AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1996
REGISTRATION STATEMENT NO. 333-10323
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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OCUREST LABORATORIES, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<CAPTION>
FLORIDA 2834 65-0259441
<S> <C> <C>
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
4400 PGA BLVD., SUITE 300
PALM BEACH GARDENS, FLORIDA 33410
561-627-8121
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
4400 PGA BLVD., SUITE 300
PALM BEACH GARDENS, FLORIDA 33410
(ADDRESS OF PRINCIPAL PLACE OF BUSINESS OR INTENDED PRINCIPAL PLACE OF
BUSINESS)
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COPIES TO:
<TABLE>
<CAPTION>
<S> <C>
THOMAS S. SMITH, ESQ.
JONATHAN B. REISMAN, ESQ. SMITH, MCCULLOUGH & FERGUSON, P.C.
REISMAN & ASSOCIATES, P.A. 1610 WYNKOOP STREET
5100 TOWN CENTER CIRCLE SUITE 300
BOCA RATON, FL 33486 DENVER, CO 80202
561-361-9300
</TABLE>
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the Registration Statement becomes effective.
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. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
-----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT(2) OFFERING PRICE (2) REGISTRATION FEE
- --------------------------------- ------------------ ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Common Stock, $.008 par value(1) 2,300,000 shares $4.00 $ 9,200,000 $3,172.42
Class A Redeemable Common Stock
Purchase Warrants(1) 2,300,000 warrants $ .50 $ 1,150,000 $396.56
Units(3) 2,300,000 units $4.50 $10,350,000 -0-(3)
Common Stock, $.008 par value(4) 2,300,000 shares $4.80 $11,040,000 $3,806.90
Common Stock
Purchase Warrants(5) 200,000 warrants $.00025 $ 50 $.02
Common Stock Purchase
Warrants(5) 200,000 warrants $.00025 $ 50 $.02
Common Stock, $.008 par value(6) 200,000 shares $4.80 $ 960,000 $331.04
Common Stock, $.008 par value(6) 200,000 shares $5.76 $ 1,152,000 $397.25
Totals $23,502,100(7) $8,104.21(8)
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
-----------------------
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>
- ------------------------------
(1) Includes 300,000 shares of Common Stock, $.008 par value, and 300,000 Class
A Redeemable Common Stock Purchase Warrants covered by an over-allotment
option.
(2) Estimated solely for purpose of calculating the registration fee pursuant to
Rules 457(a) and (g).
(3) The Units consist of the 2,300,000 shares of Common Stock and the 2,300,000
Class A Redeemable Common Stock Purchase Warrants referred to above.
Accordingly, no filing fee is payable for the registration of the Units.
(4) Issuable upon exercise of the Class A Redeemable Common Stock Purchase
Warrants referred to in Note (1) above.
(5) To be sold to the Representative of the Underwriters and its designees.
(6) Issuable upon exercise of the warrants which are the subject of Note (5)
above.
(7) Excludes Offering Price of Units inasmuch as the securities comprising the
Units are being separately registered.
(8) $9,372,333 has previously been paid.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 8, 1996
PROSPECTUS
OCUREST LABORATORIES, INC.
2,000,000 UNITS
EACH CONSISTING OF ONE SHARE OF COMMON STOCK
AND ONE CLASS A REDEEMABLE COMMON STOCK PURCHASE WARRANT
This Prospectus relates to the offering (the "Offering") by Ocurest
Laboratories, Inc. (the "Company") of 2,000,000 Units (the "Units"). Each of the
Units consists of one share of Common Stock, $.008 par value (the "Common
Stock"), and one Class A Redeemable Common Stock Purchase Warrant (a "Warrant"
and collectively, the "Warrants"). The Common Stock and Warrants must be
purchased together as Units unless this requirement is waived by RAF Financial
Corporation (the "Representative") at the request of a person who does not
desire to purchase Warrants. In such event the Common Stock will be sold at
$4.00 per share and the Warrants will be sold at $.50 per Warrant. The Common
Stock and the Warrants comprising the Units will not be separately tradeable or
transferable for a period of six months commencing on the date of this
Prospectus or earlier at the discretion of the Representative. See "Description
of Securities--The Units."
Prior to the Offering, there has not been any public market for the
securities of the Company. The initial public offering prices of the Units, the
Common Stock and the Warrants and the initial exercise price and other terms of
the Warrants have been arbitrarily determined by negotiation between the Company
and the Representative, as representative of the underwriting group (the
"Underwriters"). Application has been made to approve the Units for quotation on
the NASDAQ Small-Cap Market ("NASDAQ") under the trading symbol OCULU. Only the
Units will be listed for quotation on NASDAQ until the Common Stock and Warrants
become separately tradeable and transferable. Thereafter, subject to the Company
then meeting the NASDAQ maintenance requirements, the Units will be delisted for
quotation on NASDAQ and only the Common Stock and Warrants will be listed for
quotation on NASDAQ.
Each Warrant entitles the registered holder thereof to purchase one share of
Common Stock at an exercise price of $4.80 per share, with a credit of $.50 per
Warrant surrendered on exercise, subject to adjustment in certain events, at any
time commencing on the date the Warrants are separately tradeable and
transferable and ending on , 1999. The Company will place in
escrow $.50 per Warrant pending the occurrence of certain events. Commencing on
the date the Warrants are separately tradeable and transferable, the Warrants
are subject to redemption by the Company at $.55 per Warrant at any time until
the end of the second year after the date of this Prospectus and thereafter at
$.75 per Warrant at any time until the end of the third year after the date of
this Prospectus and prior to their expiration, on 30 days' prior written notice
to the holders of Warrants, provided that the daily trading price per share (as
defined beginning on page 38) of Common Stock has been at least $6.72 for a
period of at least 20 consecutive trading days ending within 10 days prior to
the date upon which the notice of redemption is given. Once exercisable, the
Warrants shall be exercisable until the close of the business day preceding the
date fixed for redemption, if any. See "Description of Securities--Warrants."
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE SUBSTANTIAL DILUTION TO INVESTORS. POTENTIAL PURCHASERS SHOULD NOT
INVEST IN THESE SECURITIES UNLESS THEY CAN AFFORD THE RISK OF LOSING THEIR
ENTIRE INVESTMENT. SEE "RISK FACTORS" ON PAGE 6 OF THIS PROSPECTUS AND
"DILUTION" ON PAGE 15 OF THIS PROSPECTUS.
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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>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS(1) COMPANY(2)
Per Unit(3) $ 4.50 $ .405 $ 4.095
Total(4) $9,000,000 $ 810,000 $8,190,000
</TABLE>
(FOOTNOTES ON NEXT PAGE)
It is expected that delivery of the certificates representing the Units
will be made at the offices of the Representative on or about , 1996
against payment therefor.
-------------------------
RAF Financial Corporation
<PAGE>
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(1) The Company and certain shareholders of the Company (the "Selling
Shareholders") have also agreed to pay the Representative a non-accountable
expense allowance equal to 2.6% of the total Price to Public of the Units,
Common Stock and Warrants sold by them. The Company has also agreed to issue
to the Representative and its designees for a nominal consideration (i)
warrants to purchase 200,000 shares of Common Stock at an exercise price of
$4.80 per share and (ii) warrants to purchase 200,000 shares of Common Stock
at an exercise price of $5.76 per share. The warrants to be issued to the
Representative and the shares of Common Stock underlying such warrants have
been registered under the Securities Act of 1933, as amended (the
"Securities Act)") by means of the Registration Statement of which this
Prospectus is a part. Subject to certain limitations upon exercise of the
Warrants, the Company has also agreed to pay the Representative a
solicitation fee equal to 10% of the exercise price of the Warrants. The
Representative has a three year right of first refusal with respect to
future public or private offerings for cash by the Company or any parent or
subsidiaries of the Company. In addition, the Company has agreed to
indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company
estimated at $300,000, excluding the non-accountable expense allowance
described in Note (1) above, and assumes no exercise of the Underwriters'
over-allotment option. Includes $.50 per Warrant which will be placed in
escrow and, under certain circumstances, will not be released to the
Company. See "Use of Proceeds" and "Description of Securities--Warrants."
(3) If the Representative waives the requirement that the Common Stock and the
Warrants must be purchased together, the Price to Public, Underwriting
Discounts and proceeds to the Company per share of Common Stock will be
$4.00, $.40 and $3.60, respectively and the Price to Public, Underwriting
Discounts and proceeds to the Company per Warrant will be $.50, 0 and $.50,
respectively.
(4) The Company and the Selling Shareholders have granted to the Underwriters a
30-day option to purchase up to 300,000 additional Units consisting of
300,000 additional shares of Common Stock (29,615 of which will be offered
by the Company and 270,385 of which will be offered by the Selling
Shareholders) and 300,000 additional Warrants offered by the Company at the
respective prices less the Underwriting Discounts solely to cover
over-allotments, if any (the "Over-Allotment Option"). The Company will not
receive any proceeds from the sale of securities by the Selling
Shareholders. If the Over-Allotment Option is exercised in full, the total
Price to Public, Underwriting Discounts, and Proceeds to Company will be
$10,350,000, $931,500 and $8,434,299, respectively. See "Security Ownership
of Certain Beneficial Owners and Management," "Selling Shareholders" and
"Underwriting."
THE SECURITIES OFFERED BY THIS PROSPECTUS ARE SUBJECT TO PRIOR SALE. THE
UNDERWRITERS RESERVE THE RIGHT TO WITHDRAW, CANCEL OR MODIFY SUCH OFFER
(WHICH MAY BE DONE ONLY BY FILING AN AMENDMENT TO THE REGISTRATION STATEMENT)
AND TO REJECT ORDERS IN WHOLE OR IN PART FOR THE PURCHASE OF ANY OF THE
COMPANY'S SECURITIES AND TO CANCEL ANY SALE EVEN AFTER THE PURCHASE PRICE HAS
BEEN PAID IF SUCH SALE, IN THE OPINION OF THE UNDERWRITERS, WOULD VIOLATE
FEDERAL OR STATE SECURITIES LAWS OR A RULE OR POLICY OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. ("NASD").
IN CONNECTION WITH THE OFFERING, THE REPRESENTATIVE MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE UNITS AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS. ALL INFORMATION RELATING TO SHARES OF
COMMON STOCK AND PER SHARE AMOUNTS IN THIS PROSPECTUS HAVE BEEN ADJUSTED FOR A
1-FOR-4 REVERSE STOCK SPLIT EFFECTED IN MARCH 1994 AND A 1-FOR-2 REVERSE STOCK
SPLIT EFFECTED IN JULY 1996.
THE COMPANY
Ocurest Laboratories, Inc. (the "Company") is a marketing company
organized to develop and commercialize new health and personal care products
for the consumer market. The Company's first products consist of two
Ocurest/registered trademark/ eye care products utilizing a patented delivery
system for dispensing ophthalmic drug solutions into the eye (the "Ocurest
Delivery System").
The Company acquired the exclusive worldwide licensing rights to the
Ocurest Delivery System from a then affiliate of the Company in 1991. After
three years of product development, the Company began limited marketing in
late 1994 of two over-the-counter ("OTC") eye drop products packaged in the
delivery system. The products consist of Ocurest Redness Reliever Lubricant
and Ocurest Tears Formula Lubricant (collectively, "Ocurest Eye Drops").
Ocurest Eye Drops utilize ophthalmic drug formulations owned by Bausch & Lomb
Pharmaceutical, Inc. ("Bausch & Lomb") and are manufactured under a supply
agreement with Bausch & Lomb at its pharmaceutical facility in Tampa,
Florida. The Company owns the molds used to produce parts for the Ocurest
Delivery System and the manufacturing equipment which Bausch & Lomb operates
to produce all Ocurest eye care products.
The management of the Company believes that almost all of the worldwide
sales of ophthalmic drug solutions are sold in generic eyedropper dispensers
which can be difficult and messy to use. The Ocurest Delivery System was
designed to rest on the bridge of the nose, thereby stabilizing the dropper
tip directly above the eye so that drops can be applied directly into the
eye, accurately and with no spillage.
The OTC eye care products manufactured for the Company by Bausch & Lomb
contain active ingredients as to which Bausch & Lomb has advised the Company
are recognized as safe and effective by the United States Food & Drug
Administration (the "FDA"). Ocurest Redness Reliever Lubricant contains the
same active ingredients as Visine Moisturizing, a redness reliever lubricant
brand, and Ocurest Tears Formula Lubricant contains the same active
ingredient as Tears Naturale, an artificial tears brand.
Certain aspects of the Ocurest Delivery System are covered by a U.S.
utility patent issued in March 1990 and the shape of the Ocurest Delivery
System is covered by a U.S. design trademark registration issued in July 1995
and a design patent issued in September 1991, all of which have been licensed
to the Company. The Company is also the licensee of patents issued or pending
in a number of other countries.
Ocurest Eye Drops were introduced in Florida with television and magazine
advertising starting in September 1994. In mid-1995, the marketing of Ocurest
Eye Drops was expanded to ten additional southern states with television
advertising starting in July 1995 in the Southeast and September 1995 in the
Southwest.
The Company believes the initial consumer response to Ocurest Eye Drops
has been encouraging and the Company has planned a national marketing program
for its product line with television and magazine advertising scheduled to begin
in national media during October 1996. As of the date of this Prospectus, retail
chains such as Wal-Mart, Target, Kmart, Walgreens, Revco, Rite Aid, Eckerd, CVS,
3
<PAGE>
Osco, Sav-on, Kroger, Winn-Dixie, Albertson's, A&P, Publix, Grand Union,
Pathmark, Stop & Shop, Giant Food and Fred Meyer have ordered Ocurest Eye Drops
for retail distribution. The Company intends to utilize a substantial portion of
the net proceeds of the Offering for advertising and promotion expenses in
support of the national marketing of Ocurest Eye Drops.
The Company was organized under the laws of the State of Florida on April
29, 1991. The Company's office is located at 4400 PGA Boulevard, Palm Beach
Gardens, FL 33410 and its telephone number is (561)-627-8121.
THE OFFERING
Securities offered .............. 2,000,000 Units. Each Unit consists of one
share of Common Stock and one Warrant. Each
Warrant entitles the holder thereof to
purchase one share of Common Stock. The Common
Stock and the Warrants must be purchased
together as Units unless this requirement is
waived by the Representative at the request of
a person who does not desire to purchase
Warrants. In such event the Common Stock will
be sold at $4.00 per share and the Warrants
will be sold at $.50 per Warrant. The Common
Stock and the Warrants comprising the Units
will not be separately tradeable or
transferable for a period of six months
commencing on the date of this Prospectus or
earlier at the discretion of the
Representative. See "Description of
Securities" and "Underwriting."(1)
Offering Price .................. $4.50 per Unit. If the Representative waives
the requirement that the Common Stock and the
Warrants must be purchased together, the
Common Stock will be sold at $4.00 per share
and the Warrants will be sold at $.50 per
Warrant.
Common Stock to be outstanding 3,922,674 shares (1,922,674 shares are
after the Offering ............outstanding as of the date of this Prospectus)
(2)
Warrants--Number to be outstand-
ing after the offering ....... 2,000,000 Warrants (no Warrants are
outstanding as of the date of this
Prospectus)(3)
Exercise price ................ $4.80 per share of Common Stock, with a credit
of $.50 per Warrant surrendered upon exercise,
subject to adjustment in certain
circumstances. See "Description of
Securities."
Expiration Date ............... , 1999
4
<PAGE>
Redemption .................... Commencing on the date the Warrants are
separately tradeable and transferable, the
Warrants are redeemable by the Company at
$.55 per Warrant at any time until the end of
the second year after the date of this
Prospectus and thereafter at $.75 at any time
until the end of the third year after the date
of this Prospectus and prior to their
expiration, on 30 days' prior written notice
to the holders of Warrants, provided that the
daily trading price per share of Common Stock
(as defined beginning on page 38), has been
at least $6.72 for a period of at least 20
consecutive trading days ending within 10
days prior to the date of the notice of
redemption. See "Description of Securities--
Warrants."
Use of Proceeds ................. The Company intends to apply the net proceeds
of the Offering to pay for inventory
acquisition and production equipment, to pay
for expenses relating to national advertising
and promotion of the Company's products,
to repay certain indebtedness and accrued
interest and for general corporate purposes,
including working capital. See "Use of
Proceeds."
Risk Factors .................... The securities offered hereby involve a high
degree of risk and immediate substantial
dilution and should not be purchased by
investors who cannot afford the loss of their
entire investment. See "Risk Factors."
Proposed NASDAQ Small-Cap Symbol. Units: OCULU(4)(5)
- -------------------------
(1) Does not include up to 29,615 additional shares of Common Stock and
300,000 additional Warrants that may be sold by the Company pursuant to
the Over-Allotment option. See "Underwriting."
(2) Does not include a maximum of (a) 1,207,585 shares issuable upon exercise
of outstanding warrants and options, (b) 2,000,000 shares issuable upon
exercise of the Warrants, (c) 400,000 shares issuable upon exercise of
the warrants to be issued to the Representative, (d) 29,615 shares issuable
upon exercise of the Over-Allotment Option and (e) 300,000 shares issuable
upon exercise of the Warrants included in the Over-Allotment Option. See
"Management," "Certain Relationships and Transactions" and "Underwriting."
(3) Represents the Warrants and does not include any other options or
warrants referred to in Notes (1) and (2) above.
(4) The Common Stock and the Warrants will not be separately tradeable or
transferable for a period of six months commencing on the date of this
Prospectus or earlier at the discretion of the Representative. Until such
time, it is unlikely that any trading market will develop for such
securities. See "Risk Factors."
(5) Subject to the Company then meeting the NASDAQ maintenance requirements, the
Company intends to delist the Units from NASDAQ and to list the Common
Stock and the Warrants on NASDAQ on or about the date the Common Stock and
the Warrants are separately tradeable and transferable.
5
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH
DEGREE OF RISK, INCLUDING, BUT NOT NECESSARILY LIMITED TO THE RISK FACTORS
DESCRIBED BELOW. PROSPECTIVE PURCHASERS SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS, AMONG OTHERS, AS WELL AS THE REMAINDER OF THIS
PROSPECTUS, PRIOR TO MAKING AN INVESTMENT IN THE COMPANY.
RISKS RELATING TO THE BUSINESS THE COMPANY
LIMITED OPERATING HISTORY; LACK OF PROFITABILITY; WORKING CAPITAL DEFICIENCY
The Company has recently commenced operations, has a limited operating
history, has never earned a profit and at June 30, 1996, its current
liabilities exceeded its current assets by approximately $2 million. During
the six months ended June 30, 1996, the Company incurred a net loss of
approximately $1 million. Although the Company believes that its estimates of
the capital and resources required for its continued operations are
reasonable, until the Company has a more meaningful operating history, it
will not be possible to determine the accuracy of such estimates. In
formulating its business plan, the Company has relied on its in-market sales
experience since September 1994, results of independent market studies and
the judgment of Management. There can be no assurance that the Company's past
operating history nor the results of the market studies will accurately
reflect the demand for the Company's eye care products or that the Company
will ever be profitable. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business" and "Management."
NEED FOR FINANCING TO CONTINUE AS A GOING CONCERN; REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
Since the Company's inception, the Company's operations have been primarily
funded through the private placement of equity securities of the Company. The
Company's ability to continue as a going concern is dependent upon, among other
things, the Company's receipt of the net proceeds of the Offering. On June 30,
1996, the Company had an accumulated deficit and a negative net worth of
approximately $6 million and $2.3 million, respectively. In addition, as of the
date hereof the Company is in default on the repayment of approximately $650,000
of loans, including interest thereon. Although the Company's financial
statements were prepared on a going concern basis, in the Report of Independent
Certified Public Accountants dated March 29, 1996, such accountants expressed
substantial doubt about the Company's ability to continue as a going concern.
Furthermore, although the Company believes that the receipt of the net proceeds
of the Offering will satisfy its capital requirements for a period of at least
one year, there can be no assurance that the Company will not require additional
capital or be able to continue as a going concern. The Company has not obtained
any commitments with respect to any such additional capital and there can be no
assurance that any additional capital will become available to the Company on
terms not unfavorable to the Company, if at all. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Experts" and Report of Independent Certified Public Accountants.
CERTAIN RISKS RELATED TO THE OPHTHALMIC DRUG BUSINESS
In addition to being subject to all the risks associated with the creation
of a new business, the Company is subject to certain factors affecting the
OTC ophthalmic drug business generally such as intense competition, necessity
to purchase specialized equipment and varying consumer preferences. There can
be no assurance that the Company will ever be able to operate profitably. See
Note L of Notes to Financial Statements.
REVERSION OF PATENT AND TRADEMARK RIGHTS
The patent and trademark rights of the Company were granted to the Company
by Acorn Laboratories, Inc. ("Acorn"), a then affiliate of the Company. Under
certain circumstances, including a
6
<PAGE>
failure by the Company to make requisite payments to Acorn, the patent and
trademark rights will revert to Acorn. In any such event, the Company will no
longer be able to use the Ocurest Delivery System or market any products under
the name "Ocurest" and, in such event, investors can expect to lose their
entire investment in the Company. See "Business--Patents and Trademarks" and
"Certain Relationships and Transactions."
DEPENDENCE ON A LIMITED NUMBER OF SIGNIFICANT CUSTOMERS
In 1995, three customers accounted for approximately 43%, 13% and 11% of
the Company's net sales, respectively. During the six months ended June 30,
1996, four customers accounted for approximately 13%, 11%, 10% and 9% of the
Company's net sales, respectively. The loss of any of such customers would
have a material adverse effect upon the Company. In the event that the
Company is not successful in marketing its OTC products, investors can expect
to lose their entire investment in the Company.
DEPENDENCE ON CONTRACT MANUFACTURER
Ocurest/registered trademark/ eye care products are formulated, filled and
packaged under contract by Bausch & Lomb Pharmaceutical, Inc. ("Bausch &
Lomb") pursuant to a contract in which Bausch & Lomb agreed to manufacture
the Company's OTC ophthalmic drug solutions in accordance with the Company's
manufacturing specifications. The contract runs until 1999, although it may
be terminated by either party on one year's notice. The contract provides for
minimum annual purchases by the Company. Although, as of the date of this
Prospectus, the Company is in compliance with the purchase requirements,
there can be no assurance that the Company will continue to be in compliance.
If the Company fails to so comply with such requirements and such failure is
not cured during the following six months, Bausch & Lomb may terminate the
contract as of the immediately succeeding March 31. The Company believes that
if Bausch & Lomb were to terminate or not agree to renew the contract, other
contract manufacturers are available to manufacture the Company's eye care
products on substantially similar terms, although there can be no assurance
of the foregoing. In any such event, however, the Company could incur a
significant delay in the production of its products. see "Business--Contract
Manufacturer."
DEPENDENCE ON SINGLE PRODUCT CATEGORY
The Company's future profitability initially depends primarily on the
successful marketing of ophthalmic drug solutions in the Ocurest Delivery
System as an alternative to currently available OTC ophthalmic drug solutions
sold in conventional eye drop dispensers. Should the Company's future
marketing of eye care products be unsuccessful for any reason, investors can
expect to lose their entire investment in the Company. Although the Company
plans to diversify its business through the introduction of new products in
selected health and personal care markets, there can be no assurance that the
Company will be able to discover, develop or successfully commercialize any
such products.
UNCERTAINTY OF CONSUMER ACCEPTANCE FOR OCUREST EYE CARE PRODUCTS
Unless Ocurest OTC eye care products marketed in the Ocurest Delivery
System gain significant consumer acceptance in the national market, the
Company will not be successful and investors can expect to lose their entire
investment in the Company. Although the Company has gained limited in-market
sales experience since September 1994, the Company has encountered and will
continue to encounter strong brand name and price competition in introducing
its products. The Company will be required to incur substantial advertising
and promotion expenses to introduce Ocurest eye care products to consumers,
and there can be no assurance that such products will gain sufficient
consumer acceptance to enable the Company to operate profitably.
DEPENDENCE UPON MANAGEMENT
The success of the Company will, to a significant extent, depend upon the
efforts and availability of its management. The loss of the services of the
Company's Chief Executive Officer may materially
7
<PAGE>
adversely affect the Company's business and prospects unless or until a
suitable successor is retained. The Company's employment agreement with its
Chief Executive Officer permits him to terminate his employment by the Company
for any reason. The Company has no key man life insurance. See "Management."
BROAD DISCRETION IN ALLOCATION OF A SUBSTANTIAL PORTION OF THE NET PROCEEDS
A significant portion of the net proceeds of the Offering will be
allocated for general corporate purposes at the discretion of the Company's
management. Investors, therefore, will be required to rely on the judgment of
the Company's management in the actual allocation of such portion. See "Use
of Proceeds" and "Management."
SUBSTANTIAL PORTION OF NET PROCEEDS TO BE UTILIZED FOR THE PAYMENT OF
EXISTING INDEBTEDNESS
The Company intends to utilize approximately $2,400,000 (approximately 36%)
of the net proceeds of the Offering for the payment of existing indebtedness.
Included in such indebtedness in an aggregate of $85,000 plus accrued interest
payable to Eric R. Schwarz, an employee and beneficial owner of approximately 6%
of the Company's outstanding Common Stock, and to the spouse of Edmund G.
Vimond, Jr., the Company's Chief Executive Officer, and $200,000 payable to
Robert M. Kassenbrock, a beneficial owner of approximately 9% of the Company's
outstanding Common Stock. See "Use of Proceeds," "Management," "Security
Ownership of Certain Beneficial Owners and Management," "Certain Relationships
and Transactions" and "Selling Shareholders."
REQUIRED ROYALTY PAYMENTS
Pursuant to an agreement with Acorn, the Company has agreed, contingent
upon the Company achieving certain net income levels, to pay royalties to
Acorn until $9,800,000 has been paid to Acorn. The royalty payments consist
of (a) 4% of (i) net sales of eye drops sold by the Company in the Ocurest
Delivery System; (ii) royalties received by the Company from sales by others
of Rx products; and (iii) the proceeds of licensing and similar arrangements
received by the Company from licensing or similar arrangements in connection
with Rx products and (b) 25% of (i) royalties received by the Company with
respect to sales by others of OTC eye drops in the Ocurest Delivery System
and (ii) the proceeds of any licensing or similar arrangements received by
the Company in connection with OTC products. Furthermore, in the event that
the Company disposes of all or substantially all of its business including
the licenses granted by Acorn, other than through one or more licenses, the
Company must pay to Acorn the greater of $1,250,000 or 10% of the gross
proceeds of such disposition, in which case the Company shall have no further
obligation to Acorn. Other than as set forth in the preceding sentence, the
Company's obligation to Acorn will terminate upon the payment to Acorn of an
aggregate of $10,000,000. Payments required to be made to Acorn could
adversely affect the cash flow of the Company. See "Business--Patents and
Trademarks" and "Certain Relationships and Transactions."
CONFLICT OF INTEREST
All of the equity interest of Acorn is owned by an individual who was the
Chairman of the Company's Board of Directors at the time the original
arrangements between the Company and Acorn were made, his spouse and
daughters. One such daughter, having a 16% equity interest in Acorn, is the
spouse of Larry M. Reid, one of the Company's executive officers. Acorn has
assigned 25% and 15% of its rights to receive royalties from the Company to
Edmund G. Vimond, Jr. and Mr. Reid, two of the Company's executive officers
and directors. Subject to the Company achieving certain minimum levels
of net income, any activity taken to increase the Company's sales at the
expense of profits would benefit those persons having an interest in Acorn.
See "Business--Patents and Trademarks" and "Certain Relationships and
Transactions."
8
<PAGE>
LIMITED PRODUCT LIABILITY INSURANCE
There can be no assurance that the Company will not be named as a
defendant in any litigation arising from the use of the Company's products.
Although the Company's contract supplier has agreed to include the Company as
a named insured on its product liability insurance policy and although the
Company has its own product liability insurance policy with a limit of $2
million, should such litigation ensue and the Company is held liable for
amounts in excess of such insurance coverage, the Company could be rendered
insolvent. In addition, there can be no assurance that product liability
insurance will continue to be available to the Company or that the premiums
therefor will not become prohibitively expensive.
FORMULATIONS ARE NOT UNIQUE
The formulations utilized for the Company's eye care products are not
patented or otherwise protected from duplication by others and are
substantially identical to formulations currently being sold by certain other
companies, many of which are sold under well established brand names.
Accordingly, the Company has no competitive advantage on the basis of the
quality or efficacy of its formulations and therefore, the Company's ability
to effectively compete with such other companies will be dependent upon,
among other things, whether or not consumers accept the characteristics of
the Ocurest Delivery System.
DEPENDENCE UPON TRADEMARKS AND PATENTS
The Company's success is, in part, dependent upon any protection that may
be afforded by the patents issued in connection with the Ocurest Delivery
System and the trademarks relating thereto and the name "Ocurest." There can
be no assurance that such patents or trademarks will actually provide the
Company with any protection from its competitors or that such patents or
trademarks do not infringe upon the rights of others. In the event of such
infringement, the Company would lose any protection otherwise afforded by
such patents or trademarks. In addition, in order for the Company to protect
its patents and trademarks, the Company must identify, contain and prosecute
infringement by others. Trademark and patent litigation entails substantial
legal and other costs. There can be no assurance that the Company will have
the necessary financial resources to defend or prosecute its rights in
connection with any such litigation.
NECESSITY OF COMPLIANCE WITH GOVERNMENTAL REGULATION
The manufacture, contents and labeling of the Company's products must
comply with rules, regulations and standards of the United States Food and
Drug Administration. Although the Company believes that its eye care products
are in compliance with all applicable current FDA requirements, a failure of
the Company or those that manufacture its products to comply with any of the
foregoing could have a material adverse effect on the Company.
INTENSE COMPETITION
Competition in the OTC ophthalmic drug industry is intense. The Company
competes with large, established and well financed companies, including major
corporations which are actively engaged in the manufacture and sale of
products designed to perform the same function as those of the Company. The
brand names of many of such competitors' ophthalmic drug products are well
recognized and established in the marketplace. All of such companies possess
greater financial and human resources than does the Company. Although the
Company is not aware of any technological advances or developments by others
with respect to OTC eye drops or eye drop dispensers, in the event that any
such advances or developments occur, if the Company is not then able to develop
or otherwise acquire technology to produce competitive products, the Company
would be materially adversely affected. See "Business."
9
<PAGE>
GENERAL RISK FACTORS
ABSENCE OF TRADING MARKET
There is not now nor has there ever been any public market for the Units, the
Common Stock or the Warrants. There can be no assurance that any such market
will exist in the future. Should such a market develop, there can be no
assurance that it will remain active or otherwise be sustained. The Common Stock
and the Warrants comprising the Units will not be separately tradeable or
transferable for a period of six months commencing on the date of this
Prospectus or earlier at the discretion of the Representative. In the event that
the Representative waives the requirement that the Common Stock and the Warrants
must be purchased together, it is unlikely that any trading market will develop
for the Common Stock or the Warrants prior to the end of the six month period,
if at all. Accordingly, any such purchasers of the Common Stock or the Warrants
may not be able to liquidate those securities during such six month period.
ARBITRARY DETERMINATION OF OFFERING PRICE
Because there has never been a public market for the Units, Common Stock or
Warrants, the public offering prices of the Units, Common Stock and the Warrants
and the exercise price of the Warrants have been arbitrarily determined by
negotiation between the Representative and the Company. Such prices bear no
relationship to book value, projected earnings, results of operations, net
asset value or any other objective criteria of value. Purchasers of the Units,
Common Stock and Warrants may therefore be exposed to the extraordinary risk of
a decline in the market price of the securities offered hereby subsequent to the
completion of the Offering should a market develop therefor. See "Underwriting."
NO PRESENT INTENT TO PAY DIVIDENDS
The Company has never declared or paid and does not anticipate declaring
or paying any dividends to its shareholders in the foreseeable future.
Accordingly, any investor who anticipates the need for current dividends from
an investment in the Company should not purchase any of the securities being
offered hereby. See "Description of Securities."
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price of the Common Stock included in the Units
of $4.00 per share substantially exceeds its book value. Purchasers of the
Common Stock will experience an immediate dilution in the net tangible book
value per share after the offering of $2.57 (approximately 64% of such initial
public offering price). See "Dilution."
VOTING CONTROL BY PRESENT SHAREHOLDERS BEFORE AND AFTER OFFERING AND CONTROL
BY MANAGEMENT
Following the completion of the Offering, the present shareholders of the
Company will continue to own approximately 49% of the Company's outstanding
Common Stock and, therefore, will effectively be in a position to elect all of
the Company's directors and control the policies and operation of the Company.
Accordingly, it can be anticipated that the Company's present directors will
continue to be elected and thus continue to control the Company for the
foreseeable future. Such directors who are also officers of the Company
constitute 50% of the members of the Board of Directors. See "Management" and
"Security Ownership of Certain Beneficial Owners."
ADDITIONAL SECURITIES AVAILABLE FOR ISSUANCE
The Company's Articles of Incorporation, as amended, authorize the issuance
of 25 million shares of Common Stock and five million shares of Preferred Stock
(the "Preferred Stock"). The Common Stock and the Preferred Stock can be issued
by, and the terms of the Preferred Stock, including dividend rights, voting
rights, liquidation preference and conversion rights can generally be
determined by, the Company's Board of Directors without shareholder approval.
Any issuance of the Preferred
10
<PAGE>
Stock could adversely affect the rights of the holders of Common Stock by, among
other things, establishing preferential dividends, liquidation rights or voting
powers. Accordingly, shareholders, including those purchasing the securities
offered hereby, will be dependent upon the judgment of management in connection
with the future issuance and sale of shares of the Company's Common Stock and
Preferred Stock, in the event that buyers can be found therefor. Any future
issuances of Common Stock or Preferred Stock would further dilute the percentage
ownership of the Company held by the public shareholders. Furthermore, the
issuance of Preferred Stock could be used to discourage or prevent efforts to
acquire control of the Company through acquisition of shares of Common Stock.
See "Management," "Description of Securities" and Notes to Financial Statements.
MARKET OVERHANG FROM OPTIONS AND WARRANTS
As of the date of this Prospectus, the Company had outstanding options and
warrants for the purchase of up to 1,207,585 shares of Common Stock at prices
ranging from $.01 to $5.00 per share. The options and warrants expire at various
times until June 2000. In addition, the warrants to be issued to the
Representative will permit the holders thereof to purchase a maximum of 400,000
shares of Common Stock. The holders of such warrants have certain registration
rights under the Securities Act of 1933 (the "Securities Act"). For the life of
the outstanding options and warrants and the warrants to be issued to the
Representative, the holders thereof will have the opportunity to profit from a
rise in the market price of the Common Stock. The existence of such securities
may adversely affect the terms on which the Company can obtain additional
financing, and the holders hereof can be expected to exercise the securities at
a time when the Company would, in all likelihood, be able to obtain additional
capital by an offering of its Common Stock on terms more favorable to the
Company than those provided by such warrants. See "Underwriting" and
"Description of Securities."
RESTRICTIONS ON EXERCISE OF THE WARRANTS.
During the period the Warrants are exercisable, holders of the Warrants will
not be permitted to exercise such Warrants unless at the time of the exercise
the registration statement under the Securities Act of which this Prospectus is
a part or a new registration statement is both effective and current. Although
the Company has undertaken to maintain a current and effective registration
statement during the life of the Warrants, there can be no assurance that it
either can or will do so. In addition, a holder of the Warrants residing in a
state in which the underlying Common Stock is neither registered nor exempt from
registration, will not be permitted to exercise that holder's Warrants. The
Company does not intend to advise holders of the Warrants of their inability to
exercise the Warrants other than in response to a specific written inquiry to
the Company. The value of the Warrants may be greatly reduced if a current
registration statement covering the shares of Common Stock underlying the
Warrants is not effective and current or if such Common Stock is not registered
or exempt from registration in the states in which the holders of the Warrants
reside. See "Description of Securities Warrants."
WARRANTS SUBJECT TO REDEMPTION
Commencing on the date the Warrants are separately tradeable and
transferable, the Warrants are subject to redemption by the Company at $.55 per
Warrant at any time until the end of the second year after the date of this
Prospectus and thereafter at $.75 per Warrant at any time until the end of the
third year after the date of this Prospectus and prior to their expiration, on
30 days' prior written notice to the holders of the Warrants, provided that the
daily trading price per share (as defined beginning on page 38) has been at
least $6.72 for a at least 20 consecutive trading days ending within 10 days
prior to the date of the notice of redemption. Redemption of the Warrants could
force the holders to exercise the Warrants and pay the exercise price at a time
when it may be disadvantageous for the holders to do so, to sell the Warrants at
the then current market price when they might otherwise wish to hold the
Warrants, or to accept the redemption price, which is likely to be substantially
less than the market value of the Warrants at the time of redemption. See
"Description of Securities--Warrants."
11
<PAGE>
SHARES ELIGIBLE FOR PUBLIC SALE
All of the shares of Common Stock outstanding as of the date hereof are
"restricted securities," as that term is defined in Rule 144 promulgated under
the Securities Act. Without regard to the volume limitations described below,
320,666 of such shares are currently eligible for resale under Rule 144 and
577,447 of such shares will be eligible for resale under Rule 144 commencing
ninety days subsequent to the date of this Prospectus. The remaining shares will
become so eligible at various times between October 1996 and June 1998. In
general, under Rule 144 as currently in effect, subject to the satisfaction of
certain other conditions specified in such Rule, sales of "restricted
securities" may be made if a minimum of two years has elapsed between the later
of the date of the acquisition of such securities from the Company or from an
affiliate of the Company and any resale thereof in reliance on Rule 144 for the
account of either the initial acquiror or any subsequent holder. If sales can be
made under Rule 144, a seller, including persons whose securities are required
to be aggregated, is entitled to sell, within any three-month period, a number
of shares that does not exceed the greater of 1% of the total number of
outstanding shares of the same class or, if the shares are then quoted on
NASDAQ, the average weekly trading volume during the four calendar weeks
preceding the filing of a notice with the Securities and Exchange Commission
(the "Commission"). Where a minimum of three years has elapsed between the later
of the date of the acquisition of restricted securities from the Company or from
an affiliate of the Company and any resale thereof in reliance on Rule 144 for
the account of either the initial acquiror or any subsequent holder, a person
who has not been an affiliate of the Company for at least the three months
immediately preceding the sale is entitled to sell such securities under Rule
144 without regard to any of the limitations described above. No prediction can
be made as to the effect, if any, that sales of shares of Common Stock or the
availability of such shares for sale will have on the market prices, if any,
prevailing from time to time. Nevertheless, the possibility that substantial
amounts of Common Stock may be sold in the public market may adversely affect
prevailing market prices, if any, for the Common Stock and Warrants and could
impair the Company's ability to raise capital through the sale of its equity
securities. Certain of the Company's shareholders owning an aggregate of 731,926
shares of Common Stock have agreed not to sell any of such shares without the
consent of the Representative during periods ranging from one to two years
commencing on the date of this Prospectus. In addition, the Company has granted
certain future registration rights under the Securities Act to the holders of
an aggregate of 133,920 shares of Common Stock and to the holders of warrants
for the purchase of 325,000 shares of Common Stock. See "Selling Shareholders,"
"Certain Relationships and Transactions," "Underwriting" and "Shares Eligible
for Future Sale."
NASDAQ MAINTENANCE REQUIREMENTS AND EFFECTS OF POSSIBLE DELISTING; PENNY
STOCK RULES.
Although the Company's Units have been approved for initial listing on NASDAQ
upon notice of issuance of such securities, the Company must continue to meet
certain maintenance requirements in order for such securities to continue to be
listed on NASDAQ. Further, the Company must meet such maintenance requirements
for the Company to be able to list the Company's Common Stock and Warrants on
NASDAQ at such time as they are separately tradeable and transferable. If the
Company's securities are delisted from NASDAQ, such delisting could restrict
investors' interest in the Company's securities and could materially and
adversely affect any trading market and prices for such securities. In addition,
if the Company's securities are delisted from NASDAQ, and if the Company's net
tangible assets do not exceed $2 million, and if the Company's Common Stock is
trading for less than $5.00 per share, then the Company's Common Stock and
Warrants would each be considered a "penny stock" under federal securities law.
Additional regulatory requirements apply to trading by broker-dealers of penny
stocks which could result in the loss of effective trading markets, if any, for
the Company's Common Stock and Warrants.
RESTRICTIONS ON ISSUANCE OF ADDITIONAL SECURITIES
Although the Company's Articles of Incorporation, as amended, authorize the
issuance of additional equity securities, other than with respect to securities
to be sold in connection with the Offering, substantially all of such authorized
securities may not be issued by the Company for a period
12
<PAGE>
of three years subsequent to the date of this Prospectus without the consent of
the Representative. That restriction may preclude the Company from issuing
additional shares of Common Stock or Preferred Stock or securities convertible
or exercisable into Common Stock or Preferred Stock at times when the Company
may believe that it would be advantageous to do so. See "Underwriting."
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") and the
Company intends that such forward-looking statements be subject to the safe
harbors for such statements under such sections. The Company's
forward-looking statements include the plans and objectives of management for
future operations, including plans and objectives relating to the Company's
planned national marketing campaign and future economic performance of the
Company. The forward-looking statements and associated risks set forth in
this Prospectus include or relate to: (i) the ability of the Company to
obtain a meaningful degree of consumer acceptance for its products and
proposed products, (ii) the ability of the Company to market its products and
proposed products on a national basis at competitive prices, (iii) the
ability of the Company to develop brand-name recognition for its products and
proposed products, (iv) the ability of the Company to develop and maintain an
effective sales network, (v) success of the Company in forecasting demand for
its products and proposed products, (vi) the ability of the Company to
maintain pricing and thereby maintain adequate profit margins, (vii) the
ability of the Company to achieve adequate intellectual property protection
for the Company's products and proposed products and (viii) the ability of
the Company to obtain and retain sufficient capital for its future
operations.
The forward-looking statements herein are based on current expectations
that involve a number of risks and uncertainties. Such forward-looking
statements are based on assumptions that the Company will market and provide
products on a timely basis, that there will be no material adverse
competitive or technological change in conditions in the Company's business,
that demand for the Company's products will significantly increase, that the
Company's Chief Executive Officer will remain employed as such by the
Company, that the Company's forecasts accurately anticipate market demand,
and that there will be no material adverse change in the Company's operations
or business or in governmental regulations affecting the Company or its
suppliers. The foregoing assumptions are based on judgments with respect to,
among other things, future economic, competitive and market conditions, and
future business decisions, all of which are difficult or impossible to
predict accurately and many of which are beyond the Company's control.
Accordingly, although the Company believes that the assumptions underlying
the forward-looking statements are reasonable, any such assumption could
prove to be inaccurate and therefore there can be no assurance that the
results contemplated in forward-looking statements will be realized. In
addition, as disclosed elsewhere in the "Risk Factors" section of this
Prospectus, there are a number of other risks inherent in the Company's
business and operations which could cause the Company's operating results to
vary markedly and adversely from prior results or the results contemplated by
the forward-looking statements. Growth in absolute and relative amounts of
cost of goods sold and selling, general and administrative expenses or the
occurrence of extraordinary events could cause actual results to vary
materially from the results contemplated by the forward-looking statements.
Management decisions, including budgeting, are subjective in many respects
and periodic revisions must be made to reflect actual conditions and business
developments, the impact of which may cause the Company to alter its
marketing, capital investment and other expenditures, which may also
materially adversely affect the Company's results of operations. In light of
significant uncertainties inherent in the forward-looking information
included in this Prospectus, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
Company's objectives or plans will be achieved. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."
13
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock included in
the Units offered hereby are estimated to be approximately $6,656,000
(approximately $6,743,000 if the Over-Allotment Option is exercised in full).
The Company intends to use the net proceeds as follows:
<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE
USE APPROXIMATE AMOUNT OF NET PROCEEDS
--- ------------------ ----------------------
<S> <C> <C>
Purchase of inventory and production equipment; ......... $1,500,000 23%
National advertising and promotion activities ........... $2,500,000 37%
Repayment of indebtedness and accrued interest .......... $2,400,000 36%
General corporate purposes, including working capital,
payment of accounts payable and possible future acquisi-
tion or licensing of products or technologies that
complement the Company's business ...................... $ 256,000 4%
</TABLE>
The net proceeds do not include any amounts to be realized from the sale of
the Warrants included in the Units because such amounts will be held in escrow.
See "Description of Securities--Warrants."
The Company intends to utilize any amounts realized through the exercise of
the Over-Allotment Option for general corporate purposes, including working
capital, payment of accounts payable and possible future acquisition or
licensing of products or technologies that complement the Company's business.
The Company currently has no specific agreements or understandings with respect
to any acquisitions or licensing agreements.
The indebtedness which the Company intends to repay from the net proceeds was
incurred at various times between October 1994 and September 1996, bears
interest at rates ranging from approximately 10% to 15% per annum and has
maturity dates from November 30, 1995 to the time the Company receives the net
proceeds of the Offering. Included in such indebtedness is an aggregate of
$85,000 plus accrued interest payable to Eric R. Schwarz, an employee and
beneficial owner of approximately 6% of the Company's outstanding Common Stock,
and to the spouse of Edmund G. Vimond, Jr., the Company's Chief Executive
Officer and $200,000 plus accrued interest payable to Robert M. Kassenbrock, a
beneficial owner of approximately 9% of the Company's outstanding Common Stock.
The proceeds of the indebtedness were utilized by the Company for general
corporate purposes, including working capital. On the date of this Prospectus,
the Company is in default in the repayment of approximately $650,000 of loans,
including interest thereon. See "Security Ownership of Certain Beneficial Owners
and Management," "Certain Relationships and Transactions" and "Selling
Shareholders." The Company believes that the receipt of such net proceeds will
satisfy its capital requirements for a period of at least one year.
Pending utilization of the net proceeds of the Offering, the Company will
invest such net proceeds in short-term government securities in a
non-discretionary account of the Company with the Representative.
The allocation of the net proceeds of the Offering as set forth above
represents the Company's current estimates based on its proposed plan of
operations and certain assumptions with regard to the Company's proposed plan
of operations as well as certain assumptions regarding industry and general
economic conditions. In the event that the Company's plans change, its
assumptions change or prove to be inaccurate, or the proceeds of the Offering
prove to be insufficient, the Company may find it necessary or advisable to
reallocate proceeds within the above-described categories or to use proceeds
for other purposes or to seek additional financing or curtail or cease its
activities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock nor does the Company anticipate that any such dividends will be paid in
the foreseeable future. The Company intends to apply any earnings it may
realize to the expansion of its business.
14
<PAGE>
DILUTION
The Company had a deficiency in net tangible book value of $1,139,109 or
$.59 per share of the Company's Common Stock on June 30, 1996. Net tangible
book value per share is determined by dividing the tangible net worth of the
Company (tangible assets less total liabilities) by the total number of
outstanding shares of Common Stock. After giving effect to the sale of the
Units offered hereby and the receipt of the estimated net proceeds to the
Company from the sale of the Common Stock included in the Units, and assuming no
exercise of the Over-Allotment Option, the Warrants, the warrants to be issued
to the Representative or outstanding options and warrants, the pro forma net
tangible book value of the Company at June 30, 1996 would have been $1.43 per
share, representing an immediate increase in the net tangible book value of
$2.02 per share to existing shareholders and an immediate dilution to new
investors of $2.57 per share. The following table illustrates the dilution per
share of Common Stock to new investors purchasing Units in the Offering.
<TABLE>
<CAPTION>
<S> <C> <C>
Initial public offering price per share of Common Stock ...... $4.00
Net tangible book value per share of Common Stock at June 30,
1996 ...................................................... $(.59)
Increase per share of Common Stock attributable to new
investors ................................................. $2.02
---------
Pro forma net tangible book value per share of Common Stock
after the Offering ......................................... $1.43
--------
Dilution per share to new investors .......................... $2.57
========
</TABLE>
Assuming the Over-Allotment Option is exercised in full and an additional
29,615 shares of Common Stock are sold by the Company, after deduction of the
underwriting discounts and expense allowance and the estimated expenses of the
Offering payable by the Company, the pro forma net tangible book value per share
of Common Stock at June 30, 1996 would have been $1.44, the immediate increase
in the pro forma net tangible book value per share of shares of Common Stock
owned by the existing shareholders would be $2.03 and the immediate dilution per
share to new investors would be $2.56.
The following table sets forth on a pro forma basis as of June 30, 1996 the
differences between existing stockholders and new investors with respect to the
number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price paid per share assuming
no exercise of the Over-Allotment Option.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------ -------------------------
AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ---------- ------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders 1,922,674 49.0% $ 5,084,224 38.9% $2.64
New Investors ........ 2,000,000 51.0% 8,000,000 61.1% $4.00
------------ ---------- ------------- ----------
Total: ............... 3,922,674 100.0% 13,084,224 100.0%
============ ========== ============= ==========
</TABLE>
15
<PAGE>
CAPITALIZATION
The following table sets forth the Company's capitalization as of June 30,
1996 and as of June 30, 1996 as adjusted to reflect the sale by the Company of
2,000,000 Units and the application of the net proceeds from the sale of the
2,000,000 shares of Common Stock included therein. See "Use of Proceeds."
