As filed with the Securities and Exchange Commission on August 16, 1996
Registration No.333-
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
OCUREST LABORATORIES, INC.
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(Name of Small Business Issuer in its charter)
Florida 2834 65-0259441
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(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction Industrial Identification
of Incorporation Classification Number)
or Organization) Code Number)
4400 PGA Blvd., Suite 300, Palm Beach Gardens, Florida 33410
561- 627-8121
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(Address and telephone number of principal executive offices)
4400 PGA Blvd., Suite 300, Palm Beach Gardens, Florida 33410
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(Address of principal place of business or intended principal place
of business)
Jonathan B. Reisman, Esq. Copies Thomas S. Smith, Esq.
Reisman & Associates, P.A. to: Hopper and Kanouff, P.C.
5100 Town Center Circle 1610 Wynkoop Street
Boca Raton, FL 33486 Suite 200
561-361-9300 Denver, CO 80202
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(Name, address and telephone
number of agent for service)
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. [ ]
<PAGE>
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==========================================================================================================
TITLE OF DOLLAR PROPOSED PROPOSED AMOUNT OF
EACH AMOUNT TO MAXIMUM MAXIMUM REGISTRATION
CLASS OF BE OFFERING AGGREGATE FEE (3)
SECURITIES REGISTERED PRICE PER OFFERING
TO BE UNIT (2) PRICE (2)
REGISTERED
==========================================================================================================
<S> <C> <C> <C> <C>
Common 1,552,500 $7.00 $10,867,500 $3,747.42
Stock, shares
$.008 par
value (1)
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Class A 1,552,500 $.50 $776,250 $267.68
Common warrants
Stock
Purchase
Warrants
(1)
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Common 1,552,500 $8.40 $13,041,000 $4,496.90
Stock, shares
$.008 par
value (4)
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Redeemable 135,000 $.0003703 $50 $.02
Common warrants
Stock
Purchase
Warrants
(5)
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Common 135,000 $.0003703 $50 $.02
Stock warrants
Purchase
Warrants
(5)
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Common 135,000 $8.40 $1,134,000 $391.04
Stock, shares
$.008 par
value (6)
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<PAGE>
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Common 135,000 $10.08 $1,360,800 $469.25
Stock, shares
$.008 par
value (6)
===========================================================================================================
Totals $27,179,650 $9,372.33
=================================================================
</TABLE>
(1) Includes 202,500 shares of Common Stock, $.008 par value, and 202,500
Class A 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) Paid herewith.
(4) Issuable upon exercise of the Class A 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.
-------------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
-------------------------------
<PAGE>
Ocurest Laboratories, Inc.
Cross Reference Sheet
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ITEM IN PART I OF FORM SB-2 LOCATION IN PROSPECTUS
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1. Front of Registration Outside Front Cover
Statement and Outside Front
Cover of Prospectus
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2. Inside Front and Outside Inside Front and Outside
Back Cover Pages of Back Cover
Prospectus
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3. Summary Information and Prospectus Summary; Risk
Risk Factors Factors; The Company
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4. Use of Proceeds Use of Proceeds
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5. Determination of Offering Underwriting
Price
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6. Dilution Dilution
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7. Selling Security Holders Selling Shareholders
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8. Plan of Distribution Underwriting
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9. Legal Proceedings Legal Proceedings
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10. Directors, Executive Management
Officers, Promoters and
Control Persons
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11. Security Ownership of Security Ownership of
Certain Beneficial Owners Certain Beneficial Owners
and Management and Management
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12. Description of Securities Description of Securities
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13. Interest of Named Experts Legal Matters
and Counsel
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14. Disclosure of Commission Indemnification for
Position on Indemnification Securities Act Liabilities
for Securities Act
Liabilities
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15. Organization Within Last Not applicable
Five Years
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16. Description of Business Business
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17. Management's Discussion and Management's Discussion
Analysis or Plan of and Analysis of Financial
Operation Condition
and Results of Operations
<PAGE>
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18. Description of Property Business
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19. Certain Relationships and Certain Relationships and
Related Transactions Transactions
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20. Market for Common Equity Cover Page, Dividend
and Related Stockholder Policy and Description of
Matters Securities
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21. Executive Compensation Management
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22. Financial Statements Financial Statements
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23. Changes In and Not applicable
Disagreements With
Accountants on Accounting
and Financial Disclosure
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<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 REGISTRSATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED AUGUST 16, 1996
OCUREST LABORATORIES, INC.
