in part and at any time and from time to time while any
Warrants remain outstanding. In order to exercise the Conversion Right, the
Holder shall surrender to the Company, at its offices, this Warrant with the
Notice of Conversion at the end hereof duly executed. The presentation and
surrender shall be deemed a waiver of the Holder's obligation to pay all or any
portion of the aggregate purchase price payable for the shares of Common Stock
as to which such Conversion Right is being exercised. This Warrant (or so much
thereof as shall have been surrendered for conversion) shall be deemed to have
been converted immediately prior to the close of business on the day of
surrender of such Warrant for conversion in accordance with the foregoing
provisions.
3. Upon each exercise of the Holder's rights to purchase
Warrant Shares or Conversion Shares, the Holder shall be deemed to be the holder
of record of the Warrant Shares or Conversion Shares issuable upon such exercise
or conversion, notwithstanding that the transfer books of the Company shall then
be closed or certificates representing such Warrant Shares or Conversion Shares
shall not then have been actually delivered to the Holder. As soon as
practicable after each such exercise or conversion of this Warrant, the Company
shall issue and deliver to the Holder a certificate or certificates for the
Warrant Shares or Conversion Shares issuable upon such exercise or conversion,
registered in the name of the Holder or its designee. If this Warrant should be
exercised or converted in part only, the Company shall, upon surrender of this
Warrant for cancellation, execute and deliver a new Warrant evidencing the
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<PAGE> 3
right of the Holder to purchase the balance of the Warrant Shares (or portions
thereof) subject to purchase hereunder.
4. Any Warrants issued upon the transfer or exercise or
conversion in part of this Warrant shall be numbered and shall be registered in
a Warrant Register as they are issued. The Company shall be entitled to treat
the registered holder of any Warrant on the Warrant Register as the owner in
fact thereof for all purposes and shall not be bound to recognize any equitable
or other claim to or interest in such Warrant on the part of any other person,
and shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. This Warrant shall be transferable only on the books of the Company upon
delivery thereof duly endorsed by the Holder or by his duly authorized attorney
or representative, or accompanied by proper evidence of succession, assignment,
or authority to transfer. In all cases of transfer by an attorney, executor,
administrator, guardian, or other legal representative, duly authenticated
evidence of his or its authority shall be produced. Upon any registration of
transfer, the Company shall deliver a new Warrant or Warrants to the person
entitled thereto. This Warrant may be exchanged, at the option of the Holder
thereof, for another Warrant, or other Warrants of different denominations, of
like tenor and representing in the aggregate the right to purchase a like number
of Warrant Shares (or portions thereof), upon surrender to the Company or its
duly authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Warrants to be transferred on its books to any person if, in
the opinion of counsel to the Company, such transfer does not comply with the
provisions of the Securities Act of 1933, as amended (the "Act"), and the rules
and regulations thereunder.
5. The Company shall at all times reserve and keep available
out of its authorized and unissued Common Stock, solely for the purpose of
providing for the exercise of the rights to purchase all Warrant Shares and/or
Conversion Shares granted pursuant to the Warrants, such number of shares of
Common Stock as shall, from time to time, be sufficient therefor. The Company
covenants that all shares of Common Stock issuable upon exercise of this
Warrant, upon receipt by the Company of the full Exercise Price therefor, and
all shares of Common Stock issuable upon conversion of this Warrant, shall be
validly issued, fully paid, and nonassessable, without any personal liability
attaching to the ownership thereof, and will not be issued in violation of any
preemptive rights of stockholders, optionholders, warrantholders and any other
persons and the Holders will receive good title to the securities purchased by
them, respectively, free and clear of all liens, security interests, pledges,
charges, encumbrances, stockholders' agreements and voting trusts which might be
created by acts or omissions to act of the Company.
6. (a) In case the Company shall at any time after the date
the Warrants were first issued (i) declare a dividend on the outstanding Common
Stock payable in shares of its capital stock, (ii) subdivide the outstanding
Common Stock, (iii) combine the outstanding Common Stock into a smaller number
of shares, or (iv) issue any shares of its capital stock by reclassification of
the Common Stock (including any such reclassification in connection with a
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<PAGE> 4
consolidation or merger in which the Company is the continuing corporation),
then, in each case, the Exercise Price, and the number and kind of securities
issuable upon exercise or conversion of this Warrant, in effect at the time of
the record date for such dividend or of the effective date of such subdivision,
combination, or reclassification, shall be proportionately adjusted so that the
Holder after such time shall be entitled to receive the aggregate number and
kind of shares which, if such Warrant had been exercised or converted
immediately prior to such time, he would have owned upon such exercise or
conversion and been entitled to receive by virtue of such dividend, subdivision,
combination, or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) In case the Company shall distribute to all holders of
Common Stock (including any such distribution made to the stockholders of the
Company in connection with a consolidation or merger in which the Company is the
continuing corporation) evidences of its indebtedness, cash (other than any cash
dividend which, together with any cash dividends paid within the 12 months prior
to the record date for such distribution, does not (on a per share basis) exceed
5% of the Current Market Price per share of Common Stock at the record date for
such distribution) or assets (other than distributions and dividends payable in
shares of Common Stock), or rights, options, or warrants to subscribe for or
purchase Common Stock, or securities convertible into or exchangeable for shares
of Common Stock, then, in each case, the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to the record date
for the determination of stockholders entitled to receive such distribution by a
fraction, the numerator of which shall be the Current Market Price per share of
Common Stock on such record date, less the fair market value (as determined in
good faith by the board of directors of the Company, whose determination shall
be conclusive absent manifest error) of the portion of the evidences of
indebtedness or assets so to be distributed, or of such rights, options, or
warrants or convertible or exchangeable securities, or the amount of such cash,
applicable to one share, and the denominator of which shall be such Current
Market Price per share of Common Stock. Such adjustment shall be made whenever
any such distribution is made, and shall become effective on the record date for
the determination of stockholders entitled to receive such distribution.
(c) For the purpose of any computation under this Section
6, the Current Market Price per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices for the 30 consecutive
trading days immediately preceding the date in question. The closing price for
each day shall be the last reported sales price regular way or, in case no such
reported sale takes place on such day, the closing bid price regular way, in
either case on the principal national securities exchange (including, for
purposes hereof, the NASDAQ National Market System) on which the Common Stock is
listed or admitted to trading or, if the Common Stock is not listed or admitted
to trading on any national securities exchange, the highest reported bid price
for the Common Stock as furnished by the National Association of Securities
Dealers, Inc. through NASDAQ or a similar organization if NASDAQ is no longer
reporting such information. If on any such date the Common Stock is not listed
or admitted to trading on any national securities exchange and is not quoted by
NASDAQ or any similar organization, the fair value of a share of Common Stock on
such date, as determined in good faith by the board of directors of the
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<PAGE> 5
Company, whose determination shall be conclusive absent manifest error, shall be
used.
(d) No adjustment in the Exercise Price shall be required
if such adjustment is less than $.05; provided, however, that any adjustments
which by reason of this Section 6 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 6 shall be made to the nearest cent or to the nearest
one-thousandth of a share, as the case may be.
(e) In any case in which this Section 6 shall require that
an adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the Holder, if the Holder exercised or converted this Warrant
after such record date, the shares of Common Stock, if any, issuable upon such
exercise or conversion over and above the shares of Common Stock, if any,
issuable upon such exercise or conversion on the basis of the Exercise Price in
effect prior to such adjustment; provided, however, that the Company shall
deliver to the Holder a due bill or other appropriate instrument evidencing the
Holder's right to receive such additional shares upon the occurrence of the
event requiring such adjustment.
(f) Upon each adjustment of the Exercise Price as a result
of the calculations made in Section 6(b) hereof, this Warrant shall thereafter
evidence the right to purchase, at the adjusted Exercise Price, that number of
shares (calculated to the nearest thousandth) obtained by dividing (i) the
product obtained by multiplying the number of shares purchasable upon exercise
of this Warrant prior to adjustment of the number of shares by the Exercise
Price in effect prior to adjustment of the Exercise Price, by (ii) the Exercise
Price in effect after such adjustment of the Exercise Price.
(g) Whenever there shall be an adjustment as provided in
this Section 6, the Company shall promptly cause written notice thereof to be
sent by registered mail, postage prepaid, to the Holder, at its address as it
shall appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Warrant Shares purchasable
upon the exercise of this Warrant and the Exercise Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment and
the computation thereof, which officer's certificate shall be conclusive
evidence of the correctness of any such adjustment absent manifest error.
(h) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the exercise
or conversion of this Warrant. If any fraction of a share would be issuable on
the exercise or conversion of this Warrant (or specified portions thereof), the
Company shall purchase such fraction for an amount in cash equal to the same
fraction of the Current Market Price of such share of Common Stock on the date
of exercise or conversion of this Warrant.
7. (a) In case of any consolidation with or merger of the
Company with or into another corporation (other than a merger or consolidation
in which the Company is the surviving or continuing corporation), or in case of
any sale, lease, or conveyance to another corporation of the property and assets
of any nature of the Company as an entirety or substantially as an entirety,
such
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<PAGE> 6
successor, leasing, or purchasing corporation, as the case may be, shall (i)
execute with the Holder an agreement providing that the Holder shall have the
right thereafter to receive upon exercise or conversion of this Warrant solely
the kind and amount of shares of stock and other securities, property, cash, or
any combination thereof receivable upon such consolidation, merger, sale, lease,
or conveyance by a holder of the number of shares of Common Stock for which this
Warrant might have been exercised or converted immediately prior to such
consolidation, merger, sale, lease, or conveyance, and (ii) make effective
provision in its certificate of incorporation or otherwise, if necessary, to
effect such agreement. Such agreement shall provide for adjustments which shall
be as nearly equivalent as practicable to the adjustments in Section 6.
(b) In case of any reclassification or change of the shares
of Common Stock issuable upon exercise or conversion of this Warrant (other than
a change in par value or from no par value to a specified par value, or as a
result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), or in case of any consolidation
or merger of another corporation into the Company in which the Company is the
continuing corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of the
shares of Common Stock (other than a change in par value, or from no par value
to a specified par value, or as a result of a subdivision or combination, but
including any change in the shares into two or more classes or series of
shares), the Holder shall have the right thereafter to receive upon exercise or
conversion of this Warrant solely the kind and amount of shares of stock and
other securities, property, cash, or any combination thereof receivable upon
such reclassification, change, consolidation, or merger by a holder of the
number of shares of Common Stock for which this Warrant might have been
exercised or converted immediately prior to such reclassification, change,
consolidation, or merger. Thereafter, appropriate provision shall be made for
adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 6.
(c) The above provisions of this Section 7 shall similarly
apply to successive reclassifications and changes of shares of Common Stock and
to successive consolidations, mergers, sales, leases, or conveyances.
8. In case at any time the Company shall propose
(a) to pay any dividend or make any distribution on
shares of Common Stock in shares of Common Stock or make any other
distribution (other than regularly scheduled cash dividends which are
not in a greater amount per share than the most recent such cash
dividend) to all holders of Common Stock; or
(b) to issue any rights, warrants, or other
securities to all holders of Common Stock entitling them to purchase
any additional shares of Common Stock or any other rights, warrants, or
other securities; or
(c) to effect any reclassification or change of
outstanding shares of Common Stock, or any consolidation, merger, sale,
lease, or conveyance of property, described in Section 7; or
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<PAGE> 7
(d) to effect any liquidation, dissolution, or
winding-up of the Company; or
(e) to take any other action which would cause an
adjustment to the Exercise Price;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least 15
days prior to (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined, (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up, or (iii) the date of such action which would require
an adjustment to the Exercise Price.
9. The issuance of any shares or other securities upon the
exercise or conversion of this Warrant, and the delivery of certificates or
other instruments representing such shares or other securities, shall be made
without charge to the Holder for any tax or other charge in respect of such
issuance. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder and the Company shall not be
required to issue or deliver any such certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
10. (a) If, at any time during the five-year period commencing
upon the effective date of the Company's initial public offering, the Company
shall file a registration statement (other than on Form S-4, Form S-8, or any
successor form) with the Securities and Exchange Commission (the "Commission")
while any Underwriters' Securities (as hereinafter defined) are outstanding, the
Company shall give all the then holders of any Underwriters' Securities (the
"Eligible Holders") at least 45 days prior written notice of the filing of such
registration statement. If requested by any Eligible Holder in writing within 30
days after receipt of any such notice, the Company shall, at the Company's sole
expense (other than the fees and disbursements of counsel for the Eligible
Holders and the underwriting discounts, if any, payable in respect of the
Underwriters' Securities sold by any Eligible Holder), register or qualify all
or, at each Eligible Holder's option, any portion of the Underwriters'
Securities of any Eligible Holders who shall have made such request,
concurrently with the registration of such other securities, all to the extent
requisite to permit the public offering and sale of the Underwriters' Securities
through the facilities of all appropriate securities exchanges and the
over-the-counter market, and will use its best efforts through its officers,
directors, auditors, and counsel to cause such registration statement to become
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<PAGE> 8
effective as promptly as practicable. Notwithstanding the foregoing, if the
managing underwriter of any such offering shall advise the Company in writing
that, in its opinion, the distribution of all or a portion of the Underwriters'
Securities requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely affect the
distribution of such securities by the Company for its own account, then any
Eligible Holder who shall have requested registration of his or its
Underwriters' Securities shall delay the offering and sale of such Underwriters'
Securities (or the portions thereof so designated by such managing underwriter)
for such period, not to exceed 90 days (the "Delay Period"), as the managing
underwriter shall request, provided that no such delay shall be required as to
any Underwriters' Securities if any securities of the Company are included in
such registration statement and eligible for sale during the Delay Period for
the account of any person other than the Company and any Eligible Holder unless
the securities included in such registration statement and eligible for sale
during the Delay Period for such other person shall have been reduced pro rata
to the reduction of the Underwriters' Securities which were requested to be
included and eligible for sale during the Delay Period in such registration. As
used herein, "Underwriters' Securities" shall mean the Warrants and the Warrant
Shares and the Conversion Shares which, in each case, have not been previously
sold pursuant to a registration statement or Rule 144 promulgated under the Act.
(b) If, at any time during the four-year period commencing
[one year after the effective date], the Company shall receive a written
request, from Eligible Holders who in the aggregate own (or upon exercise of all
Warrants then outstanding would own) a majority of the total number of shares of
Common Stock then included (or upon such exercise would be included) in the
Underwriters' Securities (the "Majority Holders"), to register the sale of all
or part of such Underwriters' Securities, the Company shall, as promptly as
practicable, prepare and file with the Commission a registration statement
sufficient to permit the public offering and sale of the Underwriters'
Securities through the facilities of all appropriate securities exchanges and
the over-the-counter market, and will use its best efforts through its officers,
directors, auditors, and counsel to cause such registration statement to become
effective as promptly as practicable; provided, however, that the Company shall
only be obligated to file one such registration statement for which all expenses
incurred in connection with such registration (other than the fees and
disbursements of counsel for the Eligible Holders and underwriting discounts, if
any, payable in respect of the Underwriters' Securities sold by the Eligible
Holders) shall be borne by the Company and one additional such registration
statement for which all such expenses shall be paid by the Eligible Holders.
Within three business days after receiving any request contemplated by this
Section 10(b), the Company shall give written notice to all the other Eligible
Holders, advising each of them that the Company is proceeding with such
registration and offering to include therein all or any portion of any such
other Eligible Holder's Underwriters' Securities, provided that the Company
receives a written request to do so from such Eligible Holder within 20 days
after receipt by him or it of the Company's notice.
(c) In the event of a registration pursuant to the
provisions of this Section 10, the Company shall use its best efforts to cause
the Underwriters' Securities so registered to be registered or qualified for
sale
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<PAGE> 9
under the securities or blue sky laws of such jurisdictions as the Holder or
such holders may reasonably request; provided, however, that the Company shall
not be required to qualify to do business in any state by reason of this Section
10(c) in which it is not otherwise required to qualify to do business.
(d) The Company shall keep effective any registration or
qualification contemplated by this Section 10 and shall from time to time amend
or supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document, and communication for such period of
time as shall be required to permit the Eligible Holders to complete the offer
and sale of the Underwriters' Securities covered thereby. The Company shall in
no event be required to keep any such registration or qualification in effect
for a period in excess of nine months from the date on which the Eligible
Holders are first free to sell such Underwriters' Securities.
(e) In the event of a registration pursuant to the
provisions of this Section 10, the Company shall furnish to each Eligible Holder
such number of copies of the registration statement and of each amendment and
supplement thereto (in each case, including all exhibits), such reasonable
number of copies of each prospectus contained in such registration statement and
each supplement or amendment thereto (including each preliminary prospectus),
all of which shall conform to the requirements of the Act and the rules and
regulations thereunder, and such other documents, as any Eligible Holder may
reasonably request to facilitate the disposition of the Underwriters' Securities
included in such registration.
(f) In the event of a registration pursuant to the
provisions of this Section 10, the Company shall furnish each Eligible Holder of
any Underwriters' Securities so registered with an opinion of its counsel
(reasonably acceptable to the Eligible Holders) to the effect that (i) the
registration statement has become effective under the Act and no order
suspending the effectiveness of the registration statement, preventing or
suspending the use of the registration statement, any preliminary prospectus,
any final prospectus, or any amendment or supplement thereto has been issued,
nor has the Commission or any securities or blue sky authority of any
jurisdiction instituted or threatened to institute any proceedings with respect
to such an order, (ii) the registration statement and each prospectus forming a
part thereof (including each preliminary prospectus), and any amendment or
supplement thereto, complies as to form with the Act and the rules and
regulations thereunder, and (iii) such counsel has no knowledge of any material
misstatement or omission in such registration statement or any prospectus, as
amended or supplemented. Such opinion shall also state the jurisdictions in
which the Underwriters' Securities have been registered or qualified for sale
pursuant to the provisions of Section 10(c).
(g) In the event of a registration pursuant to the
provision of this Section 10, the Company shall enter into a cross-indemnity
agreement and a contribution agreement, each in customary form, with each
underwriter, if any, and, if requested, enter into an underwriting agreement
containing conventional representations, warranties, allocation of expenses, and
customary closing conditions, including, but not limited to, opinions of counsel
and accountants' cold comfort letters, with any underwriter who acquires any
Underwriters' Securities.
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<PAGE> 10
(h) The Company agrees that until all the Underwriters'
Securities have been sold under a registration statement or pursuant to Rule 144
under the Act, it shall keep current in filing all reports, statements and other
materials required to be filed with the Commission to permit holders of the
Underwriters' Securities to sell such securities under Rule 144.
11. (a) Subject to the conditions set forth below, the Company
agrees to indemnify and hold harmless each Eligible Holder, its officers,
directors, partners, employees, agents, and counsel, and each person, if any,
who controls any such person within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), from and against any and all loss, liability, charge, claim, damage, and
expense whatsoever (which shall include, for all purposes of this Section 11,
but not be limited to, reasonable attorneys' fees and any and all reasonable
expense whatsoever incurred in investigating, preparing, or defending against
any litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation), as and when
incurred, arising out of, based upon, or in connection with (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in any
registration statement, preliminary prospectus, or final prospectus (as from
time to time amended and supplemented), or any amendment or supplement thereto,
relating to the sale of any of the Underwriters' Securities, or (B) in any
application or other document or communication (in this Section 11 collectively
called an "application") executed by or on behalf of the Company or based upon
written information furnished by or on behalf of the Company filed in any
jurisdiction in order to register or qualify any of the Underwriters' Securities
under the securities or blue sky laws thereof or filed with the Commission or
any securities exchange; or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, unless such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company with respect to
such Eligible Holder by or on behalf of such person expressly for inclusion in
any registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be, or
(ii) any breach of any representation, warranty, covenant, or agreement of the
Company contained in this Warrant. The foregoing agreement to indemnify shall be
in addition to any liability the Company may otherwise have, including
liabilities arising under this Warrant.
If any action is brought against any Eligible Holder or any of
its officers, directors, partners, employees, agents, or counsel, or any
controlling persons of such person (an "indemnified party") in respect of which
indemnity may be sought against the Company pursuant to the foregoing paragraph,
such indemnified party or parties shall promptly notify the Company in writing
of the institution of such action (but the failure so to notify shall not
relieve the Company from any liability pursuant to this Section 11(a)) and the
Company shall promptly assume the defense of such action, including the
employment of counsel (reasonably satisfactory to such indemnified party or
parties) and payment of expenses. Such indemnified party or parties shall have
the right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action or the
Company shall not have
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<PAGE> 11
promptly employed counsel reasonably satisfactory to such indemnified party or
parties to have charge of the defense of such action or such indemnified party
or parties shall have reasonably concluded that there may be one or more legal
defenses available to it or them or to other indemnified parties which are
different from or additional to those available to the Company, in any of which
events such fees and expenses shall be borne by the Company and the Company
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties. Anything in this Section 11 to the contrary
notwithstanding, the Company shall not be liable for any settlement of any such
claim or action effected without its written consent, which shall not be
unreasonably withheld. The Company shall not, without the prior written consent
of each indemnified party that is not released as described in this sentence,
settle or compromise any action, or permit a default or consent to the entry of
judgment in or otherwise seek to terminate any pending or threatened action, in
respect of which indemnity may be sought hereunder (whether or not any
indemnified party is a party thereto), unless such settlement, compromise,
consent, or termination includes an unconditional release of each indemnified
party from all liability in respect of such action. The Company agrees promptly
to notify the Eligible Holders of the commencement of any litigation or
proceedings against the Company or any of its officers or directors in
connection with the sale of any Underwriters' Securities or any preliminary
prospectus, prospectus, registration statement, or amendment or supplement
thereto, or any application relating to any sale of any Underwriters'
Securities.
(b) The Holder agrees to indemnify and hold harmless the
Company, each director of the Company, each officer of the Company who shall
have signed any registration statement covering Underwriters' Securities held by
the Holder, each other person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, and its
or their respective counsel, to the same extent as the foregoing indemnity from
the Company to the Holder in Section 11(a), but only with respect to statements
or omissions, if any, made in any registration statement, preliminary
prospectus, or final prospectus (as from time to time amended and supplemented),
or any amendment or supplement thereto, or in any application, in reliance upon
and in conformity with written information furnished to the Company with respect
to the Holder by or on behalf of the Holder expressly for inclusion in any such
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be. If
any action shall be brought against the Company or any other person so
indemnified based on any such registration statement, preliminary prospectus, or
final prospectus, or any amendment or supplement thereto, or in any application,
and in respect of which indemnity may be sought against the Holder pursuant to
this Section 11(b), the Holder shall have the rights and duties given to the
Company, and the Company and each other person so indemnified shall have the
rights and duties given to the indemnified parties, by the provisions of Section
11(a).
(c) To provide for just and equitable contribution, if (i)
an indemnified party makes a claim for indemnification pursuant to Section 11(a)
or 11(b) (subject to the limitations thereof) but it is found in a final
judicial determination, not subject to further appeal, that such indemnification
may not be enforced in such case, even though this Agreement expressly provides
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<PAGE> 12
for indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company, and its or their
respective counsel), as one entity, and the Eligible Holders of the
Underwriters' Securities included in such registration in the aggregate
(including for this purpose any contribution by or on behalf of an indemnified
party), as a second entity, shall contribute to the losses, liabilities, claims,
damages, and expenses whatsoever to which any of them may be subject, on the
basis of relevant equitable considerations such as the relative fault of the
Company and such Eligible Holders in connection with the facts which resulted in
such losses, liabilities, claims, damages, and expenses. The relative fault, in
the case of an untrue statement, alleged untrue statement, omission, or alleged
omission, shall be determined by, among other things, whether such statement,
alleged statement, omission, or alleged omission relates to information supplied
by the Company or by such Eligible Holders, and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement, alleged statement, omission, or alleged omission. The Company and the
Holder agree that it would be unjust and inequitable if the respective
obligations of the Company and the Eligible Holders for contribution were
determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages, and expenses (even if the Holder and the other
indemnified parties were treated as one entity for such purpose) or by any other
method of allocation that does not reflect the equitable considerations referred
to in this Section 11(c). In no case shall any Eligible Holder be responsible
for a portion of the contribution obligation imposed on all Eligible Holders in
excess of its pro rata share based on the number of shares of Common Stock owned
(or which would be owned upon exercise of all Underwriters' Securities) by it
and included in such registration as compared to the number of shares of Common
Stock owned (or which would be owned upon exercise of all Underwriters'
Securities) by all Eligible Holders and included in such registration. No person
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation. For purposes of this Section 11(c), each
person, if any, who controls any Eligible Holder within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act and each officer, director,
partner, employee, agent, and counsel of each such Eligible Holder or control
person shall have the same rights to contribution as such Eligible Holder or
control person and each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who shall have signed any such registration statement,
each director of the Company, and its or their respective counsel shall have the
same rights to contribution as the Company, subject in each case to the
provisions of this Section 11(c). Anything in this Section 11(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 11(c) is intended to supersede any right to contribution under the Act,
the Exchange Act or otherwise.
12. Unless registered pursuant to the provisions of Section 10
hereof, the Warrant Shares or Conversion Shares issued upon exercise or
conversion of the Warrants shall be subject to a stop transfer order and the
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<PAGE> 13
certificate or certificates evidencing such Warrant Shares shall bear the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND, UNLESS SO
REGISTERED, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS."
13. Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction, or mutilation of any Warrant (and upon surrender
of any Warrant if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses, the Company shall execute and deliver to the Holder thereof
a new Warrant of like date, tenor, and denomination.
14. The Holder of any Warrant shall not have, solely on
account of such status, any rights of a stockholder of the Company, either at
law or in equity, or to any notice of meetings of stockholders or of any other
proceedings of the Company, except as provided in this Warrant.
15. This Warrant shall be construed in accordance with the
laws of the State of New York applicable to contracts made and performed within
such State, without regard to principles of conflicts of law.
Dated: , 1996
ENAMELON, INC.
By: ______________________________
[Seal]
___________________________
Secretary
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<PAGE> 14
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, __________________________________ hereby
sells, assigns, and transfers unto __________________ a Warrant to purchase
__________ shares of Common Stock, par value $.001 per share, of Enamelon, Inc.
(the "Company"), together with all right, title, and interest therein, and does
hereby irrevocably constitute and appoint ____________________________________
attorney to transfer such Warrant on the books of the Company, with full power
of substitution.
Dated:________________________
Signature______________________
NOTICE
The signature on the foregoing Assignment must correspond to the name
as written upon the face of this Warrant in every particular, without alteration
or enlargement or any change whatsoever.
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<PAGE> 15
To: Enamelon, Inc.
15 Kimball Avenue
Yonkers, New York 10704
ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights to purchase _______
Warrant Shares covered by the within Warrant and tenders payment herewith in the
amount of $_________ in accordance with the terms thereof, and requests that
certificates for such securities be issued in the name of, and delivered to:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:______________________________ Name__________________________________
(Print)
Address:________________________________________________________
_______________________________
(Signature)
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<PAGE> 16
To: Enamelon, Inc.
15 Kimball Avenue
Yonkers, New York 10704
CASHLESS EXERCISE FORM
(To be executed upon conversion of the attached Warrant)
The undersigned hereby irrevocably elects to surrender its Warrant for
the number of shares of Common Stock as shall be issuable pursuant to the
cashless exercise provisions of the within Warrant, in respect of _____ shares
of Common Stock underlying the within Warrant, and requests that certificates
for such securities be issued in the name of and delivered to:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of shares shall not be all the shares exchangeable or
purchasable under the within Warrant, that a new Warrant for the balance of the
Warrant Shares covered by the within Warrant be registered in the name of, and
delivered to, the undersigned at the addressed stated below.
Dated:______________________________ Name__________________________________
(Print)
Address:________________________________________________________
_______________________________
(Signature)
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<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the ___ day of January
1996, by and between Enamelon, Inc., a Delaware corporation (the "Corporation"),
and the shareholders of the Corporation listed on Schedule A hereto (the
"Stockholders").
Whereas, the Stockholders are purchasers of shares of the
Corporation's Convertible Preferred Stock, par value $.01 per share (the
"Preferred Stock.") and seven-year warrants (the '"Warrants") to purchase shares
of the Corporation's Common Stock, par value $.001 per share (the "Common
Stock") at an exercise price of $5.75, pursuant to Subscription Agreements of
even date herewith (the "Subscription Agreements"); and
WHEREAS, in order to induce the Stockholders to invest funds in the
Corporation and induce the Corporation to accept such subscriptions, the
Corporation and each of the Stockholders desire to set forth certain rights of
the Stockholders with respect to registration of the shares of Common Stock
issuable upon conversion of the Preferred Stock or issuable upon exercise of the
warrants (such shares of Common Stock being collectively referred to herein as,
the "Shares");
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights.
1.1 Certain Definitions. As used in this Section l and
elsewhere in this Agreement, the following terms shall have the
following respective meanings:
"Commission" means the Securities and Exchange Commission,
or any other Federal agency at the time administering the
Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and
regulations of the Commission issued under such Act, as they,
each may, from time to time, be in effect.
<PAGE> 2
"Preferred Stockholders" means the holders of Common Stock
issued or issuable upon conversion of the Preferred Stock.
"Registration Statement" means a registration statement
filed by the Corporation with the Commission for a public
offering and sale of securities of the Corporation (other than a
registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a limited purpose, or any
registration statement covering only securities proposed to be
issued in exchange for securities or assets of another
corporation).
"Registration Expenses" means the expenses described in
subsection 1.7.
"Registrable Shares" means (i) the Shares, and (ii) any
other shares of Common Stock of the Corporation issued in respect
of any such shares (because of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events);
Provided, however, that shares of Common Stock that are
Registrable Shares shall cease to be Registrable Shares (i) upon
any sale pursuant to a Registration Statement, Section 4(1) of
the Securities Act, or Rule 144 under the Securities Act or (ii)
at such time as they are eligible for sale pursuant to Rule
144(k) under the Securities Act.
"Securities Act" means the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and
regulations of the Commission issued under such Act, as they each
may, from time to time, be in effect.
"Stockholders" means the purchasers of Preferred Stock and
Warrants in connection with the Subscription Agreements and any
persons or entities to whom the rights granted under this Section
1 are transferred by any purchasers, their successors or assigns
pursuant to the terms hereof.
1.2 Sale or Transfer of Shares; Legend.
(a) The Shares and the Registrable Shares and shares issued
in respect of the Shares or the Registrable Shares shall not be
sold or transferred unless either (i) they first. shall have been
registered under the Securities Act, or (ii) the Corporation
first shall have been furnished with an opinion of legal counsel,
reasonably satisfactory to the Corporation, to the effect that
such sale or transfer is exempt from the registration
requirements of the Securities Act.
(b) Each certificate representing the Shares and the
Registrable Shares and shares issued in respect of the
2
<PAGE> 3
Shares or the Registrable Shares shall bees a legend consistent
with the provisions of paragraph (a) of this Section 1.2. Such
legend shall be removed from the certificates representing any
Registrable Shares, at the request of the holder thereof, at such
time as they become eligible for resale pursuant to Rule 144(k)
under the Securities Act.
(c) The Corporation agrees, during any period which the
Corporation is not subject to Section 12 or 15 (d) of the 1934
Act, upon the request of the undersigned to make available to the
undersigned and to any prospective transferee of any Shares or
Registrable Shares of the undersigned the information concerning
the Corporation described in Rule 144A(d)(4) under the Securities
Act.
1.3 Required Registrations.
(a) At any time within five years of the effective date of a
Registration Statement relating to the Corporation's first
underwritten public offering of shares of Common Stock pursuant
to a Registration Statement, a Preferred Stockholder or Preferred
Stockholders holding in the aggregate at least 40% of the Common
Stock issued or issuable upon conversion of the Preferred Stock
(as adjusted for stock splits, stock dividends, recapitalizations
and the like) may request, in writing, that the Corporation
effect the registration of an aggregate of at least 20% of the
Registrable Shares or such lesser percentage of Registrable
Shares such that the anticipated aggregate offering price of
Registrable Shares would be at least $2,000,000 (based on the
then current market price or fair value) in accordance with the
intended methods of distribution as specified by the Stockholders
in such notice. If the holders initiating the registration intend
to distribute the Registrable Shares by means of an underwriting,
they shall so advise the Corporation in their request. In the
event such registration is underwritten, the right of other
Stockholders to participate shall be conditioned on such
Stockholders' participation in such underwriting. Upon receipt of
any such request, the Corporation shall promptly give written
notice of such proposed registration to all Stockholders. Such
Stockholders shall have the right, by giving written notice to
the Corporation within twenty (20) days after the Corporation
provides its notice, to elect to have included in such
registration such of their Registrable Shares as such
Stockholders may request in such notice of election; provided
that if the underwriter (if any) managing the offering determines
that, because of marketing factors, all of the Registrable Shares
requested to be registered by all Stockholders may not be
included in the offering, then all Stockholders who have
requested registration shall participate in the offering pro rata
based upon the number of Registrable Shares that they have
requested to be so registered. Thereupon, the Corporation shall,
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<PAGE> 4
as expeditiously as possible, use its best efforts to effect the
registration, of all Registrable Shares the Corporation has been
requested to so register.
(b) At any time within five years of the date of issuance of
the Preferred Stock, a Preferred Stockholder or Preferred
Stockholders may request the Corporation, in writing, to effect
the registration on Form S-3 (or such successor form), if the
Corporation is eligible to use such form of Registrable Shares
having an aggregate offering price of at least $500,000 (based on
the then current public market price or fair value) in accordance
with the intended methods of distribution as specified by the
Stockholders in such notice. Upon receipt of any such request,
the Corporation shall promptly give written notice of such
proposed registration to all Stockholders. Such Stockholders
shall have the right, by giving written notice to the Corporation
within thirty (30) days after the Corporation provides its
notice, to elect to have included in such registration such of
their Registrable Shares as such Stockholders may request in such
notice of election; provided that if the underwriter (if any)
managing the offering determines that, because of marketing
factors, all of the Registrable Shares requested to be registered
by all Stockholders may not be included in the offering, then all
Stockholders who have requested registration shall participate in
the offering pro rata based upon the number of Registrable Shares
that they have requested to be so registered. Thereupon, the
Corporation shall, as expeditiously as possible, use its best
efforts to effect the registration on Form S-3, or such successor
form, of all Registrable Shares that the Corporation has been
requested to register.
(c) The Corporation shall not be required to effect more
than three registrations pursuant to paragraph (a) above. In
addition, the Corporation shall not be required to effect any
registration within six (6) months after the effective date of
any other Registration Statement of the Corporation.
(d) If at the time of any request to register Registrable
Shares pursuant to this subsection 1.3, the Corporation is
engaged or has fixed plans to engage within thirty (30) days of
the time of the request in a registered public offering as to
which the Stockholders may include Registrable Shares pursuant to
subsection 1.4 or is engaged in any other activity that, in the
good faith determination of the Corporatlon's Board of Directors,
would be adversely affected by the requested registration to the
material detriment of the Corporation. then the Corporation may
at its option direct that such request be delayed for a period
not in excess of six months from the effective date of such
offering or the date of commencement of such other material
activity, as the case may be,
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such right to delay a request to be exercised by the Corporation
not more than once in any one year period.
1.4 Incidental Registration.
(a) At any time within 7 years of the date of issuance of
the Preferred Stock when the Corporation proposes to file a
Registration Statement (other than pursuant to subsection 1.3),
it will, prior to such filing, give written notice to all
Preferred Stockholders of its intention to do so and, upon the
written request of a Stockholder or Stockholders given within
twenty (20) days after the Corporation provides such notice
(which request shall state the intended method of disposition of
such Registration Shares), the Corporation shall use its best
efforts to cause all Registrable Shares that the Corporation has
been requested by such Stockholder or Stockholders to register to
be registered under the Securities Act to the extent necessary to
permit their sale or other disposition in accordance with the
intended methods of distribution specified in the request of such
Stockholder or Stockholders; provided that the Corporation shall
have the right to postpone or withdraw any registration effected
pursuant to this subsection 1.4 without obligation to any
Stockholder.
(b) In connection with any offering under this subsection
1.4 involving an underwriting, the Corporation shall not be
required to include any Registrable Shares in such offering
unless the holders thereof accept the terms of the underwriting
as agreed upon between the Corporation and the underwriters
selected by it (provided that such terms must be consistent with
this Agreement), and then only in such quantity as will not, in
the opinion of the underwriters, jeopardize the success of the
offering by the Corporation. If in the opinion of the managing
underwriter the registration of all, or part of, the Registrable
Shares that the holders have requested to be included would
materially and adversely affect such public offering, then the
Corporation shall be required to include in the underwriting only
that number of Registrable Shares, not less than 25% of the total
number of shares in the offering, that the managing underwriter
believes may be sold without causing such adverse effect;
provided that no persons or entities other than the Corporation,
the Stockholders and persons or entities holding registration
rights granted in accordance with Section 1.12 hereof shall be
permitted to include securities in the offering. If the number of
Registrable Shares to be included in the underwriting in
accordance with the foregoing is less than the total number of
shares that the holders of Registrable Shares have requested to
be included, then the holders of Registrable Shares who have
requested registration and other holders of shares of Common
Stock entitled to include shares of Common Stock in such
registration shall participate in the underwriting pro
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<PAGE> 6
rata based upon their total ownership of shares of Common Stock
of the Corporation (giving effect to the conversion into Common
Stock of all securities convertible thereinto). If any holder
would thus be entitled to include more shares than such holder
requested to be registered, the excess shall be allocated among
other requesting holders pro rata based upon their total
ownership of Registrable Shares.
1.5 Right of First Refusal. In the event that at any time within
one year of the date of issuance of the Preferred Stock the
Corporation proposes to offer any securities for the purpose of
financing its business (other than warrant shares, shares issued in
the acquisition of another company or shares offered to the public
pursuant to an underwritten public offering), the Corporation shall
first offer such securities to the Preferred Stockholders on a pro
rata basis for a period of 15 days on the same terms proposed to be
offered to other investors. In the event the Corporation offers
securities where the anticipated aggregate offering price would be not
greater than S3,000,000 (based on the then current market price or
fair value), at any time within six months of the date hereof, the
Corporation shall offer such securities, in the same form as the
offering relating to the Subscription Agreements, first to the
Preferred Stockholders at a purchase price of S4.80 per share. Such
holders will have 45 days after receiving the Corporation's notice of
such offer to exercise their right to acquire such securities at a
purchase price of S4.80.
1.6 Registration Procedures. If and whenever the Corporation is
required by the provisions of this Agreement to use its best efforts
to effect the registration of any of the Registrable Shares under the
Securities Act, the Corporation shall:
(a) file with the Commission a Registration Statement with
respect to such Registrable Shares and use its best efforts to
cause that Registration Statement to become and remain effective;
(b) as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration
Statement and the prospectus included in the Registration
Statement as may be necessary to keep the Registration Statement
effective, in the case of a firm commitment underwritten public
offering, until each underwriter has completed the distribution
of all securities purchased by it and, in the case of any other
offering, until the earlier of the sale of all Registrable Shares
covered thereby or one hundred twenty (120) days after the
effective date thereof;
(c) as expeditiously as possible furnish to each selling
Stockholder such reasonable numbers of copies of the
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<PAGE> 7
prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other
documents as the selling Stockholder may reasonably request in
order to facilitate the public sale or other disposition of the
Registrable Shares owned by the selling Stockholder; and
(d) as expeditiously as possible use its best efforts to
register or qualify the Registrable Shares covered by the
Registration Statement under the securities or Blue Sky laws of
such states as the selling Stockholders shall reasonably request,
and do any and all other acts and things that may be necessary or
desirable to enable the selling Stockholders to consummate the
public sale or other disposition in such states of the
Registrable Shares owned by the selling Stockholder; provided,
however, that the Corporation shall not be required in connection
with this paragraph (d) to qualify as a foreign corporation or
execute a general consent to service of process in any
jurisdiction.
If the Corporation has delivered preliminary or final
prospectuses to the selling Stockholders and after having done so
the prospectus is amended to comply with the provisions of the
Securities Act, the Corporation shall promptly notify the selling
Stockholders and, if requested, the selling Stockholders shall
immediately cease making offers of Registrable Shares and return
all prospectuses to the Corporation. The Corporation shall
promptly provide the selling Stockholders with revised
prospectuses and, following receipt of the revised prospectuses,
the selling Stockholders shall be free to resume making offers of
the Registrable Shares.
1.7 Allocation of Expenses. The Corporation will pay all
Registration Expenses of all registrations under this Agreement;
provided, however, that if a registration under Section 1.3 is
withdrawn at the request of the Stockholders requesting such
registration (other than as a result of information concerning the
business or financial condition of the Corporation that is made known
to the Stockholders after the date on which such registration was
requested) and if the requesting Stockholders elect not to have such
registration counted as a registratlon requested under subsection 1.3,
the requesting Scocknolders shall pay the Registratlon Expenses of
such registration pro rata in accordance with the number of their
Registrable Shares included in such registration. For purposes of this
Section, the term "Registration Expenses" shall mean all expenses
incurred by the Corporation in complying with this Section 1,
including, without limitation, all registration and filing {ees,
exchange listing fees, printing expenses, fees, and expenses of
counsel for the Corporation reasonable state Blue Sky fees and
expenses, and the expense of any special audits incident to or
required by any such registration, but excluding
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<PAGE> 8
underwriting discounts, selling commission, and the fees and expenses
of selling Stockholders' own counsel.
1.8 Indemnification and Contribution. In the event of any
registration of any of the Registrable Shares under the Securities Act
pursuant to this Agreement, the Corporation will indemnify and hold
harmless the seller of such Registrable Shares, each underwriter of
such Registrable Shares, and each other person, if any, who controls
such seller or underwriter within the meaning of the Securities Act or
the Exchange Act against any losses, claims, damages, or liabilities,
joint or several, to which such seller, underwriter, or controlling
person may become subject under the Securities Act, the Exchange Act,
state securities or Blue Sky laws, or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any
Registration Statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus, or
final prospectus contained in the Registration Statement, or any
amendment or supplement to such Registration Statement, or arise out
of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Corporation will reimburse
such seller, underwriter, and each such controlling person in
connection with investigation or defending any such loss, claim,
damage, liability, or action; provided, however, that the Corporation
will not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon any untrue
statement or omission made in such Registration Statement, preliminary
prospectus, or final prospectus, or any such amendment or supplement,
in reliance upon and in conformity with information furnished to the
Corporation, in writing, by or on behalf of such seller, underwriter,
or controlling person specifically for use n the preparation thereof.
In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of
Registrable Shares, severally and not jointly, will indemnify and hold
harmless the Corporation, each o' its directors and officers and each
underwriters (if any) and each person, if any, who controls the
Corporation or any such underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims,
damages, or ':abilities, joint or several, to which the Corporation,
such directors and officers, underwriter, or controlling person may
become subject under the Securities Act, Exchange Act, state
securities or Blue Sky laws, or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or
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<PAGE> 9
alleged untrue statement of a material fact contained in any
Registration Statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus or
final prospectus contained in the Registration Statement, or any
amendment or supplement to the Registration Statement, or arise out of
or are based upon any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in
reliance upon and in conformity with information relating to such
seller furnished in writing to the Corporation by or on behalf of such
seller specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment, or supplement;
provided, however, that the obligations of such Stockholders hereunder
shall be limited to an amount equal to the proceeds to each
Stockholder of Registrable Shares sold in connection with such
Registration.
Each party entitled to indemnification under this subsection 1.8
(the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after
such Indemnified party has actually knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
therefrom; provided, that counsel for the Indemnifying Party, who
shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be
unreasonably withheld); and, provided, further, that the failure of
any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section
1. The Indemnified Parry may participate in such defense at such
party's expense; provided, however, that the Indemnifying Party shall
pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due
to actual or potential differing interests between the Indemnified
Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim or
litigation, shall except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigations, and no Indemnified
Party shall consent to entry of any judgment or settle such claim or
litigation without the prior written consent of the Indemnifying
Party.
In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any
holder of Registrable Shares exercising rights under this Agreement,
or any controlling person of any such
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<PAGE> 10
holder, makes a claim for indemnification pursuant to this Section 1.8
but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time
to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the
fact that this Section 1.8 provides for indemnification in such case,
or (ii) contribution under the Securities Act may be required on the
part of any such selling Stockholder or any such controlling person in
circumstances for which indemnification is provided under this Section
1.8; then, in each such case, the Corporation and such Stockholder
will contribute to the aggregate losses, claims, damages, or
liabilities to which they may be subject (after contribution from
others) in such proportions so that such holder is responsible for the
portion represented by the percentage that the public offering price
of its Registrable Shares offered by the Registration Statement bears
to the public offering price of all securities offered by such
Registration Statement, and the Corporation is responsible for the
remaining portion; provided, however, that, in any such case, (A) no
such holder will be required to contribute any amount in excess
pursuant to such Registration Statement, and (B) no person or entity
guilty of fraudulent misrepresentation, within the meaning of Section
11 (f) of the Securities Act, shall be entitled to contribution from
any person or entity who is not guilty of such fraudulent
misrepresentation.
1.9 Indemnification with Respect to Underwritten Offering. In the
event that Registrable Shares are sold pursuant to a Registration Statement
in an underwritten offering pursuant to subsection 1.3(a), the Corporation
agrees to enter into an underwriting agreement containing customary
representations and warranties with respect to the business and operations
of an issuer of the securities being registered and customary covenants and
agreements to be performed by such issuer, including without limitation
customary provisions with respect to indemnification by the Corporation Of
the underwriters of such offering.