<TABLE>
<CAPTION>
AS
ACTUAL(1) ADJUSTED(2)(3)
-------------- ---------------
<S> <C> <C>
Current Liabilities .............................................. $ 3,265,616 $ 1,765,616
Stockholders' Equity
Preferred Stock, $.001 par value, 5,000,000 shares authorized,
no shares issued and outstanding (actual or adjusted) ......... -- --
Common Stock, $.008 par value, 25,000,000 shares authorized;
1,922,674 issued and outstanding (actual) and 3,922,674 shares
issued and outstanding (as adjusted) .......................... 15,381 31,381
Paid-in capital .................................................. 5,068,843 11,708,843
Accumulated deficit .............................................. (6,008,941) (6,008,941)
Total stockholders' equity (deficit) ............................. (924,717) 5,731,283
</TABLE>
- -------------------------
(1) Par value and number of shares have been adjusted for a 1 for 2 reverse
stock split that occurred in July 1996.
(2) Adjusted to include the 2,000,000 shares of Common Stock offered hereby by
the Company and application of the net proceeds therefrom. See "Use of
Proceeds."
(3) Adjusted for current liabilities to be paid from the net proceeds of the
Offering. See "Use of Proceeds."
16
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data of the Company for the periods set forth below
have been derived from the Company's financial statements included elsewhere
in this Prospectus. The selected financial data should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results
of Operations and the Financial Statements and the related Notes thereto
included elsewhere in this Prospectus. The data for the six months ended June
30, 1995 and 1996 and as of June 30, 1996, is unaudited. In the opinion of
management, all adjustments (consisting of only normal recurring adjustments)
necessary for the fair presentation of financial position, results of
operations and cash flows for the unaudited periods have been made.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 SIX MONTHS ENDED JUNE 30
-------------------------------- ------------------------------
1994 1995 1995 1996
--------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales .................................. $ 96,830 $ 687,122 $ 200,384 $ 734,281
Cost of goods sold ......................... 139,733 545,175 160,206 443,579
Selling & marketing expense ................ 676,079 1,784,102 462,835 639,052
General & Administrative expense ........... 948,458 964,426 466,548 484,648
Royalty expense ............................ 3,875 27,885 8,015 29,380
Other income (expense) ..................... (18,005) (102,326) (32,552) (148,082)
--------------- --------------- ------------- ---------------
Net Loss ................................... $(1,689,320) $(2,736,792) $(929,778) $(1,010,450)
=============== =============== ============= ===============
Net loss per share ......................... $ (1.16) $ (1.55) $ (.54) $ (.50)
=============== =============== ============= ===============
Supplemental pro forma net loss(1) ........ $(2,670,192) $ (977,150)
=============== ===============
Supplemental pro forma net loss per
share(1) ................................... $ (1.40) $ (.37)
=============== ===============
</TABLE>
- -----------------------------------------
(1) The supplemental pro forma net loss and net loss per share reflect the
issuance of shares necessary to repay certain indebtedness and the
related reduction in interest expense and the net loss. See Note A of Notes
to the Financial Statements.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
-------------- --------------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA
Total assets ................. $ 1,245,314 $ 1,562,271 $ 2,340,899
Total liabilities ............ 1,064,007 3,306,311 3,265,616
Common stock & Paid-in
Capital ...................... 2,443,006 3,254,451 5,084,224
Accumulated deficit .......... (2,261,699) (4,998,491) (6,008,941)
Stockholders' equity
(deficit) .................... $ (181,307) $(1,744,040) $ (924,717)
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless otherwise indicated, all dollar amounts included in this section of
the Prospectus have been rounded to the nearest thousand.
OVERVIEW
The Company was organized in 1991 to commercialize new consumer products
in the health and personal care industry. For the period from inception
though December 31, 1993, the Company was in a development stage and
accumulated a deficit of $572,000, attributable to developing manufacturing
and marketing plans and paying the cost of professional services. The Company
sells ophthalmic drug solutions in an ophthalmic delivery system in the
non-prescription eye drop market. The Company believes that a similar
delivery system has not been and is not now being marketed by any other entity.
The products sold with the delivery system are the Company's sterile eye drops
in a line of two OTC formulations. The following table sets forth, for the
periods indicated, a review of certain items included in the Company's statement
of operations. Amounts are in thousands (000's).
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SIX MONTHS ENDED
------------------------ ----------------------
12/31/94 12/31/95 6/30/95 6/30/96
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales ................ $ 97 $ 687 $ 200 $ 734
Costs & Expenses
Cost of Goods Sold ..... 140 545 160 444
Selling & Marketing .... 676 1,784 462 639
General & Administrative 948 964 467 484
Other Expenses .......... 22 130 41 177
Net Loss ................. $(1,689) $(2,736) $(930) $(1,010)
</TABLE>
In late 1994, the Company began limited marketing of two OTC eye drop
products in the Ocurest Delivery System. In late 1995, the Company expanded
its marketing efforts to ten southern states. In early 1996, the Company
began the process of expanding its brand nationally. For the years ended
December 31, 1994 and 1995, the Company had net losses of $1,689,000 and
$2,737,000, respectively, on net sales of $96,830 in 1994 and $687,122 in
1995. Net sales for the six months ended June 30, 1996 were approximately
$734,000 compared with $200,000 for the six months ended June 30, 1995 and,
during such periods, the respective net losses were approximately $1,015,000
and $930,000. While the Company continues its national expansion of its
product line, the Company anticipates that its operations will result in
continuing losses for a minimum of six months following the completion of the
Offering. There can be no assurance that the Company will ever be profitable.
COST OF GOODS SOLD
Cost of goods sold was 144% of net sales in 1994 and 79% of net sales in
1995. The increase of $405,000 in cost of goods sold in 1995 is primarily
attributable to twelve months' of sales in 1995 as compared to six months' of
sales in 1994. For the six months ended June 30, 1996, cost of goods sold was
60% of net sales as compared with 79% of net sales for the six months ended
June 30, 1995. The decrease was primarily attributable to lower per unit
production costs because of an increase in sales of $534,000 during the
latter period. The Company anticipates that product costs and expenses will
continue to decline as a percentage of net sales if the Company gains larger
national distribution.
SELLING AND MARKETING EXPENSES
The Company believes that consumer demand for its products can be
generated through advertising and sales promotion. As a result, the Company
intends to expend substantial amounts of funds in advertising and sales
promotion in 1996 and future years. Selling and marketing expenses in 1994
and 1995 reflect start-up costs associated with the introduction of the
Company's products in Florida, the Company's lead market. Spot TV and
magazine advertising are primarily attributable for
18
<PAGE>
the year to year increase of $1,108,000. The Company also continued to incur
marketing and advertising research costs in 1995 as it monitored the Florida
market. Distribution costs increased in 1995 as sales expanded nationally
from Florida. For the six months ended June 30, 1996 selling and marketing
expenses of $639,000 represented 87% of net sales as compared with $462,000
and 231%, respectively, for the six months ended June 30, 1995. The
percentage decrease was primarily attributable to a substantial reduction in
advertising expenditures per sales dollar due to unavailability of funds.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses include professional services and
administrative expenses associated with legal, accounting and consulting fees
and other expenses incurred in raising capital to finance operations. Such
expenses also include support services for three full time employees and the
related compensation and benefits cost.
General and administrative expenses for 1995 were $964,000 as compared to
$948,000 in 1994 and for the six months ended June 30, 1996, general and
administrative expenses were $485,000 as compared to $467,000 for the same
period in 1995. The Company believes general and administrative expenses will
be substantially higher for the balance of 1996 and all of 1997 as the
Company hires additional personnel necessary to provide the infrastructure to
support the Company's planned continued national distribution of the
Company's product line.
DEPRECIATION
The increase in depreciation reflects the Company's increased investment
in molds, plates, dies and packaging and filling equipment.
INTEREST EXPENSE
Interest expense was nominal through December 1994 as the Company relied
heavily on equity investments to fund operations. Interest expense increased
for 1995 and the first six months of 1996 because the Company increased
its indebtedness as discussed below under "Liquidity and Capital Resources."
Interest expense for the six months ended June 30, 1996 was $148,000.
Management estimates the interest expense for 1996 will be substantially
higher due to increased indebtedness and higher rates of interest.
The Company obtained various loans in 1995 and 1996 and in August 1995 the
Company entered into a factoring and financing agreement to sell its accounts
receivable and its finished goods inventory. The Company intends to terminate
the factoring arrangements shortly after its receipt of the net proceeds of the
Offering. Certain indebtedness, including accrued interest thereon, will be
repaid from the net proceeds of the Offering. See "Use of Proceeds."
RESEARCH AND PRODUCT DEVELOPMENT
At such time as the Company deems necessary, the Company intends to make
expenditures for product research and development, including testing and, if
necessary, technical modification to the Ocurest Delivery System. As new
formulas become available to the Company, the Company intends to conduct
appropriate testing.
LIQUIDITY AND CAPITAL RESOURCES
The Company's need for funds has increased from period to period as it has
incurred expenses for, among other things, test marketing, market and
advertising research, engineering and design of manufacturing systems,
applications for domestic and international patent protection and domestic
trademark protection. Since inception, the Company has funded these needs
primarily through private placements of its equity.
19
<PAGE>
On June 30, 1996, the Company was delinquent in the payment of certain of its
indebtedness including promissory notes issued by the Company in the aggregate
amount of $250,000. The Company intends to repay such promissory notes and
accrued interest thereon from the net proceeds of the Offering. See "Use of
Proceeds."
The Company's working capital and capital requirements will depend on
numerous factors, including growth, if any, of the Company's sales. The
Company currently has a factoring and financing agreement pursuant to which
the Company sells its accounts receivable and finished goods inventory,
subject to the right of the Company to repurchase such accounts receivable
and inventory, and pledges its machinery and equipment to secure a loan. In
addition to interest and fees, the financing agreement requires the Company
to pay the purchaser/lender a management fee of $5,000 per month. Such
agreement may be terminated by the Company or the purchaser/lender at any
time. The Company intends to terminate the arrangement shortly after the
Company receives the net proceeds of the Offering. The Company has recently
borrowed $200,000 from Robert M. Kassenbrock. See "Certain Relationships and
Transactions."
Finished goods inventory increased by $201,000 (56%) at June 30, 1996 as
compared to finished goods inventory at December 31, 1995. The increase was a
result of the Company's planned national marketing program for its product line
with television and magazine advertising which it had scheduled to begin in
national media in June 1996. The Company now intends to commence such program in
October 1996. It is the Company's policy to maintain levels of finished goods
inventory sufficient to meet sixty days' of anticipated sales. The Company
believes that such policy is consistent with industry practice. The Company's
products bear an expiration date of two years from the date of manufacture.
The Company has invested $1,001,000 in property and equipment through June
30, 1996. The equipment is specifically suited to the manufacture and
packaging of the Company products. Ownership of the machinery and equipment
allows the Company to directly affect production costs. The Company has
contractual obligations for the acquisition of additional machinery and
equipment amounting to $500,000 to be paid from the net proceeds of the
Offering. The Company believes that the financial resources available to it,
including the net proceeds from the Offering, will be sufficient to finance
its planned operations for at least one year.
The Company believes that the level of financial resources available to it is
an important factor in its ability to achieve the marketing and distribution
objectives for its products as well as in its ability to compete effectively.
Consequently, the Company may seek to raise additional capital through public or
private equity or debt financing in the future. The Company has made no
arrangements to obtain such additional capital and there can be no assurance
that any additional capital will be available to the Company on terms not
unfavorable to the Company, if at all.
The Company's net operating losses for income tax purposes are subject to
certain restrictions on their utilization. The Company has experienced in
1994, and will experience in 1996, changes in ownership under Internal
Revenue Service regulations that will limit the amount of net operating
losses that can be utilized in any given year. If the Company's future
pre-tax profits (if any) in any given year exceed such limitation, cash
payments for such income tax liabilities will have to be made. See Note I of
Notes to Financial Statements.
20
<PAGE>
BUSINESS
GENERAL
Ocurest Laboratories, Inc. (the "Company") is a marketing company organized
to develop and commercialize new health and personal care products for the
consumer market. The Company's products consist of two Ocurest/registered
trademark/ eye care products utilizing a patented delivery system for dispensing
ophthalmic drug solutions into the eye (the "Ocurest Delivery System").
The Company acquired the exclusive worldwide licensing rights to the
Ocurest Delivery System from Acorn, a then affiliate of the Company. After
three years of product development, the Company began limited marketing in
late 1994 of two over-the-counter ("OTC") eye drop products packaged in the
delivery system. See "Business--Patents and Trademarks" and "Certain
Relationships and Transactions."
The Company's initial product development related primarily to
improvements in the Ocurest Delivery System and the development of prototype
models, development of a protocol for testing the stability of product
formulations, and development of various production techniques and operating
standards.
The Company's products consist of Ocurest Redness Reliever Lubricant and
Ocurest Tears Formula Lubricant (collectively, "Ocurest Eye Drops"). Ocurest
Eye Drops utilize ophthalmic drug formulations owned by Bausch & Lomb and are
manufactured under a supply agreement with Bausch & Lomb at its
pharmaceutical facility in Tampa, Florida. The Company owns the molds used to
produce parts for the Ocurest Delivery System and the manufacturing equipment
which Bausch & Lomb operates to produce all Ocurest eye care products.
The management of the Company believes that almost all of the worldwide
sales of ophthalmic drug solutions are sold in generic eyedropper dispensers
which can be difficult and messy to use. The Ocurest Delivery System was
designed to rest on the bridge of the nose, thereby stabilizing the dropper
tip directly above the eye so that drops can be applied directly into the
eye, accurately and with no spillage.
The OTC eye care products manufactured for the Company by Bausch & Lomb
contain active ingredients as to which Bausch & Lomb has advised the Company are
recognized as safe and effective by the FDA. Ocurest Redness Reliever Lubricant
contains the same active ingredients as Visine Moisturizing, a redness reliever
lubricant brand, and Ocurest Tears Formula Lubricant contains the same active
ingredient as Tears Naturale, an artificial tears brand.
Certain aspects of the Ocurest Delivery System are covered by a U. S.
utility patent issued in March 1990 and the shape of the Ocurest Delivery
System is covered by a U.S. design trademark registration issued in July 1995
and a design patent issued in September 1991, all of which have been licensed
to the Company. The Company is also the licensee of patents issued or pending
in a number of other countries.
Ocurest Eye Drops were introduced in Florida with television and magazine
advertising starting in September 1994. In mid-1995, the marketing of Ocurest
Eye Drops was expanded to ten additional southern states with television
advertising starting in July 1995 in the Southeast and September 1995 in the
Southwest.
The Company believes the initial consumer response to Ocurest Eye Drops has
been encouraging and the Company has a planned national marketing program under
way for its product line with television and magazine advertising scheduled to
begin in national media during October 1996. As of the date of this Prospectus,
retail chains such as Wal-Mart, Target, Kmart, Walgreens, Revco, Rite Aid,
Eckerd, CVS, Osco, Sav-on, Kroger, Winn-Dixie, Albertson's, A&P, Publix, Grand
Union, Pathmark,
21
<PAGE>
Stop & Shop, Giant Food and Fred Meyer have ordered Ocurest Eye Drops for
retail distribution. The Company intends to utilize a substantial portion of the
net proceeds of the Offering for advertising and promotion expenses in support
of the national marketing of Ocurest Eye Drops.
In the future, the Company plans to extend marketing of the Ocurest
Delivery System into the prescription drug market. In 1995 the Company
granted Bausch & Lomb an option for an exclusive license to market
prescription ("Rx") ophthalmic drug products in the Ocurest Delivery System.
Bausch & Lomb did not exercise the option prior to its expiration and the
Company extended the option until December 31, 1996 for no additional
consideration. See "Business--Rx Marketing."
The Company has utilized a factor for the financing of its accounts
receivable and inventory. The Company intends to terminate the factoring
arrangements shortly after its receipt of the net proceeds of the Offering.
See Note G of Notes to Financial Statements.
OCUREST DELIVERY SYSTEM
The management of the Company believes that conventional eyedropper
dispensers for OTC and Rx ophthalmic drug solutions are cumbersome devices
that are not easy to use. Because it is often hard to keep an eyedropper
dispenser centered above the eye, it is often difficult to apply drops
directly into the eye and, consequently, the solution often misses the eye
and runs down the cheek of the user. In addition to being messy, drops that
miss the eye in this manner raise a potential drug compliance problem, since
consumers may under-medicate when the prescribed number of drops are not
applied (or over-medicate if too many drops are applied to compensate for
those that miss the eye).
The Ocurest Delivery System was designed to attempt to solve the in-use
problems the management of the Company believes are associated with existing
eyedropper dispensers. The Company believes that the Ocurest Delivery System
is an alternative to conventional eyedropper devices. The Ocurest Delivery
System is shaped like an egg which enables the user to rest it on the bridge
of the nose and angle it 45/degree/ inward toward the eye. In this position,
the dropper tip is stabilized and centered directly above the eye and should
make it easier for the user to apply drops with no messy spillage or waste.
In addition, the Company believes that accurate drug compliance is more
likely to be achieved with the Ocurest Delivery System because it has been
designed to permit metered application of one drop at a time directly into
the eye.
The Ocurest Delivery System is a molded three-piece plastic assembly which
is designed to contain and dispense a maximum of 0.5 fluid ounce of any
liquid ophthalmic drug solution. The three parts consist of a squeeze-bottom
container that holds the solution, a snap-on dropper tip shield that seals
the container to form a unitized dispenser and a single-thread screw-on cap
to protect the contents. All of the parts are made from resins that are
approved by the FDA for pharmaceutical packaging.
OCUREST OTC PRODUCTS
The Company markets two OTC formulations in the Ocurest Delivery System,
consisting of a redness reliever lubricant and an artificial tears lubricant.
The Company's current products consist of Ocurest Redness Reliever Lubricant
and Ocurest Tears Formula Lubricant, both of which use formulations that are
manufactured and owned by Bausch & Lomb. In the future, the Company intends
to expand its product line with the national introduction of two additional
OTC formulations, Ocurest Allergy Relief Formula and Ocurest Lens Rewetting
Agent, that it is planned will use formulations manufactured, but not
necessarily owned, by Bausch & Lomb. There can be no assurance that the
Company will expand its product line or that the Company's existing or
proposed products can be marketed profitably.
The Company's eye care products are packaged in tamper-resistant cartons that
prominently feature the Ocurest brand name and a picture of the product being
used on the front carton panel. The cartons also feature a riser card that
prominently displays a side-by-side comparison of a competitive dispenser next
to the Ocurest Delivery System, accompanied by the following message:
22
<PAGE>
"Nobody likes pointy things near their eyes. That's why you may find
pointy eyedroppers difficult to use. Ocurest's new egg-shaped dispenser puts
an end to hit-or-miss, pointy-tip eyedroppers. Just rest it comfortably
across the bridge of your nose. The Ocurest dispenser puts the drops where
you want them. In your eye...not down your cheek."
Each of the Company's eye care products is a sterile, buffered, isotonic
solution formulated to match the natural fluid in the eye. Each formula
contains ingredients generally recognized as safe and effective by the FDA as
published in the Final Monograph for Ophthalmic Drug Products, March 4, 1988.
Ocurest Redness Reliever Lubricant contains tetrahydrozoline Hcl, a
decongestant that relieves redness of the eye, and polyethylene glycol 400, a
demulcent that relieves and protects the eye from minor irritation. The active
ingredients in Ocurest Redness Reliever Lubricant are the same as those used in
the formulations of certain major eye drop manufacturers. Ocurest Tears Formula
Lubricant contains hydroxypropyl methylcellulose, an active ingredient that
moisturizes the eye to relieve dry-eye syndrome and relieve and protect the eye
from minor irritation. The active ingredient in Ocurest Tears Formula Lubricant
is the same as that used in the formulations of certain major eye drop
manufacturers. Although the Company believes that its products are as effective
for their intended purposes as those presently marketed by the Company's
competitors, the successful marketing of its products is dependent upon
widespread acceptance of the Ocurest Delivery System. There can be no assurance
of such acceptance or that any such potential competitor or others will not
develop products or dispensers that are superior to or are perceived to be
superior to or can be manufactured and sold a at lower cost than those of the
Company.
Ocurest Eye Drops were introduced in Florida with the start of advertising
in September 1994. This in-market test was supported by two 13-week flights
of television commercials in 10 TV markets, magazine advertisements in
selected consumer publications and distribution of coupons on three separate
occasions.
Based on market research conducted by the Company, certain adjustments
were made in the Ocurest marketing program, primarily in the areas of
television commercial production, advertising media selection and pricing.
These adjustments were incorporated in the marketing program used to launch
Ocurest Eye Drops in ten additional southern states in mid-1995 and that are
now incorporated in the marketing program being used to launch Ocurest eye
care products nationally.
MANUFACTURING PLAN
OCUREST DELIVERY SYSTEM--The Company utilizes Wheaton Plastic Products,
Inc. ("Wheaton"), a manufacturer of pharmaceutical packaging, to produce all
parts for the Ocurest Delivery System. The Company has agreed to purchase all
of its parts exclusively from Wheaton and Wheaton has agreed to fulfill the
Company's supply requirements at agreed upon prices for each component. Such
prices will be adjusted for price changes in raw materials and other actual
cost increases. The agreement with Wheaton terminates on December 31, 1998
and is subject to the Company's commitment to pay for certain molds and mold
upgrades. The Company believes that if the need arises, the Company can
obtain parts for the Ocurest Delivery System in quantities necessary to
satisfy the Company's needs on terms and conditions not unfavorable to the
Company from other sources.
CONTRACT MANUFACTURING--Parts for the Ocurest Delivery System are assembled
at the time Ocurest eye care products are formulated, filled and packaged under
contract by Bausch & Lomb at its pharmaceutical manufacturing facility in Tampa,
Florida. The Company has purchased, at a cost of approximately $526,000,
specially designed equipment consisting of a dispenser parts unscrambler,
80-per-minute sterile filling and capping machine and a dual-head pressure
sensitive labeler. In 1994, the equipment was installed and validated on behalf
of the Company at Bausch & Lomb's manufacturing facility in Tampa where it is
maintained and operated exclusively in the manufacture of eye care
23
<PAGE>
products in the Ocurest Delivery System. The Company is identified on its
product labels as the distributor of the products. Bausch & Lomb is not
identified.
The Company plans to utilize approximately $670,000 of the net proceeds of
the Offering to install a fully-automated packaging line at the Bausch & Lomb
manufacturing facility and to make final payment on certain multi-cavity
molds. The packaging line will consist of an automatic neck bander, 100 per
minute cartoner, tamper-evident tab sealer, automatic collator and shrink
wrapper and automatic case sealer. The Company anticipates that the packaging
line will be installed, validated and operational approximately six months
subsequent to its receipt of the net proceeds of the Offering, at which time
Bausch & Lomb will have the capacity to manufacture approximately 16 million
units a year of eye care products produced in the Ocurest Delivery System. In
1994, the Company entered into a Contract Supply Agreement with Bausch & Lomb
(the "Supply Agreement") pursuant to which Bausch & Lomb agreed to
manufacture the Company's OTC ophthalmic drug solutions in accordance with
the Company's manufacturing specifications. The Supply Agreement runs for a
period of five years, although either party may terminate the Supply
Agreement on one year's notice. The Company believes that if Bausch & Lomb
were to terminate the Supply Agreement or not agree to renew the Supply
Agreement, other contract manufacturers will be available to manufacture the
Company's eye care products on substantially similar terms, although there
can be no assurance of the foregoing. In any such event, however, the Company
could incur a significant delay in the production of its products. The Supply
Agreement provides for minimum annual purchases by the Company ranging from
500,000 to 4,000,000 units during the five year term at designated prices
which increase approximately 4% per annum in addition to any actual cost
increases incurred by Bausch & Lomb in excess of the annual percentage
increases. As of the date of this Prospectus, the Company is in compliance
with the purchase requirements. If the Company fails to so comply with such
requirements and such failure is not cured during the following six months,
Bausch & Lomb may terminate the Supply Agreement as of the immediately
succeeding March 31.
WAREHOUSING AND SHIPPING--The Company uses a bonded public warehouse in
Lakeland, Florida, to store its finished goods inventory, fill customer
orders and arrange for shipment by United Parcel Service or other carriers.
The Company believes that, should the need arise, other bonded public
warehouses will be readily available on terms not unfavorable to the Company.
NATIONAL MARKETING PLAN
OTC SELLING AND DISTRIBUTION--The Company began marketing its products to
most of its wholesalers and retailers on a national basis in early 1996 in
anticipation of the start of national advertising. The Company believes that
trade acceptance has been encouraging as indicated by the retailers who have
purchased Ocurest Eye Drops for chainwide distribution, including such chains
as Wal-Mart, Target, Kmart, Walgreens, Revco, Rite Aid, Eckerd, CVS, Osco,
Sav-on, Kroger, Winn-Dixie, Albertson's, A&P, Publix, Grand Union, Pathmark,
Stop & Shop, Giant Food, and Fred Meyer.
The Company sells its products through manufacturer representatives who
call on wholesalers and retail chain customers. These customers represent
drug stores, supermarkets and mass merchants. The balance of annual market
sales are transacted through small grocery stores, convenience stores,
wholesale clubs, military exchanges and optical centers.
The Company distributes its OTC eye care products at trade selling prices
that the Company believes are competitive with the leading brands in the
redness reliever and artificial tears segments of the OTC eye drop market.
The Company believes that its selling and distribution policies are also
competitive with those of other companies in the industry relating to credit
terms, shipping terms, returned and damaged goods and co-operative
promotional programs.
OTC ADVERTISING AND PROMOTION--It is planned that the Company's national
advertising will consist primarily of TV commercials that convey the Ocurest
message in 30, 15 and 10 second lengths. The Company plans to place its TV
advertising in programs that the Company believes
24
<PAGE>
reach heavy users of OTC eye drops, skewed toward men and women 50 and under
in the case of redness reliever users and women over 50 with respect to
artificial tears. It is planned that the Company's introductory TV campaign will
be reinforced by the use of magazine advertisements in selected publications
that the Company believes will reach heavy eye drop users effectively. The
Company also plans to promote its product line periodically via the use of
coupons distributed in magazine advertisements and free-standing Sunday
newspaper inserts.
RX MARKETING--In 1995, the Company granted Bausch & Lomb an option for an
exclusive license to market Rx ophthalmic drug products in the Ocurest
Delivery System. Bausch & Lomb paid the Company $10,000 for the option which
expired on December 31, 1995. The Company subsequently extended the option
until December 31, 1996 for no further consideration. Bausch & Lomb requested
the extension to allow sufficient time for Bausch & Lomb to evaluate the
potential for marketing selected ophthalmic pharmaceutical products utilizing
the Ocurest Delivery System. In the event Bausch & Lomb exercises its option
to license the Ocurest Delivery System for the domestic market, the parties
have agreed in principal to the structure of royalty payments that will be
made to the Company on Rx products marketed in the Ocurest Delivery System.
There can be no assurance that Bausch & Lomb or any other entity will seek to
utilize the Ocurest Delivery system for Rx preparations.
PRODUCT LIABILITY AND INSURANCE
Users of the Company's products could suffer, or claim to suffer, adverse
effects from the Company's products. The Company carries product liability
insurance of $2 million and, in addition, Bausch & Lomb has agreed to name
the Company as an insured on the product liability insurance policy of
Bausch & Lomb. Such insurance, however, will be subject to deductibles
payable by the Company, and it is possible that it may not apply to or be
adequate to cover all claims. There can be no assurance that any such
insurance acquired directly by the Company will not become prohibitively
expensive or otherwise be unavailable to the Company. Any recovery by a
claimant in excess of the product liability insurance limits could have a
material adverse affect on the Company.
PATENTS AND TRADEMARKS
In October 1991, pursuant to an agreement between the Company and Acorn,
as subsequently amended (the "Acorn Agreement"), Acorn granted to the Company
the exclusive worldwide license to make, use and sell eye drop solutions
contained in the Ocurest Delivery System and claimed in a United States
utility patent held by Acorn (the "Acorn Patent") and certain foreign patents
and patent applications. The Acorn Patent relates to a generally egg-shaped
eye drop dispenser with a nozzle on top of a squeezable hollow body with a
smooth, generally dome-shaped top surface substantially surrounding the
nozzle. The Company is responsible for the prosecution and protection of the
intellectual property licensed to it under the Acorn Agreement, including all
legal fees and other expenses that may be incurred in connection with any
litigation concerning patent or trademark infringement.
Certain aspects of the Ocurest Delivery System are covered in the United
States by utility patent 4,909,801 issued in March 1990 and design patent
D320,083 issued in September 1991 which will remain in force until 2007 and
2005, respectively. The shape of the Ocurest Delivery System represents a
trade dress which is also covered in the United States by a trademark
registration issued in July 1995 that is effective for ten years and is
renewable for successive ten year periods for as long as the mark is in use.
Patents corresponding to the United States utility patent have either
eventuated or are pending in a number of foreign countries.
Under the Acorn Agreement, Acorn also assigned to the Company its rights in
the United States and throughout the rest of the world for the trademark and
trade name "Ocurest." The "Ocurest" trademark was registered in the United
States in June 1988. The registration is effective for ten years and is
renewable for successive ten year periods for as long as the mark is in use. The
Company has no trademark registrations in foreign countries.
25
<PAGE>
Pursuant to the Acorn Agreement, the Company has paid $200,000 to Acorn to
acquire the worldwide licensing rights to the patents and trademarks and has
agreed to pay royalties with respect to ophthalmic solutions packaged in the
Ocurest Dispenser of (a) 4% of (i) net sales of eye drops sold by the Company
in the Ocurest Delivery System; (ii) royalties received by the Company from
sales by others of Rx products; and (iii) the proceeds of licensing and
similar arrangements received by the Company from licensing or similar
arrangements in connection with Rx products and (b) 25% of (i) royalties
received by the Company with respect to sales by others of OTC eye drops in
the Ocurest Delivery System and (ii) the proceeds of any licensing or similar
arrangements received by the Company in connection with OTC products.
Furthermore, in the event that the Company disposes of all or substantially
all of its business including the licenses granted pursuant to the Acorn
Agreement, other than through one or more licenses, the Company must pay to
Acorn the greater of $1,250,000 or 10% of the gross proceeds of such
disposition, in which case the Company shall have no further obligation to
Acorn. Other than as set forth in the preceding sentence, the Company's
obligation to Acorn will terminate upon the payment to Acorn of an aggregate
of $10,000,000
Acorn has agreed to permit the Company to defer accrued royalty payments
until such time, if any, as the Company realizes net income of at least
$1,000,000 during any four consecutive calendar quarters. The Company is also
permitted to defer 66.7% of accrued royalty payments and 33.3% of accrued
royalty payments until such time, if any, as the Company realizes net income
of at least $1,000,000 and less than $3,000,000 or at least $3,000,000 and
less than $5,000,000, respectively, during any four consecutive calendar
quarters. Notwithstanding the foregoing, the Company is required to pay Acorn
$4,000 per month as advances against accrued and deferred royalties (the
"Acorn Advances").
The Acorn Agreement further provides that the licenses granted under the
Acorn Agreement shall terminate and the Company shall have no further interest
therein upon the (a) filing by the Company of a voluntary petition of
bankruptcy; (b) filing of an involuntary petition of bankruptcy against the
Company provided that such petition is not discharged within 45 days of the
filing thereof; (c) appointment of a receiver or a trustee for all or
substantially all of the assets of the Company; (d) general assignment by the
Company of its assets for the benefit of its creditors; (e) payments due to
Acorn under the Acorn Agreement remaining unpaid subsequent to an applicable
grace period of 45 or 120 days, as the case may be or (f) default by the Company
or its successor or licensees in the performance of any other material
obligation under the Acorn Agreement, which obligation primarily relates to the
Company's requirement to protect the patents and trademarks, including bearing
of the cost thereof, and any such default remains uncured subsequent to a grace
period of 120 days. In the event that the licenses granted by Acorn are so
terminated, investors can expect to lose their entire investment in the Company.
In order for the Company to protect any of its patents and trademarks, the
Company must identify, contain and prosecute infringement by others. Such
efforts would entail substantial legal and other costs. There can be no
assurance that under such circumstances that the Company would have the
necessary financial resources to prosecute any such infringement.
Acorn has assigned 25% and 15% of its rights to receive royalties from the
Company to the Company's President and Senior Vice President, respectively.
See "Certain Relationships and Transactions."
GOVERNMENTAL REGULATION
OTC ophthalmic drugs are generally recognized as safe and effective, and not
misbranded, if they meet certain conditions set forth by the FDA as published in
the Final Monograph for Ophthalmic Drug Products, March 4, 1988 with regard to
active and inactive ingredients, dosage, permitted combinations of ingredients
and labeling, including statement of identity, indications, warnings and
directions for use. Ophthalmic drugs must be manufactured in accordance with the
FDA's Good Manufacturing Practice ("GMP") regulations. If all of the
requirements are met, the formulation may be marketed without obtaining any
specific FDA approval. The Company believes that compliance with such
requirements will not materially adversely affect the Company's OTC ophthalmic
drug business.
26
<PAGE>
No specific FDA approval is necessary for the Ocurest Delivery System if
the dispenser and its contents meet GMP requirements. The requirements
include regulations to the effect that the Ocurest Delivery System be tested
to show that it is not reactive, additive or absorptive, that stability and
sterility is suitable for the product, that appropriate testing procedures
are developed and followed and that the manufacturing establishment and the
ophthalmic drug products being manufactured are registered with the FDA. The
Company believes that Ocurest Eye Drops packaged in the Ocurest Delivery
System are in compliance with the foregoing.
DEPENDENCY UPON SIGNIFICANT CUSTOMERS
In 1995, three customers accounted for approximately 43%, 13% and 11% of
the Company's net sales, respectively. During the six months ended June 30,
1996, four customers accounted for approximately 13%, 11%, 10% and 9% of the
Company's net sales, respectively. The loss of any of such customers would
have a material adverse effect upon the Company. In the event that the
Company is not successful in marketing its OTC products, investors can expect
to lose their entire investment in the Company. There can be no assurance
that the Company will ever be able to operate profitably. See Note L of Notes
of Financial Statement.
COMPETITION
The Company competes with large and well financed manufacturers of
ophthalmic drugs, all of which have substantially greater resources than does
the Company. The Company's principal competitors are Allergan, Inc., Alcon
Laboratories, Inc., Bausch & Lomb, CibaVision, Inc., Ross Laboratories, Inc.
and Pfizer, Inc. Such companies accounted for approximately 89% of the volume
of OTC eye drop retail sales in the United States in 1995 according to
Information Resources, Inc. These competitors produce such brands as Visine,
Murine Plus and Clear Eyes in the redness reliever segment of the OTC market
and Tears Naturale, Hypotears, Refresh and Moisture Drops in the artificial
tears segment. Because the Company's eye drop formulations contain the same
or similar active ingredients as those used in certain currently available
nationally distributed eye drops, the Company expects to compete primarily on
the basis of the Ocurest Delivery System.
PROPERTY
The Company leases office space in Palm Beach Gardens, Florida. The Company
does not consider such office space material to its proposed business. The
Company believes that other suitable office space is readily available on terms
not unfavorable to the Company.
EMPLOYEES
The Company has four full-time employees, inclusive of its three executive
officers. Shortly after the receipt by the Company of the net proceeds of the
Offering, the Company plans to hire six to eight full-time accounting and
administrative employees.
27
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
executive officers and directors of the Company. Each director holds such
position until the next annual meeting of the Company's shareholders and
until his respective successor has been elected and qualifies. Any of the
Company's directors may be removed with or without cause at any time by the
vote of the holders of not less than a majority of the Company's then
outstanding Common Stock. Other than as otherwise provided in an employment
agreement, officers are elected annually by the Board of Directors. Any of
the Company's officers may be removed with or without cause at any time by
the Company's Board of Directors although, in such event, the Company may
incur certain liabilities under an applicable employment agreement.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------------------------------------------------------------------
<S> <C> <C>
Edmund G. Vimond, Jr. 61 Chairman of the Board of Directors, President,
Chief Executive Officer and Director
John F. Carlson ...... 57 Senior Vice President, Chief Financial Officer,
Treasurer and Director
Larry M. Reid ........ 51 Senior Vice President, Chief Administrative
Officer, Secretary and Director
Ralph H. Laffler .... 76 Director
Robert S. Marker .... 74 Director
Fred E. Ahlbin ....... 83 Director
</TABLE>
EDMUND G. VIMOND, JR., a co-founder of the Company, has been the President
and Chief Executive Officer of the Company since April 1991 and Chairman of
the Board of Directors since September 1994. From 1983 until 1994, Mr. Vimond
was the principal of Edmund Vimond Associates, a business development and
acquisition consulting firm. Mr. Vimond has a marketing and general
management background in the consumer products industry, including previous
positions as President of the Consumer Products Division at Warner-Lambert
Company; Group Vice President of the Domestic Operating Company at Johnson &
Johnson; Group Vice President for Worldwide Consumer Products of American
Cyanamid Company; and President and Chief Executive Officer of R. J. Reynolds
International Tobacco.
JOHN F. CARLSON has been a Senior Vice President and the Chief Financial
Officer, the Treasurer and a director of the Company since July 1, 1996. Mr.
Carlson has held management positions in the automotive accessories
industries as President and Chief Executive Officer of Allied Plastics, Inc.
("Allied") from November 1992 to January 1995 and from June 1995 until
joining the Company as General Manager of InterScept Products Corporation. In
April, 1995, Allied filed a petition seeking protection under Chapter 11 of
the Bankruptcy Act. From 1986 to March 1992, Mr. Carlson was the President
and Chief Executive Officer of JWT & Associates, a financial consultant. From
1964 through 1986, Mr. Carlson held senior financial positions with Polygram
Records, Inc., Viacom International, Inc., Worldwide Consumer Products Group
of American Cyanamid Co. and The Mennen Company. In 1989, Mr. Carlson filed a
petition for bankruptcy under Chapter 7 of the Bankruptcy Act. Mr. Carlson is
a member of the Board of Directors of Repro-Med Systems, Inc., a medical
specialties company, the securities of which are publicly traded.
LARRY M. REID, a co-founder of the Company, has been a Senior Vice
President of the Company since July 1, 1996 and the Company's Secretary and a
director of the Company since May 1991. From May 1991 to July 1996, Mr. Reid
was the Company's Executive Vice President, Treasurer and Chief Financial
Officer. Prior thereto, Mr. Reid was a financial consultant.
28
<PAGE>
FRED E. AHLBIN has been a director of the Company since January 1996 and
is the Chairman of the Company's Compensation Committee, Mr. Ahlbin is the
former co-owner and principal of two New England manufacturing companies,
John Ahlbin & Sons and Powerwinch Corporation. Mr. Ahlbin has been retired
since 1976. Mr. Ahlbin currently is Chairman of the Board of Trustees of the
Jupiter Medical Center Foundation and a Trustee of the Jupiter Medical
Center, positions he has held since 1990.
RALPH H. LAFFLER has been a director of the Company since July 1994 and is
Chairman of the Company's Audit Committee and since April 1979 has been the
Chief Executive Officer of Graphics Illustrated, Inc., a company founded and
owned by Mr. Laffler which is engaged in printing, graphic design, marketing
and digital communications. Mr. Laffler has spent his entire career in the
graphics industry.
ROBERT S. MARKER has been a director of the Company since April 1994 and
is a member of the Company's Compensation Committee. From 1970 to 1975, Mr.
Marker was the Chairman of the Board of Directors and Chief Executive Officer
of McCann-Erickson Worldwide, Inc., an advertising agency. Since 1983, Mr.
Marker has been an advertising management consultant.
Ralph H. Laffler is a member of the Audit Committee, Fred E. Ahlbin and
Robert S. Marker are members of the Compensation Committee and Robert Marker
is a member of the Nominating Committee of the Board of Directors of the
Company. There are no family relationships among any of the officers or
directors of the Company.
EXECUTIVE COMPENSATION
The following table (the "Summary Table") sets forth certain information
with respect to all compensation paid by the Company during the years
indicated to (i) the Company's chief executive officer and (ii) the Company's
four most highly compensated executive officers other than the chief
executive officer who served as such on December 31, 1995 and whose total
annual salary exceeded $100,000 (the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------------
SHARES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS GRANTED
- ---------------------------- ------- ----------- ------------------
<S> <C> <C> <C>
Edmund G. Vimond, Jr. 1995 $150,000 31,250
Chief Executive Officer 1994 100,000 -0-
1993 -0- 12,500
Larry M. Reid, 1995 $115,000 23,438
Executive Vice President and 1994 76,800 -0-
Chief Financial Officer 1993 29,000 6,250
</TABLE>
During 1993, 1994 and 1995, no other compensation not otherwise referred
to herein was paid or awarded by the Company to the Named Officers, the
aggregate amount of which compensation, with respect to any such person,
exceeded the lesser of $50,000 or 10% of the annual salary reported in the
Summary Compensation Table for such person.
Each of the Named Officers has accepted shares of common stock as payment
for a portion of the Company's cash indebtedness to him arising from unpaid
salary. The value of such shares has been included as salary in the Summary
Compensation table. See "Certain Relationships and Transactions." Neither of
the Named Officers received any bonus during the three years referred to in
the table.
29
<PAGE>
The following table sets forth certain information with respect to
individual grants of options to each of the Named Officers during the fiscal
year ended December 31, 1995:
<TABLE>
<CAPTION>
PERCENT
OF TOTAL
NUMBER OF OPTIONS
SHARES GRANTED TO
UNDERLYING EMPLOYEES EXPIRATION
NAME OPTIONS FISCAL YEAR EXERCISE PRICE DATE
- -------------------- ------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Edmund G.Vimond, Jr. 31,250 52% $4.80 October 5, 2005
Larry M. Reid ...... 23,438 39% $4.80 October 5, 2005
</TABLE>
The options referred to in the table will not become exercisable unless
the Company achieves net sales of not less than $20 million in any
consecutive twelve month period prior to January 1, 1999.
During the year ended December 31, 1995, none of the Named Officers
exercised any options issued by the Company. At that date, none of the
options issued by the Company to the Named Officers was in-the-money.
There are no standard or other arrangements pursuant to which any director
of the Company is or was compensated during the Company's last fiscal year
for services as a director, for committee participation or special
assignments.
Other than as set forth under "Management--Employment Agreements," the
Company does not have any compensatory plan or arrangement, including payments
to be received from the Company, with respect to a Named Officer, which plan or
arrangement results or will result from the resignation, retirement or any other
termination of such person's employment with the Company or from a change in
control of the Company or a change in such person's responsibilities following a
change in control and the amount involved, including all periodic payments or
installments, exceeds $100,000.
EMPLOYMENT AGREEMENTS
Messrs. Vimond and Reid have each entered into employment agreements with
the Company for a three-year period which commenced on January 1, 1994. Mr.
Carlson has entered into an employment agreement with the Company for an
eighteen-month period which commenced July 1, 1996. Each of such employment
agreements continues thereafter for successive one year terms except upon
notice to the contrary given by the Company or the respective executive
officer at least ninety days prior to the end of the then current term. Each
of Messrs. Vimond and Reid were initially entitled to receive a base salary
of $75,000 and $57,500 per annum, respectively. The foregoing salaries were
increased to $150,000 and $115,000, respectively, effective January 1, 1995.
Mr. Carlson receives a salary of $125,000 per annum.
The Company's respective employment agreements with its executive officers
permits each of them to terminate his employment by the Company for any
reason without incurring any liability to the Company. Such employment
agreements may also be terminated by the Company for any reason. If any such
employment agreement is terminated by the Company without cause, the
terminated executive officer is entitled to receive a lump sum payment equal
to the greater of one year's salary or the balance of the salary which would
otherwise have been paid to him during the remaining term of such employment
agreement. In the event of the death or permanent incapacity of an executive
officer during the term of his employment agreement, he or his estate, as the
case may be, is entitled to receive, in addition to his salary through the
date of determination of permanent incapacity or death, an additional six
months' salary. For purposes of such employment agreements, permanent
incapacity is deemed to occur at the conclusion of 90 days of continuous
incapacity or 120 days of intermittent incapacity in any twelve month period.
Each of the Company's executive officers is eligible to receive salary
increases as well as incentive compensation pursuant to the 1992 Stock Option
Plan or other incentive compensation plan which may
30
<PAGE>
be established by the Company. Any such eligibility must be determined by the
vote of Company's Board of Directors, including a majority of the directors
who are not executive officers.
1992 STOCK OPTION PLAN
In 1992, the Company adopted a Stock Option Plan (the "1992 Stock Option
Plan") in order to induce certain individuals to remain in the employ or
service of the Company; to attract new individuals to enter into such
employment and service; and to encourage such individuals to secure or
increase on reasonable terms their equity ownership in the Company. Options
granted under the 1992 Stock Option Plan may be "incentive stock options," as
that term is defined in the Internal Revenue Code of 1986, as amended or
"non-incentive stock options" as described below. An aggregate of 72,000
shares of the Company's Common Stock are available for issuance upon exercise
of options that have been granted under the 1992 Stock Option Plan. Such
options have exercise prices ranging from $4.00 to $4.80 per share and expire
from 2002 to 2006. To the extent that any such options expire or terminate
without having been exercised, they may be reissued under the 1992 Stock
Option Plan. The 1992 Stock Option Plan is administered by a committee
consisting of Messrs. Reid and Vimond, who are not eligible to participate in
the 1992 Stock Option Plan because of such duties. Incentive stock options
may be granted only to employees of the Company. Non-incentive stock options
may be granted only to (a) employees of the Company, (b) directors of the
Company who are not employees, certain independent contractors hired by the
Company, and (d) certain employees of a corporation which is acquired by the
Company. The exercise price of incentive stock options shall not be less than
the fair market value of a share of the Common Stock on the date of the
grant. The exercise price of non-incentive stock options shall not be less
than 85% of the fair market value of a share of the Common Stock on the date
of the grant. In the event that the fair market value of a share of the
Company's Common Stock declines below the exercise price of an option, the
committee may at any time reduce such exercise price with the prior approval
of the Company's Board of Directors.
31
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the date hereof
with respect to any person who is known to the Company to be the beneficial
owner of more than 5% of any class of its voting securities and as to each
class of the Company's equity securities beneficially owned by its directors
and executive officers as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES APPROXIMATE
NAME OF BENEFICIAL OWNER(1)(2) BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------------ ------------------ ----------------
<S> <C> <C>
Ralph H. Laffler ....................................... 450,846(3) 23%
Edmund G. Vimond, Jr. .................................. 183,271(4) 9%
Fred E. Ahlbin ......................................... 160,760(5) 8%
Larry M. Reid .......................................... 68,602(6) 4%
Robert S. Marker ....................................... 52,550(7) 3%
John F. Carlson ........................................ -0-(8) --
Executive Officers and Directors as a group (6 persons) 916,029(9) 44%
Maurice Porter ......................................... 242,398(10) 12%
Robert M. Kassenbrock .................................. 180,000(11) 9%
Eric R. Schwarz ........................................ 113,038(12) 6%
</TABLE>
- -----------------------
(1) Unless otherwise noted below, 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. For purposes
hereof, 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 or the conversion of convertible
securities. Each beneficial owner's percentage ownership is determined
by assuming that any such warrants, options or convertible securities
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) Each of the persons named in the above table may receive correspondence
addressed to him c/o Ocurest Laboratories, Inc., 4400 PGA Boulevard,
Palm Beach Gardens, FL 33410.
(3) Includes 218,173 shares held by Mr. Laffler's spouse, as to which shares
Mr. Laffler disclaims any beneficial ownership, and 4,500 shares which
may be purchased upon exercise of options.
(4) Includes 11,560 shares which may be purchased upon exercise of warrants
and 25,000 shares which may be purchased upon exercise of options and
25,000 shares which may be purchased upon exercise of warrants held by
Mr. Vimond's spouse in which shares Mr. Vimond disclaims any beneficial
ownership. Does not include 31,250 shares underlying options which may
not be exercised during the 60 day period subsequent to the date of this
Prospectus.
(5) Includes 41,528 shares which may be purchased upon exercise of warrants
and 4,500 shares which may be purchased by exercise of options.
(6) Includes 51,713 shares which are held jointly with Mr. Reid's spouse,
4,389 shares which may be purchased upon exercise of warrants and 12,500
shares which may be purchased upon exercise of options. Does not include
23,438 shares underlying options which may not be exercised during the 60
day period subsequent to the date of this Prospectus.
(7) Includes 20,625 shares which may be purchased upon exercise of warrants
and 4,500 shares which may be purchased upon exercise of options.
(8) Does not include 75,000 shares underlying an option which may not be
exercised during the 60 day period subsequent to the date of this
Prospectus.
(9) See Notes above.
(10) Includes 135,209 shares which may be purchased upon exercise of warrants
and 4,500 shares which may be purchased upon exercise of options. Includes
10,000 shares held jointly with two children.
(11) Includes 10,000 shares owned by Mr. Kassenbrock's spouse as to which
shares Mr. Kassenbrock disclaims any beneficial ownership. Does not
include 100,000 shares which may be purchased upon exercise of a warrant
which may not be exercised during the 60 day period subsequent to the
date of this Prospectus. See "Selling Shareholders" and "Certain
Relationships and Transactions."
(12) Includes 45,991 shares which may be purchased upon exercise of warrants
and 11,250 shares which may be purchased upon exercise of options. Does
not include 1,563 shares underlying options which may not be exercised
during the 60 day period subsequent to the date of this Prospectus.