1,350,000 SHARES OF COMMON STOCK AND
1,350,000 CLASS A COMMON STOCK PURCHASE WARRANTS
This Prospectus relates to the offering (the "Offering") by Ocurest
Laboratories, Inc. (the "Company") of 1,350,000 shares of Common Stock, $.008
par value (the "Common Stock"), and 1,350,000 Class A Common Stock Purchase
Warrants (the "Warrants"). The Common Stock and Warrants must be purchased
together (unless waived by the Representative) but will be transferable
separately upon issuance.
Prior to the Offering, there has not been any public market for the
securities of the Company. The initial public offering price of 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 RAF
Financial Corporation (the "Representative"), as representative of the
participating underwriters (the "Underwriters"). It is anticipated that the
offering price of the Common Stock will be between $5.00 and $7.00 per share and
the offering price of the Warrants will be $.50. Application has been made to
approve the Common Stock and the Warrants for quotation on the NASDAQ Small-Cap
Market under the trading symbols *________* and *________*, respectively.
Each Warrant entitles the registered holder thereof to purchase one
share of Common Stock at an exercise price of $*________* (120% of the initial
public offering price of the Common Stock) per share, with a credit of $.50 per
Warrant surrendered on exercise, subject to adjustment in certain events, at any
time prior to *________*, 1999. The Warrants are subject to redemption by the
Company at $.55 per Warrant, at any time during the first or second years after
the date of this Prospectus and at $.75 per Warrant at any time during 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 on page *________*) of Common Stock has been
at least $*________* (140% of the Warrant exercise price) 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. 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 *_____* OF THIS PROSPECTUS AND "DILUTION"
ON PAGE *______* OF THIS PROSPECTUS.
<PAGE>
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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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS (1) COMPANY (2)
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Per Share ...... $ $ $
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Per Warrant .... $.50 $ $
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Total (3) ...... $ $ $
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(1) The Company has also agreed to pay the Representative a non-accountable
expense allowance equal to 3% of the total Price to Public for the
Common Stock and Warrants and to issue to the Representative and its
designees for a nominal consideration (i) warrants to purchase 135,000
shares of Common Stock (the "Representative's Warrants") at an exercise
price of $*________* per share (120% of the initial public offering
price of the Common Stock) and (ii) redeemable warrants (the
"Representative's Redeemable Warrants") to purchase 135,000 shares of
Common Stock at an exercise price of $*________* per share (120% of the
initial exercise price of the Warrants). The Representative's Warrants,
the Representative's Redeemable Warrants 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 five 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 of
1933. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company
estimated at $________, excluding the non-accountable expense allowance
described in Note (1) above, and assumes no exercise of the
Underwriters' over-allotment option. See "Use of Proceeds."
(3) The Company and certain shareholders of the Company (the
ii
<PAGE>
"Selling Shareholders") have granted to the Underwriters a 30- day
option to purchase up to 202,500 additional shares of Common Stock
(2,500 of which will be offered by the Company and 200,000 of which will
be offered by the Selling Shareholders) and 202,500 additional Warrants
from the Company at the initial public offering price less the
Underwriting Discounts solely to cover over-allotments, if any (the
"Over- Allotment Option"). If the Over-Allotment Option is exercised in
full, the total Price to Public, Underwriting Discounts, and Proceeds to
Company will be $________, $________ and $________, respectively. See
"Security Ownership of Certain Beneficial Owners and Management,"
"Selling Shareholders" and "Underwriting."
It is expected that delivery of Common Stock and the Warrants will be
made at the offices of the Representative on or about ________, 1996 against
payment therefor.
RAF FINANCIAL CORPORATION
iii
<PAGE>
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 SHARES OF
COMMON STOCK AND THE WARRANTS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
iv
<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(R) 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 fit 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.