1.10 Information by Holder. Each holder of Registrable Shares included
in any registration shall furnish to the Corporation such information
regarding such holder and the distribution proposed by such holder as the
Corporation may request in writing and as shall be required in connection
with any registration, qualification or compliance referred to in this
Sectlon 1.
1.11 "Stand-Off" Agreement. Each Stockholder, if requested by the
Corporation and an underwriter of Common Stock or other securities of the
Corporation, shall agree not to sell or otherwise transfer or dispose of
any Registrable Shares or other securities of the Corporation held by such
Stockholder for
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<PAGE> 11
a specified period of time (not to exceed 120 days) following the effective
date of a Registration Statement; provided, that:
(a) such agreement shall only apply to the first such
Registration Statement covering Common Stock of the Corporation to be
sold on its behalf to the public in an underwritten offering; and
(b) all Stockholders holding not less than the number of shares
of Common Stock held by such Stockholder (including shares of Common
stock issuable upon the conversion of Shares, or other convertible
securities, or upon the exercise of options, warrants or rights) and
all officers and directors of the Corporation enter into similar
agreements. Such agreement shall be in writing in a form satisfactory
to the Corporation and such underwriter. The Corporation may impose
stop-transfer instructions with respect to the Registrable Shares or
other securities subject to the foregoing restriction until the end of
the standoff Period.
1.12 Limitation on Subsequent Registration Rights. The Corporation
shall not, without the prior written consent of Stockholders holding at
least 50% of the Registrable Shares, enter into any agreement with any
holder or prospective holder of any securities of the Corporation that
would allow such holder or prospective holder (a) to include securities of
the Corporation in any registration filed under subsection 1.3 or 1.4,
unless under the terms of such agreement, such holder or prospective holder
may include such securities in any such registration only on terms
substantially similar to the terms on which holders of Registrable Shares
may include shares in such registration, or (b) to make a demand
registration that could result in such registration statement being
declared effective prior to a demand registration under this Section 1.
2. Miscellaneous.
2.1 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties
(including transferees of any Registrable Shares). Nothing in this
Agreement, express or implied, is intended to confer upon any party other
than the paties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of th1S
Agreement, except as expressly provided in this Agreement
2.2 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York as
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applied to agreements among New York residents entered into and to be
performed entirely within New York.
2.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be
deemed effectively given upon personal delivery to the party to be notified
or upon deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified
at the address indicated for such party on Schedule A hereto, or at such
other address as such party may designate by ten (10) days' advance written
notice to the other parties.
2.6 Amendment and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Corporation and the
holders of a majority of the Registrable Shares then outstanding. Any
amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Registrable Shares then outstanding, each
future holder of all such Registrable Securities, and the Corporation.
2.7 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted
as if such provision were so excluded and shall be enforceable in
accordance with its terms.
2.8 Aggregation of Stock. All shares of Registrable Securities held or
acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the any availbility of any rights under this
Agreement.
2.9 Entire Agreement. This Agreement (including the Exhibits hereto,
if any} constitutes the full and entire understanding and agreement between
the parties with regard to the subjects hereof and thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ENAMELON, INC.
By: /s/ Steven R. Fox
----------------------
Name: Steven R. Fox
Title: Chairman of the Board
STOCKHOLDERS:
----------------------
----------------------
----------------------
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June 20, 1996
ENAMELON, INC.
15 Kimball Avenue
Yonkers, New York 10704
RE: REGISTRATION STATEMENT ON FORM S-1
Gentlemen:
We have acted as counsel to Enamelon, Inc., a Delaware corporation (the
"Company"), in connection with (a) the proposed public offering by the Company
of up to 2,300,000 shares of Common Stock, $.001 par value (the "Common Stock"),
including up to 300,000 shares of Common Stock solely to cover over-allotments;
and (b) the issuance by the Company to Rodman and Ren shaw, Inc. (the
"Representative") of a warrant to purchase 200,000 shares of Common Stock (the
"Representative's Warrants"), pursuant to a registration statement on Form S-1
(the "Registration Statement"), originally filed by the Company with the
Securities and Exchange Commission on June 20, 1996, pursuant to the Securities
Act of 1933, as amended.
The shares of Common Stock issuable upon exercise of the Representative's
Warrants are hereinafter referred to as the "Representative's Warrant Shares."
The shares of Common Stock issuable pursuant to the proposed public offering
(the "Offered Shares"), the Representative's Warrants and the Representative's
Warrant Shares are hereinafter referred to as the "Securities."
In connection with the foregoing, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the Certificate of
Incorporation of the Company, as amended, the By-laws of the Company, as
amended, the form of Underwriting Agreement, and the form of Representative's
Warrant filed as exhibits to the Registration Statement, your records of
corporate proceedings, and such other documents as we have deemed necessary or
appropriate as a basis for the opinions set forth below. In such examination, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the accuracy and completeness of all
documents submitted to us as copies and the authenticity of the originals of
such latter documents. As to any facts material to such opinions which we did
not independently establish or verify, we have relied upon statements or
representations of officers and other representatives of the Company, public
officials or others.
Based upon the foregoing, we are of the opinion that:
1. The Company has been duly organized and is validly existing and in
good standing under the laws of the State of Delaware.
2. The sale and issuance of the Securities have been duly authorized
by the Board of Directors of the Company, and the Offered Shares and the
Representative's Warrant Shares when issued and paid for, as contemplated
by the Registration Statement and as provided for in the Representative's
Warrants, as the case may be, will be validly issued, fully paid and
non-assessable, and no personal liability will attach to the ownership
thereof.
We hereby consent to the reference to our name in the Registration
Statement under the caption "Legal Matters" and further consent to the inclusion
of this opinion as Exhibit 5.1 to the Registration Statement.
Very truly yours,
SNOW BECKER KRAUSS P.C.
<PAGE> 1
RESTATED PATENT LICENSE AGREEMENT
This AGREEMENT, effective and dated from the 24th day of June, 1992,
by and between ENAMELON INC. (hereinafter referred to as "LICENSEE") and the
AMERICAN DENTAL ASSOCIATION HEALTH FOUNDATION, a not-for-profit corporation
under the laws of the State of Illinois, whose address for the purposes of this
AGREEMENT is 211 East Chicago Avenue, Chicago, Illinois 60611 (hereinafter
referred to as "LICENSOR"), is a restatement and partial modification of the
Patent License Agreement executed by the parties effective and dated as of June
24, 1992.
WITNESSETH:
WHEREAS, LICENSOR is the sole owner of the entire right, title and
interest of United States Patent No. 5,037,639, entitled Methods and
Compositions for Mineralizing Calcified Tissues, granted August 6, 1991; United
States Patent No. 5,268,167, entitled Methods and Compositions for Mineralizing
and Fluoridating Calcified Tissues, granted December 7, 1993, (hereinafter
"PATENTS"); and a pending application Serial No. 07/936,068 entitled Methods and
Compositions for Mineralizing and Fluoridating Calcified Tissues, filed August
26, 1992, (hereinafter "1992 APPLICATION") (the PATENTS and 1992 APPLICATION,
collectively, the "U.S. PATENT FILINGS") and warrants that it has the right to
grant a license thereunder free of any license, shop right or assignment to
others except those rights under the U.S. PATENT FILINGS that have been or will
be granted to the United States government by licenses in the form of the
licenses attached hereto as Exhibit A (hereinafter GOVERNMENT LICENSES);
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<PAGE> 2
WHEREAS, the subject matter covered by the claims of the
above-entitled U.S. PATENT FILINGS including any continuations, divisions,
reexaminations, extensions or reissues which may be filed by LICENSOR and
thereby become an integral part of this AGREEMENT, is referred to hereinbelow as
the "INVENTIONS";
WHEREAS, "MATERIAL" is defined as dentifrices (namely, toothpastes,
tooth cleansing gels or tooth cleansing powders), chewing gums, confections and
foods embodying:
(a) the materials claimed as such in said PATENTS, 1992
APPLICATION, any patent issuing on the APPLICATION, or
any continuations, divisions, reexaminations,
extensions or reissues of either;
(b) the materials not claimed as such but constituting
components in claimed compositions or articles of
manufacture, when such components are used as claimed or
sold with inducement to use as claimed, or with
knowledge that they have no substantial noninfringing
use;
(c) the materials not claimed as such but recited as
components to be used in the practice of a claimed
method, when such components are used as claimed or sold
with inducement to use as claimed or with knowledge that
they have no substantial noninfringing use, or
(d) any container, package, dispensing equipment (except for
reusable dispensing equipment), storage trays, display
trays or instructional literature for any of the
materials listed above;
WHEREAS, units of sale or kits containing MATERIAL as an essential
element thereof, whether or not they contain other items as well, are referred
to hereinbelow as "UNITS";
WHEREAS, LICENSEE desires to acquire a license to make, have made,
use, induce use of and/or contribute to use of the INVENTIONS in the field of
dentifrices, confections, foods and chewing gums and LICENSOR is willing to
grant the same under the conditions set forth hereinafter;
WHEREAS, LICENSOR desires to make the INVENTIONS available
to the public in one or more products of acceptable quality;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants of this AGREEMENT, the parties hereto agree as follows:
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ARTICLE I -- GRANT
1. LICENSOR hereby grants and agrees to grant to LICENSEE, for a
limited period, an exclusive license throughout the United States and the
territories thereof, to make, have made, sell, use, induce use of and/or
contribute to use of the INVENTIONS for use in dentifrices, confections, foods
and chewing gums only, subject to those rights granted under the GOVERNMENT
LICENSES, and subject to those rights retained by LICENSOR in the following
paragraphs and the unrestricted right of LICENSOR to grant other licenses for
other types of products ("EXCLUSIVE LICENSE"). The initial period of the
exclusive license shall extend to a date three (3) years after the LICENSEE
determines and notifies LICENSOR that the following two conditions have both
been met:
(a) The MATERIAL has been physically or chemically
stabilized to enable it to be stored and marketed in a
manner similar to other dentifrices, confections, foods
or chewing gums, respectively; and
(b) Some MATERIAL or UNIT has received the first FDA
approval necessary for marketing to professionals or
to the general public.
LICENSEE shall permit LICENSOR to have access to the information necessary to
make this determination. The exclusive period of the license may or may not be
renewed according to the terms set forth hereinafter. If it is not renewed, upon
termination of the period of exclusivity, the license shall become non-exclusive
during the remaining term of this Agreement. This license shall not be assigned,
transferred or sublicensed by LICENSEE except with the prior written consent of
LICENSOR. Such permission shall not be unreasonably withheld by LICENSOR.
2. LICENSEE agrees to use its best efforts to obtain approval of the
Food and Drug Administration of MATERIAL or UNITS embodying one or more of the
INVENTIONS if such approval is required for sale of MATERIAL or UNITS, including
any required filing of an application for such approval, made in good faith and
in a timely manner. Any such application for Food and Drug Administration
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approval of any UNITS or MATERIAL, if required, shall be the LICENSEE'S sole
responsibility and shall be made at the LICENSEE'S expense. Notwithstanding the
foregoing, LICENSOR shall cooperate with LICENSEE in connection with any such
applications and approvals by providing pre-existing documents, records and data
reasonably required in connection therewith. LICENSEE also agrees to use its
best efforts to commercialize UNITS and MATERIALS promptly.
3. If LICENSEE does market UNITS in fulfillment of the above
paragraph, LICENSEE may, at its option, extend the period of exclusivity by four
year increments from the date on which exclusivity would otherwise expire, as to
any of the product categories of dentifrices, confections, foods and chewing
gums or all product categories, but only if the following conditions have been
met as to the relevant product category or categories:
(a) LICENSEE must have sold MATERIAL and/or UNITS generating
more than $17,000 in royalties in the final year of the
preceding exclusivity period; and
(b) LICENSEE must have made all royalty payments and reports
on time as provided in Article II of this AGREEMENT,
maintained and permitted inspection of sales records as
provided in Article III hereof, and met all other
obligations specified in this AGREEMENT.
Notwithstanding LICENSEE'S failure to meet one or more of these conditions,
LICENSOR may, at its sole option, extend the period of exclusivity if it so
chooses.
4. LICENSOR retains at all times the right to make and use the
INVENTIONS for research and testing purposes, including laboratory research and
clinical trials, but does not retain the right to commercially sell or use the
invention during the period of exclusivity of this license.
5. LICENSOR will promptly notify LICENSEE of the grant of a
non-exclusive license under any U.S. PATENT FILING (as defined above) to another
party. If the terms of said license to said other party are more favorable than
those of the present AGREEMENT, those terms will be substituted in their
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entirety, at LICENSEE'S option, for analogous terms of the present AGREEMENT,
provided comparable consideration has been or is provided for the new terms.
6. LICENSOR and LICENSEE agree that the license hereunder extends
automatically to use and/or resale of MATERIAL and UNITS by any customer of
LICENSEE, provided LICENSEE shall have paid a royalty in accordance with ARTICLE
II, and to the use of the INVENTIONS by any customer of LICENSEE provided
LICENSEE shall have paid royalty in accordance with ARTICLE II.
ARTICLE II -- ROYALTY
1. With respect to any aspect of the INVENTIONS, LICENSEE agrees to
pay LICENSOR at a rate of seven percent (7%) on the basis specified hereinafter.
In no event shall the total royalty rate on any product sold by LICENSEE
pursuant to this AGREEMENT exceed seven percent (7%), regardless of whether the
product is covered by one or more of the claims of the licensed PATENTS and
APPLICATION.
2. The royalty due from LICENSEE to LICENSOR shall be calculated as
the applicable percentage of the net sales corresponding to UNITS made, sold,
used, or otherwise disposed of by LICENSEE. Only one royalty payment shall be
made for UNITS regardless of the number of claims readable thereon. Only one
royalty payment shall be made for UNITS sold under provisions of this AGREEMENT
and under the provision of any other license agreement between LICENSOR and
LICENSEE relating to the INVENTIONS.
3. No royalties shall be due or owing on UNITS sold to the United
States government.
4. "Net sales" shall mean the dollar value actually received or
invoiced by LICENSEE in connection with sales of UNITS sold under the provisions
of this AGREEMENT, excluding all amounts of freight, insurance, returns,
refunds, trade and cash discounts and sales, excise, value-added and other
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<PAGE> 6
taxes, tariffs and duties (other than income taxes of LICENSEE). In the case of
UNITS that are packaged and sold together with items other than MATERIAL, "net
sales" shall be based on an apportionment between the net sales value of the
MATERIAL alone and the net sales value of UNITS. Notwithstanding the preceding
sentence, in no event shall the basis for royalty payments be less than fifty
percent (50%) of the net sales of any items packaged and sold together which
contain any material.
5. The dollar sales used in computing "net sales" shall be
determined by regular commercial practices in pricing of products of the same
class to a bona fide customer and shall include everything which is normally
covered in the prices of such goods. The term "customers" shall not include
divisions, subsidiaries, or related companies of LICENSEE or sales companies
owned or controlled by the LICENSEE. The term "related company" shall mean a
United States or foreign corporation more than fifty percent (50%) of the voting
stock of which is now or hereafter owned by the LICENSEE or vice versa, provided
that any entity which would be a related company by reason of the foregoing
shall be considered a related company for the purposes of this Agreement only
for so long as more than fifty percent (50%) of the voting stock thereof is
owned by the LICENSEE, or vice versa.
6. With respect to UNITS or MATERIAL used internally rather than
sold by LICENSEE, the "net sales" shall be determined by multiplying the number
of UNITS used internally by the LICENSEE, by the average net sales price per
UNIT sold by LICENSEE during the accounting period last so sold, or in the event
that discrete UNITS cannot be readily identified, by multiplying the number of
pounds of MATERIAL used internally by the LICENSEE by the average net sales
price per pound of the same MATERIAL sold by LICENSEE during the accounting
period last so sold. In the event there shall have been no such previous sales,
"net sales" shall be the fair market value of the UNITS OR MATERIAL so used.
With respect to Units or MATERIALS that are given away by LICENSEE as
promotional samples, no royalties shall be due for such UNITS or MATERIAL.
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7. LICENSEE agrees that a minimum royalty of $3,000 shall be due for
1992, regardless of sales or UNITS of MATERIAL. For the year 1993, royalty
payment shall be not less than a minimum of $5,000. For all subsequent years of
this AGREEMENT, including renewal periods, the royalty shall be not less than
$7,000 per year.
8. A nonrefundable down payment of $5,000.00, not creditable against
other royalty obligations, and, in particular, not creditable against the first
annual minimum royalty payment due, shall be due from LICENSEE to LICENSOR
within 10 days of execution hereof.
ARTICLE III - RECORDS
1. LICENSEE agrees that it will keep records showing the production,
use and sales of all MATERIAL and/or UNITS coming within the scope of this
AGREEMENT in sufficient detail to enable the royalties payable hereunder to
LICENSOR to be determined, and in particular shall obtain and keep records of
the information necessary to determine net sales. LICENSEE agrees to permit a
reputable Certified Public Accountant, designated by LICENSOR and at LICENSOR's
expense, to inspect said records as often as may reasonably be required, upon
notice and during normal business hours.
2. LICENSEE agrees that on or before the last day of January, April,
July, and October of each year during the term of this AGREEMENT, it will
furnish LICENSOR with a written statement specifying the amount of net sales of
UNITS and/or MATERIAL sold or used by LICENSEE during the preceding quarter.
Such statements shall be accompanied by the payment of royalty shown thereby to
be due LICENSOR. The minimum annual royalty for the preceding calendar year
(where applicable) shall be paid annually with the January quarterly report and
payment.
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ARTICLE IV - TERMINATION
1. Unless terminated as herein provided, this AGREEMENT
shall extend for the term of the last to expire of any patent
licensed hereunder in the United States.
2. In the event of failure of LICENSEE to make any payment to
LICENSOR when due hereunder, or of LICENSEE to comply with any other obligation
imposed on it by this AGREEMENT, LICENSOR may at its election at any time
thereafter terminate this AGREEMENT by not less than thirty (30) days written
notice specifying such failure, unless LICENSEE, within thirty (30) days from
the date of service of such notice, shall have rectified all breaches specified
in such notice.
3. LICENSEE may at its election at any time by no less than ninety
(90) days written notice surrender and terminate all rights and licenses
acquired hereunder by it under said INVENTIONS, provided that such surrender and
termination shall not relieve LICENSEE of its obligations to pay any royalty
accrued hereunder prior to such termination date. At termination, annual minimum
royalty required under Article II, Paragraph 7, shall be applied on a pro-rata
basis.
4. No royalty shall be due with respect to any patent
after its expiration.
5. Termination of this AGREEMENT for any cause shall not relieve
LICENSEE from any obligation hereunder including obligation to make its terminal
report, or relieve it from its liability for payment of any royalties prior to
the date of such termination; such terminations shall not prejudice the right of
LICENSOR to recover any royalties or any other sums due or accrued at the time
of or as a result of such termination; nor shall it prejudice any cause of
action or claim of either party accrued or to accrue on account of any legal
wrong, breach, or default of the other party, not shall it prejudice the right
of LICENSOR to conduct a final audit of the records of LICENSEE in accordance
with the provisions hereof.
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ARTICLE V - INFRINGEMENTS
1. The LICENSOR and LICENSEE shall promptly notify the other in
writing of any conduct by any third party, other than another licensee of the
LICENSOR, with respect to the INVENTIONS or MATERIAL or UNITS which the LICENSEE
or LICENSOR, respectively, is aware may constitute infringement of the PATENTS
or which would constitute infringement of the 1992 APPLICATION were a patent to
issue on said APPLICATION. LICENSOR may take legal action against such
infringement if LICENSOR, in its sole discretion, deems legal actions necessary.
If LICENSOR deems legal action to be necessary, LICENSEE shall assist LICENSOR
in said legal action and shall bear its own expense in this regard, and LICENSOR
shall take reasonable steps to keep LICENSEE advised of the progress of the
lawsuit. If LICENSOR does not exercise its option to bring legal action against
alleged infringers, LICENSEE may bring legal action at its own expense and
without any set-off against royalties paid previously or later due.
2. If any claim of any patent falling within the definition of the
INVENTIONS is held invalid by the decision of a court of competent jurisdiction
from which no appeal is or can be taken, the LICENSEE shall thereafter be
relieved of the obligation to pay royalties with respect to any embodiment of
the INVENTIONS which is covered only by such claim or claims as may be so held
invalid.
3. It is hereby understood and agreed that if, by reason of practice
of the INVENTIONS with respect to which the LICENSEE is required to pay
royalties to the LICENSOR in accordance with the provisions of this AGREEMENT,
LICENSEE shall be charged with infringement of any United States patent owned or
controlled by a third party, the LICENSEE will consult with the LICENSOR with
regard to resolving such charge of infringement by redesign of the MATERIAL or
UNITS otherwise. If upon such consultation, it is agreed that no commercially
viable redesign can be made to avoid the charge of infringement, the LICENSEE
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shall have the option of terminating this AGREEMENT, the termination being
effective as of that date.
ARTICLE VI - NOTICE
LICENSEE shall apply the appropriate patent notice to all patented
MATERIAL and UNITS sold by it in accordance with the provisions of Title 35,
Section 287, of the United States Patent Statutes.
ARTICLE VII - APPLICABLE LAW
The construction and performance of this AGREEMENT shall be governed
by the laws of the State of Illinois, United States of America.
ARTICLE VIII - SUBSEQUENT DEVELOPMENTS
1. It is anticipated that LICENSOR and LICENSEE, jointly and
severally, may pursue development work that relates to remineralization of
dental tissue, via dentifrices, confections, foods or chewing gums, or to the
commercialization or regulatory approval of MATERIAL or UNITS embodying one or
more of the INVENTIONS or that otherwise relates to the MATERIAL or INVENTIONS.
Any improvements made subsequent to the date of this AGREEMENT, by either party
or both parties jointly, which require the use of or are used with MATERIAL,
shall be defined as "FIELD DEVELOPMENTS." FIELD DEVELOPMENTS, as well as any
inventions or improvements made jointly by the parties that do not relate to
such remineralization or to commercialization of INVENTIONS or MATERIAL (such
jointly unrelated improvements and inventions, "JOINT NON-FIELD DEVELOPMENTS")
whether or not patentable, shall be and remain the sole property of LICENSOR,
even though such developmental work may make use of samples or requested data
provided by or through LICENSEE. LICENSEE shall sign such applications,
assignments and other instruments and maintain such level of confidentiality as
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the LICENSOR may reasonably request in order to achieve such industrial or
intellectual property status as the LICENSOR shall deem appropriate and to
perfect the assignment of the right so granted by the LICENSEE to the LICENSOR.
If LICENSOR declines or fails to file a patent application in connection with
any patentable FIELD or JOINT NON- FIELD DEVELOPMENT referred to herein, the
LICENSEE may prepare, file and prosecute such an application in the name of
LICENSOR, and LICENSOR shall cooperate with LICENSEE and sign such applications
and other instruments as may be necessary in connection therewith, unless
LICENSOR declines any ownership rights in the invention and any ensuing patents.
2. Any FIELD DEVELOPMENTS which are made by LICENSOR alone and which
are patentable shall be licensed to LICENSEE under the terms of this Agreement.
3. Any FIELD DEVELOPMENTS which are patentable and made by LICENSEE
alone or LICENSEE and LICENSOR jointly, or any FIELD DEVELOPMENTS in the form of
unpatentable know-how made by either or both parties, and any JOINT NON-FIELD
DEVELOPMENTS shall be licensed by LICENSOR to LICENSEE under a free and
perpetual license to make, have made, sell, use, induce use of and/or contribute
to the use of these FIELD DEVELOPMENTS and JOINT NON-FIELD DEVELOPMENTS, subject
to those rights granted under the GOVERNMENT LICENSES, and subject to the right
of LICENSOR to make and use these for research and testing purposes, including
laboratory research and clinical trials, and subject to the unrestricted right
of LICENSOR to grant other licenses for other types of products. This free
license shall not be assigned, transferred or sublicensed by LICENSEE except
with the prior express written consent of LICENSOR. Such permission shall be
granted or withheld at the sole option of LICENSOR.
4. As to only those FIELD DEVELOPMENTS and JOINT NON-FIELD
DEVELOPMENTS made at least in part by LICENSEE, LICENSEE shall have a veto power
over granting of a license by LICENSOR to any party. As to this same class of
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FIELD DEVELOPMENTS and JOINT NON-FIELD DEVELOPMENTS only, in the event LICENSOR
issues a license to any third party for the production, use or sale of
improvements, LICENSOR shall promptly notify LICENSEE of such license and shall
agree to pay LICENSEE one-half of the royalty collected under such license.
5. In the last 30 days of each calendar year of this AGREEMENT, each
of LICENSEE, and LICENSOR if so requested by LICENSEE at the time, shall provide
to the other a certification stating that the responsible party has investigated
as to whether or not there have been advances, developments, or improvements
made during the year with respect to the INVENTIONS or their product, sale, or
use, or inducement of or contribution to the production or use, of the
INVENTIONS, or otherwise falling within the description of the first paragraph
of this article, and if there has been any such advances, development, or
improvement, a statement as to whether or not any or all of it may be patentable
under the standards of patentability of the Patent Act of 1952, 35 U.S.C.,
Section 1. In the event that such certification shall indicate the presence of
such patentable matter for the period in question, the certifying party shall
promptly deliver to the other party all information, including all documentation
then in the certifying party's possession pertinent to such patentable matter,
including information such as will permit the effective transfer of the
patentable matter to the LICENSOR.
6. For the purposes of this Article, joint or sole
development shall be determined in the same manner as inventorship under
35 U.S.C. Section 116.
ARTICLE IX - MISCELLANEOUS
1. To protect the rights of privacy and/or publicity of LICENSOR's
inventors, assignors, employees, officers and directors; to protect the
trademark and tradename rights of LICENSOR and its affiliates; to prevent
confusion regarding sponsorship of any given product or technique of LICENSEE;
and to preclude imposition of any warranty, guarantee or other liability or
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potential liability upon LICENSOR, its employees, assignors, affiliates,
officers, and directors; LICENSEE agrees that aside from (1) the patent notice
provided for by 35 U.S.C. Section 287, (2) any rights which may be conferred by
certification of a product by an affiliate of LICENSOR, or (3) an express prior
written consent of LICENSOR, LICENSEE will not use the name of any employee,
assignor, officer or director or the business name or identification of LICENSOR
or its affiliates, or use any certification mark of LICENSOR or its affiliates,
in advertising or promotional materials, educational materials, publications,
fliers, brochures and other public descriptions relating to UNIT(S) and/or
MATERIAL(S).
2. LICENSOR does not require status as an undisclosed principal in
this AGREEMENT, and may be identified by LICENSEE, on a private, individual
basis to potential investors in LICENSEE prior to commercialization of UNITS or
MATERIALS.
3. LICENSEE may, at its option, seek to pursue patenting in Canada
of one or more aspect of the INVENTIONS. If LICENSEE chooses to proceed in this
manner, it will bear all costs of patent procurement, including but not limited
to attorneys' fees and government fees, without set-off against royalty payments
due to LICENSOR. LICENSOR, as owner of the inventions, will agree to consult
with LICENSEE regarding the manner of patent prosecution, but retains the
authority to make all final decisions controlling such patent prosecution. If
prosecution of a Canadian patent application or applications is initiated, such
application and any patents issuing thereon will be licensed to LICENSEE under
terms which parallel this AGREEMENT to the extent to which they are permissible
under the Canadian law. If any terms of this AGREEMENT are improper under
controlling Canadian law, LICENSOR and LICENSEE will consult with each other in
good faith and attempt to modify the Canadian AGREEMENT so that it is
satisfactory to both parties and acceptable to the Canadian authorities.
LICENSOR also agrees to offer to LICENSEE the option of obtaining licensed
patent rights in other foreign countries under terms yet to be determined,
before such rights are offered to other parties.
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4. No waiver by either LICENSEE or LICENSOR, expressed or implied,
of any breach of any term, condition, or obligation of this AGREEMENT by the
other shall be construed as a waiver of any subsequent breach of that term,
condition, or obligation, or any other term, condition or obligation of the
AGREEMENT of the same or different nature.
5. If it should be determined that one or more portions of this
AGREEMENT is or are invalid, such invalidation shall not operate to relieve the
parties hereto of their rights and obligations with respect to each other under
the remaining portions of this AGREEMENT.
6. This AGREEMENT shall inure to the benefit of and will be binding
upon all legal representatives of LICENSOR and upon the legal representatives of
LICENSEE. This AGREEMENT shall not be assignable without the prior written
permission of LICENSOR, except that LICENSEE may assign the license to any other
company in which LICENSEE or Dr. Steven R. Fox owns more than 50% of the voting
stock. Written permission of LICENSOR for other assignments will not be
unreasonably withheld.
7. This AGREEMENT may not be modified by either party, in whole or
in part, except by an additional agreement in writing signed by LICENSOR and
LICENSEE and referring to this AGREEMENT.
8. This Restated Patent License Agreement restates, amends and
entirely supersedes the Patent License Agreement dated as of June 24, 1992,
between LICENSOR and LICENSEE, which prior Patent License Agreement is hereby
terminated.
ARTICLE X - SERVICE
Any notice, payment or statement required to be served herein shall
be sent by Registered or Certified Mail and addressed as follows or to such
other addresses as either party designates from time to time by written notice
to the other:
LICENSEE: Enamelon Inc.
15 Kimball Avenue
Yonkers, New York 10704
Attention: Dr. Steven Fox
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with a copy to:
Snow Becker Krauss P.C.
605 Third Avenue
New York, New York 10158
Attention: Jack Becker, Esq.
LICENSOR: American Dental Association
Health Foundation
211 East Chicago Avenue
Chicago, Illinois 60611
with a copy to:
Allegretti & Witcoff, Ltd.
Ten South Wacker Drive
Chicago, Illinois 60606
Attention: Jon O. Nelson, Esq.
Jamie S. Smith, Esq.
IN WITNESS WHEREOF, the parties have respectively caused this
instrument to be executed by an official thereunto duly authorized and their
respective signatures to be hereunto affixed as of the day and year indicated.
AMERICAN DENTAL ASSOCIATION
HEALTH FOUNDATION
By:_____________________________________
Date:___________________________________
Title:__________________________________
ENAMELON INC.
By:_____________________________________
Date:___________________________________
Title:__________________________________
<PAGE> 1
AMENDMENT AGREEMENT
-------------------
Amendment Agreement dated as of June 12, 1995 between Enamelon, Inc., a
Delaware corporation (the "LICENSEE"), and the American Dental Association
Health Foundation, a not-for-profit corporation organized under the law of
Illinois (the "LICENSOR").
Preliminary Statements
----------------------
A. LICENSOR and LICENSEE are parties to a restated Patent License Agreement
dated June 24, 1992, under which LICENSOR granted LICENSEE a license to make,
use and sell certain INVENTIONS in dentifrices, confections, foods and chewing
gums in the United States (the "PATENT LICENSE AGREEMENT").
B. In the course of developing the business and products of the LICENSEE
pursuant to the PATENT LICENSE AGREEMENT, it has become apparent that certain
amendments to such agreement are advisable and beneficial to both parties,
including modification of royalty provisions. Both parties wish to agree to such
amendments, on the terms set forth in this Agreement.
In consideration of the foregoing and mutual covenants in the Agreement,
the parties hereto hereby agree as follows.
Section 1. The fourth paragraph of the PATENT LICENSE AGREEMENT that begins
with the word "WHEREAS," which contains the definition of "MATERIAL," shall be
amended to add the word "or" at the end of item (b) of such paragraph and to
delete item (d) in its entirety from such paragraph.
Section 2. The fifth paragraph of the PATENT LICENSE AGREEMENT that begins
with the word "WHEREAS," which contains the definition of "UNITS," shall be
amended to read in its entirety as follows:
"WHEREAS, units of sale or kits containing MATERIAL as an essential element
thereof, including any container, package, dispensing equipment (except for
reusable dispensing equipment), storage trays or instructional literature
for any of the materials, whether or not such units of sale or kits contain
other items as well, are referred to herein below as "UNITS".
Section 3. Article II, Section 1 of the PATENT LICENSE AGREEMENT shall be
amended to read in its entirety as follows:
"1. Except as provided in Article II, Section 9, with respect to any aspect
of the INVENTIONS, LICENSEE agrees to pay LICENSOR at a rate of four percent
(4%) on the basis specified hereinafter. In no event shall the total royalty
rate on any product sold by LICENSEE
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pursuant to this Agreement exceed four percent (4%), regardless of whether the
product is covered by one or more of the claims of the licensed PATENTS and
APPLICATION."
Section 4. The first sentence of Article II, Section 2 of the PATENT
LICENSE AGREEMENT shall be amended to read in its entirely as follows:
"Except as provided by Article II, Section 9, the royalty due from LICENSEE
to LICENSOR shall be calculated as the applicable percentage of the net
sales corresponding to UNITS made, sold or otherwise disposed of by
LICENSEE or by a "JOINT VENTURE".
Section 5. The first sentence of Article II, Section 4 of the PATENT
LICENSE AGREEMENT shall be amended to read in its entirety as follows:
"4. 'NET SALES' shall mean the dollar value actually received or invoiced
by LICENSEE or by a JOINT VENTURE in connection with sales of UNITS sold
under the provisions of this Agreement, excluding all amounts of freight,
insurance, returns, refunds, trade and cash discounts and sales, excise,
value-added and other taxes, tariffs and duties (other than income taxes of
LICENSEE)."
Section 6. Article II, Section 4 of the PATENT LICENSE AGREEMENT shall be
amended by adding the following sentences to the end of such section:
"'JOINT VENTURE' shall mean a partnership, corporation, limited liability
company or other legal entity in connection with which (i) LICENSEE owns
capital stock or partnership or other equity interests of such legal entity
and a portion of such stock of interest is owned by another entity and (ii)
UNITS are sold in the name of or for the account of such legal entity. A
license by LICENSEE to a JOINT VENTURE shall be deemed to be an assignment,
transfer or sublicense requiring consent of LICENSOR under Article I,
Section 1 hereof or otherwise, and a JOINT VENTURE shall be permitted to be
granted such a license by LICENSEE and to make, have made, sell, use,
induce use of and/or contribute to use of the INVENTIONS pursuant to
Article I, Section 1, subject to the terms of this Agreement."
Section 7. The second sentence of Article II, Section 5 of the PATENT
LICENSE AGREEMENT shall be amended to read in its entirety as follows:
"The term 'customers' shall not include divisions, subsidiaries, JOINT
VENTURES or related companies of LICENSEE or sales companies owned or
controlled by the LICENSEE.
Section 8. Article II of the PATENT LICENSE AGREEMENT shall be amended by
adding thereto a new Section 9, which shall read in its entirety as follows:
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"9. In those instances where LICENSOR has approved and LICENSEE has entered
into a sublicense of the license hereunder, LICENSEE agrees to pay and
LICENSOR agrees to accept in consideration for this license 50% of the
gross income of the LICENSEE resulting from such sublicense and actually
received LICENSOR. Gross income shall include all royalties, whether
sales-based, minimum or calculated on another basis, or other consideration
paid by sublicensee to LICENSEE based on sales of UNITS made, sold, used or
otherwise disposed of by the sublicensee, but shall not include any fees,
milestone or progress payments or other income or amounts received by
LICENSEE in connection with research, testing, trials, government approval,
regulatory approval or development or joint marketing of any technology or
product."
Section 9. LICENSOR shall keep confidential and shall not disclose to any
third party any plans or business information of LICENSEE, any information
relating to vendors, suppliers or customers of LICENSEE, any formulas,
processes, ingredients, methods, trade secrets, know-how, notebooks, research,
technical or scientific information, reports or other information provided by
LICENSEE to LICENSOR and any information relating to Field Developments or Joint
Non-Field Developments that are made by LICENSEE or that are made jointly by
LICENSEE and LICENSOR. The provisions of this Section 9 shall not apply any
information (i) that was known to LICENSOR before the disclosure of such
information by LICENSEE and that was not received by LICENSOR in violation of
any obligation of confidentiality benefiting LICENSEE, (ii) that was generally
publicly known prior to the disclosure by LICENSEE to LICENSOR or that, after
such disclosure, becomes generally publicly known through no act or failure to
act of LICENSOR or (iii) that was made known to LICENSOR by a third party
entitled to disclose the information to LICENSOR, which third party did not
derive the information directly or indirectly from LICENSEE and which third
party was not subject to any restrictions on disclosure benefiting LICENSEE.
Section 10. The provisions of Article IX, Sections 4, 5, 6 and 7, and of
Article X are hereby incorporated in and made part of this Agreement as though
set forth in their entirety herein. Capitalized terms in this Agreement shall
have the meanings defined in the PATIENT LICENSE AGREEMENT, unless otherwise
defined herein.
In witness whereof, the parties have executed this Agreement as of the date
first set forth above.
ENAMELON, INC.
By /s/___________________________C.E.O.
AMERICAN DENTAL ASSOCIATION
HEALTH FOUNDATION
By /s/_________________________________
3
<PAGE> 4
FOREIGN LICENSE
---------------
AMENDMENT AGREEMENT
-------------------
Amendment Agreement dated as of June 14, 1995 between Enamelon, Inc., a
Delaware corporation (the "LICENSEE"), and the American Dental Association
Health Foundation, a not-for-profit corporation organized under the law of
Illinois (the "LICENSOR").
Preliminary Statements
----------------------
A. LICENSOR and LICENSEE are parties to a restated FOREIGN PATENT LICENSE
AGREEMENT dated November 18, 1992, under which LICENSOR granted LICENSEE a
license to make, use and sell certain inventions exclusively in dentifrices,
confections, foods and chewing gums and non-exclusively in other fields in
specified territories outside the Unites States (the "LICENSE AGREEMENT").
B. In the course of developing the business and products of the LICENSEE
pursuant to the LICENSE AGREEMENT, it has become apparent that certain
amendments to such agreement are advisable and beneficial to both parties,
including modification of royalty provisions. Both parties wish to agree to such
amendments, on the terms set forth in this Agreement.
In consideration of the foregoing and mutual covenants in this Agreement,
the parties hereto hereby agree as follows.
Section 1. Article I, Section 2 of the LICENSE AGREEMENT, which contains
the definition of "MATERIAL," shall be amended to add the word "or" at the end
of item (b) of such Section and to delete item (d) in its entirety from such
Section.
Section 2. Article I, Section 3 of the LICENSE AGREEMENT, which contains
the definition of "UNITS," shall be amended to read in its entirety as follows:
"3. As used herein, 'UNITS' is defined as units of sale or kits containing
MATERIAL as an essential element thereof, including any container, package,
dispensing equipment (except for reusable dispensing equipment), storage
trays, display trays or instructional literature for any of the Materials,
whether or not such units of sale or kits contain other items as well;"
Section 3. Article III, Section 1 of the LICENSE AGREEMENT shall be amended
to read in its entirety as follows:
"1. In consideration of this license, LICENSEE agrees to pay LICENSOR a
quarterly royalty payment of 7% of the basis specified hereinafter, payable
for each Calendar
4
<PAGE> 5
Quarter within one month after the end of that Calendar Quarter; provided,
however, that the quarterly royalty payment payable by LICENSEE to LICENSOR
in connection with net sales corresponding to UNITS made, sold, used or
otherwise disposed of by a JOINT VENTURE shall be 4%."
Section 4. The first sentence of Article III, Section 2 of the LICENSE
AGREEMENT shall be amended to read in its entirely as follows:
"Except in cases of approved foreign sublicenses, the royalty due from
LICENSEE to LICENSOR shall be calculated as the applicable percentage of
the net sales corresponding to UNITS made, sold, used or otherwise disposed
of by LICENSEE or by a JOINT VENTURE."
Section 5. The first and second sentences of Article III, Section 3 of the
LICENSE AGREEMENT shall be amended to read in their entirety as follows:
"4. 'Net sales' shall mean the value (in the currency used for payment)
actually received or invoiced by LICENSEE or by a JOINT VENTURE from
customers in connection with sales of UNITS sold under the provisions of
this Agreement, excluding all amounts of freight, insurance, returns,
refunds, trade and cash discounts and sales, excise, value-added and other
taxes, tariffs and duties (other than income taxes of Licensee). The term
'customers,' shall not include divisions, JOINT VENTURES or RELATED
COMPANIES of LICENSEE."
Section 6. Article III, Section 3 of the License Agreement shall be further
amended by adding the following sentences to the end of such Section:
"'JOINT VENTURE' shall mean a partnership, corporation, limited liability
company or other legal entity in connection with which (i) LICENSEE owns
capital stock or partnership or other equity interests of such legal entity
and a portion of such stock or interests is owned by another entity and
(ii) UNITS are sold in the name of or for the account of such legal
entity. A license by LICENSEE to a JOINT VENTURE shall be deemed to be an
assignment, transfer or sublicense requiring consent of LICENSOR under
Article II, Section 2 hereof or otherwise, and a JOINT VENTURE shall be
permitted to be granted such a license by LICENSEE and to make, have made,
sell, use, induce use of and/or contribute to use of the INVENTIONS
pursuant to Article II, Section 1, subject to the terms of this Agreement."
Section 7. The first and second sentence of Article III, Section 9 of the
LICENSE AGREEMENT shall be amended to read in their entirety as follows:
"9. In those instances where (1) LICENSOR has approved a foreign sublicense
under a Foreign Application or Foreign Patent, and (2) LICENSEE or a
sublicensee of
<PAGE> 6
5
LICENSEE has paid or undertakes to continue to pay all costs of obtaining,
maintaining and enforcing the Foreign Application or Foreign Patent,
LICENSEE agrees to pay and LICENSOR agrees to accept in consideration for
this license 25% of the Gross income of LICENSEE resulting from such
sublicense and actually received by LICENSEE. Gross income shall include
all royalties, whether sales-based, minimum or calculated on another basis,
or other consideration paid by sublicenses to LICENSEE based on sales of
UNITS made, sold, used or otherwise disposed of by the sublicense, but
shall not include any fees, milestone or progress payments or other income
or amounts received by LICENSEE. In connection with research, testing,
trials, government approval, regulatory approval or development or joint
marketing of any technology or product."
Section 8. Licensor shall keep confidential and shall not disclose to any
third party any plans or business information of LICENSEE, any information
relating to vendors, suppliers or customers of LICENSEE, any formulas,
processes, ingredients, methods, trade secrets, know-how, notebooks research,
technical or scientific information relating to Field Developments or Joint
Non-Field Developments that are made by LICENSEE or that are made jointly by
LICENSEE and LICENSOR. The provisions of this Section 9 shall not apply to any
information (i) that was not known to LICENSOR before the disclosure of such
information by LICENSEE and that was not received by LICENSOR in violation of
any obligation of confidentiality benefiting LICENSEE, (ii) that was generally
publicly known prior to the disclosure by LICENSEE to LICENSOR or that, after
such disclosure, becomes generally publicly known through no act or failure to
act of LICENSOR or (iii) that was made known to LICENSOR by a third party
entitled to disclose the information to LICENSOR, which third party did not
derive the information directly or indirectly from LICENSEE and which third
party was not subject to any restrictions on disclosure benefiting LICENSEE.
Section 9. The provisions of Article VIII, Sections 3, 4, 5 and 6, and of
Article IX are hereby incorporated in and made a part of the Agreement as though
set forth in their entirety herein. Capitalized terms in this Agreement shall
have the meanings defined in the LICENSE AGREEMENT, unless otherwise defined
herein.
In witness whereof, the parties have executed this Agreement as of
the date first set forth above.
ENAMELON, INC.
By /s/______________________________C.E.O.
AMERICAN DENTAL ASSOCIATION
HEALTH FOUNDATION
By /s/_________________________________DDS
6
<PAGE> 1
RESTATED FOREIGN PATENT LICENSE AGREEMENT
-----------------------------------------
This AGREEMENT, effective and dated from the 18th day of November, 1992, by
and between ENAMELON INC. (hereinafter referred to as "LICENSEE") and the
AMERICAN DENTAL ASSOCIATION HEALTH FOUNDATION, a not-for-profit corporation
under the laws of the State of Illinois, whose address for the purposes of this
AGREEMENT is 211 East Chicago Avenue, Chicago, Illinois 60611 (hereinafter
referred to as "LICENSOR"), is a restatement and partial modification of the
Foreign Patent License Agreement executed by the parties effective and dated as
of November 18, 1992.
WITNESSETH:
WHEREAS, LICENSOR is the sole owner of the entire right, title and interest
of United States Patent No. 5,037,639, entitled Methods and Compositions for
Mineralizing Calcified Tissues, granted August 6, 1991; United States Patent No.
5,268,167, entitled Methods and Compositions for Mineralizing and Fluoridating
Calcified Tissues, granted December 7, 1993, (hereinafter "U.S. PATENTS"); and a
pending application Serial No. 07/936,068 entitled Methods and Compositions for
Mineralizing and Fluoridating Calcified Tissues, filed August 26, 1992,
(hereinafter "1992 U.S. APPLICATION") (the U.S. PATENTS and 1992 U.S.