32
<PAGE>
SELLING SHAREHOLDERS
If the Over-Allotment Option is exercised, the Selling Shareholders will
sell certain shares of their Common Stock in the Offering. The following
table sets forth certain information regarding the ownership of Common Stock
by each of the Selling Shareholders as of the date of this Prospectus and
after giving effect to the shares of Common Stock offered hereby, assuming
that the Over-Allotment Option is exercised in full. Substantially all offering
expenses, other than the underwriting discount and non accountable expense
allowance applicable to sales of shares of Common Stock by the Selling
Shareholders, will be borne by the Company. See "Management" and "Certain
Relationships and Transactions" for a description of certain relationships
between certain of the Selling Shareholders and the Company.
<TABLE>
<CAPTION>
SHARES TO BE OWNED
AFTER SALES IN
THE OFFERING (1)
---------------------------
NUMBER OF APPROXIMATE
SHARES OWNED PERCENTAGE OF
PRIOR TO SHARES TO BE SOLD OUTSTANDING
SELLING SHAREHOLDER OFFERING(1) IN THE OFFERING NUMBER COMMON STOCK(2)
- ----------------------------- --------------- ------------------ --------- ----------------
<S> <C> <C> <C> <C>
American Growth Fund I L.P. 50,000 30,000 20,000 *
Jose Azel ................... 10,000 7,072 2,928 *
William Boyd ................ 53,334 14,140 39,194 *
Scott Cunningham ............ 5,000 3,535 1,465 *
Robert & Nancy Cousins ...... 4,000 2,828 1,172 *
Cousins Trust ............... 4,000 2,828 1,172 *
Paul Engel .................. 2,000 1,414 586 *
William J. Hart ............. 10,000 7,070 2,930 *
Hideaway Partners ........... 40,000 28,281 11,719 *
Marcia G. Kassenbrock ....... 10,000 7,070 2,930 *
Robert M. Kassenbrock ....... 170,000 120,192 49,808 1%
Carl Teutch ................. 2,000 1,414 586 *
Thomas L. Schroeder Trust .. 3,000 2,121 879 *
William Roberts ............. 5,000 3,535 1,465 *
Ardis Schwarz ............... 98,243(3) 21,210 77,033(3) 2%(3)
Jeffrey Simon ............... 5,000 3,535 1,465 *
E.J. Sylvester Trust ........ 10,000 7,070 2,930 *
Duane Wilder ................ 10,000 7,070 2,930 *
</TABLE>
- -----------------------------------------------------------------------------
Less than 1%.
(1) For purposes hereof, a person is deemed to be the owner of securities
that can be acquired by such person within 60 days from the date hereof
upon the exercise of warrants or options or the conversion of convertible
securities. Each owner's percentage ownership is determined by assuming
that any such warrants, options or convertible securities 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) Computed without regard to a maximum of (a) 782,328 shares of Common
Stock issuable upon exercise of outstanding warrants and options, (b)
2,000,000 shares issuable upon exercise of the Warrants, (c) 400,000
shares issuable upon exercise of warrants to be issued to the
Representative, (d) 29,615 shares issuable upon exercise of the
Over-Allotment Option and (e) 300,000 shares issuable upon exercise of
the Warrants included in the Over-Allotment Option.
(3) Includes 5,303 shares issuable upon exercise of warrants.
On April 1, 1996 the Company borrowed $260,000 from American Growth Fund I
L.P. ("AGF"). The Company intends to repay such amount, plus accrued interest
thereon, from the net proceeds of the Offering. In connection with the
transaction with AGF, the Company issued warrants to AGF for the purchase of
25,000 shares of the Company's Common Stock at $.01 per share and warrants
for the purchase of 25,000 shares of the Company's Common Stock at $2.50 per
share. 30,000 shares underlying the warrants are being offered by AGF
pursuant to this Prospectus. The exercise prices of the warrants were
determined by negotiation between the Company and AGF. Between April 1, 1996
and August 1, 1996, AGF agreed to provide certain management consulting and
investment banking services to the
33
<PAGE>
Company. In addition, during such period, the Company had agreed to grant a
right of first refusal to AGF in connection with subsequent public offerings of
debt or equity. The offers and sales of the shares and warrants to AGF were not
registered under the Securities Act in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act for "transactions by
an issuer not involving any public offering." The principals of AGF are E.G.
Marchi and Donna Snyder. See "Use of Proceeds."
The shares being offered by the Selling Shareholders were purchased from
the Company from February to June 1996.
Other than as set forth above or, in the case of Mr. Kassenbrock under the
caption "Certain Relationships and Transactions," none of the Selling
Shareholders has had any position, office or other material relationship with
the Company during the past three years.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Eric R. Schwarz, an employee and beneficial owner of approximately 6% of
the Company's outstanding Common Stock, has entered into an employment
agreement with the Company for a three-year period which commenced on January
1, 1994 and continues thereafter for successive one year terms except upon
notice to the contrary given by either party. Mr. Schwarz initially received
a base annual salary of $33,000 which increased to $55,000 when the Company
began shipments of its products to Florida and to $66,000 seven months
subsequent to the commencement of shipments to a designated area of Florida.
In addition, Mr. Schwarz is eligible to receive incentive compensation
pursuant to the 1992 Stock Option Plan or other incentive compensation plan
which may be established by the Company as well as increases in salary.
In July 1994, Fred E. Ahlbin, Ralph H. Laffler, Eric R. Schwarz and
Maurice Porter, a former director of the Company and beneficial owner of
approximately 12% of the Company's outstanding Common Stock, purchased 15,625
shares, 75,000 shares, 31,250 shares and 20,834 shares of Common Stock and a
like number of warrants (the "$5.00 Warrants"), respectively. The purchase
price consisted of $4.80 for a combination of one such share and one $5.00
Warrant. Each of the $5.00 Warrants entitles its holder to purchase one share
of Common Stock at $5.00 per share on or before May 31, 1998. The original
exercise price of the $5.00 Warrants was $8.00 per share. Such exercise price
was subsequently lowered to $5.00.
In July 1994, Messrs. Laffler and Porter converted promissory notes
previously issued to them by the Company in the respective amounts of $25,000
and $150,000 into units consisting of one share of Common Stock and one $5.00
Warrant at a price of $4.80 per unit.
In November 1994, Eric R. Schwarz, Mr. Laffler, Berthold and Ardis Schwarz
and Mr. Ahlbin purchased 7,340 shares, 15,469 shares, 10,605 shares and 15,469
shares of Common Stock, respectively, upon the exercise of warrants previously
issued to them at an exercise price of $4.60 per share.
In December 1994, Robert S. Marker was issued 1,000 shares of Common Stock
for services rendered to the Company having an aggregate value of $4,500.
In January 1995, for no additional consideration, the Company issued $5.00
Warrants, to Mr. Laffler, Mr. Ahlbin, Eric R. Schwarz and Berthold and Ardis
Schwarz in the respective amounts of 22,735, 7,735, 3,421 and 5,303 $5.00
Warrants.
In January 1995, Mr. Laffler loaned $300,000 to the Company for which he
received a one year promissory note bearing interest at the rate of 12% per
annum and 15,000 $5.00 Warrants.
In April 1995, Mr. Ahlbin purchased 18,169 shares of Common Stock and a
like number of $5.00 Warrants for $73,584. During the same month, Mr. Laffler
converted a promissory note in the amount of
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$100,000 previously issued to him by the Company into 22,223 shares of Common
Stock and Mr. Marker received 4,000 shares of Common Stock for services
rendered to the Company valued at $18,000.
In May 1995, Mr. Laffler received 1,645 shares of Common Stock as payment
for interest of approximately $7,400 owed to him by the Company.
In June 1995, Mr. Laffler loaned the Company $75,000 for which he received
a one year promissory note bearing interest at the rate of 12% per annum and
warrants for the purchase of 25,000 shares of Common Stock at an exercise
price of $4.00 per share on or before June 30, 2000. During the same month
Mr. Marker received 1,800 shares of Common Stock for services rendered to the
Company valued at $9,000 and Eric R. Schwarz purchased 3,422 shares of Common
Stock for $15,741 upon the exercise of warrants previously issued to him.
In November 1995, Mr. Porter loaned the Company $50,000 for which he
received a ninety day promissory note bearing interest at the rate of 12% per
annum and warrants to purchase 25,000 shares of Common Stock on the same
terms as those issued to Mr. Laffler in June 1995.
During 1995, Edmund G. Vimond, Jr., Larry M. Reid and Eric R. Schwarz,
accepted 37,336 shares of Common Stock, 14,957 shares of Common Stock and
22,388 shares of Common Stock, respectively, at values ranging from $5.00 per
share in February 1995 to $2.32 per share in December 1995 as payment for a
portion of their respective salaries.
In January 1996, Mr. Laffler purchased 75,000 shares of Common Stock for
$130,000 upon exercise of warrants previously issued to him by the Company.
During the same month Messrs. Laffler, Porter and Eric R. Schwarz converted
the Company's indebtedness to them of approximately $525,000, $52,000 and
$19,500, respectively, into 226,334 shares, 22,480 shares and 8,417 shares of
Common Stock, respectively.
In January 1996, Mr. Ahlbin and Berthold and Ardis Schwarz purchased 40,000
and 20,000 shares of Common Stock, respectively, at $2.50 a share.
In February 1996, Robert M. Kassenbrock and his spouse purchased an
aggregate of 180,000 shares of Common Stock at $2.50 per share. 127,262 of such
shares have been registered under the Securities Act by means of the
registration statement of which this Prospectus is a part. See "Selling
Shareholders."
In March 1996, the spouse of Mr. Vimond loaned $50,000 to the Company for
which she received a ninety day promissory note bearing interest at the rate
of 12% per annum and 25,000 warrants. Each of the warrants entitles its
holder to purchase one share of Common Stock at an exercise price of $2.50 a
share on or before June 30, 2000 (the "$2.50 Warrants"). During the same
month Mr. Laffler and Eric R. Schwarz received 5,000 $2.50 Warrants and
22,500 $2.50 Warrants, respectively in connection with loans made by them to
the Company in the respective amounts of $10,000 and $45,000. In connection
with such loans Messrs. Laffler and Schwarz each received ninety day
promissory notes bearing interest at the rate of 12% per annum. During the
same month, Mr. Porter received 7,500 shares of Common Stock for services
rendered to the Company valued at $18,750.
The exercise prices of the warrants described above were determined by the
Company.
In March 1996, Mr. Reid accepted 3,256 shares of Common Stock as payment
for $8,140 of salary owed to him by the Company.
In May 1996 Messrs. Ahlbin and Laffler each purchased 10,000 shares of
Common Stock at $2.50 per share.
In September 1996, the Company borrowed $200,000 from Mr. Kassenbrock. The
Company intends to repay such amount, plus accrued interest thereon at the
annual rate of 12%, from the net proceeds of
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<PAGE>
the Offering. In connection with the transaction with Mr. Kassenbrock, the
Company issued a warrant to him for the purchase of 100,000 shares of the
Company's Common Stock at $2.40 per share (60% of the initial public offering
price). The Company has granted piggy back registration rights with respect to
such shares. The exercise price of the warrants was determined by negotiation
between the Company and Mr. Kassenbrock. See "Use of Proceeds," "Security
Ownership of Certain Beneficial Owners and Management" and "Selling
Shareholders."
The offers and sales of the securities referred to hereunder were not
registered under the Securities Act in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act for "transactions
by an issuer not involving any public offering."
From July 1992 until September 1996, the Company sold warrants (the "Private
Warrants") for the purchase of an aggregate of 1,098,152 shares of the Company's
Common Stock at prices ranging from $.01 to $5.00 per share (the "Warrant
Shares"). 131,068 of the Warrant Shares have been issued upon exercise of the
Private Warrants. 64,281 of such shares were issued to officers, directors and
more than 10% shareholders of the Company. The Company has suspended the
exercise of the Private Warrants until six months subsequent to the date of this
Prospectus. The offer or any subsequent sale of the Warrant Shares has not been
registered under the Securities Act in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act for "transactions by
an issuer not involving any public offering." Because the Warrant Shares were
being offered for sale to the holders of the Private Warrants shortly prior to
the time that the Registration Statement for the securities being offered hereby
was filed, an issue may arise as to whether the offer of the Warrant Shares
would be integrated with the offering of the securities being offered hereby,
and, therefore, required to be registered under the Securities Act. If it were
to be determined that the offer and sale of the Warrant Shares are to be so
integrated, the Company may incur a liability to the purchasers of the Warrant
Shares who could be given the right under the federal securities laws to rescind
their purchases. The Company believes that such purchases have been and will be
exempt from the registration provisions of the Securities Act pursuant to
Section 4(2) thereof. Accordingly, the Company does not believe that it will
incur any liability with respect to the registration provisions of the
Securities Act if any of the Warrant Sales are sold.
All of the equity interest of Acorn is owned by William J. Casey, his
spouse and daughters. Mr. Casey is a former director of the Company and
beneficially owns approximately 4% of the Company's outstanding Common Stock.
One such daughter, having a 16% equity interest in Acorn, is the spouse of
Larry M. Reid. Acorn has assigned 25% and 15% of its rights to receive
payments from the Company to Edmund G. Vimond, Jr. and Larry M. Reid,
respectively. Notwithstanding the foregoing, in the event that the Company
disposes of all or substantially all of its business including the licenses
granted pursuant to the Acorn Agreement, Messrs. Vimond and Reid will not be
entitled to receive any amounts from Acorn from the first $2,500,000 of
proceeds therefrom. Should, however, such proceeds exceed that amount,
Messrs. Vimond and Reid shall be entitled to receive from Acorn 25% and 15%,
respectively, of the proceeds above such amount and not in excess of
$8,133,333 and 62.5% and 37.5%, respectively, of such proceeds between such
latter amount and $9,800,000 less any payments made to them by Acorn from
royalties paid to Acorn by the Company, respectively. Because royalty
payments to Acorn are based on the Company's sales, subject to the Company
achieving the minimum levels of net income as described earlier, any activity
taken thereafter to increase the Company's sales at the expense of profits
would benefit those persons having an interest in Acorn, including Messrs.
Vimond and Reid. Both Messrs. Vimond and Reid, as officers and directors of
the Company, owe a fiduciary duty to the Company and have advised the Company
that they will act in the best interests of the Company, irrespective of
their personal interests in Acorn. See "Business--Patents and Trademarks."
The terms of the Acorn Agreement were determined through negotiation
between Messrs. Casey and Vimond. Mr. Casey has advised the Company that
Acorn's cost of the assets which are the subject of the Acorn Agreement was
in excess of $200,000. The Company does not know whether the terms of the
Acorn Agreement are as favorable to the Company as could have been obtained
from an
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unaffiliated third party in a similar transaction. Under the Acorn Agreement,
the Company has made payments to Acorn and is obligated to make additional
payments thereto, including royalties. See "Business--Patents and
Trademarks."
The Board of Directors of the Company has adopted a resolution to the
effect that all future transactions between the Company and its officers,
directors, or the beneficial owners of more than 5% of any class of the
Company's voting securities, or any affiliate of any of such person, must be
approved or ratified by a majority of the disinterested directors of the
Company, and the terms of such transaction must be no less favorable to the
Company than could have been realized by the Company in an arms-length
transaction with an unaffiliated person.
The Board of Directors of the Company has also adopted a resolution that
provides that the area in which the Company shall be interested for the
purpose of the doctrine of corporate opportunities shall be the business of
marketing eye care products for the consumer market. Pursuant to the
resolution, any business opportunity which falls within such area of interest
must be brought to the attention of the Company for acceptance or rejection
prior to any officer or director of the Company taking advantage of such
opportunity. Any business opportunity outside such area of interest may be
entered into by any officer of director of the Company without the officer or
director first offering the business opportunity to the Company.
Subsequent to the receipt of the net proceeds of the Offering, the Company
does not intend to borrow any funds from or make loans to its officers and
directors.
DESCRIPTION OF SECURITIES
THE UNITS
Each Unit consists of one share of Common Stock and one Warrant. The Common
Stock and Warrants must be purchased together unless that requirement is waived
by the Representative. The Common Stock and the Warrants will not be separately
tradeable or transferable for a period of six months from the date of this
Prospectus or earlier at the discretion of the Representative.
COMMON STOCK
The holders of the Common Stock are entitled to one vote per share on all
matters submitted to a vote of shareholders. Subject to preferential rights
that may be applicable to any Preferred Stock which may be issued, holders of
the Common Stock are entitled to receive dividends, if and when declared by
the Company's Board of Directors from funds legally available for that
purpose. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of the Company, holders of the Common Stock are entitled to share
ratably in the assets available of the Company, if any, remaining after the
payment of all liabilities of the Company and the liquidation preferences
applicable to any outstanding Preferred Stock. Holders of the Common Stock
have no cumulative voting rights, no preemptive rights and no conversion
rights and there are no redemption or sinking fund provisions with respect to
the Common Stock. The outstanding Common Stock is fully paid, validly issued
and non-assessable.
On July 30, 1996, the Company's 1,922,674 shares of outstanding Common
Stock were held by 118 holders of record.
PREFERRED STOCK
The Company's Board of Directors has the authority to issue the authorized
shares of Preferred Stock in one or more series and to fix the designations,
relative powers, preferences, rights, qualifications, limitations and
restrictions of all shares of each such series, including without limitation
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dividend rates, conversion rights, voting rights, redemption and sinking fund
provisions, liquidation preferences and the number of shares constituting
each such series, without any further vote or action by the stockholders. The
issuance of Preferred Stock could decrease the amount of earnings and assets
available for distribution to holders of Common Stock or adversely affect the
rights and powers, including voting rights, of the holders of Common Stock.
The issuance of Preferred Stock also could have the effect of delaying,
deterring or preventing a change in control of the Company without further
action by the shareholders.
THE WARRANTS
The Warrants will be issued in registered form under, governed by and subject
to the terms of a Warrant Agent Agreement (the "Warrant Agreement") between the
Company and the Warrant Agent. The following statements are qualified in their
entirety by reference to the Warrant Agreement and also the detailed provisions
of the form of Warrant attached to the Warrant Agreement. Copies of the Warrant
Agreement may be obtained from the Company or the Warrant Agent and have been
filed with the Securities and Exchange Commission as an exhibit to the
Registration Statement of which this Prospectus is a part. See "Additional
Information." Commencing on the date the Warrants are separately tradeable and
transferable, the Warrants may be presented to the Warrant Agent for transfer,
exchange or exercise at any time prior to their redemption or expiration date,
at which time the Warrants become wholly void and of no value. If a market for
the Warrants develops, the holder may sell the Warrants instead of exercising
them. There can be no assurance, however, that a market for the Warrants will
develop or continue.
Each Warrant entitles its holder to purchase, at any time commencing on the
date the Warrants are separately tradeable and transferable and until the third
anniversary of the date of this Prospectus, one share of Common Stock at a price
of $4.80 per share, with a $.50 credit for each Warrant surrendered on exercise,
subject to adjustment in certain events. The right to exercise the Warrants will
terminate at the close of business on the third anniversary of the date of this
Prospectus. The Warrants contain provisions that protect the Warrantholders
against dilution by adjustment of the exercise price in certain events
including, but not limited to, stock dividends, stock splits, reclassifications
or mergers. In the event of liquidation, dissolution or winding up of the
Company, holders of the Warrants, unless exercised, will not be entitled to
participate in the assets of the Company. Holders of the Warrants will have no
voting, preemptive, liquidation or other rights of a shareholder by virtue of
holding the Warrants, and no dividends will be declared on the Warrants. The
Company has authorized and reserved for issuance a sufficient number of shares
of Common Stock to accommodate the exercise of all Warrants to be issued in the
Offering. The shares of Common Stock, when issued upon the exercise of the
Warrants in accordance with the terms thereof, will be fully paid and
non-assessable.
Commencing on the date the Warrants are separately tradeable and
transferable, the holder of any Warrant may exercise such Warrant by
surrendering the certificate representing the Warrant to the Warrant Agent, with
the subscription form on the reverse side of such certificate properly completed
and executed, together with payment of the exercise price. Unless they have been
redeemed by the Company, the Warrants may be exercised at any time in whole or
in part at the applicable exercise price commencing on the date the Warrants are
separately tradeable and transferable and until expiration of the Warrants three
years from the date of this Prospectus. In lieu of fractional shares which would
otherwise be issuable upon the exercise of the Warrants, the Company will round
up to the nearest whole share.
Commencing on the date the warrants are separately tradeable and
transferable, the Warrants may be redeemed by the Company at a redemption price
of $0.55 per Warrant until the end of the second year after the date of this
Prospectus, and at $0.75 per Warrant until the end of the third year after the
date of this Prospectus and prior to their expiration, on 30 days' prior written
given at any time that the Common Stock has traded above $6.72 per share for a
at least 20 consecutive trading days ending within 10 days prior to the date of
the notice of redemption. For purposes of determining the daily trading price of
the Common Stock, if the Common Stock is listed on a national securities
exchange, is
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admitted to unlisted trading privileges on a national securities exchange, or is
listed for trading on a trading system of the NASD such as the NASDAQ Small-Cap
Market or the NASDAQ National Market System, then the last reported sale price
of the Common Stock on such exchange or system each day shall be used or if the
Common Stock is not so listed on such exchange or system or admitted to unlisted
trading privileges, then the average of the last reported high bid prices
reported by the National Quotation Bureau, Inc. each day shall be used to
determine such daily trading price. Holders of Warrants shall have exercise
rights until the close of the business day preceding the date fixed for
redemption. If any Warrant called for redemption is not exercised by such time,
it will cease to be exercisable and the holder will be entitled only to the
redemption price. Redemption of the Warrants could force Warrantholders either
to (i) exercise the Warrants and pay the exercise price thereof at a time when
it may be less advantageous economically to do so, or (ii) accept the redemption
price in consideration for cancellation of the Warrant, which could be
substantially less than the market value thereof at the time of redemption.
At any time when the Warrants are exercisable, the Company is required to
have a current registration statement on file with the Commission and to
effect appropriate qualifications under the laws and regulations of the
states in which the holders of Warrants reside in order to comply with
applicable laws in connection with the exercise of the Warrants and the
resale of the Common Stock issued upon such exercise. So long as the Warrants
are outstanding, the Company has undertaken to file all post-effective
amendments to the Registration Statement required to be filed under the
Securities Act, and to take appropriate action under federal and state
securities laws to permit the issuance and resale of Common Stock issuable
upon exercise of the Warrants. There can be no assurance, however, that the
Company will be in a position to effect such action under the federal and
applicable state securities laws, and the failure of the Company to effect
such action may cause the exercise of the Warrants and the resale or other
disposition of the Common Stock issued upon such exercise to become unlawful.
The Company may amend the terms of the Warrants but only by extending the
termination date or lowering the exercise price thereof. The Company has no
present intention of amending such terms.
If the Representative, at its election, solicits the exercise of the
Warrants, the Company will be obligated, subject to certain conditions, to
pay the Representative a solicitation fee equal to 10% of the aggregate
proceeds received by the Company as a result of the solicitation. The
Representative may reallow a portion of the fee to soliciting broker-dealers.
Because the Representative is a member of the National Association of
Securities Dealers, Inc. ("NASD"), any such solicitation by the
Representative must comply with the requirements of Section 2710(c)(6)(B)(ix)
of the NASD Corporate Financing Rules.
The entire proceeds from sale of the Warrants will be placed in an
interest-bearing escrow account established with Tri-State Bank, Denver,
Colorado during the three-year term of the Warrants. The escrow proceeds,
together with accrued interest, will be released to the Company or to the
Warrantholders, as follows: (i) upon exercise of each Warrant, $.50 will be
credited to the exercise price and will be released to the Company; and (ii)
upon redemption of the Warrants, the escrow proceeds relating to such redemption
will be released to the Company; and (iii) to the extent that the Warrants are
not exercised or redeemed within the three-year period, then the remaining
escrow proceeds, plus accrued interest thereon, will be returned to those
Warrantholders owning unexercised or unredeemed Warrants.
TRANSFER AGENT AND WARRANT AGENT
The transfer agent for the Common Stock and the Warrant Agent is American
Securities Transfer & Trust, Inc.
CONTROL-SHARE ACQUISITIONS
The Florida Business Corporation Act (the "FBCA") provides that "control
shares" of an "issuing public corporation" acquired in a "control-share
acquisition" have the same voting rights as accorded
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the shares before the control-share acquisition only to the extent granted by
resolution approved by the shareholders. Such resolution must be approved by:
(a) a majority of the votes of the shareholders entitled to vote thereon, and if
the proposed control-share acquisition would, if fully carried out, result in
any action which would require a vote as a class or series, by a majority of the
votes of the shareholders of each such class or series entitled to vote thereon;
and (b) a majority of the votes by the shareholders of each class or series
entitled to vote as a class or series, excluding all shares owned by the
acquiror (or member of a group), officers and directors who are employees of the
corporation.
An "issuing public corporation" is a corporation that has: (a) 100 or more
shareholders; (b) its principal place of business, its principal office or
substantial assets within Florida; and (c) one or more of the following: (i)
more than 10% of its shareholders reside in Florida; (ii) more than 10% of its
shares are owned by Florida residents; (iii) 1,000 of its shareholders reside in
Florida. A "control-share acquisition" is the acquisition by any person of
ownership of, or the power to direct the exercise of voting power with respect
to, issued and outstanding control shares. "Control shares" are voting shares
which, if aggregated with all other shares owned by such person, would entitle
the acquiror, directly or indirectly, alone or as part of a group, to exercise
voting power in electing directors within one of the following ranges of voting
power: (a) one-fifth or more but less than one-third, (b) one-third or more but
less than a majority, or (c) a majority of all voting power.
A person who has made or proposes to make a control-share acquisition,
upon satisfaction of certain conditions (including an undertaking to pay
expenses), may compel the Board of Directors to call a special meeting of
shareholders to be held within 50 days of the receipt of the demand to
consider the voting rights of the shares. If the acquiring person's statement
has been filed but no request for a meeting is made, the corporation must
present the question at the next special or annual shareholders' meeting.
If authorized in an issuing public corporation's articles of incorporation
or bylaws before a control-share acquisition has occurred, control shares
acquired in a control-share acquisition where no acquiring person's statement
has been filed, may be subject to redemption by the corporation at the fair
value of the shares at any time during the period ending 60 days after the
last acquisition of control shares. Control shares acquired in a
control-share acquisition are not subject to such redemption after an
acquiring person's statement has been filed and after the meeting at which
the voting rights of the control shares acquired in a control-share
acquisition are submitted to the shareholders unless the shares are not
accorded full voting rights by the shareholders.
Unless otherwise provided in an issuing public corporation's articles of
incorporation or bylaws before a control-share acquisition has occurred, if
voting rights for control shares are approved at a shareholders' meeting and
the acquiror becomes entitled to vote a majority of all of the corporation's
shares entitled to vote, all other shareholders may exercise dissenters'
rights to receive the fair value of their shares. Neither the Company's
Bylaws nor its Articles of Incorporation makes any provision with respect to
control-share acquisitions.
The control-share acquisition provisions of the FBCA could have the effect
of discouraging offers to acquire the Company and of increasing the
difficulty of consummating any such offer.
SHARES ELIGIBLE FOR FUTURE SALE
All of the shares of Common Stock outstanding as of the date hereof are
"restricted securities," as that term is defined in Rule 144 promulgated
under the Securities Act. Without regard to the volume limitations described
below, 320,666 of such shares are currently eligible for resale under Rule
144 and 577,447 of such shares will be eligible for resale under Rule 144
commencing ninety days subsequent to the date of this Prospectus. The
remaining shares will become so eligible at various times between October 1996
and June 1998. See "Underwriting" with respect to an agreement by certain
shareholders restricting their ability to sell their Common Stock without the
consent of the Representative.
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In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions specified in such Rule, sales of
restricted securities may be made if a minimum of two years has elapsed between
the later of the date of the acquisition of such securities from the issuer or
from an affiliate of the issuer and any resale thereof in reliance on Rule 144
for the account of either the initial acquiror or any subsequent holder. If
sales can be made under Rule 144, a seller, including persons whose securities
are required to be aggregated, is entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of 1% of the total
number of outstanding shares of the same class or, if the shares are quoted on
NASDAQ, the average weekly trading volume during the four calendar weeks
preceding the filing of a notice with the Securities and Exchange Commission.
Where a minimum of three years has elapsed between the later of the date of the
acquisition of restricted securities from the issuer or from an affiliate of the
issuer and any resale thereof in reliance on Rule 144 for the account of either
the initial acquiror or any subsequent holder, a person who has not been an
affiliate of the Company for at least the three months immediately preceding the
sale is entitled to sell such securities under Rule 144 without regard to any of
the limitations described above.
The Company has granted piggyback registration rights to the holders of an
aggregate of 133,920 shares of the Company's outstanding Common Stock should the
Company file a registration statement under the Securities Act which includes
shares of Common Stock of certain of the Company's officers and directors. The
Company has granted piggyback registration rights with respect to 100,000 shares
of Common Stock which may be obtained by Robert M. Kassenbrock upon exercise of
a warrant issued to him by the Company. The Company has granted similar rights
to holders of warrants for the purchase of an aggregate of 200,000 shares of
Common Stock. The Company has also granted future demand and piggyback
registration rights to AGF with respect to 25,000 shares of Common Stock
underlying a warrant held by AGF. Such registration rights terminate seven years
subsequent to the Company's receipt of the net proceeds of the Offering. See
"Security Ownership of Certain Beneficial Owners and Management," "Selling
Shareholders" and "Certain Relationships and Transactions."
No meaningful 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, if any, of the Common Stock and Warrants
prevailing from time to time. Nevertheless, the possibility that substantial
amounts of Common Stock may be sold in the public market may adversely affect
any prevailing market prices for the Common Stock and Warrants and could
impair the Company's ability to raise capital through the sale of its equity
securities.
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UNDERWRITING
The Underwriters named below, acting through the Representative, have
jointly and severally agreed, subject to the terms and conditions of the
Underwriting Agreement, to purchase from the Company and the Company has agreed
to sell to the Underwriters, the respective number of Units set forth opposite
their names below at the initial public offering price less the underwriting
discount set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF UNITS
- ------------------------------ ---------------------
<S> <C>
RAF Financial Corporation ...
---------------------
TOTAL ........................ 2,000,000
=====================
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Units offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to purchase 2,000,000 Units, if
any are purchased.
The Underwriters propose to offer part of the Units offered hereby
directly to the public at the initial offering price and part of such Units to
certain dealers at a price that represents a concession within the discretion of
the Representative. The Underwriters do not intend to confirm sales to accounts
over which they exercise discretionary authority. The Underwriters may allow,
and such dealers may re-allow, a concession within the discretion of the
Representative. After the initial offering, the offering price and the selling
terms may be changed by the Underwriters.
The Units offered by the Underwriters are subject to prior sale. The
Underwriters reserve the right to withdraw, cancel or modify such offer (which
may be done only by filing an amendment to the Registration Statement) and to
reject orders in whole or in part for the purchase of any of the Units and to
cancel any sale even after the purchase price has been paid if such sale, in
the opinion of the Underwriters, would violate federal or state securities laws
or a rule or policy of the NASD.
The Company and the Underwriters have agreed to indemnity each other and
related persons against certain liabilities, including liabilities under the
Securities Act, and, if such indemnifications are unavailable or are
insufficient, the Company and the Underwriters have agreed to damage
contribution arrangements between them based upon the relative benefits
received from the Offering and the relative fault resulting in such damages.
Such relative benefits and relative fault would be determined in legal
actions among the parties. Under such contribution arrangements, the maximum
amount payable by any Underwriter would be the public offering price of the
Units underwritten and distributed by such Underwriter.
Except for the outstanding securities described herein and except upon the
exercise of the options and warrants described herein, the Company has agreed
not to sell any additional securities (other than debt securities to financial
institutions) for three years after the date of this Prospectus without the
Representative's prior written consent. Also excepted are securities issued to
officers, directors, holders of more than 5% of the Company's outstanding Common
Stock and their affiliates two years after the date of this Prospectus. The
officers and directors of the Company, holders of more than 5% of the Company's
outstanding Common Stock prior to the Offering and their affiliates have entered
into agreements which provide that such persons, who own an aggregate of 731,926
shares of Common
42
<PAGE>
Stock, may not sell any of such shares without the consent of the Representative
during period ranging from one to two years commencing on the date of this
Prospectus. The agreements also provide that any sales of Common Stock by such
persons pursuant to Rule 144 will be executed through the Representative. The
provisions of this paragraph do not apply to any securities held by Maurice
Porter. See "Shares Eligible for Future Sale."
The Company and the Selling Shareholders have granted to the Underwriters an
option excersisable for 30 days from the date of this Prospectus to purchase up
to 300,000 additional Units consisting of 300,000 additional shares of Common
Stock (29,615 of which will be offered by the Company and 270,385 of which will
be offered by the Selling Shareholders) and 300,000 additional Warrants offered
by the Company at the respective prices to public less the underwriting
discounts solely to cover over-allotments, if any. In addition, the Company and
the Selling Shareholders have agreed to pay to the Representative at the closing
of the Offering, a non-accountable expense allowance equal to 2.6% of the
aggregate initial public offering prices of the Units, Common Stock and Warrants
sold by them. Such expense allowance is to cover expenses incurred by the
Representative in connection with the Offering, reduced by amounts advanced by
the Company which, as of the date of this Prospectus, are $30,000.
The Company has agreed to issue for $50.00, warrants to the Representative to
purchase 200,000 shares of Common Stock. These warrants are exercisable at any
time during the five year period after the date of this Prospectus at $4.80 per
share. These warrants are not transferable for one year from the date of this
Prospectus except (i) to an Underwriter or a partner or officer of an
Underwriter or (ii) by will or operation of law. Any profit realized on the sale
of these warrants or the underlying shares may be deemed additional underwriting
compensation. Commencing one year from the date hereof, holders of these
warrants and the shares underlying these warrants will have demand and piggyback
registration rights for periods of four years and six years, respectively, with
respect to these warrants and the underlying shares. These warrants and the
shares of Common Stock underlying these warrants have been registered under the
Securities Act by means of the Registration Statement of which this Prospectus
is a part.
In addition to the aforementioned warrants, the Company has agreed upon
completion of the Offering to issue to the Representative, for $50.00,
additional warrants to purchase 200,000 shares of Common Stock. These warrants
contain the same terms and conditions as the Warrants except that (i) the
exercise price of these warrants will be $5.76 (ii) these warrants will be
exercisable immediately but will not be transferable for a period of one year
after the date of this Prospectus except to an Underwriter or a partner or
officer of an Underwriter, or by will or operation of law and (iii) these
Warrants are not redeemable. These warrants and the shares of Common Stock
underlying these warrants have been registered under the Securities Act by means
of the Registration Statement of which this Prospectus is a part.
If any warrants issued to the Representative are exercised during the
first year after the date of this Prospectus, then any Common Stock acquired
as a result of any such exercise may not be transferred or assigned until
after the expiration of such one year period.
For a period of three years from the date hereof, the Representative has a
preferential right to purchase for its account or to sell for the account of
the Company, or any parent or subsidiaries of the Company, any securities
with respect to which any of them may seek to sell, publicly or privately,
for cash.
The price to the public of the Units has been determined by negotiations
between the Company and the Representative, with consideration being given to
the current status of the Company's business, its financial condition, its
present and prospective operations, the general status of the securities market,
and the market conditions for new offerings of securities. The price bears no
relationship to the assets, net worth, book value, sales price of securities
issued to shareholders of the Company, or any other criteria of value.
43
<PAGE>
The Company has agreed to give the Representative notice of meetings of
its Board of Directors and to grant access to such meetings to a
representative of the Representative. Any such representative will have no
official status or voting rights at any such meeting.
For a period of five years after the date of this Prospectus, the Company
has agreed to pay the Representative a consulting fee in connection with any
merger, consolidation, stock exchange or acquisition or sale of all or a
material part of the assets or business of any entity, if such transaction
involves the Company, its parent company, or any of its subsidiaries, if such
transaction was initiated by the Representative. The total fee will be from
1% to 5% of the value of the transaction. In connection with any such
transaction, the Representative has agreed to provide consulting services
which are customary in the industry. If the Company, its parent company, or
any of its subsidiaries, proposes to engage in any such type of transaction
which is not initiated by the Representative, but in connection with which the
Company, its parent company, or any of its subsidiaries, proposes to obtain
services from an investment banker, the Company has agreed that the
Representative will have the first opportunity to provide consulting services
which are customary in the industry in connection therewith. In such event, the
fee to be paid to the Representative will be 50% of the total fee described
above.
If the Representative, at its election, at any time one year after the
date of this Prospectus, solicits the exercise of the Warrants, the Company
will be obligated, subject to certain conditions, to pay the Representative a
solicitation fee equal to 10% of the aggregate proceeds received by the
Company as a result of the solicitation. No warrant solicitation fees will be
paid within one year after the date of this Prospectus. The Representative
may reallow a portion of the fee to soliciting broker-dealers. Because the
Representative is a member of the NASD, any such solicitation by the
Representative must comply with the requirements of Section 2710(c)(6)(B)(xi)
of the NASD Corporate Financing Rules.
LEGAL PROCEEDINGS
There are no material pending or threatened legal proceedings to which the
Company or any of its subsidiaries is a party or of which any of their
property is the subject or, to the knowledge of the Company, any proceedings
contemplated by governmental authorities.
EXPERTS
The audited financial statements included in this Prospectus have been
audited by Grant Thornton L.L.P., independent certified public accountants, to
the extent and for the periods set forth in their report thereon which contains
an explanatory paragraph expressing substantial doubt about the Company's
ability to continue as a going concern which is attributed to recurring
operating losses, working capital deficiencies and delinquencies and defaults on
its accounts payable and other matters and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
LEGAL MATTERS
The legality of the securities offered hereby has been passed upon for the
Company by Reisman & Associates, P.A., Boca Raton, Florida. An affiliate of
Reisman & Associates, P.A. is a beneficial owner of options to acquire an
aggregate of 15,000 shares of the Company's Common Stock at prices of $4.00
and $4.50 per share. Smith, McCullough & Ferguson, P.C., Denver, Colorado,
has acted as legal counsel to the Representative in connection with certain
legal matters relating to the Offering.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Under the Florida Business Corporation Act, the Company has the power and
authority to indemnify any person who is or was a director, officer, employee
or agent of the Company (or of the
44
<PAGE>
affiliates of the Company) for liability incurred in connection with any
action brought against such person (other than an action by, or in the right of,
the Company) if such person acted in good faith and in a manner reasonably
believed to be in, or not opposed to, the best interests of the Company, and
with respect to any criminal action or proceeding, had no reasonable cause to
believe that his conduct was unlawful. The Company's Articles of Incorporation
and Bylaws require the Company to indemnify any such person who has complied
with the foregoing standard. Under the Florida Business Corporation Act, the
Company also currently has the power and authority to indemnify any such person
for liability incurred in any action by, or in the right of, the Company against
the expenses and amounts paid in settlement not exceeding, in the judgment of
the Board of Directors, the estimated expense of litigating the proceeding
described above to its conclusion, provided such expenses and amounts are
actually and reasonably incurred in connection with the defense or settlement of
such proceeding, including any appeal thereof. The Company's Articles of
Incorporation and Bylaws require the Company to indemnify any such person
against the expenses and amounts paid in settlement as described in the
foregoing sentence. The Underwriting Agreement provides that, in certain cases,
the Underwriters shall indemnify each officer and director and controlling
person of the Company against certain costs, expenses and liabilities which he
may incur in his capacity as such. The indemnification provisions described
under this caption include indemnification for breaches of fiduciary duties.
Insofar as indemnification arising under the Securities Act may be permitted to
directors, officers and controlling persons of the Company pursuant to such
provisions, or otherwise, the Company has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement under the Securities Act
with respect to the securities offered hereby with the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. This Prospectus, which is a part of the
Registration Statement, does not contain all of the information contained in
the Registration Statement and the exhibits and schedules thereto, certain
items of which are omitted in accordance with the rules and regulations of
the Commission. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement,
including all exhibits and schedules thereto, which may be examined at the
Commission's Washington, D.C. office, 450 Fifth Street, N.W., Washington,
D.C. 20549 without charge, or copies of which may be obtained from the
Commission upon request and payment of the prescribed fee. Statements made in
this Prospectus as to the contents of any contract, agreement or document are
not necessarily complete and in each instance reference is made to the copy
of such contract, agreement or other document filed as an exhibit to the
Registration Statement, and each such statement is qualified in its entirety
by such reference.
As of the date of this Prospectus, the Company became a reporting company
under the Exchange Act and in accordance therewith in the future will file
reports and other information with the Commission. All of such reports and
other information may be inspected and copied in Washington, D.C. and at
regional offices of the Commission located at 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York,
New York 10048. The Commission maintains a web site that contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the Commission. The address of such site is
http://www.sec.gov. In addition, the Company intends to provide its
shareholders with annual reports, including audited financial statements,
unaudited semi-annual reports and such other reports as the Company may
determine.
45
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Certified Public Accountants ........................................... F-2
FINANCIAL STATEMENTS
Balance Sheets at December 31, 1994 and 1995 and June 30, 1996 (Unaudited) .................. F-3
Statements of Operations for the years ended December 31, 1994 and 1995 and the six months
ended June 30, 1995 and 1996 (Unaudited) ................................................... F-4
Statement of Stockholders' Equity (Deficit) for the years ended December 31, 1994 and 1995
and the six months ended June 30, 1996 (Unaudited) ......................................... F-5
Statements of Cash Flows for the years ended December 31, 1994 and 1995 and the six months
ended June 30, 1995 and 1996 (Unaudited) ................................................... F-6
Notes to Financial Statements ................................................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Ocurest Laboratories, Inc.
We have audited the accompanying balance sheets of Ocurest Laboratories,
Inc. (a Florida corporation) as of December 31, 1994 and 1995, and the
related statements of operations, stockholders' equity (deficit) and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by managment, 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 Ocurest Laboratories,
Inc. as of December 31, 1994 and 1995, and the results of its operations and
its cash flows for the years then ended, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial
statments, the Company incurred a net loss of $2,736,792 for the year ended
December 31, 1995, and, as of that date, the Company's current liabilities
exceeded its current assets by $1,975,824. These factors, among others, as
discussed in Note B to the financial statements, raise substantial doubt
about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note B. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
GRANT THORNTON LLP
Fort Lauderdale, Florida
March 29, 1996
F-2
<PAGE>
OCUREST LABORATORIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
--------------- --------------- --------------
(UNAUDITED)
ASSETS
<S> <C> <C> <C>
Current Assets ........................................
Cash ................................................. $ 84,836 $ 1,607 $ 5,138
Accounts receivable-customers ........................ 22,066 65,140 240,643
Inventories .......................................... 325,854 542,071 847,183
Prepaid expenses ..................................... 21,056 64,412 133,100
------------- -------------- --------------
Total current assets ............................... 453,812 673,230 1,226,064
Property and Equipment, at cost, net .................. 618,602 543,301 888,443
Other Assets ..........................................
Patent and trademark licensing rights, net .......... 164,300 141,600 130,250
Deposits ............................................. 7,000 198,340 12,000
Deferred offering costs .............................. -- 5,000 83,742
Organizational costs, net ............................ 1,600 800 400
------------- -------------- --------------
Total Other Assets ................................. 172,900 345,740 226,392
------------- -------------- --------------
Total assets ....................................... $ 1,245,314 $ 1,562,271 $ 2,340,899
============= ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable ..................................... $ 548,854 $ 1,889,113 $ 1,626,865
Accrued advertising .................................. 114,436 155,276 --
Accrued salaries and taxes ........................... 116,649 47,362 60,202
Accrued expenses ..................................... 55,531 144,620 259,298
Accrued interest ..................................... -- 16,770 98,530
Notes payable-stockholders ........................... 198,537 238,774 295,000
Notes payable-factor ................................. -- 127,139 665,721
Notes payable-other .................................. -- -- 260,000
Patent and trademark licensing rights payable ....... 30,000 30,000 --
------------- -------------- --------------
Total current liabilities ......................... 1,064,007 2,649,054 3,265,616
Notes Payable Stockholders ............................ -- 657,257 --
Commitments ........................................... -- -- --
Stockholders' Equity (deficit) ........................
Preferred stock -$.01 par value, 5,000,000 shares
authorized -none issued ............................ -- -- --
Common stock, $.008 par value, 25,000,000 shares
authorized, 897,811, 1,123,341 and 1,922,674 shares
issued and outstanding at December 31, 1994,
December 31, 1995 and June 30, 1996, respectively .. 7,183 8,989 15,381
Paid-in capital ...................................... 2,435,823 3,245,462 5,068,843
Accumulated deficit .................................. (2,261,699) (4,998,491) (6,008,941)
------------- -------------- --------------
Total stockholders' equity (deficit) .............. 181,307 (1,744,040) (924,717)
------------- -------------- --------------
Total liabilities and stockholders' equity
(deficit) ............................................. $ 1,245,314 $ 1,562,271 $ 2,340,899
============= ============== ============
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
OCUREST LABORATORIES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ -----------------------------
1994 1995 1995 1996
--------------- -------------- ------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales ........................... $ 96,830 $ 687,122 $ 200,384 $ 734,291
Cost of goods sold .................. 139,733 545,175 160,206 443,579
------------- -------------- ------------- --------------
Gross profit (loss) .............. (42,903) 141,947 40,178 290,712
Selling and marketing expenses ..... 676,079 1,784,102 462,835 639,052
General and administrative expenses 948,458 964,426 466,548 484,648
Royalty expense ..................... 3,875 27,885 8,015 29,380
------------- -------------- ------------- ---------------
Operating loss ................... (1,671,315) (2,634,466) (897,220) (862,368)
Other income (expense) ..............
Interest expense ................... (20,626) (112,326) (32,558) (148,082)
Interest income .................... 2,621 -- -- --
Royalty income ..................... -- 10,000 -- --
------------- -------------- ------------- ---------------
Net loss before
provision for taxes ............. (1,689,320) (2,736,792) (929,778) (1,010,450)
Provision for taxes ................. -- -- -- --
------------- -------------- ------------- ---------------
Net loss ......................... $(1,689,320) $(2,736,792) $ (929,778) $(1,010,450)
============= ============== ============= ===============
Net loss per share .................. $ (1.16) $ (1.55) $ (.54) $ (.40)
============= ============== ============= ===============
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
OCUREST LABORATORIES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON
COMMON STOCK ADDITIONAL STOCK
------------------------- PAID-IN SUBSCRIPTION ACCUMULATED
SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT TOTAL
------------ ----------- ----------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 579,698 $ 4,638 $ 940,602 $ (50,000) $ (572,379) $ 322,861
Issuance of stock, net of placement
costs of $98,520 ................... 268,375 2,147 1,252,219 -- -- 1,254,366
Common stock subscription received .. -- -- -- 50,000 -- 50,000
Issuance of stock upon conversion of
notes .............................. 48,738 390 237,610 -- -- 238,000
Issuance of stock in lieu of cash to
stockholders who provide
professional services .............. 1,000 8 5,392 -- -- 5,400
Net loss for the year ................ -- -- -- -- (1,689,320) (1,689,320)
----------- ---------- ----------- ------------ ------------ ------------
Balance at December 31, 1994 ......... 897,811 7,183 2,435,823 -- (2,261,699) 181,307
Issuance of stock for cash, net of
placement costs of $6,548 .......... 57,031 457 248,452 -- -- 248,909
Issuance of stock upon conversion of
notes .............................. 23,865 191 107,204 -- -- 107,395
Issuance of stock for cash upon
exercised warrants ................. 35,730 286 124,767 -- -- 125,053
Issuance of stock in lieu of cash to
directors/stockholders who provide
professional services .............. 30,203 242 86,063 -- -- 86,305
Issuance of stock in lieu of cash to
employees for accrued salaries ..... 78,701 630 243,153 -- -- 243,783
Net loss for the year ................ -- -- -- -- (2,736,792) (2,736,792)
----------- ---------- ----------- ------------ ------------ ------------
Balance at December 31, 1995 ......... 1,123,341 8,989 3,245,462 -- (4,998,491) (1,744,040)
Balance at December 31, 1995 ......... 1,123,341 $ 8,989 $ 3,245,462 $ -- $ (4,998,491) $ (1,744,040)
Issuance of stock, net ............... 400,000 3,200 931,800 -- -- 935,000
Issuance of stock upon conversion of
notes and accrued interest ......... 300,327 2,402 693,081 -- -- 695,483
Issuance of stock for cash upon
exercised warrants ................. 88,250 705 171,695 -- -- 172,400
Issuance of stock in lieu of cash to
stockholders who provide
professional services .............. 7,500 60 18,690 -- -- 18,750
Issuance of stock in lieu of cash to
employees for accrued salaries ..... 3,256 25 8,115 -- -- 8,140
Net loss for the six months ended
June 30, 1996 ...................... -- -- -- -- (1,010,450) (1,010,450)
----------- ---------- -------------- ------------ ------------ ------------
Balance at June 30, 1996 (Unaudited) 1,922,674 $ 15,381 $ 5,068,843 $ -- $ (6,008,941) $ (924,717)
=========== ========== ============== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
OCUREST LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------- ------------------------------
1994 1995 1995 1996
---------------- ---------------- ------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net loss ................................... $ (1,689,320) $ (2,736,792) $ (929,778) $ (1,010,450)
Adjustments to reconcile net loss to net cash
used in operating activities: ..............
Professional services paid with stock ..... 5,400 86,305 27,000 18,750
Accrued salaries paid with stock ............ -- 243,783 118,848 8,140
Interest expense paid with stock ............ -- -- 7,394 53,425
Depreciation and amortization ............... 63,128 102,986 51,264 65,098
Changes in assets and liabilities ...........