1
<PAGE>
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 shortly after the receipt by the Company of the net proceeds
of the Offering. As of the date of this Prospectus, retail chains such as
Wal-Mart, Target, 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 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 has
verbally advised the Company that it is currently conducting tests and other
evaluations to be completed prior to the December 31, 1996 expiration of the
licensing option agreement.
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.
2
<PAGE>
THE OFFERING
Securities offered ............ 1,350,000 shares of Common
Stock and 1,350,000 Warrants.
Each Warrant entitles the
holder thereof to purchase one
share of Common Stock. The
Common Stock and the Warrants
are separately tradeable and
transferable. See "Description
of Securities" and
"Underwriting." (1)
Offering Prices .............. $5.00 to $7.00 per share of
Common Stock and $.50 per
Warrant.
Common Stock to be outstanding
after the Offering ....... 3,272,674 shares (2)
Warrants - Number to be
outstanding after
the offering ................ 1,350,000 Warrants (3)
Exercise price ........... $_____ (120% of the initial
public offering price of the
Common Stock) 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
3
<PAGE>
Redemption ............... The Warrants are redeemable by
the Company at $.55 per
Warrant, at any time during the
first or second years after the
date of this Prospectus and at
$.75 at any time during 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 on page ________), has
been at least $______ (140% of
the warrant exercise price) 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, and 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 Symbols........ Common Stock: ________
Warrants: ________
4
<PAGE>
- -------------------------------
(1) Does not include up to 2,500 additional shares of Common Stock and
202,500 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) 907,585 shares issuable upon exercise
of outstanding warrants and options, (b) 1,350,000 shares issuable upon
exercise of the Warrants, (c) 270,000 shares issuable upon exercise of
the Representative's Warrants and the Representative's Redeemable
Warrants, (d) 2,500 shares issuable upon exercise of the Over-Allotment
Option and (e) 202,500 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.
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. 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."
CERTAIN RISKS RELATED TO THE COMPANY'S OPERATIONS
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. In
1995, three customers accounted for approximately 43%, 13% and 11% of the
Company's net sales, respectively. During the three months ended March 31, 1996,
four customers accounted for approximately 19%, 18%, 15% and 14% of the
Company's net sales, respectively, and during the six months ended June 30,
1996, three customers accounted for approximately 13%, 11%, and 10% 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 to Financial
Statements.
6
<PAGE>
DEPENDANCE 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.
NEED FOR FINANCING
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.
Although the Company believes that the receipt of such proceeds 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. 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
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Report of Independent Certified Public Accountants.
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 adversely affect the Company's
business and prospects unless or until a suitable successor is retained. The
Company's
7
<PAGE>
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."
PAYMENT OF ROYALTIES
Pursuant to an Agreement with Acorn Laboratories, Inc. ("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. Any
such payments could adversely affect the cash flow of the Company. In addition,
Acorn has assigned a portion of such royalties to the Company's President and
Senior Vice President which could give rise to a conflict of interest. See
"Business - Patents and Trademarks" and "Certain Relationships and
Transactions."
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
8
<PAGE>
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.
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.
REVERSION OF PATENT AND TRADEMARK RIGHTS
The patent and trademark rights of the Company were granted to the
Company by Acorn. Under certain circumstances, including a 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."
See "Business - Patents and Trademarks."
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 was not 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
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.
DETERMINATION OF OFFERING PRICE
Because there has never been a public market for the Common Stock or the
Warrants, the public offering prices of the 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 Common Stock
and the 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."
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."
DILUTION
The offering price of the Common Stock substantially exceeds its book
value. Purchasers of the Common Stock will therefore experience an immediate
substantial dilution in the net tangible book value per share after the
offering. See "Dilution."
VOTING CONTROL BEFORE AND AFTER OFFERING
Following the completion of the Offering, the present shareholders of
the Company will continue to own more than 50% of the Company's outstanding
Common Stock and, therefore, will 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. See
"Management" and "Security Ownership of
10
<PAGE>
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
dividends, 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 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 907,585 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 Representative's Warrants and the
Representative's Redeemable Warrants will permit the holders thereof to purchase
a maximum of 270,000 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, the
Representative's Warrants, and the Representative's Redeemable Warrants, 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."