APPLICATION collectively, the "U.S. PATENT FILINGS");
WHEREAS, LICENSOR has the sole right to file patent applications in
designated Patent Cooperation Treaty countries (hereinafter "PCT"), and in
Argentina, Taiwan, the Peoples Republic of China, India, Mexico and Venezuela
and other countries listed on Exhibit A that correspond to the above-identified
U.S. Patent No. 5,268,167 and 1992 U.S. APPLICATION (hereinafter "FOREIGN
APPLICATIONS") and to be the sole owner of the entire right, title and interest
of such FOREIGN APPLICATIONS and warrants that it has the right to grant an
exclusive license in those countries under any such FOREIGN APPLICATIONS to the
extent
1
<PAGE> 2
permitted by law in each jurisdiction, free of any license, shop right or
assignment to others except those rights that have been or will be granted to
the United States government by licenses in the form of the license attached
hereto as Exhibit B;
WHEREAS, LICENSEE desires to acquire a license to make, have made, use,
induce use of and/or contribute to use of the subject matter claimed in the
FOREIGN APPLICATIONS to be filed in certain foreign countries and LICENSOR is
willing to grant the same under the conditions set forth hereinafter;
NOW, THEREFORE, in consideration of the promises and the mutual convenants
of this AGREEMENT, the parties hereto agree as follows:
ARTICLE I: DEFINITIONS
----------------------
1. As used herein, "INVENTIONS" is defined as the subject matter covered by
the claims of the above-identified FOREIGN APPLICATIONS or any patents issuing
thereon (hereinafter "FOREIGN PATENTS"), including any continuations, divisions,
reexaminations, extensions or reissues thereof;
2. As used herein, "MATERIAL" is defined as:
(a) the materials claimed as such in any of said FOREIGN APPLICATIONS
or FOREIGN PATENTS, or any continuations, divisions,
reexaminations, extensions or reissues thereof;
(b) the materials not claimed as such but constituting components in
claimed compositions or articles of manufacture, when such
components are used as claimed or sold with inducement to use as
claimed, or with knowledge that they have no substantial
noninfringing use;
(c) the materials not claimed as such but recited as components to be
used in the practice of a claimed method, when such components
are used as claimed or sold with inducement to use as claimed or
with knowledge that they have no substantial noninfringing use,
or
2
<PAGE> 3
(d) any container, package, dispensing equipment (except for reusable
dispensing equipment), storage trays, display trays or
instructional literature for any of the materials listed above;
3. As used herein, "UNITS" is defined as units of sale or kits containing
MATERIAL as an essential element thereof, whether or not they contain other
items as well;
4. As used herein, "LICENSED TERRITORY" means the countries, territories
and possessions listed on Exhibit A;
5. As used herein, "EXCLUSIVELY LICENSED FIELDS" means dentifrices (namely,
toothpastes, tooth cleansing gels or tooth cleansing powders), confections,
foods and chewing gums embodying MATERIAL;
5.5 As used herein, "NON-EXCLUSIVELY LICENSED FIELDS" means all aspects of
the claimed INVENTIONS other than dentifrices, confections, foods and chewing
gums embodying MATERIAL;
6. As used herein, "RELATED COMPANIES" of a party include: any present or
future PARENT or CONTROLLED COMPANY of such party; and any present or future
CONTROLLED COMPANY of any PARENT of such party.
7. As used herein, a "PARENT" of any party means any corporation, company
or other entity owning over 50% of the voting stock of such party.
8. As used herein, a "CONTROLLED COMPANY" of a party means: (i) any
SUBSIDIARY of such party; or (ii) any corporation, company or other entity, not
a SUBSIDIARY, at least 50% of the voting stock of which is directly or
indirectly owned or controlled by such party, provided such party also has, in
case (ii), either:
(a) the irrevocable right to name a majority of the members of the
governing board of such corporation; or
(b) effective managerial control by virtue of a management agreement
entered into with such corporation.
3
<PAGE> 4
9. As used herein, a "SUBSIDIARY" of a party means a corporation, company
or other entity more than 50% of whose outstanding securities (representing the
right, other than as affected by events of default, to vote for the election of
directors or other governing authorities) are now or hereafter owned or
controlled, directly or indirectly, by such party.
10. As used herein, the term "CALENDAR QUARTER" means each of the three
month periods commencing on January 1, April 1, July 1, or October 1.
NOW, THEREFORE, in consideration of the promises and the mutual convenants
of this AGREEMENT, the parties hereto agree as follows:
ARTICLE II - GRANT
------------------
1. LICENSOR hereby grants and agrees to grant to LICENSEE, during the term
of this AGREEMENT, a license under the above-identified FOREIGN APPLICATIONS and
FOREIGN PATENTS within the LICENSED TERRITORY to make, have made, sell, use,
induce use of and/or contribute to use of the INVENTIONS subject to those rights
that have been or will be granted to the United States government by licenses in
the form of Exhibit B, and subject to any countervailing requirements of
applicable foreign law. In the fields of dentifrices, confections, foods and
chewing gum, LICENSEE'S license shall be exclusive to the extent permitted by
law in each of the LICENSED TERRITORIES, except that LICENSOR retains at all
times for itself and its RELATED COMPANIES the right to make and use the
INVENTIONS for research and testing purposes, including laboratory research and
clinical trials, but not the right to commercially sell or use the invention in
the EXCLUSIVELY LICENSED FIELDS. In all fields of the INVENTIONS other than
dentifrices, chewing gums, confections and foods, the license granted hereunder
shall be non-exclusive.
2. This license shall not be assigned, transferred or sublicensed by
LICENSEE except with the prior express written consent of LICENSOR. Such
permission shall not be unreasonably withheld by LICENSOR.
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<PAGE> 5
3. LICENSEE agrees to use its best efforts to commercialize the INVENTIONS
and promote the sale and/or use of UNITS and/or MATERIAL. As an aspect of this,
LICENSEE agrees to use its best efforts to obtain any necessary governmental
approvals of MATERIAL or UNITS embodying one or more of the INVENTIONS if such
approval is required for contemplated manufacture, use or sale of MATERIAL or
UNITS, including any required filing of an application for such approval, made
in good faith and in a timely manner. Any such application for governmental
approval, if required, shall be LICENSEE'S sole responsibility and shall be made
at LICENSEE'S expense. LICENSEE also agrees to be responsible for securing any
other governmentally required approvals to performance of this AGREEMENT.
Notwithstanding the foregoing, LICENSOR shall cooperate with LICENSEE in
connection with any such approvals and applications by providing pre-existing
documents, records and data reasonably required in connection therewith.
4. With respect to the NON-EXCLUSIVELY LICENSED FIELDS, LICENSOR will
promptly notify LICENSEE of the grant of a non-exclusive license under any of
said FOREIGN APPLICATIONS and/or FOREIGN PATENTS to another party. If the terms
of said license to said other party are more favorable than those of the present
AGREEMENT, those terms may be substituted in their entirety, at LICENSEE'S
option, for analogous terms of the present AGREEMENT, provided comparable
consideration has been or is provided for the new terms, and except that
subsequent non-exclusive licenses shall not be deemed more favorable solely
because they do not require the licensee to in any way fund the procurement or
maintenance of FOREIGN APPLICATIONS or FOREIGN PATENTS.
5. LICENSOR and LICENSEE agree that the license hereunder extends
automatically to use and/or resale of MATERIAL and UNITS by any customer of
LICENSEE, provided LICENSEE shall have paid a royalty in accordance with Article
III, and to the use of the INVENTIONS by any customer of LICENSEE provided
LICENSEE shall have paid a royalty in accordance with Article III.
5
<PAGE> 6
6. LICENSEE shall observe quality standards reasonable in the industry for
the MATERIAL and UNITS commercialized by it. On a quarterly basis simultaneous
with the statement required by Article III, Paragraph (7), LICENSEE shall
deliver to the LICENSOR, at LICENSEE'S expense, one representative sample of
each type of UNIT or MATERIAL made, used, or sold by LICENSEE, to provide the
LICENSOR with an opportunity to evaluate the quality of each such UNIT or
MATERIAL.
7. LICENSEE shall hold harmless, indemnify, and defend LICENSOR and its
affiliates, directors, officers, employees and agents from and against any and
all losses, costs, expenses (including reasonable attorney fees), fees,
liabilities and damages that any of them may suffer as a result of any claim,
demand, lawsuit, cost or judgment arising out of LICENSEE'S activities under
this AGREEMENT, regardless of whether such claims are based in contract or tort
(whether negligence, product liability, strict liability or otherwise) or any
other legal theory.
8. LICENSOR hereby grants LICENSEE an option and right of first refusal for
a limited license under future patents and applications for INVENTIONS and
MATERIAL for all territories not within the LICENSED TERRITORIES or the United
States or its territories or possessions. The option and right of first refusal
hereunder are also limited in that they apply only in the fields of dentifrices,
confections, foods and chewing gums. Before licensing another party in any
territory other than the LICENSED TERRITORIES or the United States under future
patents or patent applications for dentifrices, confections, foods or chewing
gums embodying MATERIAL, LICENSOR shall provide LICENSEE with written notice of
its intention to pursue license negotiations. Within thirty (30) days of receipt
of the notice, LICENSEE must exercise its option and right of first refusal
hereunder. If LICENSEE chooses to accept a license with respect to a territory,
other than the LICENSED TERRITORIES or the United States, it will do so under
terms consistent with the terms of this Agreement. LICENSEE may exercise its
option to obtain a license from LICENSOR on the same terms as
6
<PAGE> 7
this Agreement for a territory or territories other than the LICENSED
TERRITORIES and the United States at any time during the life of the FOREIGN
APPLICATIONS or FOREIGN PATENTS issued thereunder, assuming that LICENSOR has
not granted and exclusive license for the territory after LICENSEE'S failure to
exercise its right of first refusal hereunder.
ARTICLE III - FEE PROVISIONS
----------------------------
1. In consideration of this license, LICENSEE agrees to pay to LICENSOR a
quarterly royalty payment of 7% of the basis specified hereinafter, payable for
each CALENDAR QUARTER within one month after the end of that CALENDAR QUARTER.
2. Except in cases of approved foreign sublicenses, the royalty due from
LICENSEE to LICENSOR shall be calculated as the applicable percentage of the Net
Sales corresponding to UNITS made, sold, used, or otherwise disposed of by
LICENSEE. Only one royalty payment shall be made for UNITS regardless of the
number of claims readable thereon. Only one royalty payment shall be made for
UNITS sold under the provisions of this AGREEMENT and under the provisions of
any other license agreement between LICENSOR and LICENSEE relating to the
INVENTIONS.
3. "Net Sales" shall mean the value (in the currency used for payment)
actually received or invoiced by LICENSEE from customers in connection with
sales of UNITS sold under the provisions of this AGREEMENT, excluding all
amounts of freight, insurance, returns, refunds, trade and cash discounts and
sales, excise, value-added and other taxes, tariffs and duties (other than
income taxes of LICENSEE). The term "customers" shall not include divisions or
RELATED COMPANIES of LICENSEE. In the case of UNITS that are packaged and sold
together with items other than MATERIAL, "net sales" shall be based on an
apportionment between the net sales value of the MATERIAL alone and the net
sales value of the UNITS. Notwithstanding the preceding sentence, in no event
shall the basis for royalty
7
<PAGE> 8
payments be less than fifty percent (50%) of the net sales of any items packaged
and sold together which contain any MATERIAL.
4. With respect to UNITS or MATERIAL used internally rather than sold by
LICENSEE, the "net sales" shall be determined by multiplying the number of UNITS
used internally by the LICENSEE by the average net sales price per UNIT sold by
LICENSEE during the accounting period last so sold, or in the event that
discrete UNITS cannot be readily identified, by multiplying the number of pounds
of MATERIAL used internally by the LICENSEE by the average net sales price per
pound of the same MATERIAL sold by LICENSEE during the accounting period last so
sold. In the event there shall have been no such previous sales, "net sales"
shall be the fair market value of the UNITS or MATERIAL so used. With respect to
UNITS or MATERIAL that are given away by LICENSEE as promotional samples, no
royalties shall be due for such UNITS or MATERIAL.
5. All payments shall be made in United States dollars at the rate of
exchange prevailing on the last day of the CALENDAR QUARTER for which the
payment is made.
6. No royalties shall be due or owing on UNITS sold to the United States
government.
7. LICENSEE agrees that it will keep records showing the production, use,
and sales of all MATERIAL and/or UNITS coming within the scope of this AGREEMENT
in sufficient detail to enable the royalties payable thereunder to LICENSOR to
be determined, and in particular shall obtain and keep records of the
information necessary to determine net sales. The records shall be open for
inspection by an accountant selected by the LICENSOR, during all reasonable
business hours, at the expense of LICENSOR, with the results of the audit to be
made available to both parties. LICENSEE agrees that along with each quarterly
royalty payment due under this Article, LICENSEE will furnish LICENSOR with a
written statement specifying the volume of sales of UNITS and/or MATERIAL and
the net sales price of the
8
<PAGE> 9
UNITS and/or MATERIAL sold or used by LICENSEE during the preceeding CALENDAR
QUARTER.
8. As further consideration for this license, LICENSEE agrees to bear all
costs of prosecution and maintenance of the FOREIGN APPLICATIONS and FOREIGN
PATENTS, including but not limited to attorneys' fees and government fees,
without set-off against royalty payments due to LICENSOR. LICENSOR, as owner of
the INVENTIONS, will agree to consult with LICENSEE regarding the manner of
patent prosecution, but retains the authority to make all final decisions
controlling patent prosecution and maintenance.
9. In those instances where (1) LICENSOR has approved a foreign sublicensee
under a FOREIGN APPLICATION or FOREIGN PATENT, and (2) LICENSEE or a sublicensee
of LICENSEE has paid or undertaken to continue to pay all costs of obtaining,
maintaining and enforcing the FOREIGN APPLICATION or FOREIGN PATENT, LICENSEE
agrees to pay and LICENSOR agrees to accept in consideration for this license
25% of the gross income resulting from such sublicense arrangements and actually
received by LICENSEE. Gross income shall include all royalties, whether
sales-based, minimum, or calculated on another basis, non-refundable fees, or
other consideration paid by the sublicensee to LICENSEE in consideration for the
sublicense. LICENSEE may negotiate any reasonable royalty rate on a sublicense
agreement with an approved sublicensee located outside of the United States
where all sales will fall under FOREIGN PATENT(S) or FOREIGN APPLICATION(S).
ARTICLE IV - TERMINATION
------------------------
1. Unless terminated as herein provided, this AGREEMENT shall extend (a)
until the domestic RESTATED PATENT LICENSE AGREEMENT effective from June 24,
1992, between LICENSOR and LICENSEE terminates, except as to those countries for
which the royalty paid per country in the preceding year exceeded seven thousand
dollars ($7,000); or (b) until the expiration of the last to expire of any
FOREIGN PATENT licensed hereunder; or (c)
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<PAGE> 10
until LICENSOR abandons or permits to lapse all FOREIGN APPLICATIONS and FOREIGN
PATENTS licensed hereunder, whichever comes first. In the case of abandonment or
lapse, LICENSOR will promptly notify LICENSEE of the pertinent abandonment or
lapse.
2. In the event of failure of LICENSEE to make any payment to LICENSOR when
due hereunder, or of LICENSEE to comply with any other obligation imposed on it
by this AGREEMENT, LICENSOR may at its election at any time thereafter terminate
this AGREEMENT by not less than thirty (30) days written notice specifying such
failure, unless LICENSEE, within thirty (30) days from the date of service of
such notice, shall have rectified all breaches specified in said notice.
3. LICENSEE may at its election at any time by no less than ninety (90)
days written notice surrender and terminate all rights and licenses acquired
hereunder by it under said INVENTIONS, provided that termination of this
AGREEMENT for any cause shall not relieve LICENSEE from any obligation hereunder
including obligation to make its terminal report, or relieve it from its
liability for payment of any royalties prior to the date of such termination;
such termination shall not prejudice the right of LICENSOR to recover any
royalties or any other sums due or accrued at the time of or as a result of such
termination, nor shall it prejudice any cause of action or claim of either party
accrued or to accrue on account of any legal wrong, breach, or default of the
other party, nor shall it prejudice the right of LICENSOR to conduct a final
audit of the records of LICENSEE in accordance with the provisions hereof.
4. No royalty shall be due with respect to any patent after its expiration.
ARTICLE V - INFRINGEMENTS
-------------------------
1. LICENSEE shall promptly notify LICENSOR in writing of any conduct by any
third party, other than another licensee of LICENSOR, with respect to the
INVENTIONS or MATERIAL or UNITS which may constitute infringement of a FOREIGN
PATENT or which
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<PAGE> 11
would constitute infringement of a FOREIGN APPLICATION were a patent to issue on
said APPLICATION. LICENSOR may take legal action against such infringement if
LICENSOR, in its sole discretion, deems legal action necessary. If LICENSOR
deems legal action to be necessary, LICENSEE shall assist LICENSOR in said legal
action and shall bear its own expenses in this regard, and LICENSOR shall take
reasonable steps to keep LICENSEE advised of the progress of the lawsuit. If
LICENSOR does not exercise its option to bring legal action against alleged
infringers, LICENSEE may bring legal action at its own expense and without any
set-off against royalties paid previously or later due.
2. If any claim of any licensed FOREIGN PATENT is held invalid by the
decision of a court of competent jurisdiction from which no appeal is or can be
taken, LICENSEE shall thereafter be relieved of the obligation to pay royalties
with respect to any embodiment of the INVENTIONS which is covered only by such
claim or claims as may be so held invalid.
3. It is hereby understood and agreed that if, by reason of practice of the
INVENTIONS with respect to which the LICENSEE is required to pay royalties to
the LICENSOR in accordance with the provisions of this AGREEMENT, LICENSEE shall
be charged with infringement of any patent owned or controlled by a third party,
LICENSEE will consult with LICENSOR with regard to resolving such charge of
infringement by redesign of the MATERIAL or UNITS or otherwise. If upon such
consultation, it is agreed that no commercially viable redesign can be made to
avoid the charge of infringement, LICENSEE shall have the option of terminating
this AGREEMENT, the termination being effective as of that date.
ARTICLE VI - NOTICE
-------------------
LICENSEE shall apply the appropriate patent notice to all patented MATERIAL
and UNITS sold by it, in accordance with the provisions of the applicable law of
each LICENSED TERRITORY.
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<PAGE> 12
ARTICLE VII - SUBSEQUENT DEVELOPMENTS
-------------------------------------
1. It is anticipated that LICENSOR and LICENSEE, jointly and severally, may
pursue development work that relates to remineralization of dental tissue, via
dentifrices, confections, foods or chewing gums, or to the commercialization or
regulatory approval of MATERIAL or UNITS embodying one or more of the INVENTIONS
or that otherwise relates to the MATERIAL or INVENTIONS. Any improvements made
subsequent to the date of this AGREEMENT, by either party or both parties
jointly, which require the use of or are used with MATERIAL, shall be defined as
"FIELD DEVELOPMENTS." FIELD DEVELOPMENTS, as well as any invention or
improvements made jointly by the parties that do not relate to such
remineralization or to commercialization of INVENTIONS or MATERIAL (such joint
unrelated improvements and inventions, "JOINT NON-FIELD DEVELOPMENTS") whether
or not patentable, shall be and remain the sole property of LICENSOR, even
though such developmental work may make use of samples or requested data
provided by or through LICENSEE. LICENSEE shall sign such applications,
assignments and other instruments and maintain such level of confidentiality as
the LICENSOR may reasonably request in order to achieve such industrial or
intellectual property status as the LICENSOR shall deem appropriate and to
perfect the assignment of the rights so granted by the LICENSEE to the LICENSOR.
If LICENSOR declines or fails to file a patent application in connection with
any patentable FIELD or JOINT NON-FIELD DEVELOPMENT referred to herein, then
LICENSEE may prepare, file and prosecute such an application in the name of
LICENSOR, and LICENSOR shall cooperate with LICENSEE and sign such applications
and other instruments as may be necessary in connection therewith, unless
LICENSOR declines any ownership rights in the invention and any ensuing patents.
2. Any FIELD DEVELOPMENTS which are made by LICENSOR alone and which are
patentable shall be licensed to LICENSEE under the terms of this Agreement.
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<PAGE> 13
3. Any FIELD DEVELOPMENTS which are patentable and made by LICENSEE alone
or LICENSEE and LICENSOR jointly, or any FIELD DEVELOPMENTS in the form of
unpatentable know-how made by either or both parties, and any JOINT NON-FIELD
DEVELOPMENTS shall be licensed by LICENSOR to LICENSEE under a free and
perpetual license to make, have made, sell, use, induce use of and/or contribute
to the use of these FIELD DEVELOPMENTS and JOINT NON-FIELD DEVELOPMENTS, subject
to those rights granted under the GOVERNMENT LICENSES, and subject to the right
of LICENSOR to make and use these for research and testing purposes, including
laboratory research and clinical trials, and subject to the unrestricted right
of LICENSOR to grant other licenses for other types of products. This free
license shall not be assigned, transferred or sublicensed by LICENSEE except
with the prior express written consent of LICENSOR. Such permission shall be
granted or withheld at the sole option of LICENSOR.
4. As to only those FIELD DEVELOPMENTS and JOINT NON-FIELD DEVELOPMENTS
made at least in part by LICENSEE, LICENSEE shall have a veto power over
granting of a license by LICENSOR to any other party. As to this same class of
FIELD DEVELOPMENTS and JOINT NON-FIELD DEVELOPMENTS only, in the event LICENSOR
issues a license to any third party for the production, use, or sale of
improvements, LICENSOR shall promptly notify LICENSEE of such license and shall
agree to pay LICENSEE one-half of the royalty collected under such license.
5. In the last 30 days of each calendar year of this AGREEMENT, each of
LICENSEE, and LICENSOR if so requested by LICENSEE at the time, shall provide to
the other a certification stating that the responsible party has investigated as
to whether or not there have been advances, developments, or improvements made
during the year with respect to the INVENTIONS or their product, sale, or use,
or inducement of or contribution to the production or use, of the INVENTIONS, or
otherwise falling within the description of the first paragraph of this article,
and if there has been any such advance, development, or
13
<PAGE> 14
improvement, a statement as to whether or not any or all of it may be patentable
under the standards of patentability of any applicable licensed territory and/or
the Patent Act of 1952, 35 U.S.C., Section 1. In the event that such
certification shall indicate the presence of such patentable matter for the
period in question, the certifying party shall promptly deliver to the other
party all information, including all documentation then in the certifying
party's possession pertinent to such patentable matter, including information
such as will permit the effective transfer of the patentable matter to the
LICENSOR.
6. For the purposes of this Article, joint or sole development shall be
determined in the same manner as inventorship under 35 U.S.C. Section 116.
ARTICLE VIII - MISCELLANEOUS
----------------------------
1. To protect the rights of privacy and/or publicity of LICENSOR's
inventors, assignors, employees, officers and directors; to protect the
trademark and tradename rights of LICENSOR and its affiliates; to prevent
confusion regarding sponsorship of any given product or technique of LICENSEE;
and to preclude imposition of any warranty, guarantee or other liability or
potential liability upon LICENSOR, its employees, assignors, affiliates,
officers, and directors; LICENSEE agrees that aside from (1) the patent notice
provided for by applicable law, (2) any rights which may be conferred by
certification of a product by an affiliate of LICENSOR, or (3) an express prior
written consent of LICENSOR, LICENSEE will not use the name of any employee,
assignor, officer or director or the business name or identification of LICENSOR
or its affiliates, or use any certification mark of LICENSOR or its affiliates,
in advertising or promotional materials, educational materials, publications,
fliers, brochures and other public descriptions relating to UNIT(S) and/or
MATERIAL(S).
2. LICENSOR does not require status as an undisclosed principal in this
AGREEMENT, and may be identified by LICENSEE, on a private, individual basis to
potential investors in LICENSEE prior to commercialization of UNITS or
MATERIALS.
14
<PAGE> 15
3. No waiver by either LICENSEE or LICENSOR, expressed or implied, of any
breach of any term, condition, or obligation of this AGREEMENT by the other
shall be construed as a waiver of any subsequent breach of that term, condition,
or obligation, or any other term, condition, or obligation of the AGREEMENT of
the same or different nature.
4. If it should be determined that one or more portions of this AGREEMENT
is or are invalid, such invalidation shall not operate to relieve the parties
hereto of their rights and obligations with respect to each other under the
remaining portions of this AGREEMENT.
5. This AGREEMENT shall inure to the benefit of and will be binding upon
all legal representatives of LICENSOR and upon the legal representatives of
LICENSEE. This AGREEMENT shall not be assignable without the prior written
permission of LICENSOR, except that LICENSEE may assign the license to any other
company in which LICENSEE or Dr. Steven R. Fox owns more than 50% of the voting
stock. Written permission of LICENSOR for other assignments will not be
unreasonably withheld.
6. This AGREEMENT may not be modified by either party, in whole or in part,
except by an additional agreement in writing signed by LICENSOR and LICENSEE and
referring to this AGREEMENT.
7. This Restated Foreign Patent License Agreement restates, amends and
entirely supersedes the following agreements between the parties hereto, which
are hereby terminated: (a) the Foreign Patent License Agreement dated as of
November 18, 1992, (b) the letter agreement dated with signatures of the parties
on November 18 and November 21, 1992 and (c) the First Modification of Foreign
License Agreement dated with signatures of the parties on July 26, 1993 and
August 16, 1993.
15
<PAGE> 16
ARTICLE IX - SERVICE
--------------------
Any notice, payment or statement required to be served herein shall be sent
by Registered or Certified Mail and addressed as follows or to such other
addresses as either party designates from time to time by written notice to the
other.
LICENSEE: Enamelon Inc.
- --------- 15 Kimball Avenue
Yonkers, New York 10704
with a copy to:
Snow Becker Krauss P.C.
605 Third Avenue
New York, New York 10158
Attention: Jack Becker, Esq.
LICENSOR: American Dental Association
- --------- Health Foundation
211 East Chicago Avenue
Chicago, Illinois 60611
with a copy to:
Allegretti & Witcoff, Ltd.
Ten South Wacker Drive
Chicago, Illinois 60606
Attention: Jon O. Nelson, Esq. and Jamie S. Smith, Esq.
IN WITNESS WHEREOF, the parties have respectively caused this instrument to
be executed by an official thereunto duly authorized and their respective
signatures to be hereunto affixed as of the day and year indicated.
AMERICAN DENTAL ASSOCIATION
HEALTH FOUNDATION
By:
--------------------------------
Date:
------------------------------
Title:
-----------------------------
16
<PAGE> 17
ENAMELON INC.
By: /s/ Dr. Steven R. Fox
--------------------------------
Date: November 18, 1992
------------------------------
Title: Chief Executive Officer
-----------------------------
17
<PAGE> 18
EXHIBIT A
LIST OF LICENSED COUNTRIES
1. Argentina 20. Luxembourg (PCT)
2. Taiwan 21. Monaco (PCT)
3. China 22. the Netherlands (PCT)
4. Venezuela 23. Sweden (PCT)
5. South Korea (PCT) 24. India
6. Brazil (PCT) 25. Mexico
7. Australia (PCT) 26. Indonesia
8. Canada (PCT) 27. Philippines
9. Japan (PCT) 28. Thailand
10. Austria (PCT) 29. Israel
11. Belgium (PCT) 30. Columbia
12. Switzerland and Liechtenstein (PCT) 31. Peru
13. Germany (PCT) 32. Chile
14. Denmark (PCT) 33. Bolivia
15. Spain (PCT) 34. Panama
16. France (PCT) 35. Pakistan
17. United Kingdom (PCT) 36. Egypt
18. Greece (PCT) 37. Russian Federation
19 Italy (PCT)
<PAGE> 19
LICENSE TO THE UNITED STATES GOVERNMENT
This instrument confers to the United States Government, as represented by
the Department of Health and Human Services, a nonexclusive, nontransferable,
irrevocable, paid-up license to practice or have practiced on its behalf
throughout the world the following subject invention:
Invention Title : Method and Compositions for Mineralizing and
Fluoridating Calcified Tissue
Inventor(s) : Ming S. Tung
Patent
Registration No. : 5,037,639
Registration Date : August 6, 1991
Title : Method and Compositions for Mineralizing and
Fluoridating Calcified Tissue
Country, if other than the
United States :
This license will extend to all divisions or continuations of the patent
application and all patents or re-issues which may be granted thereon.
This subject invention was made with government support under Grant No. DE
05030 awarded by the National Institute of Health.
Principal rights to this subject invention have been left with the
licensor; _______________, subject to the provisions of Title 35 U.S.C. 200-212,
37 C.F.R. 401, and 45 C.F.R. 8.
Signed: Date:
------------------------- -----------------------
Typed Name:
Title:
<PAGE> 1
ENAMEL0N, INC.
1993 STOCK OPTION PLAN
1. Purposes.
The ENAMELON, INC. 1993 STOCK OPTION PLAN (the "Plan") is intended
to provide the employees , directors, independent contractors and consultants of
Enamelon, Inc. (the "Company") with an added incentive to continue their
services to the Company and to induce them to exert their maximum efforts toward
the Company's success. By thus encouraging employees, directors, independent
contractors and consultants and promoting their continued association with the
Company, the Plan may be expected to benefit the Company and its Shareholders.
The Plan allows the Company to grant Incentive Stock options ("ISOs") (as
defined in Section 422(b) of the Internal Revenue Code of 1986, as amended [the
"Code"]), Non-Qualified Stock Options ("NQSOs") not intended to qualify under
Section 422(b) of the Code, Stock Appreciation Rights ("SARs") and Stock
Depreciation Rights ("SDRs") (collectively the "Options").
2. Shares Subject to the Plan.
The total number of shares of Common Stock of the Company, $.01 par
value per share (the "Common Stock"), that may be subject to Options granted
under the Plan shall be 500,000 in the aggregate, subject to adjustment as
provided in Paragraph 8 of the Plan; however, the grant of any NQSO to an
employee together with a tandem SAR or SDR shall only require one share of
Common Stock available subject to the Plan to satisfy such joint Option. The
Company shall at all times while the Plan is in force reserve such number of
shares of Common Stock as will be sufficient to satisfy the requirement of
outstanding Options granted under the Plan. In the event any Option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or in
part, the unpurchased shares subject thereto shall again be available for
granting of Options under the Plan.
3. Eligibility.
ISO's may be granted from time to time under the Plan to one or more
employees of the Company or of a "subsidiary" or "parent" of the Company, as the
quoted terms are defined within Section 424 of the Code. An Officer is an
employee for the above purposes. Options, other than ISO's, may be granted from
time to time under the Plan to one or more employees of the
<PAGE> 2
Company, Officers, members of the Board of Directors, independent contractors,
consultants and other individuals who are not employees of, but are involved in
the continuing development and success of the Company and/or of a subsidiary of
the Company, including persons who have previously been granted Options under
the Plan.
4. Administration of the Plan.
(a) The Plan shall be administered by the Board of Directors of the
Company as such Board of Directors may be composed from time to time or by a
Stock Option Committee (the "Committee") comprised of at least two disinterested
persons (the term "disinterested" having the meaning ascribed to it by Rule
16b-3 of the Securities Exchange Act of 1934 [the "1934 Act"]) appointed by such
Board of Directors of the Company. As and to the extent authorized by the Board
of Directors of the Company, the Committee may exercise the power and authority
vested in the Board of Directors under the Plan. Within the limits of the
express provisions of the Plan, the Board of Directors or Committee shall have
the authority, in its discretion, to determine the individuals to whom, and the
time or times at which, options shall be granted, the character of such Options
(whether ISO, NQSO and/or SAR or SDR in tandem with a NQSO) and the number of
shares of Common Stock to be subject to each option, and to interpret the Plan,
to prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of Option agreements that may be entered into
in connection with Options (which need not be identical), subject to the
limitation that agreements granting ISOs must be consistent with requirements
for the ISOs being qualified as "incentive stock options" as provided in Section
422 of the Code, and to make all other determinations and take all other actions
necessary or advisable for the administration of the Plan. In making such
determinations, the Board of Directors may take into account the nature of the
services rendered by such individuals, their present and potential contributions
to the Company's success, and such other factors as the Board of Directors, in
its discretion, shall deem relevant. The Board of Directors' determinations on
the matters referred to in this paragraph shall be conclusive.
(b) Notwithstanding anything contained herein to the contrary, the
Committee shall have the exclusive right to grant Options to persons subject to
Section 16 of the 1934 Act and set forth the terms and conditions thereof. With
respect to persons subject to Section 16 of the 1934 Act, transactions under the
Plan are intended to comply with all applicable conditions of Rule 16b-3 for its
successors under the 1934 Act. To the extent any provision of the Plan or action
by the Board of Directors or Committee fails to so comply, it shall be
-2-
<PAGE> 3
deemed null and void, to the extent permitted by law and deemed advisable by the
Board of Directors.
5. Terms of Options.
Within the limits of the express provisions of the Plan, the Board
or the Committee may grant either ISOs or NQSOs or SARs and/or SDRs in tandem
with NQSOs. An ISO or an NQSO enables the optionee to purchase from the Company,
at any time during a specified exercise period, a specified number of shares of
Common Stock at a specified price (the "Option Price"). The optionee, if granted
a SAR in tandem with a NQSO, may receive from the Company, in lieu of exercising
his option to purchase shares pursuant to his NQSO, at one of the certain
specified times during the exercise period of the NQSO as set by the Board or
the Committee, the excess of the fair market value upon such exercise (as
determined in accordance with subparagraph (b) of this Paragraph 5) of one share
of Common Stock over the Option Price per share specified upon grant of the
NQSO/SAR multiplied by the number of shares of Common Stock covered by the SAR
so exercised. The optionee, if qranted a SDR in tandem with a NQSO, may receive
from the Company at such date after the optionee's exercise of the NQSO with
which the SDR is in tandem and the SDR itself, which date shall be determined by
the Board or the Committee in its sole discretion, the excess of the fair market
value of one share of Common Stock upon the optionee's exercise of the NQSO with
which the SDR is in tandem over the greater of the (i) fair market value on the
date six months and one day after the exercise of such NQSO and (ii) the option
price paid on the exercise thereof, multiplied by the number of shares of Common
Stock covered by the NQSO/SDR so exercised. The character and terms of each
Option granted under the Plan shall be determined by the Board of Directors
consistent with the provisions of the Plan, including the following:
(a) An Option granted under the Plan must be granted within 10 years
from the date the Plan is adopted, or the date the Plan is approved by the
Shareholders of the Company, whichever is earlier.
(b) The Option Price of the shares of Common Stock subject to each
ISO shall not be less than the fair market value of such shares of Common Stock
at the time such ISO is granted. Such fair market value shall be determined by
the Board of Directors and, if the shares of Common Stock are listed on a
national securities exchange or traded on the over-the-counter market, the fair
market value shall be the closing price on such exchange, or the mean of the
closing bid and asked prices of the shares of Common Stock on the
over-the-counter market, as reported by the National Association of Securities
Dealers Automated Quotation System
-3-
<PAGE> 4
(NASDAQ), the National Association of Securities Dealers OTC Bulletin Board or
the National Quotation Bureau, Inc., as the case may be, on the day on which the
Option is granted or, if there is no closing price or bid or asked price on that
day, the closing price or mean of the closing bid and asked prices on the most
recent day preceding the day on which the Option is granted for which such
prices are available. If an ISO is granted to any individual who, immediately
before the ISO is to be granted, owns (directly or through attribution) more
than 10% of the total combined voting power of all classes of capital stock of
the Company or a subsidiary or parent of the Company, the Option Price of the
shares of Common Stock subject to such ISO shall not be less than 110% of the
fair market value per share of the shares of Common Stock at the time such ISO
is granted.
(c) The Option Price of the shares of Common Stock subject to an
NQSO or a SAR or SDR in tandem with a NQSO granted pursuant to the Plan shall be
determined by the Board of Directors or the Committee, in its sole discretion.
(d) In no event shall any Option granted under the Plan have an
expiration date later than 10 years from the date of its grant, and all Options
granted under the Plan shall be subject to earlier termination as expressly
provided in Paragraph 6 hereof. If an ISO is granted to any individual who,
immediately before the ISO is granted, owns (directly or through attribution)
more that 10% of the total combined voting power of all classes of capital stock
of the Company or of a subsidiary or parent of the Company, such ISO shall by
its terms expire and shall not be exercisable after the expiration of five (5)
years from the date of its grant.
(e) An SAR may be exercised at any time after six months of the date
of the grant thereof during the exercise period of the NQSO with which it is
granted in tandem and prior to the exercise of such NQSO, but only within the
specified 10 business day period referred to in subsection (e)(3) of Rule 16b-3
of the 1934 Act (generally, the 10 business days immediately following the
publication of the Company's quarterly financial information). The exercise of
an SAR granted in tandem with an NQSO shall be deemed to cancel such number of
shares subject to the unexercised Option as were subject to the exercised SAR.
An SDR may be exercised at any time prior to the expiration date of the NQSO
granted in tandem with the SDR and after 6 months from the exercise of the NQSO
granted in tandem with the SDR. The Board or the Committee has discretion to
determine and impose conditions on SDRs such as setting the time of payment at
the date six months and one day following the date of exercise, the date of the
sale of the Common Stock received upon the exercise of the NQSO which was
granted in tandem with the SDR, or some other date (but not
-4-
<PAGE> 5
later than the expiration date of the option), and reducing the amount of the
distribution to take into account appreciation in the fair market value of the
aforementioned Common Stock prior to the payment of the distribution. The Board
or the Committee also has the discretion to alter the terms of the SDRs if
necessary to comply with Federal or state securities law. Amounts to be paid by
the Company in connection with an SAR or SDR may, in the Board's or the
Committee's discretion, be made in cash, Common Stock or a combination thereof.
An NQSO granted in tandem with an SAR or SDR may not be exercised within six
months of the grant thereof.
(f) Unless otherwise provided in any Option agreement under the
Plan, an Option granted under the Plan shall become exercisable, in whole at any
time or in part from time to time, but in no case may an Option (i) be exercised
as to less than one hundred (100) shares of Common Stock at any one time, or the
remaining shares of Common Stock covered by the Option if less than one hundred
(100), and (ii) become fully exercisable more than five years from the date of
its grant nor shall less than 20% of the Option become exercisable in any of the
first five years of the Option.
(g) An Option granted under the Plan shall be exercised by the
delivery by the holder thereof to the Company at its principal office (to the
attention of the Secretary) of written notice of the number of full shares of
Common Stock with respect to which the Option is being exercised, accompanied by
payment in full, in cash or by certified check payable to the order of the
Company, of the Option Price of such shares of Common Stock, or, at the
discretion of the Committee or the Board, by the delivery of shares of Common
Stock having a fair market value equal to the Option Price (provided, in order
to qualify as an ISO, more than one year shall have passed since the date of
grant and one year from the date of exercise), or at the option of the Committee
or the Board, by a combination of cash and such shares (subject to the
restriction above) held by the employee that have a fair market value together
with such cash that shall equal the Option Price, and, in the case of a NQSO, at
the discretion of the Committee or Board by having the Company withhold from the
shares of Common Stock to be issued upon exercise of the Option that number of
shares having a fair market value equal to the exercise price and/or the tax
withholding amount due, otherwise provide for withholding as set forth in
Paragraph 9(c) hereof, or in the event an employee is granted a NQSO in tandem
with an SAR and/or SDR and desires to exercise such SAR or SDR, such written
notice shall so state such intention.
(h) The holder of an Option shall have none of the rights of a
Shareholder with respect to the shares of Common Stock covered by such holder's
Option until such shares of
-5-
<PAGE> 6
Common Stock shall be issued to such holder upon the exercise of the Option.
(i) An ISO granted under the Plan and any NQSO granted under the
Plan with an exercise price below the fair market value at the date of grant or
other NQSO which the Board or Committee so designates at the time of grant shall
not be transferable otherwise than by will or the laws of descent and
distribution, and any ISO granted under the Plan may be exercised during the
lifetime of the holder thereof only by the holder. No Option granted under the
Plan shall be subject to execution, attachment or other process.
(j) The aggregate fair market value, determined as of the time any
ISO is granted and in the manner provided for by subparagraph (b) of this
Paragraph 5, of the shares of Common Stock with respect to which ISOs granted
under the Plan are exercisable for the first time during any calendar year and
under incentive stock options qualifying as such in accordance with Section 422
of the Code granted under any other Incentive Stock Option plan maintained by
the Company or its parent or subsidiary corporations, shall not exceed $100,000.
Any grant of Options in excess of such amount shall be deemed a grant of a NQSO.
6. Death or Termination of Employment.
(a) If the employment of a holder of an ISO under the Plan shall be
terminated voluntarily by the employee or for cause, such holder's ISO shall
expire thirty (30) days after such termination. If such employment shall
terminate for any reason other than death, voluntary termination by the employee
or for cause, then such ISO may be exercised at any time within three (3) months
after such termination, subject to the provisions of subparagraph (f) of this
Paragraph 6. For the purposes of this subparagraph (a), the retirement of an
individual either pursuant to a pension or retirement plan adopted by the
Company or at the normal retirement date prescribed from time to time by the
Company shall be deemed to be a termination of such individual's employment
other than voluntarily by the employee or for cause.
(b) If the holder of an ISO under the Plan dies (i) while employed
by the Company or a subsidiary or parent corporation or (ii) within three (3)
months after the termination of such holder's employment other than voluntarily
by the employee or for cause, such ISO may, subject to the provisions of
subparagraph (f) of this Paragraph 6, be exercised by a legatee or legatees of
such Option under such individual's last will or by such individual's personal
representatives or distributees at any time within one year after the
individual's death.
-6-
<PAGE> 7
(c) If the holder of an ISO under the Plan becomes disabled within
the definition of section 22(e)(3) of the Code while employed by the Company or
a subsidiary or parent corporation, such ISO may, subject to the provisions of
subparagraph (f) of this Paragraph 6, be exercised at any time within one year
after such holder's termination of employment due to the disability.
(d) An ISO may not be exercised pursuant to this Paragraph 6 except
to the extent that the holder was entitled to exercise the ISO at the time of
termination of employment or death, and in any event may not be exercised after
the original expiration date of the ISO.
7. Leave of Absence.
For the purposes of the Plan, an individual who is on military or
sick leave or other bona fide leave of absence (such as temporary employment by
the Government) shall be considered as remaining in the employ of the Company or
of a subsidiary or parent corporation for ninety (90) days or such longer period
as such individual's right to reemployment is guaranteed either by statute or by
contract.
8. Adjustment Upon Changes in Capitalization.
(a) In the event that the outstanding shares of Common Stock are
hereafter changed by reason of recapitalization, reclassification, stock
split-up, combination or exchange of shares of Common Stock or the like, or by
the issuance of dividends payable in shares of Common Stock, an appropriate
adjustment shall be made by the Board of Directors, as determined by the Board
of Directors, in the aggregate number of shares of Common Stock available under
the Plan, in the number of shares of Common Stock issuable upon exercise of
outstanding Options, and the Option Price per share. In the event of any
consolidation or merger of the Company with or into another company, or the
conveyance of all or substantially all of the assets of the Company to another
company, each then outstanding Option shall upon exercise thereafter entitle the
holder thereof to such number of shares of Common Stock or other securities or
property to which a holder of shares of Common Stock of the Company would have
been entitled to upon such consolidation, merger or conveyance; and in any such
case appropriate adjustment, as determined by the Board of Directors of the
Company (or successor entity) shall be made as set forth above with respect to
any future changes in the capitalization of the Company or its successor entity.
In the event of the proposed dissolution or liquidation of the Company, all
outstanding Options under the Plan will automatically terminate, unless
otherwise provided by the Board of Directors
-7-
<PAGE> 8
of the Company or any authorized committee thereof. Notwithstanding anything
contained herein to the contrary, no adjustment in the aggregate number of
shares of Common Stock available under the Plan (irrespective of any adjustments
required in the number of shares of Common Stock issuable upon exercise of
outstanding Options) or in the Option Price per share, provided the Option Price
in any option agreement issued under the Plan is the initial public offering
price of the Company's Common Stock, shall be required, except as otherwise
provided in any Option Agreement evidencing the Options, in the event of a stock
split or other re-capitalization of the Company, as described above, prior to
the consummation of an initial public offering by the Company.
(b) Any adjustment in the number of shares of Common Stock shall
apply proportionately to only the unexercised portion of the Options granted
hereunder. If fractions of shares of Common Stock would result from any such
adjustment, the adjustment shall be revised to the next lower whole number of
shares of Common Stock.
9. Further Conditions of Exercise.
(a) Unless the shares of Common Stock issuable upon the exercise of
an Option under the Plan have been registered with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended, prior to the
exercise of the Option, the notice of exercise shall be accompanied by a
representation or agreement of the individual exercising the Option to the
Company to the effect that such shares of Common Stock are being acquired for
investment and not with a view to the resale or distribution thereof or such
other documentation as may be required by the Company, unless in the opinion of
counsel to the Company such representation, agreement or documentation is not
necessary to comply with said Act.
(b) The Company shall not be obligated to deliver any shares of
Common Stock until they have been listed on each securities exchange on which
the shares of Common Stock may then be listed or until there has been
qualification under or compliance with such state or federal laws, rules or
regulations as the Company may deem applicable. The Company shall use reasonable
efforts to obtain such listing, qualification and compliance.
(c) The Board or Committee may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of any taxes
that the Company is required by any law or regulation of any governmental
authority, whether federal, state or local, domestic or foreign, to withhold in
connection with the exercise of any Option, including, but not limited to, (i)
the withholding of payment of all or any portion of such Option and/or SAR
and/or SDR until the holder
-8-
<PAGE> 9
reimburses the Company for the amount the Company is required to withhold with
respect to such taxes, or (ii) the cancelling of any number of shares of Common
Stock issuable upon exercise of such Option and/or SAR and/or SDR in an amount
sufficient to reimburse the Company for the amount it is required to so
withhold, (iii) the selling of any property contingently credited by the Company
for the purpose of exercising such Option, in order to withhold or reimburse the
Company for the amount it is required to so withhold, or (iv) withholding the
amount due from such employee's wages if the employee is employed by the Company
or any subsidiary thereof.