Increase in accounts receivable ............ (22,066) (43,074) (65,508) (175,503)
Increase in inventories .................... (325,854) (216,217) (24,009) (305,112)
Increase in prepaid expenses ............... (21,056) (43,356) (2,944) (65,688)
Increase (decrease) in accounts payable ... 524,646 1,340,259 (451,275) (262,248)
Increase in accrued expenses ............... 251,786 108,748 194,737 54,002
-------------- --------------- -------------- --------------
Net cash used in operating activities .... (1,213,336) (1,157,358) (1,074,271) (1,622,586)
Cash flows from investing activities ........
Purchase of property and equipment ........ (606,420) (4,185) (47,744) (398,490)
Deposits on fixed assets .................... -- (186,340) -- 186,340
Increase in deposits ........................ (6,600) (5,000) -- --
-------------- --------------- -------------- --------------
Net cash used in investing activities .... (613,020) (195,525) (47,744) (212,150)
Cash flows from financing activities ........
Proceeds from issuance of common stock, net 1,304,366 373,962 363,109 1,107,400
Proceeds from new borrowings ................ 277,498 900,692 713,439 1,079,609
Principal repayments on indebtedness ....... (5,000) -- -- (270,000)
(Increase) decrease in deferred offering
costs ..................................... 25,000 (5,000) (16,500) (78,742)
-------------- --------------- -------------- --------------
Net cash provided by financing activities 1,601,864 1,269,654 1,060,048 1,838,267
-------------- --------------- -------------- --------------
Net increase (decrease) in cash .............. (224,492) (83,229) (61,967) 3,531
Cash at beginning of period .................. 309,328 84,836 84,836 1,607
-------------- --------------- -------------- --------------
Cash at end of period ........................ $ 84,836 $ 1,607 $ 22,869 $ 5,138
============== =============== ============== ==============
Supplemental disclosure of cash flow
information: ...............................
Cash paid during the period for: ...........
Interest .................................. $ 17,767 $ 32,340 $ 8,920 $ 12,896
============== =============== ============== ==============
Noncash transactions: ........................
Conversion of notes payable to common stock $ 238,000 $ 107,395 $ 100,000 $ 642,058
============== =============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
PRESENTATION
The interim financial statements as of June 30, 1995 and 1996 and the six
months then ended as included herein are unaudited. However, in the opinion
of management, such information reflects all adjustments, consisting only of
normal recurring accruals necessary for a fair presentation of the
information shown. The interim financial statements for the periods stated
and notes presented herein do not contain certain information included in the
Company's annual financial statements and notes as also herein presented.
Results for interim periods are not necessarily indicative of results
expected for the full year.
OPERATIONS
Ocurest Laboratories, Inc. (the "Company") was incorporated in the State
of Florida on April 29, 1991. In July 1994, the Company began selling Ocurest
Sterile Eyedrops, a line of non-prescription eye medications featuring a
patented new dispenser for delivering ophthalmic drugs into the eye.
CASH
Cash and cash equivalents include cash on deposit in checking and money
market accounts with maturities of three months or less.
INVENTORIES
Inventories are principally raw materials and finished goods held for
resale and are stated at the lower of cost (first in, first out) or market.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the related assets which range from 5 to 10 years.
ORGANIZATIONAL COSTS
Organizational costs were capitalized and are being amortized using the
straight-line method over five years. Accumulated amortization was $2,400,
$3,200 and $3,600 at December 31, 1994, December 31, 1995 and June 30, 1996,
respectively.
PATENT AND TRADEMARK LICENSING RIGHTS
The Company has acquired the exclusive worldwide licensing rights to
certain patents and trademarks from a previously related party (see Note E)
and is capitalizing additional costs to maintain and protect these patents
and trademarks as they are incurred. These costs are being amortized over ten
years, the estimated economic life of the patent, using the straight line
method.
F-7
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION--
(CONTINUED)
ADVERTISING
The Company expenses the cost of advertising, which includes production
costs, media time and space as costs are incurred. Total advertising expense
for the years ended December 31, 1994, December 31, 1995 and the six months
ended June 30, 1996, amounted to approximately $567,000, $1,528,000 and
$301,000, respectively.
INCOME TAXES
The Company accounts for income taxes under the provisions of FAS 109,
"Accounting for Income Taxes." This pronouncement requires accounting for
deferred taxes utilizing the liability method, which applies the enacted
statutory rates in effect at the balance sheet date to differences between
the book and tax basis of assets and liabilities. The resulting deferred tax
liabilities and assets are adjusted to reflect changes in tax laws.
FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, trade receivables,
accounts payable and notes payable approximate fair value due to the
short-term maturities of these instruments.
USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amount of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period. Actual
results could differ from those estimates.
STOCK OPTIONS
Options granted under the Company's Stock Option Plans are accounted for
under APB 25, "Accounting for Stock Issued to Employees," and related
interpretations. In November 1995, the Financial Accounting Standards Board
issued Statement 123, "Accounting for Stock-Based Compensation," which will
require additional proforma disclosures for companies that will continue to
account for employee stock options under the intrinsic value method specified
in APB 25. The Company plans to continue to apply APB 25 and the only effect
of Statement 123 in 1996 is the new disclosure requirement.
NET LOSS PER SHARE
Net loss per share has been computed by dividing net loss by the weighted
average number of shares of common stock and common stock equivalents
outstanding during each period. The weighted average number of shares of
common stock and common stock equivalents used for computing net loss per
share was 1,459,059 and 1,767,562 for the years ended December 31, 1994 and
1995, respectively,
F-8
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION--
(CONTINUED)
and 1,725,825 and 2,527,613 for the six months ended June 30, 1995 and 1996,
respectively. The weighted average includes the effect of common stock,
options and warrants issued within one year of the proposed Initial Public
Offering ("IPO") at prices below the IPO price, as calculated under the
treasury stock method, and have been retroactively restated for a 1 for 2
reverse stock split that was approved on July 15, 1996 (See Note P). The
weighted average number of shares of common stock and common stock
equivalents was not computed utilizing the modified treasury stock method as
this method is antidilutive.
SUPPLEMENTAL PRO FORMA NET LOSS AND NET LOSS PER SHARE
The Company's supplemental pro forma net loss and net loss per share for
the year ended December 31, 1995 and the six months ended June 30, 1996 are
$2,670,192 and $977,150 and $1.40 and $0.37, respectively.
The supplemental pro forma net loss and net loss per share reflect the
issuance of shares necessary to retire $555,000 of notes payable and the
resulting decrease in net loss in the amount of $66,600 and $33,300 for the
year ended December 31, 1995 and the six months ended June 30, 1996,
respectively, as of the beginning of 1995. The calculation is based on the
weighted average shares outstanding used in the calculation of net loss per
share, adjusted for the estimated shares that would be issued by the Company,
i.e. 138,750 shares at $4.00 per share, to retire these obligations.
ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
requires that long-lived assets and certain intangibles held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. This
statement had no impact on the Company's results of operations or financial
position upon adoption in 1996.
NOTE B-GOING CONCERN
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate continuation
of the Company as a going concern. However, the Company has sustained
substantial losses from operations since the date of inception, and such
losses have continued through the year ended December 31, 1995. In addition,
the Company has used more cash than capital raised and provided through its
operations which resulted in the working capital deficit of $1,975,824 as of
December 31, 1995. As of January 31, 1996, the Company also became delinquent
on $250,000 of notes payable.
In view of the matters described in the preceding paragraph,
recoverability of a major portion of the recorded asset amounts shown in the
accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to raise funds
to continue to fund its operations and planned expansion. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or amounts and classification of
liabilities that might be necessary should the Company be unable to continue
in existence.
F-9
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
NOTE B-GOING CONCERN--(CONTINUED)
In addition to the debt conversion, debt issuance and the private
placement of its common stock described in Note P, the Company has entered
into a Letter of Intent (Note O) with RAF Financial Corporation relating to a
proposed IPO of its common stock and warrants. This offering is intended to
generate net proceeds to the Company of approximately $6,656,000.
NOTE C-INVENTORIES
Inventories consist of the following at:
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
--------------- -------------- ------------
(UNAUDITED)
Raw materials $ 68,406 $ 44,646 $ 68,742
Finished goods 257,448 497,425 778,441
--------------- -------------- ------------
$325,854 $542,071 $847,183
=============== ============== ============
NOTE D-PROPERTY AND EQUIPMENT
Property and equipment consists of the following at:
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
--------------- -------------- -------------
(UNAUDITED)
Manufacturing equipment ..... $648,565 $ 652,295 $1,050,784
Furniture and fixtures ....... 2,268 2,723 2,723
Computer equipment ........... 7,111 7,111 7,111
--------------- -------------- -------------
657,944 662,129 1,060,618
Less accumulated depreciation (39,342) (118,828) (172,175)
--------------- -------------- -------------
$ 618,602 $ 543,301 $ 888,443
=============== =============== =============
At December 31, 1995, the Company had placed a $310,000 order for certain
product specific molds to be used in its manufacturing process, of which
approximately $152,000 had been billed and is reflected in deposits and
accounts payable in the accompanying financial statements.
As of December 31, 1995, the Company has also paid a $34,000 deposit
towards the purchase of specialized machinery with an acquisition price of
$370,000. The deposit is subject to the risk of forfeiture in the event the
machinery is not purchased by October 31, 1996.
NOTE E-PATENT AND TRADEMARK LICENSING RIGHTS
The Company has acquired the exclusive worldwide licensing rights to
certain patents and trademarks for the newly developed eye drop dispenser
from a related party, Acorn Laboratories, Inc. ("Acorn"), owned by William J.
Casey, past Chairman of the Company. The Company has paid to Acorn $170,000
and accrued for an additional $30,000 through December 31, 1995, both of
which represent an initial payment on the purchase from Acorn.
F-10
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION--
(CONTINUED)
Further, the Company has agreed to pay Acorn a royalty of 4% of future net
sales up to a maximum royalty of $9,800,000. The Company has capitalized the
initial payment and other related patent costs and is amortizing them using
the straight line method over a ten year life. Upon payment of the maximum
royalty of $9,800,000, Acorn has agreed to assign the patent and trademark to
the Company. Acorn has also agreed to allow the Company to defer payment of
certain royalties until certain earnings levels are attained. The agreement
also provides for a payment to Acorn in the event of a change in control of
the Company.
Patent and trademark licensing rights consist of the following at:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
--------------- -------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Patent and trademark licensing rights $227,000 $227,000 $227,000
Less accumulated amortization ....... (62,700) (85,400) (96,750)
--------------- -------------- ------------
$164,300 $141,600 $130,250
=============== ============== ============
</TABLE>
F-11
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
NOTE F-NOTES PAYABLE -STOCKHOLDERS
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
--------------- --------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Notes payable, minority stockholders, fixed interest
at 10%, maturing June 1994 ............................ $ 5,000 $ 5,000 $ 5,000
Notes payable, minority stockholders, fixed interest
at 10%, maturing February 1995 ........................ 10,000 10,000 10,000
Notes payable, minority stockholders, fixed interest
at 12%, maturing June 1994 ............................ 50,000 -- --
Note payable, minority stockholders, fixed interest at
12%, maturing January 1995 ............................ 123,537 50,000 50,000
Note payable, minority stockholders, fixed interest at
15%, maturing June 1994 ............................... 10,000 10,000 10,000
Note payable, minority stockholders, fixed interest at
12%, maturing October 1995 ............................ -- 73,966 --
Note payable, minority stockholder, fixed interest at
12%, maturing April 1995 .............................. -- 50,000 50,000
Note payable, Director, fixed interest at 12%,
maturing November 1996 ................................ -- 200,000 --
Note payable, Director, fixed interest at 12%,
maturing January 1996 ................................. -- 91,906 --
Note payable, minority stockholders, interest at 12%,
maturing January 1996 ................................. -- 135,000 85,000
Note payable, Director, interest at prime plus 1.5%,
maturing December 31, 1995 ............................ -- 238,823 --
Note payable, individual, interest at 12%, maturing
June 1996 ............................................. -- -- 50,000
Note payable, corporation, interest at prime plus 2%,
maturing September 1996 ............................... -- -- 260,000
Note payable, minority shareholder, interest at 12%,
maturing June 1996 .................................... -- -- 35,000
------------ -------------- ------------
$198,537 $864,695 $555,000
============ ============== ============
</TABLE>
Principal and interest is due at maturity for all notes. Accrued interest
due during 1994 on these notes was paid. The accrued and unpaid interest as
of December 31, 1995 amounted to $48,106 of which $31,336 was converted into
common stock during January 1996 and is classified in the long-term portion
of notes payable stockholders in the 1995 financial statements. Interest
expense was $20,626 and $112,326 for the years ended December 31, 1994 and
1995 and $148,082 for the six months ended June 30, 1996, respectively.
Subsequent to December 31, 1995, the Company converted $625,921 of notes
payable to common stock. This portion of the notes payable has been
classified as long-term in the 1995 financial statements.
F-12
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
NOTE G-NOTES PAYABLE -FACTOR
During 1995, the Company entered into an agreement with a factor for the
financing of accounts receivable and inventory. Under the terms of the accounts
receivable agreement, the Company sells its accounts receivable to the factor
and the factor advances the Company an amount equal to 70% of the accounts
receivable sold. The factor's initial fee for this service is equal to 3% of the
amount advanced. Under certain circumstances, such fee may increase by an
additional 3%. However, the Company can avoid the additional fees by replacing
an unpaid invoice with a new invoice of equal value prior to the expiration of
the aforementioned 30 day period. Under the terms of the inventory agreement,
the factor will finance 50% of the finished goods inventory cost. Financings are
made in the form of a "sale" whereby the factor buys the inventory and then
re-sells it to the Company when the sale is made to the end customer. The factor
charges a fee ranging from 3% to 6% of the inventory amounts financed. Based
upon the escalating fee schedule and the Company's ability to substitute sales
invoices, all rights and obligations associated with a sale have not occurred
and therefore this transaction has been accounted for as a financing transaction
in the financial statements.
The total amounts financed under this agreement amounted to $127,539 and
$665,721 as of December 31, 1995 and June 30, 1996, respectively.
NOTE H-COMMITMENTS AND CONTINGENCY
LEASES
The Company is obligated under noncancelable leases which are classified
as operating leases. The Company conducts operations in a facility under a
three year lease that expires on June 30, 1997. The rent expense for real
property was $17,530, $21,530 and $6,446 for the years ended December 31,
1994 and 1995, and for the six months ended June 30, 1996, respectively.
Total rent expense for the years ended December 31, 1994 and 1995 and for the
six months ended June 30, 1996, amounted to approximately $19,200, $25,221
and $13,005, respectively.
At December 31, 1995, the following are the minimum rental payments under
such operating leases which expire at various dates through 1997:
OFFICE OFFICE
YEAR TOTAL RENTAL EQUIPMENT
- ------- -------- --------- -----------
1996 24,834 22,806 $2,028
1997 13,021 11,669 1,352
-------- --------- -----------
37,855 34,475 $3,380
======== ========= ===========
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with three key
executives which provide for base salaries ranging from $66,000 to $150,000.
Total compensation paid under these agreements amounted to approximately
$221,000 and $326,000 for the years ended December 31, 1994 and 1995,
respectively. The employment agreements expire on December 31, 1996, and are
extended automatically for successive one-year terms of employment. The
Company's remaining aggregate commitments at December 31, 1995, under such
contracts, total approximately $331,000.
F-13
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
NOTE I-INCOME TAXES
The Company has a net operating loss carryforward for tax purposes of
approximately $3,821,000, which will expire during the years 2006 through 2011.
As a result of certain cumulative changes in the Company's stock ownership over
the past three years, future use of the net operating loss carryforwards may be
substantially limited by the change in ownership rules. The Company has
deductible temporary differences which consists of the following at:
DECEMBER 31,
-----------------------
1994 1995
------------ -----------
Allowance for doubtful accounts ............. -- 5,000
Start up and organization costs ............. 741,000 577,000
Depreciation and amortization ............... 144,000 67,000
Accrued salaries ............................ 117,000 47,000
Inventory capitalization ................... 56,000 90,000
------------ ----------
1,058,000 786,000
============ ==========
The following tax benefit was recorded for the net operating loss
carryforwards and the deductible temporary differences at:
DECEMBER 31,
---------------------------
1994 1995
----------- --------------
Current assets:
Deferred tax benefit ..................... $ 127,000 $ 135,000
Less valuation allowance ................. (127,000) (135,000)
----------- --------------
Deferred tax benefit -net of allowance .. $ -- $ --
=========== ==============
Other assets:
Deferred tax benefit ..................... $ 716,000 $ 1,598,000
Less valuation allowance ................. (716,000) (1,598,000)
----------- --------------
Deferred tax benefit -net of allowance $ -- $ --
=========== ==============
NOTE J-STOCK OPTIONS
In July 1994, the Board of Directors amended the 1992 Stock Option Plan
(the "Plan") which reserves 143,750 shares of common stock for issuance under
the Plan. Options may be granted as qualified options under Section 422 of
the Internal Revenue Code, or as non-qualified options, as deemed
appropriate. Qualified options must have exercise prices equal to at least
100% of the fair market value of the stock at the date of grant. The term of
the options is generally ten years and they are exercisable in one-third
installments annually from the date of grant.
In addition, the Company has granted other non-qualified options. The term
of these options is for a period of 10 years and they remain exercisable
throughout their term. Options granted and outstanding are as follows at:
F-14
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
NOTE J-STOCK OPTIONS--(CONTINUED)
GRANTED UNDER THE PLAN
----------------------------------------
QUALIFIED NON-QUALIFIED OTHER NON-QUALIFIED
------------------- ------------------ -------------------
SHARES PRICE SHARES PRICE SHARES PRICE
-------- -------- --------- -------- --------- ---------
December 31, 1992 9,375 $4.00 18,750 $4.00 5,125 $ 4.00
December 31, 1993 3,125 $4.00 18,750 $4.50 1,875 $4.00
3,125 $4.50
December 31, 1994 3,125 $4.50 -- $ -- 18,000 $4.50
December 31, 1995 5,000 $4.50 56,250 $4.80 22,750 $4.50
-------- --------- --------
23,750 93,750 47,750
======== ========= =========
Non-qualified options are currently exercisable, and no compensation
expense has been recognized under any of these grants. As of December 31,
1995, no options have been exercised.
NOTE K-WARRANTS
During the years ended December 31, 1994 and 1995, the Company issued
warrants to acquire common stock of the Company. Each warrant represents the
right to purchase one share of common stock for prices ranging from $4.00 to
$12.00 per warrant. Warrants unexercised as of December 31, 1995 are as
follows (exercise prices are retroactively restated to reflect 1 for 2
reverse stock split -see Note P):
NUMBER OF WARRANTS EXERCISE PRICE EXPIRATION DATE
- ------------------- --------------- ----------------
463,545 $ 8.00 January 1997
9,750 $12.00 January 1997
43,750 $11.00 January 2000
10,784 $ 7.20 November 1997
27,000 $ 5.00 January 1996
50,000 $ 4.50 June 1997
50,000 $ 4.00 June 2000
In January 1996, the Company allowed warrant holders to exercise their
warrants at 40% of their exercise price provided that they exercised on or
before January 31, 1996. Pursuant to this agreement, 88,250 warrants were
exercised for $172,400. The incremental value of the modified warrants is not
significantly different than the value of the previous warrants.
In February 1996, the Company agreed to permanently reduce the exercise
price of all warrants with an exercise price above $5.00 per share to $5.00
share (see Note P).
NOTE L-SIGNIFICANT CUSTOMERS
For the year ended December 31, 1994, the Company's three largest
customers accounted for 25%, 23% and 23%, respectively, of the Company's
gross sales. For the year ended December 31, 1995, the Company's three
largest customers accounted for 43%, 13% and 11%, respectively, of the
Company's gross sales. For the six months ended June 30, 1996, the Company's
three largest customers accounted for 13%, 11% and 10%, respectively, of the
Company's gross sales.
F-15
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
NOTE M-SIGNIFICANT VENDORS
The Company has purchases from two vendors which represent 97% of net
purchases in 1995. The Company does not anticipate any interruption in
supplies from its vendors. In the event supplies were disrupted for any
reason, management believes alternative sources for these purchases are
available.
NOTE N-AFFILIATED TRANSACTIONS
During 1994, the Company entered into consulting agreements with each of
the previous Chairman of the Board of Directors and a director to provide
certain advertising consulting activities. Total consulting expense during
the years ended December 31, 1994 and 1995 was $28,000 and $27,000,
respectively, and the amount accrued and unpaid as of December 31, 1994 and
1995 was $5,600 and $-0-, respectively.
NOTE O-INITIAL PUBLIC OFFERING
The Board of Directors has authorized the filing of a registration statement
relating to an IPO for Units consisting of 2,000,000 shares of common stock and
2,000,000 Class A warrants. In connection with the offering, during February
1996 the Company entered into a Letter of Intent with RAF Financial Corporation
(RAF). RAF individually or as the representative of a group of underwriters
intends to underwrite the shares and the warrants being offered on a "firm
commitment basis." The underwriters will be paid 9% of the IPO proceeds and a
non-accountable expense allowance (of which $30,000 has been paid), will be
given the right to purchase warrants for 10% of the shares and will be given the
right to purchase 10% of the warrants sold exclusive of over-allotment shares.
The Letter of Intent, among other things, provides for certain
anti-dilution and registration rights to RAF in the warrant for 10% of the
shares and allows designees of RAF to observe all Board of Directors meetings
for three years.
NOTE P-SUBSEQUENT EVENTS
In January 1996, the Company converted $657,257 of its debt to common
stock. This conversion reduces long-term debt to $-0- and decreases total
stockholders' deficit to $1,086,783.
In addition to the warrant exercise described in Note K, between January 1,
1996 and June 30, 1996 the Company sold and issued 400,000 shares of its common
stock for approximately $935,000.
During April 1996, the Company issued a $260,000 promissory note which is to
be repaid at the earlier of September 1996 or the closing of the IPO. In
connection with this note, the Company issued warrants to purchase 50,000 shares
of the Company's common stock.
On April 19, 1996, the Company's Board of Directors approved a 1 for 2
reverse-split of its issued and outstanding shares of common stock, warrants and
options. The Company will issue new certificates to shareholders following the
closing of the Company's forthcoming IPO. All per share and weighted average
share amounts, for all periods presented, have been restated to reflect the
effect of the 1 for 2 reverse stock split. The Company amended its Article of
Incorporation by increasing the authorized shares of common stock from 3 million
to 25 million shares and preferred stock from 1 million to 5
F-16
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
NOTE P-SUBSEQUENT EVENTS--(CONTINUED)
million shares. The Company also approved the post-split warrants with an
exercise price greater than $5.00 to be $5.00 and all warrants with expiration
dates falling in calendar year 1997 to a common expiration date of May 31, 1998.
In September 1996, the Company borrowed an additional $600,000 from certain
individuals including a shareholder, at 12% interest. The loans and accrued
interest mature upon the earlier of 10 days after the closing of the initial
public offering or 6 months from the date of the loans. In connection with the
loans, the Company issued warrants to purchase an aggregate of 300,000 shares of
its common stock at $2.40 per share. The warrant holders have certain piggyback
registration rights.
F-17
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS 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 A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS .
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary ................................ 3
Risk Factors ...................................... 6
Use of Proceeds ................................... 14
Dividend Policy ................................... 14
Dilution .......................................... 15
Capitalization .................................... 16
Selected Financial Data ........................... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations ................................... 18
Business .......................................... 21
Management ........................................ 28
Security Ownership of Certain Beneficial Owners
and Management .................................... 32
Selling Shareholders .............................. 33
Certain Relationships and
Related Transactions .............................. 34
Description of Securities ......................... 37
Shares Eligible for Future Sale ................... 40
Underwriting ...................................... 42
Legal Proceedings ................................. 44
Experts ........................................... 44
Legal Matters ..................................... 44
Indemnification for Securities Act Liabilities ... 44
Additional Information ............................ 45
Index to Financial Statements ..................... F-1
</TABLE>
- -----------------------------------------------------------------------------
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE UNITS, 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.
OCUREST LABORATORIES, INC.
2,000,000 UNITS
EACH CONSISTING OF ONE SHARE OF
COMMON STOCK AND
ONE CLASS A
COMMON STOCK
PURCHASE WARRANT
- -----------------------------------------------------------------------------
PROSPECTUS
- -----------------------------------------------------------------------------
, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Florida Business Corporation Act, the small business issuer has
the power and authority to indemnify any person who is or was a director,
officer, employee or agent of the small business issuer (or the affiliates of
the small business issuer) for liability incurred in connection with any
action brought against such person (other than an action by, or in the right
of, the small business issuer) if such person acted in good faith and in a
manner reasonably believed to be in, or not opposed to, the best interests of
the small business issuer, and with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was unlawful.
The small business issuer, pursuant to its Articles of Incorporation and
By-Laws, is required to indemnify any such person who has complied with the
foregoing standard. Under the Florida Business Corporation Act, the small
business issuer also currently has the power and authority to indemnify any
such person for liability incurred in any action by, or in the right of, the
small business issuer against the expense and amounts paid in settlement not
exceeding, in the judgment of the Board of Directors, the estimated expense
of litigating the proceeding described above to its conclusion, provided such
expenses and amounts are actually and reasonably incurred in connection with
the defense or settlement of such proceeding, including any appeal thereof.
The small business issuer's Articles of Incorporation and By-Laws require the
small business issuer to indemnify any such person against the expenses and
amounts paid in settlement as described in the foregoing sentence. The
Underwriting Agreement provides that, in certain cases, the Underwriters
shall indemnify each officer and director and controlling person of the small
business issuer against certain costs, expenses and liabilities which he may
incur in his capacity as such.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the expenses (other than underwriting discounts) of the
offering, all of which are to be paid by the small business issuer. Other than
the Securities and Exchange Commission Registration Fee, the NASD filing fee and
the NASDAQ Small-Cap fees, all expenses are estimated.
SECURITIES AND EXCHANGE COMMISSION REGISTRATION
FEE ............................................ $ 9,372
NASD Filing Fee .................................. 3,218
NASDAQ Small-Cap Fees ............................ 13,105
Blue Sky Fees and Expeses ........................ 25,000
Transfer Agent Fees and Expenses ................. 10,000
Representative's Non-Accountable Expense
Allowance ...................................... 234,000*
Legal Fees ....................................... 70,000
Accounting Fees .................................. 55,000
Printing and engraving ........................... 60,000
Miscellaneous .................................... 54,305
-----------
Total .......................................... $534,000
===========
- -----------------------------------------------------------------------------
* Assumes no exercise of the Over-Allotment Option.
ITEM 26 RECENT SALES OF UNREGISTERED SECURITIES
(a) Between August 1993 and September 1996, the small business issuer sold
1,303,768 shares of its Common Stock, promissory notes in the aggregate
principal amount of $1,826,770 and warrants for the purchase of an aggregate
of 967,084 shares of Common Stock.
(b) The securities were sold to private investors.
II-1
<PAGE>
(c) Shares of Common Stock were sold for an aggregate price of $4,265,759,
including the conversion of certain promissory notes. Promissory notes were
sold for an aggregate amount representing their respective principal amounts.
No additional consideration was received for the warrants.
(d) Exemption from registration was claimed pursuant to Section 4(2) of
the Securities Act of 1933 on the basis that all offers and sales of
securities by the small business issuer were conducted privately and no
public offering was involved.
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------- --------------------------------------------------------------------------------------------------
<S> <C>
1.1 Amended Form of Underwriting Agreement.***
3.1 Articles of Incorporation.*
3.2 Amendment to Articles of Incorporation dated May 20, 1991.**
3.3 Amendment to Articles of Incorporation dated March 9, 1994.*
3.4 Amendment to Articles of Incorporation dated July 15, 1996.*
3.5 Amendment to Articles of Incorporation dated August 7, 1996.**
3.6 Statement of Designation of the Series A, 9% Cumulative Preferred Stock dated April 30, 1991.**
3.7 Articles of Amendment to the Statement of Designation of the Series A, 9% Cumulative Preferred Stock
dated May 30, 1991.**
3.8 By-Laws.**
4.1 Amended Form of Representative's Warrants to Purchase Common Stock.***
4.2 1992 Key Employee Stock Option Plan, as amended.**
4.3 Form of Class A Common Stock Purchase Warrant.***
4.4 Form of certificate representing Common Stock.*
5.1 Opinion re legality.***
10.1 Lease of June 24, 1994 for premises located at 4400 PGA Blvd., Palm Beach Gardens, Florida by and
between Rimco XII, Inc. and the small business issuer.*
10.2 Master Broker Agreement as of December 1, 1993 by and between the small business issuer and Morano
Associates, Inc.*
10.3 Employment Agreement as of December 1, 1993 by and between the small business issuer and Edmund
G. Vimond, Jr.*
10.4 Employment Agreement as of December 1, 1993 by and between the small business issuer and Larry M.
Reid.*
10.5 Addendum of June 19, 1996 to Employment Agreement as of December 1, 1993 by and between the small
business issuer and Larry M. Reid.*
10.6 Employment Agreement as of December 1, 1993 by and between the small business issuer and Eric Schwarz.*
10.7 Addendum of June 19, 1996 to Employment Agreement as of December 1, 1993 by and between the small
business issuer and Eric Schwarz.*
10.8 Employment Agreement as of June 19, 1996 by and between the small business issuer and John F. Carlson.*
10.9 Agreement of October 30, 1991 by and between Acorn Laboratories, Inc. and the small business issuer.*
II-2
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -----------------------------------------------------------------------------------------------------------
10.10 First Amendment to Agreement by and between Acorn Laboratories, Inc. and the small business issuer
dated March 31, 1995.*
10.11 Second Amendment to Agreement by and between Acorn Laboratories, Inc. and the small business issuer
dated January 29, 1996.*
10.12 Letter dated June 17, 1996 from Acorn Laboratories, Inc. to the small business issuer.**
10.13 Contract Supply Agreement as of March 1, 1994 by and between the small business issuer and Bausch
& Lomb Pharmaceutical, Inc.**
10.14 Letter Agreement of October 4, 1995 by and between the small business issuer and Bausch & Lomb.**
10.15 Letter Agreement of March 27, 1996 by and between the small business issuer and Bausch & Lomb.**
10.16 Letter Agreement effective January 1, 1996 between Wheaton Plastic Products and the small business
issuer.**
10.17 Form of Warrant Agent Agreement.***
10.18 Form of Escrow Agreement by and between the small business issuer and Tri-State Bank.***
10.19 Consulting Agreement as of February 20, 1995 by and between the small business issuer and Joseph
Morano.**
10.20 Consulting Agreement, as amended, as of February 17, 1992 by and between the small business issuer
and Leonard L. Kaplan.**
10.21 Loan Agreement of April 1, 1996, as amended on August 1, 1996, by and between the small business
issuer and American Growth Fund I.L.P. and Common Stock Purchase Warrants issued thereto on April
1, 1996.**
10.22 Promissory Note dated April 1, 1996 from the small business issuer to American Growth Fund I.L.P.
and N Note Modification Agreement dated August 1, 1996 between the small business issuer and American
Growth Fund I.L.P.**
10.23 Security Agreement of April 1, 1996 by and between the small business issuer and American Growth
Capital Corporation.**
10.24 Agreement effective November 15, 1995 between JMR Funding, Inc. and the small business issuer.**
10.25 $524,000 Note dated June 28, 1996 from the small business issuer to JMR Funding, Inc.**
10.26 Security Agreements dated June 28, 1996 and November 15, 1995 between the small business issuer
and JMR Funding, Inc.**
10.27 Agreement, Promissory Note and Security Agreement dated May 3, 1995 between the small business issuer
and Ralph H. Laffler.**
10.28 Promissory Note dated November 6, 1995 from the small business issuer to Maurice Porter.**
10.29 Agreement, as amended, dated April 30, 1993 between Acorn Laboratories, Inc. and Edmund J. Vimond,
Jr.**
10.30 Agreement, as amended, dated April 30, 1993 between Acorn Laboratories, Inc. and Larry M. Reid.**
10.31 Subscription Agreement of September 6, 1996 between the small business issuer and Robert M. Kassenbrock,
including form of promissory note and warrant.*
11 Statement Regarding Computation of Per Share Earnings.**
23.1 Consent of Grant Thornton L.L.P.*
23.2 Consent of Reisman & Associates, P.A.***
II-3
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
27.1 Financial Data Schedule.**
</TABLE>
- -------------
* Filed herewith.
** Previously filed as an exhibit to Registration Statement No. 333-10303 on
Form SB-2.
*** To be filed by amendment.
ITEM 28. UNDERTAKINGS
The undersigned small business issuer hereby undertakes to:
(1) File, during any period in which it offers or sells securities being
registered hereby, a post-effective amendment to this registration statement
to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in
the registration statement;
(iii) Include any additional or changed material information on the plan
of distribution.
(2) For the purpose of determining liability under the Securities Act of
1933, treat each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at that time to be
the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) Provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to each
purchaser.
Insofar as indemnification arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the small
business issuer pursuant to any of the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in such Act and is, therefore, unenforceable.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Sarasota, State of Florida on October 7, 1996.
Ocurest Laboratories, Inc.
By: /s/ Edmund G. Vimond, Jr.
--------------------------
Edmund G. Vimond, Jr.
President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
and on the dates stated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------- -------------------------------- --------------------
<S> <C> <C>
/s/ Edmund G. Vimond, Jr. Principal Executive Officer October 7, 1996
- ------------------------- and Director
Edmund G. Vimond, Jr.,
/s/ John F. Carlson Principal Financial and Accounting October 7, 1996
- ------------------------- Officer and Director
John F. Carlson
/s/ Larry M. Reid Director October 7, 1996
- -------------------------
Larry M. Reid
Director , 1996
- -------------------------
Fred Ahlbin
/s/ Ralph Laffler Director October 7, 1996
- -------------------------
Ralph Laffler
Director , 1996
- -------------------------
Robert S. Marker
</TABLE>
II-5
EXHIBIT 3.1
STATE OF FLORIDA
IN GOD WE TRUST
DEPARTMENT OF STATE
[LETTERHEAD]
I certify that the attached is a true and correct copy of the Articles of
Incorporation of OCUREST LABORATORIES, INC., a corporation organized under the
Laws of the State of Florida, filed on May 1, 1991, effective April 29, 1991, as
shown by the records of this office.
The document number of this corporation is S49868.
[GREAT SEAL OF THE STATE OF FLORIDA IN BACKGROUND]
GIVEN UNDER MY HAND AND THE
GREAT SEAL OF THE STATE OF FLORIDA,
AT TALLAHASSEE, THE CAPITAL, THIS THE
6TH DAY OF MAY, 1991.
GREAT SEAL OF THE
STATE OF FLORIDA
IN GOD WE TRUST /s/ JIM SMITH
CR2E022 (2-91) Jim Smith
Secretary of State
<PAGE>
ARTICLES OF INCORPORATION
OF
OCUREST LABORATORIES, INC.
EFFECTIVE DATE
Article I 4 - 29 - 91
--------------
The name of the corporation is Ocurest Laboratories, Inc. (the
"Corporation").
ARTICLE II [LANDSCAPE]
DURATION FILED 1991 MAY-1 AM 11:16
SECRETARY OF STATE
TALLAHASSEE, FLORIDA
The Corporation shall have a perpetual existence.
ARTICLE III
PURPOSE
The Corporation is organized for the purpose of transacting any and all
lawful business.
ARTICLE IV
ADDRESS
The principal place of business or mailing address of the Corporation shall
be:
1423 14th Terrace
Palm Beach Gardens. Florida 33418-3624
ARTICLE V
CAPITAL STOCK
SECTION 1: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Twelve Million (12,000,000) shares,
consisting of Nine Million (9,000,000) shares of Common Stock, par value $.001
per share ("Common Stock"), and Three Million (3,000,000) shares of Preferred
Stock, par value $.001 per share (the "Preferred Stock").
SECTION 2: Shares of the Preferred Stock of the Corporation may be issued
from time to time in one or more classes or series, each of which class or
series shall have such distinctive designation or title as shall be fixed by
resolution of the Board of Directors of the Corporation prior to the issuance
of any shares thereof. Each such class or series of Preferred Stock shall have
such preferences and relative,
<PAGE>
participating, optional or other special rights and such qualifications,
limitations or restrictions thereof (which may include, without limitation, the
right to receive share dividend s payable in shares of another class or series),
as shall be stated in such resolution or resolutions providing for the issue of
such class or series of Preferred Stock as may be adopted from time to time by
the Board of Directors prior to the issuance of any shares thereof pursuant to
the authority hereby expressly vested in it, all in accordance with the laws of
the state of Florida.
ARTICLE VI
INITIAL REGISTERED OFFICE AND AGENT
The street address of the initial registered office of the Corporation is
1423 14th Terrace, Palm Beach Gardens, Florida 33418-3624, and the name of the
initial registered agent of the Corporation at the address is William J. Casey.
ARTICLE VII
MANAGEMENT OF THE CORPORATION
The following provisions are inserted for the management of the business
and the conduct of the affairs of the Corporation, and for further definition,
limitation and regulation of the powers of the Corporation and of its directors
and shareholders:
SECTION 1: The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors. In addition to the powers and
authority expressly conferred upon them by statute or by these Articles of
Incorporation or the BYlaws of the Corporation, the directors are hereby
empowered to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation.
SECTION 2: The directors of the Corporation need not be elected by written
ballot, unless the Bylaws so provide.
SECTION 3: Any action required or permitted to be taken by the shareholders
of the Corporation may not be effected by any consent in writing by such
shareholders unless such consent shall be signed by the holders of at least
two-thirds (66 2/3%) of the voting power of all the then outstanding share s of
capital stock of the Corporation entitled to vote generally in the election of
directors (the "Voting Stock") or such higher vote as may be required by these
Articles of Incorporation, voting together as a single class.
SECTION 4: Special Meetings of shareholders of the Corporation may be
called only by the President of the Corporation, the Board of Directors
pursuant to a resolution
2
<PAGE>
adopted by a majority of the Disinterested Directors (as defined in Article IX,
Section 3D herein, and whether or not there exists any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board of Directors for adoption) or upon the request in writing by the holders
of not less than twenty-five (25%) of the Voting Stock.
ARTICLE VIII
BOARD OF DIRECTORS
SECTION 1: The number of directors of the Corporation shall be not less
than three (3), with the exact number of directors to be determined from time to
time by resolution adopted by the Board of Directors. Directors shall be divided
into three (3) classes, designated Class I, Class II and Class II I. Each class
shall consist, as nearly as may be possible, of one-third of the total number of
directors constituting the Board of Directors (the "Full Board"). The term of
the initial Class I directors shall terminate on the date of the 1992 annual
meeting of shareholders; the term of the initial Class II directors shall
terminate on the date of the 1993 annual meeting of shareholders and the term of
the initial Class III directors shall terminate on the date of the 1994 Annual
meeting of shareholders. At each annual meeting of shareholders beginning in
1992, successors to the class of directors whose term expires at that annual
meeting shall be elected for a three-year term. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as possible,
and any additional directors of any class elected to fill a vacancy resulting
from an increase in such class shall hold office for a term that shall coincide
with the remaining term of that class, but in no case will a decrease in the
number of directors shorten the term of any incumbent director. A director shall
hold office until the annual meeting for the year in which his term expires and
until his successor shall be elected and shall qualify, subject however, to
prior death, resignation, retirement, disqualification or removal from office.
Any vacancy on the Board of Directors, howsoever resulting (including vacancies
created as a result of a resolution of the Board of Directors increasing the
authorized number of directors), may be filled by a majority of the directors
then in office, even if less than a quorum, or by a sole remaining director. Any
director elected to fill a vacancy shall hold office for a term that shall
coincide with the term of the class to which such director shall have been
elected.
3
<PAGE>
The names and address of the initial directors of the Corporation and their
respective class are:
NAME AND ADDRESS CLASS
---------------- -----
William J. Casey I
1423 14th Terrace
Palm Beach Gardens, Florida 33418-3624
Edmund Vimond II
1423 14th Terrace
Palm Beach Gardens, Florida 33418-3624
Laurence Reid III
1423 14th Terrace
Palm Beach Gardens, Florida 33418-3624
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of shareholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of these Articles of Incorporation or the resolution or resolutions
adopted by the Board of Directors pursuant to Article V, Section 2, and such
directors so elected shall not be divided into classes pursuant to this Article
VII unless expressly provided by such terms.
SECTION 2: Advance notice of shareholder nominations for the election of
directors and of business to be brought by shareholders before any meeting of
the shareholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
SECTION 3: Subject to the rights of the holders of any series of Preferred
Stock then outstanding, any directors, or the Full Board, may be removed from
office at any time, but only for cause and with the affirmative vote of either
(i) the holders of at least two-thirds (66 2/3) of the voting power of all of
the then-outstanding shares of Voting Stock, voting together as a single class,
or (ii) the holders of at least a majority of the voting power of all of the
then-outstanding shares of Voting Stock, voting together as a single class, and
a majority of Disinterested Directors (as hereinafter defined). "Cause" shall
be defined as a breach of fiduciary duty involving personal dishonesty,
intentional failure to perform stated duties as director or willful violation of
any law, rule, regulation or final cease and desist order.
4
<PAGE>
ARTICLE IX
SPECIAL VOTING PROVISIONS
SECTION 1: In addition to any affirmative vote required by law or these
Articles of Incorporation, and except as otherwise expressly provided in this
Section:
A. Any merger, consolidation or other combination, or any share exchange,
of the Corporation or any Subsidiary (as hereinafter defined) with or into (i)
any Interested Shareholder (as hereinafter defined) or (ii) any other
corporation (whether or not itself an Interested Shareholder) which is, or
after such merger or consolidation would be, an Affiliate or Associate (each as
hereinafter defined) of an Interested Shareholder, irrespective of which entity
is the surviving entity in such merger, consolidation or other combination or
which entity is the partner in such share exchange; or
B. Any sale, lease, exchange, mortgage, pledge, transfer, distribution to
shareholders or other disposition (in one transaction or a series of
transactions) to or with any Interested Shareholder, or any Affiliate or
Associate of any interested Shareholder' of all or substantially all or any
Substantial Part (as defined herein) of the assets or business of the
Corporation or any Subsidiary; or
C. The issuance, sale, transfer or other disposition by the Corporation or
any Subsidiary (in one transaction or a series of transactions) of any
securities, or of any rights, warrants or options to acquire any securities, of
the Corporation or any Subsidiary to any Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder in exchange for cash,
securities or other property (or a combination thereof) except pursuant to an
employee benefit plan of the Corporation or any Subsidiary thereof or except
pursuant to the exercise of warrants or rights to purchase securities offered
(or a dividend or distribution paid or made) pro rata to all shareholders of the
Corporation; or the acquisition by the Corporation or any Subsidiary of any
securities, or of any rights, warrants or options to acquire any securities, of
an Interested Shareholder of any Affiliate or Associate of such Interested
Shareholder; or
D. Any purchase, exchange, lease or other acquisition by the Corporation or
any Subsidiary (in a single transaction or a series of related transactions) of
all or substantially all, or of any Substantial Part, of the assets or business
of an Interested Shareholder or any Affiliate or Associate of such Interested
Shareholder; or
5
<PAGE>
E. The adoption of any plan or proposal for the liquidation or dissolution
of the Corporation or any Subsidiary proposed at a time in which an Interested
Shareholder exists; or
F. Any reclassification of securities (including, without limitation, any
stock split, stock dividend, or other distribution of shares in respect of
shares, or any reverse stock split), or recapitalization of the Corporation, or
any merger, consolidation, share exchange or other combination of the
Corporation with any of its Subsidiaries or any other transaction (whether or
not with or into or otherwise involving an Interested Shareholder) which has the
effect, directly or indirectly (in one transaction or a series of transactions),
of increasing the proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any Subsidiary which is
directly or indirectly owned by any Interested Shareholder or any Affiliate or
Associate of any Interested Shareholder; or
G. Any receipt by any Interested Shareholder or any Affiliate or Associate
of any Interested Shareholder of the benefit, directly or indirectly (except
proportionately as a shareholder of the Corporation), of any loans, advances,
guarantees, pledges, or other financial assistance or any tax credits or other
tax advantages provided by or through the Corporation;
shall require the affirmative vote of the holders of (i) at least two-thirds
(66 2/3%) of the voting power of the then-outstanding shares of Voting Stock,
voting together as a single class, and (ii) at least a majority vote of the
shares of the Voting Stock Beneficially Owned (as hereinafter defined) by
shareholders other than those Beneficially Owned by any Interested Shareholder.
Such affirmative vote shall be required notwithstanding the fact that no vote
may be required, or that a lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise.
The term "Business Combination" as used in this Article IX shall mean any
transaction which is referred to in any one or more of Paragraphs A through G of
this Section 1.
SECTION 2. The provisions of Section 1 of this Article IX shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such vote as is required by law, if all of the conditions
specified in any of the following Paragraphs A, B or C are met:
A. The Business Combination shall have been approved by a majority of the
Disinterested Directors (as hereinafter defined).
6
<PAGE>
B. Immediately prior to "the time the Business Combination is consummated,
the Corporation is the Beneficial Owner of a majority of each class of the
outstanding Equity Securities (as defined under Rule 3a11-1 promulgated under
the Securities Exchange Act of 1934 as in effect on the date of these Articles
of Incorporation are filed with the Florida Secretary of State) of the
Interested Shareholder.
C. All of the following conditions in subparagraphs (1)-(7) shall have been
met:
(1) The cash and Fair Market Value (as hereinafter defined) of the
property, securities or other consideration to be received per share by all
holders of the Common Stock in the Business Combination is not less than
the highest of:
(a) the highest per share price (including brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by, or on behalf of,
the Interested Shareholder in becoming the Beneficial Owner of any
shares of Common Stock (i) within the two-year period immediately
prior to the Date of Determination (as hereinafter defined), (ii)
within the two-year period immediately prior to the public
announcement of the proposed Business Combination, or (iii) in the
transaction or series of transactions in which the Interested
Shareholder became an Interested Shareholder; or .
(b) the highest Fair Market Value per share of the Common Stock
as of (i) the Date of - Determination of the Business Combination,
(ii) the date of the public announcement of the proposed Business
Combination, or (iii) the date on which the Interested Shareholder
became an Interested Shareholder; or
(c) the earnings per share of Common Stock as customarily
computed and reported in the financial community for the four full
consecutive fiscal quarters of the Corporation immediately preceding
the Date of Determination of such Business Combination multiplied by
the then price/earnings multiple (if any) of such Interested
Shareholder, as customarily computed and reported in the financial
community; provided, that for the purposes of this clause (c), if more
than one Person constitutes the Interested Shareholder
7
<PAGE>
involved in the Business Combination, the price/earnings multiple (if
any) of the Person having the highest price/earnings multiple shall
be used for the computation in this clause (c);
(2) The ratio of:
(a) the cash and Fair Market Value of the property, securities or
other consideration to be received per share by all holders of Common
Stock in the Business Combination, to
(b) the highest Fair Market Value per share of the Common Stock
as of (i) the Date of Determination of the Business Combination, (ii)
the date of the public announcement of the proposed Business
Combination, or (iii) the date on which the Interested Shareholder
became an Interested Shareholder;
must be equal to or greater than the ratio of:
(c) the highest per share price (including brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by, or on behalf of,
the Interested Shareholder in becoming the beneficial owner of any
shares of Common Stock (i) within the two-year period immediately
prior to the Date of Determination, (ii) within the two-year period
immediately prior to the public announcement of the proposed Business
Combination, or (iii) in the transaction or series of transactions in
which the Interested Shareholder became an Interested Shareholder, to
(d) the Fair Market Value per share of the Common Stock on the
day prior to the day the Interested Shareholder first became a
beneficial owner of Common Stock;
(3) The cash and Fair Market Value of the property, securities or
other consideration to be received per share by the holders of any
Preferred Stock in the Business Combination must be at least equal to the
highest of:
(a) the Fair Market Value of any cash, property or other
consideration that would be received per share of Preferred Stock upon
liquidation of the Corporation,
8
<PAGE>
(b) the Fair Market Value of any cash, property or other
consideration that would be received per share upon redemption of the
Preferred Stock, or
(c) the Fair Market Value of any cash, property or other
consideration to be received per share upon the conversion of the
Preferred Stock;
(4) The consideration to be received by holders of a particular class
of outstanding Voting Stock (including Common Stock) shall be in cash or in
the same form as the Interested Shareholder has previously paid for shares
of such class of Voting Stock. If the Interested Shareholder has paid for
shares of any class of Voting Stock with varying forms of consideration,
the form of consideration for such class of Voting Stock shall be either
cash or the form used to acquire the largest number of shares of such class
of Voting Stock previously acquired by it. The price determined i=
accordance with Section 2 of this Article shall be subject to appropriate
adjustment in the event of any smock dividend, stock split, combination of
shares or similar event.
(5) After such Interested Shareholder has become an Interested
Shareholder and prior to the consummation of such Business Combination:
(a) except as approved by a majority of the Disinterested
Directors, there shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends (whether or not
cumulative) on any outstanding stock havina ~ preference over the
Common Stock as to dividends or liquidation;
(b) there shall have been (i) no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to reflect any
subdivision of the Common Stock), except as approved by a majority of
the Disinterested Directors, and (ii) an increase in such annual rate
of dividends as necessary to reflect any reclassification (including
any reverse stock split), recapitalization, reorganization or any
similar transaction which has the effect of reducing the number of
outstanding shares of the Common Stock, unless the failure to so
increase such annual rate is approved by a majority of the
Disinterested Directors; and
9
<PAGE>
(c) such Interested Shareholder shall have not become the
Beneficial Owner of any additional shares of Voting Stock except as
part of the transaction which results in such Interested Shareholder
becoming an Interested Shareholder.