11
<PAGE>
RESTRICTIONS ON EXERCISE OF THE WARRANTS.
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 the 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 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
The Warrants are subject to redemption by the Company at $.55 per
Warrant, at any time during the first or second years after the date of this
Prospectus and at $.75 at any time during 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 on page ________) has been at least $________ (140% of the then exercise
price of the Warrants) 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."
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,
________ of such shares are currently eligible for resale under Rule 144 and
________ 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 ________
12
<PAGE>
and ________. 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. 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 either a fourteen month or two year period
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 holder of a warrant for
the purchase of 25,000 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.
Although the Company's Common Stock and Warrants have been approved for
initial listing on the NASDAQ Small-Cap Market 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. If the
Company's securities are delisted from NASDAQ, this could restrict investors'
interest in the Company's securities and could materially and adversely affect
the trading market and prices for such securities.
13
<PAGE>
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 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."
14
<PAGE>
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 advertising
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
15
<PAGE>
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 of Financial Condition and Results of
Operations" and "Business."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the securities offered
hereby, assuming an initial public offering price of $6.00 per share of Common
Stock, are estimated to be approximately $6,747,000 (approximately $6,760,000 if
the Over- Allotment Option is exercised in full).
The Company intends to use approximately $1,000,000 of the net proceeds
for inventory acquisition and production equipment; approximately $2,400,000 for
national advertising and promotion activities; approximately $1,500,000 to repay
indebtedness and accrued interest; and the balance of the net proceeds,
including 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 March 1996,
bears interest at rates ranging from approximately 10% to 15% per annum and has
maturity dates from November 30, 1995 to July 31,1996. 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. The proceeds of the indebtedness were
utilized by the Company for general corporate
16
<PAGE>
purposes, including working capital. See "Security Ownership of Certain
Beneficial Owners and Management."
The Company believes that the receipt of such 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 may be required 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.
DILUTION
The Company had a net tangible book value (deficiency) 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. Assuming an initial public offering price of
$6.00 per share of Common Stock, after giving effect to the sale of the
securities offered hereby and the receipt of the estimated net proceeds to the
Company, and assuming no exercise of the Over- Allotment Option, the Warrants,
the Representative's Warrants or the Representative's Redeemable Warrants, or
outstanding optioins and warrants the pro forma net tangible book value of the
Company at June 30, 1996 would have been $1.74 per share, representing an
immediate increase in the net tangible book value of $2.33 per share to existing
shareholders and an immediate dilution to new investors of $4.26 per share. The
following table illustrates the per share dilution to new investors purchasing
Common Stock in the Offering.
17
<PAGE>
Initial public offering price per share $6.00
Net tangible book value per
share at June 30, 1996 $(.59)
Increase per share attributable
to new investors $2.33
Pro forma net tangible book value per
share after the Offering $1.74
Dilution per share to new investors $4.26
==========
Assuming the Underwriters' over-allotment option is exercised in full
and an additional 2,500 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 at June 30, 1996 would have been $5,822,346, the immediate
increase in the pro forma net tangible book value per share of shares owned by
the existing shareholders would be $1.74 and the immediate dilution per share to
new investors would be $4.26.
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
an initial public offering price of $6.00 per share) and no exercise of the
Over-Allotment Option.
<TABLE>
<CAPTION>
===========================================================================================================
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE PER SHARE
NUMBER PERCENT AMOUNT PERCENT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders 1,922,674 58.7% $5,084,224 38.6% $2.64
- -----------------------------------------------------------------------------------------------------------
New Investors 1,350,000 41.3% 8,100,000 61.4% 6.00
- -----------------------------------------------------------------------------------------------------------
Total: 3,272,674 100.0% 13,184,224 100.0%
========= ====== ========== ======
===========================================================================================================
</TABLE>
18
<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 1,350,000 shares of Common Stock and a like number of Warrants at assumed
prices of $6.00 per Share and $.50 per Warrant, respectively, and the
application of the net proceeds of such sale. See "Use of Proceeds."