10. Termination, Modification and Amendment.
The Plan (but not Options previously granted under the Plan) shall
terminate ten (10) years from the earliest of the date of its adoption by the
Board of Directors, or the date the Plan is approved by the Shareholders of the
Company, or such date of termination, as hereinafter provided, and no Option
shall be granted after termination of the Plan.
The Plan may from time to time be terminated, modified or amended by
the affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company entitled to vote thereon.
The Board of Directors of the Company may at any time, prior to ten
(10) years from the earlier of the date of the adoption of the Plan by such
Board of Directors or the date the Plan is approved by the Shareholders,
terminate the Plan or from time to time make such modifications or amendments of
the Plan as it may deem advisable; provided, however, that the Board of
Directors shall not, without approval by the affirmative vote of the holders of
a majority of the outstanding shares of capital stock of the Company entitled to
vote thereon, increase (except as provided by Paragraph 8) the maximum number of
shares of Common Stock as to which Options may be granted under the Plan,
materially change the standards of eligibility under the Plan or materially
increase the benefits which may accrue to participants under the Plan. Any
amendment to the Plan which, in the opinion of counsel to the Company, will be
deemed to result in the adoption of a new Plan, will not be effective until
approved by the affirmative vote of the holders of a majority of the outstanding
shares of capital stock of the Company entitled to vote thereon.
No termination, modification or amendment of the Plan may adversely
affect the rights under any outstanding Option without the consent of the
individual to whom such Option shall have been previously granted.
-9-
<PAGE> 10
11. Effective Date of the Plan.
The Plan shall become effective upon adoption by the Board of
Directors of the Company. The Plan shall be subject to approval by the
affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company entitled to vote thereon within one year before or
after adoption of the Plan by the Board of Directors.
12. Not a Contract of Employment.
Nothing contained in the Plan or in any option agreement executed
pursuant hereto shall be deemed to confer upon any individual to whom an Option
is or may be granted hereunder any right to remain in the employ of the Company
or of a subsidiary or parent of the Company or in any way limit the right of the
Company, or of any parent or subsidiary thereof, to terminate the employment of
any employee.
13. Other Compensation Plans.
The adoption of the Plan shall not affect any other stock option
plan, incentive plan or any other compensation plan in effect for the employees
of the Company, nor shall the Plan preclude the Company from establishing any
other form of stock option plan, incentive plan or any other compensation plan
for employees of the Company.
-10-
<PAGE> 1
ENAMELON, INC.
INCENTIVE COMPENSATION PROGRAM
Enamelon, Inc. (the "Company") has established the following
five-year incentive compensation program for its officers and key employees to
maximize stockholder valuation by creating a program to award officers and key
personnel for their efforts on behalf of the Company as measured by yearly
increases in the net income (before taxes and extraordinary items) generated by
the Company. The program provides for incentive compensation utilizing an
objective formulation based upon guidelines in accordance with the Company's
goals.
The Company will establish a yearly pool commencing with the
Company's initial public offering, equal to five percent of its net income
before taxes and extraordinary items, to be distributed to officers and key
employees, as set forth below. For the subsequent four fiscal years, such pool
shall only be established in the event the Company's net income before taxes and
extraordinary items equals or exceeds by at least 5% the Company's net income
before taxes and extraordinary items for the prior fiscal year. For any given
fiscal year during which a pool is created under this program, the amount of
money in the pool will be distributed based upon the percentages in accordance
with the following schedule:
<PAGE> 2
Chief Executive Officer 50.0%
President and Chief
Operating Officer 15.0%
Chief Financial Officer 12.5%
Vice President-Research
and Development 12.5%
Vice President
- Sales and Marketing 10.0%
-----
100.0%
=====
Notwithstanding the foregoing, the maximum amount the foregoing
persons can receive from the pool shall be limited to two times such person's
salary.
In the event any of the aforesaid positions are not filled, any of
the funds so allocated in the pool shall not be reallocated to the other
positions, but rather said amount of money shall be reallocated to be used by
the Company for working capital purposes. The compensation committee and the
Board of Directors shall have the discretion to vary the terms and conditions of
the bonus pool.
-2-
<PAGE> 1
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT, entered into this 1st day of January, 1994, by and between
Enamelon, Inc., a Delaware corporation with its principal place of business at
15 Kimball Avenue, Yonkers, New York 10704 (the "Company"), and Steven R. Fox,
D.D.S., residing at 200 East 62nd Street, Apartment 5D, New York, New York 10021
(the "Employee").
W I T N E S S E T H :
WHEREAS, the Company is desirous of employing the Employee upon the terms
and conditions contained herein;
WHEREAS, the Employee is desirous of accepting employment with the Company
upon the terms and conditions contained herein; and
WHEREAS, the Company intends to develop, market, sell and exploit
dentifrice, chewing gum and other products under licenses from the American
Dental Association Health Foundation.
NOW, THEREFORE, in consideration of the mutual premises contained herein
and for other good and valuable consideration, the parties hereto hereby agree
as follows:
1. Employment
----------
The Company hereby employs the Employee and the Employee hereby accepts
employment upon the terms and conditions set forth herein.
2. Term
----
The term of this Agreement shall commence on January 1, 1994 and shall
terminate on the fifth anniversary of such date.
3. Services To Be Rendered
-----------------------
(a) During the term of this Agreement, the Employee shall serve the Company
in an executive capacity and shall perform such duties as are determined from
time to time by the Company's Board of Directors. Unless prevented by death or
disability, the Employee shall devote such time as is necessary to fulfill his
responsibilities to the Company hereunder, but in no event less
<PAGE> 2
than twenty (20) hours per week. Employee shall use his best efforts, skill and
abilities to promote the Company's interests during the term hereof.
(b) It is hereby acknowledged that the Board of Directors of the Company
has elected the Employee to serve as the Company's Chairman and Chief Executive
Officer, and the Company hereby agrees to use its best efforts to have the
Employee continue to serve as Chairman and Chief Executive Officer of the
Company during the term of this Agreement. The Employee is one of the Company's
principal operating officers and will conduct and manage the Company's business
in accordance with policies established by the Company from time to time. The
precise services of the Employee may be extended or curtailed from time to time
at the direction and in the sole discretion of the Company's Board of Directors.
4. Compensation
------------
For the services rendered hereunder, the Company shall pay and the
Employee shall accept the following compensation:
(a) From the commencement of the term hereof and until the closing of an
initial public offering effectuated by the Company, the Employee shall receive a
base annual salary of $75,000. Said salary shall be increased to $175,000 upon
the closing of the initial public offering. Subsequent thereto, the Employee's
salary shall be subject to annual upward adjustments, as determined by the Board
of Directors of the Company. Notwithstanding the foregoing, the Board of
Directors of the Company may, prior to the closing of an initial public offering
by the Company, increase the Employee's base annual salary from its initial base
of $75,000 or from its then current level in the event the Company generates
revenues from operations and/or the Company consummates a private financing.
(b) The Employee shall participate in an executive compensation plan to
be established by the Board of Directors of the Company. The Employee shall be
entitled to 50% of any amounts allocated by the Board of Directors each year
during the term hereof to such plan for the purpose of providing an incentive to
key employees. In addition, in the event the term hereof is not commensurate
with the fiscal year of the Company or the Employee is not employed hereunder
for a full fiscal year, any such amounts due Employee hereunder pursuant to the
terms of an executive compensation plan shall be pro-rated for any such fiscal
year during which the Employee was not employed for the full twelve
<PAGE> 3
month period thereof.
(c) The Company will use its best efforts to procure the following
insurance policies designating the Employee as the insured: (i) a disability
policy providing for disability income to the Employee of $15,000 per month and
(ii) a term life insurance policy in the face amount of $2,000,000, provided
that the premium for said policies do not aggregate in excess of $22,000 per
year. In such an event, the Company may procure less insurance for Employee up
to said maximum amount. The beneficiaries of such policies shall be designated
by the Employee. In the event the Company is unable to procure such policy,
nothing hereunder shall obligate the Company to remit any payments which would
have been used to pay the premiums for such policy to Employee.
(d) The Employee's salary shall be payable subject to such deductions as
are then required by law and such further deductions as may be agreed to by the
Employee, in accordance with the Company's prevailing salary payroll practices.
5. Benefits and Expenses
---------------------
(a) The Employee shall participate in all fringe benefits such as
medical, disability, hospital and health insurance plans, profit sharing,
pension and stock option plans, life insurance and other plans, if any, which
the Company may generally make available to its executive employees.
(b) In the event that the Employee's employment by the Company is
terminated for any reason, the Employee shall have the right to purchase from
the Company any insurance policies on his life owned by the Company for a price
equal to the cash surrender value of the policies at the date of such
termination, plus prepaid premiums. The right to purchase shall be exercised by
the Employee by written notice to the Company not less than seven (7) days prior
to the date of such termination, and the purchase price for such policies shall
be paid by the Employee to the Company on the date of termination.
(c) During the term of this Agreement, the Company shall, upon
presentation of proper vouchers, reimburse the Employee for all reasonable
expenses incurred by him directly in connection with his performance of services
as an officer and employee of the
-3-
<PAGE> 4
Company.
(d) The Employee shall be entitled to such vacation as permitted in
accordance with any policy established by the Board of Directors from time to
time, but in no event shall Employee be entitled to less than four (4) weeks
vacation per year.
(e) The Employee shall receive as paid days off all national holidays
that the Company, pursuant to established policy, recognizes and observes.
6. Disability and Death
--------------------
(a) In the event of the permanent disability of Employee, as hereinafter
defined, the Company shall have the right thereafter to terminate this Agreement
with Employee by sending written notice of such termination to Employee, and
thereupon this Agreement shall terminate. For purposes hereof, "permanent
disability" shall mean the inability of Employee to perform his duties hereunder
due to physical or mental illness, including drug abuse and alcoholism, for six
(6) months in any twelve (12) consecutive month period. In addition, the
"permanent disability" of Employee shall also have been deemed to have occurred
if the Employee shall have had appointed a guardian or conservator for him or
such appointment shall have been made by a court of competent jurisdiction.
(b) The parties hereto hereby agree that if a disagreement arises as to
whether a condition of disability exists hereunder, Employee shall submit to a
physical examination by a physician of his own choice and by a physician of the
Company's choice. If either physician so chosen does not agree as to the
determination of disability, the two physicians shall mutually select a third
qualified physician, whose determination shall be conclusive upon all parties.
Each party shall bear the expense of the physician selected by such party and
the expense of the third physician shall be borne equally by Employee and the
Company. Employee hereby consents to the examination provided for herein and
waives, if applicable, any privilege which exists between any physician and
Employee as a result of such examination.
(c) This Agreement shall also terminate upon and as of the date of death
of the Employee at any time during the term of
-4-
<PAGE> 5
this Agreement.
(d) Notwithstanding anything contained herein to the contrary, Employee
shall be compensated as set forth in this Agreement, through the date of
termination of this Agreement due to permanent disability or death, provided,
however, in the event of permanent disability any such compensation shall be
reduced by any amounts payable to Employee from or in respect of disability
insurance plans for which the Company has paid any portion of the premiums
therefore and which payments are received by the Employee for the period of such
incapacity or illness.
7. Covenants and Restrictions
--------------------------
The Employee covenants that, except in carrying out his duties
hereunder, during the term of his employment and for a period of five (5) years
following the date of termination of employment hereunder, irrespective of the
reasons for any such termination and unless such longer period of time is
specifically set forth herein:
(a) Employee will not, directly or indirectly, own any interest in,
participate or engage in, assist, render any services (including advisory
services) to, become associated with, work for, serve (in any capacity
whatsoever, including, without limitation, as an employee, consultant, advisor,
agent, independent contractor, officer or director) or otherwise become in any
way or manner connected with the ownership, management, operation, or control
of, any business, firm, corporation, partnership or other entity (collectively
referred to herein as a "Person") that engages in, or assists others in engaging
in or conducting any business, which deals, directly or indirectly, in products
or services competitive with the Company's product line or services, as
described below, anywhere in the world; and provided, however, the above shall
not be deemed to exclude Employee from acting as a director of a corporation for
the benefit of the Company with the consent of the Company's Board of Directors;
and provided further, however, that the above shall not also be deemed to
prohibit Employee from owning or acquiring securities issued by any corporation
which neither directly nor indirectly competes with the Company. For purposes
hereof, "products or services competitive with the Company's product line or
services" shall mean any products or services which have as their primary
purpose or
-5-
<PAGE> 6
function or which are marketed, promoted or sold as having the effect of
repairing, remineralizing, rebuilding, desensitizing teeth or preventing or
retarding tooth decay and/or cavities.
(b) Employee shall not sell or solicit any products or services to any
customer of the Company, except on behalf of the Company. The term "customer"
shall mean any Person or individual (including any Person or individual who
controls, is under common control with or has the ability to control any such
Person) to whom the Company has provided goods or services within the
twenty-four (24) month period prior to the termination of Employee's employment
hereunder or to whom the Employee had actively solicited business in an attempt
to develop such Person or individual as a customer of the Company during the
term hereof, or any licensee of the Company who was a licensee of the Company at
any time during the twenty-four (24) month period prior to the termination of
this Agreement.
(c) The Employee hereby covenants and agrees that the Employee will not
at any time subsequent to the date hereof, reveal, divulge, or make known to any
person, firm or corporation, any Confidential Information, as defined
hereinafter, made known to Employee or of which Employee has become aware,
regardless of whether developed, prepared, devised or otherwise created in whole
or in part by the efforts of the Employee and except to the extent so authorized
in writing by the Company in order to carry out the terms of this Agreement or
except as required by law. For purposes of this Agreement, the term
"Confidential Information" shall mean any technical, scientific or engineering
information relating to the Company's products and/or services; information
relating to any customer of the Company, including without limitation, the
names, addresses, telephone numbers and sales records of, or pertaining to any
such customer; price lists, methods of operation and other information
pertaining to the Company and which the Company, in its sole discretion, regards
as confidential and in the nature of trade secrets. Notwithstanding anything
contained herein to the contrary, Confidential Information as used herein shall
not include that which (i) was in the public domain prior to receipt hereunder
in the same context as the disclosure made hereunder; or (ii) Employee can show
was in his possession and in the same context prior to receipt; or (iii)
subsequently becomes known to Employee by third parties not in the course of
this Agreement and as a matter of right and without restriction on disclosure;
or (iv)
-6-
<PAGE> 7
subsequently comes into the public domain in the same context as the disclosure
by the Company through no fault of Employee.
(d) The Employee further covenants and agrees that Employee shall retain
all of such Confidential Information in trust for the sole benefit of the
Company, and shall not divulge or deliver or show any of such Confidential
Information to any unauthorized person and shall not make use of or in any
manner seek to turn to account any of such Confidential Information in an
independent business however unrelated to the business of the Company. The
Employee further agrees that upon the termination of this Agreement or upon the
request of the Company, the Employee will either supply or return to the
Company, in accordance with the Company's request, all Confidential Information
in the Employee's possession, including, without limitation, all account lists,
records and data related to all customers of the Company.
(e) Employee will neither solicit, hire or seek to solicit or hire any
of the Company's personnel, irrespective of the capacity of such personnel,
including any agent, independent contractor, or consultant to the Company, nor
shall Employee induce or attempt to induce any of the Company's personnel to
leave the employ of the Company to work for Employee or otherwise, or to
terminate their relationship with the Company.
(f) Employee acknowledges that his breach or threatened violation of any
of the restrictive covenants contained in this Section 7 may cause irreparable
damage to the Company for which remedies at law would be inadequate. Employee
further acknowledges that the restrictive covenants set forth herein are
essential terms and conditions of this Agreement. The Employee therefore agrees
that the Company shall be entitled to a decree or order by any court of
competent jurisdiction enjoining such threatened or actual violation of any of
such covenants. Such decree or order, to the extent appropriate, shall
specifically enforce the full performance of any such covenant by the Employee
and the Employee hereby consents to the jurisdiction of any such court of
competent jurisdiction and authorizes the entry on its behalf of any required
appearance for such purpose. This remedy shall be in addition to all other
remedies available to the Company at law or equity. If any portion of this
Section 7 is adjudicated to be invalid or unenforceable, this Section 7 shall be
deemed amended to delete therefrom the portion so adjudicated, such
-7-
<PAGE> 8
deletion to apply only with respect to the operation of this Section 7 in the
jurisdiction in which such adjudication is made.
8. Proprietary Property
(a) The parties hereto hereby agree that Proprietary Property, as
hereinafter defined, shall be the sole and exclusive property of the Company,
except as provided below. For purposes hereof, Proprietary Property shall mean
inventions, discoveries, improvements, ideas, trade secrets and knowhow, whether
patentable or not, made solely by Employee or jointly with others, which relate
to the Company's business, including any of its products, services, processes,
technology, research, product development, marketing programs, manufacturing
operations, or engineering activities.
(b) Employee shall promptly disclose to the Company in writing all
Proprietary Property, including those in the formative stages, created during
the term hereof, irrespective of whether created during normal business hours.
In addition, Employee hereby agrees to promptly disclose to the Company all
Proprietary Property created subsequent to the date of termination hereof,
irrespective of the reasons for termination hereof, which relate to or
constitute an improvement on Proprietary Property or Confidential Information,
as defined herein.
(c) Employee hereby agrees and acknowledges that Employee shall have no
right, title or interest in or with respect to any Proprietary Property, except
as described below, and will during the term hereof or at any time subsequent to
the termination hereof, at the Company's request and expense, execute any and
all patent applications and assignments to the Company and take any all action
as required by the Company to perfect and maintain the Company's rights and
interests in and with respect to the Proprietary Property.
(d) Employee hereby agrees to maintain written records concerning the
Proprietary Property and agrees to make those records available to the Company
at all times.
(e) Notwithstanding anything contained herein to the contrary,
Proprietary Property shall not include inventions or discoveries with respect to
which all of the following conditions
-8-
<PAGE> 9
apply:
(i) no equipment, supplies, facilities or Confidential
Information of the Company was used in its development;
(ii) it was developed on the Employee's own time;
(iii) it does not relate to the Company's business and/or
any proposed or planned products or services of the Company,
including any research and development activities; and
(iv) it does not arise in connection with any work performed
by the Employee for the Company.
(f) During or subsequent to the Employee's employment by Company,
Employee will not, directly or indirectly, lecture upon, publish articles
concerning, use, disseminate, disclose, sell or offer for sale any Proprietary
Property without the Company's prior written permission.
9. Prior Agreements
----------------
Employee represents that he is not now under any written agreement, nor
has he previously, at any time, entered into any written agreement with any
person, firm or corporation, which would or could in any manner preclude or
prevent him entering into this Agreement and abiding by the terms and conditions
hereof. The parties hereto hereby agree that notwithstanding the terms and
conditions of this Agreement, nothing herein shall preclude Employee from
engaging in the practice of dentistry for his own pecuniary profit and gain.
10. Termination Provisions
-----------------------
(a) In addition to, and not in lieu of, the termination provisions set
forth in Section 6 of this Agreement, the employment of the Employee hereunder
may be terminated by the Company prior to the termination date of the initial
term or any renewal term thereafter (as set forth in Section 2 hereof) in the
event that the Employee (i) breaches this Agreement or (ii) engages
-9-
<PAGE> 10
in any act of dishonesty with respect to the Company, including any act of
willful misfeasance (the foregoing reasons for termination set forth under
Subparagraphs (i) and (ii) above are sometimes referred to hereinafter as
termination for "Cause"). Such termination of the Employee's employment
hereunder shall be effective immediately upon delivery of written notice to the
Employee setting forth the reason or reasons for such termination. Upon the
termination of this Agreement in accordance with this Section 10(a), the Company
shall not be obligated to make any further payments hereunder to the Employee.
(b) If, as both a director and a stockholder of the Company, Employee
opposes a "change of control" (defined below) of the Company and such change of
control shall occur at any time during Employee's employment hereunder in spite
of Employee's objection, Employee may by at least thirty (30) days prior written
notice to the Company given within six (6) months of such change of control,
elect to terminate his employment with the Company at the end of such six (6)
month period. In the event Employee opposes a change in control, as both a
stockholder and a director of the Company, and such change nevertheless takes
place, then, if Employee elects to terminate his employment pursuant to this
Section 10(b), the Company shall promptly pay him either (i) two and nine-tenths
(2.9) times his current compensation payable under Sections 4(a) and 4(b) within
thirty (30) days of receipt of Employee's notice, if a majority of the Company's
Board of Directors opposed the change of control, or (ii) two and one-half (2.5)
times such current compensation within thirty (30) days of receipt of Employee's
notice, if a majority of the Company's Board of Directors voted in favor of the
change of control; provided, however, in no event shall the amount paid to
Employee pursuant to this Paragraph 11 exceed the maximum payment permitted by
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") or
then applicable law, and to the extent any "excess parachute payment", as that
phrase is defined in Section 280G(b) of the Code or then applicable law, would
result from the application of the formulas set forth in (i) or (ii) above, then
the amount Employee would otherwise receive shall be reduced so that no "excess
parachute payment" is made by the Company or received by Employee; provided
further, however, that this Section 10 shall not apply to any change in control
supported by the Employee either as an officer, a director or as a stockholder
of the Company. A "change of control" shall be deemed to occur when any person,
corporation,
-10-
<PAGE> 11
partnership, association or entity, directly or indirectly (through a subsidiary
or otherwise), (A) acquires or is granted the right to acquire, directly or
through a merger or similar transaction, a majority of Company's outstanding
voting securities, or (B) acquires all or substantially all of the Company's
assets.
11. Miscellaneous
--------------
(a) This Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns, and upon the Employee, his heirs,
executors, administrators, legatees and legal representatives.
(b) Should any part of this Agreement, for any reason whatsoever, be
declared invalid, illegal, or incapable of being enforced in whole or in part,
such decision shall not affect the validity of any remaining portion, which
remaining portion shall remain in full force and effect as if this Agreement had
been executed with the invalid portion thereof eliminated, and it is hereby
declared the intention of the parties hereto that they would have executed the
remaining portion of this Agreement without including therein any portion which
may for any reason be declared invalid.
(c) This Agreement shall be construed and enforced in accordance with
the laws of the State of New York applicable to agreements made and to be
performed in such State without application of the principles of conflicts of
laws of such State.
(d) This Agreement and all rights and obligations hereunder are personal
to the Employee and shall not be assignable or delegable, and any purported
assignment or delegation in violation hereof shall be null and void. Any person,
firm or corporation succeeding to the business of the Company by merger,
consolidation, purchase of assets or otherwise, shall assume by contract or
operation of law the obligations of the Company hereunder; provided, however,
that the Company shall, notwithstanding such assumption and/or assignment,
remain liable and responsible for the fulfillment of the terms and conditions of
the Agreement on the part of the Company.
(e) This Agreement constitutes the entire agreement between the parties
hereto with respect to the terms and conditions
-11-
<PAGE> 12
of the Employee's employment by the Company, and this Agreement supersedes and
renders null and void any and all other prior oral or written agreements,
understandings, or commitments pertaining to the Employee's employment by the
Company. This Agreement may only be amended upon the written consent of both
parties hereto.
(f) Any notice required or permitted to be given under this Agreement
shall be in writing and shall be delivered in person, by nationally recognized
courier service or by certified mail, return receipt requested, postage prepaid,
to the parties at the addresses set forth above, or at such other place that
either party may designate by notice in the foregoing manner to the other. If
mailed as aforesaid, any such notice shall be deemed given on receipt or three
(3) days after being so mailed, unless the receiving party proves the notice was
received later or not received.
(g) The failure of either party to insist upon the strict performance of
any of the terms, conditions and provisions of this Agreement shall not be
construed as a waiver or relinquishment of future compliance therewith, and said
terms, conditions and provisions shall remain in full force and effect. No
waiver of any term or any condition of this Agreement on the part of either
party shall be effective for any purpose whatsoever unless such waiver is in
writing and signed by such party.
(h) The provisions of Sections 6, 7, 8, 10 and 11 of this Agreement
shall survive any termination of this Agreement
(i) The headings in this Agreement are inserted for convenience and
shall not affect any interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
ENAMELON, INC.
By: /s/ Steven R. Fox
----------------------------
-12-
<PAGE> 13
Steven R. Fox, D.D.S.
Chief Executive Officer
/s/ Steven R. Fox
-------------------------------
Steven R. Fox D.D.S.
-13-
<PAGE> 14
A M E N D M E N T
This Agreement (the "Amendment") is made and entered into on June 1, 1995,
by and between Enamelon, Inc., a Delaware corporation with its principal place
of business at 15 Kimball Avenue, Yonkers, New York 10704 (the "Company") and
Steven R. Fox, D.D.S., residing at 200 East 62nd Street, Apartment 5D, New York,
New York 10021 (the "Employee").
WHEREAS, the Company and the Employee entered into a certain Employment
Agreement (the "Agreement") dated January 1, 1994, pursuant to which the
Employee was employed as the Chairman and Chief Executive Officer of the
Company;
WHEREAS, the parties to this Amendment desire to amend the Agreement
conditioned upon the terms set forth herein.
NOW, THEREFORE, in consideration of the premises and the material covenants
and agreements hereinafter set forth, the parties agree as follows:
1. Paragraph 4(a) is amended in its entirety to read as follows:
" (a) The Employee shall receive an initial base annual salary of $75,000.
Said salary shall be increased to $175,000 when the Company's cash exceeds
$2,000,000. Subsequent thereto, the Employee's salary shall be subject to annual
upward adjustments, as determined by the Board of Directors of the Company.
Notwithstanding the foregoing, the Board of Directors of the Company may
mutually agree with the Employee, prior to the Company's cash exceeding
$2,000,000, to increase the Employee's base annual salary from its initial base
of $75,000 or from its then current level in the event the Company generates
revenues from operations and/or the Company consummates a public or private
financing."
2. Other than as provided herein, the Agreement remains in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
Enamelon, Inc.
<PAGE> 15
By: /s/ Steven R. Fox /s/ Steven R. Fox
----------------------- -----------------------
Steven R. Fox, D.D.S. Steven R. Fox, D.D.S.
Chief Executive Officer
<PAGE> 16
A M E N D M E N T
This Agreement (the "Amendment") is made and entered into on June 15, 1996
by and between Enamelon, Inc., a Delaware corporation with its principal place
of business at 15 Kimball Avenue, Yonkers, New York 10704 (the "Company") and
Steven R. Fox, D.D.S., residing at 200 East 62nd Street, Apartment 5D, New York,
New York 10021 (the "Employee").
WHEREAS, the Company and the Employee entered into a certain Employment
Agreement (the "Agreement") dated January 1, 1994, pursuant to which the
Employee was employed as the Chairman and Chief Executive Officer of the
Company;
WHEREAS, on June 1, 1995 the parties entered into an Amendment to amend
the Agreement;
WHEREAS, the parties to this Amendment desire to further amend the
Agreement conditioned upon the terms set forth herein.
NOW, THEREFORE, in consideration of the premises and the material covenants
and agreements hereinafter set forth, the parties agree as follows:
1. Paragraph 3(a) is amended in its entirety to read as follows:
(a) During the term of this Agreement, the Employee shall serve the
Company in an executive capacity and shall perform such duties as are
determined from time to time by the Company's Board of Directors. Unless
prevented by death or disability, the Employee shall devote such time as is
necessary to fulfill his responsibilities to the Company hereunder, but in no
event less than forty (40) hours per week. Employee shall use his best efforts,
skill and abilities to promote the Company's interests during the term hereof.
2. Other than as provided herein, the Agreement remains in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
Enamelon, Inc.
<PAGE> 17
By: /s/ Steven R. Fox /s/ Steven R. Fox
----------------------- -----------------------
Steven R. Fox, D.D.S. Steven R. Fox, D.D.S.
Chief Executive Officer
<PAGE> 1
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED AGREEMENT, entered into this 1st day of June 1995,
by and between Enamelon, Inc., a Delaware corporation with its principal place
of business at 15 Kimball Avenue, Yonkers, New York 10704 (the "Company"), and
D. Brooks Cole, residing at 36 Cherry Tree Lane, Orchard Park, New York 14127
(the "Employee").
W I T N E S S E T H :
WHEREAS, the Company and the Employee entered into an Employment
Agreement dated December 9, 1993 (the "1993 Agreement") of which the term was to
commence upon the closing date of the Company's then proposed initial public
offering of its securities;
WHEREAS, the Company and the Employee are desirous of amending and
restating the 1993 Agreement upon the terms and conditions contained herein;
WHEREAS, the Company is desirous of employing the Employee upon the
terms and conditions contained herein;
WHEREAS, the Employee is desirous of accepting employment with the
Company upon the terms and conditions contained herein; and
WHEREAS, the Company intends to develop, market, sell and exploit
licenses from the American Dental Association Health Foundation to repair,
remineralize, rebuild and desensitize teeth.
NOW, THEREFORE, in consideration of the mutual premises contained
herein and for other good and valuable consideration, the parties hereto hereby
agree as follows:
1. Employment
----------
The Company hereby employs the Employee and the Employee hereby
accepts employment upon the terms and conditions set forth herein.
2. Term
----
The term of this Agreement shall commence on a mutually agreeable
date after the Company's cash exceeds $2,000,000. The Employee shall remain
employed hereunder at the pleasure of the
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Board of Directors of the Company for a term determined by the Board in its sole
discretion, subject to the termination provisions of Sections 6 and 10 and the
other provisions of this Agreement.
3. Services To Be Rendered
-----------------------
(a) During the term of this Agreement, the Employee shall serve the
Company in an executive capacity and shall perform such duties as are determined
from time to time by the Company's Board of Directors. Unless prevented by death
or disability, the Employee shall devote his full business time, allowing for
vacations and national holidays, as set forth in Sections 5(d) and (e) hereof,
and illnesses, exclusively to the business and affairs of the Company, and shall
use his best efforts, skill and abilities to promote the Company's interests.
(b) It is hereby acknowledged that the Board of Directors of the
Company has elected the Employee to serve as the Company's President and Chief
Operating Officer, and the Company hereby agrees to use its best efforts to have
the Employee continue to serve as President and Chief Operating Officer of the
Company during the term of this Agreement. The Employee is one of the Company's
principal operating officers and will conduct and manage the Company's business
in accordance with policies established by the Company from time to time. The
precise services of the Employee may be extended or curtailed from time to time
at the direction and in the sole discretion of the Company's Board of Directors.
Nothing herein shall be construed as requiring the Company, or anybody else, to
cause the election of the Employee as a Director of the Company.
4. Compensation
------------
For the services rendered hereunder, the Company shall pay and the
Employee shall accept the following compensation:
(a) From the commencement of the term hereof, the Employee shall
receive a base annual salary of $150,000 plus an upward adjustment at the end of
the first anniversary hereof equal to any increase in the consumer price index
("CPI"), with such increase not to exceed 5% per annum. The amount of such
increase based on the CPI shall be determined as provided in Exhibit A annexed
hereto.
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(b) The Employee shall participate in an executive compensation plan
to be established by the Board of Directors of the Company. The Employee shall
be entitled to 15% of any amounts allocated by the Board of Directors each year
during the term hereof to such plan for the purpose of providing an incentive to
key employees. In no event, however, shall Employee receive more than two times
his base salary, inclusive of any CPI increases described above. In addition, in
the event the term hereof is not commensurate with the fiscal year of the
Company or the Employee is not employed hereunder for a full fiscal year, any
such amounts due Employee hereunder pursuant to the terms of an executive
compensation plan shall be pro-rated for any such fiscal year during which the
Employee was not employed for the full twelve month period thereof.
(c) The Company will do its best efforts to procure a disability
insurance policy designating the Employee as the insured and providing for
disability income to the Employee of $2,000 per month. The beneficiary of such
policy shall be designated by the Employee. In the event the Company is unable
to procure such policy, nothing hereunder shall obligate the Company to remit
any payments which would have been used to pay the premiums for such policy to
Employee.
(d) The Employee's salary shall be payable subject to such deductions
as are then required by law and such further deductions as may be agreed to by
the Employee, in accordance with the Company's prevailing salary payroll
practices.
(e) The Employee shall be granted as of the date hereof 99,000 (post
3:1 stock split) seven-year non-qualified stock options in accordance with the
terms of the Company's Stock Option Plan. The options so granted are exercisable
at $1.33 (post 3:1 stock split) per share, are immediately exercisable from the
date of the grant, and are subject to the terms and conditions set forth in the
afore-referenced Plan, a copy of which the Employee hereby acknowledges
receiving.
5. Benefits and Expenses
(a) The Employee shall participate in all fringe benefits such as
medical, disability, hospital and health insurance plans, profit sharing,
pension and stock option plans, life
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insurance and other plans, if any, which the Company may generally make
available to its executive employees.
(b) In the event that the Employee's employment by the Company is
terminated for any reason, the Employee shall have the right to purchase from
the Company any insurance policies on his life owned by the Company for a price
equal to the cash surrender value of the policies at the date of such
termination, plus prepaid premiums. The right to purchase shall be exercised by
the Employee by written notice to the Company not less than seven (7) days prior
to the date of such termination, and the purchase price for such policies shall
be paid by the Employee to the Company on the date of termination.
(c) During the term of this Agreement, the Company shall, upon
presentation of proper vouchers, reimburse the Employee for all reasonable
expenses incurred by him directly in connection with his performance of services
as an Officer and employee of the Company.
(d) The Employee shall be entitled to four (4) weeks of paid vacation
per calendar year, provided that the Employee shall not take more than two
consecutive weeks of vacation during any fiscal year. Vacation entitlements are
non-cumulative and if the Employee fails to use any or all of his four (4) week
vacation allotment during a particular calendar year, such vacation shall be
deemed forfeited forever.
(e) The Employee shall receive as paid days off all national holidays
that the Company, pursuant to established policy, recognizes and observes.
(f) During the term of this Agreement, prior to any notice of
termination hereof, if the Employee relocates his principal family residence to
a place within 100 miles of the principal executive offices of the Company, then
the Company shall pay the Employee a one-time moving expense allowance at the
time of such move in the amount of $5,000.
6. Disability and Death
(a) In the event of the permanent disability of Employee, as
hereinafter defined, the Company shall have the right
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thereafter to terminate this Agreement with Employee by sending written notice
of such termination to Employee, and thereupon this Agreement shall terminate.
For purposes hereof, "permanent disability" shall mean the inability of Employee
to perform his duties hereunder due to physical or mental illness, including
drug abuse and alcoholism, for a continuous period of three (3) months or for
six (6) months in any twelve (12) consecutive month period. In addition, the
"permanent disability" of Employee shall also have been deemed to have occurred
if the Employee shall have had appointed a guardian or conservator for him or
such appointment shall have been made by a court of competent jurisdiction.
(b) The parties hereto hereby agree that if a disagreement arises as
to whether a condition of disability exists hereunder, Employee shall submit to
a physical examination by a physician of his own choice and by a physician of
the Company's choice. If either physician so chosen does not agree as to the
determination of disability, the two physicians shall mutually select a third
qualified physician, whose determination shall be conclusive upon all parties.
Each party shall bear the expense of the physician selected by such party and
the expense of the third physician shall be borne equally by Employee and the
Company. Employee hereby consents to the examination provided for herein and
waives, if applicable, any privilege which exists between any physician and
Employee as a result of such examination.
(c) This Agreement shall also terminate upon and as of the date of
death of the Employee at any time during the term of this Agreement.
(d) Notwithstanding anything contained herein to the contrary,
Employee shall be compensated as set forth in this Agreement, through the date
of termination of this Agreement due to permanent disability or death, provided,
however, in the event of permanent disability any such compensation shall be
reduced by any amounts payable to Employee from or in respect of disability
insurance plans for which the Company has paid any portion of the premiums
therefore and which payments are received by the Employee for the period of such
incapacity or illness.
7. Covenants and Restrictions
--------------------------
The Employee covenants that, except in carrying out his duties
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hereunder, during the term of his employment and for a period of five (5) years
following the date of termination of employment hereunder, irrespective of the
reasons for any such termination and unless such longer period of time is
specifically set forth herein:
(a) Employee will not, directly or indirectly, own any interest in,
participate or engage in, assist, render any services (including advisory
services) to, become associated with, work for, serve (in any capacity
whatsoever, including, without limitation, as an employee, consultant, advisor,
agent, independent contractor, officer or director) or otherwise become in any
way or manner connected with the ownership, management, operation, or control
of, any business, firm, corporation, partnership or other entity (collectively
referred to herein as a "Person") that engages in, or assists others in engaging
in or conducting any business, which deals, directly or indirectly, in products
or services competitive with the Company's product line or services, as
described below, anywhere in the world; and provided, however, the above shall
not be deemed to exclude Employee from acting as a director of a corporation for
the benefit of the Company with the consent of the Company's Board of Directors;
and provided further, however, that the above shall not also be deemed to
prohibit Employee from owning or acquiring securities issued by any corporation
which neither directly nor indirectly competes with the Company and whose
securities are listed with a national securities exchange or are traded in the
over-the-counter market, provided that Employee at no time owns, directly or
indirectly, beneficially or otherwise, five (5%) percent or more of any class of
any such corporation's outstanding capital stock. For purposes hereof, "products
or services competitive with the Company's product line or services" shall mean
any products or services which have as their primary purpose or function or
which are marketed, promoted or sold as having the effect of repairing,
remineralizing, rebuilding, desensitizing teeth or preventing or retarding tooth
decay and/or cavities.
(b) Employee shall not sell or solicit any products or services to
any customer of the Company. The term "customer" shall mean any Person or
individual (including any Person or individual who controls, is under common
control with or has the ability to control any such Person) to whom the
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Company has provided goods or services within the twenty-four (24) month period
prior to the termination of Employee's employment hereunder or to whom the
Employee had actively solicited business in an attempt to develop such Person or
individual as a customer of the Company during the term hereof, or any licensee
of the Company who was a licensee of the Company at any time during the
twenty-four (24) month period prior to the termination of this Agreement.
(c) The Employee hereby covenants and agrees that the Employee will
not at any time subsequent to the date hereof, reveal, divulge, or make known to
any person, firm or corporation, any Confidential Information, as defined
hereinafter, made known to Employee or of which Employee has become aware,
regardless of whether developed, prepared, devised or otherwise created in whole
or in part by the efforts of the Employee and except to the extent so authorized
in writing by the Company in order to carry out the terms of this Agreement or
except as required by law. For purposes of this Agreement, the term
"Confidential Information" shall mean any technical, scientific or engineering
information relating to the Company's products and/or services; information
relating to any customer of the Company, including without limitation, the
names, addresses, telephone numbers and sales records of, or pertaining to any
such customer; price lists, methods of operation and other information
pertaining to the Company and which the Company, in its sole discretion, regards
as confidential and in the nature of trade secrets. Notwithstanding anything
contained herein to the contrary, Confidential Information as used herein shall
not include that which (i) was in the public domain prior to receipt hereunder
in the same context as the disclosure made hereunder; or (ii) Employee can show
was in his possession and in the same context prior to receipt; or (iii)
subsequently becomes known to Employee by third parties not in the course of
this Agreement and as a matter of right and without restriction on disclosure;
or (iv) subsequently comes into the public domain in the same context as the
disclosure by the Company through no fault of Employee.
(d) The Employee further covenants and agrees that Employee will
retain all of such Confidential Information in trust for the sole benefit of the
Company, and will not divulge or deliver or show any of such Confidential
Information to any unauthorized person and will not make use of or in any manner
seek to turn to account any of such Confidential Information in an independent
business however unrelated to the business of the Company. The Employee further
agrees that upon the termination of this Agreement or upon the request of the
Company, the Employee
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will either supply or return to the Company, in accordance with the Company's
request, all Confidential Information in the Employee's possession, including,
without limitation, all account lists, records and data related to all customers
of the Company.
(e) Employee will neither solicit, hire or seek to solicit or hire
any of the Company's personnel, irrespective of the capacity of such personnel,
including any agent, independent contractor, or consultant to the Company, nor
shall Employee induce or attempt to induce any of the Company's personnel to
leave the employ of the Company to work for Employee or otherwise, or to
terminate their relationship with the Company.
(f) Employee acknowledges that his breach or threatened violation of
any of the restrictive covenants contained in this Section 7 may cause
irreparable damage to the Company for which remedies at law would be inadequate.
Employee further acknowledges that the restrictive covenants set forth herein
are essential terms and conditions of this Agreement. The Employee therefore
agrees that the Company shall be entitled to a decree or order by any court of
competent jurisdiction enjoining such threatened or actual violation of any of
such covenants. Such decree or order, to the extent appropriate, shall
specifically enforce the full performance of any such covenant by the Employee
and the Employee hereby consents to the jurisdiction of any such court of
competent jurisdiction and authorizes the entry on its behalf of any required
appearance for such purpose. This remedy shall be in addition to all other
remedies available to the Company at law or equity. If any portion of this
Section 7 is adjudicated to be invalid or unenforceable, this Section 7 shall be
deemed amended to delete therefrom the portion so adjudicated, such deletion to
apply only with respect to the operation of this Section 7 in the jurisdiction
in which such adjudication is made.
8. Proprietary Property
(a) The parties hereto hereby agree that Proprietary Property, as
hereinafter defined, shall be the sole and exclusive property of the Company,
except as provided below. For purposes hereof, Proprietary Property shall mean
inventions, discoveries, improvements and ideas, whether patentable or not, made
solely by Employee or jointly with others, which relate to the Company's
business, including any of its products, services, processes,
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technology, research, product development, marketing programs, manufacturing
operations, or engineering activities.
(b) Employee shall promptly disclose to the Company in writing all
Proprietary Property, including those in the formative stages, created during
the term hereof, irrespective of whether created during normal business hours.
In addition, Employee hereby agrees to promptly disclose to the Company all
Proprietary Property created subsequent to the date of termination hereof,
irrespective of the reasons for termination hereof, which relate to or
constitute an improvement on Proprietary Property or Confidential Information,
as defined herein.
(c) Employee hereby agrees and acknowledges that Employee shall have
no right, title or interest in or with respect to any Proprietary Property,
except as described below, and will during the term hereof or at any time
subsequent to the termination hereof, at the Company's request and expense,
execute any and all patent applications and assignments to the Company and take
any all action as required by the Company to perfect and maintain the Company's
rights and interests in and with respect to the Proprietary Property.
(d) Employee hereby agrees to maintain written records concerning the
Proprietary Property and agrees to make those records available to the Company
at all times.
(e) Notwithstanding anything contained herein to the contrary,
Proprietary Property shall not include inventions or discoveries with respect to
which all of the following conditions apply:
(i) no equipment, supplies, facilities or Confidential Information
of the Company was used in its development;
(ii) it was developed on the Employee's own time;
(iii) it does not relate the Company's business and/or any
proposed or planned products or services of the Company, including
any research and development activities; and
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(iv) it does not result from any work performed by the Employee
for the Company.
(f) During or subsequent to the Employee's employment by Company,
Employee will not, directly or indirectly, lecture upon, publish articles
concerning, use, disseminate, disclose, sell or offer for sale any Proprietary
Property without the Company's prior written permission.
9. Prior Agreements
----------------
Employee represents that he is not now under any written agreement,
nor has he previously, at any time, entered into any written agreement with any
person, firm or corporation, which would or could in any manner preclude or
prevent him from giving freely and the Company receiving the exclusive benefit
of his services.
10. Termination Provisions
----------------------
(a) In addition to, and not in lieu of, the termination provisions
set forth in Section 6 of this Agreement, the employment of the Employee
hereunder may be terminated by the Company prior to the termination date of the
initial term or any renewal term thereafter (as set forth in Section 2 hereof)
in the event that the Employee (i) breaches this Agreement or (ii) engages in
any act of dishonesty with respect to the Company, including any act of willful
misfeasance (the foregoing reasons for termination set forth under Subparagraphs
(i) and (ii) above are sometimes referred to hereinafter as termination for
"Cause"). Such termination of the Employee's employment hereunder shall be
effective immediately upon delivery of written notice to the Employee setting
forth the reason or reasons for such termination. Upon the termination of this
Agreement in accordance with this Section 10(a), the Company shall not be
obligated to make any further payments hereunder to the Employee.
(b) Notwithstanding any provisions in this Agreement to the contrary,
the Company may terminate the employment of the Employee hereunder without
Cause, but in such event the Company shall be obligated to pay the Employee any
and all amounts payable to the Employee pursuant to Section 4 above for a period
of six (6) months after the Company gives written notice of such termination
(such period, the "Remainder Term"), and the Company shall also
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continue for the Remainder Term to permit the Employee to receive or participate
in all fringe benefits available to him pursuant to Section 5 above; provided,
however, that the Company, in its discretion, shall have the right to decide
whether the Employee will continue to perform his services hereunder or to be
present at the Company's premises during the Remainder Term and provided further
that during the Remainder Term any amounts payable to the Employee pursuant to
this Section 10(b), and any fringe benefits which he receives or in which he
participates pursuant to this Section 10(b), shall be reduced by any payments or
fringe benefits the Employee shall receive during the Remainder Term from any
other source of employment which is unaffiliated with the Company.
11. Miscellaneous
-------------
(a) This Agreement shall inure to the benefit of and be binding upon
the Company, its successors and assigns, and upon the Employee, his heirs,
executors, administrators, legatees and legal representatives.
(b) Should any part of this Agreement, for any reason whatsoever, be
declared invalid, illegal, or incapable of being enforced in whole or in part,
such decision shall not affect the validity of any remaining portion, which
remaining portion shall remain in full force and effect as if this Agreement had
been executed with the invalid portion thereof eliminated, and it is hereby
declared the intention of the parties hereto that they would have executed the
remaining portion of this Agreement without including therein any portion which
may for any reason be declared invalid.