(6) After such Interested Shareholder has become an Interested
Shareholder, such Interested Shareholder shall not have received the
benefit, directly or indirectly (except proportionately as a shareholder),
of any loans, advances, guarantees, pledges or other financial assistance
or any tax credits or other tax advantages provided by the Corporation,
whether in anticipation of or in connection with such Business Combination
or otherwise.
(7) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange
Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations) shall be mailed to
stockholder s of the Corporation at least 30 days prior to the consummation
of such Business Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or subsequent
provisions or otherwise).
SECTION 3. For the purposes of this Article IX:
A. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
~he Securities Exchange Act of 1934, or, if said Rule 12b-2 shall be rescinded
and there shall be no successor rule or statutory provision thereto, pursuant
to said Rule 12b-2 as in effect on the filing date of these Articles of
Incorporation.
B "Beneficial Ownership" shall be determined pursuant to Rule 13d-3 of
the General Rules and Regulations under the Securities Exchange Act of 1934 (or
any successor rule or statutory provision), or, if said Rule 13d-3 shall be
rescinded and there shall be no successor rule or statutory provision thereto,
pursuant to said Rule 13d-3 as in effect or the filing date of these Articles of
Incorporation; provided, however, that a Person shall, in any event, also be
deemed the "Beneficial Owner" of any Voting Stock:
(1) which such Person or any of its Affiliates or Associates
Beneficially Owns, directly or indirectly; or
10
<PAGE>
(2) which such Person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding (but shall not be deemed to be the Beneficial Owner of any
shares solely by reason of an agreement, contract, or other arrangement
with this Corporation to effect any transaction which is described in any
one or more of clauses of Section 1 of Article IX) or upon the exercise of
conversion rights, exchange rights, warrants, or options or otherwise, or
(ii) sole or shared voting or investment power with respect thereto
pursuant to any agreement, arrangement, understanding, relationship or
otherwise (but shall not be deemed to be the Beneficial Owner of any shares
solely by reason of a revocable proxy granted for a particular meeting of
stockholders, pursuant to a public solicitation of proxies for such
meeting, with respect to shares of which neither such person nor any such
Affiliate or Associate is otherwise deemed the Beneficial Owner); or
(3) which are Beneficially Owned, directly or indirectly, by any other
Person with which such first-mentioned Person or any of its Affiliates or
Associates acts as a partnership, limited partnership, syndicate or other
group pursuant to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of capital
stock of this Corporation.
Notwithstanding any of the foregoing to the contrary, (i) no director or
officer of this Corporation (or any Affiliate or Associate of any such director
or officer) shall, solely by reason of any or all of such directors or officers
acting in their capacities as such, be deemed, for any purposes hereof, to
Beneficially Own any Voting Stock Beneficially Owned by any other such director
or officer (or any Affiliate or Associate thereof), and (ii) neither any
employee stock ownership or similar plan of this Corporation or any subsidiary
of this Corporation nor any trustee with respect thereto ( or any Affiliate of
such trustee) shall, solely by reason of such capacity of such trustee, be
deemed, for any purposes hereof, to Beneficially Own any Voting Stock held under
any such plan. For purposes of computing the percentage of Beneficial Ownership
of Voting Stock of a Person, the outstanding Voting Stock shall include shares
deemed owned by such Person through application of this subsection, but shall
not include any other Voting Stock which may be issuable by this Corporation
11
<PAGE>
pursuant to any agreement, or upon exercise of conversion rights, warrants or
options, or otherwise, For all other purposes, the outstanding Voting Stock
shall include only Voting Stock then outstanding and shall not include any
Voting Stock which may be issuable by this Corporation pursuant to any
agreement, or upon the exercise of conversion rights, warrants or options or
otherwise.
C. "Date of Determination." The Date of Determination is:
(1) the date on which a binding agreement (except for the fulfillment
of conditions precedent, including, without limitation, votes of
stockholders to approve such transaction) is entered into by the
Corporation, as authorized by its Board of Directors, and any other Person
providing for any Business Combination; or
(2) if such an agreement as referred to in Paragraph (1) is amended so
as to make it less favorable to the Corporation or the holders of its
Preferred or Common Stock, the date on which such amendment is approved by
the Board of Directors of the Corporation; or,
(3) in cases where neither Paragraph (1) nor Paragraph (~) shall be
applicable, the record date for the determination of the shareholders of
the Corporation entitled to notice of and to vote upon the transaction in
question.
D. "Disinterested Director" means any member of the Board of Directors who
is unaffiliated with the Interested Shareholder and was a member of the Board of
Directors prior to the time that the Interested Shareholder became an Interested
Shareholder, and any successor of a Disinterested Director who is unaffiliated
with the Interested Shareholder and is recommended to succeed a Disinterested
Director by a majority of Disinterested Directors then on the Board of
Directors.
E. "Fair Market Value" means: (i) in the case of stock, the highest closing
sales price of the stock during the 30-day period immediately preceding the date
in question of a share of such stock on the National Association of Securities
Dealers Automated Quotation System or any system then in use, or, if such stock
is admitted to trading on a principal United States securities exchange
registered under the Securities Exchange Act of 1934, Fair Market Value shall be
the highest sale price reported during the 30-day period preceding the date in
question. If no such quotations are available, the Fair Market Value on the date
in question of a share of such stock as
12
<PAGE>
determined by a majority of Disinterested Directors in good faith, in each case
with respect to any class of stock, appropriately adjusted for any dividend or
distribution in shares of such stock or any combination or reclassification of
outstanding shares of such stock into a different number of s hares of such
stock; and (ii) in the case of property other than cash or stock, the Fair
Market Value of such property on the date in question as determined by a
majority of Disinterested Directors in good faith.
F. Reference to "highest per share price" shall in each case with respect
to any class of stock reflect an appropriate adjustment for any dividend or
distribution in shares of such stock or any stock split or reclassification of
outstanding shares of such stock into a greater number of shares of such stock
or any combination or reclassification of outstanding shares of such stock into
a different number of shares of such stock.
G. "Interested Shareholder" shall mean any person (other than the
Corporation, any Subsidiary thereof or William J. Casey, Edmund Vimond, Laurence
Reid or any of their respective Affiliates, none of who~ shall be an Interested
Shareholder for purposes of these Articles of Incorporation) who or which:
(1) is the Beneficial Owner, directly or indirectly, of more than 10%
of the voting power of the outstanding Voting Stock; or
(2) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the
Beneficial Owner, directly or indirectly, of 10% or more of the voting
power of the then outstanding Voting Stock; or
(3) is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period immediately
prior to the date in question Beneficially Owned by any Interested
Shareholder, if such assignment or succession shall have occurred in the
course of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933,
H. "Person" shall include an individual, a group acting in concert, a
corporation, a partnership, an association, a joint venture, a pool, a joint
stock company, a trust, an unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities.
13
<PAGE>
I. "Subsidiary" means any corporation of which a majority of any class of
equity security is owned, directly or indirectly, by the Corporation.
J. "Substantial Part" consists of assets or securities, as the case may be,
with a Fair Market Value of at least five percent (5%) of the total consolidated
assets of the Corporation as of the end of the Corporation's most recent fiscal
year ending prior to the time the determination is made.
K. "Voting Stock" means any issued and outstanding shares of capital stock
of the Corporation entitled to vote generally in the election of directors;
provided, however, that for the purpose of determining whether a person is an
Interested Shareholder pursuant to Paragraph G of this Section 3, the number of
shares of Voting Stock deemed to be outstanding shall include shares deemed
owned through application of Paragraph B of this Section 3 but shall not include
any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
L. In the event of any Business Combination in which the Corporation
survives, the phrase "other consideration to be received" as used in
Subparagraphs (2) and (3) of Paragraph C of Section 2 of this Article IX shall
include the shares of Common Stock and/or the shares of any other class of
outstanding Voting Stock retained by the holders of such snares.
SECTION 4. A majority of the Disinterested Directors of the Corporation
shall have the power and duty to determine for the purposes of this Article IX,
on the basis of information known to them after reasonable inquiry, (i) whether
a Person is an Interested Shareholder; (ii) the number of shares of Voting Stock
Beneficially Owned by any Person; (iii) whether a Person is an Affiliate or
Associate of another; (iv) whether the assets which are the subject of any
Business Combination have, or the consideration to be received for the issuance
or transfer of securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value equaling or exceeding all or
substantially all or a Substantial Part of the assets of the Corporation or its
Subsidiary; (v) whether a Person has an agreement, arrangement or understanding
with another as to the matters referred to in the definition of Beneficial
Ownership; (vi) the application of any other definition or operative provision
of Article IX to the given facts; or (vii) any other matter relating to the
applicability or effect of this Article IX. A majority of the Disinterested
Directors shall have the further power to interpret all of the terms and
provisions of this Article IX. Any constructions, applications or determinations
made by the Board of Directors,
14
<PAGE>
pursuant to this Article IX in good faith and on the basis of such information
and assistance as was then reasonably available for such purpose shall be
conclusive and binding upon the Corporation and its shareholders.
SECTION 5. Nothing contained in this Article IX shall be construed to
relieve any Interested Shareholder from any fiduciary obligation imposed by law.
ARTICLE X
ACQUISITION OFFERS
The Board of Directors of the Corporation, when evaluating any offer of
another Person (as defined in Article IX hereof) to (i) make a tender or
exchange offer for any equity security of the Corporation, (ii) merge or
consolidate the Corporation, or cause the Corporation to conduct a share
exchange or other combination, with another corporation or entity, or (iii)
purchase or otherwise acquire all or substantially all of the properties and
assets of the Corporation, shall, in connection with the exercise of its
judgment in determining what is in the best interest of the Corporation and its
shareholders, give due consideration to all relevant factors, including,
without limitation, the social and economic effect of acceptance of such offer
on the Corporation's present and future customers and employees and those of its
Subsidiaries (as defined in Article IX); on the communities in which the
Corporation and its Subsidiaries operate or are located; and on the ability of
the Corporation to fulfill its corporate objectives.
ARTICLE XI
AMENDMENTS
SECTION 1. The Corporation reserves the right to amend or repeal any
provision contained in these Articles of Incorporation in the manner prescribed
by the laws of the State of Florida and all rights conferred upon shareholders
are granted subject to this reservation; provided, however, that,
notwithstanding any other provision of these Articles of Incorporation or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any vote of the holders of any class or series of the stock of this
Corporation required by law or by these Articles of Incorporation, the
affirmative vote of the holders of at least two-thirds (66 2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class shall be required to amend, modify or repeal any of Articles
VII, VIII, IX, X, XI, XII or XIII herein, unless such amendment, modification
or repeal has been approved by a majority of the Disinterested Directors of the
Corporation.
15
<PAGE>
SECTION 2. Only a majority of the Disinterested Directors of the
Corporation shall have the power to adopt, alter, amend or repeal By-laws of the
Corporation.
ARTICLE XII
AFFILIATED TRANSACTIONS
The Corporation elects not to be subject to the provisions of Florida
Statutes 607.108 regarding Affiliated Transactions.
ARTICLE XIII
CONTROL-SHARE ACQUISITIONS
The Corporation elects to be subject to the provisions of Florida Statutes
607.109, or any successor statute thereto, regarding Control-Share Acquisitions.
ARTICLE XIV
INDEMNIFICATION
Provided the person proposed to be indemnified satisfies the requisite
standard of conduct for permissive indemnification by a corporation as
specifically set forth in the applicable provisions of the Florida Business
Corporation Act (currently, Sections 607.0850(1) and (2) of the Florida Statutes
), as the same may be amended from time to time, this corporation shall
indemnify its officers and directors, and may indemnify its employees and
agents, from and against any and all of the expenses or liabilities incurred in
defending a civil or criminal proceeding, or other matters referred to in or
covered by said provisions, including advancement of expenses prior to the final
disposition of such proceedings and amounts paid in settlement of such
proceedings, both as to action in their official capacity and as to action in
any other capacity while an officer, director, employee or other agent. The
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any by-law, agreement,
vote of shareholders or disinterested directors or otherwise. The
indemnification provided herein shall continue as to a person who has ceased to
be a director, officer, employee or agent, and shall inure to the benefit of the
heirs, the personal and other legal representatives of such person, and an
adjudication of liability shall not affect the right to indemnification for
those indemnified.
16
<PAGE>
ARTICLE XV
POWERS
The Corporation shall have all of the corporate powers enumerated in the
Florida Business Corporation Act.
ARTICLE XVI
INCORPORATORS
The name and address of the person signing these Articles is:
William J. Casey
1423 14th Terrace
Palm Beach Gardens, Florida 33418-3624
ARTICLE XVII
BEGINNING OF CORPORATE EXISTENCE
The date when corporate existence shall begin shall be April 29, 1991.
/s/ WILLIAM J. CASEY
----------------------------
William J. Casey,
Incorporator
DATED: April 30, 1991
17
EXHIBIT 3.3
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
OCUREST LABORATORIES, INC.
1. ARTICLE V of the Articles of Incorporation of the Corporation is hereby
amended to read as follows:
SECTION 1: The Corporation is authorized to issue six million
(6,000,000) Shares of Common Stock, $.004 par value, which shall be
designated "Common Shares" and One million (1,000,000) shares of
Preferred Stock, $.0l par value, which shall be designated "Preferred
Shares". The Preferred Shares shall be designated and issued in such
series and upon such terms and conditions as the Board of Directors
may from time to time see fit. Such terms and conditions shall
include, but not be limited to, the entitlement of the holders of the
Preferred Shares to (a) cumulative, non-cumulative or partially
cumulative dividends, (b) the preference over any other class or
classes of shares as to the payment of dividends, (c) the preference
in the assets of the Corporation over any other class or classes of
shares upon the voluntary or involuntary liquidation of the
Corporation, (d) the convertibility, if any, into shares of any other
class or into shares of any series of the same or any other class,
and (e) voting rights, if any.
SECTION 2: The shares of the Corporation's Common Stock shall be
combined so that each outstanding share immediately prior to the
filing of these Articles of Amendment as well as each such share
which may be issued upon exercise of warrants or conversion of debt
instruments outstanding immediately prior to such filing shall be
changed to one fourth (1/4) of a share of the Corporation's Common
Stock having a par value of $.004 per share.
2. ARTICLES VII, VIII, IX, X and XIII all of the Articles of Incorporation
of the Corporation are hereby deleted in their entirety.
3. The foregoing amendments were approved by the shareholders pursuant to
written consent given in accordance with the provisions of Section
607.0704 of the Florida Business Corporation Act. The number of shares
consenting to the amendments was sufficient for approval. One voting
group was entitled to vote on the amendments.
1
<PAGE>
IN WITNESS WHEREOF, the undersigned President has executed these
Articles of Amendment on the 9th day of March 1994.
/s/ EDMUND G. VIMOND, JR.
--------------------------------
Edmund G. Vimond, Jr., President
2
EXHIBIT 3.4
FILED
96 JUL 23 PM 12: 47
SECRETARY OF STATE
TALLAHASSEE, FLORIDA
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
OCUREST LABORATORIES, INC.
1. The name of the corporation is Ocurest Laboratories, Inc.
2. ARTICLE V of the Articles of Incorporation of the corporation is hereby
amended to read as follows:
SECTION 1: The corporation is authorized to issue twenty five million
(25,000,000) shares of Common Stock, $.008 par value, which shall be
designated "Common Shares" and five million (5,000,000) shares of
Preferred Stock, $.001 par value, which shall be designated "Preferred
Shares." The Preferred Shares shall be designated and issued in such
series and upon such terms and conditions as the Board of Directors
may from time to time see fit. Such terms and conditions shall include,
but not be limited to, the entitlement of the holders of the:
Preferred Shares to (a) cumulative, non-cumulative or partially
cumulative dividends, (b) the preference over any other class or
classes of shares as to the payment of dividends, (c) the preference in
the assets of the corporation over any other class or classes of shares
upon the voluntary or involuntary liquidation of the corporation, (d)
the convertibility, if any, into shares of any other class or into
shares of any series of the same or any other class, and (e) voting
rights, if any.
SECTION 2: The shares of the corporation's Common Stock shall be
combined so that each outstanding share immediately prior to the
filing of these Articles of Amendment as well as each such share which
may be issued upon exercise of warrants or options or conversion of
debt instruments outstanding immediately prior to such filing shall
be changed to one half (1/2) of a share of the corporation's Common
Stock having a par value of $.008 per share.
3. The foregoing amendments were approved by the shareholders pursuant to
written consent effective on July 15, 1996 given in accordance with the
provisions of Section 607.0704 of the Florida Business Corporation Act. The
number of shares consenting to
1
<PAGE>
the amendments was sufficient for approval. One voting group was entitled to
vote on the amendments.
IN WITNESS WHEREOF, the undersigned President has executed these
Articles of Amendment on the 15th day of July, 1996.
/s/ EDMUND G. VIMOND, JR.
-------------------------------
Edmund G. Vimond, Jr., President
EXHIBIT 4.4
NUMBER OCUREST LABORATORIES, INC. - SHARES
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
25,000,000 AUTHORIZED SHARES $0.008 PAR VALUE
CUSIP NUMBER
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY-PAID AND NON-ASSESSABLE SHARES OF $0.008 PAR VALUE COMMON STOCK OF
OCUREST LABORATORIES, INC
transferable only on the books of the Company in person or by duly authorized
attorney, upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the said Company has caused this Certificate to be
executed by the facsimile signatures of its duly authorized officers and to be
sealed with the facsimile seal of the Company.
Dated:
OCUREST LABORATORIES, INC
CORPORATE SEAL
FLORIDA
SECRETARY PRESIDENT
[LANDSCAPED]
COUNTERSIGNED:
AMERICAN SECURITIES TRANSFER & TRUST INC
P.O. BOX 1596
DENVER, COLORADO 80201
By____________________________________________________
TRANSFER AGENT AND REGISTRAR AUTHORIZED SIGNATURE
<PAGE>
OCUREST LABORATORIES, INC.
The following abbreviations when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______ Custodian_______
(Cust) (Minor)
TEN ENT - as tenants by the
entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with rights Act _________________
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above list.
________________________________________________________________________________
For value received, _______________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
- --------------------------------------------------------------------------------
Please print or typewrite name and address including zip code of assignee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------- Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- --------------------------------------------------------------------,
attorney-in-fact to transfer the said stock on the books of the within-name
Corporation with full power of substitution in the premises.
Dated, ___________________________________
___________________________________________________________________
___________________________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature(s) Guaranteed:
____________________________________
The signature(s) should be guaranteed by an eligible guarantor institution
(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with
membership in an approved signature guarantee Medallion Program), pursuant to
S.E.C. Rule 17Ad-15.
EXHIBIT C
OFFICE LEASE AGREEMENT
By and Between
RIMCO XII, INC. ("Landlord")
27777 Inkster Road
Farmington Hills, Michigan 48333-9065
and
OCUREST LABORATORIES. INC. ("Tenant")
for
Suite 306
4400 PGA Boulevard
Palm Beach Gardens, FL 33410 ("Premises")
Dated: June 24, 1994
<PAGE>
OFFICE LEASE AGREEMENT
TABLE OF CONTENTS
-----------------
1. Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Possession; Estoppel Certificate. . . . . . . . . . . . . . . . . . . . . 1
4. Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
5. CPI Escalation of Base Rent . . . . . . . . . . . . . . . . . . . . . . . 3
6. Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
A. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(i) "Real Estate Taxes". . . . . . . . . . . . . . . . . . . . . . 3
(ii) "Operating Expenses" . . . . . . . . . . . . . . . . . . . . . 4
(iii) "Utility Expenses" . . . . . . . . . . . . . . . . . . . . . . 5
(iv) "Tenant's Proportionate Share" . . . . . . . . . . . . . . . . 5
(v) "Tax and Operating Expense Statements" . . . . . . . . . . . . 5
B. Payment of Proportionate Share of Real Estate Taxes . . . . . . . . . 5
C. Payment of Proportionate Share of Operating Expenses. . . . . . . . . 5
D. Payment of Proportionate Share of Utilities.. . . . . . . . . . . . . 5
E. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7. Method of Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8. Security Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9. Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
10. Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
11. Alterations, Additions or Improvements . . . . . . . . . . . . . . . . . .8
12. Maintenance and Repair . . . . . . . . . . . . . . . . . . . . . . . . . .9
13. Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
14. Rules and Regulations of Building . . . . . . . . . . . . . . . . . . . 10
15. Passes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
16. Extraordinary Equipment . . . . . . . . . . . . . . . . . . . . . . . . 10
17. Landlord's Access . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
18. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ll
19. Fire or Other Casualty . . . . . . . . . . . . . . . . . . . . . . . . . 11
20. Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . 12
21. Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
22. Light and Air . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
23. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
24. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
OFFICE LEASE AGREEMENT
TABLE OF CONTENTS (Continued)
-----------------------------
25. Waiver of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 13
26. Relocation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
27. Subordination by Tenant . . . . . . . . . . . . . . . . . . . . . . . . 13
28. Tenant to Surrender Premises in Good Condition . . . . . . . . . . . . 14
29. Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
30 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
31. Landlord's Right to Cure Defaults . . . . . . . . . . . . . . . . . . . 16
32. Payments After Termination . . . . . . . . . . . . . . . . . . . . . . 16
33. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
34. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
35. Assignment and Subletting . . . . . . . . . . . . . . . . . . . . . . . 17
36 Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
37. Non-Liability of Landlord . . . . . . . . . . . . . . . . . . . . . . . 18
38. Inability to Perform. . . . . . . . . . . . . . . . . . . . . . . . . . 19
39. Attorneys' Fees and Costs . . . . . . . . . . . . . . . . . . . . . . . 19
40. Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
41. Indemnity for Toxic Waste . . . . . . . . . . . . . . . . . . . . . . . 19
42. Attornment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
43. Signage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
44. Parking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
45. Recording . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
46. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
47. Radon Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
48. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
49. Lease Validity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
50. TRIAL BY JURY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
EXHIBIT "A" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
EXHIBIT "B" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
EXHIBIT "C" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
1. MOVING PERSONAL PROPERTY OF TENANTS. . . . . . . . . . . . . . . . . . . 24
2. SHIPPING AND RECEIVING. .. . . . . . . . . . . . . . . . . . . . . . . . 24
3. PREVENTION OF DAMAGE TO BUILDING AND PREMISES. . . . . . . . . . . . . . 24
4. NUISANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5. EXCLUSION OF PERSONS FROM BUILDING. . . . . . . . . . . . . . . . . . . 24
-ii-
<PAGE>
OFFICE LEASE AGREEMENT
TABLE OF CONTENTS (Continued)
-----------------------------
6. COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . 24
7. REPORTING ACCIDENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8. LOST OR STOLEN PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . 25
9. LOCKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10. KEYS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11. PETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12. FIREARMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
13. CANVASSING, SOLICITING, PEDDLING. . . . . . . . . . . . . . . . . . . . 25
14. VEHICLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
15. SIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
16. DIRECTORY BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
17. HOUSEKEEPING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
18. WATER FIXTURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
19. PARKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
20. WINDOWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
21. REPAIR, MAINTENANCE, ALTERATIONS AND IMPROVEMENTS . . . . . . . . . . . 27
22. PERSONAL USE OF PREMISES. . . . . . . . . . . . . . . . . . . . . . . . 27
23. OBSTRUCTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
24. EMPLOYEES, AGENTS AND INVITEES. . . . . . . . . . . . . . . . . . . . . 27
25. PEST CONTROL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
26. LANDLORD NOT RESPONSIBLE FOR VIOLATIONS . . . . . . . . . . . . . . . . 27
-iii-
<PAGE>
OFFICE LEASE AGREEMENT
THIS IS A LEASE AGREEMENT (the "Lease") made and entered into on 6/24/94
by and between RIMCO XII, INC., having its principal offices at 27777 Inkster
Rd., Farmington Hills, MI 48333-9065, hereinafter referred to as the "Landlord",
and OCUREST LABORATORIES, INC., a Florida corporation with offices at 4400 PGA
Boulevard, Suite 812, Palm Beach Gardens, FL 33410, hereinafter referred to as
the "Tenant".
WITNESSETH:
1. LEASED PREMISES: In consideration of the mutual covenants and
agreements set forth herein, Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord, for the rental and on the terms and conditions hereinafter
set forth, those certain premises outlined on the floor plan attached hereto as
EXHIBIT A (the "Premises"), and containing approximately 1,276 square feet of
leasable area in Suite #306 in the building known as Admiralty II located at
4400 PGA Boulevard, Palm Beach Gardens, FL 33410, (the "Building").
2. TERM: Subject to and upon the terms and conditions set forth herein,
the term of this Lease shall be for a period of 36 months (the "Term"),
beginning on the 1ST day of JULY, 1994, ("Commencement Date") and expiring on
the 30th day of June 30, 1997 ("Termination Date").
3. POSSESSION; ESTOPPEL CERTIFICATE: Except as hereinafter provided,
Landlord shall deliver possession of the Premises in the condition required by
this Lease on or before the Commencement Date, but delivery of possession prior
to such Commencement Date shall not affect the Termination Date. Failure of
Landlord, due to a holding over by a prior tenant or time required for
construction delays due to strikes, acts of God or any other cause beyond
Landlord's control, to deliver possession of the Premises by the date
hereinafter provided, shall automatically postpone the Commencement Date and
shall extend the Termination Date by periods equal to those which shall have
elapsed between and including the date hereinabove specified for commencement of
the term hereof and the date on which possession of the Premises is delivered to
the Tenant. The rent herein reserved shall commence on the first day of the
Term, provided however, in the event of any occupancy by Tenant prior to the
beginning of the Term, such occupancy shall in all respects be the same as that
of a tenant under this Lease, and the rent shall commence as of the date that
Tenant enters into such occupancy of the Premises. By occupying the Premises as
a tenant, or to install fixtures, facilities, or equipment, or to perform
finishing work, Tenant conclusively shall be deemed to have accepted the same
and to have acknowledged that the Premises are in the condition required by this
Lease.
<PAGE>
Should the commencement of the rent obligations of Tenant under this Lease
occur for any reason on the day other than the first day of a calendar month,
solely for the purpose of computing the term of this Lease, the commencement
date of the Term shall become and be the first day of the first calendar month
following the date when Tenant's rent obligation commences, or the first day of
the first full calendar month following the Commencement Date set out in SECTION
2 (if such day is other than the first day of a calendar month), whichever date
is later, and the Termination Date shall be adjusted accordingly; provided,
however, that the Termination Date shall be the last day of a calendar month,
which date in no event shall be earlier than the Termination Date set out in
SECTION 2. At any time and from time to time upon five (5) days prior request by
Landlord, Tenant will promptly execute, acknowledge and deliver to Landlord, in
a form satisfactory to Landlord, a certificate indicating (a) that this Lease is
unmodified and in full force and effect (or, if there have been modifications,
that this Lease is in full force and effect, as modified, and stating the date
and nature and enclosing a complete copy of each modification), (b) the dates
and amounts of the last made and next due rental installments and the amount of
any prepaid rent, (c) that no notice has been received by Tenant of any default
which has not been cured, except as to defaults specified in said certificate,
(d) a good standing and absence of default under this Lease (e) the absence of
setoffs to charges hereunder, (f) the amount of security deposit (g) the
commencement and expiration dates hereof, and (h) such other matters as may be
reasonable requested by Landlord. Any such certificates may be relied upon by
any prospective purchasers, mortgagees, or beneficiary under any mortgage,
ground lease or deed of trust of the Building or any part thereof.
4. Base Rent: As base rent for the lease of the Premises, Tenant hereby agrees
to pay, without claim, deductions or setoffs for the Term of the Lease base
rent. ("Base Rent") as follows:
PERIOD PSF ANNUAL EQUAL MONTHLY PAYMENT:
------ --- ------ ----------------------
Lease Year 1 6/1/94-5/31/95 $16.29 $20.786.04 $1.732.17
Lease Year 2 6/1/95-5/31/96 $17.29 $22.062.04 $1.838.50
Lease Year 3 6/1/96 5/31/97 $18.29 $23.338.04 $l.944.84
Such Base Rent for each Lease Year shall be due and payable in the equal monthly
installments set forth above, in advance, on the first day of each calendar
month during the Term, commencing on the 1ST day of JULY 1994. All payments of
Base Rent shall be paid to the Landlord in lawful money of the United States of
America at the address of Landlord shown herein, or to such other party or at
such other place as Landlord may designate from time to
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<PAGE>
time in a written notice to Tenant. If the Term commences or terminates on any
day other than the first or last day of a calendar month, the Base Rent and any
other sums due hereunder shall be prorated for such fractional calendar month.
All past due installments of Base Rent and Additional Rent (defined below) shall
bear interest at the rate of twelve percent (12%) per annum from the date due
until paid.
Anything herein to the contrary notwithstanding, in no event shall the Base
Rent provided herein ever be reduced. A "Lease Year" shall be the twelve month
period commencing with the Commencement Date of this Lease, and ending one year
later, and each following twelve-month period. If at the expiration of any
twelve month period during the Term the Term has not expired and there remains
less than twelve months prior to the expiration of the Term, the final period
during the Term shall be treated like a Lease Year and Base Rent shall be
adjusted accordingly. Notwithstanding the foregoing, no Base Rent and
Additional Rent shall be payable by Tenant for the first two months of the Term
(July and August 1994).
5. ADDITIONAL RENT: In addition to Base Rent, the Tenant shall pay "Additional
Rent" as follows in accordance with this Section:
A. DEFINITIONS
.
(i) "REAL ESTATE TAXES" means real estate tax and
assessments, general and special, assessed and levied upon the
Building and any improvements, easements or interests deemed real
property by any governmental entity having jurisdiction upon the
Building. For purposes of calculating Real Estate Taxes hereunder,
Landlord will be deemed to have taken the benefit of the provisions
of any statute or ordinance permitting any assessment to be paid over
a period of
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<PAGE>
time and the installments of such assessment which would become due
and payable by virtue of such provisions during the Term or any
extension hereof, together with the interest thereon, will be included
in the calculation of Real Estate Taxes. In the event that the United
States or the city, county, state or other political subdivision of
any governmental authority having jurisdiction imposes a tax,
assessment or surcharge of any kind or nature upon, against, measured
by or with respect to the rentals payable by the tenants of the
Building or on the income of Landlord derived from the Building, or
with respect to Landlord's ownership of the Building either by way of
substitution for all or any part of the taxes and assessments levied
or assessed against the Building, or, in addition thereto (but not
including federal, state or local income taxes unless levied by way of
substitution), such tax, assessment or surcharge will be deemed a Real
Estate Tax for purposes of this Section 5. Notwithstanding the above
tenant will not pay any real estate taxes.
(ii) "OPERATING EXPENSES" means any and all expenses for
operation, maintenance and administration of the Building as
determined by standard building management practices, and includes the
following by way of illustration (but not limitation): personal
property taxes (except those payable by Tenant); payments made by
Landlord for common area maintenance, repairs and (subject to the
provisions set forth below) replacements; payments made by Landlord
for services for the Building; charges for the rental and, subject to
the provisions set forth below, purchase and replacement of any
equipment and facilities acquired (voluntarily or pursuant to
government directive) by Landlord to reduce energy consumption;
charges for the repair and maintenance of any equipment and facilities
acquired (voluntarily or pursuant to government directive) by Landlord
to reduce energy consumption; insurance premiums; license fees; permit
and inspection fees; charges for janitorial service and window
cleaning; wages and salaries (including employee benefits) of any
building superintendent and maintenance employees; payments made by
Landlord for the repair, maintenance and (subject to the provisions
set forth below) replacement of the air-conditioning, heating,
ventilating and all other Building systems; charges for supplies,
equipment, tools and materials necessary for operation of the
Building; charges for exterminating services, security services,
rubbish and snow removal and telephone service; landscaping costs;
administrative and overhead expenses; and management fees. The term
"Operating Expenses" does not include: (i) depreciation of the
Building or equipment, (ii) mortgage interest and principal payments,
(iii) real estate brokerage and leasing commissions, (iv) costs or
other items included within the meaning of the term "Real Estate
Taxes", (v) costs of alteration of the premises of other tenants of
the Building, (vi) any cost which Landlord incurs which is charged
directly to the tenant on whose behalf it is incurred (whether or not
the same shall finally be paid), or for which Landlord otherwise is
compensated, including costs for which Landlord receives reimbursement
from insurance proceeds, (vii) income, profit, franchise, corporate,
capital stock, estate, inheritance and any other taxes imposed on, or
measured by, the income of Landlord from the operation of the Building
or imposed in connection with any change of ownership of the Building,
(viii) costs
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<PAGE>
of Landlord's leasing activities, including costs of tenant
improvements, renovations, decorations and alterations made at the
initiation, or in connection with the renewal, of any lease, and (ix)
costs or other items included within the meaning of the term "Utility
Expenses". If the aggregate space in the Building is not 100% occupied
by Tenants during all or a portion of any year, then Landlord shall
make appropriate adjustment for such year of those components of
expenses which may vary, depending upon the occupancy level of the
Building, employing generally accepted accounting principles so that
all of such variable components of Operating Expenses paid or incurred
by Landlord are ratably allocated to the Tenants then occupying space
in the Building. Any such adjustment shall also be deemed expenses
paid or incurred by Landlord and included in Operating Expenses for
such year, as if the Building had been 100% occupied and the Landlord
had paid or incurred such expenses. Notwithstanding any of the above
Tenant will not pay any operating expenses.
(iii) "UTILITY EXPENSES" means any and all expenses and
charges for heat, light, power, steam and/or other utilities and/or
fuels for the Building. No utility charges will be billed to tenant
except in accordance with paragraph D below.
(iv) "TENANT'S PROPORTIONATE SHARE" equals 1.5% and is
based upon 1.276 divided by 80.233 and rounded. In the event Tenant
leases the Expansion Premises, its proportionate share shall increase
to 2.8%.
(v) "TAX AND OPERATING EXPENSE STATEMENTS" means written
statements, certified by Landlord, showing the amounts of Real Estate
Taxes, Operating Expenses and Utility Expenses for each calendar year
which includes any portion of the Term or any renewal or extension
thereof.
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<PAGE>
D. PAYMENT OF PROPORTIONATE SHARE OF ELECTRIC. Tenant shall pay
to Landlord, as Additional Rent, Tenant's Proportionate Share of any
and all Electric Expenses which become due in any calendar year during
the Term. Any such payments will be prorated for the first calendar
year and last calendar year of the Term. LANDLORD ESTIMATES 1994
ELECTRIC CHARGES TO BE $1.88 PER SQUARE FOOT.
E. Payment. All Additional Rent will be payable in monthly
installments, in advance, on the first day of each calendar month
during the Term and any extensions or renewals thereof. The amount of
the monthly installments will be estimated by Landlord and may be
increased by Landlord at any time Landlord believes such adjustment to
be necessary or appropriate to fully cover current Electrical
Expenses. At the end of each fiscal year of Landlord, Landlord will
compute the Electrical Expenses incurred during that year and any
prior year in which Landlord failed to collect Tenant's Proportionate
Share of Electrical Expenses and will deliver to Tenant a Tax and
Operating Expense Statement for such year(s). If the installments paid
by Tenant during that year are less than the Additional Rent due under
this SECTION 6 for such year, the difference will be paid to Landlord
within thirty (30) days following delivery of the statement. If the
installments paid by Tenant during that year are more than the
Additional Rent due for such year, at Tenant's option, the difference
either will be held by Landlord and applied against the next
installment(s) of additional rent falling due or will be repaid within
thirty (30) days following delivery of the statement.
7. Method of Measurement: The term "Leasable Area", as used herein,
shall refer to the area or areas of space within the Building determined as
follows:
A. Leasable Area on a single-tenancy floor is determined by
measuring from the extended plane of the inside surface of the outer
glass to the extended plane of the inside surface of the opposite
outer glass bounded by the intersections of such planes, and shall
include all areas within such plans excluding vertical penetrations
such as building stairs, fire towers, elevator shafts, flues, vents,
stacks, pipe shafts and vertical ducts. Vertical penetrations which
are for the specific use of Tenant, such as special stairs or
elevators, shall be included as Leasable Area; and
B. Leasable Area for a particular floor shall include all space
within the demising walls (measured for the midpoint of demising walls
and, in the case of exterior walls, measured as defined in 7.A
above), plus 19%, which is Tenant's proportionate share of the Common
Areas, such as elevator lobbies, corridors, toilet and mechanical
rooms, telephone and electrical closets and service areas on such
floors. Tenant's Common Area charge is 204 square feet and is included
in Leasable Area.
No deductions from Leasible Area shall be made for projections necessary to the
Building. The Leasable Area in the Premises has been calculated on the basis of
the foregoing definition and is hereby stipulated for all purposes hereof to be
1276 square feet, whether the same should be more or less as a result of minor
variations resulting from actual construction and completion of the Premises for
occupancy, so long as such work is done in accordance with the terms and
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<PAGE>
provisions hereof.
8. Security Deposit: Simultaneously with the execution of this Lease,
Tenant has paid to Landlord the sum of TWO THOUSAND AND NO/100 DOLLARS
($2.000.00), to be held by Landlord without interest as a security deposit for
the full and faithful performance by Tenant of the terms and conditions of this
Lease. Landlord may utilize such part of the security deposit as is necessary to
cure any default of Tenant under this Lease and in such event Tenant shall
immediately replace such portions as may be expended by Landlord. Upon the
expiration of this Lease (except arising due to a default by Tenant), delivery
of the Premises to Landlord in their original condition, ordinary wear and tear
excepted, and payment to Landlord of Tenant's Additional Rent for the final
calendar year of this Lease, then the security deposit shall be returned to
Tenant without interest. Upon any conveyance of the Building by Landlord to a
successor in title, the successor shall become liable to Tenant for the return
of the security deposit and the conveying party released for same, provided that
estoppel prepared by Landlord notes credit due Tenant for such Security Deposit.
Landlord shall not be required to hold the security deposit in any special
account for the benefit of the Tenant and the security deposit may be commingled
with Landlord's funds. In the event any installment of Base Rent or other
charges accruing under this Lease shall not be paid when due (including the
return of any of Tenant's checks for insufficient or uncollected funds or
otherwise), the Landlord shall have the right, at the Landlord's sole
discretion, to require the Tenant to place with Landlord an additional security
deposit (in excess of the original security deposit), of up to two installments
of then current Base Rent, which sum shall become a part of the original
security deposit. The rights of the Landlord shall in no way be limited or
restricted by the security deposit, and the Landlord shall have the absolute
right to pursue any available remedies to protect its interests herein, as if
the security deposit had not been made.
9. USE: Tenant shall use the Premises for purposes of general offices
and no other purpose whatsoever. Tenant shall not overload, damage or deface
the Premises or do any act which may void or render voidable any insurance on
the Premises or the Building or which may increase insurance premiums. Tenant
shall comply with all federal, state and municipal laws and ordinances relating
to the use, condition or occupancy of the Premises. Tenant shall not occupy or
use the Premises for any for any business or purpose which is unlawful,
disreputable for deemed by Landlord to be hazardous or a nuisance.
10. IMPROVEMENTS:
A. If Landlord has agreed to do any work in the Premises in
preparation for Tenant's occupancy, the nature and extent of, and the
payment for, that work will be as set forth in attached Exhibit B.
Exhibit B is intended to include all Tenant improvement work on the
Premises, whether within or beyond the Standard Basic leasehold
Improvements established by Landlord and whether to be performed or
paid for by Landlord or Tenant and shall hereinafter be referred to as
the "Work."
B. Landlord and Tenant have reviewed and approved the
attached single line drawing floor plan layout (set forth in Exhibit
A), together with the attached Schedule of Building Standards set
forth in attached Exhibit B. Tenant covenants and agrees to deliver to
Landlord within Ten (10) days from the date of this Lease a detailed
floor plan
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<PAGE>
of desired tenant improvements to be constructed and or installed
within the Premises (in addition to the standard work to be performed
by Landlord described in Exhibit B), together with working drawings
and written specifications (collectively "Tenant's Plans")
sufficiently detailed to enable Landlord to obtain firm contracts,
order any special items and secure a building permit. Tenant's Plans
are subject to the approval of Landlord.
C. All work involved in completing the Premises in
accordance with Tenant's Plans (including the purchase of the required
materials and equipment) shall be carried out by Landlord's contractor
under the sole direction of Landlord. Tenant shall cooperate with
Landlord and its contractor upon request to promote the efficient and
expeditious completion of such work. Tenant shall be responsible for
and pay for the work set forth in Tenant's Plans, to the extent that
the same exceeds the work for which Landlord is responsible in Exhibit
B. No credits are given or implied.
D. In the event the Premises are not ready for occupancy
within five (5) days after the Commencement Date of this Lease due to
(i) Tenant's request for work in excess of Building Standards, or
(ii) any changes in Tenant's Plans requested by Tenant then the term
of this Lease shall be deemed to have commenced from the Commencement
Date stipulated herein.
11. ALTERATION, ADDITIONS OR IMPROVEMENTS: Tenant will not make nor
allow to be made any alterations, additions, removals, improvements or physical
additions in or to the Premises without the prior written consent of Landlord.
Unless otherwise provided by written agreement, all such consented alterations,
additions or improvements shall be done either by, or under the direction of,
Landlord, but at the sole cost of Tenant, and shall upon installation at
Landlord's option (i) become the property of Landlord and shall remain upon and
be surrendered with the Premises, or (ii) be removed therefrom the Premises
shall be restored by Tenant to their original condition, reasonable wear and
tear excepted, at the sole expense of the tenant at the expiration or sooner
termination of the Lease. Tenant shall have no right or power to create
mechanics' liens on the Building or underlying property, shall so advise any
suppliers of material or labor for work on the Premises, and shall save harmless
Landlord on account of claims for mechanic's, materialmen's or other liens in
connect with any alteration, additions or improvements made by Tenant. The
Landlord may (i) alter, add to, subtract from, construct improvements on,
re-arrange, and construct additional facilities in, adjoining or proximate to
the Building; (ii) relocate the facilities and improvements in or comprising the
Building; (iii) do such things on or in the Building as required to comply with
any laws, by-laws, regulations, orders or directive affecting the Building or
any part thereof; and (iv) do such other things on or in the Building as the
Landlord, in the use of good business judgment, determines to be advisable. The
Landlord shall not be in breach of its covenants for quiet enjoyment or liable
for any loss, costs or damages, whether direct or indirect, incurred by the
Tenant due to any of the foregoing, provided that Landlord uses reasonable care
so as to minimize the impact to Tenant.
12. MAINTENANCE END REPAIR:
A. Landlord shall provide for the cleaning and maintenance
of the Building. including painting and landscaping surrounding the
Building, in keeping with the usual
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<PAGE>
standard for similar office buildings. Landlord shall not be
required to maintain or repair any non-building standard or special
tenant improvements installed by Tenant in or about the Premises,
unless otherwise approved by Landlord, identifying same.
B. The first installation of electric light lamps in the
Premises will be made by the Landlord in the manner and of the style
and voltage customary in the Building. Thereafter, the Tenant shall
replace and maintain such installation of electric light lamps and
shall be liable for any damage from overloading of any of the
lighting circuits in, or leading to, the Premises, absent latent
defects existing on the Commencement Date.
C. Tenant shall keep and maintain the Premises in good
repair and condition, reasonable wear and tear, damage by fire and
other casualty excepted. Tenant shall not commit nor allow any waste
or damage to be committed on any portion of the Building or Premises.
If any repairs or replacements to the Premises are required by the
acts, whether of commission or omission, of Tenant or Tenant's agents,
employees, invitees, or visitors, Tenant shall pay Landlord the costs
and expenses of such repairs or replacement plus a 15%
administration fee, as additional rent to Landlord upon 30 days
notice.
13. SERVICES: So long as Tenant is not in default hereunder, the
Landlord shall, at its own cost and expense, furnish to the Tenant the
following services, utilities, supplies and facilities to the extent normally
furnished in similar office buildings:
(A) Access to the Premises twenty-four (24) hours a day, seven (7)
days a week.
(B) Freight and passenger elevator service as reasonably required by
the Tenant.
(C) Electricity for lighting and for normal operation of standard
office machines, appliances and equipment, heat, ventilation and air
conditioning ("HVAC") on weekdays (holidays excepted) from 8:00 a.m.
to 6:00 p.m. and on Saturdays from 8:00 a.m. to 1:00 p.m., and at the
Tenant's request, at all other times as hereinafter provided in this
Section. The Landlord shall furnish electricity and HVAC beyond the
above stated hours, provided that notice requesting such service is
delivered to the Landlord before noon on the business day when such
service is required for that evening, and by noon of the preceding
business day when such service is required on a Saturday, Sunday or
holiday by the Tenant. The Landlord's cost of supplying such
additional service shall be free to the Tenant except in the event
that the Landlord changes the policy and begins charging other tenants
in a nondiscriminatory manner. In this case, the Landlord shall bill
the Tenant on or before the last day of the month following the month
in which such charges are incurred (not to exceed $15.00 per hour),
and shall submit with its invoice a tabulation of the hours and the
dam on which the overtime electricity and HVAC was furnished. The
Tenant shall reimburse the Landlord therefor within fifteen (15) days
after receipt of the invoice.
(D) Cleaning and janitorial services, including removal of refuse and
rubbish and furnishing washroom supplies.
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<PAGE>
Landlord reserves the right to stop the supply of utilities, supplies
and facilities without hereby incurring liability to Tenant when necessary by
reason of accident or emergency or for repairs, alterations, replacement or
improvements which are, in the reasonable judgment of Landlord, desirable or
necessary, or when prevented from supplying such services by strikes, lockouts,
energy shortages, difficulty of obtaining materials, governmental regulation,
accidents, or any other cause beyond Landlord's control, or bylaws, orders or
inability by exercise of reasonable diligence to obtain electricity, water, gas,
steam coal, oil or other suitable fuel or power. No diminution or abatement of
Base Rent or Additional Rent or other compensation shall or will be claimed by
Tenant unless demised premises is untenantable as a result of Landlord's action,
nor shall this Lease or any of the obligations of Tenant be affected or reduced
by reason of any such interruption, curtailment or suspension, provided that
Landlord uses reasonable efforts to correct such situations in a timely manner.
14. RULES AND REGULATIONS OF BUILDING: Tenant shall comply with the
Rules and Regulations of the Building with respect to safety, care, cleanliness
and preservation of good order in the Building that Landlord may establish from
time to time for tenants of the Building. Landlord shall not be liable to Tenant
for any failure of any other tenants of the Building to comply with such Rules
and Regulations, attached hereto as Exhibit C, but will use its best efforts to
enforce such rules in a nondiscriminatory manner.
15. PASSES: No passes are needed for this property.
16. EXTRAORDINARY EQUIPMENT: Without the prior written consent of
Landlord and Tenant's prior written agreement to pay related additional costs
and expenses, Tenant shall not install or maintain any apparatus or devices
which will increase the usage of electrical power, steam, gas or other fuel for
the Premises to an amount greater than would be required for normal general
office use for space of comparable size.
17. LANDLORD'S ACCESS: Landlord and Landlord's mortgagee(s) shall
have the right at all times during the Term given at least 24 hours notice
(except in the case of emergency which shall not require notice) to enter the
Premises to inspect the condition thereof, to show the Premises to prospective
new tenants or purchasers of the Building, to determine if Tenant is performing
its obligations under this Lease and to perform the services or to make the
repairs and restoration that Landlord is obligated or elects to perform or
furnish under this Lease, to make repairs to adjoining space, to cure and to
remove from the Premises any improvements thereto or property placed therein in
violation of this Lease. In furtherance of such rights, Landlord shall retain a
key to the Premises and Tenant shall not install any new locks tO the Premises
without the prior written consent of Landlord and furnishing Landlord with a
copy of such key. No entry into the Premises by the Landlord pursuant to a
right granted by this Lease shall constitute a breach of any covenant for quiet
enjoyment, or (except where expressed by the Landlord in writing) shall
constitute a retaking of possession by Landlord or forfeiture of Tenant's
rights hereunder.
18. INSURANCE: Landlord shall maintain during the Term fire and
extended coverage insurance insuring the Building and Premises against damage
or loss from file or other casualty normally insured against under the terms of
standard policies of fire and extended coverage
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<PAGE>
insurance. Landlord may, at its option, preserve and maintain such other
insurance coverages as it may require in its discretion. Tenant shall be
responsible for providing, at Tenant's own expense:
A. Liability insurance with companies and in form satisfactory
to Landlord naming Landlord and Landlord's mortgagee(s) as additional
insureds thereunder as their interest may appear and providing
coverage of at least $1,000,000 single limit coverage and $1,000,000
aggregate coverage for any single incident; and
B. Contents insurance for fire, water, damage or other casualty
and theft covering all of the Tenant's stock in trade, fixtures,
furnishings, floor coverings, equipment or any other improvements
beyond the improvements for which Landlord is responsible pursuant to
attached EXHIBIT B, in an amount equal to the replacement value
thereof.
Tenant will furnish Landlord evidence of coverage and payment of premiums at
all times.