(c) This Agreement shall be construed and enforced in accordance with
the laws of the State of New York applicable to agreements made and to be
performed in such State without application of the principles of conflicts of
laws of such State.
(d) This Agreement and all rights hereunder are personal to the
Employee and shall not be assignable, and any purported assignment in violation
thereof shall be null and void. Any person, firm or corporation succeeding to
the business of the Company by merger, consolidation, purchase of assets or
otherwise, shall assume by contract or operation of law the obligations of the
Company hereunder; provided, however, that the Company shall,
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notwithstanding such assumption and/or assignment, remain liable and responsible
for the fulfillment of the terms and conditions of the Agreement on the part of
the Company.
(e) Upon the date of this Agreement, the 1993 Agreement shall
terminate. This Agreement constitutes the entire agreement between the parties
hereto with respect to the terms and conditions of the Employee's employment by
the Company, as distinguished from any other contractual arrangements between
the parties pertaining to or arising out of their relationship, and this
Agreement supersedes and renders null and void any and all other prior oral or
written agreements, understandings, or commitments pertaining to the Employee's
employment by the Company. Notwithstanding the foregoing, the parties hereto may
enter into any oral or written agreements, understandings or commitments
pertaining to the Employee's retainment as a consultant to the Company prior to
the commencement of the term of this Agreement. This Agreement may only be
amended upon the written consent of both parties hereto.
(f) Any notice, statement, report, request or demand required or
permitted to be given by this Agreement shall be in writing, and shall be
sufficient if delivered in person or if addressed and sent by certified mail,
return receipt requested, postage prepaid, to the parties at the addresses set
forth above, or at such other place that either party may designate by notice in
the foregoing manner to the other. If mailed as aforesaid, any such notice shall
be deemed given three (3) days after being so mailed.
(g) The failure of either party to insist upon the strict performance
of any of the terms, conditions and provisions of this Agreement shall not be
construed as a waiver or relinquishment of future compliance therewith, and said
terms, conditions and provisions shall remain in full force and effect. No
waiver of any term or any condition of this Agreement on the part of either
party shall be effective for any purpose whatsoever unless such waiver is in
writing and signed by such party.
(h) The provisions of Sections 6, 7, 8, 10 and 11 of this Agreement
shall survive any termination of this Agreement
(i) The heading of the paragraphs herein are
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inserted for convenience and shall not affect any interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
ENAMELON, INC.
By: /s/ Steven R. Fox
------------------------------------
Steven R. Fox, D.D.S.
Chief Executive Officer
/s/ D. Brooks Cole
--------------------------------------
D. Brooks Cole
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EXHIBIT A - Consumer Price Index Increase
-----------------------------------------
1. Within sixty (60) days after the end of each fiscal year of the
Company during the term of Employee's employment (the "Term"), the Company shall
determine the increase, if any, in the cost of living during such year over the
cost of living for the preceding fiscal year, which increase shall be computed
on the basis of the Consumer Price Index - Urban Wage Earners (1967=100)
published by the Bureau of Labor Statistics of the United States Department of
Labor (the "Index") (any such increase, a "Cost of Living Increase"). The base
Index number to be used in determining any Cost of Living Increase to be
applicable during any fiscal year shall be the Index number appearing in the
column of the Index entitled "all items" for the first month of the preceding
fiscal year for the City of New York or for such other location in which the
principal executive office of the Company shall be located at the time of the
computation of any Cost of Living increase (the "Base Index Number" or "BIN").
The current Index number for the determination of the Cost of Living Increase to
be applicable during such fiscal year shall be the Index number appearing in the
Index column entitled "all items" for the first month of such fiscal year for
New York City or such other location (the "Current Index Number" or "CIN").
2. The Cost of Living Increase, if any, for each fiscal year of the
Company during the Term shall be determined by dividing the Current Index Number
for such fiscal year by the corresponding Base Index Number and deducting the
integer 1 from the quotient, in accordance with the following formula: Cost of
Living Increase = CIN/BIN - 1.
3. If any amendment or modification is published of any figures in the
Index on which any Cost of Living Increase hereunder shall be based, then any
increase in payments or benefits hereunder based on such Cost of Living Increase
shall be adjusted to reflect such amendment or modification. Such adjustment
shall be made promptly after the publication of any such amendment or
modification. If publication of the Index is discontinued, the Company and the
Employee shall accept and apply hereunder comparable statistics on the cost of
living for the City of New York, or any other location of the principal
executive offices of the Company at the time of computation of a cost of living
increase, as such statistics are computed and published by an
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agency of the United States government or, if no such statistics are published
by a federal government agency, by a responsible financial periodical of
recognized authority to be agreed upon by the Company and the Employee.
4. Within sixty (60) days after the end of each fiscal year of the
Company during the Term, the Company shall give the Employee written notice of
any Cost of Living Increase that is to be applied to the determination of any
increase in salary or
benefits for the then current fiscal year. The amount of any increase in the
Employee's Base Salary payable during any fiscal year based on any Cost of
Living Increase shall be paid to the Employee pro rata in equal monthly
installments during the remainder of such fiscal year.
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EMPLOYMENT AGREEMENT
AGREEMENT, entered into as of the 1st day of May 1995, by and between
Enamelon, Inc., a Delaware corporation with its principal place of business at
15 Kimball Avenue, Yonkers, New York 10704 (the "Company"), and Norman Usen,
residing at 12 Kennedy Drive, Marlboro, New Jersey 07746 (the "Employee"), and
Nu-Products Company, with its principal place of business at 12 Kennedy Drive,
Marlboro, New Jersey 07746 ("Nu-Products").
W I T N E S S E T H:
WHEREAS, the Company is desirous of employing the Employee upon the terms
and conditions contained herein;
WHEREAS the Employee is desirous of accepting the Company upon the terms
and conditions employment with contained herein; and
WHEREAS, the Company intends to develop, market, sell and exploit licenses
from the American Dental Association Health Foundation to repair, remineralize,
rebuild and desensitize teeth.
NOW, THEREFORE, in consideration of the mutual premises contained herein
and for other good and valuable consideration, the parties hereto hereby agree
as follows:
1. Employment
The Company hereby employs the Employee and the Employee hereby accepts
employment upon the terms and conditions set forth herein.
2. Term
The term of this Agreement shall commence as of the date hereof and shall
terminate on the third anniversary hereof, subject to the termination provisions
of Sections 6 and 10 and the other provisions of this Agreement.
3. Services To Be Rendered
(a) During the term of this Agreement, the Employee shall serve the Company
in an executive capacity and shall perform such duties as are determined from
time to time by the Company's Board of Directors. Unless prevented by death or
disability, the Employee
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shall devote his full business time, allowing for vacations and national
holidays, as set forth in Sections 5(d) and (e) hereof, and illnesses,
exclusively to the business and affairs of the Company, and shall use his best
efforts, skill and abilities to promote the Company's interests.
(b) It is hereby acknowledged that the Board of Directors of the Company
has elected the Employee to serve as the Company's Vice President of research
and development and its Vice President of operations, and as such the Employee
is responsible directly to the Board of Directors. The Company hereby agrees to
use its best efforts to have the Employee continue to serve in such capacity for
the Company during the term of this Agreement. The Employee is one of the
Company's principal operating officers and will conduct and manage the Company's
business in accordance with policies established by the Company from time to
time. The precise services of the Employee may be extended or curtailed from
time to time at the direction and in the sole discretion of the Company's Board
of Directors. Nothing herein shall be construed as requiring the Company, or
anybody else, to cause the election of the Employee as a Director of the
Company.
(c) It is hereby further acknowledged that notwithstanding the full-time
basis of the Employee's responsibilities under this Agreement, the Agreement
does not preclude the Employee from performing incidental consulting services
entailing less than 6 hours per week for other parties which will not conflict
with the Agreement.
4. Compensation
For the services rendered hereunder, the Company shall pay and the Employee
shall accept the following compensation:
(a) For the first year following commencement of the term of this
Agreement, the Employee shall receive an annual salary of $105,000. For the
second year of the term hereof, the Employee shall receive an annual salary of
$115,000. For the third year of the term hereof, the Employee shall receive an
annual salary of $125,000.
(b) The Employee shall participate in an executive compensation plan to be
established by the Board of Directors of
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the Company. The Employee shall be entitled to 12.5% of any amounts allocated by
the Board of Directors each year during the term hereof to such plan for the
purpose of providing an incentive to key employees. In no event, however, shall
Employee receive more than two times his base salary, inclusive of any CPI
increases described above. In addition, in the event the term hereof is not
commensurate with the fiscal year of the Company or the Employee is not employed
hereunder for a full fiscal year, any such amounts due Employee hereunder
pursuant to the terms of an executive compensation plan shall be pro-rated for
any such fiscal year during which the Employee was not employed for the full
twelve month period thereof.
(c) The Company will use its best efforts to procure a term life insurance
policy designating the Employee as the insured in the face amount of $250,000.
The beneficiary of such policy shall be designated by the Employee. In the event
the Company is unable to procure such policy, nothing hereunder shall obligate
the Company to remit any payments which would have been used to pay the premiums
for such policy to Employee. Notwithstanding anything contained herein to the
contrary, the Company shall not be obligated to purchase such policy until the
Company's cash is greater than $1,000,000.
(d) The Employee's salary shall be payable subject to such deductions as
are then required by law and such further deductions as may be agreed to by the
Employee, in accordance with the Company's prevailing salary payroll practices.
(e)(i)(A) The Employee shall be granted as of the commencement of the term
hereof 20,000 seven-year incentive stock options at an exercise price equal to
$4.00 per share in accordance with the terms of the Company's Stock Option Plan.
The options so granted may not be exercised by the Employee during the first
year succeeding the date of grant. Thereafter, 10,000 options shall become
exercisable on the first anniversary hereof and the remaining 10,000 options
shall become exercisable on the second anniversary of the date of grant.
(B) Notwithstanding the foregoing, all of the options shall become
exercisable before such anniversaries upon (i) a change in ownership of a
majority of the common stock of the Company from the majority ownership
prevailing immediately
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<PAGE> 4
following consummation of the Company's initial public offering or (ii) a sale
of substantially all of the assets of the Company. The options will be subject
to the terms and conditions set forth in the afore-referenced Plan, a copy of
which the Employee hereby acknowledges receiving.
(ii) The Employee shall be granted as of the commencement of the term
hereof 10,000 seven-year non-qualified stock options at an exercise price equal
to $4.00 per share in accordance with the terms of the Company's Stock Option
Plan. All of such options shall be immediately exercisable upon issuance.
(f) The Employee shall be regranted certain options previously granted to
Nu-Products pursuant to a consulting agreement between the Company and
Nu-Products dated as of August 1, 1993 (the "Consulting Agreement") on the
following terms and conditions:
(i) Options granted to Nu-Products to purchase an aggregate of 18,127
(as adjusted) shares of Common Stock exercisable from July 22, 1993 until
July 21, 1998 at an exercise price equal to $5.57 are hereby terminated and
Nu-Products shall deliver to the Company the originally executed Option
Agreement for cancellation.
(ii) Options granted to Nu-Products to purchase an aggregate of 18,127
(as adjusted) shares of Common Stock exercisable from July 22, 1993 until
July 21, 1998 at an exercise price equal to $6.00 are hereby terminated and
Nu-Products shall deliver to the Company the originally executed Option
Agreement for cancellation.
(iii) In lieu of the aforementioned options, the Employee shall be
granted as of the commencement of the term hereof 36,254 seven-year
non-qualified stock options at an exercise price equal to $4.00 per share
in accordance with the terms of the Company's Stock Option Plan. All of
such options shall be immediately exercisable upon issuance.
(g) Notwithstanding anything contained herein to the contrary, the Company
shall not be obligated to pay the Employee entirely in cash if the Company's
cash is less than $200,000. In such event, the Company and the Employee shall
mutually agree upon the form of compensation, which may include employee stock
options
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<PAGE> 5
and/or deferred payments, until such time that the Company's cash exceeds
$200,000.
5. Benefits and Expenses
(a) The Employee shall participate in all fringe benefits such as medical,
disability, hospital and health insurance plans, profit sharing, pension and
stock option plans, life insurance and other plans, if any, which the Company
may generally make available to its executive employees. Until such time that
the Company's health insurance is available to the Employee, the Company, upon
presentation of proper vouchers, shall reimburse the Employee for up to $250 per
month for such insurance expense.
(b) In the event that the Employee's employment by the Company is
terminated for any reason, the Employee shall have the right to purchase from
the Company any insurance policies on his life owned by the Company for a price
equal to the cash surrender value of the policies at the date of such
termination, plus prepaid premiums. The right to purchase shall be exercised by
the Employee by written notice to the Company not less than seven (7) days prior
to the date of such termination, and the purchase price for such policies shall
be paid by the Employee to the Company on the date of termination.
(c) During the term of this Agreement, the Company shall, upon presentation
of proper vouchers, reimburse the Employee for all reasonable expenses incurred
by him directly in connection with his performance of services as an Officer and
employee of the Company.
(d) The Employee shall be entitled to five (5) weeks of paid vacation per
calendar year; provided, however, that the Employee shall not take more than two
consecutive weeks of vacation during any fiscal year and the Employee shall not
use any or all of his five (5) week vacation allotment during the following
calendar year, without the prior consent of the Company.
(e) The Employee shall receive ten (10) paid personal days per calendar
year, which shall include all national holidays that the Company, pursuant to
established policy, recognizes and observes.
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<PAGE> 6
6. Disability and Death
(a) In the event of the permanent disability of Employee, as hereinafter
defined, the Company shall have the right thereafter to terminate this Agreement
with Employee by sending written notice of such termination to Employee, and
thereupon this Agreement shall terminate. For purposes hereof, "permanent
disability" shall mean the inability of Employee to perform his duties hereunder
due to physical or mental illness, including drug abuse and alcoholism, for a
continuous period of three (3) months or for six (6) months in any twelve (12)
consecutive month period. In addition, the "permanent disability" of Employee
shall also have been deemed to have occurred if the Employee shall have had
appointed a guardian or conservator for him or such appointment shall have been
made by a court of competent jurisdiction.
(b) The parties hereto hereby agree that if a disagreement arises as to
whether a condition of disability exists hereunder, Employee shall submit to a
physical examination by a physician of his own choice and by a physician of the
Company's choice. If either physician so chosen does not agree as to the
determination of disability, the two physicians shall mutually select a third
qualified physician, whose determination shall be conclusive upon all parties.
Each party shall bear the expense of the physician selected by such party and
the expense of the third physician shall be borne equally by Employee and the
Company. Employee hereby consents to the examination provided for herein and
waives, if applicable, any privilege which exists between any physician and
Employee as a result of such examination.
(c) This Agreement shall also terminate upon and as of the date of death of
the Employee at any time during the term of this Agreement.
(d) Notwithstanding anything contained herein to the contrary, Employee
shall be compensated as set forth in this Agreement, through the date of
termination of this Agreement due to permanent disability or death, provided,
however, in the event of permanent disability any such compensation shall be
reduced by any amounts payable to Employee from or in respect of disability
insurance plans for which the Company has paid any portion of the premiums
therefore and which payments are received by the Employee for the period of such
incapacity or illness.
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<PAGE> 7
7. Covenants and Restrictions
The Employee covenants that, except in carrying out his duties hereunder,
during the term of his employment and for a period of five (5) years following
the date of termination of employment hereunder, irrespective of the reasons for
any such termination and unless such longer period of time is specifically set
forth herein:
(a) Employee will not, directly or indirectly, own any interest in,
participate or engage in, assist, render any services (including advisory
services) to, become associated with, work for, serve (in any capacity
whatsoever, including, without limitation, as an employee, consultant, advisor,
agent, independent contractor, officer or director) or otherwise become in any
way or manner connected with the ownership, management, operation, or control
of, any business, firm, corporation, partnership or other entity (collectively
referred to herein as a "Person") that engages in, or assists others in engaging
in or conducting any business, which deals, directly or indirectly, in products
or services competitive with the Company's product line or services, as
described below, anywhere in the world; and provided, however, the above shall
not be deemed to exclude Employee from acting as a director of a corporation for
the benefit of the Company with the consent of the Company's Board of Directors;
and provided further, however, that the above shall not also be deemed to
prohibit Employee from owning or acquiring securities issued by any corporation
which neither directly nor indirectly competes with the Company and whose
securities are listed with a national securities exchange or are traded in the
over-the-counter market, provided that Employee at no time owns, directly or
indirectly, beneficially or otherwise, five (5%) percent or more of any class of
any such corporation's outstanding capital stock. For purposes hereof, "products
or services competitive with the Company's product line or services" shall mean
any products or services which have as their primary purpose or function or
which are marketed, promoted or sold as having the effect of desensitizing teeth
or preventing or retarding tooth decay and/or cavities via the process of
remineralizing, repairing or rebuilding of tooth enamel.
(b) Employee shall not sell or solicit any products or services to any
customer of the Company. The term "customer" shall mean any Person or individual
(including any Person or individual who controls, is under common control with
or has the ability to
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<PAGE> 8
control any such Person) to whom the Company has provided goods or services
within the twenty-four (24) month period prior to the termination of Employee's
employment hereunder or to whom the Employee had actively solicited business in
an attempt to develop such Person or individual as a customer of the Company
during the term hereof, or any licensee of the Company who was a licensee of the
Company at any time during the twenty-four (24) month period prior to the
termination of this Agreement.
(c) The Employee hereby covenants and agrees that the Employee will not at
any time subsequent to the date hereof, reveal, divulge, or make known to any
person, firm or corporation, any Confidential Information, as defined
hereinafter, made known to Employee or of which Employee has become aware,
regardless of whether developed, prepared, devised or otherwise created in whole
or in part by the efforts of the Employee and except to the extent so authorized
in writing by the Company in order to carry out the terms of this Agreement or
except as required by law. For purposes of this Agreement, the term
"Confidential Information" shall mean any technical, scientific or engineering
information relating to the Company's products and/or services; information
relating to any customer of the Company, including without limitation, the
names, addresses, telephone numbers and sales records of, or pertaining to any
such customer; price lists, methods of operation and other information
pertaining to the Company and which the Company, in its sole discretion, regards
as confidential and in the nature of trade secrets. Notwithstanding anything
contained herein to the contrary, Confidential Information as used herein shall
not include that which (i) was in the public domain prior to receipt hereunder
in the same context as the disclosure made hereunder; or (ii) Employee can show
was in his possession and in the same context prior to receipt; or (iii)
subsequently becomes known to Employee by third parties not in the course of
this Agreement and as a matter of right and without restriction on disclosure;
or (iv) subsequently comes into the public domain in the same context as the
disclosure by the Company through no fault of Employee.
(d) The Employee further covenants and agrees that Employee will retain all
of such Confidential Information in trust for the sole benefit of the Company,
and will not divulge or deliver or show any of such Confidential Information to
any unauthorized person and will not make use of or in any manner seek to turn
to account any of such Confidential Information in an independent
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<PAGE> 9
business however unrelated to the business of the Company. The Employee further
agrees that upon the termination of this Agreement or upon the request of the
Company, the Employee will either supply or return to the Company, in accordance
with the Company's request, all Confidential Information in the Employee's
possession, including, without limitation, all account lists, records and data
related to all customers of the Company.
(e) Employee will neither solicit, hire or seek to solicit or hire any of
the Company's personnel, irrespective of the capacity of such personnel,
including any agent, independent contractor, or consultant to the Company, nor
shall Employee induce or attempt to induce any of the Company's personnel to
leave the employ of the Company to work for Employee or otherwise, or to
terminate their relationship with the Company.
(f) Employee acknowledges that his breach or threatened violation of any of
the restrictive covenants contained in this Section 7 may cause irreparable
damage to the Company for which remedies at law would be inadequate. Employee
further acknowledges that the restrictive covenants set forth herein are
essential terms and conditions of this Agreement. The Employee therefore agrees
that the Company shall be entitled to a decree or order by any court of
competent jurisdiction enjoining such threatened or actual violation of any of
such covenants. Such decree or order, to the extent appropriate, shall
specifically enforce the full performance of any such covenant by the Employee
and the Employee hereby consents to the jurisdiction of any such court of
competent jurisdiction and authorizes the entry on its behalf of any required
appearance for such purpose. This remedy shall be in addition to all other
remedies available to the Company at law or equity. If any portion of this
Section 7 is adjudicated to be invalid or unenforceable, this Section 7 shall be
deemed amended to delete therefrom the portion so adjudicated, such deletion to
apply only with respect to the operation of this Section 7 in the jurisdiction
in which such adjudication is made.
8. Proprietary Property
(a) The parties hereto hereby agree that Proprietary Property, as
hereinafter defined, shall be the sole and exclusive property of the Company,
except as provided below. For purposes hereof, Proprietary Property shall mean
inventions, discoveries,
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<PAGE> 10
improvements and ideas, whether patentable or not, made solely by Employee or
jointly with others, which relate and are unique to the Company's business,
including any of its products, services, processes, technology, research,
product development, marketing programs, manufacturing operations, or
engineering activities.
(b) Employee shall promptly disclose to the Company in writing all
Proprietary Property, including those in the formative stages, created during
the term hereof, irrespective of whether created during normal business hours.
In addition, Employee hereby agrees to promptly disclose to the Company all
Proprietary Property created subsequent to the date of termination hereof,
irrespective of the reasons for termination hereof, which relate to or
constitute an improvement on Proprietary Property or Confidential Information,
as defined herein.
(c) Employee hereby agrees and acknowledges that Employee shall have no
right, title or interest in or with respect to any Proprietary Property, except
as described below, and will during the term hereof or at any time subsequent to
the termination hereof, at the Company's request and expense, execute any and
all patent applications and assignments to the Company and take any all action
as required by the Company to perfect and maintain the Company's rights and
interests with respect to the Proprietary Property.
(d) Employee hereby agrees to maintain written records concerning the
Proprietary Property and agrees to make those records available to the Company
at all times.
(e) Notwithstanding anything contained herein to the contrary, Proprietary
Property shall not include inventions or discoveries with respect to which all
of the following conditions apply:
(i) no equipment, supplies, facilities or Confidential Information of the
Company was used in its development;
(ii) it was developed on the Employee's own time;
(iii) it does not relate to anything unique to the Company's business,
products, services or research and development
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<PAGE> 11
activities; and
(iv) it does not result from any work performed by the Employee for the
Company.
(f) During or subsequent to the Employee's employment by Company, Employee
will not, directly or indirectly, lecture upon, publish articles concerning,
use, disseminate, disclose, sell or offer for sale any Proprietary Property
without the Company's prior written permission.
9. Prior Agreements
Employee represents that he is not now under any written agreement, nor has
he previously, at any time, entered into any written agreement with any person,
firm or corporation, which would or could in any manner preclude or prevent him
from giving freely and the company receiving the exclusive benefit of his
services.
10. Termination Provisions
(a) In addition to, and not in lieu of, the termination provisions set
forth in Section 6 of this Agreement, the employment of the Employee hereunder
may be terminated by the Company prior to the termination date of the initial
term or any renewal term thereafter (as set forth in Section 2 hereof) in the
event that the Employee (i) breaches this Agreement or (ii) engages in any act
of dishonesty with respect to the Company, including any act of willful
misfeasance (the foregoing reasons for termination set forth under Subparagraphs
(i) and (ii) above are sometimes referred to hereinafter as termination for
"Cause"). Such termination of the Employee's employment hereunder shall be
effective immediately upon delivery of written notice to the Employee setting
forth the reason or reasons for such termination. Upon the termination of this
Agreement in accordance with this Section 10(a), the Company shall not be
obligated to make any further payments hereunder to the Employee.
(b) Notwithstanding any provisions in this Agreement to the contrary, the
Company may terminate the employment of the Employee hereunder without Cause,
but in such event the Company shall be obligated to pay the Employee any and all
amounts payable to the Employee pursuant to Section 4 above for the remainder of
the
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<PAGE> 12
initial term or any renewal term of this Agreement (such period, the "Remainder
Term"), and the Company shall also continue for the Remainder Term to permit the
Employee to receive or participate in all fringe benefits available to him
pursuant to Section 5 above; provided, however, that the Company, in its
discretion, shall have the right to decide whether the Employee will continue to
perform his services hereunder or to be present at the Company's premises during
the Remainder Term and provided further that during the Remainder Term any
amounts payable to the Employee pursuant to this Section 10(b), and any fringe
benefits which he receives or in which he participates pursuant to this Section
10(b), shall be reduced by any payments or fringe benefits the Employee shall
receive during the Remainder Term from any other source of employment which is
unaffiliated with the Company.
11. Miscellaneous
(a) This Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns, and upon the Employee, his heirs,
executors, administrators, legatees and legal representatives.
(b) Should any part of this Agreement, for any reason whatsoever, be
declared invalid, illegal, or incapable of being enforced in whole or in part,
such decision shall not affect the validity of any remaining portion, which
remaining portion shall remain in full force and effect as if this Agreement had
been executed with the invalid portion thereof eliminated, and it is hereby
declared the intention of the parties hereto that they would have executed the
remaining portion of this Agreement without including therein any portion which
may for any reason be declared invalid.
(c) This Agreement shall be construed and enforced in accordance with the
laws of the State of New York applicable to agreements made and to be performed
in such State without application of the principles of conflicts of laws of such
State.
(d) This Agreement and all rights hereunder are personal to the Employee
and shall not be assignable, and any purported assignment in violation thereof
shall be null and void. Any person, firm or corporation succeeding to the
business of the Company by merger, consolidation, purchase of assets or
otherwise, shall
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<PAGE> 13
assume by contract or operation of law the obligations of the
Company hereunder; provided, however, that the Company shall, notwithstanding
such assumption and/or assignment, remain liable and responsible for the
fulfillment of the terms and conditions of the Agreement on the part of the
Company.
(e) Upon the commencement of the term of this Agreement pursuant to Section
2, the Consulting Agreement shall terminate, except that Sections 5, 7 and 8 of
the Consulting Agreement shall not terminate and shall remain in effect and
shall be applicable to matters arising before termination of the Consulting
Agreement. With the exception of certain terms of the Consulting Agreement, this
Agreement constitutes the entire agreement between the parties hereto with
respect to the terms and conditions of the Employee's employment by the Company,
as distinguished from any other contractual arrangements between the parties
pertaining to or arising out of their relationship, and this Agreement
supersedes and renders null and void any and all other prior oral or written
agreements, understandings, or commitments pertaining to the Employee's
employment by the Company. This Agreement may only be amended upon the written
consent of both parties hereto.
(f) Any notice, statement, report, request or demand required or permitted
to be given by this Agreement shall be in writing, and shall be sufficient if
delivered in person or if addressed and sent by certified mail, return receipt
requested, postage prepaid, to the parties at the addresses set forth above, or
at such other place that either party may designate by notice in the foregoing
manner to the other. If mailed as aforesaid, any such notice shall be deemed
given three (3) days after being so mailed.
(g) The failure of either party to insist upon the strict performance of
any of the terms, conditions and provisions of this Agreement shall not be
construed as a waiver or relinquishment of future compliance therewith, and said
terms, conditions and provisions shall remain in full force and effect. No
waiver of any term or any condition of this Agreement on the part of either
party shall be effective for any purpose whatsoever unless such waiver is in
writing and signed by such party.
(h) The provisions of Sections 6, 7, 8, 10 and 11 of this Agreement shall
survive any termination of this Agreement.
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<PAGE> 14
(i) The heading of the paragraphs herein are inserted for convenience and
shall not affect any interpretation of this Agreement.
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
ENAMELON, INC.
BY: /s/ Steven R. Fox
-----------------------------
Steven R. Fox, D.D.S.
Chief Executive Officer
/s/ Norman Usen
--------------------------------
Norman Usen
Solely with respect to Sections 4(f) and 11(e):
NU-PRODUCTS COMPANY
BY: /s/ Norman Usen
------------------------------------
Norman Usen
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<PAGE> 1
EMPLOYMENT AGREEMENT
AGREEMENT, entered into this 17th day of January 1995, between Enamelon,
Inc., a Delaware corporation with its principal place of business at 15 Kimball
Avenue, Yonkers, New York 10704 (the "Company"), and Anthony E. Winston,
residing at 42 Tall Oak Drive, East Brunswick, New Jersey 08816 (the
"Employee").
W I T N E S S E T H :
WHEREAS, The Company has obtained certain exclusive license rights under a
certain Patent License Agreement dated as of June 24, 1992 and a Foreign Patent
License Agreement dated as of November 18, 1992, each between the American
Dental Association Health Foundation ("ADAHF") and the Company (as amended,
each, a "License Agreement" and collectively, the "License Agreements"),
pursuant to which the Company was granted exclusive licenses to make, have made,
sell, use, induce use of and/or contribute to use of inventions, material and
products in the fields of dentifrices and chewing gums (any such inventions,
materials or products, the "Products") in the United States and abroad;
WHEREAS, the Employee has extensive experience in research, technology
development and clinical testing of oral care products;
WHEREAS, the Company is desirous of employing the Employee and the Employee
is desirous of accepting employment with the Company, respectively, upon the
terms and conditions contained herein;
WHEREAS, the Company is presently attempting to complete a private
placement of its 8% Series A Convertible Redeemable Preferred Stock (the Private
Placement") which proceeds will, in part, be used to pay the Employee's salary;
and
NOW, THEREFORE, in consideration of the mutual premises contained herein
and for other good and valuable consideration, the parties hereto hereby agree
as follows:
1. Employment
Upon execution of this Agreement, the Company agrees to employ the Employee
and the Employee accepts employment for a term of two (2) years, upon the terms
and conditions set forth herein.
<PAGE> 2
2. Services To Be Rendered
(a) During the term of this Agreement, the Employee shall serve the Company
in executive and research capacities and shall perform such duties as are
determined from time to time by the Company's Board of Directors which may
include all aspects of the testing, development and commercialization of the
Products. Unless prevented by death or disability, the Employee shall devote his
full business time, allowing for Vacations Allotments as set forth in Sections
5(d) and (e) hereof, and illnesses, exclusively to the business and affairs of
the Company, and shall use his best efforts, skill and abilities to promote the
Company's interests.
(b) It is hereby acknowledged that the Board of Directors of the Company
has elected the Employee to serve as the Company's Vice President of Technology
and Clinical Research, and the Company hereby agrees to use its best efforts to
have the Employee continue to serve in such capacity for the Company during the
term of this Agreement. The Employee is one of the Company's principal operating
officers and will conduct and manage the Company's business in accordance with
policies established by the Company from time to time. The precise services of
the Employee may be extended or curtailed from time to time at the direction and
in the sole discretion of the Company's Board of Directors. Nothing herein shall
be construed as requiring the Company, or anybody else, to cause the election of
the Employee as a Director of the Company.
(c) It is hereby further acknowledged that notwithstanding the full-time
basis of the Employee's responsibilities under this Agreement, the Agreement
does not preclude the Employee from performing incidental consulting services
entailing less than 6 hours per week for other parties which will not conflict
with the Agreement.
3. Compensation
For the services rendered hereunder, the Company shall pay and the Employee
shall accept the following compensation:
(a) The Company shall pay to the Employee the sum of $11,250 per month.
Upon successful completion of the Private Placement, such compensation shall be
paid by the Company to the Employee pursuant to the prevailing payroll practices
of the Company with retroactive payments for work performed prior to the
successful completion of the Private Placement.
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<PAGE> 3
(b) The Employee's salary shall be payable subject to such deductions as
are then required by law and such further deductions as may be agreed to by the
Employee, in accordance with the Company's prevailing salary payroll practices.
(c) The Employee shall participate in an executive compensation plan to be
established by the Board of Directors of the Company. The Employee shall be
entitled to 5% of any amounts allocated by the Board of Directors each year
during the term hereof to such plan for the purpose of providing an incentive to
key employees. In no event, however, shall the Employee receive more than two
times his base salary, inclusive of any CPI increases described above. In
addition, in the event the term hereof is not commensurate with the fiscal year
of the Company or the Employee is not employed hereunder for a full fiscal year,
any such amounts due to the Employee hereunder pursuant to the terms of an
executive compensation plan shall be pro-rated for any such fiscal year during
which the Employee was not employed for the full twelve month period thereof.
(d) The Employee shall be granted as of the commencement of this Agreement
50,000 ten-year incentive stock options in accordance with the terms of the
Company's Stock Option Plan. The options so granted are immediately exercisable.
The Company may make further grants to the Employee pursuant to future good
faith negotiations between the parties.
4. Benefits and Expenses
(a) During the term of this Agreement, the Company shall provide the
Employee with a monthly $250 stipend to be used for medical insurance (the
"Medical Stipend"). The Medical Stipend can be applied toward the Employee's
personal medical insurance or toward the Employee's payment under the Company's
group medical plan.
(b) During the term of this Agreement the Company shall, upon presentation
of proper vouchers, reimburse the Employee for all reasonable expenses incurred
by him directly in connection with his performance of services as an Officer and
employee of the Company.
(c) The Employee shall be entitled to five (5) weeks of paid vacation and
twelve (12) personal days per calendar year ("Vacation Allotments"),
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<PAGE> 4
provided that the Employee shall not take more than two consecutive weeks of
vacation during any fiscal year, except for personal emergencies with the
Company's permission. The Vacation Allotments are non-cumulative and if the
Employee fails to use any or all of his Vacation Allotments during a particular
calendar year, such Vacation Allotments shall be deemed forfeited forever.
5. Disability and Death
(a) In the event of the permanent disability of the Employee, as
hereinafter defined, the Company shall have the right thereafter to terminate
this Agreement with the Employee by sending written notice of such termination
to the Employee, and thereupon this Agreement shall terminate. For purposes
hereof, "permanent disability" shall mean the inability of the Employee to
perform his duties hereunder due to physical or mental illness, including drug
abuse and alcoholism, for a continuous period of three (3) months or for six (6)
months in any twelve (12) consecutive month period. In addition, the "permanent
disability" of the Employee shall also have been deemed to have occurred if the
Employee shall have had appointed a guardian or conservator for him or such
appointment shall have been made by a court of competent jurisdiction.
(b) The parties hereto hereby agree that if a disagreement arises as to
whether a condition of disability exists hereunder, the Employee shall submit to
a physical examination by a physician of his own choice and by a physician of
the Company's choice. If either physician so chosen does not agree as to the
determination of disability, the two physicians shall mutually select a third
qualified physician, whose determination shall be conclusive upon all parties.
Each party shall bear the expense of the physician selected by such party and
the expense of the third physician shall be borne equally by the Employee and
the Company. The Employee hereby consents to the examination provided for herein
and waives, if applicable, any privilege which exists between any physician and
the Employee as a result of such examination.
(c) This Agreement shall also terminate upon and as of the date of death of
the Employee at any time during the term of this Agreement.
(d) Notwithstanding anything contained herein to the contrary, the Employee
shall be compensated as set forth in this Agreement, through the date of
termination of this Agreement due to permanent disability or death, provided,
however, in the event of permanent disability any such compensation shall be
reduced by any
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<PAGE> 5
amounts payable to the Employee from or in respect of disability insurance plans
for which the Company has paid any portion of the premiums therefore and which
payments are received by the Employee for the period of such incapacity or
illness.
6. Covenants and Restrictions
The Employee covenants that, except in carrying out his duties hereunder,
during the term of his employment and for a period of two (2) years following
the date of termination of employment hereunder, irrespective of the reasons for
any such termination and unless such longer period of time is specifically set
forth herein:
(a) The Employee will not, directly or indirectly, own any interest
in, participate or engage in, assist, render any services (including
advisory services) to, become associated with, work for, serve (in any
capacity whatsoever, including, without limitation, as an employee,
consultant, advisor, agent, independent contractor, officer or director) or
otherwise become in any way or manner connected with the ownership,
management, operation, or control of, any business, firm, corporation,
partnership or other entity (collectively referred to herein as a "Person")
that engages in, or assists others in engaging in or conducting any
business, which deals, directly or indirectly, in products or services
competitive with the Company's product line or services, as described
below, anywhere in the world whereby the Employee will make use of the
Enamelon Technology, as defined hereinafter; and provided, however, the
above shall not be deemed to exclude the Employee from acting as a director
of a corporation for the benefit of the Company with the consent of the
Company's Board of Directors; and provided further, however, that the above
shall not also be deemed to prohibit the Employee from engaging in any
business activity involving the research and development, manufacture,
marketing or sale of any dentifrice, chewing gum, food, confection, spray
professional gel or mouth rinse that utilizes currently accepted technology
which, for example, makes use of fluoride, in the prevention of cavities,
and may directly result in the remineralization of teeth so long as the
Employee, in such a capacity, does not make use of the Enamelon Technology,
as defined hereinafter. For purposes hereof, "products or services
competitive with the Company's product line or services" shall mean any
products or services which have as their primary purpose or function or
which are marketed, promoted or sold as having the effect of repairing,
remineralizing, rebuilding, desensitizing teeth or preventing or retarding
tooth decay and/or cavities. For purposes hereof, the "Enamelon Technology"
shall mean any scientific know-how or methods developed by the Company or
any of its employees with the aim to further develop the Products. Enamelon
Technology includes but is not
-5-
<PAGE> 6
limited to its development of Amorphous Calcium Phosphate technology
("ACPT").
(b) The Employee shall not sell or solicit any products or services to
any customer of the Company. The term "customer" shall mean any Person or
individual (including any Person or individual who controls, is under
common control with or has the ability to control any such Person) to whom
the Company has provided goods or services within the twenty-four (24)
month period prior to the termination of the Employee's employment
hereunder or to whom the Employee had actively solicited business in an
attempt to develop such Person or individual as a customer of the Company
during the term hereof, or any licensee of the Company who was a licensee
of the Company at any time during the twenty-four (24) month period prior
to the termination of this Agreement.
(c) The Employee hereby covenants and agrees that the Employee will
not at any time subsequent to the date hereof, reveal, divulge, or make
known to any person, firm or corporation, any Confidential Information, as
defined hereinafter, made known to the Employee or of which the Employee
has become aware, regardless of whether developed, prepared, devised or
otherwise created in whole or in part by the efforts of the Employee and
except to the extent so authorized in writing by the Company in order to
carry out the terms of this Agreement or except as required by law. For
purposes of this Agreement, the term "Confidential Information" shall mean
any technical, scientific or engineering information relating to the
Company's products and/or services; information relating to any customer of
the Company, including without limitation, the names, addresses, telephone
numbers and sales records of, or pertaining to any such customer; price
lists, methods of operation and other information pertaining to the Company
and which the Company, in its sole discretion, regards as confidential and
in the nature of trade secrets. Notwithstanding anything contained herein
to the contrary, Confidential Information as used herein shall not include
that which (i) was in the public domain prior to receipt hereunder in the
same context as the disclosure made hereunder; or (ii) the Employee can
show was in his possession and in the same context prior to receipt; or
(iii) subsequently becomes known to the Employee by third parties not in
the course of this Agreement and as a matter of right and without
restriction on disclosure; or (iv) subsequently comes into the public
domain in the same context as the disclosure by the Company through no
fault of the Employee.
(d) The Employee further covenants and agrees that the Employee will
retain all of such Confidential Information in trust for the sole benefit
of the Company, and will not divulge or deliver or show any of such
Confidential Information to any
-6-
<PAGE> 7
unauthorized person and will not make use of or in any manner seek to
account for any of such Confidential Information in an independent business
however unrelated to the business of the Company. The Employee further
agrees that upon the termination of this Agreement or upon the request of
the Company, the Employee will either supply or return to the Company, in
accordance with the Company's request, all Confidential Information in the
Employee's possession, including, without limitation, all account lists,
records and data related to all customers of the Company.
(e) The Employee will neither solicit, hire or seek to solicit or hire
any of the Company's personnel, irrespective of the capacity of such
personnel, including any agent, independent contractor, or consultant to
the Company, nor shall the Employee induce or attempt to induce any of the
Company's personnel to leave the employ of the Company to work for the
Employee or otherwise, or to terminate their relationship with the Company.
(f) The Employee acknowledges that his breach or threatened violation
of any of the restrictive covenants contained in this Section 6 may cause
irreparable damage to the Company for which remedies at law would be
inadequate. The Employee further acknowledges that the restrictive
covenants set forth herein are essential terms and conditions of this
Agreement. The Employee therefore agrees that the Company shall be entitled
to a decree or order by any court of competent jurisdiction enjoining such
threatened or actual violation of any of such covenants. Such decree or
order, to the extent appropriate, shall specifically enforce the full
performance of any such covenant by the Employee and the Employee hereby
consents to the jurisdiction of any such court of competent jurisdiction
and authorizes the entry on its behalf of any required appearance for such
purpose. This remedy shall be in addition to all other remedies available
to the Company at law or equity. If any portion of this Section 6 is
adjudicated to be invalid or unenforceable, this Section 6 shall be deemed
amended to delete therefrom the portion so adjudicated, such deletion to
apply only with respect to the operation of this Section 6 in the
jurisdiction in which such adjudication is made.
7. Proprietary Property
(a) The parties hereto hereby agree that Proprietary Property, as
hereinafter defined, shall be the sole and exclusive property of the Company,
except as provided below. For purposes hereof, Proprietary Property shall mean
inventions, discoveries, improvements and ideas, whether patentable or not, made
solely by the Employee or jointly with others, which relate to the Enamelon
Technology, including any
-7-
<PAGE> 8
of its products, services, processes, technology, research, product development,
marketing programs, manufacturing operations, or engineering activities.
(b) The Employee shall promptly disclose to the Company in writing all
Proprietary Property, including those in the formative stages, created during
the term hereof, irrespective of whether created during normal business hours.
In addition, the Employee hereby agrees to promptly disclose to the Company all
Proprietary Property created subsequent to the date of termination hereof,
irrespective of the reasons for termination hereof, which relate to or
constitute an improvement on Proprietary Property or Confidential Information,
as defined herein.
(c) The Employee hereby agrees and acknowledges that the Employee shall
have no right, title or interest in or with respect to any Proprietary Property,
except as described below, and will during the term hereof or at any time
subsequent to the termination hereof, at the Company's request and expense,
execute any and all patent applications and assignments to the Company and take
any all action as required by the Company to perfect and maintain the Company's
rights and interests in and with respect to the Proprietary Property.
(d) The Employee hereby agrees to maintain written records concerning the
Proprietary Property and agrees to make those records available to the Company
at all times.
(e) In the event that the Company requires substantial services from the
Employee in order to maintain and enforce the Company's patent or patents
subsequent to the termination of all agreements between the Company and the
Employee, the Company shall compensate the Employee for his time at a rate of
$75 per hour. For purposes hereof, "substantial services" shall mean that the
Company requires the Employee to devote 5 hours over 2 weeks.
(f) Notwithstanding anything contained herein to the contrary, Proprietary
Property shall not include inventions or discoveries with respect to which all
of the following conditions apply:
(i) no equipment, supplies, facilities or Confidential
Information of the Company was used in its development;
(ii) it was developed on the Employee's own time;
-8-
<PAGE> 9
(iii) it does not relate the Company's business and/or any
proposed or planned products or services of the Company,
including any research and development activities; and
(iv) it does not result from any work performed by the
Employee for the Company.
(g) During or subsequent to the Employee's employment by Company, the
Employee will not, directly or indirectly, lecture upon, publish articles
concerning, use, disseminate, disclose, sell or offer for sale any Proprietary
Property without the Company's prior written permission. Such permission will
not be unreasonably withheld by the Company.
8. Prior Agreements
The Employee represents that as of January 23, 1995 he will not be under
any written agreement, nor has he previously, at any time, entered into any
written agreement with any person, firm or corporation, which would or could in
any manner preclude or prevent him from giving freely and the Company receiving
the exclusive benefit of his services.
9. Termination Provisions
(a) In addition to, and not in lieu of, the termination provisions set
forth in Section 5 of this Agreement, the employment of the Employee hereunder
may be terminated by the Company prior to the termination date of the initial
term or any renewal term thereafter (as set forth in Section 2 hereof) in the
event that the Employee (i) breaches this Agreement or (ii) engages in any act
of dishonesty with respect to the Company, including any act of willful
misfeasance (the foregoing reasons for termination set forth under Subparagraphs
(i) and (ii) above are sometimes referred to hereinafter as termination for
"Cause"). Such termination of the Employee's employment hereunder shall be
effective immediately upon delivery of written notice to the Employee setting
forth the reason or reasons for such termination. Upon the termination of this
Agreement in accordance with this Section 9(a), the Company shall not be
obligated to make any further payments hereunder to the Employee.
(b) Notwithstanding any provisions in this Agreement to the contrary, the
Company may terminate the employment of the Employee hereunder without Cause,
-9-
<PAGE> 10
but in such event the Company shall be obligated to pay the Employee any and all
amounts payable to the Employee pursuant to Section 3 above for the remainder of
the initial term or any renewal term of this Agreement (such period, the
"Remainder Term"), and the Company shall also continue for the Remainder Term to
permit the Employee to receive or participate in all fringe benefits available
to him pursuant to Section 4 above; provided, however, that the Company, in its
discretion, shall have the right to decide whether the Employee will continue to
perform his services hereunder or to be present at the Company's premises during
the Remainder Term and provided further that during the Remainder Term any
amounts payable to the Employee pursuant to this Section 9(b), and any fringe
benefits which he receives or in which he participates pursuant to this Section
9(b), shall be reduced by any payments or fringe benefits the Employee shall
receive during the Remainder Term from any other source of employment which is
unaffiliated with the Company.