19. FIRE OR OTHER CASUALTY: If the Building is damaged or destroyed
by fire or other casualty, the Landlord shall have the right to terminate this
Lease upon delivery of written notice to the Tenant within ninety (90) days
after such damage or destruction. If a portion of the Premises is damaged by
fire or other casualty, and this Lease is not thereby terminated, the Landlord
shall, at its expense, restore the Premises, exclusive of any improvements or
other changes made to the Premises by the Tenant, to as near the condition
which existed immediately prior to such damage or destruction, as reasonably
possible, and rent shall abate during such period of time as the Premises are
untenantable, in the proportion that the untenantable portion of the Premises
bears to the entire Premises. The Landlord shall not be responsible to the
Tenant for damage to, or destruction of, any furniture, equipment, improvement,
or other changes made by the Tenant in, on or about the Premises regardless of
the cause of the damage or destruction.
20. WAIVER OF SUBROGATION: Landlord and Tenant shall each use best
efforts to obtain from their respective insurers under all policies of fire
insurance maintained by either of them at any time during the Term insuring or
covering the Building or any portion thereof or operations therein, a waiver of
all rights of subrogation which the insurer of one party might have against the
other party, and Landlord and Tenant shall each indemnify the other against any
loss or expense, including reasonable attorney's fees, resulting from the
failure to obtain such waiver and, so long as such waiver is outstanding, each
party waives, to the extent of the proceeds received under such policy, any
right of recovery against the other party for any loss covered by the policy
containing such waiver; provided, however, that if at any time their respective
insurers shall refuse to permit waivers of subrogation, Landlord or Tenant, in
each instance, may revoke said waiver of subrogation effective thirty (30) days
from the date of such notice, unless within such thirty (30) day period, the
other is able to secure and furnish (without additional expense) equivalent
insurance with such waivers with other companies satisfactory to the other
party.
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21. EMINENT DOMAIN: If the entire Building is taken by eminent domain,
this Lease shall terminate automatically as of the date of taking. If a portion
of the Building is taken by eminent domain, Landlord shall have the right to
terminate this Lease by giving written notice thereof to Tenant within ninety
(90) days after the date of taking. If a portion of the Premises is taken by
eminent domain and the Landlord does not terminate this Lease, the Landlord
shall restore Premises, exclusive of any improvements or other alterations to
the Premises made by Tenant, to as near the condition which existed immediately
prior to such damage or destruction, as reasonably possible, and rent shall
abate during such period of time as the Premises are untenantable, in the
proportion that the untenantable portion of the Premises bears to the entire
Leasable Area of the Building. Landlord shall, in any event, be entitled to
receive and to retain as its own, any award payable from such taking and the
Tenant disclaims any right to participate in such award to make a claim against
the award for the loss of its leasehold: provided, the Tenant may make a
separate claim against the condemning authority for loss of its trade fixtures,
moving expenses and loss of business, if such claim will not reduce the award
payable to the Landlord.
22. LIGHT AND AIR: Tenant has no right to light or air over any
premises adjoining the Building.
23. LIENS: Tenant shall not permit any mechanic's, materialmen's or
other liens to attach to the Premises, the Building, or the land on which the
Building lies and agrees immediately to discharge (either by payment or by
filing of the necessary bond, or otherwise) any mechanic's, materialmen's or
other lien which is alleged, attached or placed against any of the foregoing,
arising out of work performed by direction of Tenant.
24. INDEMNITY: Except for Landlord's gross negligence or willful
misconduct, Tenant hereby waives all claims against Landlord and Landlord's
agents and employees, for damage to any property or injury or death of any
person in, upon or about the Premises arising at any time and from any cause
whatsoever, and Tenant shall indemnify and hold Landlord and Landlord's
officers, directors, agents and employees harmless from any damage to any
property or injury to or death of any person arising from the use of the
Premises by Tenant. The foregoing indemnity obligation of Tenant shall include
reasonable attorney's fees, investigation costs and all other reasonable costs
and expenses incurred by Landlord and Landlord's agents and employees from the
first notice that any claim or demand is to be made or may be made. The
provisions of this SECTION 24 shall survive the termination of this Lease with
respect to any damage, injury or death occurring prior to such termination.
Landlord shall not be liable for any damage of any kind or for any damage to
property, death or injury to persons from any cause whatsoever by reason of the
use and occupancy of the Premises by Tenant.
25. WAIVER OF COVENANTS: Failure of Landlord to insist, in any one or
more instances, upon strict performance of any term, covenant or condition of
the Lease, or to exercise any option herein contained, shall not be construed
as a waiver, or an relinquishment for the future, of such term, covenant,
condition or option, but the same shall continue and remain in full force and
effect. The receipt by Landlord of rents with knowledge of a breach in any of
the terms, covenants or conditions of this Lease to be kept or performed by
Tenant shall not be deemed a waiver of any such breach, and Landlord shall not
be deemed to have waived any provision of
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this Lease unless expressed in writing and signed by Landlord.
26. RELOCATION: Landlord shall have the right to relocate Tenant to
comparable quarters with comparable expansion premises (if applicable) within
the Building upon at least sixty (60) days prior written notice to Tenant. Any
and all reasonable Costs incurred by Tenant in the event of such relocation
(included but not limited to Tenant's moving and relocation Costs plus
stationery reprints) and which have been agreed to in writing prior to the
move, shall be paid by Landlord at its sole cost.
27. SUBORDINATION BY TENANT: This Lease, and Tenant's rights
hereunder, are hereby made expressly subject and subordinate to any and all
mortgages, deeds of trust, restrictions, ground or underlying leases affecting
all or any portion of the Premises which are currently in existence or which may
hereafter be created by Landlord, or its successors or assigns, including any
and all extensions, modifications, consolidations, renewals, substitutions, and
amendments thereof, and to any and all advances made or to be made under same.
Tenant agrees to execute any instrument or instruments which the Landlord may
deem necessary or desirable to further evidence the foregoing subordination.
Tenant hereby irrevocably appoints Landlord as attorney-in-fact for Tenant with
full power and authority to execute and deliver in the name of Tenant any such
instrument which appointment shall be deemed coupled with an interest and
irrevocable. Further agrees to make such reasonable modifications to this Lease
(not increasing Tenant's obligations hereunder) as may be required by the holder
of any such mortgage, deed of trust, ground or underlying lease. Landlord agrees
to use reasonable efforts to secure a subordination, nondisturbance and
attornment agreement so that possession of Tenant is not disturbed in the event
of Landlord foreclosure, unless Tenant is in default under its Lease.
28. TENANT TO SURRENDER PREMISES IN GOOD CONDITION: Upon expiration
or termination of the lease Term, Tenant shall, at its expenses:
A. Remove Tenant's goods and effects and those of all persons
claiming under Tenant.
B. Quit and deliver upon the Premises to Landlord, peaceably and
quietly, in as good order and condition as the same existed on
the date the Term commenced, or were thereafter placed in by
Landlord, reasonable wear and tear and damage by fire and other
casualty excepted.
C. At the Landlord's request, restore the Premises to general
Building Standards adopted by Landlord for general application
through the Building.
Any property left in the Premises after the expiration or termination of the
Term shall be deemed to have been abandoned and then becomes the property of
Landlord to be disposed of in a lawful manner.
29. HOLDING OVER: If, with Landlord's written consent, Tenant remains
in possession of the Premises after the expiration or other termination of the
Term, Tenant shall be deemed to be occupying the Premises on a month-to-month
tenancy at a rental rate as stated in the written consent. Such month-to-month
tenancy may be terminated by Landlord or Tenant on the last day of any calendar
month by delivery of at least thirty (30) days advance notice of
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termination to the other. If, without Landlord's written consent, Tenant
remains in possession of the Premises after the expiration or other termination
of the Term, Tenant shall be deemed to be occupying the Premises upon a tenancy
at sufferance at a monthly rental equal to 1.5 times the Rent determined in
accordance with SECTIONS 4, 5 and 6.
30. DEFAULT: Tenant covenants and agrees that any of the following
events shall be a default under this Lease: (i) if any false or materially
misleading financial report or statement is furnished or made by or on behalf
of Tenant; or (ii) if any Base Rent or Additional Rent is in arrears; or (iii)
if Tenant fail to perform or observe or breach any covenant, condition or
agreement to be performed or observed by such party hereunder and Tenant shall
not have cured same within 15 days after Landlord's written notice thereof, or
shall be in breach of any other lease with Landlord or in breach of or in
default in the payment and/or performance of any obligation owing to Landlord,
whether or not related to this Lease and howsoever arising, whether by
operation or law or otherwise, present or future, contracted for or acquired,
and whether joint, several, absolute, contingent, secured, unsecured, matured
or unmatured; or (v) if Tenant shall cease doing business as a going concern,
make an assignment for the benefit of creditors, generally not pay its debts as
they become due, admit in writing its inability to pay its debts as they become
due, become insolvent (i.e. greater liabilities than assets), or take any
action looking to its dissolution or liquidation; or (vi) if Tenant should file
for relief, or have filed against them, an action under any provision of any
state or federal bankruptcy or insolvency law; or (vii) if Tenant shall abandon
or vacate the Premises and fail to pay rent hereunder; or (viii) if Tenant
fails to pay all charges for gas, sewer, electricity and other utilities which
are separately metered for the Premises within five (5) days after such are due;
or (ix) if Landlord determines, in its reasonable discretion, that unpleasant
noises or odors emanate from the Premises and Tenant does not take immediate
steps to eliminate such noises and/or odors or fails to eliminate such noises
and odors permanently within five (5) days of notice from Landlord,
In the event of any such default, Landlord may, at its option, elect
any of the following remedies:
(a) Re-take and recover possession of the Premises, terminate
this Lease, and retain Tenant's security deposit.
(b) Re-take and recover possession of the Premises, without
terminating this Lease, in which event Landlord may re-rent
the Premises as agent for and for the account of Tenant and
recover from Tenant the difference between the rental
herein specified and the rent provided in such re-rental,
less all of Landlord's costs and expenses of re-renting
including, without limitation, reasonable attorneys' fees
plus all other sums due hereunder.
(c) Permit the Premises to remain vacant in which event Tenant
shall continue to be responsible for all rental and other
payments due hereunder.
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(d) Re-take and recover possession of the Premises, and
accelerate and collect all rent due hereunder for the
balance of the term of this Lease.
(e) Take any other action as may be permitted under applicable
law.
All of the Landlord's remedies contained in this lease shall be cumulative and
election by Landlord to take any one remedy shall not preclude Landlord from
taking any other remedy not by its nature absolutely incompatible with any
previously or contemporaneously elected remedy. The Landlord may, at its option,
apply any sums received from the Tenant against any amounts due and payable by
the Tenant under this Lease in such manner as the Landlord sees fit and
regardless of the express purpose for which the tender was made and regardless
of any endorsement placed on the check by which payment is made. The Tenant
expressly waives the service of any demand for the payment of rent or for
possession and the service of any notice of the Landlord's election to terminate
this Lease or to re-enter the Premises, including any and every form of demand
and notice prescribed by a statute or other law, and agrees that the simple
breach of any covenant or provision of this Lease by the Tenant shall, of
itself, without the service of any notice or demand whatsoever, constitute a
forcible detainer by the Tenant of the Premises within the meaning of the
statutes of the State of Florida.
31. LANDLORD'S RIGHT TO CURE DEFAULTS: If Tenant defaults in the
observance or performance of any of Tenant's covenants, wherein the default can
be cured by the expenditure of money, Landlord may, but
without obligation, and without limiting any other remedies which it may have by
reason of such default, cure the default, charge the cost thereof to Tenant, and
Tenant shall pay the same, including any and all attorney's fees incurred by
Landlord in during such default forthwith as Additional Rent upon demand,
together with interest thereon at 12% per annum.
32. PAYMENTS AFTER TERMINATION: No payment of money by the Tenant to
the Landlord after the termination of this Lease, in any manner, or after the
giving of any notice by the Landlord to the Tenant shall reinstate, continue or
extend the terms of this Lease or affect any notice given to the Tenant prior
to the payment of such money, it being agreed that after the service of notice
or the commencement of a suit or after final judgment granting the Landlord
possession of said Premises, the Landlord may receive and collect any sums of
rent due or any other sums of money due under the terms of this Lease, and the
payment of such sums of money, whether as rent or otherwise, shall not waive
said notice or in any manner affect any pending suit or any judgment
theretofore obtained. Tenant expressly waives any right to redemption or
reinstatement of the Premises.
33. NOTICES: Each notice required or permitted to be given hereunder
by one party to the other shall be in writing with a statement therein to the
effect that notice is given pursuant to this Lease and the same shall be given
and shall be deemed to have been delivered, served, and given if delivered in
person or placed in the United States Mail, postage prepaid, by United States
registered or certified mail, addressed to such party at the address provided
for such party herein. Any notices to Landlord shall be addressed and given to
Landlord as follows: RIMCO
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XII, INC., 27777 Inkster Rd., P.O. Box 9065, Farmington Hills, MI 48333-9065,
Attn: John F. Regan, Treasurer.
Prior to the Commencement Date, the address for notices to Tenant
shall be the address set forth for Tenant on the 1ST page of this Lease; after
the Commencement Date, the address for Tenant shall be the Premises. The
addresses stated above shall be effective for all notices to the respective
parties until written notice of a change in address is given.
34. INTERPRETATION: The captions, sections, clauses, article numbers,
section numbers and table of contents, if any, of this Lease are inserted for
convenience only and in no way limit, enlarge, define or otherwise affect the
scope or intent of the Lease or any provision thereof. The parties hereto
intend that the interpretation and enforcement of this Lease be governed by the
laws of the State of Florida. If there is more than one Tenant, the obligations
and liabilities hereunder imposed upon Tenant shall be joint and several. The
words "Landlord" and "Tenant" shall also extend to and mean the successors in
interest of the respective parties hereto and their permitted assigns although
this shall not be construed as conferring upon the Tenant the right to assign
this Lease or sublet the Premises or confer rights of occupancy upon anyone
other than Tenant. All charges due from Tenant to Landlord hereunder, including,
without limitation, any charges against Tenant by Landlord for services or work
done on the Premises by order of Tenant, except sales tax, shall be deemed
Additional Rent, shall be included in any lien for rent, and shall be paid
(including sales tax) without setoff or defense of any kind. This Lease has been
fully negotiated and reviewed by the parties and their counsel and is the work
product of both Landlord and Tenant; it shall not be more strictly construed
against either party. Provisions inserted herein or affixed hereto shall not be
valid unless appearing in the duplicate original hereof held by the Landlord
and initialled by the parties hereto. In the event of variation or discrepancy,
the Landlord's duplicate shall control. This Lease and the exhibits, schedules,
addenda, riders, and guaranty, if any, attached hereto are incorporated herein
and set forth the entire agreement between the Landlord and Tenant concerning
the Premises and Building and there are no other agreements or understandings
between them. This Lease and its exhibits, schedules, addenda, riders, and
guaranty, if any, may not be modified except by agreement in writing executed by
the Landlord and Tenant. Nothing in this Lease creates any relationship between
the parties other than that of lessor and lessee and nothing in this Lease
constitutes the Landlord a partner of the Tenant or a joint venturer or member
of a common enterprise with the Tenant.
35. ASSIGNMENT AND SUBLETTING: Tenant will not assign, mortgage, pledge,
or hypothecate this, or any interest therein, nor shall Tenant permit
the use of the Premises by any person or persons other than Tenant, nor shall
Tenant sublet the Premises, or any part thereof, without the express written
consent of Landlord, which shall in all respects be subject to the provisions
of this SECTION 35. Any sale of stock of Tenant (if a corporation), assignment
of partnership interest (if a partnership), assignment of beneficial interest
(if a trust), or other device which has the effect of transferring the practical
benefits of this Lease from the parties currently controlling Tenant, shall be
deemed a transfer of Tenant's rights requiring Landlord's consent as herein
provided. Landlord's written consent to any assignment or subletting shall not
operate to release Tenant from its obligations hereunder, nor operate as a
waiver of the necessity for a consent to any subsequent assignment or
subletting, and the terms of such consent shall be binding upon any person
holding by, under or through Tenant. In the event Tenant desires to
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sublease the Premises, or assign this Lease, Tenant shall submit to Landlord
the name of the proposed sub-tenant or assignee, along with sufficient
background and credit information to enable Landlord to determine the
qualifications of the proposed sub-tenant or assignee. Landlord shall notify
Tenant of the acceptance or rejection of the proposed sub-tenant or assignee
within ten (10) business days following the receipt by Landlord of the
aforesaid information. In the event Landlord reasonably rejects the proposed
sub-tenant or assignee, Landlord shall state the reasons for such rejection and
the burden of overcoming the reasons for the rejection shall be that of the
Tenant or proposed sub-tenant or assignee. Notwithstanding anything contained
herein to the contrary, the acceptance by Landlord of any prospective sub-tenant
or assignee is contingent upon both Tenant and the prospective subtenant or
assignee executing an affidavit, attaching a true and complete copy of the
sublease or assignment, and stating all terms of the sublease or assignment
including all consideration paid or to be paid under the sublease or assignment.
To the extent that the total consideration to be paid under the sublease or
assignment exceeds the total consideration that would have been paid by Tenant
pursuant to the terms of this Lease, Landlord may require, as a condition of its
approval of the sub-tenant or assignee, that all or any portion of said economic
benefit be paid directly to Landlord. Tenant shall not advertise that the
Premises or any part thereof is available for subletting, or that this Lease is
available for assignment nor shall Tenant cause any broker or other party to do
so unless the text and format of such advertisement is approved, in writing, by
Landlord, which consent shall not be unreasonably withheld. No such
advertisement shall contain any reference to the rental rate.
36. COMMISSIONS: Tenant represents and warrants that there are no
claims for brokerage commissions or finder's fees in connection with the
execution of this Lease except for JMB Properties Company and Dan Casey and
Associates, Inc. and Tenant agrees to indemnify the Landlord against and hold it
harmless from all liabilities arising from any such claim. It is recognized by
Landlord that the Tenant is represented by Dan Casey and Associates, Inc., who
owes its fiduciary duty to Tenant, and will earn upon execution of the Lease by
Landlord (or upon expansion or renewal as stipulated on
the Addendum to Lease), a four percent commission of Base Rents for term of the
lease, payable by Landlord within ten days of Landlord's execution. JMB
Properties, Inc., owing their fiduciary to Landlord, shall be paid a commission
under separate agreement with Landlord.
37. NON-LIABILITY OF LANDLORD:
A. Landlord and/or its successors in interest shall have the
right to transfer and assign, in whole or in part, all and every
feature of Landlord's rights and obligations hereunder as part of a
conveyance of the Building and underlying property. In the event the
Landlord hereunder or any successor owner of the Building shall sell
or convey the Building, all liabilities and obligations on the part
of the original Landlord or such
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successor owner under this Lease accruing thereafter, shall terminate, and
thereupon all such liabilities and obligations shall be binding upon the new
owner. Tenant shall attorn to such new owner.
B. Landlord shall not be responsible or liable to Tenant for
any loss or damage that may be occasioned by or through the acts or
omissions of persons occupying adjoining areas or any part of the
area adjacent to or connected with the Premises or any part of the
Building or for any loss or damage resulting to Tenant or his
property from theft or a failure of the security systems in the
Building, or for any damage or loss of property within the Premises
from any other cause whatsoever, except for Landlord's gross
negligence or willful misconduct, and no such occurrence shall be
deemed to be an actual or constructive eviction from the Premises or
result in an abatement of rental.
C. If Landlord shall fail to perform any covenant, term or
condition of this Lease upon Landlord's part to be performed, and, if
as a consequence of such default, Tenant shall recover a money
judgment against Landlord, such judgment shall be satisfied only
against the right, title and interest of Landlord in the Building and
out of rents or other income from the Building receivable by Landlord,
or out of the consideration received by Landlord from the sale or
other disposition of all or any part
of Landlord's right, title and interest in the Building, and Landlord
shall not be liable for any deficiency.
38. INABILITY TO PERFORM: If, by reason of the occurrence of
unavoidable delays due to acts of God, governmental restrictions, strikes, labor
disturbances, shortages of materials or supplies or for any other cause or event
beyond Landlord's reasonable control, Landlord is unable to furnish or is
delayed in furnishing any utility or service required to be furnished by
Landlord under the provisions of this Lease or any collateral instrument, or is
unable to perform or make or is delayed in performing or making any
installations, decorations, repairs, alterations, additions, or improvements,
whether required to be performed or made under this Lease or under any
collaterally ground lessor and their successors and assigns harmless from and
against any cost, claim, damage, expense or liability of any kind whatsoever
including, but not limited to, attorney's fees and costs at all tribunal levels
arising out of any act or omission of Tenant, its agents or any other person on
the Premises under color of authority of Tenant, giving rise to any toxic waste,
chemical pollution, or similar environmental hazard regardless of whether any
such act or omission is, at the time of occurrence, a violation of any law or
regulation. The foregoing indemnity shall survive the termination or expiration
of this Lease, anything else herein to the contrary notwithstanding. Landlord
warrants to the best of its knowledge that the Building is not in violation of
any federal or state laws regarding hazardous waste.
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39. ATTORNEYS' FEES AND COSTS: Tenant shall pay to Landlord all costs,
including reasonable attorneys' fees at all tribunal levels, incurred by
Landlord in enforcing this Lease or any covenant hereof in the collection of
any rent, or other sum of money, becoming due hereunder or in the recovery of
possession of the Premises, in the event of the breach by Tenant of any of the
terms or provisions of this Lease. In the event of litigation, the prevailing
party shall be awarded the reimbursement of its attorney fees.
40. TIME: Time is of the essence with respect to Tenant's obligations
under this Lease. Any time period herein specified of five days or less shall
mean business days; any period in excess of five days shall mean calendar days.
41. INDEMNITY FOR TOXIC WASTE: Tenant (and any guarantor) hereby
agree to indemnify, defend and hold the Landlord, the holder of any mortgagee
on the Building and any ground lessor and their successors and assigns harmless
from and against any cost, claim, damage, expense or liability of any kind
whatsoever including, but not limited to, attorney's fees and costs at all
tribunal levels arising out of any act or omission of Tenant, its agents or any
other person on the Premises under color of authority of Tenant, giving rise to
any toxic waste, chemical pollution, or similar environmental hazard regardless
of whether any such act or omission is, at the time of occurrence, a violation
of any law or regulation. The foregoing indemnity shall survive the termination
or expiration of this Lease, anything else herein to the contrary
notwithstanding.
42. ATTORNMENT: In the events of any foreclosure of any mortgage
encumbering the Building, or deed-in-lieu thereof, Landlord shall be released
from all liability hereunder and Tenant shall attorn to the purchaser upon any
such foreclosure or sale and recognize such purchaser as the Landlord under
this Lease. Tenant shall not be disturbed by new landlord provided that it is
not in default of the lease.
43. SIGNAGE: Tenant shall have no right to display any signage of any
kind visible from the exterior of the Premises, except for reasonable directory
information on the entrance door to the Premises and in the common areas of the
Building which shall be installed by Landlord, at Tenant's expense, in styles
and locations selected by Landlord in its sole but reasonable discretion.
44. PARKING: Tenant shall have free use of 2 covered parking spaces and
free use of 4 roof top spaces, and shall (together with its agents, employees
and invitees) make use of not more than 6 parking spaces at any one time in the
parking area for the Building. If suite 307 is leased by Tenant, then 1
additional free covered space and three additional free rooftop spaces will be
granted by Landlord.
45. RECORDING: Neither the Tenant nor anyone claiming under the Tenant
shall record this Lease or any memorandum hereof in any public records without
the prior written consent of the Landlord. At Landlord's request, Tenant shall
execute and deliver to Landlord, on Landlord's form, a memorandum of this Lease
or Notice of Lien Prohibition in accordance with
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IN WITNESS WHEREOF, the undersigned Landlord and Tenant have executed this
instrument this 24 day of June, 1994.
WITNESSES: LANDLORD:
RIMCO XII, INC.
/s/ PAULA REID By: /s/ ILLEGIBLE
- --------------------------- ------------------------------
Paula Reid
/s/ TONYA MCCRARY Its: Vice President
- -------------------------- -----------------------------
Tonya McCrary
TENANT:
OCUREST LABORATORIES, INC.
/s/ ILLEGIBLE By: /s/ ILLEGIBLE
- --------------------------- ------------------------------
/s/ ILLEGIBLE Its: Executive Vice President
- -------------------------- -----------------------------
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RULES AND REGULATIONS
1. MOVING PERSONAL PROPERTY OF TENANTS. No furniture, freight or
equipment of any kind shall be brought into or removed from the Building or any
demised premises without the consent of Landlord. All moving of same by tenants,
into or out of the Building, shall be done at such times and in such manner as
Landlord shall designate. Landlord shall have the right to prescribe the weight,
size and position of all safes and other heavy property brought into the
Building. All damage done to the Building by such moving or maintaining any such
safe or heavy property shall be repaired at the expense of the Tenant.
2. SHIPPING AND RECEIVING. No Tenant shall receive or ship articles of
any kind except through facilities and designated doors and at hours designated
by the Landlord. Hand trucks, carryalls or similar appliances shall only be used
in the Building with the consent of the Landlord and shall be equipped with
rubber tires, slide guards and such other safeguards as the Landlord requires.
3. PREVENTION OF DAMAGE TO BUILDING AND PREMISES. It shall be the duty
of every tenant to assist and cooperate with the Landlord in preventing damage
to the Building and any demised premises. If any tenant desires telegraphic or
telephonic connections, the Landlord may direct the electricians as to where and
how the wires are to be introduced. No electric wires will be permitted which
have not been authorized by the Landlord. No outside radio, television, or other
antenna shall be allowed on any part of the Building without authorization in
writing by the Landlord.
4. NUISANCE. All tenants will conduct their business, including
supervision of their agents, employees, invitees and visitors, so as not to
create any nuisance, annoyance, disturbance, excessive noise, odor or eyesore
within the Building, or on the surrounding property.
5. EXCLUSION OF PERSONS FROM BUILDING. Landlord reserves the right to
exclude or expel from the Building any person who, in the reasonable judgment
of Landlord, is under the influence of liquor or drugs, or who shall in any
manner do any act in violation of the rules and regulations of the Building.
6. COMPLIANCE WITH LAWS. All tenants will keep and maintain their
demised premises in a clean and healthful condition and comply with all laws,
ordinances, orders, rules and regulations (State, Federal, Municipal and other
agencies or bodies having any jurisdiction thereof, including rules, orders and
regulations of the Southeastern Underwriters Association for the prevention of
fires), with reference to use, conditions or occupancy of the Building or their
demised premises.
7. REPORTING ACCIDENTS. Tenants shall promptly report to Landlord any
accident of which they are aware involving personal injury or property damage
occurring within any demised premises or occurring within the public areas of
or surrounding the Building.
-22-
<PAGE>
8. LOST OR STOLEN PROPERTY. All tenants shall take their own adequate
precautions against loss or theft of personal property belonging to them and
their agents, employees and invitees, as well as any other appropriate security
precautions. Although Landlord shall not be responsible for any such
precautions, the Landlord may from time to time adopt appropriate systems and
procedures for the security or safety of the Building, any persons occupying,
using or entering the same, or any equipment, furnishings or contents thereof,
and the Tenant shall comply with the Landlord's reasonable requirements relative
thereto.
9. LOCKS. No additional or replacement locks shall be placed on any door
without the written consent of Landlord. Landlord may require that changes be
done by Landlord, at tenant's expense, and that Landlord retain a key to each
lock installed for security and safety purposes.
10. KEYS. Upon expiration of any lease, keys must be returned to the
Building manager or the leasing office, and a receipt obtained by the tenant.
In the event any tenant fails to return keys, Landlord may retain $50.00 of
tenant's security deposit for necessary locksmith work and administration.
11. PETS. No pets or animals are allowed in or around the Building or
any demised premises.
12. FIREARMS. No firearms of any kind shall be permitted in the building
or any demised premises.
13. CANVASSING, SOLICITING, PEDDLING. Canvassing, soliciting and
peddling in or about the Building are prohibited.
14. VEHICLES. No bicycles or vehicles shall be brought within any part
of the Building without the consent of the Landlord.
15. SIGNS. No sign, placard, picture, advertisement, name or notice
shall be inscribed, displayed, printed or affixed on or to any part of the
outside of the Building or to any interior public areas, or in any demised
premises so as to be visible from the outside, without the written consent of
Landlord. Landlord Shall have the right to remove any such objectionable item
without notice to and at the expense of the party so placing such item.
16. DIRECTORY BOARD. The directory of the Building will be provided
exclusively for the display of the name and location of tenants only. Landlord
reserves the right to exclude any other names therefrom.
15. (Continued from above): Landlord shall permit Tenant to install
building standard signage at the entry of the suite.
-23-
<PAGE>
17. HOUSEKEEPING. Tenants shall permit window cleaners to clean the
windows of the Building during normal business hours. Tenants shall not place
any debris, garbage, trash or refuse or permit same to be placed or left in or
upon any part of the Building or surrounding property, other than in the
location provided by the Landlord specifically for such purposes. Tenants shall
not allow any undue accumulation of any debris, garbage, trash or refuse in or
outside of the Premises.
18. WATER FIXTURES. The Tenant shall not use water fixtures for any
purpose for which they are not intended, nor shall water be wasted by tampering
with such fixtures. Any cost or damage resulting from such misuse by the Tenant
shall be paid for by the Tenant.
19. PARKING. If the Landlord designates tenant parking areas in the
Building, the Tenant shall park its vehicles and shall cause its employees and
agents to park their vehicles only in such designated parking areas. The Tenant
shall furnish the Landlord, upon request, with the current license numbers of
all vehicles owned or used by the Tenant or its employees and agents and the
Tenant thereafter shall notify the Landlord of any changes in such numbers
within five (5) days after the occurrence thereof. In the event of failure of
the Tenant or its employees and agents to park their vehicles in such designated
parking areas, the Tenant shall forthwith on demand pay to the Landlord, the sum
of TWENTY DOLLARS ($20.00) per day per each car so parked. Landlord may itself
or through any agent designated for such purpose, make, administer and enforce
additional rules and regulations regarding parking by tenants and by their
employees and agents in the Building, including, without limitation, rules and
regulations permitting the Landlord or such agent to move any vehicles
improperly parked to the designated tenant or employee parking areas. No
disabled vehicle shall be left in the parking areas of the Building for more
than 24 hours. A parking area for use by tenants of the Building will be
maintained by Landlord as a cost pass thru expense item. Landlord shall use
reasonable efforts to prevent unauthorized use of the parking area but shall not
be liable to any tenant for any such unauthorized use nor does Landlord warrant
that a parking space shall, in every event, be available for each tenant nor
shall any portion of the parking area be considered a portion of any Tenant's
demised premises. Overnight parking or repairing of vehicles in the parking area
is prohibited. No disabled vehicle shall be left in the parking area for more
than 24 hours. No vehicle shall be parked except in a "lined off" parking space.
Landlord may designate a certain portion of the parking area as reserved for one
or more specific tenants and their invitees. Landlord shall have the right to
place window stickers and/or tow any vehicles violating the Building Rules and
Regulations.
20. WINDOWS. Except for the proper use of blinds and drapes approved in
writing by Landlord, no tenant shall cover, obstruct or affix any object or
material to the windows of the Building or any demised premises that might
reflect or admit light into any part of the Building, including, without
limiting the generality of the foregoing, the application of solar films.
21. REPAIR. MAINTENANCE. ALTERATIONS AND IMPROVEMENTS. The Tenant shall
carry out Tenant's repairs, maintenance, alterations and improvements in the
Premises only during times agreed to in advance by the Landlord and in a manner
which will not interfere with
-24-
<PAGE>
the rights of other tenants in the Building.
22. PERSONAL USE OF PREMISES. The Premises shall not be used or
permitted to be used for residential, lodging or sleeping purposes or for the
storage of personal effects or property not required for business purposes.
23. OBSTRUCTIONS. The Tenant shall not obstruct or place anything in or
on the sidewalks or driveways outside the Building or in the lobbies, corridors,
stairwells or other common areas of the Building, or use such locations for any
purpose except access to and exit from the Premises without the Landlord's prior
written consent. The Landlord may remove at the Tenant's expense any such
obstruction or thing caused or placed by the Tenant (and unauthorized by the
Landlord) without notice or obligation to the Tenant.
24. EMPLOYEES. AGENTS AND INVITEES. In these Rules and Regulations,
Tenant includes the employees, agents, invitees and licensees of the Tenant and
others permitted by the Tenant to use or occupy the Premises.
25. PEST CONTROL. In order to maintain satisfactory and uniform pest
control throughout the Building, the Tenant shall engage for its own Premises
and at its sole cost, a qualified pest extermination contractor either
designated or approved by the Landlord, who shall perform pest control and
extermination services in the Premises at such intervals as reasonably required
or as may be directed by the Landlord.
26. LANDLORD NOT RESPONSIBLE FOR VIOLATIONS. Landlord is not responsible
to any tenant for the non observance or violation of the rules and regulations
by any other tenant, but will use reasonable efforts to enforce the rules.
-25-
<PAGE>
ADDENDUM TO LEASE AGREEMENT
This Addendum to Lease made and entered into this 24th day of JUNE,
1994 by and between RIMCO XII, as "Landlord" and OCUREST LABORATORIES, INC.,
"TENANT."
WITNESSETH
Whereas, Landlord and Tenant have entered into that certain Leased
dated June 24, 1994, (the "Lease"). The Lease relates to the premises located
on the third floor of the building (hereinafter referred to as the "Premises")
consisting of approximately 1,276 leasable square feet known as Suite 306 in
the Admiralty II Building, 4400 PGA Boulevard, Palm Beach Gardens, Florida
33410.
Now, Therefore, in consideration of ten dollars and mutual promises and
covenants contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto mutually agree as follows:
ARTICLE 1
LEASE BINDING: Except as hereinafter provided and modified, all of the
covenants, agreements, terms, provisions and conditions of the Lease are hereby
incorporated by reference herein and shall otherwise remain in full force and
effect and continue to be binding upon the parties. Defined terms which are not
defined herein shall have the same meaning as set forth in the Lease.
ARTICLE 2
*see below
RIGHT OF FIRST REFUSAL: Tenant shall have the ongoing Right of First
Refusal for Suite 307 until the Lease expires. In the event that Landlord shall
desire to enter into a lease for #307 with a third party, then prior to its
execution, it shall notify Tenant in writing of its intention, and outline the
basic terms and conditions of the proposed third party lease, and the Tenant
shall then have five (5) days in which to lease or not to lease the Expansion
Premises per the terms and conditions of the proposed third party lease.
Landlord's work for the preparation of suite 307, should Ocurest lease the space
as provided for in Article 2, is shown on Exhibit D.
<PAGE>
ARTICLE 4
(See attached Option to Renew)
IN WITNESS WHEREOF, LANDLORD AND TENANT HAVE DULY EXECUTED THIS AMENDMENT
TO LEASE AGREEMENT THIS DAY AND YEAR FIRST ABOVE WRITTEN.
Signed, sealed and delivered LANDLORD:
in the presence of:
RIMCO XII, INC.
/s/ PAULA M. REID By: /s/ ILLEGIBLE
- --------------------------- ------------------------------
Paula M. Reid
/s/ TONYA MCCRARY Its: Vice President
- -------------------------- -----------------------------
Tonya McCrary
Signed, sealed and delivered TENANT:
in the presence of:
OCUREST LABORATORIES, INC.
/s/ ILLEGIBLE By: /s/ ILLEGIBLE
- --------------------------- ------------------------------
/s/ ILLEGIBLE Its: Executive Vice President
- -------------------------- -----------------------------
<PAGE>
ARTICLE 4 OF ADDENDUM TO LEASE AGREEMENT DATED JUNE 24, 1994
OPTION TO RENEW
Provided that Tenant is not, in default during the Term under any of
the covenants, terms, conditions and provisions of this
Lease, then Tenant shall have the option to renew this Lease (including Suite
306 and Suite 307 if Tenant properly exercises its Expansion Option) for a
further term of three (3) years, provided that, in order to exercise this Option
to Renew, Tenant is required to give to Landlord written notice thereof not less
than six (6) months before the date of expiration of the Term of this Lease.
Any renewal pursuant to this Option shall be on the same terms and conditions as
are contained in this Lease except: (i) there shall be no additional right of
renewal; (ii) the annual Base Rent payable by Tenant for the renewed Term shall
be as follows:
<TABLE>
<CAPTION>
EQUAL
MONTHLY
PERIOD PSF ANNUAL PAYMENT
------ --- ------ -------
<S> <C> <C> <C>
Option Year 1: (July 1, 1997 - June 30, 1998) $18.79 $18,921.53 $1,576.79
Option Year 2: (July 1, 1998 - June 30, 1999) $19.29 $19,425.03 $1,618.75
Option Year 3: (July 1, 1999 - June 30, 2000) $19.79 $19,928.53 $1,660.71
</TABLE>
In addition to Base Rent, Tenant shall pay Additional Rent and all other
sums payable under the Lease increased to reflect the leasable area of the
Expansion Space which Landlord and Tenant hereby stipulate is 1,007 leasable
square feet.
<PAGE>
EXHIBIT A
[LAYOUT OF SUITE 306]
SUITE 306
ADMIRALTY II
Suite # 306, consisting of approximately 1276 leasable square feet, located on
the south side of the third floor of the Admiralty II building at 4400 PGA
Boulevard, Palm Beach Gardens, Florida.
The above Premises to be modified by Landlord at its cost prior to the
Commencement Date of the Lease as delineated on Exhibit B, Landlord's Work.
<PAGE>
EXHIBIT D
[LAYOUT OF SUITE 307]
Suite # 307, consisting of approximately 1007 leasable square feet, located
on the south side of the third floor of the Admiralty II building at 4400 PGA
Boulevard Palm Beach Gardens, Florida, contiguous to the east of suite # 306.
The following is a description of Landlord's Work, to be completed by Landlord
at its sole cost prior to the commencement date of the Expansion Premises
(refer to numbers on the schematic plan above):
1. Reconfigure entry area (suites 306 and 307) to provide a new set of glass
double doors facing hallway and repair and patch walls in areas effected.
2. Replace carpet throughout suite 307 to match 306 and touch up paint where
necessary.
EXHIBIT 10.2
MASTER BROKER AGREEMENT
This MASTER BROKER AGREEMENT ("Agreement") is made as of the 1st day of
December, 1993 by and between Ocurest Laboratories, Inc., a Florida corporation
(hereinafter called "OLI") and Morano Associates, Inc., a New York corporation
(hereinafter called "MAI")
WHEREAS, OLI believes it is in its best interest to retain MAI as OLI's
exclusive master broker, and MAI desires to be retained by OLI as its exclusive
master broker; and
WHEREAS, the parties desire to set forth the terms and conditions on
which MAI shall be retained by and provide its services to OLI;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereby agree as follows:
1. RETENTION: OLI hereby retains MAI as OLI's exclusive master broker
and MAI hereby accepts such retention, all upon the terms and conditions
hereinafter set forth.
2. TERM: Unless sooner terminated pursuant to the provisions of this
Agreement, the initial term shall be for a period of three years, commencing
January 1, 1994. Such period shall be extended automatically for successive
one-year terms thereafter, unless either OLI or MAI terminates the Agreement
upon ninety (90) days prior written notice.
3. SERVICES: MAI agrees to perform master broker services related to
the sale, distribution and merchandising of Ocurest Eyecare Products
("Products") through third-party sales brokers and manufacturer representatives
("Representatives") to customer accounts for all classes of trade in the United
States. Such services shall be performed on a best efforts basis and include,
but not necessarily be limited to, the following:
(a) MAI shall solicit and select Representatives to represent
OLI in the sale, distribution and merchandising of Products to customer accounts
authorized by OLI within territorial boundaries designated by OLI.
(b) MAI shall negotiate and facilitate the closing of a contract
between OLI and each individual Representative, subject to terms and conditions
which are acceptable to OLI in its sole discretion.
(c) MAI shall manage the relationship and all communications
between OLI and each individual Representative, consistent with the objectives
and policies of OLI.
<PAGE>
(d) MAI shall periodically evaluate the performance of each
individual Representative and advise OLI of its findings and recommendations.
4. COMPENSATION: MAI shall enter into a compensation agreement with each
Representative retained by OLI, wherein MAI shall be entitled to receive a
master broker commission from each Representative equal to ten percent (10.0%)
of all commissions earned by the Representative on invoiced net sales of OLI
Products. Such commissions earned by Representatives will be pursuant to the
provisions of a contract between OLI and each Representative.
5. TERMINATION: Commencing one year from the date hereof, either party
shall be entitled to terminate this Agreement at any time or for any reason
upon ninety (90) days prior written notice to the other. In the event of such
termination:
(a) MAI agrees to notify each Representative that the
compensation agreement specified in paragraph 4 will be terminated as of the
date this Agreement is terminated.
(b) MAI shall be entitled to receive its master broker
commission on commissions earned by all Representatives on invoiced net sales
through the date this Agreement is terminated.
(c) During the 90-day notification period, OLI shall be
entitled at its election to deal directly or indirectly with each Representative
provided, however, that such election shall not waive MAI's right to collect its
master broker commission from each Representative through the termination date
of this agreement.
6. INDEMNIFICATION: MAI hereby irrevocably agrees to idemnify OLI and
hold it harmless from and against any loss, cost or damage arising from (a) a
failure or alleged failure of MAI to make payment to or otherwise fulfill its
obligations to any other party or (b) a misrepresentation or alleged
misrepresentation made by or on behalf of MAI to any other party with respect to
OLI or any of its products.
7. NOTICES: All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered if delivered personally or delivered by facsimile
transmission or as of the date mailed by registered or certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice, except
that notices of changes of address shall be effective upon receipt):
(a) Ocurest Laboratories, Inc.
4400 PGA Boulevard, Suite 800
Palm Beach Gardens, Florida 33410
-2-
<PAGE>
(b) Morano Associates, Inc.
39 Grand View Avenue
Cornwall-on-the-Hudson, New York 12520
8. BINDING AGREEMENT: All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties and their respective administrators, executors, legal representatives,
successors and assigns.
9. ASSIGNMENTS: Neither party shall assign its rights and/or obligations
hereunder without the prior written consent of the other.
10. VENUE AND JURISDICTION: Each of the parties hereto hereby consents
to the exclusive jurisdiction and venue of the courts of the State of Florida
located in Palm Beach County, Florida and the United States District Court in
and for the Southern District of Florida with respect to any matter relating to
this Agreement and the performance of the parties' obligations hereunder, and
each of the parties hereto hereby further consents to the personal jurisdiction
of such courts. Any action suit or proceeding brought by and or on behalf of
either of the parties hereto relating to such matters shall be commenced,
pursued, defended and resolved only in such courts and any appropriate appellate
court having jurisdiction to hear an appeal from any judgment entered in such
courts. The parties hereby agree that service of process may be made in any
manner permitted by the rules of such courts and the laws of the State of
Florida.
11. INVALIDITY OF PROVISIONS: If any provision hereof shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding or
action shall be strictly construed and shall not affect the validity or effect
of any other provision hereof.
12. GENERAL PROVISIONS
(a) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(b) This Agreement may be executed in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
13. ENTIRE AGREEMENT: This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof. This Agreement may be
modified, amended or otherwise changed only with and by the mutual written
consent of both parties.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written.
OCUREST LABORATORIES, INC. MORANO ASSOCIATES, INC.
By: /s/ EDMUND G. VIMOND, JR. /s/ JOSEPH MORANO
------------------------------ ----------------------------
Edmund G. Vimond, Jr. Joseph Morano
President President
EXHIBIT 10.3
OCUREST LABORATORIES., INC.
4400 PGA BOULEVARD * SUITE 800 * PALM BEACH GARDENS, FL 33410
TEL (407) 627-8121
FAX (407) 627-7954
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made as of the 1st day of
December, 1993 by and between Ocurest Laboratories, Inc., a Florida corporation
(hereinafter called the "Company") and Edmund G. Vimond, Jr., hereinafter called
the ("Employee").
WHEREAS, the Company believes it is in the Company's best interest to
employ the Employee, and the Employee desires to be employed by the Company; and
WHEREAS, the Company and the Employee desire to set forth the terms and
conditions on which the Employee shall be employed by and provide his services
to the Company;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereby agree as follows:
1. EMPLOYMENT: The Company hereby employs the Employee in its business as
President & Chief Executive Officer and the Employee hereby accepts such
employment, all upon the terms and conditions hereinafter set forth.
2. TERM: Unless sooner terminated pursuant to the provisions of this
Agreement, the initial term of employment under this Agreement shall be for a
period of three years, commencing January 1, 1994 (the "Initial Term"). Such
period of employment shall be extended automatically for successive one-year
terms of employment after the Initial Term, unless either the Company or the
Employee notifies the other in writing at least ninety (90) days prior to the
end of the current term that it or he will not renew such Employment Period for
another term, in which case such Employment Period will expire at the end of the
current term. Any such notice of termination shall be irrevocable unless
otherwise subsequently agreed upon in writing by the parties. All references
herein to the "Employment Period" shall refer to both the Initial Term and such
successive terms.
3. BASE SALARY: The employee shall be entitled to receive a base salary
during the Employment Period at the rate of Seventy Five Thousand Dollars
($75,000) per annum starting January 1, 1994 (the "Base Salary"); provided,
however, the Base Salary shall be increased to One Hundred Twenty Five Thousand
Dollars ($125,000)
<PAGE>
per annum in the month Ocurest shipments commence in any portion of the State of
Florida and One Hundred Fifty Thousand Dollars ($150,000) in the seventh month
following the start of Ocurest shipments in the designated Florida area. Such
salary shall be payable in accordance with the normal payroll policies of the
Company, and shall be subject to all appropriate withholding taxes; provided,
however, such salary shall be payable no less frequently than monthly and no
later than the fifteenth (15th) day of each such month. The annual salary set
forth in this Paragraph shall be subject to review and upward adjustment from
time to time, at the sole discretion of the Board of Directors of the Company
("Board"). An adjustment to the amount of Base Salary, if any, shall not
otherwise be deemed a modification, amendment or waiver of this Agreement
except as to the Base Salary amount.
4. INCENTIVE COMPENSATION: In addition to the Base Salary, the Employee
shall be eligible to receive incentive compensation pursuant to an incentive
compensation plan to be established under the direction of the Chief Executive
Officer of the Company on terms satisfactory to and approved by the Board in its
discretion.
5. DUTIES: During the Employment Period the Employee shall report directly
to the Board and shall furnish all manner of services in connection with his
position an President & Chief Executive Officer of the Company as would be
expected from a person holding a similar position in a similar company. The
Employee shall have the primary responsibility for oversight of the business of
the Company, including the hiring and firing of employees, disbursement of funds
and final decision-making authority as to all matters not otherwise requiring
final approval by the Board. The Employee shall devote his full time, energy and
skill to the service of the Company and the promotion of its interests, and
shall use his best efforts in the performance of his services hereunder.
6. CONFIDENTIALLY: In the course of the Employee's employment hereafter,
the Company may disclose or make known to the Employee, and the Employee may be
given access to or may become acquainted with, certain confidential information,
trade secrets or both, including but not limited to marketing techniques,
pricing, customer lists and information relating to potential customers
(collectively "Information"), as well as financial records, documents, reports,
correspondence, lists, other written records, and the like relating to the
foregoing (collectively, the "Materials"). During the Employment Period and at
all times thereafter, the Employee shall not in any manner, directly or
indirectly, divulge, disclose or communicate to any person or firm, except to or
for the Company's benefit, any of the information or Materials which he may have
acquired in the course of his employment by the Company. Promptly upon
termination of the Employment period, or otherwise upon request of the Company,
the Materials and all copies thereof in the custody or control of the Employee
shall be delivered to the Chairman of the Board or his designee.
-2-
<PAGE>
7. DEATH OR INCAPACITY: In the event of the permanent incapacity of the
Employee, defined as ninety (90) days continuous incapacity or one hundred
twenty (120) days of intermittent incapacity in any twelve (12) month period, as
determined by the Board at its sole discretion, or the death of the Employee
during the Employment Period, the Employee's employment hereunder shall
terminate immediately upon such death or determination of incapacity. The
Company shall thereupon be obliged to pay to the Employee or the Employee's
estate all Base Salary amounts owed to the Employee which have accrued until the
date of such death or determination of incapacity plus six months of the
Employee's Base Salary. All such amounts shall be payable in accordance with the
normal payroll policies of the Company.
8. TERMINATION: The Company shall be entitled to terminate the employment
of the Employee for "just cause" or without cause. The Employee shall be
entitled to terminate his employment for any reason. For purposes of this
Agreement, "just cause" is herein defined as any conduct by the Employee
involving the commission of any criminal act, act of moral turpitude, any
fraudulent or dishonest act in connection with his employment with the Company,
or a material breach of any provision of this Agreement which material breach
results in a loss to the Company as determined by the Board. Any decision by the
Company to terminate the Employee without cause shall be made by majority vote
of the Board.
Any termination of the Employment Period other than by death, determination
of permanent disability or just cause shall require no less than thirty (30)
days prior written notice from the party requesting termination to the other. In
the event of termination of the employment of the Employee by the Employee or by
the Company for just cause, the Employee shall not be entitled to any severance
pay and shall only be paid the Base Salary amounts accrued through the date of
termination. In the event of termination of the employment of the Employee
without cause by the Company, the Employee shall be entitled to Base Salary
amounts accrued through the date of termination plus severance pay equal to the
greater of (i) one year's Base Salary or (ii) the balance of the Base Salary
which, but for termination, would have been payable over the remainder of the
Initial Term (the "Severance Pay"). The Severance Pay shall be due and payable
in one (1) lump sum within (30) days at the date of termination.