10. Miscellaneous
(a) Subject to Section 10(d) hereunder, this Agreement shall inure to the
benefit of and be binding upon the Company, its successors and assigns, and upon
the Employee, his heirs, executors, administrators, legatees and legal
representatives.
(b) Should any part of this Agreement, for any reason whatsoever, be
declared invalid, illegal, or incapable of being enforced in whole or in part,
such decision shall not affect the validity of any remaining portion, which
remaining portion shall remain in full force and effect as if this Agreement had
been executed with the invalid portion thereof eliminated, and it is hereby
declared the intention of the parties hereto that they would have executed the
remaining portion of this Agreement without including therein any portion which
may for any reason be declared invalid.
(c) This Agreement shall be construed and enforced in accordance with the
laws of the State of New York applicable to agreements made and to be performed
in such State without application of the principles of conflicts of laws of such
State.
(d) This Agreement and all rights hereunder are personal to the parties and
shall not be assignable, and any purported assignment in violation thereof shall
be null and void.
-10-
<PAGE> 11
(e) Any notice, statement, report, request or demand required or permitted
to be given by this Agreement shall be in writing, and shall be sufficient if
delivered in person or if addressed and sent by certified mail, return receipt
requested, postage prepaid, or by overnight courier service or by facsimile
transmission, followed promptly by first class mail, to the parties at the
addresses set forth above, or at such other place that either party may
designate by notice in the foregoing manner to the other. Any such notice shall
be deemed given three (3) days after being mailed by certified mail, one (1) day
after being sent by overnight courier service and immediately when personally
delivered or sent by facsimile transmission.
(f) The failure of either party to insist upon the strict performance of
any of the terms, conditions and provisions of this Agreement shall not be
construed as a waiver or relinquishment of future compliance therewith, and said
terms, conditions and provisions shall remain in full force and effect. No
waiver of any term or any condition of this Agreement on the part of either
party shall be effective for any purpose whatsoever unless such waiver is in
writing and signed by such party.
(g) The provisions of Sections 5, 6, 7, 9 and 10 of this Agreement shall
survive any termination of this Agreement
(h) The heading of the paragraphs herein are inserted for convenience and
shall not affect any interpretation of this Agreement.
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first written above.
ENAMELON, INC.
By: /s/ Steven R. Fox
-----------------------------
Steven R. Fox, D.D.S.
Chief Executive Officer
/s/ Anthony E. Winston
-----------------------------
Anthony E. Winston
-12-
<PAGE> 1
LEASE AGREEMENT
LEASE AGREEMENT made as of the 19th day of December, 1995, by and between
Elaine Fox, with an address of 43 Stratton Road, Scarsdale, New York 10583
(hereinafter referred to as the "Landlord") and Enamelon, Inc. A Delaware
corporation with an address of 15 Kimball Avenue, Yonkers, New York (hereinafter
referred to as the "Tenant").
WITNESSETH:
-----------
WHEREAS, Landlord is the owner of premises at 15 Kimball Avenue, Yonkers,
New York (hereinafter referred to as the "Property").
WHEREAS, Tenant is desirous of leasing a six room office suite in the lower
level of the Property for corporate offices (the "Premises"); and
WHEREAS, Landlord is desirous of leasing the Premises to Tenant.
NOW THEREFORE, in consideration of the mutual covenants and promises
hereinafter contained, it is agreed as follows:
1. Landlord hereby leases to Tenant a six room office suite in the lower
level of the Property, which suite shall constitute the Premises for a term of
on e (1) year commencing January 1, 1996 and terminating December 31, 1996,
unless sooner terminated. Tenant agrees to use the Premises solely for office
purposes.
2. The parties agree that the basic annual reserved rent during the term of
this Lease shall be THIRTY THOUSAND DOLLARS ($30,000.00). Rent shall be payable
in equal monthly installments of the first day of each month in advance.
3. On or before the commencement of the term of the Lease, Tenant shall
deliver to Landlord the amount of TWO THOUSAND FIVE HUNDRED AND 00/100 DOLLARS
($2,500.00) as security for the true and faithful performance of all the terms
and covenants contained herein (the "Security Deposit"). The Security Deposit
shall not be applied against the rent under this Lease, but shall be returned to
Tenant upon the expiration of the term of this Lease subject to the provision of
Paragraph 9 below. Landlord shall have the right to apply the Security Deposit
to cure any default by Tenant, and Tenant thereafter agrees to restore the
Security Deposit. Landlord shall have no obligation to pay Tenant any interest
on account of the Security Deposit. Landlord shall have the right to commingle
the Security Deposit with other funds of Landlord.
1
<PAGE> 2
4. Tenant has inspected the Premises and agrees to accept them as is.
Tenant agrees that any painting and/or alterations to the Premises for the term
of the Lease shall be the obligation of Tenant, and any such painting or
alterations shall be done only with the express prior written consent of the
Landlord. Tenant shall also be responsible for the repair and/or replacement of
all window air conditioners in the Premises. Tenant agrees that any alteration
work to be performed shall be done by competent contractors; that all work shall
be performed in accordance with all applicable Federal, State or Municipal
rules, regulations and ordinances; that Tenant shall secure all necessary
permits and licenses to proceed with the work; that all workmen and contractors
shall be fully and property insured; and Tenant shall not permit the filing of
any mechanics liens against the Premises of the Property. If any mechanics liens
are filed, Tenant shall satisfy or bond the same within thirty (30) days of the
filing of such mechanics liens. If the Tenant shall fail to do so, then Landlord
may do so, and the amount so paid together with any attorney's fees or other
costs and expenses shall be deemed to be additional rent owing from Tenant to
the Landlord for the month next ensuing after the Landlord shall have paid the
charge. Any permanent improvements made by Tenant to the Premises, such as
installation of carpeting and tiles, shall become the property of Landlord upon
installation.
5. The parties agree that Tenant may not sublet the Premises or assign its
interest in this Lease without the prior written consent of Landlord, which
consent may be withheld by Landlord in Landlord's sole and absolute discretion.
6. Tenant agrees to maintain and operate the Premises and all business
conducted there in accordance with and in compliance with all laws, rules,
orders, regulations, ordinances of each and every governmental department,
agency unit or bureau having jurisdiction over the Premises or the business of
Tenant.
7. The following shall constitute events of default by Tenant and shall be
a breach of this Lease:
a) failure to pay rent as and when due;
b) failure to pay the utility bill as and when due;
c) failure to perform any of the terms, conditions and covenants
contained in this Lease.
Upon the occurrence of the events listed in a) and b) above, this Lease
shall cease and terminate upon there (3) days written notice by Landlord to
Tenant, unless Tenant shall cure said default within three (3) days after
receipt of such notice. Upon the occurrence of any of the events listed in c)
above, Landlord shall give Tenant written notice of, such default and Tenant
shall have a period of ten (10) days. Tenant shall diligently proceed to
commence to cure such default within the ten (10) day period. If Tenant has
failed to cure such default within ten (10) days, then this
2
<PAGE> 3
Lease shall cease and terminate upon three (3) days written notice by Landlord
to Tenant.
8. If the Premises are rendered wholly or partially unusable by fire or
other casualty, the rent payable hereunder shall abate proportionate to the date
of such casualty and to the portion of the Premises which is unusable. Landlord
shall, except as hereinafter provided, repair and restore the Premises with all
reasonable speed, subject to delays beyond Landlord's control, including,
without limitation, delays due to adjustment of insurance claims, and labor
troubles. In the event Landlord shall decide following fire or other casualty to
demolish the building on the Property or not to repair and restore the Premises,
Landlord may elect to terminate this Lease by notice thereof to Tenant given
within thirty (30) days from the giving of such notice. In no event may Tenant
elect to terminate this Lease. Nothing contained herein shall relieve Tenant
from liability that may exist as a result of damage from fire or other casualty.
Landlord shall in no event be liable to Tenant for any loss to Tenant's personal
property on the Premises of the interruption of Tenant's business.
9. Notwithstanding anything in Paragraph 8 to the contrary, upon the
expiration or other termination of this Lease, Tenant shall quit and surrender
to Landlord the Premises in good order and condition, reasonable wear and tear
excepted. Tenant shall remove all its personal property from the Premises, but
shall be liable for any damage caused to the Premises during removal of said
property.
10. Tenant agrees that the Premises shall be separately metered for
electricity. Tenant agrees to promptly pay, when due, all utility bills rendered
by Consolidated Edison (or successor company). Tenant hereby indemnifies
Landlord against all losses from Tenant's failure to pay such utility bill.
Landlord is not responsible for any curtailment of such electrical services by
Consolidated Edison (or successor company) and such curtailment of electrical
service shall not entitle Tenant to any abatement of rent or additional rent.
11. The tenant agrees that the individual Landlord or any successor
interest thereto who may be an individual, Joint Venture, tenancy in common,
firm or partnership, general or limited, shall have no personal liability in
respect to any of the covenants or conditions of this Lease. The Tenant or any
successor thereto shall look solely to the equity of the Landlord in the
Property for the satisfaction of any remedy against the Landlord in the event of
a breach by the Landlord of any of the covenants or conditions of this Lease.
12. If any violation shall be filed or noted against Landlord or against
the Premises by any governmental agency having jurisdiction of the Premises,
Landlord agrees that it will promptly cure such violations at its own cost and
expense.
13. Landlord shall not be liable for any loss of property by or injury to
Tenant resulting from theft or other criminal activity in the Premises. Landlord
shall not be liable to Tenant for any damage caused by other Tenants or persons
in the Premises.
3
<PAGE> 4
14. The failure of Landlord to seek redress of Tenant's breach of any of
the terms and conditions of this Lease shall not prevent Landlord from enforcing
any of its rights and remedies as to any future breach by Tenant. Acceptance by
Landlord of rent with knowledge of any breach of any term or covenant of this
Lease shall not be deemed a waiver of such breach.
15. Tenant agrees that in no event shall any right of subrogation be
asserted against Landlord for any injury, damage or loss suffered by Tenant.
16. The interpretation and enforcement of this Lease shall be governed by
New York law.
17. In the event of any dispute between the parties to this Lease, if such
dispute results in litigation between Landlord and Tenant, the prevailing party
in any such action shall be entitled to recover attorney's fees and court costs
from the non-prevailing party.
IN WITNESS WHEREOF, the parties hereto have duly executed this Lease
Agreement as of the date and year first written above.
/s/ Elaine Fox ENAMELON, INC.
- ---------------------------- a Delaware corporation
ELAINE FOX
Landlord
By: Dr. Steven R. Fox
---------------------------------
Dr. Steven R. Fox,
Chairman of the Board
4
<PAGE> 1
================================================================================
================================================================================
L E A S E
Between
UNUM LIFE INSURANCE COMPANY OF AMERICA
Landlord
-and-
ENAMELON, INC.
Tenant
HERON MANAGEMENT LTD.
909 Third Avenue
New York, N. Y. 10022
212-7S3-3210
<PAGE> 2
<TABLE>
<CAPTION>
ARTICLE NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C> <C>
I Demise 3
II Term 3
III Rent 4
IV Use and Occupancy 4
V Alterations or Improvements by Tenants 5
VI Maintenance 6
VII Compliance with Laws, Indemity and Insurance 6
VII Hazardous Materials 7
IX Subordination and Estoppel 8
X Destruction - Fire or Other Casualty 8
XI Mutual Waiver of Subrogation 9
XII Condemnation and Other PRoceedings 10
XIII Assignment and Subletting 11
XIV Surrender 12
XV Holding Over 12
XVI Landlord's Right of Entry 12
XVII Default 13
XVIII Landlord's Rights Upon Tenant's Default 14
XIX Landlord's Remedies Cumulative: Expenses 16
XX No Waiver 16
XXI Landlord's Reserved Rights 17
XXII Landlord's Liability 17
XXIII Tenant's Liability 17
XXIV Tenant's Insurance 18
XXV Mechanic's Liens 19
XXVI Quiet Enjoyment 19
XXVII Air and Light 19
XXVIII Landlord's Services 19
(Additional Rent) Intentionally Omitted
XXIX Personal Property Taxes 21
XXX Security Deposit 21
XXXI Use of Security Deposit Intentionally Omitted 21
XXXII Definition of Landlord 22
XXXIII Notices 22
XXXIV Signs 23
XXXV Notice of Defects and Accidents 23
XXXVI Rules and Regulations 23
XXXVII Directory 23
XXXVIII Miscellaneous 24
XXXIX Definitions 27
XXXX Americans With Disabilities Act 28
Corporate Tenant Acknowledgement 29
Partnership Tenant Acknowledgement 29
Exhibit A - Floor Plan
Exhibit B - Cleaning Schedule
Exhibit C - Tenants Work
</TABLE>
2
<PAGE> 3
LEASE, dated as of the 27 day of December, 1993, between UNUM LIFE INSURANCE
COMPANY OF AMERICA having its principal office at 2211 Congress Street,
Portland, ME 04121 (hereinafter referred to as "Landlord") and Enamelon, Inc.
having its principal office at 15 Kimball Avenue, Yonkers, New York 10704
(hereinafter referred to as "Tenant").
W I T N E S S E T H:
Landlord and Tenant hereby covenant and agree as follows:
ARTICLE I
Demise
1.1 Landlord hereby leases to Tenant and Tenant hereby hires from Landlord
approximately Two Thousand Two Hundred and Fifty (2,250) Sq. Ft. as shown on the
floor plan which has been initialed by the parties and annexed hereto and made a
part hereof and marked Exhibit A, in the building known as THE WOODS OF EAST
BRUNSWICK, 758 ROUTE 18, EAST BRUNSWICK, NEW JERSEY at the annual rental rate
set forth in Article III and upon and subject to all of the terms, covenants and
conditions contained in this Lease. The premises shall be deemed to and hereby
are agreed to have a Rentable Area (as defined in Article 39.3 herein) as above
of approximately 2,250 sq. ft. of floor area constituting a portion of the
ground floor of the building subject however to and reserving unto Landlord, its
successors and assigns, its agents, employees and invitees, the use in common
with Tenant of common areas and facilities located upon said first floor which
common areas and facilities include but are not limited to corridors and rest
rooms. The premises leased to Tenant, together with all appurtenances, fixtures,
improvements, additions and other property attached thereto or installed therein
at the commencement of, or at any time during, the term of this Lease, other
than Tenant's personal property are referred to collectively as the "Premises."
ARTICLE II
Term
2.1 The Premises are leased for a term to commence at 12:01 A.M. on January 1,
1994 (Commencement Date) and to end at 11:59 P.M. on December 31, 1998
(Termination Date) unless the term shall sooner terminate pursuant to any of the
terms, covenants or conditions of this Lease or pursuant to law.
2.2 When Tenant takes possession of the Premises, Tenant shall be deemed to have
accepted the Premises as being in satisfactory condition as of the date of such
possession.
3
<PAGE> 4
ARTICLE III
Rent
3.1 The Tenant covenants and agrees to pay to the Landlord as rent for and
during the term hereof the sums pursuant to the following schedule:
<TABLE>
<CAPTION>
Lease Year Annual Rent
---------- -----------
<S> <C>
January 1, 1994 through December 31, 1994 $23,625.00
January 1, 1995 through December 31, 1995 $24,750.00
January 1, 1996 through December 31, 1996 $27,000.00
January 1, 1997 through December 31, 1997 $29,350.00
January 1, 1998 through December 31, 1998 $31,350.00
</TABLE>
3.2 The Basic Rent and Additional Rent payable pursuant to the provisions of
this Lease shall be payable by Tenant to Landlord at its office (or at such
other place as Landlord may designate in a notice to Tenant) in lawful money of
the United States without prior demand thereof and without any offset or
deduction whatsoever except as otherwise specifically provided in this Lease for
the convenience of the Landlord. The Basic Rent shall be payable in equal
monthly installments pursuant to the following schedule, in advance, on the
first (1st) day of each month during the term:
<TABLE>
<CAPTION>
Lease Year Monthly Rent
---------- ------------
<S> <C>
January 1, 1994 through December 31, 1994 $1,968.74
January 1, 1995 through December 31, 1995 S2,062.50
January 1, 1996 through December 31, 1996 $2,250.00
January 1, 1997 through December 31, 1997 S2,437.50
January 1, 1998 through December 31, 1998 $2,625.00
</TABLE>
3.3 Tenant covenants to pay the Basic Rent and any Additional Rent payable
pursuant to the provisions of this Lease and to observe and perform and to
permit no violation of the terms, covenants and conditions of this Lease on
Tenant's part.
3.4 Notwithstanding anything contained herein to the contrary, simultaneous with
the execution of this lease, Tenant shall pay to Landlord the first month's rent
due hereunder.
ARTICLE IV
Use and Occupancy
4.1 Tenant shall use or occupy the Premises only for the following purpose:
Executive Offices for non hazardous, nontoxic, toothpaste, and
toothpaste-related research laboratory.
4
<PAGE> 5
4.2 Tenant shall not use or occupy, or permit the use or occupancy of the
Premises or any part thereof for any purpose other than the purpose specifically
set forth herein. Any violations of this Article shall be deemed a material
breach of this Agreement.
ARTICLE V
Alterations or Improvements by Tenant
5.1 Tenant shall make no change in or to the Premises of any nature without
Landlord's prior written consent. Subject to the prior written consent of
Landlord (which consent shall not unreasonably be withheld or delayed), Tenant,
at Tenant's sole expense, may hire contractors approved by Landlord (which
approval may not unreasonably be withheld or delayed) to make alterations,
installations, additions or improvements in or to the Premises (collectively
"Alterations") which are nonstructural and which do not materially affect
utility services, plumbing or electrical lines in or to the Premises or the
Building. All alterations shall, upon installation, become the property of
Landlord and shall remain upon and be surrendered with the Premises unless
Tenant by notice to Landlord no later than thirty (30) days prior to the
Termination Date requests Landlord's consent to remove same and Landlord so
consents (which consent shall not be unreasonably withheld or delayed). If
Landlord so consents the same shall be removed from the Premises by Tenant prior
to the Termination Date at Tenant's sole expense. Nothing in this Article V
shall be construed to give Landlord title to or to prevent Tenant's removal of
trade fixtures, moveable office furniture and equipment but upon removal of any
such item from the Premises or upon removal of any other installation as may be
permitted by Landlord, Tenant shall promptly and at its expense, repair and
restore the Premises to the condition existing prior to such Alteration,
reasonable wear and tear excepted. Tenant shall repair any damage to the
Premises, the building, or the real property on which the building is located
(hereinafter referred to as the "Real Property") incurred during such removal.
All property permitted or required to be removed by Tenant at the end of the
Term remaining on the Premises on the thirtieth day after the Termination Date
shall be deemed abandoned and may, at the election of Landlord, either be
retained as Landlord's property or may be removed from the Premises by Landlord
at Tenant's reasonable expense.
5.2 Prior to the commencement of any Alteration, Tenant shall at its sole
expense, obtain all required permits, approvals and certificates required by all
Governmental Authorities as determined by Landlord and upon completion of the
Alteration and Tenant shall promptly deliver to Landlord certificates of final
approval thereof. Tenant shall carry and will cause Tenant's
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contractors and subcontractors to carry such worker's compensation, general
liability, personal and property damage insurance as required by law and in
amounts no less than the amounts set forth in Article XXIV hereof.
ARTICLE VI
Maintenance
6.1 Tenant shall take good care of the Premises throughout the Term and preserve
same in the condition delivered to Tenant on the Commencement Date, normal wear
and tear excepted. Tenant further agrees not to injure, overload, deface or
commit waste of the Premises. Tenant shall be responsible for all injury or
damage of any kind or character to the Real Property, including the windows,
floors, walls, ceilings, lights, electrical equipment and HVAC equipment, caused
by Tenant or by anyone using or occupying the Premises by, through or under the
Tenant. Landlord shall repair the same and Tenant shall pay the reasonable costs
incurred thereof to Landlord promptly upon demand. This shall be deemed to be
additional rent.
6.2 Landlord shall be responsible for all Structural Repairs and shall maintain,
and replace all plumbing, heating, air conditioning, electrical and mechanical
fixtures supplied by Landlord (exclusive of (a) starters, ballasts, incandescent
and fluorescent lamps and (b) electrical and mechanical fixtures installed by
Tenant) which shall be standard for the Building, when required, and maintain
and make repairs to the parking area and the exterior of the building, except
those repairs or replacements arising from the negligence of Tenant, its agents,
servants, employees, licensees, or invitees, which shall be the sole
responsibility of Tenant. Landlord shall promptly remove all snow and ice at
Landlord's sole expense.
ARTICLE VII
Compliance with Laws, Indemnity and Insurance
7.1 Tenant shall not do, or permit anything to be done in or to the Premises, or
bring or keep anything therein which will, in any way, increase the cost of fire
or public liability insurance on the Real Property, or invalidate or conflict
with the fire insurance or public liability insurance policies covering the Real
Property, any Building, fixtures or any personal property kept therein, obstruct
or interfere with the rights of Landlord or other tenants, or in any other way
injure or annoy Landlord or other tenants, or subject Landlord to any liability
for injury to persons or damage to property, or interfere with the good order
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of the Building, or conflict with the present or future laws, rules or
regulations of any Governmental Authority. Tenant hereby indemnifies and shall
hold Landlord harmless of and from all liability for injury to persons or damage
occurring on the Premises or in the Building whether occasioned by any act or
omission of Tenant, or Tenant's agents, servants, employees, invitees, or
licensees. Tenant agrees that any increase in fire and casualty insurance
premiums on the Building or contents caused by the occupancy of Tenant and any
expense or cost incurred in consequence of negligence, carelessness or willful
action of Tenant, Tenant's agents, servants, employees, invitees or licensees,
shall be reimbursed to Landlord within ten (10) days of demand thereof and
shall be considered additional rental.
ARTICLE VIII
Hazardous Materials
8.1 Tenant shall not, without Landlord's prior written consent, use, generate,
release, spill, store, deposit, transport or dispose of (collectively "Release")
any hazardous substances, sewage, petroleum products, hazardous materials, toxic
substances or any pollutants, contaminants or substances, defined as hazardous
or toxic under any applicable federal, state, and local laws and regulations
("Hazardous Substances") or create the emission of noxious odors in, on or about
the Premises. In the event, and only in the event, Landlord approves such
Release of Hazardous Substances or noxious odors on the Premises, Tenant agrees
that such Release shall occur safely and in compliance with all applicable
federal, state and local laws and regulations. Tenant shall indemnify, hold
harmless and defend Landlord, its officers, directors, employees and agents from
any and all claims, liabilities, losses, damages, cleanup costs and expenses
(including reasonable attorney's fees) arising directly or indirectly out of or
attributable to failure of Tenant, its agents, servants, employees or invitees
to comply with this Article. The provisions of this Article shall survive the
expiration or termination of the Lease for any reason. The Tenant is not liable
to the Landlord for Releases which occurred prior to the date of occupancy by
Tenant. Notwithstanding anything contained herein to the contrary, should
Landlord determine, in its sole reasonable opinion, that Tenants conduct is
violative of this paragraph or in any way causing harm to the building or its
inhabitants, Landlord may terminate this lease upon 30 days written notice to
Tenant. However said termination of lease shall not be Landlord's sole remedy
and shall not limit any other damages to which Landlord may be entitled under
the circumstances.
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ARTICLE IX
Subordination and Estoppel
9.1 Tenant agrees that this Lease is subject and subordinate to all ground or
underlying leases and to the lien of any mortgages or deeds of trust now on or
which at any time in the future that may be made a lien upon the Real Property,
and to all advances made or hereafter to be made upon the security thereof. This
subordination provision shall be self-operative and no further instrument of
subordination shall be required. Tenant agrees to execute and deliver within ten
days, upon request, such further instrument or instruments confirming this
subordination as shall be desired by Landlord or by any mortgagee or proposed
mortgagee of the Real Property; and Tenant hereby constitutes and appoints
Landlord as Tenant's attorney-in-fact to execute any such instrument or
instruments. Tenant further agrees that at the option of the holder of any
mortgage or of the trustee under any deed of trust securing the Real Property,
this Lease may be made superior to said mortgage or deed of trust by the
insertion therein of a declaration that this Lease is superior.
9.2 Tenant agrees at any time and from time to time upon not less than ten (10)
days, prior written request by Landlord, to execute, acknowledge and deliver
to Landlord a statement in writing certifying that this Lease is unmodified and
in full force and effect (or, if there have been modifications, that the same
are in full force and effect as modified and stating the modifications), that
there are no offsets, defenses, defaults or counterclaims under this Lease or
against the Landlord (or of there are any then specifying the same), the dates
to which the Basic Rent and Additional Rent have been paid in advance, if any,
it being intended that any such statement delivered pursuant to this paragraph
8.2 may be relied upon by a prospective purchaser of Landlord's interest or
mortgagee of Landlord's interest or assignee of any mortgage upon Landlord's
interest in the Real Property.
ARTICLE X
Destruction - Fire or Other Casualty
10.1 (a) If Landlord's building is totally damaged or is rendered wholly
untenantable by fire or other cause, and cannot reasonably be repaired by
Landlord within sixty (60) days, or if the Building shall be so damaged that
Landlord cannot reasonably restore the same but must demolish it or rebuild it,
which Landlord may in its sole discretion determine, then either party may,
within thirty (30) days after such casualty, give to the other party a notice in
writing of intention to terminate this Lease, and thereupon the term of this
Lease shall expire by lapse
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of time upon the thirtieth (30th) day after such notice is given, and Tenant
shall vacate the demised Premises and surrender the same to Landlord. Upon
termination of this Lease under this Paragraph X(a), Tenant's liability for rent
shall cease as of the day following the casualty or when tenant ceases to do
business in the demised Premises, whichever date is earlier. In the event this
Lease is not terminated under the provisions of this Paragraph X(a), Landlord
shall repair and rebuild the Demised Premises with reasonable diligence.
(b) If the Demised Premises shall be totally or partially damaged by fire
or other casualty and the parties do not terminate this lease pursuant to
paragraph (a) above, the damages to the Landlord's Building and to the Demised
Premises shall, to the extent that they were originally constructed and
furnished by the Landlord, be promptly repaired by and at Landlord's expense and
the damage to all of tenant's fixtures and other improvements installed by
Tenant shall be promptly repaired by and at the expense of Tenant and the rent
until such repair shall be made shall be apportioned according to the part of
the Demised Premises which is tenantable by Tenant until the Landlord has made
the repairs required of Landlord.
(c) Landlord shall provide and maintain, at its expense, during the term
hereof, fire insurance. Anything contained in this Lease to the contrary
notwithstanding, in the event the Landlord's Building shall be totally or
partially damaged by fire or other casualty, the Landlord shall not be obligated
to expend for such repair or restoration an amount in excess of the net proceeds
of insurance recovered as a result of such damage.
ARTICLE XI
Mutual Waiver of Subrogation
11.1 Landlord hereby waives any and all rights of recovery against Tenant for or
arising out of damage to or destruction of the Premises, Building, or the Real
Property and any other property of Landlord from causes then insured under
standard and extended coverage insurance policies or endorsements to extent that
its insurance policies then in effect permit such waiver, and Tenant hereby
waives any and all rights of recovery against Landlord for or arising out of
damage to or destruction of the Premises or the Real Property and any property
of Tenant from causes then insured under standard fire and extended coverage
insurance policies to the extent that its insurance policies then in effect
permit such waiver. If at any time during the Term any insurance carrier which
shall have issued a
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policy to either of the parties covering the Real Property, the Premises or any
of the property of Tenant, shall refuse to consent to the waiver of the right of
recovery with respect to any loss payable under such policy, or if such carrier
shall consent to such waiver only upon the payment of an additional premium
(unless such additional premium is voluntarily paid by one of the parties
hereto) or shall cancel a consent previously given, or shall cancel or threaten
to cancel any policy previously issued and then in full force and effect, then
in any such event, the waiver of this paragraph 10.1 shall thereupon be of no
further force and effect as to the loss, damage or destruction covered by such
policy except as hereinafter provided. If however, at any time thereafter such
consent shall be obtained thereof from any existing or any substitute insurance
carrier, the waiver hereinabove provided for shall again become effective.
ARTICLE XII
Condemnation and Other Proceedings
12.1 In the event the whole of the Demised Premises shall be acquired or
condemned by eminent domain for any public or quasi-public use or purpose, then
and in that event, the term of this Lease shall cease and terminate from the
date of title vesting in such proceeding or the termination of the Tenant's
right to possession, whichever is earlier. In the event any substantial part
thereof or of Landlord's Building or of the structure of which Landlord's
Building is a part is so acquired or condemned as to render the Demised Premises
reasonably untenantable or in the event that a part of Landlord's Building,
other than the Demised Premises, shall be so condemned or taken and if in the
opinion of the Landlord, the Building should be restored in such ways to alter
the Demised Premises materially, the Landlord may terminate this Lease and the
term and the estate hereby granted by notifying the tenant in writing of such
termination and this Lease and the term and estate hereby granted shall expire
on the date specified in the notice of termination, not less than thirty (30)
days after the giving of such notice, as fully and completely as if such date
were the date hereinbefore set forth for the expiration of the term of this
Lease, and the rent hereunder shall be apportioned as of said date. Tenant shall
have no claim against Landlord for the value of any unexpired term of said
Lease, nor a claim to any part of an award in such proceeding and rent shall be
adjusted and paid to the date of such termination. Nothing herein contained
shall be deemed to affect or be in derogation of any right or rights of Tenant
against the condemning authority to claim and recover damages, if any, to or for
the taking of its movable fixtures and equipment or expenses or removal or
relocation resulting from any such condemnation or acquisition.
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ARTICLE XIII
Assignment and Subletting
13.1 Tenant, for itself, its successors and assigns, expressly covenants that it
shall not, during the Original Term or during the renewal Term (if any), assign,
mortgage or encumber this Lease, nor sublet, or suffer or permit the Demised
Premises or any part thereof to be used by others, without the prior written
consent of the Landlord in each instance, which consent shall not be
unreasonably withheld or delayed. Except as herein provided, if this Lease be
assigned, or if the Demised Premises or any part thereof be sublet or occupied
by any party other than Tenant, Landlord may, at its option, terminate this
Lease, or may, at its option after default by Tenant, collect rent from the
assignee, subtenant or occupants of Tenant, and apply the net amount collected
to the rent herein reserved, but no such assignment, subletting, occupancy or
collection shall be deemed a waiver of this covenant, or the acceptance of the
assignee, subtenant or occupant's tenant, or a release of Tenant from the
further performance by Tenant of covenants on the part of Tenant herein
contained. In the event Tenant shall at any time desire to have Landlord sublet
the Premises for Tenant's account, Landlord or Landlord's agents are authorized
to receive keys for such purposes without releasing Tenant from any of the
obligations under this Lease. The consent by Landlord to an assignment or
subletting shall not in any way be construed to relieve Tenant from obtaining
the express consent in writing of Landlord to any further assignment or
subletting. Each permitted assignee or transferee shall assume and be deemed to
have assumed this Lease and shall be liable for the payment of the rent and
additional rent and for the due performance of all of the terms, covenants,
conditions and agreements herein contained on Tenant's part to be performed for
the term of this Lease. No assignment shall be binding on Landlord unless such
assignee or tenant shall deliver to Landlord a duplicate original of the
instrument of assignment, in form reasonable satisfactory to Landlord,
containing a covenant of assumption by the assignee of all of the obligations
aforesaid and shall obtain from Landlord the aforesaid written consent, prior
thereto.
Notwithstanding anything contained herein to the contrary, Tenant shall
continue to remain primarily liable to Landlord under all of the terms and
conditions of this Lease, even upon assignment of this Lease, and assumption by
a third party.
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ARTICLE XIV
Surrender
14.1 Upon the termination of the Term or prior expiration of this Lease, Tenant
shall peaceably and quietly quit and surrender to the Landlord the Premises,
broom clean, in as good condition as they were on the Commencement Date ordinary
wear and tear, repairs and replacements by Landlord, loss by fire, casualty and
other causes beyond Tenant's control and alterations, additions and improvements
permitted hereunder, excepted. Tenant's obligation to observe or perform this
covenant shall survive the Termination Date or prior expiration of the Term. If
the Termination Date falls on a Sunday or a legal holiday, this Lease shall
expire at 11:59 P.M. on the business day first preceding said date.
ARTICLE XV
Holding Over
15.1 If Tenant holds possession of the Premises beyond the Termination Date or
prior expiration of the Term, Tenant shall become a tenant from month-to-month
at ONE AND A HALF TIMES the Basic Rent and Additional Rent payable hereunder and
upon all other terms and conditions of this Lease, and shall continue to be such
month-to-month tenant until such tenancy shall be terminated by Landlord and
such possession shall cease. Nothing contained in this Lease shall be construed
as a consent by Landlord to the occupancy or possession by Tenant of the
Premises beyond the Termination Date or prior expiration of the Term, and
Landlord, upon said Termination Date or prior expiration of the Term shall be
entitled to the benefit of all legal remedies that now may be in force or may be
hereafter enacted relating to the speedy repossession of the Premises and to all
damages to which landlord is entitled.
ARTICLE XVI
Landlord's Right of Entry
16.1. Landlord and Landlord's agents and representatives shall have the right to
enter into or upon the Premises, or any part thereof, at all reasonable business
hours upon reasonable oral notice for the following purposes:
(1) examining the Premises;
(2) making such repairs or alterations therein as may be necessary in
Landlord's sole judgment for the
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safety and preservation thereof;
(3) erecting, maintaining, repairing or replacing wires, cables,
conduits, vents or plumbing equipment running in to or through
the Premises; or
(4) showing the Premises to prospective new tenants during the last
90 days of the Term.
16.2. Landlord may enter upon the Premises at any time in case of emergency
without prior notice to Tenant. In the event that Landlord enters the Premises
in case of an emergency and the Premises are not occupied by the Tenant,
Landlord will promptly give the Tenant written detailed notice of such entry
(time, reason etc.)
16.3. Landlord, in exercising any of its rights under this Article XVI shall not
be deemed guilty of an eviction, partial eviction or disturbance of Tenant's use
or possession of the Premises and shall not be liable to Tenant for same.
ARTICLE XVII
Default
17.1. Each of the following, whether occurring before or after the Commencement
Date, shall be deemed a substantial and material Default by Tenant and a breach
of this Lease;
(a) the filing of a petition by or against Tenant for adjudication as a
bankrupt, or for reorganization, or for arrangement under any bankruptcy act or
any state or federal insolvency law; if proceeding is not withdrawn or
discharged within 90 days,
(b) the commencement of any action or proceeding for the dissolution or
liquidation of Tenant, whether instituted by or against Tenant, or for the
appointment of a receiver or trustee of the property of Tenant under any state
or federal statute for relief of debtors; if proceeding is not withdrawn or
discharged within 90 days,
(c) the making by Tenant of an assignment for the benefit of creditors; if
proceeding is not withdrawn or discharged within 90 days,
(d) the suspension of business by Tenant other than in the ordinary course
of business or any act by Tenant amounting to a business failure,
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(e) the filing of a tax lien or a mechanics' lien against any property of
Tenant, with exception for Tax liens which the Tenant is opposing in the
appropriate manner and tribunal,
(f) Tenant's causing or permitting the Premises to be vacant, or
abandonment of the Premises by Tenant for a period in excess of ten (10) days
unless Tenant shall give Landlord prior notice of its intention to extend such
period but in no event for a period longer than sixty (60) days,
(g) failure by Tenant to pay Landlord when due the Basic Rent, the
Additional Rent herein reserved, or any other sum by the time require by the
terms of this Lease,
(h) a failure by Tenant in the performance of any other material term,
covenant, agreement or condition of this lease on the part of Tenant to be
performed,
(i) a material default by Tenant under any other lease or sublease with
Landlord, or any default by Tenant under any other work agreement which would
have a material effect upon Tenant.
ARTICLE XVIII
Landlord's Rights Upon Tenant's Default
18.1. (a) Upon a Default by Tenant or any subtenant or assignee, Landlord, upon
failure of Tenant to cure a default in the payment of Basic Rent, Additional
Rent or any other sum of money due to Landlord hereunder within ten (10) days
after same was due, without notice thereof from Landlord, or to cure or
diligently commence to cure any other Default within thirty (30)days after
notice thereof from Landlord, (provided same is cured within a reasonable time
thereafter and without any delay) may immediately or at any time thereafter,
without further notice to Tenant (i) enter upon the Premises as agent for
Tenant, by legal entry, without terminating this Lease and do any and all acts
as Landlord may reasonably deem necessary, proper or convenient to curing such
Default, for the account of and at the expense of Tenant, and Tenant agrees to
pay Landlord, promptly upon demand, all damages and/or expenses incurred by
Landlord in so doing, or (ii) terminate this Lease and Tenant's right to
possession of the Premises and take possession of the Premises and remove
Tenant, and occupant and any property therefrom, without being guilty of
trespass and without relinquishing any rights of Landlord against Tenant.
(b) Landlord shall be entitled to recover reasonable
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damages from Tenant in an amount equal to the amount herein covenanted to be
paid as Basic Rent and Additional Rent, together with: (i) all reasonable
expenses of any proceedings (including but not limited to, legal expenses and
reasonable attorney's fees) which may reasonably be necessary in order for
Landlord to recover possession of the Premises; and (ii)) the reasonable
expenses of re-renting the Premises, including, but not limited to, any
commissions paid to any real estate brokers, advertising expenses and the costs
of such alterations, repairs, replacements and decoration or re-decoration as
Landlord in its sole judgment considers reasonably advisable and necessary for
the purpose of re-renting the Premises. Landlord shall in no event be liable in
any way whatsoever for failure to collect rent thereof under such re-renting.
Landlord shall be under the obligation to make a reasonable effort to re-rent
the Premises which will reduce the tenants obligation under the lease.
18.2. No act or thing done by Landlord shall be deemed to be an acceptance of
Tenant's surrender of the Premises, unless Landlord should execute a written
agreement of surrender with Tenant. Tenant's liability hereunder shall not be
terminated by the execution of a new lease of the Premises by Landlord. Tenant
agrees to pay to Landlord, promptly upon demand, the amount of damages herein
provided after the amount of such damages for any month shall have been
ascertained; provided, however, that any expenses reasonably incurred by
Landlord shall be deemed to be a part of the damages for the month in which they
were incurred. Separate actions maybe maintained each month by Landlord against
Tenant to recover the damages then due, without waiting until the end of the
Term to determine the aggregate amount of such damages or Landlord, at its
option, if the Premises have been re-let for a term extending at least as long
as the remainder of the Term thereof, may hold the Tenant responsible in advance
for the entire deficiency to be realized during the term of the re-letting.
Tenant hereby expressly waives any and all rights of redemption granted by or
under any present or future laws in the event of the eviction of Tenant or
tenant being dispossessed for any cause, or in the event of Landlord obtaining
possession of the Premises by reason of the violation by Tenant of any of the
covenants or conditions of this Lease.
18.3. Landlord shall have the right, as agent for Tenant, to take possession and
dispose of any furniture or fixtures of Tenant found upon the Premises and
dispose after taking possession of same pursuant to this Article XVIII. Tenant
waives any notice of execution or levy in connection therewith.
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ARTICLE XIX
Landlord's Remedies Cumulative: Expenses
19.1. All rights and remedies of Landlord herein enumerated shall be cumulative,
and none shall exclude any other right or remedy allowed by law. For the
purposes of any suit brought or based hereon, this Lease shall be construed to
be a divisible contract, to the end that successive actions may be maintained on
this Lease as successive periodic sums mature hereunder.
19.2. Tenant shall pay, promptly upon demand, all of the Landlord's reasonable
costs, charges and expenses, including the reasonable fees of counsel, agents
and others retained by Landlord, incurred in enforcing Tenant's obligations
hereunder.
ARTICLE XX
No Waiver
20.1. No waiver by Landlord of any breach by Tenant of any of the terms,
covenants, agreements, or conditions of this Lease shall be deemed to constitute
a waiver of any succeeding breach thereof, or waiver of any of the terms,
covenants, agreements and conditions herein contained.
20.2. No employee of Landlord or of Landlord's agents shall have any authority
to accept the keys of the Premises prior to the Termination date and the
delivery of keys to any employee of Landlord or Landlord's agents shall not
operate as an acceptance of a termination of this Lease or an acceptance of a
surrender of the Premises except in accordance with any procedures stated in
Article XVII.
20.3. The receipt by Landlord of the Basic Rent and Additional Rent with
knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such breach. No payment by Tenant or receipt by Landlord of a lesser
amount than the monthly Basic Rent or a lesser amount of the Additional Rent
then due shall be deemed to be other than on account of the earliest stipulated
amount then due, nor shall any endorsement or statement on any check or any
letter or other instrument accompanying any check or payment as Basic Rent or
Additional Rent or pursue any other ready provided in this Lease.
20.4. The failure of Landlord to enforce any of the Rules or Regulations as may
be set by Landlord from time to time against Tenant or against any other tenant
in the Building shall not be deemed a waiver of any such rule or regulation.
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ARTICLE XXI
Landlord's Reserved Rights
21.1. (a) Landlord reserves the following rights: (i) If during or prior to the
last sixty (60) days of the Term Tenant vacates the Premises, Landlord shall be
permitted to decorate, remodel, repair, alter or otherwise prepare the Premises
for occupancy and, (ii) to have pass keys to the Premises.
(b) Landlord may enter upon the Premises and may exercise either of the
preceding rights hereby reserved without being deemed to have caused an eviction
or disturbance of Tenant's use and possession of the Premises and without being
liable in any manner to Tenant.
ARTICLE XXII
Landlord's Liability
22.1. Landlord or its agents shall not be liable for any injury or damage to
persons or property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water, rain, snow or leaks from any part of the building or from
the pipes, appliances, plumbing, or the roof, street, subsurface or from any
other place or by dampness or by any other cause of whatsoever nature; nothing
contained herein shall apply to Landlord's willful misconduct or negligence or
that of Landlord's contractors, agents, servants, employees, licensees, or
invitees.
ARTICLE XXIII
Tenant's Liability
23.1. Tenant shall reimburse Landlord for all reasonable expenses, damages or
fines, incurred or suffered by Landlord by reason of any breach, violation or
non-performance by Tenant, its agents, servants, employees, invitees or
licensees of any covenant or provision of this Lease, or by reason of damage to
persons or property caused by moving property of or for Tenant in or out of the
Building, or by the installation or removal of furniture or other property of or
for Tenant by reason of or arising out of the carelessness, negligence or
improper conduct of Tenant, or its agents, servants, employees, invitees and
licensees in the use or occupancy of the Premises. Any such expense shall be
deemed Additional Rent, due in the next calendar monthly after it is incurred.
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ARTICLE XXIV
Tenant's Insurance
24.1. Notwithstanding the agreement in Article 22.1, Tenant covenants to provide
on or before the Commencement Date for the benefit of Landlord and Tenant a
comprehensive policy of liability insurance protecting Landlord and Tenant
against any liability whatsoever occasioned by accident on or about the Premises
or any appurtenances thereto. Such policy is to be written by insurance
companies qualified to do business in the State of New Jersey which shall be
rated grade A or better and with a rating therein of 12 or better and the limits
of liability thereunder shall not be less than the amount of one million
($1,000,000.00) in respect of any one person, in respect of any one accident and
in respect of property damage.
24.2. Prior to the time such insurance is first required by this Article XX to
be carried by Tenant, and thereafter, at least thirty (30) days prior to the
expiration of any such policy, Tenant agrees to deliver to Landlord either a
duplicate original of the aforesaid policy or a certificate evidencing such
insurance, provided said certificate contains an endorsement that such insurance
may not be canceled except upon thirty (30) days' notice to Landlord, together
with evidence of payment for the policy.
24.3. Upon failure at any time on the part of Tenant to procure delivery to
Landlord the policy or certificate of insurance, as hereinabove provided,
stamped "Premium Paid" by the issuing company at least thirty (30) days before
the expiration of the prior insurance policy or certificate, if any, or to pay
the premiums thereof, after 15 days written notice to Tenant demanding same
Landlord shall be at liberty, from time to time, as often as such failure shall
occur, to procure such insurance and to pay the premium thereof, and any sums
paid for insurance by Landlord shall be and become, and are hereby declared, to
be Additional Rent hereunder due immediately for the collection of which
Landlord shall have all the remedies provided for in this Lease or by law for
the collection of rent. Payment by Landlord of such premium or the carrying by
Landlord of any such policy shall not be deemed to waive or release the default
of Tenant with respect thereto. Tenant's failure to provide and keep in force
the aforementioned insurance shall be regarded as a Default hereunder entitling
Landlord to exercise any or all of the remedies as provided in this Lease in the
event of Default.
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ARTICLE XXV
Mechanic's Liens
25.1. Any mechanic's liens filed against the Real Property for work claimed to
have been done for, or materials claimed to have been furnished to Tenant, shall
be considered a substantial and material breach of this Lease unless removed or
bonded at Tenant's expense within forty five (45) days after notice of filing is
received by Tenant.
ARTICLE XXVI
Quiet Enjoyment
26.1. Landlord covenants and agrees that, upon the performance by Tenant of all
of the covenants, agreements and provisions hereof on Tenant's part to be kept
and performed, Tenant shall have, hold and enjoy the premises, subject and
subordinate to the rights set forth in Article VIII, free from any interference
whatsoever by, from or through the Landlord, provided, however, that no
diminution or abatement of the Basic Rent, Additional Rent or other payment to
Landlord shall be claimed by or allowed to Tenant for inconvenience or
discomfort arising from the making of any repairs or improvements to the
Premises or the Real Property, or for any space taken to comply with any law,
ordinance or order of any Governmental Authority, except as provided for herein.