9. SURVIVAL: Notwithstanding anything to the contrary herein, the
provisions of paragraphs 6 and 10-14 shall survive and remain in effect in
accordance with their respective terms in the event the Agreement or any portion
hereof or the Employment Period is terminated.
10. VENUE AND GOVERNING LAW: Venue for all proceedings shall be in any
court of competent jurisdiction in Palm Beach County, Florida. This Agreement
and all transactions contemplated by this Agreement shall be governed by, and
construed and enforced
-3-
<PAGE>
in accordance with, the laws of the State of Florida without regard to
principles of conflicts of laws.
11. AMENDMENTS: The provisions of this Agreement may be amended or
otherwise modified only with and by the written mutual consent of both parties.
12. BINDING EFFECT: All of the terms and provisions of this Agreement,
whether so expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective administrators, executors
legal representatives, heirs and successors.
13. SPECIFIC PERFORMANCE: The Employee acknowledges that the services to
be rendered by the Employee hereunder are extraordinary and unique and are vital
to the success of the Company, and that damages at law would be an inadequate
remedy for any breach or threatened breach of this Agreement by the Employee.
Therefore, in the event of a breach or threatened breach by the Employee of any
provision of this Agreement, then the Company shall be entitled, in addition to
all other rights or remedies, to injunctions restraining such breach, without
being required to show any actual damage or to post any bond or other security.
14. ENTIRE AGREEMENT: This Agreement represents the entire agreement and
understanding among the parties with respect to the subject matter hereof, and
supersedes a similar agreement dated June 1, 1993 and all other negotiations,
understandings and representations (if any) made by and among such parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written.
OCUREST LABORATORIES, INC.
BY: /s/ WILLIAM J. CASEY
--------------------
TITLE: CHAIRMAN
--------
/s/ EDMUND G. VIMOND, JR.
-------------------------
Edmund G. Vimond, Jr.
-4-
EXHIBIT 10.4
OCUREST LABORATORIES, INC.
4400 PGA BOULEVARD * SUITE 800 * PALM BEACH GARDENS, FL 33410
TEL (407) 627-8121
FAX (407) 627-7954
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made as of the lst day of
December, 1993 by and between Ocurest Laboratories, Inc., a Florida corporation
(hereinafter called the "Company") and Larry M. Reid, hereinafter called the
"Employee").
WHEREAS, the Company believes it is in the Company's best interest to
employ the Employee, and the Employee desires to be employed by the Company; and
WHEREAS, the Company and the Employee desire to set forth the terms and
conditions on which the Employee shall be employed by and provide his services
to the Company;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereby agree as follows:
1. EMPLOYMENT: The Company hereby employs the Employee in its business as
Executive Vice President & Secretary-Treasurer and the Employee accepts such
employment, all upon the terms and conditions hereinafter set forth.
2. TERM: Unless sooner terminated pursuant to the provisions of this
Agreement, the initial term of employment under this Agreement shall be for a
period of three years, commencing January 1, 1994 (the "Initial Term"). Such
period of employment shall be extended automatically for successive one-year
terms of employment after the Initial Term, unless either the Company or the
Employee notifies the other in writing at least ninety (90) days prior to the
end of the current term that it or he will not renew such Employment Period
for another term, in which case such Employment Period will expire at the end of
the current term. Any such notice of termination shall be irrevocable unless
otherwise subsequently agreed upon in writing by the parties. All references
herein to the "Employment Period" shall refer to both the Initial Term and such
successive terms.
3. BASE SALARY: The Employee shall be entitled to receive a base salary
during the Employment Period at the rate of Fifty Seven Thousand Five Hundred
Dollars ($57,500) per annum starting January 1, 1994 (the "Base Salary");
provided, however, the Base Salary shall be increased to Ninety Six Thousand
Dollars ($96,000)
<PAGE>
per annum in the month Ocurest shipments commence in any portion of the State of
Florida and One Hundred Fifteen Thousand Dollars ($115,000) in the seventh month
following the start of Ocurest shipments in the designated Florida area. Such
salary shall be payable in accordance with the normal payroll policies of the
Company, and shall be subject to all appropriate withholding taxes; provided,
however, such salary shall be payable no less frequently than monthly and no
later than the fifteenth (15th) day of each such month. The annual salary set
forth in this Paragraph shall be subject to review and upward adjustment from
time to time, at the sole discretion of the Board of Directors of the Company
("Board"). An adjustment to amount of Base Salary, if any, shall not otherwise
be deemed a modification, amendment or waiver of this Agreement except as to the
Base Salary amount.
4. INCENTIVE COMPENSATION: In addition to the Base Salary, the Employee
shall be eligible to receive incentive compensation pursuant to an incentive
compensation plan to be established under the direction of the Chief Executive
Officer of the Company on terms satisfactory to and approved by the Board in
its discretion.
5. DUTIES: During the Employment Period the Employee shall report directly
to the President & Chief Executive Officer and shall furnish all manner of
services in connection with his position as Executive Vice President &
Secretary-Treasurer of the Company as would be expected from a person holding a
similar position in a similar company. The employee shall have the primary
responsibility for overseeing the financial and administrative activities of the
Company. The Employee shall devote his full time, energy and skill to the
service of the Company and the promotion of its interests, and shall use his
best efforts in the performance of his services hereunder.
6. CONFIDENTIALITY: In the course of the Employee's employment hereafter,
the Company may disclose or make known to the Employee, and the Employee may be
given access to or may become acquainted with, certain confidential information,
trade secrets or both, including but not limited to marketing techniques,
pricing, customer lists and information relating to potential customers
(collectively "Information"), as well as financial records, documents, reports,
correspondence, lists, other written records, and the like relating to the
foregoing (collectively, the "Materials"). During the Employment Period and at
all times thereafter, the Employee shall not in any manner, directly or
indirectly, divulge, disclose or communicate to any person or firm, except to or
for the Company's benefit, any of the Information or Materials which he may have
acquired in the course of his employment by the Company. Promptly upon
termination of the Employment Period, or otherwise upon request of the Company,
the Materials and all copies thereof in the custody or control of the Employee
shall be delivered to the President & Chief Executive Officer or his designee.
-2-
<PAGE>
7. DEATH OR INCAPACITY: In the event of the permanent incapacity of the
Employee, defined as ninety (90) days continuous incapacity or one hundred
twenty (120) days of intermittent incapacity in any twelve (12) month period, as
determined by the Board at its sole discretion, or the death of the Employee
during the Employment Period, the Employee's employment hereunder shall
terminate immediately upon such death or determination of incapacity. The
Company shall thereupon be obliged to pay to the Employee or the Employee's
estate all Base Salary amounts owed to the Employee which have accrued until the
date of such death or determination of incapacity plus six months of the
Employee's Base Salary. All such amounts shall be payable in accordance with the
normal payroll policies of the Company.
8. TERMINATION: The Company shall be entitled to terminate the employment
of the Employee for "just cause" or without cause. The Employee shall be
entitled to terminate his employment for any reason. For purposes of this
Agreement, "just cause" in herein defined as any conduct by the Employee
involving the commission of any criminal act, act of moral turpitude, any
fraudulent or dishonest act in connection with his employment with the Company,
or a material breach of any provision of this Agreement which material breach
results in a loss to the Company as determined by the Board. Any decision by the
Company to terminate the Employee without cause shall be made by majority vote
of the Board.
Any termination of the Employment Period other than by death, determination
of permanent disability or just cause shall require no less than thirty (30)
days prior written notice from the party requesting termination to the other. In
the event of termination of the employment of the Employee by the Employee or by
the Company for just cause, the Employee shall not be entitled to any severance
pay and shall a only be paid the Base Salary amounts accrued through the date of
termination. In the event of termination of the employment of the Employee
without cause by the company, the Employee shall be entitled to Base Salary
amounts accrued through the date of termination plus severance pay equal to the
greater of (i) one year's Base Salary or (ii) the balance of the Base Salary
which, but for termination, would have been payable over the remainder of the
Initial Term (the "Severance Pay"). The Severance Pay shall be due and payable
in one (1) lump sum within (30) days of the date of termination.
9. SURVIVAL: Notwithstanding anything to the contrary herein, the
provisions of paragraphs 6 and 10-14 shall survive and remain in effect in
accordance with their respective terms in the event the Agreement or any portion
hereof or the Employment Period in terminated.
10. VENUE AND GOVERNING LAW: Venue for all proceedings shall be in any
court of competent jurisdiction in Palm Beach County, Florida. This Agreement
and all transactions contemplated by this Agreement shall be qoverned by, and
construed and enforced
-3-
<PAGE>
in accordance with, the laws of the State of Florida without regard to
principles of conflicts of laws.
11. AMENDMENTS: The provisions of this Agreement may be amended or
otherwise modified only with and by the written mutual consent of both parties.
12. BINDING EFFECT: All of the terms and provisions of this Agreement,
whether so expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective administrators, executors,
legal representatives, heirs and successors.
13. SPECIFIC PERFORMANCE: The Employee acknowledges that the services to be
rendered by the Employee hereunder are extraordinary and unique and are vital to
the success of the Company, and that damages at law would be an inadequate
remedy for any breach or threatened breach of this Agreement by the Employee.
Therefore, in the event of a breach or threatened breach by the Employee of any
provision of this Agreement, then the Company shall be entitled, in addition to
all other rights or remedies, to injunctions restraining such breach, without
being required to show any actual damage or to post any bond or other security.
14. ENTIRE AGREEMENT: This Agreement represents the entire agreement and
understanding among the parties with respect to the subject matter hereof, and
supersedes a similar agreement dated June 1, 1993 and all other negotiations,
understandings and representations (if any) made by and among such parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written.
OCUREST LABORATORIES, INC.
By: /s/ EDMUND G. VIMMLH
-----------------------------
Title: President
/s/ LARRY M. REID
---------------------------------
Larry M. Reid
-4-
EXHIBIT 10.5
ADDENDUM TO EMPLOYMENT AGREEMENT
The Employment Agreement dated December 1, 1993 between Ocurest
Laboratories and Larry M. Reid is hereby amended to reflect the employee's new
position as of July 1, 1996 as Senior Vice President & Chief Administrative
Officer and Secretary.
Paragraph 5 of the Agreement is replaced in its entirety with
the following amendment:
5. DUTIES: During the Employment Period the Employee shall report
directly to the President & Chief Executive Officer and shall furnish all manner
of services in connection with his position as Senior Vice President & Chief
Administrative Officer as would be expected from a person holding a similar
position in a similar Company. The Employee shall devote his full time, energy
and skill to the service of the Company and the promotion of its interests, and
shall use his beat efforts in the performance of his services hereunder.
Dated: June 19, 1996 OCUREST LABORATORIES, INC.
By: /s/ EDMUND G. VIMOND, JR.
-------------------------
Edmund G. Vimond, Jr.
President
/s/ LARRY M. REID
-----------------
Larry M. Reid
EXHIBIT 10.6
OCUREST LABORATORIES, INC.
4400 PGA BOULEVARD * SUITE 800 * PALM BEACH GARDENS, FL 33410
Tel (407) 627-8121
Fax (407) 627-7954
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made as of the 1st day of
December, 1993 by and between Ocurest Laboratories, Inc., a Florida corporation
(hereinafter called the "Company") and Eric Schwarz (hereinafter called the
("Employee").
WHEREAS, the Company believes it is in the Company's best interest to
employ the Employee, and the Employee desires to be employed by the Company; and
WHEREAS, the Company and the Employee, desire to set forth the terms
and conditions on which the Employee shall be employed by and provide his
services to the Company;
NOW, THEREFORE for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged the parties hereby agree as follows:
1. EMPLOYMENT: The Company hereby employs the Employee in its
business as Vice President--Finance & Investor Relations and the Employee hereby
accepts such employment, all upon the terms and conditions hereinafter set
forth.
2. TERM: Unless sooner terminated pursuant to the provisions of this
Agreement, the initial term of employment under this Agreement shall be for a
period of three years, commencing January 1, 1994 (the "Initial Term"). Such
period of employment shall be extended automatically for successive one-year
terms of employment after the Initial Term unless either the Company or the
Employee notifies the other in writing at least ninety (90) days prior to the
end of the current term that it or he will not renew such Employment Period for
another term, in which case such Employment Period will expire at the end of the
current term. Any such notice of termination shall be irrevocable unless
otherwise subsequently agreed upon in writing by the parties. All references
herein to the "Employment Period" shall refer to both the Initial Term and such
successive terms.
3. BASE SALARY: The Employee shall be entitled to receive a base
salary during the Employment Period at the rate of Thirty Three Thousand Dollars
($33,000) per annum starting January 1, 1994 (the "Base Salary"); provided,
however, the Base Salary shall be increased to Fifty Five Thousand Dollars
($55,000) per annum in
<PAGE>
the month Ocurest shipments commence in any portion of the State of Florida and
Sixty Six Thousand Dollars ($66,000) in the seventh month following the start of
Ocurest shipments in the designated Florida area. Such salary shall be payable
in accordance with the normal payroll policies of the Company, and shall be
subject to all appropriate withholding taxes; provided, however, such salary
shall be payable no less frequently than monthly and no later than the fifteenth
(15th) day of each such month. The annual salary set forth in this Paragraph
shall be subject to review and upward adjustment from time to time, at the sole
discretion of the Company. An adjustment to the amount of Base Salary, if any,
shall not otherwise be deemed a modification, amendment or waiver of this
Agreement except as to the Base Salary amount.
4. INCENTIVE COMPENSATION: In addition to the Base Salary, the
Employee shall be eligible to receive incentive compensation pursuant to an
incentive compensation plan to be established by the Company on terms
satisfactory to and approved by the Board of Directors at its discretion.
5. DUTIES: During the Employment Period the Employee shall report to
the Executive Vice President of the Company and shall furnish all manner of
services in connection with his position as Vice President--Finance & Investor
Relations as would be expected from a person holding a similar position in a
similar Company. The Employee shall have direct responsibility for managing the
Company's financial affairs and investor relations, in addition to other
administrative duties that may be assigned the Employee from time to time. The
Employee shall devote his full time, energy and skill to the service of the
Company and the promotion of its interests, and shall use his best efforts in
the performance of his services hereunder.
6. CONFIDENTIALITY: In the course of the Employee's employment
hereafter, the Company may disclose or make known to the Employee, and the
Employee may be given access to or may become acquainted with, including
confidential information, trade secrets or both, including but not limited to
marketing techniques, pricing, customer lists and information relating to
potential customers (collectively "Information"), as well as financial records,
document, reports, correspondence, lists, other written records, and the like
relating to the foregoing (collectively, the "Materials"). During the Employment
Period and at all times thereafter, the Employee shall not in any manner,
directly or indirectly, divulge, disclose or communicate to any person or firm,
except to or for the Company's benefit, any of the information or Materials
which he may have acquired in the course of his employment by the Company.
Promptly upon termination of the Employment Period, or otherwise upon request of
the Company, the Materials and all copies thereof in the custody or control of
the Employee shall be delivered to the Executive Vice President or his designee.
-2-
<PAGE>
7. DEATH OR INCAPACITY: In the event of the permanent incapacity of
the Employee, defined as ninety (90) days continuous incapacity or one hundred
twenty (120) days of intermittent incapacity in any twelve (12) month period, as
determined by the Company at its sole discretion, or the death of the Employee
during the Employment Period, the Employee's employment hereunder shall
terminate immediately upon such death or determination of incapacity. The
Company shall thereupon be obliged to pay to the Employee or the Employee's
estate all Base Salary amounts owed to the Employee which have accrued until the
date of such death or determination of incapacity plus six months of the
Employee's Base Salary. All such amounts shall be payable in accordance with the
normal payroll policies of the Company.
8. TERMINATION: The Company shall be entitled to terminate the
employment of the Employee for "just cause" or without cause. The Employee shall
be entitled to terminate his employment for any reason. For purposes of this
Agreement, "just cause" is herein defined as any conduct by the Employee
involving the commission of any criminal act, act of moral turpitude, any
fraudulent or dishonest act in connection with is employment with the Company,
or a material breach of any provision of this Agreement.
Any termination of the Employment Period other than by death,
determination of permanent disability or just cause shall require no less than
thirty (30) days prior written notice from the party requesting termination to
the other. In the event of termination of the employment of the Employee by the
Employee or by the Company for just cause, the Employee shall not be entitled
to any severance pay and shall only be paid the Base Salary amounts accrued
through the date of termination. In the event of termination of the employment
of the Employee without cause by the Company, the Employee shall be entitled to
Base Salary amounts accrued through the date of termination plus severance pay
equal to the greater of: (i) one year's Base Salary or (ii) the balance of the
Base Salary which, but for termination, would have been payable over the
remainder of the Initial Term (the "Severance Pay"). The Severance Pay shall be
due and payable in one (1) lump sum within (30) days of the date of termination.
9. SURVIVAL: Notwithstanding anything to the contrary herein, the
provisions of paragraphs 6 and 10-14 shall survive and remain in effect in
accordance with their respective terms in the event the Agreement or any portion
hereof or the Employment Period is terminated.
10. VENUE AND GOVERNING LAW: Venue for all proceedings shall be in any
court of competent jurisdiction in Palo Beach County, Florida. This Agreement
and all transactions contemplated by this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Florida
without regard to principles of conflicts of laws.
-3-
<PAGE>
11. AMENDMENTS: The provisions of this Agreement may be amended or
otherwise modified only with and by the written mutual consent of both parties.
12. BINDING EFFECT: All of the terms and provisions of this Agreement,
whether so expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective administrators, executors,
legal representatives, heirs, and successors.
13. SPECIFIC PERFORMANCE: The Employee acknowledges that the services
to be rendered by the Employee hereunder are extraordinary and unique and are
vital to the success of the Company, and that damages at law would be an
inadequate remedy for any breach or threatened breach of this Agreement by the
Employee. Therefore, in the event of a breach or threatened breach by the
Employee of any provision of this Agreement, then the Company shall be entitled,
in addition to all other rights or remedies, to injunctions restraining such
breach, without being required to show any actual damage or to post any bond or
other security.
14. ENTIRE AGREEMENT: This Agreement represents the entire agreement
and understanding among the parties with respect to the subject matter hereof,
and supersedes a similar agreement dated June 1, 1993 and all other
negotiations, understandings and representations (if any) made by and among such
parties.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written.
OCUREST LABORATORIES,, INC.
BY: /s/ EDMUND G. VIMMEL, JR.
-------------------------
Edmund G. Vimmel, Jr.
Title: PRESIDENT
/s/ ERIC SCHWARTZ
-----------------
Eric Schwartz
-4-
EXHIBIT 10.7
ADDENDUM TO EMPLOYMENT AGREEMENT
The Employment Agreement dated December 1, 1993 between Ocurest
Laboratories and Eric Schwarz is hereby amended to reflect the employee's new
position as of July 1, 1996 as Director of Administration.
Paragraph 5 of the Agreement is replaced in its entirety with the
following amendment:
5. DUTIES: During the Employment Period the Employee shall report to
the Senior Vice President & Chief Administrative Officer of the Company and
shall furnish all manner of services in connection with his position as Director
of Administration as would be expected from a person holding a similar position
in a similar company. The Employee shall devote his full time, energy and skill
to the service of the Company and the promotion of its interests, and shall use
his best efforts in the performance of his services hereunder.
Dated: June 19, 1996 OCUREST LABORATORIES, INC.
By: /s/ LARRY M. REID
---------------------------
Larry M. Reid
Executive Vice President
/s/ ERIC SCHWARTZ
--------------------------
Eric Schwartz
EXHIBIT 10.8
OCUREST LABORATORIES, INC.
4400 PGA BOULEVARD * SUITE 300 * PALM BEACH GARDENS, FL 33410
TEL (407) 627-8121
FAX (407) 627-7254
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made as of the 19th day of
June, 1996 by and between Ocurest Laboratories, Inc., a Florida corporation
(hereinafter called the "Company") and John F. Carlson, hereinafter called the
("Employee")
WHEREAS, the Company believes it is in the Company's best interest to
employ the Employee, and the Employee desires to be employed by the Company; and
WHEREAS, the Company and the Employee desire to set forth the terms and
conditions on which the Employee shall be employed by and provide his services
to the Company;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which in hereby akmowledged, the parties hereby agree as follows:
1. EMPLOYMENT: The Company hereby employs the Employee in its business
as Senior Vice President & Chief Financial Officer and Treasurer of the
Company and the Employee accepts such employment, all upon the terms and
conditions hereinafter set forth.
2. TERM: Unless sooner terminated pursuant to the provisions of this
Agreement, the initial term of employment under this Agreement shall be for a
period of eighteen months, commencing July 1, 1996 (the "Initial Term"). Such
period of employment shall be extended automatically for successive one-year
terms of employment after the Initial Term, unless either the Company or the
Employee. notifies the other in writing at least ninety (90) days prior to the
end of the current term that it or he will not renew such Employment Period for
another term, in which case such Employment Period will expire at the and of the
current term. Any such notice of termination shall be irrevocable unless
otherwise subsequently agreed upon in writing by the parties. All references
herein to the "Employment Period" shall refer to both the Initial Term and such
successive terms.
3. BASE SALARY: The Employee shall be entitled to receive a base salary
during the Employment Period at the rate of One Hundred Twenty Five Thousand
Dollars ($125,000.00) per annum starting July 1, 1996 (the "Base Salary"). Such
salary shall be
<PAGE>
payable in accordance with the normal payroll policies of the Company and shall
be subject to all appropriate withholding taxes; provided, however, such salary
shall be payable no less frequently than monthly and no later than the fifteenth
(15th) day of each such month. The annual salary set forth in this Paragraph
shall be subject to review and upward adjustment from time to time, at the sole
discretion of the Company. An adjustment to the amount of Base Salary, if any,
shall not otherwise be deemed a modification, amendment or waiver of this
Agreement except as to the Base Salary amount.
4. INCENTIVE COMPENSATION: In addition to the Base Salary, the Employee
shall be eligible to receive incentive compensation pursuant to an incentive
compensation plan to be established under the direction of the Chief Executive
Officer of the Company on terms satisfactory to and approved by the Board in its
discretion.
5. DUTIES: During the Employment Period the Employee shall report
directly to the President & Chief Executive Officer and shall furnish all manner
of services in connection with his position as Senior Vice President & Chief
Financial Officer of the Company as would be expected from a person holding a
similar position in a similar Company. The Employee shall devote his full time,
energy and skill to the service of the Company and the promotion of its
interests, and shall use his best efforts in the performance of his services
hereunder.
6. CONFIDENTIALITY: In the course of the Employee's employment
hereafter, the Company may disclose or make known to the Employee, and the
Employee may be given access to or may become acquainted with, certain
confidential information, trade secrets or both, including but not limited to
marketing techniques pricing, customer lists and information relating to
potential customers (collectively "Information"), as well as financial records,
documents, reports, correspondence, lists, other written records, and the like
relating to the foregoing (collectively, the "Materials"). During the Employment
Period and at all times thereafter, the Employee shall not in any manner,
directly or indirectly, divulge, disclose or communicate to any person or firm,
except to or for the Company's benefit, any of the Information or Materials
which he may have acquired in the course of his employment by the Company.
Promptly upon termination of the Employment Period, or otherwise upon request of
the Company, the Materials and all copies thereof in the custody or control of
the Employee shall be delivered to the President & Chief Executive officer or
his designee.
7. DEATH OR INCAPACITY: In the event of the permanent incapacity of the
Employee, defined as ninety (90) days continuous incapacity or one hundred
twenty (120) days of intermittent incapacity in any twelve (12) month period, as
determined by the Board at its sole discretion, or the death of the Employee
during the Employment Period, the Employee's employment hereunder shall
terminate immediately upon such death or determination of
- 2 -
<PAGE>
incapacity. The Company shall thereupon be obliged to pay to the Employee or the
Employee's estate all Base Salary amounts owed to the Employee which have
accrued until the date of such death or determination of incapacity plus six
months of the Employee's Base Salary. All such amounts shall be payable in
accordance with the normal payroll policies of the Company.
8. TERMINATION: The Company shall be entitled to terminate the
employment of the Employee for "just cause" or without cause. The Employee shall
be entitled to terminate his employment for any reason. For purposes of this
Agreement, "just cause" is herein defined as any conduct by the Employee
involving the commission of any criminal act, act of moral turpitude, any
fraudulent or dishonest act in connection with his employment with the Company,
or a material breach of any provision of this Agreement which material breach
results in a loss to the Company as determined by the Board. Any decision by the
Company to terminate the Employee without cause shall be made by majority vote
of the Board.
Any termination of the Employment Period other than by death,
determination of permanent disability or just cause shall require no less than
thirty (30) days prior written notice from the party requesting termination to
the other. In the event of termination of the employment of the Employee by the
Employee or by the Company for just cause, the Employee shall not be entitled to
any severance pay and shall only be paid the Base Salary amounts accrued through
the date of termination. In the event of termination of the employment of the
Employee without cause by the Company, the Employee shall be entitled to Base
Salary amounts accrued through the date of termination plus severance pay equal
to the greater of (i) one year's Base Salary or (ii) the balance of the Base
Salary which, but for termination, would have been payable over the remainder of
the Initial Term (the "Severance Pay"). The Severance Pay shall be due and
payable in one (1) lump sum within (30) days of the date of termination.
9. MOVING EXPENSES: The Company shall reimburse the Employee for moving
expenses from his home in New Jersey to a location within 50 miles of the
Company's offices in Palm Beach Gardens, Florida, up to a maximum reimbursement
of $10,000.00 for all expenses relating to the move of household belongings and
two automobiles to the new location.
10. SURVIVAL: Notwithstanding anything to the contrary herein, the
provisions of paragraphs 6 and 11-15 shall survive and remain in effect in
accordance with their respective terms in the event the Agreement or any portion
hereof or the Employment Period is terminated.
11. VENUE AND GOVERNING LAW: Venue for all proceedings shall be in any
court of competent jurisdiction in Palm Beach County, Florida. This Agreement
and all transactions contemplated by this Agreement shall be governed by, and
construed and enforced
- 3 -
<PAGE>
in accordance with, the laws of the State of Florida without regard to
principles of conflicts of laws.
12. AMENDMENT: The provisions of this Agreement may be amended or
otherwise modified only with and by the written mutual consent of both parties.
. 13. BINDING AFFECT: All of the terms and provisions of this Agreement,
whether so expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective administrators, executors,
legal representatives, heirs and successors.
14. SPECIFIC PERFORMANCE: The Employee acknowledges that the services
to be rendered by the Employee hereunder are extraordinary and unique and are
vital to the success of the Company, and that damages at law would be an
inadequate remedy for any breach or threatened breach of this Agreement by the
Employee. Therefore, in the event of a breach or threatened breach by the
Employee of any provision of this Agreement, then the Company shall be entitled,
in addition to all other rights or remedies, to injunctions restraining such
breach, without being required to show any actual damage or to post any bond or
other security.
15 ENTIRE AGREEMENT: This Agreement represents the entire agreement and
understanding among the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and among such parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written.
OCUREST LABORATORIES, INC.
By: /s/ EDMUND G. VIMOND
----------------------------
Title: PRESIDENT
/s/ JOHN F. CARLSON
---------------------------
John F. Carlson
-4-
EXHIBIT 10.9
AGREEMENT
BETWEEN ACORN LABORATORIES, INC., having its offices at 1423 14th
Terrace, PGA National, Palm Beach Gardens, Florida 33410 ("ACORN") and OCUREST
LABORATORIES, INC., having offices at 1423 14th Terrace, PGA National, Palm
Beach Gardens, Florida 33410 ("OCUREST").
WHEREAS, ACORN is the owner of United States Letters Patent and of
corresponding foreign applications for patents and of applications for U.S. and
corresponding foreign design patents and registrations (the patent properties),
as listed in the attached Schedule A, covering inventions in eyedrop dispensers
and the ornamental designs thereof; and
WHEREAS, ACORN is the owner of the trademarks "OCUREST" and the
miscellaneous design comprising the shape of the container for use on and in
conjunction with eyedrop preparations and of the Registration U.S. No. 1,492,900
of "OCUREST" and of the application for registration, .U.S. No. 74/036,743 of
the miscellaneous design (the trademark properties); and
WHEREAS, OCUREST desires to make, use and sell eyedrop dispensers in
accordance with the inventions and in conjunction with the trademarks; and upon
developing the market for eyedrops
<PAGE>
contained within such dispensers, to own said patent and trademark properties
and ACORN is willing to license and eventually sell said patent and trademark
properties upon OCUREST's successful development of such market;
NOW, THEREFORE, in consideration of these premises, of other good and
valuable consideration, the receipt of which is hereby acknowledged and for the
consideration as expressed infra, it is agreed as follows:
1.a) ACORN does hereby grant OCUREST the exclusive right throughout
the world to make, use and sell eyedrop solutions contained in dispensers
described and claimed in said patent properties and to market the same in
conjunction with the trademarks.
b) unless sooner terminated hereunder, the licenses granted herein
shall be for the life of the patent properties and so long as OCUREST uses the
trademarks.
2. For the license granted under the patent and trademark
properties, OCUREST shall pay ACORN:
a) $200,000.00 upon the execution of this agreement, to be paid
from the proceeds of the stock offering to be made substantially concurrently
with the execution of this agreement; and
-2-
<PAGE>
b) shall pay to ACORN royalties of five percent (5%) of the net
sales of eyedrop preparations sold in dispensers covered by the patent
properties and in conjunction with said trademark properties; net sales
defined herein as gross sales minus returns and cash discounts; until the
sum of $9,800,000.00 has been paid to ACORN; payments to be made to ACORN
quarterly on receipts from the previous quarter to be accompanied by sales
reports for that quarter; records for inspection by ACORN at reasonable times
to be kept by OCUREST; payments to be made within forty-five (45) days of the
end of each quarter;
c) in the event OCUREST sells or transfers its business in the
production and sale of eyedrop preparations or otherwise disposes of its assets,
or licenses the patent and trademark properties, any remaining balance due ACORN
hereunder shall be paid from the proceeds of such sale, transfer, disposition or
license.
3. ACORN agrees to assign to OCUREST, its successors or licensees,
its entire right, title and interest in and to the patent properties identified
in the attached Schedule A, including the right to sue for past infringement and
its entire right, title and interest in and to the trademark properties,
together with the good will attending the same, including the right to sue for
past infringement, upon the payment to ACORN of the full sum specified in Clause
2(b) hereof.
-3-
<PAGE>
4.a) ACORN will assist OCUREST in the prosecution of pending
applications and OCUREST will assume outstanding and future patent and trademark
preparation and prosecution costs and will maintain all patents and trademark
registrations and prosecute all pending applications and pay maintenance and
renewal fees, annuities and taxes on all patent and trademark properties.
b) OCUREST shall have the right to assert the patent and trademark
properties against infringers and shall assume the costs and fees attending such
assertion and ACORN agrees to assist OCUREST, at OCUREST's expense, in the
assertion of the patent and trademark properties against infringers.
5. The licenses granted hereunder shall terminate and/or OCUREST or
its successor or licensee, shall reassign the patent and trademark properties to
ACORN and turn over to ACORN all materials and products marked with or
incorporating the trademarks transferred hereunder:
a) in the event OCUREST becomes bankrupt or insolvent or its assets
are held for the benefit of creditors or if OCUREST determines to cease the
production and sale of eyedrop preparations before the monies due ACORN
hereunder are fully paid;
b) in the event the payments due ACORN hereunder are not paid
within 120 days after any notice of default; and
c) in the event OCUREST or its successor or licensee defaults in
the performance of any other obligation under this
-4-
<PAGE>
agreement and such default is not cured within one hundred twenty (120) days
after notice of default.
6. This agreement may be assigned by ACORN, but not by OCUREST
without the consent of ACORN which shall not be unreasonably withheld and is
binding upon both parties, their assigns and successors.
WHEREFORE, the parties have executed this agreement on this 30th day of
October, 1991.
Dated: 10/30/91 ACORN LABORATORIES INC.
Witnessed: By: /s/ WILLIAM J. CASEY
--------------------
William J. Casey
President
/s/ ILLEGIBLE
- -----------------------
Dated: OCUREST LABORATORIES, INC.
Witnesses: 10/30/91 By: /s/ LARRY REID
-----------------
Larry Reid
Vice President
/s/ MARGARET THIEL
- -----------------------
-5-
<PAGE>
SCHEDULE A
PATENT PROPERTIES
UNITED STATES PATENT 4,909,90l
FOREIGN APPLICATIONS
EPC Application No. 89908615.1 - Filed 6/30/89 and claiming
priority date or 07/07/88
Designated countries: Austria; Belgium; Germany; France;
United Kingdom; Luxumbourg; Netherlands; Sweden and
Italy;
Australia Application No. 39819/89 - Filed 6/30/89 and claiming
priority date of 07/07/88;
Canada Application No. 604,958-3 - Filed 07/06/89 and claiming
priority date of 07/07/88;
Denmark Application No. 3087/90 - Filed 12/28/90 and claiming
priority date of 07/07/88;
Finland Application No. 910045 - Filed 01/04/91 and claiming
priority date of 07/O7/88;
Japan Based on PTC/US89/02998 - Filed 01/07/91;
New Zealand Application No. 229857 - Filed 7/6/89 and claiming
priority date of 07/07/88;
Norway Application No. 91.0028 - Filed 1/4/91 and claiming
priority date of 07/07/88;
<PAGE>
Portugal Application No. 91 086 - Filed 7/6/89 and claiming
priority date of 07/07/88;
Spain Application No. 8902409 - Filed 7/8/89 and claiming
priority date of 07/07/88; and
Switzerland Application No. 960/90-6 - Filed 6/30/89 and claiming
priority date of 07/07/88
U.S. AND FOREIGN DESIGN PATENTS, APPLICATIONS AND REGISTRATIONS FOR THE DESIGN
OF THE EYE DROP DISPENSER
U.S. Design Patent D320,083, issued September 17, 1991;
Australia Registration No. 107381 - Dated 4/24/90 and four
divisional applications:
Registration Nos. 109530; 109529; 109528; and 109527;
Austria Application No. 550.174-550.196 - Filed 6/29/89
(Collective design) claiming priority date of 01/03/89;
Benelux Multiple (six) Registration No. 19385-01/06 claiming
priority date of 01/03/89;
Canada Application No. 30-06-89-6 - Filed 6/30/89 and claiming
priority date of 01/03/89;
Denmark Registration No. 0085 1991 - Filed 7/6/89 three
divisional Registration Nos. 0151 1991; 0150 1991; and
0149 1991;
-2-
<PAGE>
France Registration No. 894 287 - Filed 6/29/89 and claiming
priority date of 01/03/89;
Italy Multiple Appln. No. 35853-B - Filed 7/3/89 and
claiming priority date of 01/03/89;
Japan Four applns. filed 1/3/89 - Application Nos. 1-24306;
1-24307; 1-24308 and 1-24309 and claiming priority date
of 01/03/89;
Liechtenstein Registration No. 183 - Dated 7/3/89;
New Zealand Registration No. 22689 - Filed 8/30/90 three divisional
Registration Nos. 23322; 23323 and 23324 - Filed
6/18/90
Norway Application No. 89.0609 - Filed 7/3/89 four divisional
applications filed: 90.01051; 90.0896; 90.0897; and
90.898 published 01/03/91;
Portugal Application No. 21.512 - Filed 7/3/89 and claiming
priority date of 01/03/89 published 7/31/90;
Spain Registration No. 119598 - Granted 3/6/90
Sweden Registration No. 48 215 - Dated 8/22/90 four divisional
applications filed; Registration Nos. 48 216; 48 217; 48
218 and 48 219;
Switzerland Registration No. ll7.57O - Dated 6/28/89;
-3-
<PAGE>
United Kingdom Registration No. 1060515 - Dated 1/3/89 three divisional
applications filed; Registration Nos. 2002848; 2002849;
and 2002850;
Germany Registration No. M 89 O- 650.1 - Dated 10/17/89 (five
models)
-4-
EXHIBIT 10.10
FIRST AMENDMENT TO AGREEMENT
THIS FIRST AMENDMENT TO AGREEMENT (the "Amendment") relates to a certain
Agreement dated October 30, 1991 (the "Agreement"), between ACORN LABORATORIES,
INC., a Florida corporation ("Acorn") and OCUREST LABORATORIES, INC., a Florida
corporation ("Ocurest")
1. Section 2 of the Agreement is hereby amended in its entirety to read as
follows:
2.a) For the license and exclusive right granted to Ocurest by Acorn pursuant
to Section I hereof, subject to the provisions of Section 2.b) hereof,
Ocurest hereby agrees to pay Acorn and Acorn hereby agrees to accept the
following:
(i) $200,000 to be paid on or before September 30, 1995 (the "Initial
Payment").
(ii) royalties of four percent (4%) of net sales of eye drop
preparations sold by Ocurest in dispensers covered by the patent
properties and/or in conjunction with the trademark properties (the
"Eye Drop Products"). As used herein, the term "net sales" shall
mean (a) the proceeds of gross sales actually received by Ocurest,
less returns, discounts and allowances; (ii) royalties actually
received by Ocurest with respect to sales by others of Prescription
Products, as that term is hereinafter defined; and (iii) the
proceeds of any licensing or similar arrangements actually received
by Ocurest with respect to Eye Drop Products, the retail sale of
which would require a prescription of a duly licensed health care
practitioner either in the United States or in the country where
such products are sold or intended to be sold ("Prescription
Products"). All payments required to be made to Ocurest pursuant
to this Subsection 2.a) (ii) shall become due and payable 45 days
subsequent to the end of each calendar quarter and shall be
accompanied by sales
1
<PAGE>
reports with respect to such calendar quarter. Acorn shall have the
right to inspect the records of Ocurest at the office of Ocurest at
reasonable times during normal business hours to the extent
necessary to verify the information contained in any sales report
required to be furnished by Ocurest to Acorn pursuant to the
provisions of this Subsection 2.a)(ii).
(iii) royalties of twenty five percent (25%) of (a) royalties actually
received by Ocurest with respect to sales by others of Eye Drop
Products other than Prescription Products (such other products
hereinafter being referred to as "Non-Prescription Products") and
(b) the proceeds of any licensing or similar arrangements actually
received by Ocurest with respect to Non-Prescription Products. All
payments required to he made to Ocurest Pursuant to this Subsection
2.a) (iii) shall become due and payable 45 days subsequent to the
end of each calendar quarter and shall be accompanied by sales
reports with respect to such calendar quarter. Acorn shall have the
right to inspect the records of Ocurest at the office of Ocurest
at reasonable times during normal business hours to the extent
necessary to verify the information contained in any sales report
required to be furnished by Ocurest to Acorn pursuant to the
provisions of this Subsection 2.a)(iii).
(iv) in the event that Ocurest sells or transfers all or substantially
all of its business in connection with the production and sale of
the Eye Drop Products, other than through one or more licenses, the
proceeds of such sale or transfer shall be paid or assigned by
Ocurest to Acorn.
2
<PAGE>
b) Notwithstanding anything herein to the contrary:
(i) Any payment, other than a payment resulting from the license by
Ocurest of all or substantially all of its rights with respect
to the Eye Drop Products, which would otherwise be required to
be made by Ocurest to Acorn pursuant to the provisions of
Section 2.a)(ii) or 2.(a).(iii) hereof (each such payment being
hereinafter referred to as a "Royalty Payment") shall be accrued
and deferred and shall not be required to be made unless Ocurest
realizes net income to the extent set forth in the following
table:
FIRST FOUR CONSECUTIVE PORTION OF ACCRUED AND
CALENDAR QUARTERS DURING DEFERRED ROYALTY PAYMENTS
WHICH NET-INCOME OF OCUREST REQUlRED TO BE PAID (2)
IS: (1), (2)
--------------------------- ---------------------------
At least $1,000,000 and 33.3%
less than $3,000,000
At least $3,000,000 and 66.7%
less than $5,000,OOO
At least $5,000,000 100%
(1) No accrued and deferred Royalty Payments shall be required to
be made by Ocurest prior to the first time that Ocurest has net
income of at least $1,000,000 during any four consecutive calendar
quarters.
(2) Only one Royalty Payment shall be required to be made by
Ocurest with respect to each level of not income under $5,000,000
set forth in the above table. For example, if the net income of
Ocurest at the end of four consecutive calendar quarters is
$2,500,000, the Royalty Payment required to be made by Ocurest
would be 33.3% of the then accrued, deferred and unpaid Royalty
Payments less the Advances (as such term in hereinafter defined)
theretofore paid by Ocurest, and, in such event, Ocurest would not
be required to make any subsequent Royalty Payment until its not
income during any subsequent four consecutive calendar quarters
is at least $3,900,000. By way of further examples, if the net
income of Ocurest at the and of four consecutive calendar quarters
is $3,500,000, the Royalty Payment required to be made by
3
<PAGE>
Ocurest would be 66.7% of the then accrued, deferred and unpaid
Royalty Payments less the Advances (as such term is hereinafter
defined) theretofore paid by Ocurest, and, in such event, Ocurest
would not be required to make any subsequent Royalty Payments until
its not income during any subsequent four consecutive calendar
quarters is at least $5,000,000.
For purposes hereof, "not income" shall mean net income
determined in accordance with generally accepted accounting
principles, consistently applied and the opinion with respect
thereto of Ocurest's independent certified public accountants
shall be bindinq on the parties hereto, provided however that
such accountants shall be reasonably acceptable to Acorn.
Acorn hereby acknowledges that Grant Thornton is acceptable to
Acorn. Any payments required to be made pursuant to the
provisions of this Subsection 2.b)(i) shall become due and
payable 45 days subsequent to the end of the respective
calendar quarter. The provisions of this Subsection 2.b) (i)
shall not limit the obligation of Ocurest set forth in
Subsection 2.b) (ii) hereof.
(ii) Commencing as of January 1, 1995 Ocurest shall pay to
Acorn a nonrefundable advance against accrued and deferred
royalties whether future or presents of $4,000 per month
other than with respect to a month in which a Royalty Payment
is made by Ocurest to Acorn (the "Advances"). Subject to the
provisions of the last sentence of this Section 2. b) (ii) ,
other than with respect to a month in which a Royalty Payment
is made by Ocurest to Acorn, the Advances shall be
unconditionally made irrespective of the amount of any accrued
and deferred Royalties. Advances for the months of January,
February and March 1995 shall be made on or before March 31,
1995 and all subsequent Advances shall become due and payable
on the last day of each calendar month commencing April 30#,
1995. No Advance shall be deemed to be delinquent if it is
paid within 45 days subsequent to the giving of notice of any
non-payment by Acorn. Each Advance paid by Ocurest to Acorn
shall be deducted from and constitute an offset against
present and future accrued and deferred Royalty Payments
otherwise payable to Acorn; and
(iii) The obligation of Ocurest to any payments to Acorn pursuant to
this section 2. shall terminate at such time as the aggregate
of all payments made to Acorn pursuant to this
4
<PAGE>
4 Section 2. equals $10,000,000 and upon payment of such
amount, neither Ocurest nor its successors or licensee shall
have any further monetary or other obligation to Acorn
pursuant to this Agreement.
(iv) In the event that Ocurest grants a license to one or more
third parties with respect to the Non-Prescription Products to
be sold in the United states, then, in such event, the
royalties payable to Acorn in connection with any license of
Prescription Products shall be increased to 25% of the
proceeds of such arrangement.
2. Acorn hereby acknowledges and confirms that Ocurest has (a) heretofore paid
$170,000 to Acorn pursuant to the provisions of Section 2.a)(i) of the Agreement
as amended hereby and (b) simultaneously with the execution hereof, Ocurest has
paid Acorn $12,000 representing the Advances for the months of January,
February and March, 1995.
3. Section 5 of the Agreement is hereby amended to read as follows:
5.a) The licenses granted hereunder shall terminate and/or Ocurest or its
successor or licensee shall reassign the patent and trademark properties
to Acorn:
(i) Prior to the payment to Acorn of an aggregate $10,000,000 pursuant
to the provisions of Section 2. hereof,, upon the (a) filing by
Ocurest of a voluntary petition of bankruptcy; (b) filing of an
involuntary petition of bankruptcy against Ocurest provided that
such petition is not discharged within 45 days of the filing
thereof; (c) appointment of a receiver or a trustee for all or
substantially all of the assets of Ocurest or (d) general
assignment by Ocurest of its assets for the benefit of its
creditors.
(ii) In the event that any payment due Acorn hereunder, other than (a)
the payment referred to in Section 2. a) (i) hereof and (b) the
Advances, are not paid within 120 days after any notice of
non-payment;
(iii) in the event that any Advance is not paid within 45 days
subsequent to the giving of notice of any non-payment by Acorn;
5
<PAGE>
iv) In the event that the payment referred to in Section 2. a) (i)
hereof is not paid on or before September 30, 1995; and
v) Upon the default by Ocurest or its successor or licensee in the
performance of any other material obligation under this Agreement
and such default is not cured within 120 days after notice of
default unless either at the time of such default or not later
than the and of such 120 day period Acorn has been paid an
aggregate of $10,000,000 pursuant to the provisions of Section 2.
hereof.
(b) In the event that the licenses granted hereunder shall terminate or
the patent and trademark properties shall be reassigned in accordance
with the provisions of this Section 5, Ocurest shall be permitted to
dispose of its finished goods inventory and complete and dispose of
its work in process during the 180 day period commencing upon the day
of such termination or reassignment and Ocurest shall have no
obligation to deliver or assign to Acorn any of its inventory, work
product, materials, supplies or other items. At the end of such 180
day period, any items then owned by Ocurest which have been marked
with or otherwise incorporate the trademark properties licensed to
Ocurest hereunder, other than reasonable quantities of such items
which may be retained for file, reference or archive purposes, shall
be destroyed by Ocurest.
4. Acorn hereby waives and releases any rights it has or may have against
Ocurest prior to the execution of the Amendment (a) for any breaches or
alleged breaches of the Agreement or (b) to terminate the license granted
under the Agreement, or (c) to require Ocurest to turn over any materials and
products to Acorn.
5. Acorn hereby confirms and acknowledges that it is the intent of Acorn that
the licenses granted to Ocurest pursuant to the Agreement continue to remain
in full and affect and not be revoked or otherwise terminated or abridged
irrespective of any provision in the Agreement or otherwise. In order to
further assure the foregoing, upon the execution of this Amendment, Acorn
shall be deemed to have again granted such licenses to Ocurest as of the date
hereof.
6. The following provisions shall be applicable to the Agreement and the
Amendment;
6
<PAGE>
a. NO THIRD-PARTY BENEFICIARIES. The Agreement and Amendment shall not
confer any rights or remedies upon any person other than the parties and
their respective successors and permitted assigns.
b. ENTIRE AGREEMENT. This Agreement and Amendment (including the
documents referred to herein) constitute the entire agreement between
the parties and supersedes any prior understandings, agreements, or
representations by or between the parties, written or oral, to the
extent they relate in any way to the subject matter hereof.
c. SUCCESSION. The Agreement and Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
d. COUNTERPARTS. The Agreement and Amendment be executed in one or more
counterparts , each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
e. READINGS. The headings contained in the Agreement and Amendment are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement and Amendment.
f. NOTICES. All notices, requests, demands, claims, and other
communications hereunder must be in writing. Any notice, request demand,
claim, or other communication hereunder shall be deemed duly given if
(and then three business days after) it in sent by registered or
certified mail, return receipt requested, postage prepaid, and addressed
to the intended recipient as set forth below or to such other address as
shall be designated in a notice to such effect given by either of the
parties to the other:
If to Acorn: Acorn Laboratories, Inc.
1423 14th Terrace
Palm Beach Gardens, FL 33418
Telephone: (407) 626-1739
7
<PAGE>
If to Ocurest: Ocurest Laboratories, Inc.
4400 PGA Blvd., Suite 800
Palm Beach Gardens, FL 33410
Telephone: (407) 627-8121
Facsimile: (407) 627-7954
Copy to: Jonathan B. Reisman, Esq.
Reisman & Associates, P.A.
Suite 330
Boca Raton, FL 33486
Telephone: (407) 361-9300
Facsimile: (407) 361-9369
Any party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set
forth above using any other means (including personal delivery
expedited courier, messenger service, telecopy, telex, ordinary mail,
or electronic mail), but no such notice, request, demand, claim, or
other communication shall be deemed to have been duly given unless and
until it actually in received by the intended recipient. Any party may
change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other
party notice in the manner herein set forth.
g. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without giving effect
to any choice or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of
Florida.
h. AMENDMENTS AND WAIVERS. No amendment of any provision of the Agreement
or Amendment shall be valid unless the same shall be in writing and
signed by Acorn and Ocurest. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder
or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
8
<PAGE>
i. SEVERABILITY. Any term or provision of the Agreement and Amendment
that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms
and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.
j. EXPENSES. Each of the parties shall bear its own costs and expenses
(including legal fees and expenses) incurred in connection with the
Agreement and Amendment.
k. CONSTRUCTION. The parties have participated jointly in the negotiation
and drafting of the Agreement and Amendment. In the event an ambiguity
or question of intent or interpretation arises, the Agreement and
Amendment shall be construed as it drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of the provisions of this
Agreement and Amendment. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder unless the context requires
otherwise. The word "including" shall mean including without limitations
1. INCORPORATION OF EXHIBITS AND SCHEDULES. All Exhibits and Schedules
identified in this Agreement and Amendment are incorporated herein by
reference and made a part hereof.
m. DISCLAIMER OF PARTNERSHIP AND AGENCY. This is an agreement between
separate entities and neither is the agent of the other for any purpose
whatsoever. The Agreement and Amendment shall not be construed as
constituting Ocurest and Acorn partners or to create any other form of
legal association which would impose liability upon one party for the
act or failure to act of the other.
n. SUBMISSION TO JURISDICTION. Each of the parties submits to the
jurisdiction of any state or federal court sitting in Palm Beach County,
Florida, in any action or proceeding
9
<PAGE>
arising out of or relating to the Agreement or Amendment and agrees that
all claims in respect of the action or proceeding may be heard and
determined in any such court. Each party also agrees not to bring any
action or proceeding arising out of or relating to the Agreement or
Amendment in any other court. Each of the parties hereby waives any
defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety, or other security
that might be required of any other party with respect thereto.
o. FURTHER ACTS. In case any further action is necessary or desirable to
carry out the purposes of the Agreement and Amendment, each of the
parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other party
reasonably may request.