ARTICLE XXVII
Air and Light
27.1. This lease does not grant any rights or easements to air and light to
tenant.
ARTICLE XXVIII
Landlord's Services
28.1. Landlord shall furnish to Tenant the electrical services set forth herein
at a cost of .13 per sq. ft. per month, subject to any additional costs refereed
to below.
28.2. (a) Landlord shall furnish cleaning service to Tenant in accordance with
Exhibit B attached hereto. Air heating, air cooling, ventilating, and
electricity as well as cold water and hot water shall be furnished only between
the hours of 8:00 a.m. and 9:00 p.m., Mondays through Fridays, from 8:00 a.m. to
6:00
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p.m. on Saturdays and Sundays, Building Holidays excluded, and then only when
weather conditions in the reasonable opinion of Landlord, require.
(b) If Tenant shall request the use of air cooling (during the periods when
such is available), ventilating, heat and/or electricity at any times other than
the hours in this Lease provided for such service, Landlord shall furnish such
to Tenant provided (i) that Tenant pays to Landlord, as additional rent, a
special overtime charge thereof which shall be agreed upon between the Landlord
and Tenant; (ii) that Tenant's request shall be received by Landlord by 12 noon
of the day on which after-hours service is required (and by 12 noon of the day
preceding any requested before hours service).
28.3. (a) Throughout the Term, Landlord agrees to distribute electrical energy
to the Premises (not exceeding the present electrical capacity at the Premises
and the Buildings upon the following terms and conditions: (i) Landlord shall
not be liable in any way to Tenant for any loss, damage or defect or change in
the quantity or charger of electricity furnished to the Premises or due to any
cessation, diminution or interruption of the supply thereof; (ii) Tenant shall
be responsible for replacing all light bulbs, fluorescent lamps, non-Building
standard lamps and bulbs, and all ballasts used by Tenant in the Premises,
except that the Landlord shall supply the above at the beginning of this lease.
(b) Tenant covenants that its use of electricity in the Premises shall be
limited to and for the operation of (1) the building standard lighting, and (2)
electric typewriters, calculators, copying machines and other small office
machines, AV equipment, computers, 18 Cubic Foot Refrigerator, and small kitchen
items.
(c) Subject to the provisions of Exhibit C attached hereto, Tenant shall
make no alteration to the existing electrical equipment or connect any fixtures,
appliances or equipment in addition to the equipment permitted in Article 28.3
(b) above without the prior written consent of Landlord in each instance. Should
Landlord grant such consent, all additional risers or other equipment required
thereof shall be provided by Landlord and the reasonable cost hereof shall be
paid by Tenant promptly upon Landlord's demand. As a condition to granting such
consent, Landlord shall require an increase in the Additional Rent by an amount
which will reflect the cost of the additional equipment and service to be
furnished by Landlord. If Landlord and Tenant agree to such increase the
Additional Rent increase shall be determined by an independent electrical
engineer, to be selected by Landlord and whose services shall be paid for by
Tenant. All consents and permits are a condition of this lease.
(d) Landlord shall not be liable in the event of any
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<PAGE> 21
interruption in the supply of electricity not due to the act or omission of
Landlord, Landlord's agents, employees, contractors, invitees, servants, or
licensees, and Tenant agrees that such supply may be interrupted for inspection,
repairs, replacement and in emergencies.
28.4. The failure of Landlord to furnish any service hereunder shall not be
construed as a constructive eviction of Tenant and shall not excuse Tenant from
failing to perform any of its obligations hereunder and shall not give Tenant
any claim against Landlord for damages for failure to furnish such service.
28.5 Notwithstanding anything contained herein to the contrary, Landlord and
Tenant acknowledge that there presently exists in the demised premises a sewage
ejection pump system servicing only the demised premises; Landlord represents
and Tenant agrees that the system shall be in good working order on the
commencement date of this lease. Thereafter it shall be Tenant's responsibility
to keep the pump in good workinG order.
ARTICLE XXIX
Personal Property Taxes
29.1. Tenant agrees to pay all taxes imposed on the personal property of Tenant,
the conduct of its business and its use and occupancy of the Premises.
ARTICLE XXX
Security Deposit
30.1. Subject to the provisions of Paragraph 38.15, simultaneously with the
execution hereof, Tenant has deposited with Landlord the sum of $1,968.75.
ARTICLE XXXI
Use of Security Deposit
31.1. In the event of a Default by Tenant, beyond any applicable grace or cure
period, in respect of any of the terms, covenants or conditions of this Lease
Landlord may use, apply or retain the whole or any part of the Security Deposit
to the extent required for the payment of any Basic Rent, Additional Rent or any
other sum as to which Tenant is in Default or for any sum which Landlord may
reasonably expend or may be reasonably required to expend by reason of Tenant's
Default in respect of any of the terms, covenants or conditions of this Lease,
including but not limited to, any damages or deficiency accrued before or after
summary proceedings or other re-entry by Landlord. In the event that Tenant
shall fully and faithfully
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comply with all of the terms, covenants and conditions of this Lease, the
Security Deposit shall be returned to Tenant within fifteen (15) days after the
Termination Date and after delivery of possession of the entire Premises to
Landlord.
31.2. In the event of a sale of the Real Property or a leasing thereof, Landlord
shall have the right to transfer the Security Deposit to the vendee or Lessee,
as the case may be, and Landlord shall thereupon be released by Tenant from all
liability for the return of such Security Deposit; and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
Security Deposit to a new landlord. Tenant further covenants that it will not
assign or encumber or attempt to assign or encumber the Security Deposit and
that neither the Landlord nor its successors or assigns shall be bound by any
such assignment, encumbrance, attempted assignment or attempted encumbrance.
ARTICLE XXXII
Definition of Landlord
32.1. The term "Landlord" as used in this Lease means only the owner for the
time being of the Real Property and/or Building or the owner of a lease of the
Real Property. In the event of any transfer of title to or lease of the Real
Property, the Landlord shall be and hereby is entirely freed and relieved of all
covenants and obligations of Landlord hereunder and this Lease shall be deemed
and construed as a covenant running with the land without further agreement
between the parties or their successors in interest.
32.2. Landlord shall be under no personal liability with respect to any of the
provisions of this Lease, and if Landlord is in breach of default with respect
to its obligations or otherwise, Tenant shall look solely to the equity of
Landlord in the Real Property for the satisfaction of Tenant's remedies. It is
expressly understood and agreed that Landlord's liability under the terms,
covenants, conditions, and obligations of this Lease shall in no event exceed
the loss of its equity in the Real Property. Upon execution of this Lease,
Landlord will deliver to Tenant an Insurance Certificate describing Landlord's
Business and Liability Insurance in respect to the Real Property.
ARTICLE XXXIII
Notices
33.1. Notices by either party to the other shall be in writing, postage paid,
deposited in a U.S. mail box in the Continental United States and addressed to
Landlord or Tenant at
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their respective addresses hereinabove set forth, or to such other address as
either party shall hereafter designate by notice as aforesaid. All notices shall
be by certified mail, return receipt requested. Notices shall be deemed to be
given three (3) business days after mailing. The attorneys for the respective
parties may give notice hereunder.
ARTICLE XXXIV
Signs
34.1. No sign, advertisement or notice shall be affixed to or placed upon any
part of the Premises by the Tenant, except in such manner and of such size,
design and color as shall be approved in advance in writing by Landlord (which
approval may not be unreasonably withheld or delayed).
ARTICLE XXXV
Notice of Defects and Accidents
35.1. Tenant shall give Landlord immediate notice in case of accident on the
Premises or involving Tenant, its servants, agents, employees, invitees or
licensees in the Building or of any defects in the Building.
ARTICLE XXXVI
Rules and Regulations
36.1. Tenant, on behalf of itself and its employees, agents, servants, invitees
and licensees, agrees to comply with the Rules and Regulations with respect to
the Real Property. Landlord shall have the right to make reasonable amendments
thereto from time to time for the safety, care and cleanliness of the Real
Property and Building, the preservation of good order therein and the general
convenience of all the tenants and Tenant agrees to comply with such amended
Rules and Regulations, after twenty (20) days' written notice thereof from
Landlord. All such amendments shall apply to all tenants in the building, and
will not materially interfere with the use and enjoyment of the Premises or the
parking lot by Tenant.
ARTICLE XXXVII
Directory
37.1 Landlord shall furnish and service in the lobby of the
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Building as well as the entrance to the property a directory. Tenant shall be
entitled to one listing on such directory. Tenant, at its expense, may request
from Landlord and pay for such reasonable number of names that Tenant may from
time to time request to be listed in such directory, provided, in Landlord's
sole discretion, there is sufficient space on such directory to accommodate
additional listings.
ARTICLE XXXVIII
Miscellaneous
38.1. Entire Agreement. This Lease contains the entire agreement between the
parties, and any attempt hereafter made to change, modify, discharge or effect
an abandonment of it in whole or in part shall be void and ineffective unless in
writing and signed by the party against whom enforcement of the change,
modification, discharge or abandonment is sought.
38.2. Jury Trial Waiver. Landlord and Tenant do hereby waive trial by jury in
any action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matter whatsoever arising out of or in connection with
this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy
of the premises, and/or any claim, injury or damage, or any emergency or
statutory remedy.
38.3. Force Majeure. If, by reason of strike, labor troubles or other causes
beyond Landlord's control, including, but not limited to, governmental
preemption in connection with a national emergency or any rule, order or
regulation of any Governmental Authority, or conditions of supply and demand
which are affected by war or other emergency, Landlord shall be unable to
fulfill its obligations under this Lease or shall be unable to supply any
service which Landlord is obligated to supply, this Lease and Tenant's
obligation to pay Basic Rent and Additional Rent hereunder shall in no way be
affected, impaired or excused.
38.4. Broker. Landlord and Tenant mutually represent that they have not dealt
with any real estate broker in connection with this Lease other than Heron
Properties Realty, Ltd. and C.B. Commercial Real Estate Group. Landlord shall
pay commission per separate agreement. Landlord and Tenant indemnify and hold
the other harmless from any and all claims, liabilities, costs or damages the
other may incur as a result of a breach of this representation arising from the
indemnitary's acts. The provisions of this paragraph shall survive the
expiration of this Lease.
38.5. Separability. If any term or provision of this Lease or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such term or
provision to persons or circumstances other than those to which it is held
invalid or unenforceable, shall not be affected thereby and all other terms
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and provisions of this Lease shall be valid and enforced to the fullest extent
permitted by law.
38.6.(a) Interpretation. Whenever in this Lease any words of obligation or duty
are used, such words or expressions shall have the same force and effect as
though made in the form of covenants.
(b) Words of any gender used in this Lease shall be held to include any
other gender, and words in the singular number shall be held to include the
plural, when the sense requires.
(c) All pronouns and any variations thereof shall be deemed to refer to the
neuter, masculine, feminine, singular number shall be held to include the plural
as the identity of the parties requires.
(d) This Lease shall be strictly construed neither against Landlord nor
Tenant. No remedy or election given by any provision in this Lease shall be
deemed exclusive unless so indicated, but each shall, wherever possible, be
cumulative with all other remedies in law or equity as otherwise specifically
provided. Each provision hereof shall be deemed both a covenant and a condition
and shall run with the land.
(e) If, and to the extent that, any of the provisions of any rider to this
Lease conflict or are otherwise consistent with any of the preceding provisions
of this Lease, or of the Rules and Regulations appended to this Lease, whether
or not such inconsistency is expressly noted in the rider, the provisions of the
rider shall prevail, and in case of inconsistency with said Rules and
Regulations, shall be deemed a waiver of such Rules and Regulations with respect
to Tenant to the extent of such inconsistency.
(f) Tenant agrees that all of Tenant's covenants and agreements herein
contained providing for the payment of money and Tenant's covenant to remove
mechanics' liens shall be deemed conditions as well as covenants, and that if
default be made in any such covenants, Landlord shall have all of the rights
provided for herein.
(g) The parties mutually agree that the headings and captions contained in
this Lease are inserted for convenience of reference only, and are not to be
deemed part of or to be used in construing this Lease.
(h) The covenants and agreements herein contained shall be subject to the
provisions of this Lease, bind and inure to the benefit of Landlord, its
successors and assigns, the Tenant, its successors and assigns except as
otherwise provided herein.
(i) This Lease has been executed and delivered in the
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State of New Jersey and shall be construed in accordance with the laws of the
State of New Jersey and Landlord and Tenant acknowledge that all of the
applicable statutes of the State of New Jersey are superimposed on the rights,
duties and obligations of Landlord and Tenant hereunder and this Lease shall not
otherwise provide that which said statutes prohibit.
(j) Landlord has made no representations or promises with respect to the
Premises or the Real Property, except as expressly contained herein. Tenant has
inspected the Premises and agrees to take the same in an "as is" condition,
except as otherwise expressly set forth. Landlord shall have no obligation,
except as herein set forth, to do any work in and to the Premises to render them
ready for occupancy and use by Tenant.
(k) Time is of the essence with respect to all dates, notices and time
periods.
38.7. No Recordation. Tenant shall not record this Lease or a memorandum hereof.
38.8. Late Charges. If Tenant shall fail to pay within ten (10) days of any due
date any rent or additional rent payments due hereunder, such unpaid amounts
shall bear interest from the due date thereof to the date of payment at the rate
of 5% of the amount due.
38.9. Approval of Lender. The Tenant agrees to sign a recordable assignment of
this Lease to any future mortgagee of Landlord. The Tenant agrees, upon request,
to furnish said mortgagee within ten (10) days written request that:
a. The Lease is in full force and effect.
b. The possession of premises is accepted by Tenant.
c. Confirm the commencement of the lease term.
d. It is in occupancy and paying rent on a current basis, with no
rental offsets or claims.
38.10. Parking. The Landlord covenants and agrees with Tenant that it shall have
the right to use 10 parking spaces and the access driveways in common with other
tenants of the Property for use by Tenant and Tenant's employees, servants or
invitees.
38.11. Preparation of Office: Tenant agrees to take space in its "as is"
condition except that the Landlord agrees to perform the following work prior to
the Tenant's occupancy:
1. Landlord will cover exposed electrical lines.
2. Landlord will patch holes in walls.
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3. Landlord will remove signs and decals from previous Tenant.
38.12. Tenant's Proportionate Share. Tenant's proportionate share is 11.5%.
38.13. Relocation. From time to time or at any time after the first year of the
term, on not less than ninety (90) days' notice to Tenant, Landlord shall have
the right to move the Tenant out of the demised premises and into similar space
within the Building of at least equal rentable area. In such event, Landlord
shall remove, relocate and reinstall Tenant at Landlord's sole cost and expense
without interruption to Tenant's business. Landlord shall pay a reasonable fee
in the event that new phones letterhead, etc. are required by Tenant. For the
balance of the Term, this Lease shall continue in full force and effect and
shall apply to the new space as though this Lease had originally been for such
new space.
38.14 Full Execution. This Lease shall not be binding until fully executed by
Landlord and Tenant.
38.15 Lease Termination. Tenant may terminate this Lease at the end of the first
year of the term (December 31, 1994) by giving Landlord written notice no later
than October 1, 1994. In the event Tenant elects to cancel, Tenant shall vacate
Premises no later than December 31; 1994. If Tenant does not notify Landlord by
October 1, 1994 of its intention to cancel this Lease during the first term,
Tenant shall deposit with Landlord on January 1, 1995 one additional month's
security in the amount of $1,968.74 at which time the total security deposit
with Landlord will be $3937.49.
In addition, if Tenant does not notify Landlord by October 1, 1994 of its
intention to cancel, Landlord agrees to contribute to Tenant improvements to the
Premises an amount not to exceed $10.00 per square foot promptly upon Tenant's
presenting copies of paid bills and canceled checks for such work.
ARTICLE XXXIX
Definitions
39.1. Building Holidays. Building Holidays shall mean all holidays including,
but not limited to: Washington's Birthday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and the day after, Christmas Day and New Year's Day, as
each of said holidays are celebrated in the State of New Jersey.
39.2. Excusable Delay. Excusable delay shall mean a delay caused by strike,
lockout, act of God, inability to obtain labor or materials, governmental
restrictions, enemy actions, civil commotion, fire, unawardable casualty or any
other cause similar
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or dissimilar beyond the reasonable control of either Landlord or Tenant or due
to the passing of time while waiting for an adjustment of insurance proceeds.
39.3. Rental Area of the Premises. Rental area of the Premises shall mean the
sum of (i) the total number of square feet contained in the area shown on
Exhibit A computed by measuring from the outside finish of the exterior of the
Building wall(s) to the offside of the corridor walls or permanent partitions in
the Premises from adjoining areas in the Building; and, (ii) Tenant's
proportionate share of the area of the Building used for public corridors,
public toilets, air conditioning rooms, fan rooms, janitor's closets, electrical
closets, telephone closets and overhead shafts.
39.4. Structural Repairs. Structural repairs shall mean repairs to the roof,
foundation and permanent exterior walls and support columns of the building.
ARTICLE XXXX
American Disabilities Act
40.1 Americans with Disabilities Act. Notwithstanding anything contained in this
Lease to the contrary, Landlord represents that it is currently making good
faith efforts to bring the common areas of the building in which the demised
premises is located into compliance with the requirements of Title III of the
ADA. Tenant represents and covenants that it shall conduct its occupancy and use
of the Premises in accordance with ADA (including but not limited to, modifying
its policies, practices, and procedures, and providing auxiliary aids and
services to disabled persons). If the Lease provides that the Tenant is to
complete certain alterations and improvements to the Premises in conjunction
with Tenant taking occupancy of the Premises, Tenant agrees that all such work
shall comply with the ADA. Furthermore, Tenant covenants and agrees that any and
all future alterations or improvements made by Tenant to the Premises shall
comply with the ADA.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the 27 day
of December 1993.
WITNESS: LANDLORD:
BY: /s/ James D. Means
-----------------------------------
James D. Means
ITS: Director of Property Management
-----------------------------------
WITNESS TENANT: Enamalon Inc.
BY: /s/ Doctor Fox
-----------------------------------
ITS: Chairman
-----------------------------------
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<PAGE> 29
CORPORATE TENANT ACKNOWLEDGEMENT
--------------------------------
STATE OF :
: SS.
COUNTY OF :
On this day of , 19 before me personally
came , to me known, who, being by me duly sworn, did depose and
say that he resides in , City of , State of
, that he is the of , the
corporation described in and which executed the foregoing lease, as Tenant; that
he knows the seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by order of the Board of
Directors of said corporation, and that he/she signed his/her name thereto by
like order.
Notary Public
PARTNERSHIP TENANT ACKNOWLEDGEMENT
----------------------------------
STATE OF :
: SS.
COUNTY OF :
On this day of , 19 , before me
personally came , to me known and in and who executed this
foregoing Lease, as Tenant, and to me acknowledged that each is a partner in the
firm of and that they each executed the same individually and as
co-partners in said firm.
Notary Public
STATE OF :
: SS.
COUNTY OF :
On this day of , 19 , before me
personally came , to me known, and known to me to be the
individual described in and who executed the foregoing Lease, as Tenant, and he
duly acknowledged to me that he executed the same.
Notary Public
29
<PAGE> 30
EXHIBIT "A"
[DRAWING OF FIRST FLOOR PLAN OF 758 ROUTE 18, SUITE 105 EAST BURNSWICK, N.J.
DEMISED PREMISES.]
<PAGE> 31
EXHIBIT B
CLEANING SCHEDULE
-----------------
I. GENERAL CLEANING
----------------
Nightly:
1. All the nightly cleaning services as listed herein are to be performed
(5) nights each week, Monday through Friday, except on legal holidays.
2. Cartons of refuse in excess of that which can be placed in
wastebaskets will not be removed. Tenants are required to make
arrangements with the building manager for the disposal of such
unusual refuse, for which tenant may incur reasonable additional
charges.
3. Sweep and dust mop all uncarpeted floors. Vacuum all rugs and carpeted
areas.
4. Damp clean all glass desk tops.
5. Hand dust all office furniture, paneling and window sills.
6. Empty and wash clean all ashtrays and receptacles.
7. Wash clean all water fountains and coolers, emptying all wastes
8. Keep cigarette urns clean.
9. Dust and wipe clean all sand urns.
10. Hand dust all moldings, chair rails, baseboards and trim as necessary.
11. Spot clean all partitions and doors.
12. Damp dust all telephone equipment whenever necessary.
13. Remove all hand marks from around light switches.
14. On completion of work all slop sinks, locker areas, etc.
15. All lights shall be extinguished, all windows closed, and all doors
shall be locked after cleaning is completed.
II. MAIN LOBBY ELEVATORS AND CORRIDORS
----------------------------------
1. Vacuum entrance and corridors nightly; spot for stains
<PAGE> 32
and necessary.
2. Vacuum elevator floor nightly.
3. Elevator cab to be wiped clean daily and polished as necessary.
III. CORE LAVATORIES
---------------
Nightly:
1. Mop, rinse and dry floors, polish mirrors, wash shelves, clean
enameled surfaces, wash basins, urinals, and bowls, using scouring
powder to remove stains, making certain to clean under sides of rim on
urinals and bowls.
2. Wash both sides of all toilet seats with soap and water.
3. Damp rinse and wash with disinfectant tile walls near urinals.
4. Fill toilet tissue dispensers in appropriate washrooms. Tissue to be
furnished by owner.
5. Wastepaper cans and receptacles are to be emptied and thoroughly
cleaned.
6. Install paper hand towels and liquid hand soap in core lavatories.
Hand towels and liquid soap to be supplied by owner.
IV. DAY CUSTODIAN WILL (when applicable):
-------------------------------------
1. Clean and sanitize lavatories as necessary.
2. Empty and clean paper towel and sanitary disposal receptacles, refill
same as necessary.
3. Keep public areas in neat and orderly condition at all times.
4. Custodian will be available for special tasks and will fix minor
problems that arise in the building, such as cleaning up spillage,
changing light tubes, etc.
5. Wash lobby entrance door windows in and out.
6. Keep parking lot area free of papers and general debris.
<PAGE> 33
V. CORE LAVATORIES
---------------
Monthly:
1. Wash all partitions, tile walls, and enamel surfaces.
2. Wash down walls in washrooms and stalls from trim to floor
3. Dust all lighting fixtures.
VI. GLASS CLEANING
--------------
1. All windows in premises shall be cleaned inside and out two (2) times
per year.
VII. QUARTERLY SERVICES
------------------
1. Dust all pictures, frames, charts, graphs and similar wall hangings.
2. Dust exterior of light fixture diffuses.
<PAGE> 34
[DRAWING OF ROOM IN BACK RIGHT HAND CORNER OF PREMISE.]
<PAGE> 35
RULES AND REGULATIONS ATTACHED
TO AND MADE A PART OF THE FOREGOING LEASE
ONE - The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors and public parts of the Building shall not be obstructed or
encumbered by Tenants or used by Tenant for any purpose other than ingress and
egress to and from the Premises.
TWO - No awnings, air conditioning units or other projections shall be attached
to the outside walls or window sills of the Building or otherwise project from
the Building without the prior written consent of the Landlord.
THREE - The Tenants shall not erect, make or maintain on or attach or affix to
any part of the Premises of the Building including the windows and doors of said
Building, any sign, picture, or other representation or advertisement or notice
of any kind, without the express written consent of the Landlord obtained in
advance. Tenant shall have the right to apply on the main entrance door to the
Premises lettering of approved type, size and style, as well as company logo
where applicable. Landlord shall place Tenant's name on directory in the lobby
of the Building. Tenant shall not have the right to have additional names placed
on the director without Landlord's prior written consent.
FOUR - The Tenant shall not install window covering such as venetian blinds,
drapes or the like, without the approval of Landlord, which shall not be
unreasonably withheld or delayed. The windows in the Premises shall not be
covered or obstructed by Tenant, nor shall articles be placed on the window
sills or in the halls or in any other part of the Building, nor shall any
article be thrown out of the doors or windows of the Premises.
FIVE - Tenant shall not lay linoleum or other similar floor covering so that the
same shall come in direct contact with the floor of the Premises, and if
linoleum or other similar floor covering is desired to be used, an interlining
of builder's deadening felt shall be first fixed to the floor by a paste or
other material that may easily be removed with water, the use of cement or other
similar adhesive material being expressly prohibited.
SIX - Tenant shall not make, or permit to be made, any unseemly or disturbing
noises nor interfere with other tenants or those having business with them.
SEVEN - No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by Tenant, and Tenant shall upon the termination of this
tenancy, deliver to Landlord all keys to any space within the Building, either
furnished to, or otherwise
<PAGE> 36
procured by, Tenant, and in the event of the loss of any keys so furnished,
Tenant shall pay Landlord the cost thereof.
EIGHT - The carrying in or out of freight or bulky matter of any description
must take place during such hours as Landlord may from time to time reasonably
determine. The installation and moving of such freight or bulky matter shall be
made upon previous notice to the Landlord, and the persons employed by Tenant
for such work must be reasonably acceptable to Landlord. Notwithstanding the
above, Tenant shall be permitted to bring in cartons on a handtruck with notice
to Landlord.
NINE - Landlord reserves the right to prescribe the weight and position of all
safes and other heavy equipment so as to distribute properly the weight thereof
and to prevent any unsafe condition from arising. Business machines and other
equipment shall be placed and maintained by Tenant at Tenant's expense in
settings sufficient in Landlord's reasonable judgment to absorb and prevent
unreasonable vibration, noise and annoyance.
TEN - Tenant shall not clean or permit the cleaning of any window in the
Premises from the outside
ELEVEN - Tenant shall not keep in the Building any explosives, cleaning fluid or
any inflammable material. Tenant shall not bring or place any bed or bedding in
the Premises and shall not use the Premises as a lodging place. Tenant shall not
keep any animal, reptile or bird on or about the Premises.
TWELVE - No article shall be fastened to or holes drilled or nails or screws
driven into the walls or partitions, nor shall the walls or partitions be
painted, papered or otherwise covered, or in any way marked or broken, without
the written consent of the Landlord which shall not be unreasonably withheld or
delayed, and no work shall be done upon the Premises by any persons except those
employed by the Landlord.
THIRTEEN - Landlord shall not be responsible to Tenant for the non-observance or
violation of any of these Rules and Regulations by any other Tenants.
FOURTEEN - The moving in or out of furniture and furnishings for initial
occupancy or removal of same upon surrender of premises shall be limited to week
nights after 6:00 p.m. or weekends between the hours of 9:00 a.m. and 6:00 p.m.
or as Landlord may reasonably determine. Tenant must notify Landlord of proposed
moving schedule at least two weeks in advance and Tenant shall be responsible
for payment of any overtime reasonably necessary for Landlord's personnel,
excluding the initial move in.
<PAGE> 37
EXHIBIT C
Notwithstanding anything to the contrary contained in either the
printed portion of the Lease or the Rules and Regulations attached thereto, the
parties agree that Tenant may, without the need to obtain any further consent
from Landlord, make the following alterations and additions to the Premises in
accordance with the plans and specifications set forth on the attached drawing
prepared by Izzy's Kitchen Showcase:
1. Installation of floor and wall cabinets, work benches, two sinks,
a dishwasher and a 16-18 cubic foot high efficiency refrigerator in the room
located at the rear corner of the Premises. All necessary plumbing for the
installation of the two sinks and dishwasher already exists in the Premises.
2. Certain of the work benches referred to in 1 above will be placed
over floor cabinets to form a center island. This center island will require 120
volt AC electric power in order to operate low amperage equipment located
thereon and therein.
3. In order to supply the requisite electric power to the center
island. Tenant will be permitted to reroute the electrical wiring coming into
said room from the existing riser or, at Tenant's option, to run a new 120 volt
AC electric line into the said room from the circuit box located within the
Premises.
4. Tenant will be responsible for and will pay the entire cost of
Tenant's aforesaid cabinets, benches, sinks and appliances, as well as the cost
of installation thereof and the cost of Tenant's electrical
installation/rerouting and plumbing hookups.
5. All of the aforesaid installations and electrical and plumbing
work will be performed by duly licensed personnel (who may be persons other than
those employed by Landlord) in accordance with all applicable laws, rules,
regulations and codes of governmental authorities having jurisdiction of the
Premises.
6. All of the foregoing installations are and shall remain the
property of Tenant, and shall not become or be deemed to have become Landlord's
property unless abandoned or deemed abandoned by Tenant pursuant to the Lease.
Upon the expiration of the Lease term or the earlier termination of the Lease,
Tenant will remove the same and restore the Premises to their condition
immediately prior to the installation, reasonable wear and tear and fire or
other casualty excluded, all at Tenant's cost and expense.
<PAGE> 1
================================================================================
L E A S E
Between
EAST BRUNSWICK WOODS ASSOCIATES, L.P.
Landlord
-and-
ENAMELON, INC.
Tenant
<PAGE> 2
ARTICLE NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
I Demise 3
II Term 3
III Rent 4
IV Use and Occupancy 4
V Alterations or Improvements by Tenants 5
VI Maintenance 6
VII Compliance with Laws, Indemnity and Insurance 6
VIII Hazardous Materials 7
IX Subordination and Estoppel 8
X Destruction - Fire or Other Casualty 8
XI Mutual Waiver of Subrogation 9
XII Condemnation and Other Proceedings 10
XIII Assignment and Subletting 11
XIV Surrender 12
XV Holding Over 12
XVI Landlord's Right of Entry 12
XVII Default 13
XVIII Landlord's Rights Upon Tenant's Default 14
XIX Landlord's Remedies Cumulative: Expenses 16
XX No Waiver 16
XXI Landlord's Reserved Rights 17
XXII Landlord's Liability 17
XXIII Tenant's Liability 17
XXIV Tenant's Insurance 18
XXV Mechanic's Liens 19
XXVI Quiet Enjoyment 19
XXVII Air and Light 19
XXVIII Landlord's Services 19
(Additional Rent) Intentionally Omitted
XXIX Personal Property Taxes 21
XXX Security Deposit 21
XXXI Use of Security Deposit Intentionally Omitted 21
XXXII Definition of Landlord 22
XXXIII Notices 22
XXXIV Signs 23
XXXV Notice of Defects and Accidents 23
XXXVI Rules and Regulations 23
XXXVII Directory 23
XXXVIII Miscellaneous 24
XXXIX Definitions 27
XXXX Americans with Disabilities Act 28
Corporate Tenant Acknowledgement 29
Partnership Tenant Acknowledgement 29
Exhibit A - Floor Plan
Exhibit B - Cleaning Schedule
2
<PAGE> 3
LEASE, dated as of the day of November, 1995 between East Brunswick Woods
Associates Limited Partnership having its principal office at 330 Garfield
Street, Santa Fe, New Mexico 87501 (hereinafter referred to as "Landlord") and
Enamelon, Inc. having its principal office at 15 Kimball Avenue, Yonkers, New
York 10704 (hereinafter referred to as "Tenant").
W I T N E S S E T H:
LANDLORD AND TENANT HEREBY COVENANT AND AGREE AS FOLLOWS:
ARTICLE I
Demise
1.1 Landlord hereby leases to Tenant and Tenant hereby hires from Landlord
approximately One Thousand Three Hundred and twenty-one (1,321) Sq. Ft. as shown
on the floor plan which has been initialled by the parties and annexed hereto
and made a part hereof and marked by the cross hatching in Exhibit A, in the
building known as THE WOODS OF EAST BRUNSWICK, 758 ROUTE 18, EAST BRUNSWICK, NEW
JERSEY at the annual rental rate set forth in Article III and upon and subject
to all of the terms, covenants and conditions contained in this Lease. The
premises shall be deemed to and hereby are agreed to have a Rentable Area (as
defined in Article 39.3 herein) as above of approximately 1,321 sq.ft. of floor
area constituting a portion of the ground floor of the building subject however
to and reserving unto Landlord, its successors and assigns, its agents,
employees and invitees, the use in common with Tenant of common areas and
facilities located upon said first floor which common areas and facilities
include but are not limited to corridors and rest rooms. The premises leased to
Tenant, together with all appurtenances, fixtures, improvements, additions and
other property attached thereto or installed therein at the commencement of, or
at any time during, the term of this Lease, other than Tenant's personal
property are referred to collectively as the "Premises."
ARTICLE II
Term
2.1 The Premises are leased for a term to commence at 12:01 A.M. on January 1,
1996 (Commencement Date) and to end at 11:59 P.M. on December 31, 1998
(Termination Date) unless the term shall sooner terminate pursuant to any of
the terms, covenants or conditions of this Lease or pursuant to law.
2.2 When Tenant takes possession of the Premises, Tenant shall be deemed to have
accepted the Premises as being in satisfactory condition as of the date of such
possession.
3
<PAGE> 4
ARTICLE III
Rent
3.1 The Tenant covenants and agrees to pay to the Landlord as rent for and
during the term hereof the sums pursuant to the following schedule:
Lease Year Annual Rent
---------- -----------
January 1, 1996 through December 31, 1996 $18,824.00
January 1, 1997 through December 31, 1997 $19,320.00
January 1, 1998 through December 31, 1998 $20,311.00
3.2 The Basic Rent and Additional Rent payable pursuant to the provisions of
this Lease shall be payable by Tenant to Landlord at its office (or at such
other place as Landlord may designate in a notice to Tenant) in lawful money of
the United States without prior demand thereof and without any offset or
deduction whatsoever except as otherwise specifically provided in this Lease for
the convenience of the Landlord. The Basic Rent shall be payable in equal
monthly installments pursuant to the following schedule, in advance, on the
first (1st) day of each month during the term:
Lease Year Monthly Rent
---------- ------------
January 1, 1996 through December 31, 1996 $1,568.66
January 1, 1997 through December 31, 1997 $1,610.00
January 1, 1998 through December 31, 1998 $1,692.58
3.3 Tenant covenants to pay the Basic Rent and any Additional Rent payable
pursuant to the provisions of this Lease and to observe and perform and to
permit no violation of the terms, covenants and conditions of this Lease on
Tenant's part.
3.4 Notwithstanding anything to the contrary, simultaneous with the execution of
this lease, Tenant shall pay to Landlord the first month's rent due hereunder.
ARTICLE IV
Use and Occupancy
4.1 Tenant shall use or occupy the Premises only for executive
offices, and for non-hazardous, non-toxic toothpaste and
toothpaste related research laboratory.
4
<PAGE> 5
4.2 Tenant shall not use or occupy, or permit the use or occupancy of the
Premises or any part thereof for any purpose other than the purpose specifically
set forth herein. Any violations of this Article shall be deemed a material
breach of this Agreement.
ARTICLE V
Alterations of Improvements by Tenant
5.1 Tenant shall make no changes in or to the Premises of any nature without
Landlord's prior written consent. Subject to the prior written consent of
Landlord (which consent shall not unreasonably be withheld or delayed), Tenant,
at Tenant's sole expense, may hire contractors approved by Landlord (which
approval may not unreasonably be withheld or delayed) to make alterations,
installations, additions or improvements in or to the Premises (collectively,
"Alterations") which are non-structural and which do not materially affect
utility services, plumbing or electrical lines in or to the Premises or the
Building. All alterations shall, upon installation, become the property of
Landlord and shall remain upon and be surrendered with the Premises unless
Tenant by notice to Landlord no later than thirty (30) days prior to the
Termination Date requests Landlord's consent to remove same and Landlord so
consents (which consent shall not unreasonably be withheld or delayed). If
Landlord so consents the same shall be removed from the Premises by Tenant prior
to the Termination Date at Tenant's sole expense. Nothing in this Article V
shall be construed to give Landlord title to or to prevent Tenant's removal of
trade fixtures, moveable office furniture and equipment but upon removal of any
such item from the Premises or upon removal of any other installation as may be
permitted by Landlord, Tenant shall promptly and at its expense, repair and
restore the Premises to the condition existing prior to such Alteration,
reasonable wear and tear excepted. Tenant shall repair any damage to the
Premises, the building, or the real property on which the building is located
(hereinafter referred to as the "Real Property") incurred during such removal.
All property permitted or required to be removed by Tenant at the end of the
Term remaining on the Premises on the thirtieth day after the Termination Date
shall be deemed abandoned and may, at the election of Landlord, either be
retained as Landlord's property or may be removed from the Premises by Landlord
at Tenant's reasonable expense.
5.2 Prior to the commencement of any Alteration, Tenant shall at its sole
expense, obtain all required permits, approvals and certificates required by all
Governmental Authorities as determined by Landlord and upon completion of the
Alteration and Tenant shall promptly deliver to Landlord certificates of final
5
<PAGE> 6
approval thereof. Tenant shall carry and will cause Tenant's contractors and
subcontractors to carry such worker's compensation, general liability, personal
and property damage insurance as required by law and in amounts no less than the
amounts set forth in Article XXIV hereof.
ARTICLE VI
Maintenance
6.1 Tenant shall take good care of the Premises throughout the term and preserve
the same in the condition delivered to Tenant on the Commencement Date, normal
wear and tear excepted. Tenant further agrees not to injure, overload, deface or
commit waste of the Premises. Tenant shall be responsible for all injury or
damage of any kind or character to the Real Property, including the windows,
floors, walls, ceilings, lights, electrical equipment and HVAC equipment, caused
by Tenant or by anyone using or occupying the Premises by, through or under the
Tenant. Landlord shall repair the same and Tenant shall pay the reasonable costs
incurred thereof to Landlord promptly upon demand. This shall be deemed to be
additional rent.
6.2 Landlord shall be responsible for all Structural Repairs and shall maintain,
and replace all plumbing, heating, air conditioning, electrical and mechanical
fixtures supplied by Landlord (exclusive of (a) starters, ballasts, incandescent
and fluorescent lamps and (b) electrical and mechanical fixtures installed by
Tenant) which shall be standard for the Building, when required, and maintain
and make repairs to the parking area and the exterior of the building, except
those repairs or replacements arising from the negligence of the Tenant, its
agents, servants, employees, licensees, or invitees, which shall be the sole
responsibility of Tenant. Landlord shall promptly remove all snow and ice at
Landlord's sole expense.
ARTICLE VII
Compliance with Laws, Indemnity and Insurance
7.I Tenant shall not do, or permit anything to be done in or to the Premises, or
bring or keep anything therein which will, in any way, increase the cost of fire
or public liability insurance on the Real Property, or invalidate or conflict
with the fire insurance or public liability insurance policies covering the Real
Property, any Building, fixtures or any personal property kept therein, obstruct
or interfere with the rights of Landlord or other tenants, or in any other way
injure or annoy Landlord or other tenants, or subject Landlord to any liability
for injury to persons or damage to property, or interfere with the good order of
6
<PAGE> 7
the Building, or conflict with the present or future laws, rules or regulations
of any governmental Authority. Tenant hereby indemnifies and shall hold Landlord
harmless of and from all liability for injury to persons or damage occurring on
the Premises or in the Building whether occasioned by any act or omission of
Tenant, or Tenant's agents, servants, employees, invitees, or licensees. Tenant
agrees that any increase in fire and casualty insurance premiums on the Building
or contents caused by the occupancy of Tenant and any expense or cost incurred
in consequence of negligence, carelessness or willful action of Tenant, Tenant's
agents, servants, employees, invitees, or licensees, shall be reimbursed to
Landlord within ten (10) days of demand thereof and shall be considered
additional rental.
ARTICLE VIII
Hazardous Materials
8.1 Tenant shall not, without Landlord's prior written consent, use, generate,
release, spill, store, deposit, transport or dispose of (collectively "Release")
any hazardous substances, sewage, petroleum products, hazardous materials, toxic
substances or any pollutants, contaminants or substances, defined as hazardous
or toxic under any applicable federal, state and local laws and regulations
("Hazardous Substances") or create the emission of noxious odors in, on or about
the Premises. In the event, and only in the event, Landlord approves such
Release of Hazardous Substances or noxious odors on the Premises, Tenant agrees
that such Release shall occur safely and in compliance with all applicable
federal, state and local laws and regulations. Tenant shall indemnify, hold
harmless and defend Landlord, its officers, directors, employees and agents from
any and all claims, liabilities, losses, damages, cleanup costs and expenses
(including reasonable attorney's fees) arising directly or indirectly out of or
attributable to failure of Tenant, its agents, servants, employees or invitees
to comply with this Article. The provisions of this Article shall survive the
expiration or termination of the Lease for any reason. The Tenant is not liable
to the Landlord for Releases which occurred prior to the date of occupancy by
the Tenant. Notwithstanding anything contained herein to the contrary, should
Landlord determine, in its sole reasonable opinion, that Tenant's conduct is
violative of this paragraph or in any way causing harm to the building or its
inhabitants, Landlord may terminate this lease upon 30 days' written notice to
Tenant. However said termination of lease shall not be Landlord's sole remedy
and shall not limit any other damages to which Landlord may be entitled under
the circumstances.
7
<PAGE> 8
ARTICLE IX
Subordination and Estoppel
9.1 Tenant agrees that this Lease is subject and subordinate to all ground or
underlying leases and to the lien of any mortgages or deeds of trust now on or
which at any time in the future that may be made a lien upon the Real Property,
and to all advances made or hereafter to be made upon the security thereof. This
subordination provision shall be self-operative and no further instrument of
subordination shall be required. Tenant agrees to execute and deliver within ten
days, upon request, such further instrument or instruments confirming this
subordination as shall be desired by Landlord or by any mortgagee or proposed
mortgagee of the Real Property; and Tenant hereby constitutes and appoints
Landlord as Tenant's attorney-in-fact to execute any such instrument or
instruments. Tenant further agrees that at the option of the holder of any
mortgage or of the trustee under any deed of trust securing the Real Property,
this Lease may be made superior to said mortgage or deed of trust by the
insertion therein of a declaration that this Lease is superior.
9.2 Tenant agrees at any time and from time to time upon not less than ten (10)
days' prior written request by Landlord, to execute, acknowledge and deliver to
Landlord a statement in writing certifying that this Lease is unmodified and in
full force and effect (or, if there have been modifications, that the same are
in full force and effect as modified and stating the modifications), that there
are no offsets, defenses, defaults or counterclaims under this Lease or against
the Landlord (or if there are any then specifying the same), the dates to which
the Basic Rent and Additional Rent have been paid in advance, if any, it being
intended that any such statement delivered pursuant to this paragraph 9.2 may be
relied upon by a prospective purchaser of Landlord's interest or mortgagee of
Landlord's interest or assignee of any mortgage upon Landlord's interest in the
Real Property.
ARTICLE X
Destruction - Fire or Other Casualty
10.1 (a) If Landlord's building is totally damaged or is rendered wholly
untenable by fire or other cause, and cannot reasonable be repaired by Landlord
within sixty (60) days, or if the Building shall be so damaged that Landlord
cannot reasonably restore the same but must demolish it or rebuild it, which
Landlord may in its sole discretion determine, then either party may, within
thirty (30) days after such casualty, give to the other party a notice in
writing of intention to terminate this Lease, and thereupon the term of this
8
<PAGE> 9
Lease shall expire by lapse of time upon the thirtieth (30th) day after such
notice is given, and Tenant shall vacate the demised Premises and surrender the
same to Landlord. Upon termination of this Lease under this Paragraph X(a),
Tenant's liability for rent shall cease as of the day following the casualty or
when Tenant ceases to do business in the demised Premises, whichever date is
earlier. In the event this Lease is not terminated under the provisions of this
Paragraph X(a), Landlord shall repair and rebuild the Demised Premises with
reasonable diligence.
(b) If the Demised Premises shall be totally or partially damaged by
fire or other casualty and the parties do not terminate this lease pursuant to
paragraph (a) above, the damages to the Landlord's Building and to the Demised
Premises shall, to the extent that they were originally constructed and
furnished by the Landlord, be promptly repaired by and at Landlord's expense and
the damage to all of Tenant's fixtures and other improvements installed by
Tenant shall be promptly repaired by and at the expense of Tenant and the rent
until such repair shall be made shall be apportioned according to the part of
the Demised Premises which is tenantable by Tenant until the Landlord has made
the repairs required of Landlord.
(c) Landlord shall provide and maintain, at its expense, during the
term hereof, fire insurance. Anything contained in this Lease to the contrary
notwithstanding, in the event the Landlord's Building shall be totally or
partially damaged by fire or other casualty, the Landlord shall not be obligated
to expend for such repair or restoration an amount in excess of the net proceeds
of insurance recovered as a result of such damage.
ARTICLE XI
Mutual Waiver of Subrogation
11.1 Landlord hereby waives any and all rights of recovery against Tenant for or
arising out of damage to or destruction of the Premises, Building, or the Real
Property and any other property of Landlord from causes then insured under
standard fire and extended coverage insurance policies or endorsements to the
extent that its insurance policies then in effect permit such waiver, and Tenant
hereby waives any and all rights of recovery against Landlord for or arising out
of damage to or destruction of the Premises or the Real Property and any
property of Tenant from causes then insured under standard fire and extended
coverage insurance policies to the extent that its insurance policies then in
effect permit such waiver. If at any time during the Term any insurance carrier
which shall have issued a policy to either of the parties covering the Real
Property, the Premises or any of the property of Tenant, shall refuse to consent
9
<PAGE> 10
to the Waiver of the right of recovery with respect to any loss payable under
such policy, or if such carrier shall consent to such waiver only upon the
payment of an additional premium (unless such additional premium is voluntarily
paid by one of the parties hereto) or shall cancel a consent previously given,
or shall cancel or threaten to cancel any policy previously issued and then in
full force and effect, then in any such event, the waiver of this paragraph 10.1
shall thereupon be of no further force and effect as to the loss, damage or
destruction covered by such policy except as hereinafter provided. If however,
at any time thereafter such consent shall be obtained thereof from any existing
or any substitute insurance carrier, the waiver hereinabove provided for shall
again become effective.