7. Other than as expressly set forth herein, the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the Amendment has been executed this 31st day of
March, 1995.
WITNESS: ACORN LABORATORIES, INC.
/s/ illegible By: /s/ illegible
- --------------------------- ---------------------------
WITNESS: OCUREST LABORATORIES, INC
/s/ illegible By: /s/ illegible
- --------------------------- ---------------------------
10
EXHIBIT 10.11
SECOND AMENDMENT TO AGREEMENT
THIS SECOND AMENDMENT TO AGREEMENT (the "Amendment") relates to a
certain Agreement dated October 30, 1991 as amended by that certain First
Amendment to Agreement dated March 31, 1995 (such Agreement as so amended
thereby is hereinafter referred to as the "Agreement"), between ACORN
LABORATORIES, INC., a Florida corporation ("Acorn") and OCUREST LABORATORIES,
INC., a Florida corporation ("Ocurest")
1. Section 2.a)(i) of the Agreement is hereby amended in its entirely to read
as follows:
(i) $200,000 to be paid on or before February 28, 1996 (the "Initial
Payment"). Acorn hereby acknowledges and confirms that Ocurest has
heretofore paid $170,000 of the Initial Payment to Acorn and,
accordingly, the remaining obligation of Ocurest to Acorn with
respect thereto is $30,000.
2. Section 2.a)(iv) of the Agreement is hereby amended in its entirety to
read as follows:
(iv) In the event that Ocurest sells or transfers all or substantially
all of its business, which sale or transfer includes the licenses
granted to Ocurest pursuant to the Agreement, in connection with the
production and sale of the Eye Drop Products, other than through one
or more licenses, the greater of (a) $1,250,000 or (b) 10% of the
gross proceeds of such sale or transfer shall be paid or assigned by
Ocurest to Acorn. Notwithstanding anything to the contrary in
the Agreement as amended hereby or otherwise, upon such payment or
assignment, neither Ocurest, the purchaser nor the transferee, as the
case may be, shall have any further obligation to Acorn.
3. Section 5.a) of the Agreement is hereby amended to read as follows:
1
<PAGE>
5.a) The licenses granted hereunder shall terminate and/or Ocurest or
its successor or licensee, shall reassign the patent and trademark
properties to Acorn:
i) Prior to the payment to Acorn of an aggregate of $10,000,000
pursuant to the provisions of Section 2. hereof, upon the (a) filing
by Ocurest of a voluntary petition of bankruptcy; (b) filing
of an involuntary petition of bankruptcy against Ocurest provided
that such petition is not discharged within 45 days of the filing
thereof; (c) appointment of a receiver or a trustee for all or
substantially all of the assets for the benefit of its creditors.
ii) In the event that any payment due Acorn hereunder, other than (a)
the payment referred to in Section 2.a) (i) hereof and (b) the
Advances, are not paid within 120 days after any notice of
non-payment;
iii) In the event that any Advance is not paid within 45 days
subsequent to the giving of notice of any non-payment by Acorn;
iv) In the event that the payment referred to in Section 2.a) (i)
hereof is not paid on or before February 28, 1996; and
v) Upon the default by Ocurest or its successor or licensee in the
performance of any other material obligation under this Agreement and
such default is not cured within 120 days after notice of default or
not later than the and of such 120 day period Acorn has been paid an
aggregate of $10,000,000 pursuant to the provisions of Section 2.
hereof.
4. Simultaneously with the execution hereof, Eric Schwarz shall deliver his
release to Acorn with respect to any claims in
2
<PAGE>
connection with that certain promissory note dated February 26, 1992 payable
to him by Acorn in the principal amount of $12,500. The form of such release
is attached hereto as an exhibit. The delivery of such release to Acorn shall
be deemed to constitute a payment by Ocurest to Acorn of $12,500 of the
Initial Payment.
5. Acorn hereby acknowledges the payment in full of all Advances payable on or
before November 30, 1995.
6. Acorn hereby waives and releases any rights it has or may have against
Ocurest prior to the execution of the Amendment (a) for any breaches or
alleged breaches of the Agreement or (b) to terminate the license granted
under the Agreement, or (c) to require Ocurest to turn over any materials
and products to Acorn.
7. Acorn hereby confirms and acknowledges that it is the intent of Acorn that
the licenses granted to Ocurest pursuant to the Agreement continue to remain
in full and effect and not be revoked or otherwise terminated or abridged
irrespective of any provision in the Agreement or otherwise. In order to
further assure the foregoing, upon the execution of this Amendment,
Acorn shall be deemed to have again granted such licenses to Ocurest as of
the date hereof.
8. Other than as expressly set forth herein, the Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the Amendment has been executed 29th day of January,
1996.
WITNESS: ACORN LABORATORIES, INC.
/s/ illegible By: /s/ illegible
- -------------------------- --------------------------
President
WITNESS: OCUREST LABORATORIES, INC.
/s/ illegible
- -------------------------- By: /s/ illegible
--------------------------
Executive Vice President
3
EXHIBIT 10.31
SUBSCRIPTION AGREEMENT
OCUREST LABORATORIES, INC.
Subscription Agreement (the "Subscription Agreement") between Ocurest
Laboratories, Inc., a Florida corporation (the "Company") and Robert M.
Kassenbrock (the "Subscriber").
The Subscriber hereby subscribes to make a loan to the Company of $200,000
(the "Loan") which Loan shall be evidenced by a promissory note of even date
herewith, the form of which is attached hereto as EXHIBIT A (the "Note") and a
warrant, the form of which is attached hereto as EXHIBIT B (the "Warrant") for
the purchase of 100,000 shares of the Company's common stock, $.008 par value
(the "Shares"). For purposes this Agreement, the term "Securities" means
A. the Note;
B. the Shares issuable upon exercise of the Warrant;
C. any additional securities which the Holder (as defined in the Warrant) or
any direct or indirect assignee of the Holder may be entitled to obtain upon
exercise of the Warrant and
D. any securities which may be obtained in exchange for any one of the
securities referred to in subparagraphs A., B. and C. above.
1. ACKNOWLEDGEMENTS AND UNDERSTANDINGS OF THE SUBSCRIBER. The Subscriber
acknowledges and understands as follows:
(a) Investment in the Securities involves a high degree of risk,
because, among other things:
(1) no public market exists for the Securities;
(2) an investment in the Securities is highly speculative and the
Subscriber may lose such Subscriber's entire investment;
(3) the Subscriber may not be able to liquidate an investment in
the Securities.
(b) Neither the Securities and Exchange Commission (the "SEC") nor any
state securities agency has made any finding or determination of the
fairness or suitability for investment in, nor any endorsement of, the
Company or the Securities.
(c) The price of the Securities has been determined solely by the
Company and does not necessarily bear any relationship to the results of
operations, net worth or prospects of
<PAGE>
the Company or to any other recognized criteria of value, and should not
be considered as an indication of any price at which any of the securities
of the Company may trade in the future.
2. REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER. The Subscriber
hereby makes the following representations and warranties to the Company, which
representations and warranties shall survive the acceptance, if any, by the
Company of a subscription by the Subscriber:
(a) The Subscriber is an accredited investor (an "Accredited Investor")
as such term is defined in Rule 501 of Regulation D promulgated under the
Securities Act of 1933 (the "Act").
(b) The Subscriber understands that the Subscriber is purchasing the
Securities without being furnished any offering literature or prospectus.
The Subscriber has had the opportunity to review the registration
statement filed by the Company on Form SB-2 under the Act in August, 1996.
(c) The Subscriber is able to bear the economic risk of an investment
in the Securities for an indefinite period of time.
(d) The Subscriber has prior investment experience, including
investment in non-listed securities and securities not registered under the
Act and the Subscriber has such knowledge and expertise in financial and
business matters so that the Subscriber is capable of evaluating the
merits and risks of an investment in the Securities, or the Subscriber has
employed the services of an investment advisor, attorney or accountants
to review the documents in connection with the Subscriber's purchase of the
Securities in order to evaluate, on behalf of the Subscriber, the merits
and risks of an investment in the Securities.
(e) The Subscriber has adequate means of providing for Subscriber's
current needs and possible personal contingencies and that the Subscriber
has no need for liquidity of the investment in the Securities and can
afford the loss of the entire investment in the Securities.
(f) The Subscriber recognizes the highly speculative nature of an
investment in the Securities.
(g) The Subscriber is not subscribing for the Securities as a result
of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media, or
broadcast over television or radio, or presented at any seminar or
meeting or any solicitation of a subscription by a person not previously
known to the Subscriber in connection with investments in securities
generally.
(h) The Subscriber is purchasing the Securities for such Subscriber's
own account, for investment and not for distribution or resale to others.
Accordingly, the Subscriber agrees that the Subscriber will not sell or
otherwise transfer the Securities unless they are registered under the Act
or unless an exemption from such registration is available.
2
<PAGE>
(i) The Subscriber understands that neither the offer nor sale of the
Securities nor the Securities themselves have been registered under the
Act or any state securities laws by reason of a claimed exemption from
the registration provisions thereof, the applicability of which depends,
in part, upon the investment intent of the Subscriber. In this connection,
the Subscriber understands that it is the position of the SEC that the
statutory basis for such exemptions would not be present if the investment
intention of the Subscriber merely meant that the present intention of the
Subscriber was to hold the Securities for a short period, such as the
capital gains period of tax statutes, for a deferred sale, for a market
rise, assuming a market develops, or for any other fixed period. The
Subscriber, further, realizes that, a current purchase with an intention
to resell in a relatively short period of time would represent a purchase
with an intent inconsistent with the representations which are required by
the Company from Subscribers, and the SEC might regard any such sale or
disposition as a deferred sale to which an exemption is not available.
Accordingly, it is the specific intention of the Subscriber to acquire the
Securities for Subscriber's own account and not for distribution or resale
to others.
(j) The Subscriber understands that there is no public market for the
Securities. The Subscriber, further, understands that Rule 144 (the "Rule")
promulgated under the Act requires, among other conditions, a minimum of a
two year holding period prior to the resale (in limited amounts) of
securities acquired in a non-public offering without having to satisfy the
registration requirements of the Act. The Subscriber acknowledges that the
Company makes no representation or warranty regarding its fulfillment in
the future of any reporting requirements under the Securities Exchange Act
of 1934 (the "Exchange Act") or dissemination by the Company to the public
of any current financial or other information concerning the Company, as is
required by the Rule as one of the conditions of its availability.
(k) The Subscriber understands that the Company is under no oblation
to register the Securities, other than to the extent expressly set forth
in the certificate evidencing the Warrant, and the Company is the only
person that may register Securities issued by it under the Act.
(l) The Subscriber consents to the placement of a legend (the "Legend")
on any certificate or other document evidencing the Securities to the
effect that such Securities have not been registered under the Act or under
any applicable state securities laws and setting forth or referring to the
restrictions on transferability and sale thereof.
(m) The address of the Subscriber furnished by the Subscriber at the
end of this Subscription Agreement is the principal residence of the
Subscriber if the Subscriber is an individual or the principal business
address of the Subscriber if the investor is a corporation or other entity,
and that all offers to the Subscriber have been made in the state specified
in such address.
(n) The Subscriber has had a reasonable opportunity to ask questions of
and receive answers from the Company concerning the Company and the
Securities, and all such questions, if any, have been answered to the full
satisfaction of the Subscriber.
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<PAGE>
(o) The Subscriber is not engaged in part of a plan or scheme to evade
the registration provisions of any federal or state securities laws
(collectively the "Securities Laws").
(p) The Subscriber is not an officer, director or otherwise an
affiliate (as defined in the rules promulgated under the Act) of the
Company, nor is the Subscriber purchasing the Securities for the benefit
of any such person.
(q) The Subscriber understands that the subscription by the Subscriber
is not binding upon the Company until the Company accepts it, which
acceptance is at the sole and absolute discretion of the Company and will
be evidenced by the Company's execution of this Subscription Agreement
where required. This Subscription Agreement shall be null and void if the
Company does not accept it as aforesaid. The Subscriber understands that
the Company, in its sole discretion, may reduce the amount of Securities
subscribed for by the Subscriber to any amount deemed appropriate by the
Company, whether or not pro rata reductions are made to any other
Subscriber's subscription.
(r) The Subscriber has full power and authority to executive and deliver
this Subscription Agreement and to perform the obligations of the
Subscriber, and this Subscription Agreement is a legally binding obligation
of the Subscriber in accordance with the terms hereof.
3. AGREEMENT TO INDEMNIFY COMPANY. The Subscriber hereby agrees to
indemnify and hold the Company and its directors, officers, controlling persons,
legal counsel and their respective heirs, representatives, successors and
assigns harmless for and to indemnify them against any and all liabilities,
damages, losses, costs and expenses which any of the foregoing parties may
incur:
(a) by reason of the Subscriber's failure to fulfill any of the terms
and conditions of this Subscription Agreement; and
(b) by reason of the breach by the Subscriber of any of the agreements,
acknowledgements, understandings, representations or warranties contained
in this Subscription Agreement; and
(c) by reason of any misrepresentation by the Subscriber; and
(d) by reason of any sale or distribution by the Subscriber
in violation of the Securities Laws; and
(e) by reason of any and all claims made by or involving any person,
other than the Subscriber, claiming any interest, right, title, power or
authority in respect to the purchase by the Subscriber of the Securities.
The Subscriber further agrees and acknowledges that this indemnification
provision shall survive any sale or transfer or attempted sale or transfer of
all or any portion of the Securities, the
4
<PAGE>
dissolution or bankruptcy of the Company, default by the Company under the
Subscription Agreement, or failure of any of the conditions stated in the
Subscription Agreement.
4. MISCELLANEOUS.
(a) SUBSCRIPTION AGREEMENT BINDING ON HEIRS AND ASSIGNS. This
Subscription Agreement shall be binding upon the Subscriber and the heirs,
successors, estate, legal representatives and assigns of the Subscriber.
(b) NOTICES. All notices, consents and other communications under this
Subscription Agreement shall be in writing and shall be deemed to have
been duly given:
(1) when delivered by hand; or
(2) one business day after the business day of transmission if
sent by telex or telecopier (with receipt confirmed), provided that a
copy is mailed by registered mail, return receipt requested; or
(3) one business day after the business day of deposit with the
carrier, if sent by Express Mail, Fedex or other recognized express
delivery service for overnight delivery (receipt requested).
(c) MODIFICATION. This Subscription Agreement shall not be change,
modified or amended except by a writing signed by the parties to be
charged, and this Subscription Agreement may not be discharged except by
performance in accordance with its terms or by a writing signed by the
party to be charged.
(d) ENTIRE AGREEMENT. This Subscription Agreement constitutes the
entire agreement among the parties as to the subject matter thereof and
merges and supersedes any prior discussions, understandings, and agreements
of any and every nature among them. (e) JURISDICTION AND VENUE.
Notwithstanding the place where this Subscription Agreement may be executed
by any of the parties hereto, the parties expressly agree that all terms
and provisions hereof shall be construed in accordance with and governed by
the laws of the State of Florida. The parties hereby agree that any dispute
which may arise between them as a result of or in connection with this
Subscription Agreement shall be adjudicated before a court located in
Florida and such parties hereby submits to the exclusive jurisdiction of
the courts of the State of Florida and the federal courts in Florida with
respect to any action or legal proceeding commenced by any party, and
irrevocably waive any objection they now have or hereafter may have
respecting the venue of any such action or proceeding brought in such a
court or respecting the fact that such court is an inconvenient forum,
relating to or arising out of this Subscription Agreement or any acts or
omissions relating to the sale of the Securities hereunder, and consent to
service of process in any such action or legal proceeding by means of
registered mail or certified mail, return receipt requested, in care of the
address set forth herein or such other address as either party may furnish
in writing to the other, provided process is actually received.
5
<PAGE>
(f) COUNTERPARTS. This Subscription Agreement may be in counterparts.
Upon execution and delivery of this Subscription Agreement by the
Subscriber, this Subscription Agreement shall become a binding obligation
of the Subscriber with respect to the purchase of the Securities as
indicated herein.
(g) INVALIDITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any
other situation or in any other jurisdiction.
(h) WAIVER. A waiver by either party of a breach of any provision of
this Subscription Agreement shall not operate, or be construed, as a
waiver of any subsequent breach by the same party.
(i) FURTHER DOCUMENTS. The parties agree to execute all such further
documents, agreements and instruments and take such other and further
action as may be necessary or appropriate to carry out the purposes and
intent of this Subscription Agreement.
5. SUBSCRIBER DATA. The Subscriber represents and warrants to the Company
that the following information is complete, accurate and may be relied upon by
the Company. In accordance with the foregoing, the following is hereby provided:
Name of Subscriber: Robert M. Kassenbrock
Date of Birth: 10-13-51
State or Country of Residence: Indiana, USA
Social Security Number: ###-##-####
Subscriber Address: 11151 Ridge Knoll Dr.
City: Evansville State: Indiana Zip: 47710
Country: USA Telephone Number: (812)-867-6510
In the event the Company accepts the subscription by the Subscriber and payment
in full for the the Securities(s) purchased is tendered to the Company,
certificates representing the Securities will be forwarded to the Subscriber by
the Company in accordance herewith. Subscriptions one received by the Company
are irrevocable may not be withdrawn by the Subscriber.
6
<PAGE>
IN WITNESS WHEREOF, the Subscriber hereby represents and warrants that the
Subscriber has read that entire Subscription has read this entire Subscription
Agreement, and has executed this Subscription Agreement this 6 day of Sept,
1996, at (City) Evansville (State) Indiana (Country) USA
SUBSCRIBER SIGNATURE
\s\ ROBERT M. KASSENBROCK
- --------------------------------------------------------------------------------
NOT FOR SUBSCRIBER USE:
Accepted this 6th day of September 1996
OCUREST LABORATORIES, INC.
By: [ILLEGIBLE]
Title: Senior Vice President
7
<PAGE>
PROMISSORY NOTE
Palm Beach Gardens, Florida
$200,000.00 September 6, 1996
FOR VALUE RECEIVED, the undersigned, OCUREST LABORATORIES, INC., a Florida
corporation, whose address is 4400 PGA Blvd., Suite 300, Palm Beach Gardens,
Florida 33410 (the ``Obligor''), promises to pay to Robert M. Kassenbrock (the
``Holder'') at 11151 Ridge Knoll Drive, Evansville, Indiana 47710 (or at such
other place as the Holder hereof may designate) the principal sum of Two Hundred
Thousand and No/100 Dollars ($200,000.00) the ``Principal''), plus interest (the
``Interest'') at the annual rate set forth below on the principal from time to
time remaining unpaid.
Interest on the outstanding principal balance shall accrue at a rate of
twelve percent (12%) per annum based upon 365-day year. The outstanding
principal balance plus all accrued and unpaid interest thereon shall be due upon
the earlier to occur of the following:
1. six (6) months from the date hereof; or
2. receipt by the Obligor of the proceeds of the sale of the Obligor's
common stock to RAF Financial Corporation as representative of the
underwriters, in accordance with the Registration Statement filed with
the United States Securities and Exchange Commission on Form SB-2,
under file #333-10323.
(the ``Maturity Date'').
Failure of Obligor to pay in full any Principal and Interest due hereunder
within ten (10) days after notice of any such failure shall constitute a default
hereunder, whereupon the entire amount of this Note remaining unpaid, less the
amount of any discount and any rebates required by law, shall become due and
payable forthwith or thereafter at the option of the Holder and without notice
or demand. In no event and under no circumstances shall Holder be entitled
hereunder to unaccrued or unearned interest or other charges. In the event of
default, the then unpaid principal balance hereof shall bear interest form the
time of such default at eighteen percent (18%) per annum.
This Note may be prepaid without penalty at any time until the Maturity
Date.
The Obligor agrees to pay all filing fees and taxes, and all costs of
collection or securing or attempting to collect or secure the payment thereof,
including attorneys' fees, whether or not involving litigation and/or appellate
proceedings.
The Holder shall not be any act, delay, omission or otherwise be deemed to
have waived any of its rights or remedies, and no waiver of any kind shall be
valid, unless in writing and signed by the Holder.
All rights and remedies of the Holder shall be cumulative.
This Note shall be governed by and construed in accordance with the laws of
the State of Florida.
Any provision of this Note that may be unenforceable or invalid under any
law shall be ineffective to the extent of such unenforceability or invalidity
without affecting the enforceability or validity of any other provision hereof.
Any notice required to be given to any person shall be deemed sufficient if
mailed, postage prepaid, to such persons's address as set forth in this Note.
<PAGE>
The provisions of this Note are binding on the assigns and successors of
Obligor.
If this Note is not paid upon demand or according to the tenor hereof and
strictly as above provided, it may be placed in the hands of an attorney at law
for collection. In such event, each party liable for payment thereof, as
obligor, maker, endorser, guarantor or otherwise, hereby agrees to pay the
holder hereof, in addition to the sums above stated, a reasonable attorneys'
fee, whether or not suit be initiated, which fee shall include attorneys' fees
at the trial level and on appeal, together with all costs incurred.
Notwithstanding anything to the contrary, in no event, whether by reason of
advancement of the proceeds hereof, acceleration of maturity of the unpaid
balance hereof, or otherwise, shall the amount taken, reserved or paid, charged
or agreed to be paid, for the use, forbearance or detention of money advanced
pursuant hereto or pursuant to any other document executed in connection
herewith, exceed the maximum rate allowed by Florida law. If, for any
circumstances whatsoever, fulfillment of any obligation hereunder shall cause
the effective rate of interest to exceed the maximum lawful rate allowed under
Florida law, then, IPSO FACTOR, the obligation shall be reduced to the limit of
such validity, and any amounts received by the Holder as interest that would
exceed the maximum lawful rate allowed under Florida law shall be applied to the
reduction of the unpaid principal balance and not the payment of interest. If
such excessive interest exceeds the unpaid principal balance, the excess shall
be refunded. In determining whether or not the interest paid or payable
hereunder exceeds the maximum lawful rate, the Holder may utilize any law, rule
or regulation in effect from time to time and available to the Holder. This
provision shall control every other provision of all agreements between the
undersigned and Holder.
Ocurest Laboratories, Inc.
By: /s/ LARRY M. REID
----------------------------
Larry N. Reid
Senior Vice President
2
<PAGE>
THIS WARRANT (the ``Warrant'') AND COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE ``ACT''), AND MAY NOT BE OFFERED OR SOLD UNLESS SAME ARE
REGISTERED UNDER THE ACT OR, IN THE OPINION OF THE COMPANY'S COUNSEL, AN
EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
Void after 5:00 P.M., Palm Beach Gardens, Florida Time, on June 30, 2000,
unless sooner terminated pursuant to the terms hereof (the ``Termination Date'')
WARRANT TO PURCHASE COMMON STOCK
TO BE ISSUED BY
OCUREST LABORATORIES, INC.
This is to certify that, FOR VALUE RECEIVED, ROBERT M, KASSENBROCK (the
``Holder'') is entitled to purchase, subject to the provisions of this Warrant,
from Ocurest Laboratories, a Florida corporation (``Company''), One Hundred
Thousand (100,000) shares of the Company's Common Stock, $.008 par value (the
``Shares'') at a price per Share equal to sixty percent (60%) of the initial
public offering price per share of the Company's Common Stock, $.008 par value
sold pursuant to the Registration Statement filed with the Securities and
Exchange Commission (the ``SEC'') on Form SB-2, File No. 333-10323 (the
``Registration Statement''), at any time or from time to time during the period
commencing on the later to occur of (a) the date that the Registration Statement
is declared effective by the SEC or (b) six (6) months from the date hereof (the
``Commencement Date'') and ending on the Termination Date (``The Exercise
Period''). It is understood and agreed that this Warrant shall not be
exercisable prior to the Commencement Date. The number of Shares to be received
upon the exercise of this Warrant and the price to be paid for each such Share
may be adjusted from time to time as hereinafter set forth. The Shares
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as ``Warrant Shares'' and the exercise price
of this Warrant as in effect at any time and as in effect at any time and as
adjusted from time to time is hereinafter sometimes referred to as the
``Exercise Price''.
1. EXERCISE OF WARRANT AND EARLY TERMINATION. This Warrant may be
exercised in whole or in part at any time or from time to time during the
Exercise Period; provided, however, that (1) if such Termination Date is a day
on which banking institutions in the State of Florida are authorized by law to
close, then the Termination Date shall become the next succeeding day on which
banking institutions in the State of Florida are open for business, and (2) in
the event of any merger, consolidation or sale of substantially all the assets
of the Company as an entirety that results in any distribution to the Company's
stockholders during the Exercise Period, the Holder shall have the right to
exercise this Warrant commencing at such time through the Termination Date which
shall entitle the Holder to receive, in lieu of Shares, the kind and amount of
securities and property (including cash) receivable by a holder of the number of
shares of Shares into which this Warrant might have been excercisable
immediately prior thereto. This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the purchase form annexed hereto (the
``Purchase Form''), duly executed and accompanied by payment of the Exercise
Price for the number of Warrant Shares specified in such Purchase Form. As soon
as practicable after each such exercise of the Warrants, but not later than
seven (7) days from the date of such exercise, the Company shall issue and
deliver to the Holder a certificate representing the securities constituting the
Warrant Shares issuable upon such exercise, registered in the name of the Holder
or such Holder's designee. If this Warrant shall be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute deliver
a new Warrant evidencing the rights of the Holder thereof to purchase the
balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its
<PAGE>
office, or by the stock transfer agent of the COmpany at its office, in proper
form for exercise, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be physically delivered
to the Holder. Notwithstanding anything to the contrary contained herein, this
Warrant shall be of no force and effect and the Termination Date shall occur
upon the first to occur of either of the following events (a) the issuance of
this Warrant causes the date that the Registration Statement is declared effect
by the SEC to be significantly delayed and (b) a determination by the National
Association of Securities Dealers, Inc. (the ``NASD'') that any NASD member or
associated person thereof is deemed to have received underwriting compensation
in connection with the transactions pursuant to which this Warrant has been
issued.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
3. FRACTIONAL SHARES.
(a) No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. With respect to any fraction of a
Share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the current market value
of a Share, determined as follows:
(b) If the Common Stock is listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange or listed for trading
on the NASDAQ Stock Market system, the current market value shall be the last
reported sale price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant, or if no such sale
is made on such day, the average closing bid and asked prices for such day on
such exchange or system; or
(c) If the Common is not so listed or admitted to unlisted trading
privileges but bid and asked prices are reported by the National Quotation
Bureau, Inc., the current market value shall be the mean of the last reported
bid and asked prices reported by the National Quotation Bureau, Inc. on the last
business day prior to the date of the exercise of this Warrant; or
(d) If the Common Stock is not so listed or admitted to unlisted trading
privileges and bid and asked prices are not so reported, the current market
value shall be an amount not less than book value thereof as of the end of the
most recent fiscal year of the Company ending prior to the date of the exercise
of the Warrant, determined in such reasonable manner as may be prescribed by the
Board of Directors of the Company.
4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Common
Stock purchasable hereunder. The term ``Warrant'' as used herein includes any
Warrants into which this Warrant may be divided or exchanged. Upon receipt by
the Company of evidence satisfactory to its of the loss, theft, destruction or
mutilation of the Warrant, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will execute and deliver a new Warrant
of like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed or mutilated shall be at
any time enforceable by anyone.
5. RIGHTS AND LIABILITIES OF THE HOLDER. The Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder in the Company, either at law
or in equity, and the rights of the Holder are limited to those expressed in the
Warrant and are not enforceable against the Company except to the extend set
forth herein. No provision of this Warrant, in the absence of affirmative action
by the Holder to purchase the Warrant Shares, and
2
<PAGE>
no more enumeration herein of the rights or privileges of the Holder shall give
use to any liability of the Holder for the Exercise Price or as a shareholder of
the Company, whether such liability is asserted by the Company or by creditors
of the Company.
6. ADJUSTMENTS, NOTICE PROVISIONS AND RESTRICTIONS ON ISSUANCE OF
ADDITIONAL SECURITIES.
(a) ADJUSTMENT OF EXERCISE PRICE. The Exercise Price in effect from
time to time shall be subject to adjustment, as follows:
(1) In case the Company shall:
(A) declare a dividend or make a distribution on the
outstanding shares of its capital stock that is payable in shares of its
Common Stock;
(B) subdivide, split or reclassify the outstanding shares of
its Common Stock into a greater number of shares, or
(C) combine or reclassify the outstanding shares of its
Common Stock into a smaller number of shares.
then the Exercise Price in effect immediately after the record date for
such dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be adjusted so that its shall equal
the price determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numberator of which shall be
the number of shares of Common Stock outstanding immediately before such
dividend, distribution, split, subdivision, combination or
reclassification, and the denominator of which shall be the number fo
shares of Common Stock outstanding immediately after such devidend,
distribution, split, subdivision, combination or reclassification. Any
shares of Common Stock issuable in payment of a dividend shall be deemed to
have been issued immediately prior to the record date for such dividend for
purposes of calculating the number of outstanding shares of Common Stock of
the Company under this Paragraph 6. Such adjustment shall be made
successively upon the occurrence of each event specified above.
(2) In case the Company fixes a record date for the making of a
distribution to all holders of shares of its Common Stock;
(A) of shares of any class of capital stock other than its
Common Stock or
(B) of evidences of its indebtedness or
(C) of assets, excluding cash dividends or distributions
[other than extraordinary cash dividends or distributions, and dividends or
distributions referred to in Paragraph 6.(a)(1) hereof],
then in each such case the Exercise Price in effect immediately
thereafter shall be determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numerator of which shall be
the total number of shares of Common Stock outstanding on such record date
multiplied by the Current Market Price [as such term is defined in
Paragraph 6.(a)(3) hereof] per share on such record date, less the
aggregate fair market value as determined in good faith by the Board of
Directors of the Company of said shares or evidences of indebtedness or
assets or rights so distributed, and the denominator of which shall be the
total number of shares of Common Stock outstanding on such record date
multiplied by such Current market Price per share. Such adjustment shall be
made successively each time such a record date is fixed. In the event that
such distribution is not so made, the Exercise Price then in effect shall
be readjusted to the Exercise Price which would then be in effect if such
record date had not been fixed.
3
<PAGE>
(3) For the purpose of any computation under Paragraphs 6.(a)(1)
or 6.(a)(2) hereof, the ``Current Market Price'' per share at any date
(the ``Computation Date'') shall be deemed to be the average of the daily
Closing Prices of the Common Stock for Twenty (20) consecutive trading days
ending the trading day before such date; provided, however, upon the
occurrence, prior to the Computation Date, of any event described in
Paragraphs 6.(a)(1) or 6.(a)(2) that shall have become effective with
respect to market transactions at any time (the ``Market-Effect Date'') on
or after the beginning of such 20-day period, the Closing Price for each
trading day preceding the Market-Effect Date'') on or after the beginning
of such 20-day period, the CLosing Price for each trading day preceding the
Market-Effect Date shall be adjusted, for purposes of calculating such
average, by multiplying such Closing Price by a fraction the numerator of
which is the Exercise Price as in effect immediately after the
Market-Effect Date and the denominator of which is the Exercise Price
immediately prior to the Market-Effect Date, it being understood that the
purpose of this proviso is to ensure that the effect of such event on the
market price of the Common Stock shall, as nearly as possible, be
eliminated in order that distortion of the calculation of the Current
Market Price may be minimized.
(4) All calculations under this Paragraph 6.(a) shall be made to
the nearest cent.
(b) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to Paragraphs 6.(a)(1) or 6.(a)(2) hereof, this Warrant
shall thereupon evidence the right the purchase, in addition to any other
securities to which the Holder is entitled to purchase, that number of shares of
Common Stock (calculated to the nearest one-hundred thousandth of a share)
obtained by multiplying the number of shares of Common Stock purchasable upon
exercise of the Warrant immediately prior to such adjustment by the Exercise
Price in effect immediately prior to such adjustment and dividing the product so
obtained by the Exercise Price in the effect immediately after such adjustment.
(c) VERIFICATION OF COMPUTATIONS. The Company shall select a firm of
independent public accountants, which may be the Company's independent auditors,
and which selection may be changed from time to time, to verify the computations
made in accordance with this Paragraph 6. The certificate, report or other
written statement of an such firm shall be conclusive evidence of the
correctness of any computation made under this Paragraph 6. Promptly upon its
receipt of such certificate, report or statement from such firm of independent
public accountants, the Company shall deliver a copy thereof to the Holder.
(d) WARRANT CERTIFICATE AMENDMENTS. Irrespective of any adjustments
pursuant to this Paragraph 6, Warrant Certificates theretofore or thereafter
issued need not be amended or replaced, but Warrant Certificates thereafter
issued shall bear an appropriate legend or other notice of any adjustments and
which legend and/or notice has been provided by the Company to the Holder;
provided, however, the Company may, at its option, issue new Warrant
Certificates evidencing Warrants to reflect any adjustment in the Exercise
Price and the number of Warrant Shares evidenced by such Warrant Certificates
and deliver the same to the Holder in substitution for existing Warrant
Certificates.
7. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as
required by the provisions of the foregoing Paragraph 6, the Company shall
forthwith place in the custody of its Secretary or an Assistant Secretary at its
principal office, with a copy to its stock transfer agent, if any, an officer's
certificate showing the adjusted Exercise Price determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment,
including a statement of the number of additional shares of Common Stock, if
any, and such other facts as shall be necessary to show the reason for and the
manner of computing such adjustment. Each such officer's certificate shall be
made available at all reasonable times for inspection by the Holder or any
holder of a Warrant executed and delivered pursuant to Paragraph 1, and the
Company shall, forthwith after each such adjustment, mail a copy by certified
mail of such certificate to the Holder or any such holder.
8. NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding:
(a) if the Company shall pay any dividend or make any distribution upon
the Common Stock,
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(b) if the Company shall offer to the holders of its Common Stock
rights to subscribe for, purchase, or exchange property for any shares of any
class of stock, or any other rights or options or
(c) if any capital reorganization of the Company, reclassification of
the capital stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or transfer of all or substantially all of
the property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected
then in any such case, the Company shall cause to be sent by mail or courier
service to the Holder, at least five days prior to the date specified in (x) or
(y) below, as the case may be, a notice containing a brief description of the
proposed action and stating the date on which (x) a record is to be taken for
the purpose of such dividend, distribution or subscription rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any is
to be fixed, as of which the holders of Common Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up.
9. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or of any sale, lease or
conveyance to another corporation of the property of the Company as an entirety
(collectively such actions being hereinafter referred to as
``Reorganizations''), the Company shall, as a condition precedent to such
Reorganization transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant during the
Exercise Period, to receive in lieu of the amount of securities otherwise
deliverable, the king and amount of shares of stock and other securities and
property receivable upon such Reorganization by a holder of the number of shares
of Common Stock which might have been purchased upon exercise of this Warrant
and the warrants included in the Shares immediately prior to such
Reorganization. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant. The foregoing provisions of this paragraph shall similarly
apply to successive Reorganizations.
10. ISSUE TAX. The issuance of certificates representing the Warrant Shares
upon the exercise of this Warrant shall be made without charge to the Holder for
any issuance tax in respect thereor.
11. REGISTRATION RIGHTS
(a) PIGGY-BACK REGISTRATION. If, at any time after the Commencement
Date, the Company proposes to file a registration statement under the Act with
respect to any class of security (other than the Registration Statement or a
registration statement on Form S-4 or S-8, or any form substituting therefor, or
a registration statement filed in connection with any one or more of an exchange
offer or an offering of securities solely to the Company's existing
stockholders, or an offering of securities limited to securities underlying
options issued to officers, directors or employees of the Company whether or not
pursuant to a stock option plan) then the Company shall give written notice of
such proposed filing to the holder(s) of the Registrable Securities (as
hereinafter defined) and the holders of securities which grant the right to such
holders to obtain registrable Securities (collectively, the "Registrable
Securities Holders") at lease twenty (20) days before the anticipated filing
date, and such notice shall offer each of the Registrable Securities Holders the
opportunity to register such registrable Securities as such Registrable
Securities Holders my request (the "Piggy-back Registration"). For purposes this
Agreement, "Registrable Securities" means
(1) the Shares issued upon exercise of this Warrant;
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(2) any additional securities which the Holder or any direct or
indirect assignee of the Holder nay be entitled to obtain upon
exercise of this Warrant and
(3) any securities which may be obtained in exchange for any of
the securities referred to in subparagraphs 11.(a)(1) and
11.(a)(2) above.
Notwithstanding the foregoing, Registrable Securities shall not include such
securities which can be freely sold to the public in the United States without
registration under the Act.
(b) HOLDBACK AGREEMENT. In the case of an underwritten public offering,
to the extent not inconsistent with applicable law, each registrable Securities
Holder whose securities are included in a registration statement agrees not to
effect any public sale or distribution of the security being registered or a
similar security of the Company or any securities convertible into or
exchangeable or exercisable for such securities, including a sale pursuant to
Rule 144 promulgated under the Act, during the five (5) days prior to, and
during the twenty (20) day period beginning on, the effective date of such
registration statement (except as part of such registration ), if and to the
extent timely notified in writing by the managing underwriters if any, or the
Company.
(c) PIBBY-BACK ON UNDERWRITTEN PUBLIC OFFERING. In the event that
Registrable Securities Holder(s) seek to exercise their rights pursuant hereto
to include registrable Securities in a registration statement to be filed by the
Company for an underwritten public offering, if requested by such Registrable
Securities Holders, the Company shall use its best efforts to cause the managing
underwriter or underwriters of such proposed underwritten offering to permit
such registrable Securities Holders to participate therein on the same terms and
conditions as any similar securities of the Company included therein.
Notwithstanding the foregoing, if the managing underwriter or underwriters of
such offering delivers a written notice to the Company to the effect that the
total amount or kind of securities which the Registrable Securities Holders and
any other persons or entitles intend to include in such underwritten offering,
or the inclusion of such securities in the offering, would adversely affect the
success of such offering, then, the amount or kind of securities to be offered
by such underwriter for the accounts of the registrable Securities Holders shall
be eliminated or reduced pro rate to the extent necessary to reduce the total
amount of securities to e included in such offering to the amount recommended by
such managing underwriter or underwriters. The Company shall have the right to
terminate or withdraw any registration initiated by The Company pursuant to this
paragraph prior to the effective date of such registration statement.
(d) EQUAL TREATMENT. Other than with respect to selling shareholders
whose securities are included in a registration statement pursuant to a
contractual right to demand such inclusion, in connection with any registration
statement filed pursuant hereto with respect to which the registrable Securities
Holders have piggy-back rights to have their registration Securities included
therein, the Registration Securities Holders shall in no event be treated any
differently than any other selling shareholders in connection with any
requirement by an underwriter.
(e) REGISTRATION PROCEDURES.
(1) Whenever the Registrable Securities Holders are entitled to
have any registrable Securities registered pursuant hereto, the Company
will use its best efforts to cause the registration to become effective as
quickly as practicable, and in connection therewith, the Company will as
expeditiously as possible:
(A) furnish to each Registrable Securities Holder whose
registrable Securities are to e registered (a "Seller" or collectively,
the "Sellers"), prior to filing a registration statement, a copy of such
registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto), and the prospectus (the "Prospectus")
included in such registration statement (including each preliminary
prospectus) as shall be reasonably requested;
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(B) use its best efforts to register or qualify such
registrable Securities under such securities or "blue sky" laws of such
jurisdictions as any Registrable Securities Holder reasonably requests and
do any and all other acts and things which may be reasonably necessary or
advisable to enable such Seller to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such Seller, provided
that the Company will not be required to
(i) Qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this paragraph;
(ii) subject itself to general taxation in any such
jurisdiction; or
(iii) consent to general service of process in any such
jurisdiction;
(C) use its best efforts to cause the Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary by
virtue of the business and operations of the Company to enable the Seller
or Sellers thereof to consummate the disposition of such registrable
Securities;
(D) promptly notify the Sellers at any time when a
Prospectus relating thereto is required to delivered under the Act of the
happening of any event as a result of which the Prospectus included in such
registration statement contains an untrue statement of a material fact or
omits to state any fact required to be stated therein or necessary to make
the statements therein in light of the circumstances under which they were
made not misleading, or must otherwise be supplemented or amended (a
"supplement or Amendment Event") and the Company will prepare a supplement
or amendment to such Prospectus so that, as thereafter delivered , such
Prospectus will not contain an untrue statement of fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein light of the circumstances under which they were made
not misleading (other than as to information furnished by Sellers and not
known to the contrary by the Company);
(E) supplement or amend the registration statement, as
required by the registration form utilized by the Company or by the
instructions applicable to such registration from or by the Act or the
rules and regulations thereunder and the Company agrees to furnish to the
Sellers copies of any such supplement or amendment prior to or
simultanesouly with its being used and/or filed with the SEC.
(F) attempt to enter into customary agreements (including
any underwriting agreement in customary form including customary
indemnification provisions) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such
Registrable Securities;
(G) make available for inspection by any Seller, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by any
Seller or underwriter, all pertinent financial and other records,
pertinent corporate documents and properties of the Company and each of
its subsidiaries, as shall be reasonable necessary to enable each to
exercise such party's due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information reasonably
requested in connection with such registration statement.
(H) use its best efforts to obtain a "cold comfort" letter
from the Company's independent public accountants covering such matters as
are customarily covered by "cold comfort" letters as the Sellers or the
managing underwriter reasonably request;
(I) use its best efforts to obtain an opinion or opinions
from counsel for the Company in customary form and content as opinions
given in similar transactions;
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(J) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, its earnings statement
which need not be audited covering a period of twelve (12) months,
beginning within three (3) months after the effective date of the
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act;
(K) use its best efforts to take all other steps necessary
to effect the registration of the Registrable Securities contemplated
hereby.
(2) The Company may require each Seller to furnish to the
Company such reasonable information and undertakings regarding such Seller
and the distrubtion of the Registrable Securities and such other
information as the Company may from time to time reasonable request,
including the prompt advice to the Company in writing of any materials
changes in any information so supplied by such Seller. The Company's
obligation to include any Seller's Registrable Securities in any
registration statement is conditioned upon such Seller's furnishing all
such information and undertakings to the Company in a timely manner upon
request.
(3) The Company may require each Seller to agree that, upon
receipt of any notice from the Company of the occurrence of a Supplement
or Amendment Event, such Seller will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering
such Registrable Securities until such Seller has received copies of the
requisite supplemented or amended Prospectus and, if so directed by the
Company such holder will deliver to the Company (at the expense of the
Company) all copies, other than permanent file copies then in such Seller's
possession, of the Prospectus covering such Registrable Securities current
at the time of receipt of such notice. In the event the Company shall give
any such notice, the Company shall extend the period during which such
registration statement shall be maintained effective pursuant to this
Warrant by the number of days during the period from and including the
date of the giving of each notice of a supplement or amendment Event to
and including the date or dates when each Seller shall have been sent the
copies of the requisite supplemented or amended Prospectus.
(4) The Company may require each Seller to agree to comply with
all applicable federal and state laws, rules and regulations relating to
the offer and sale of the Registrable Securities, including laws and
regulations relating to the deliver of prospectuses and, if an
underwritten offering, to execute all documents reasonably requested by
the managing underwriter, if any, including the underwriting agreement.
(f) EXPENSES. All expenses incident to the Company's performance of or
compliance with the provisions of this Paragraph 11 including, without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or "blue sky" laws (including fees and disbursements of the
Company's counsel in connection with "blue sky" qualifications of the
Registrable Securities); the fees and expenses associated with any filing with
the National Association of Securities Dealers, Inc. (including fees and
expenses of any "qualified independent underwriter" and its counsel); printing
expenses (including expenses of printing prospectuses; messenger and delivery
expenses (other than expenses of deliveries from any Seller to the Company
except as otherwise hereinabove set forth; fees and expenses of counsel for the
company and its independent certified public accountants (including the expenses
of any special audit or "cold comfort") letters required by or incident to such
performance); securities acts liability insurance (if the Company elects to
obtain such insurance); and the fees and expenses of any special experts
retained by the Company in connection with such registration, (all such expenses
being herein called "Registration Expenses"), shall be borne by the Company. All
underwriting discounts and selling commissions with respect to securities sold
by a Seller as well as fees and expenses of counsel to any seller shall be
borne by such Seller.
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(g) INDEMNIFICATION
(1) INDEMNIFICATION BY THE COMPANY. In addition to any other
rights of indemnification herein, the Company agrees to indemnify, to the
full extent permitted by law, each Seller, its affiliates, officers,
employees and agents and each person who controls such Seller (within the
meaning of the Act), and any investment adviser thereof or agent or
underwriter therefor against all losses, claims, damages, liabilities and
expenses (including reasonable costs of investigation and legal expenses)
arising out of or based upon any untrue or alleged untrue statement of
fact contained in any registration statement, prospectus or preliminary
prospectus or an omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein (in the case of a prospectus or preliminary prospectus, in light
of the circumstances under which they were made) not misleading, except
insofar as the same arise out of or are based upon or contained in any
information furnished in writing to the Company by such Seller expressly
for use therein or in the preparation thereof; provided that the Company
shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission in a prospectus or preliminary prospectus, if such untrue
statement or alleged untrue statement or omission or alleged omission is
corrected in an amendment or supplement to the prospectus or preliminary
prospectus and the Seller thereafter fails to deliver such prospectus as
so amended or supplemented prior to or concurrently with the sale of the
registrable Securities after the Company had furnished such Seller with
the number of copies of such amended or supplemented prospectus reasonably
requested by such Seller.
(2) INDEMNIFICATION BY SELLERS. As a condition to the inclusion
by the Company of A Seller's registrable Securities in a registration
statement, the company may require such Seller to agree to indemnify, to
the full extent permitted by law, the Company, the directors, officers,
agents and attorneys of, and each person who controls, the Company (within
the meaning of the Act) against any loses, claims, damages, liabilities
and expenses (including reasonable costs of investigation and legal
expenses) arising solely out of any untrue statement of a material fact or
any omission to state a material fact required to be stated in the
registration statement or prospectus or any amendment thereof or supplement
thereto or necessary to make the statements therein (in the case of a
prospectus, in light of the circumstances under which they were made) not
misleading solely to the extent that such untrue statement or omission is
contained in or failed to be contained in any information or affidavit with
respect to such Seller furnished in writing by such Seller to the Company
specifically with respect to the preparation of a registration statement.
(3) CONTRIBUTION. If the indemnification provided for herein
from the indemnitor is unavailable to an indemnitee hereunder in respect of
any losses, claims, damages, liabilities or expenses referred to herein,
then the indemnitor may, in lieu of indemnifying such indemnitee,
contribute to the amount paid or payable by such indemnitee as a result of
such losses, claims, damages, liabilities or expenses in such proportion as
in appropriate to reflect the relative fault of the indemnitor and
indemnitee in connection with the actions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The amount of contribution shall be determined by
reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact, has been made by, or relates to
information supplied, the indemnitor or the indemnitee, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such action. the amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this paragraph was determined by pro
rata allocation or by any other method of allocation which does not take
account of he equitable considerations referred to in the immediately
preceding paragraph. No person adjudicated guilty of any fraudulent
misrepresentation within the meaning of Section 11(f) of
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the act shall be entitled to contribution from any person who was not
adjudicated guilty of such fraudulent misrepresentation.
12. GOVERNING LAW. This Warrant shall be governed by and construed and
enforced in accordance with the laws of the State of Florida, and any action,
suit or proceeding brought by or on behalf of either the Company or the Holder
with respect to this Warrant shall be adjudicated in the courts of the State of
Florida located in Palm Beach County and the United States District Court in and
for the Southern District of Florida.
OCUREST LABORATORIES, INC., a Florida
corporation
[CORPORATE SEAL] By: /s/ LARRY M. REID
-----------------------------------
Larry M. Reid
Senior Vice President/Secretary
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PURCHASE FORM
Dated ____________, 19__
The undersigned hereby irrevocably elects to exercise the within Warrant
to the extent of purchasing _______________________ Shares and hereby makes
payment of _________________ in payment of the actual exercise price thereof,
INSTRUCTIONS FOR REGISTRATION OF STOCK
---------------------------------------
(Please type or print in block letters)
Name
Address
Signature
11
EXHIBIT 23.1
We have issued our report dated March 29, 1996, accompanying the financial
statements of Ocurest Laboratories, Inc. contained in Amendment No. 1 of the
Registration Statement and Prospectus. We consent to the use of the
aforementioned report in Amendment No. 1 of the Registration Statement and
Prospectus, and to the use of our name as it appears under the Caption
"Experts."
GRANT THORNTON LLP
Fort Lauderdale, Florida
October 7, 1996