ARTICLE XII
Condemnation and Other Proceedings
12.1 In the event the whole of the Demised Premises shall be acquired or
condemned by eminent domain for any public or quasi-public use or purpose, then
and in that event, the term of this Lease shall cease and terminate from the
date of title vesting in such proceeding or the termination of the Tenant's
right to possession, whichever is earlier. In the event any substantial part
thereof or of Landlord's Building or of the structure of which Landlord's
Building is a part is so acquired or condemned as to render the Demised Premises
reasonably untenantable or in the event that a part of Landlord's Building,
other than the Demised Premises, shall be so condemned or taken and if, in the
opinion of the Landlord, the Building should be restored in such ways to alter
the Demised Premises materially, the Landlord may terminate this Lease and the
term and the estate hereby granted by notifying the Tenant in writing of such
termination and this Lease and the term and estate hereby granted shall expire
on the date specified in the notice of termination, not less than thirty (30)
days after the giving of such notice, as fully and completely as if such date
were the date hereinbefore set forth for the expiration of the term of this
Lease, and the rent hereunder shall be apportioned as of said date. Tenant shall
have no claim against Landlord for the value of any unexpired term of said
Lease, nor a claim to any part of any part of an award in such proceeding and
rent shall be adjusted and paid to the date of such termination. Nothing herein
contained shall be deemed to affect or be in derogation of any right or rights
of Tenant against the condemning authority to claim and recover damages, if any,
to or for the taking of its movable fixtures and equipment or expenses or
removal or relocation resulting from any such condemnation or acquisition.
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<PAGE> 11
ARTICLE XIII
Assignment and Subletting
13.1 Tenant, for itself, its successors and assigns, expressly covenants that it
shall not, during the Original Term or during the renewal Term (if any), assign,
mortgage or encumber this Lease, nor sublet, or suffer or permit the Demised
Premises or any part thereof to be used by others, without the prior written
consent of the Landlord in each instance, which consent shall not be
unreasonably withheld or delayed. Except as herein provided, if this Lease be
assigned, or if the Demised Premises or any part thereof be sublet or occupied
by any party other than Tenant, Landlord may, at its option, terminate this
Lease, or may, at its option after default by Tenant, collect rent from the
assignee, subtenant or occupants of Tenant, and apply the net amount collected
to the rent herein reserved, but no such assignment, subletting occupancy or
collection shall be deemed a waiver of this covenant, or the acceptance of the
assignee, subtenant or occupant's tenant, or a release of Tenant from the
further performance by Tenant of covenants on the part of Tenant herein
contained. In the event Tenant shall at any time desire to have Landlord sublet
the Premises for Tenant's account, Landlord or Landlord's agents are authorized
to receive keys for such purposes without releasing Tenant from any of the
obligations under this Lease. The consent by Landlord to an assignment or
subletting shall not in any way be construed to relieve Tenant from obtaining
the express consent in writing of Landlord to any further assignment or
subletting. Each permitted assignee or transferee shall assume and be deemed to
have assumed this Lease and shall be liable for the payment of the rent and
additional rent and for the due performance of all of the terms, covenants,
conditions and agreements herein contained on Tenant's part to be performed for
the term of this Lease. No assignment shall be binding on Landlord unless such
assignee or tenant shall deliver to Landlord a duplicate original of the
instrument of assignment, in form reasonably satisfactory to Landlord,
containing a covenant of assumption by the assignee of all of the obligations
aforesaid and shall obtain from Landlord the aforesaid written consent, prior
thereto.
Notwithstanding anything contained herein to the contrary, Tenant
shall continue to remain primarily liable to Landlord under all of the terms and
conditions of this Lease, even upon assignment of this lease, and assumption by
a third party.
11
<PAGE> 12
ARTICLE XIV
Surrender
14.1 Upon the termination of the Term or prior expiration of this Lease, Tenant
shall peaceably and quietly quit and surrender to the Landlord the Premises,
broom clean, in as good condition as they were on the Commencement Date,
ordinary wear and tear, repairs and replacements by Landlord, loss by fire,
casualty and other causes beyond Tenant's control and alterations, additions and
improvements permitted hereunder, excepted. Tenant's obligation to observe or
perform this covenant shall survive the Termination Date or prior expiration of
the Term. If the Termination Date falls on a Sunday or a legal holiday, this
Lease shall expire at 11:59 P.M. on the business day first preceding said date.
ARTICLE XV
Holding Over
15.1 If Tenant holds possession of the Premises beyond the Termination Date or
prior expiration of the Term, Tenant shall become a tenant from month-to-month
at ONE AND A HALF TIMES the Basic Rent and Additional Rent payable hereunder and
upon all other terms and conditions of this Lease, and shall continue to be such
month-to-month tenant until such tenancy shall be terminated by Landlord and
such possession shall cease. Nothing contained in this Lease shall be construed
as a consent by Landlord to the occupancy or possession by Tenant of the
Premises beyond the Termination Date or prior expiration of the Term, and
Landlord, upon said Termination Date or prior expiration of the Term shall be
entitled to the benefit of all legal remedies that now may be in force or may be
hereafter enacted relating to the speedy repossession of the Premises and to all
damages to which Landlord is entitled.
ARTICLE XVI
Landlord's Right of Entry
16.1 Landlord and Landlord's agents and representatives shall have the right to
enter into or upon the Premises, or any part thereof, at all reasonable business
hours upon reasonable oral notice for the following purposes:
(1) examining the Premises;
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(2) making such repairs or alteration therein as may be necessary in
Landlord's sole judgment for the safety and preservation thereof;
(3) erecting, maintaining, repairing or replacing wires, cables,
conduits, vents or plumbing equipment running in, to or through
the Premises; or
(4) showing the Premises to prospective new tenants during the last
90 days of the Term.
16.2 Landlord may enter upon the Premises at any time in case of emergency
without prior notice to Tenant. In the event that Landlord enters the Premises
in case of an emergency and the Premises are not occupied by the Tenant,
Landlord will promptly give the Tenant written detailed notice of such entry
(time, reason, etc.)
16.3 Landlord, in exercising any of its rights under this Article XVI shall not
be deemed guilty of an eviction, partial eviction or disturbance of Tenant's use
or possession of the Premises and shall not be liable to Tenant for the same.
ARTICLE XVII
Default
17.1 Each of the following, whether occurring before or after the Commencement
Date, shall be deemed a substantial and material Default by Tenant and a breach
of this Lease;
(a) the filing of a petition by or against Tenant for adjudication
as a bankrupt, or for reorganization, or for arrangement under any bankruptcy
act or any state or federal insolvency law; if proceeding is not withdrawn or
discharged within 90 days.
(b) the commencement of any action or proceeding for the dissolution
or liquidation of Tenant, whether instituted by or against Tenant, or for the
appointment of a receiver or trustee of the property of Tenant under any state
or federal statute for relief of debtors; if proceeding is not withdrawn or
discharged within 90 days.
(c) the making by Tenant of an assignment for the benefit
of creditors; if proceeding is not withdrawn or discharged
within 90 days.
(d) the suspension of business by Tenant other than in the
ordinary course of business or any act by Tenant amounting to a
business failure;
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(e) the filing of a tax lien or a mechanics' lien against any
property of Tenant, with exception for Tax liens which the Tenant is opposing in
the appropriate manner and tribunal;
(f) Tenant's causing or permitting the Premises to be vacant, or
abandonment of the Premises by Tenant for a period in excess of ten (10) days
unless Tenant shall give Landlord prior notice of its intention to extend such
period but in no event for a period longer than (60) days;
(g) failure by Tenant to pay Landlord when due the Basic
Rent, the Additional Rent herein reserved, or any other sum by
the time required by the terms of this Lease;
(h) a failure by Tenant in the performance of any other
material term, covenant, agreement or condition of this lease on
the part of Tenant to be performed;
(i) a material default by Tenant under any other lease or sublease
with Landlord, or any default by Tenant under any other work agreement which
would have a material effect upon Tenant.
ARTICLE XVIII
Landlord's Rights Upon Tenant's Default
18.1 (a) Upon a Default by Tenant or any subtenant or assignee, Landlord, upon
failure of Tenant to cure a default in the payment of Basic Rent, Additional
Rent or any other sum of money due to Landlord hereunder within ten (10) days
after same was due, without notice thereof from Landlord, or to cure or
diligently commence to cure any other Default within thirty (30) days after
notice thereof from Landlord, (provided same is cured within a reasonable time
thereafter and without any delay) may immediately or at any time thereafter,
without further notice to Tenant (i) enter upon the Premises as agent for
Tenant, by legal entry, without terminating this Lease and do any and all acts
as Landlord may reasonable deem necessary, proper or convenient to curing such
Default, for the account of and at the expense of Tenant, and Tenant agrees to
pay Landlord, promptly upon demand, all damages and/or expenses incurred by
Landlord in so doing, or (ii) terminate this Lease and Tenant's right to
possession of the Premises and take possession of the Premises and remove
Tenant, and occupant and any property therefrom, without being guilty of
trespassing and without relinquishing any rights of Landlord against Tenant.
(b) Landlord shall be entitled to recover reasonable damages from
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Tenant in an amount equal to the amount herein covenanted to be paid as Basic
Rent and Additional Rent, together with: (i) all reasonable expenses of any
proceedings (including but not limited to, legal expenses and reasonable
attorney's fees) which may reasonably be necessary in order for Landlord to
recover possession of the Premises; and (ii) the reasonable expenses of
re-renting the Premises, including, but not limited to, any commissions paid to
any real estate brokers, advertising expenses and the costs of such alterations,
repairs, replacements and decoration or re-decoration as Landlord in its sole
judgment considers reasonably advisable and necessary for the purpose of
re-renting the Premises. Landlord shall in no event be liable in any way
whatsoever for failure to collect rent thereof under such re-renting. Landlord
shall be under the obligation to make a reasonable effort to re-rent the
Premises which will reduce the Tenant's obligation under the lease.
18.2 No act or thing done by Landlord shall be deemed to be an acceptance of
Tenant's surrender of the Premises, unless Landlord should execute a written
agreement of surrender with Tenant. Tenant's liability hereunder shall not be
terminated by the execution of a new lease of the Premises by Landlord. Tenant
agrees to pay to Landlord, promptly upon demand, the amount of damages herein
provided after the amount of such damages for any month shall have been
ascertained; provided, however, that any expenses reasonably incurred by
Landlord shall be deemed to be a part of the damages for the month in which they
were incurred. Separate actions may be maintained each month by Landlord against
Tenant to recover the damages then due, without waiting until the end of the
Term to determine the aggregate amount of such damages or Landlord, at its
option, if the Premises have been re-let for a term extending at lease as long
as the remainder of the Term thereof, may hold the Tenant responsible in advance
for the entire deficiency to be realized during the term of the re- letting.
Tenant hereby expressly waives any and all rights of redemption granted by or
under any present or future laws in the event of the eviction of Tenant or
tenant being dispossessed for any cause, or in the event of Landlord obtaining
possession of the Premises by reason of the violation by Tenant of any of the
covenants or conditions of this Lease.
18.3 Landlord shall have the right, as agent for Tenant, to take possession and
dispose of any furniture or fixtures of Tenant found upon the Premises and
dispose after taking possession of same pursuant to this Article XVIII. Tenant
waives any notice of execution or levy in connection therewith.
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ARTICLE XIX
Landlord's Remedies Cumulative: Expenses
19.1 All rights and remedies of Landlord herein enumerated shall be cumulative,
and none shall exclude any other right or remedy allowed by law. For the
purposes of any suit brought or based hereon, this Lease shall be construed to
be a divisible contract, to the end that successive actions may be maintained on
this Lease as successive periodic sums mature hereunder.
19.2 Tenant shall pay, promptly upon demand, all of the Landlord's reasonable
costs, charges and expenses, including reasonable fees of counsel, agents and
others retained by Landlord, incurred in enforcing Tenant's obligations
hereunder.
ARTICLE XX
No Waiver
20.1 No waiver by Landlord of any breach by Tenant of any of the terms,
covenants, agreements, or conditions of this Lease shall be deemed to constitute
a waiver of any succeeding breach thereof, or waiver of any of the terms,
covenants, agreements and conditions herein contained.
20.2 No employee of Landlord or of Landlord's agents shall have any authority to
accept the keys of the Premises prior to the Termination Date and the delivery
of keys to any employee of Landlord or Landlord's agents shall not operate as an
acceptance of a termination of this lease or an acceptance of a surrender of the
Premises except in accordance with any procedures stated in Article XVII.
20.3 The receipt by Landlord of the Basic Rent and Additional Rent with
knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such breach. No payment by Tenant or receipt by Landlord of a lesser
amount than the monthly Basic Rent or a lesser amount of the Additional Rent
then due shall be deemed to be other than on account of the earliest stipulated
amount then due, nor shall any endorsement or statement on any check or any
letter or other instrument accompanying any check or payment as Basic Rent or
Additional Rent or pursue any other ready provided in this Lease.
20.4 The failure of Landlord to enforce any of the Rules or Regulations as may
be set by Landlord from time to time against Tenant or against any other tenant
in the Building shall not be deemed a waiver of any such rule or regulation.
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ARTICLE XXI
Landlord's Reserved Rights
21.1 (a) Landlord reserves the following rights: (i) If during or prior to the
last sixty (60) days of the Term Tenant vacated the Premises, Landlord shall be
permitted to decorate, remodel, repair, alter or otherwise prepare the Premises
for occupancy, and (ii) to have pass keys to the Premises.
(b) Landlord may enter upon the Premises and may exercise either of
the preceding rights hereby reserved without being deemed to have caused an
eviction or disturbance of Tenant's use and possession of the Premises and
without being liable in any manner to Tenant.
ARTICLE XXII
Landlord's Liability
22.1 Landlord or its agents shall not be liable for any injury or damage to
persons or property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water, rain, snow or leaks from any part of the building or from
the pipes, appliances, plumbing, or the roof, street, subsurface or from any
other place or by dampness or by any other cause of whatsoever nature; nothing
contained herein shall apply to Landlord's wilful misconduct or negligence or
that of Landlord's contractors, agents, servants, employees, licensees, or
invitees.
ARTICLE XXIII
Tenant's Liability
23.1 Tenant shall reimburse Landlord for all reasonable expenses, damages or
fines, incurred or suffered by Landlord by reason of any breach, violation or
non-performances by Tenant, its agents, servants, employees, invitees or
licensees of any covenant or provisions of this Lease, or by reason of damage to
persons or property caused by moving property of or for Tenant in or out of the
Building, or by the installation or removal of furniture or other property of or
for Tenant by reason of or arising out of the carelessness, negligence or
improper conduct of Tenant, or its agents, servants, employees, invitees and
licensees in the use or occupancy of the Premises. Any such expense shall be
deemed Additional Rent, due in the next calendar monthly after it is incurred.
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ARTICLE XXIV
Tenant's Insurance
24.1 Notwithstanding the agreement in Article 22.1, Tenant covenants to provide
on or before the Commencement Date for the benefit of Landlord and Tenant a
comprehensive policy of liability insurance protecting Landlord and Tenant
against any liability whatsoever occasioned by accident on or about the Premises
or any appurtenances thereto. Such policy is to be written by insurance
companies qualified to do business in the State of New Jersey which shall be
rated grade A or better and with a rating therein of 12 or better and the limits
of liability thereunder shall not be less than the amount of one million
($1,000,000.00) in respect of any one person, in respect of any one accident and
in respect of property damage.
24.2 Prior to the time such insurance is first required by this Article XX to be
carried by Tenant, and thereafter, at least thirty (30) days prior to the
expiration of any such policy, Tenant agrees to deliver to Landlord either a
duplicate original of the aforesaid policy or a certificate evidencing such
insurance, provided said certificate contains an endorsement that such insurance
may not be canceled except upon thirty (30) days' notice to Landlord, together
with evidence of payment for the policy.
24.3 Upon failure at any time on the part of Tenant to procure delivery to
Landlord the policy or certificate of insurance, as hereinabove provided,
stamped "Premium Paid" by the issuing company at least thirty (30) days before
the expiration of the prior insurance policy or certificate, if any, or to pay
the premiums thereof, after 15 days' written notice to Tenant demanding same,
Landlord shall be at liberty, from time to time, as often as such failure shall
occur, to procure such insurance and to pay the premium thereof, and any sums
paid for insurance by Landlord shall be and become, and are hereby declared, to
be Additional Rent hereunder due immediately for the collection of which
Landlord shall have all the remedies provided for in this Lease or by law for
the collection of rent. Payment by Landlord of such premium or the carrying by
Landlord of any such policy shall not be deemed to waive or release the default
of Tenant with respect thereto. Tenant's failure to provide and keep in force
the aforementioned insurance shall be regarded as a Default hereunder entitling
Landlord to exercise any or all of the remedies as provided in this Lease in the
event of Default.
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ARTICLE XXV
Mechanic's Liens
25.1 Any mechanic's liens filed against the Real Property for work claimed to
have been done for, or materials claimed to have been furnished to Tenant, shall
be considered a substantial and material breach of this lease unless removed or
bonded at Tenant's expense within forty-five (45) days after notice of filing is
received by Tenant.
ARTICLE XXVI
Quiet Enjoyment
26.1 Landlord covenants and agrees that, upon the performance by Tenant of all
of the covenants, agreements and provisions hereof on Tenant's part to be kept
and performed, Tenant shall have, hold and enjoy the Premises, subject and
subordinate to the rights set forth in Article VIII, free from any interference
whatsoever by, from or through the Landlord, provided, however, that no
diminution or abatement of the Basic Rent, Additional Rent or other payment to
Landlord shall be claimed by or allowed to Tenant for inconvenience or
discomfort arising from the making of any repairs or improvements to the
Premises or the Real Property, or for any space taken to comply with any law,
ordinance or order of any Governmental Authority, except as provided for herein.
ARTICLE XXVII
Air and Light
27.1 This lease does not grant any rights or easements to air
and light to Tenant.
ARTICLE XXVIII
Landlord's Services
28.1 Landlord shall furnish to Tenant the electrical services set forth herein
as a cost of .13 per sq. ft. per month, subject to any additional costs referred
to below.
28.2 (a) Landlord shall furnish cleaning service to Tenant in accordance with
Exhibit B attached hereto. Air heating, air cooling, ventilating, and
electricity as well as cold water and hot water shall be furnished only between
the hours of 8:00 a.m. and 9:p.m., Mondays through Fridays, from 8:00 a.m. to
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6:00 p.m. on Saturdays and Sundays, Building Holidays excluded, and then only
when weather conditions in the reasonable opinion of Landlord, require.
(b) If Tenant shall request the use of air cooling (during the
periods when such is available), ventilating, heat and/or electricity at any
times other than the hours in this Lease provided for such service, Landlord
shall furnish such to Tenant provided (i) that Tenant pays to Landlord, as
additional rent, a special overtime charge thereof which shall be agreed upon
between the Landlord and Tenant; (ii) that Tenant's request shall be received by
Landlord by 12 noon of the day on which after-hours service is required (and by
12 noon of the day preceding any requested before hours service).
28.3 (a) Throughout the Term, Landlord agrees to distribute electrical energy to
the Premises (not exceeding the present electrical capacity at the Premises and
the Buildings upon the following terms and conditions: (i) Landlord shall not be
liable in any way to Tenant for any loss, damage or defect or change in the
quantity or charger of electricity furnished to the Premises or due to any
cessation, diminution or interruption of the supply thereof; (ii) Tenant shall
be responsible for replacing all light bulbs, fluorescent lamps, non-Building
standard lamps and bulbs, and all ballasts used by Tenant in the Premises,
except that the Landlord shall supply the above at the beginning of this lease.
(b) Tenant covenants that its use of electricity in the Premises
shall be limited to and for the operation of (1) the building standard lighting,
and (2) electric typewriters, calculators, copying machines and other small
office machines, AV equipment, computers, 18 Cubic Foot Refrigerator, and small
kitchen items.
(c) Subject to the provisions of Exhibit C attached hereto, Tenant shall make no
alteration to the existing electrical equipment or connect any fixtures,
appliances or equipment in addition to the equipment permitted in Article 28.3
(b) above without the prior written consent of Landlord in each instance. Should
Landlord grant such consent, all additional risers or other equipment required
thereof shall be provided by Landlord and the reasonable cost hereof shall be
paid by Tenant promptly upon Landlord's demand. As a condition to granting such
consent, Landlord shall require an increase in the Additional Rent by an amount
which will reflect the cost of the additional equipment and service to be
furnished by Landlord. If Landlord and Tenant agree to such increase, the
Additional Rent increase shall be determined by an independent electrical
engineer, to be selected by Landlord and whose services shall be paid for by
Tenant. All consents and permits are a condition of this Lease.
(d) Landlord shall not be liable in the event of any interruption in
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the supply of electricity not due to the act or omission of Landlord, Landlord's
agents, employees, contractors, invitees, servants or licensees, and Tenant
agrees that such supply may be interrupted for inspection, repairs, replacement
and in emergencies.
28.4 The failure of Landlord to furnish any service hereunder shall not be
construed as a constructive eviction of Tenant and shall not excuse Tenant from
failing to perform any of its obligations hereunder and shall not give Tenant
any claim against Landlord for damages for failure to furnish such service.
ARTICLE XXIX
Personal Property Taxes
29.1 Tenant agrees to pay all taxes imposed on the personal
property of Tenant, the conduct of its business and its use and
occupancy of the Premises.
ARTICLE XXX
Security Deposit
30.1 Subject to the provisions of Paragraph 38.15, simultaneously with the
execution hereof, Tenant has deposited with Landlord the sum of $1,568.66.
ARTICLE XXXI
Use of Security Deposit
31.1 In the event of a Default by Tenant, beyond any applicable grace or cure
period, in respect of any of the terms, covenants or conditions of this Lease,
Landlord may use, apply or retain the whole or any part of the Security Deposit
to the extent required for the payment of any Basic Rent, Additional Rent or any
other sum as to which Tenant is in Default or for any sum which Landlord may
reasonably expend or may be reasonably required to expend by reason of Tenant's
Default in respect of any of the terms, covenants or conditions of this Lease,
including but not limited to, any damages or deficiency accrued before or after
summary proceedings or other re-entry by Landlord. In the event that Tenant
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shall fully and faithfully comply with all of the terms, covenants and
conditions of this Lease, the Security Deposit shall be returned to Tenant
within fifteen (15) days after the Termination Date and after delivery of
possession of the entire Premises to Landlord.
31.2 In the event of a sale of the Real Property or a leasing thereof, Landlord
shall have the right to transfer the Security Deposit to the vendee or Lessee,
as the case may be, and Landlord shall thereupon be released by Tenant from all
liability for the return of such Security Deposit; and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
Security Deposit to a new landlord. Tenant further covenants that it will not
assign or encumber or attempt to assign or encumber the Security Deposit and
that neither the Landlord not its successors and assigns shall be bound by any
such assignment, encumbrance, attempted assignment or attempted encumbrance.
ARTICLE XXXII
Definition of Landlord
32.1 The term "Landlord" as used in this Lease means only the owner for the time
being of the Real Property and/or Building or the owner of a lease of the Real
Property. In the event of any transfer of title to or lease of the Real
Property, the Landlord shall be and hereby is entirely freed and relieved of all
covenants and obligations of Landlord hereunder and this Lease shall be deemed
and construed as a covenant running with the land without further agreement
between the parties or their successors in interest.
32.2 Landlord shall be under no personal liability with respect to any of the
provisions of this Lease, and if Landlord is in breach of default with respect
to its obligations or otherwise, Tenant shall look solely to the equity of
Landlord in the Real Property for the satisfaction of Tenant's remedies. It is
expressly understood and agreed that Landlord's liability under the terms,
covenants, conditions, and obligations of this Lease shall in no event exceed
the loss of its equity in the Real Property. Upon execution of this lease,
Landlord will deliver to Tenant an Insurance Certificate describing Landlord's
Business and Liability Insurance in respect to the Real Property.
ARTICLE XXXIII
Notices
33.1 Notices by either party to the other shall be in writing, postage
paid, deposited in a U.S. mail box in the Continental United States and
addressed to Landlord or Tenant at their respective addresses hereinabove set
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forth, or to such other address as either party shall hereafter designate by
notice as aforesaid. All notices shall be by certified mail, return receipt
requested. Notices shall be deemed to be given three (3) business days after
mailing. The attorneys for the respective parties may give notice hereunder.
ARTICLE XXXIV
Signs
34.1 No sign, advertisement or notice shall be affixed to or placed upon any
part of the Premises by the Tenant, except in such manner and of such size,
design and color as shall be approved in advance in writing by Landlord (which
approval may not be unreasonably withheld or delayed).
ARTICLE XXXV
Notice of Defects and Accidents
35.1 Tenant shall give Landlord immediate notice in case of accident on the
Premises or involving Tenant, its servants, agents, employees, invitees or
licensees in the Building or of any defects in the Building.
ARTICLE XXXVI
Rules and Regulations
36.1 Tenant, on behalf of itself and its employees, agents, servants, invitees
and licensees, agrees to comply with the Rules and Regulations with respect to
the Real Property. Landlord shall have the right to make reasonable amendments
thereto from time to time for the safety, care and cleanliness of the Real
Property and Building, the preservation of good order therein and the general
convenience of all the tenants and Tenant agrees to comply with such amended
Rules and Regulations, after twenty (20) days' written notice thereof from
Landlord. All such amendments shall apply to all tenants in the building, and
will not materially interfere with the use and enjoyment of the Premises or the
parking lot by Tenant.
ARTICLE XXXVII
Directory
37.1 Landlord shall furnish and service in the lobby of the Building as well as
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the entrance to the property a directory. Tenant shall be entitled to one
listing on such directory. Tenant, at its expense, may request from Landlord and
pay for such reasonable number of names that Tenant may from time to time
request to be listed in such directory, provided, in Landlord's sole discretion,
there is sufficient space on such directory to accommodate additional listings.
ARTICLE XXXVIII
Miscellaneous
38.1 Entire Agreement. This Lease contains the entire agreement between the
parties, and any attempt hereafter made to change, modify, discharge or effect
an abandonment of it in whole or in part shall be void and ineffective unless in
writing and signed by the party against whom enforcement of the change,
modification, discharge or abandonment is sought.
38.2 Jury Trial Waiver. Landlord and Tenant do hereby waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matter whatsoever, arising out of or in connection with
this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy
of the Premises, and/or any claim, injury or damage, or any emergency or
statutory remedy.
38.3 Force Majeure. If, by reason of strike, labor troubles or other causes
beyond Landlord's control, including, but not limited to, governmental
preemption in connection with a national emergency or any rule, order or
regulation of any Governmental Authority, or conditions of supply and demand
which are affected by war or other emergency, Landlord shall be unable to
fulfill its obligations under this Lease or shall be unable to supply any
service which Landlord is obligated to supply, this Lease and Tenant's
obligation to pay Basic Rent and Additional Rent hereunder shall in no way be
affected, impaired or excused.
38.4 Broker. Landlord and Tenant mutually represent that they have not dealt
with any real estate broker in connection with this Lease other than WNY
Management Corp. Landlord shall pay commission per separate agreement. Landlord
and Tenant indemnify and hold the other harmless from any and all claims,
liabilities, costs or damages the other may incur as a result of a breach of
this representation arising from the indemnified acts. The provisions of this
paragraph shall survive the expiration of this Lease.
38.5 Separability. If any term or provision of this Lease or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such term or
provision to persons or circumstances other than those to which it is held
invalid or unenforceable, shall not be affected thereby and all other terms and
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provisions of this Lease shall be valid and enforced to the fullest extent
permitted by law.
38.6 Interpretation. (a) Whenever in this lease any words of obligation or duty
are used, such words or expressions shall have the same force and effect as
though made in the form of covenants.
(b) Words of any gender used in this Lease shall be held to include
any other gender, and words in the singular number shall be held to include the
plural, when the sense requires.
(c) All pronouns and any variations thereof shall be deemed to refer
to the neuter, masculine, feminine, singular number shall be held to include the
plural as the identity of the parties requires.
(d) This Lease shall be strictly construed neither against Landlord
nor Tenant. No remedy or election given by any provision in this Lease shall be
deemed exclusive unless so indicated, but each shall, wherever possible, be
cumulative with all other remedies in law or equity as otherwise specifically
provided. Each provision hereof shall be deemed both a covenant and a condition
and shall run with the land.
(e) If, and to the extent that, any of the provisions of any rider
to this Lease conflict or are otherwise consistent with any of the preceding
provisions of this Lease, or of the Rules and Regulations appended to this
Lease, whether or not such inconsistency is expressly noted in the rider, the
provisions of the rider shall prevail, and in case of inconsistency with said
Rules and Regulations, shall be deemed a waiver of such Rules and Regulations
with respect to Tenant to the extent of such inconsistency.
(f) Tenant agrees that all of Tenant's covenants and agreements
herein contained providing for the payment of money and Tenant's covenant to
remove mechanics' liens shall be deemed conditions as well as covenants, and
that if default be made in any such covenants, Landlord shall have all of the
rights provided for herein.
(g) The parties mutually agree that the headings and captions
contained in this Lease are inserted for convenience of reference only, and are
not to be deemed part of or to be used in construing this Lease.
(h) The covenants and agreements herein contained shall be subject
to the provisions of this Lease, bind and inure to the benefit of Landlord, its
successors and assigns, the Tenant, its successors and assigns except as
otherwise provided herein.
(i) This Lease has been executed and delivered in the State of New
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Jersey and shall be construed in accordance with the laws of the State of New
Jersey and Landlord and Tenant acknowledge that all of the applicable statutes
of the State of New Jersey are superimposed on the rights, duties and
obligations of Landlord and Tenant hereunder and this Lease shall not otherwise
provide that which said statutes prohibit.
(j) Landlord has made no representations or promises with respect to
the Premises or the Real Property, except as expressly contained herein. Tenant
has inspected the Premises and agrees to take the same in an "as is" condition,
except as otherwise expressly set forth. Landlord shall have no obligation,
except as herein set forth, to do any work in and to the Premises to render them
ready for occupancy and use by Tenant.
(k) Time is of the essence with respect to all dates,
notices and time periods.
38.7 No Recordation. Tenant shall not record this Lease or a
memorandum hereof.
38.8 Late Charges. If Tenant shall fail to pay within ten (10) days of any due
date any rent or additional rent payments due hereunder, such unpaid amounts
shall bear interest from the due date thereof to the date of payment at the rate
of 5% of the amount due.
38.9 Approval of Lender. The Tenant agrees to sign a recordable assignment of
this Lease to any future mortgagee of Landlord. The Tenant agrees, upon request,
to furnish said mortgagee within ten (10) days' written request that:
a. The Lease is in full force and effect.
b. The possession of premises is accepted by Tenant.
c. Confirm the commencement of the lease term.
d. It is in occupancy and paying rent on a current basis, with
no rental offsets or claims.
38.10 Parking. The Landlord covenants and agrees for the Demised Premises with
Tenant that it shall have the right to use 6 parking spaces for the Demised
Premises and the access driveways in common with other tenants of the Property
for use by Tenant and Tenant's employees, servants or invitees.
38.11 Preparation of Office. Tenant agrees to take space in its "as is"
condition except that the Landlord agrees to perform the following work prior to
the Tenant's occupancy:
1. Construction of approximately 57 feet of partition wall
creating 3 new offices.
2. Installation of 5 doors (hollow core) 2 with glass 20" x 24"
and leverset handles.
3. Installation of 2 electrical receptacles and 2 additional
fluorescent lights.
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4. Replace ceiling tiles as needed.
5. Two HVAC supplies and two returns moved to new locations.
6. Relocate one thermostat and one power pole.
7. Strip wallpaper and paint entire suite.
8. Replace approximately 15' X 24' of carpet in reception area
with new carpet.
38.12 Tenant's Proportionate Share. Tenant's proportionate share is 6.8%.
38.13 Relocation. From time to time or at any time after the first year of the
term, on not less than ninety (90) days' notice to Tenant, Landlord shall have
the right to move the Tenant out of the Demised Premises and into similar space
within the Building of at least equal rentable area. In such event, Landlord
shall remove, relocate and reinstall Tenant at Landlord's sole cost and expense
without interruption to Tenant's business. Landlord shall pay a reasonable fee
in the event that new phones, letterhead, etc. are required by Tenant. For the
balance of the Term, this Lease shall continue in full force and effect and
shall apply to the new space as though this Lease had originally been for such
new space.
38.14 Full Execution. This Lease shall not be binding until fully executed by
Landlord and Tenant.
ARTICLE XXXIX
Definitions
39.1 Building Holidays. Building Holidays shall mean all holidays including, but
not limited to: Washington's Birthday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and the day after, Christmas Day and New Year's Day as
each of said holidays are celebrated in the State of New Jersey.
39.2 Excusable Delay. Excusable delay shall mean a delay caused by strike,
lockout, act of God, inability to obtain labor or materials, governmental
restrictions, enemy actions, civil commotion, fire, unawardable casualty or any
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other cause similar or dissimilar beyond the reasonable control of either
Landlord or Tenant or due to the passing of time while waiting for an adjustment
of insurance proceeds.
39.3 Rental Area of the Premises. Rental area of the Premises shall mean the sum
of (i) the total number of square feet contained in the area shown on Exhibit A
computed by measuring from the outside finish of the exterior of the Building
wall(s) to the offside of the corridor walls or permanent partitions in the
Premises from adjoining areas in the Building; and, (ii) Tenant's proportionate
share of the area of the Building used for public corridors, public toilets, air
conditioning rooms, fan rooms, janitor's closets, electrical closets, telephone
closets and overhead shafts.
39.4 Structural Repairs. Structural repairs shall mean repairs to the roof,
foundation and permanent exterior walls and support columns of the building.
ARTICLE XXXX
American Disabilities Act
40.1 Americans with Disabilities Act. Notwithstanding anything contained in this
Lease to the contrary, Landlord represents that it is currently making good
faith efforts to bring the common areas of the building in which the Demised
Premises is located into compliance with the requirements of Title III of the
ADA. Tenant represents and covenants that it shall conduct its occupancy and use
of the Premises in accordance with ADA (including but not limited to, modifying
it policies, practices, and procedures, and providing auxiliary aids and
services to disable persons). If the Lease provides that the Tenant is to
complete certain alterations and improvements to the Premises in conjunction
with Tenant taking occupancy of the Premises, Tenant agrees that all such work
shall comply with the ADA. Furthermore, Tenant covenants and agrees that any and
all future alterations or improvements made by Tenant to the Premises shall
comply with the ADA.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the
day of November, 1995.
WITNESS: LANDLORD: East Brunswick Woods Associates, Inc.
By: Empire National Corporation, General Partner
By: /s/__________________________________________
Title: President
WITNESS: TENANT:
By: /s/__________________________________________
Title: Pres. Enamelon Inc.
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CORPORATE TENANT ACKNOWLEDGEMENT
STATE OF :
: SS.
COUNTY OF :
On this day of , 19 , before me personally came , to me known, who,
being by me duly sworn , did depose and say that he resides in , City of , State
of , that he is the of , the corporation described in and which executed the
foregoing lease, as Tenant; that he knows the seal of said corporation; that the
seal affixed to said instrument is such corporate seal; that it was so affixed
by order of the Board of Directors of said corporation, and that he/she signed
his/her name thereto by like order.
Notary Public
PARTNERSHIP TENANT ACKNOWLEDGEMENT
STATE OF :
: SS.
COUNTY OF :
On this day of , 19 , before me
personally came , to me known and in and
who executed this foregoing Lease, as Tenant, and to me
acknowledged that each is a partner in the firm of and that they each executed
the same individually and as co- partners in said firm.
Notary Public
STATE OF :
: SS.
COUNTY OF :
On this day of , 19 , before me personally came , to me known, and
known to me to be the individual described in and who executed the foregoing
Lease, as Tenant, and he duly acknowledged to me that he executed the same.
Notary Public
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LANDLORD TENANT ACKNOWLEDGEMENT
STATE OF NEW MEXICO :
: SS.
COUNTY OF SANTA FE :
On this 4th day of December, 1995, before me personally came Edward
M. Gilbert, to me known, who, being by me duly sworn, did depose and say that he
is the President of Empire National Corporation, the corporation described in
and which of said corporation; that the seal affixed to said instrument is of
Directors of said corporation, and that he/she signed his/her name thereto by
like order.
/s/ Maureen McGuire
------------------------
Notary Public
My commission expires: 8-1-99
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EXHIBIT A
[First Floor Plan]
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EXHIBIT B
CLEANING SCHEDULE
I. GENERAL CLEANING
Nightly:
1. All the nightly cleaning services as listed herein are
to be performed (5) nights each week, Monday through
Friday, except on legal holidays.
2. Cartons of refuse in excess of that which can be placed
in wastebaskets will not be removed. Tenants are
required to make arrangements with the building manager
for the disposal of such unusual refuse, for which
tenant may incur reasonable additional charges.
3. Sweep and dust mop all uncarpeted floors. Vacuum all
rugs and carpeted areas.
4. Damp clean all glass desk tops.
5. Hand dust all office furniture, paneling and window
sills.
6. Empty and wash clean all ashtrays and receptacles.
7. Wash clean all water fountains and coolers, emptying
all wastes.
8. Keep cigarette urns clean.
9. Dust and wipe all sand urns.
10. Hand dust all moldings, chair rails, baseboards and
trim as necessary.
11. Spot clean all partitions and doors.
12. Damp dust all telephone equipment whenever necessary.
13. Remove all hand marks from around light switches
14. On completion of work all slop sinks, locker areas,
etc.
15. All lights shall be extinguished, all windows closed,
and all doors shall be locked after cleaning is
completed.
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II. MAIN LOBBY, ELEVATORS AND CORRIDORS
1. Vacuum entrance and corridors nightly; spot for stains
as necessary.
2. Vacuum elevator floor nightly.
3. Elevator cab to be wiped clean daily and polished as
necessary.
III. CORE LAVATORIES
Nightly:
1. Mop, rinse and dry floors, polish mirrors, wash shelves,
clean enameled surfaces, wash basins, urinals, and
bowls, using scouring powder to remove stains, making
certain to clean under sides of rim on urinals and
bowls.
2. Wash both sides of all toilet seats with soap and
water.
3. Damp rinse and wash with disinfectant tile walls near
urinals.
4. Fill toilet tissue dispensers in appropriate
washrooms. tissue to be furnished by owner.
5. Wastepaper cans and receptacles are to be emptied and
thoroughly cleaned.
6. Install paper hand towels and liquid hand soap in core
lavatories. Hand towels and liquid soap to be
supplied by owner.
IV. DAY CUSTODIAN WILL (when applicable):
1. Clean and sanitize lavatories as necessary.
2. Empty and clean paper towel and sanitary disposal
receptacles, refill same as necessary.
3. Keep public areas in neat and orderly condition at all
times.
4. Custodian will be available for special tasks and will
fix minor problems that arise in the building, such as
cleaning up spillage, changing light tubes, etc.
5. Wash lobby entrance door windows in and out.
6. Keep parking lot area free of papers and general
debris.
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V. CORE LAVATORIES
Monthly:
1. Wash all partitions, tile walls, and enamel surfaces.
2. Wash down walls in washrooms and stalls from trim to
floor.
3. Dust all lighting fixtures.
VI. GLASS CLEANING
1. All windows in premises shall be cleaned inside and
out two (2) times per year.
VII. QUARTERLY SERVICES
1. Dust all pictures, frames, charts, graphs and similar
wall hangings.
2. Dust exterior of light fixture diffuses.
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RULES AND REGULATIONS ATTACHED
TO AND MADE A PART OF THE FOREGOING LEASE
ONE - The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors and public parts of the Building shall not be obstructed or
encumbered by Tenants or used by Tenant for any purpose other than ingress and
egress to and from the Premises.
TWO - No awnings, air conditioning units or other projections shall be attached
to the outside walls or window sills of the Building or otherwise project from
the Building without the prior written consent of the Landlord.
THREE - The Tenants shall not erect, make or maintain on or attach or affix to
any part of the Premises of the Building including the windows and doors of said
Building, any sign, picture, or other representation or advertisement or notice
of any kind, without the express written consent of the Landlord obtained in
advance. Tenant shall have the right to apply on the main entrance door to the
Premises lettering of approved type, size and style, as well as company logo
where applicable. Landlord shall place Tenant's name on directory in the lobby
of the Building. Tenant shall not have the right to have additional names placed
on the directory without Landlord's prior written consent.
FOUR - The Tenant shall not install window covering such as venetian blinds,
drapes or the like, without the approval of Landlord, which shall not be
unreasonably withheld or delayed. The windows in the Premises shall not be
covered or obstructed by Tenant, nor shall articles be placed on the window
sills or in the halls or in any other part of the Building, nor shall nay
article be thrown out of the doors or windows of the Premises.
FIVE - Tenant shall not lay linoleum or other similar floor covering so that the
same shall come in direct contact with the floor of the Premises, and if
linoleum or other similar floor covered is desired to be used, an interlining of
builder's deadening felt shall be first fixed to the floor by a paste or other
material that may be easily removed with water, the use of cement or other
similar adhesive material being expressly prohibited.
SIX - Tenant shall not make, or permit to be made, any unseemly or disturbing
noises nor interfere with other tenants or those having business with them.
SEVEN - No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by Tenant, and Tenant shall upon the termination of this
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tenancy, deliver to Landlord all keys to any space within the Building, either
furnished to, or otherwise procured by, Tenant, and in the event of the loss of
any keys so furnished, Tenant shall pay Landlord the cost thereof.
EIGHT - The carrying in or out of freight or bulky matter of any description
must take place during such hours as Landlord may from time to time reasonably
determine. The installation and moving of such freight or bulky matter shall be
made upon previous notice to the Landlord, and the persons employed by Tenant
for such work must be reasonably acceptable to Landlord. Notwithstanding the
above, Tenant shall be permitted to bring in cartons on a handtruck with notice
to Landlord.
NINE - Landlord reserves the right to prescribe the weight and positions of all
safes and other heavy equipment so as to distribute properly the weight thereof
and to prevent any unsafe condition from arising. Business machines and other
equipment shall be placed and maintained by Tenant at Tenant's expense in
setting sufficient in Landlord's reasonable judgment to absorb and prevent
unreasonable vibration, noise and annoyance.
TEN - Tenant shall not clean or permit the cleaning of any window in the
Premises from the outside.
ELEVEN - Tenant shall not keep in the Building any explosives, cleaning fluid or
any inflammable material. Tenant shall not bring or place any bed or bedding in
the Premises and shall not use the Premises as a lodging place. Tenant shall not
keep any animal, reptile or bird on or about the Premises.
TWELVE - No article shall be fastened to or holes drilled or nails or screws
driven into the walls or partitions, nor shall the walls or partitions be
painted, papered or otherwise covered or in any way marked or broken, without
the written consent of the Landlord which shall not be unreasonably withheld or
delayed, and no work shall be done upon the Premises by any persons except those
employed by the Landlord.
THIRTEEN - Landlord shall not be responsible to Tenant for the non-observance or
violation of any of these Rules and Regulations by other Tenants.
FOURTEEN - The moving in or out of furniture and furnishings for initial
occupancy or removal of same upon surrender of premises shall be limited to week
nights after 6:00 p.m. or weekends between the hours of 9:00 a.m. and 6:00 p.m.
or as Landlord may reasonably determine. Tenant must notify Landlord of proposed
moving schedule at least two weeks in advance and Tenant shall be responsible
for payment of any overtime reasonably necessary for Landlord's personnel,
excluding the initial move-in.
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EXHIBIT C
Notwithstanding anything to the contrary contained in either the
printed portion of the Lease or the Rules and Regulations attached thereto, the
parties agree that Tenant may, without the need to obtain any further consent
from Landlord, make the following alterations and additions to the Premises in
accordance with the plans and specifications set forth on the attached drawing
prepared by Izzy's Kitchen Showcase:
1. Installation of floor and wall cabinets, work benches, two sinks,
a dishwasher and a 16-18 cubic foot high efficiency refrigerator in the room
located at the rear corner of the Premises. All necessary plumbing for the
installation of the two sinks and dishwasher already exists in the Premises.
2. Certain of the work benches referred to in 1 above will be placed
over floor cabinets to form a center island. This center island will require 120
volt AC electric power in order to operate low amperage equipment located
thereon and therein.
3. In order to supply the requisite electric power to the center
island, Tenant will be permitted to reroute the electrical wiring coming into
said room from the existing riser or, at Tenant's option, to run a new 120 volt
AC electric line into the said room from the circuit box located within the
Premises.
4. Tenant will be responsible for and will pay the entire costs of
Tenant's aforesaid cabinets, benches, sinks and appliances, as well as the cost
of installation thereof and the cost of Tenant's electrical
installation/rerouting and plumbing hookups.
5. All of the aforesaid installations and electrical and plumbing
work will be performed by duly licensed personnel (who may be persons other than
those employed by Landlord) in accordance with all applicable laws, rules,
regulations and codes of governmental authorities having jurisdiction of the
Premises.
6. All of the foregoing installations are and shall remain the
property of Tenant, and shall not become or be deemed to have become Landlord's
property unless abandoned or deemed abandoned by Tenant pursuant to the Lease.
Upon the expiration of the Lease term or the earlier termination of the Lease,
Tenant will remove the same and restore the Premises to their condition
immediately prior to the installation, reasonable wear and tear and fire or
other casualty excluded, all at Tenant's cost and expense.
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