Actual (1) As Adjusted
(2)(3)
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, 15,381 26,181
$.008 par value,
25,000,000 shares
authorized;
1,922,674 issued
and outstanding
(actual) and
3,272,674 shares
issued and
outstanding (as
adjusted)
Paid-in capital 5,068,843 11,805,043
Accumulated deficit (6,008,941) (6,008,941)
Total stockholders' (924,717) 5,822,285
equity (deficit)
(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 1,350,000 shares 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."
19
<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 Managements' 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
===========================================================================================
STATEMENT
OF
OPERATIONS
DATA:
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
Net Sales $ 96,830 $687,122 $200,384 $734,281
- -------------------------------------------------------------------------------------------
Cost of 139,733 545,175 160,206 443,579
Goods Sold
- -------------------------------------------------------------------------------------------
Selling & 676,079 1,784,102 462,835 639,052
Marketing
Expense
- -------------------------------------------------------------------------------------------
General & 948,458 964,426 466,548 484,648
Adminis-
trative
Expense
- -------------------------------------------------------------------------------------------
Royalty 3,875 27,885 8,015 29,380
Expense
- -------------------------------------------------------------------------------------------
Other (18,005) (102,326) (32,552) (148,082)
income
(expense)
- -------------------------------------------------------------------------------------------
Net Loss $(1,689,320) $(2,736,792) $ (929,778) $(1,010,450)
- -------------------------------------------------------------------------------------------
Net loss $ (1.16) $ (1.55) $ (.54) $ (.50)
per share
- -------------------------------------------------------------------------------------------
Supplemental pro forma $(2,670,192) $ (977,150)
net loss (1) =========== ===========
- -------------------------------------------------------------------------------------------
Supplemental pro forma $ (1.44) $ (.37)
net loss per share (1) =========== ===========
===========================================================================================
</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 to the
financial statements.
20
<PAGE>
================================================================================
DECEMBER 31, DECEMBER 31 JUNE 30, 1996
1994 1995
- --------------------------------------------------------------------------------
BALANCE SHEET
DATA:
- --------------------------------------------------------------------------------
Total $1,245,314 $1,562,271 $2,340,899
Assets
- --------------------------------------------------------------------------------
Total 1,064,007 3,306,311 3,265,616
Liabiliti
es
- --------------------------------------------------------------------------------
Common 2,443,006 3,254,451 5,084,224
Stock &
Paid-in
Capital
- --------------------------------------------------------------------------------
Accumulat (2,261,699) (4,998,491) (6,008,941)
ed
Deficit
- --------------------------------------------------------------------------------
Stockholders' $ (181,307) $ (1,744,040) $ (924,717)
equity
(deficit)
================================================================================
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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 $572,379, 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 or is
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 & 948 964 467 484
Administrative
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 $1,689,320 and $2,736,792, 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
22
<PAGE>
completion of the Offering. There can be no assurance, however, that the
Company will ever be profitable.
PRODUCT COSTS AND EXPENSES
Product costs and expenses were 144% of net sales in 1994 and 79% of net
sales in 1995. For the six months ended June 30, 1996, product costs and
expenses were 60% of net sales as compared with 79% of net sales for the six
months ended June 30, 1995. 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. The lower percentage in 1996 reflects
certain efficiencies built into the production cycles.
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. The Company also continued to
incur market 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
were 92% of net sales as compared with 131% of net sales for the six months
ended June 30, 1995. The decrease was primarily attributable to a substantial
reduction in advertising 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. Expenses
also include support services for three full time employees and the related
compensation and benefits cost.
General and administrative expenses for 1995 were $964,426 as compared
to $948,458 in 1994 and for the six months ended June 30, 1996, general and
administrative expenses were $485,000 as compared with $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
national distribution of the Company's product line.
23
<PAGE>
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 investment to fund operations. Interest expense increased for
1995 and the first six months of 1996 because the Company has recently used debt
financing to fund certain working capital demands as discussed below in
"Liquidity and Capital Resources."
The Company obtained various loans in 1995 and 1996 and in August 1995
the Company entered into a factoring agreement to sell its accounts receivable
and to pledge its inventory as collateral for additional loans. The Company is
committed to keep the factoring agreement in place until December 31, 1996 but
intends to reduce the amount borrowed against inventory following the completion
of the Offering. Interest expense, however, will be considerably higher in 1996
then in previous years. Indebtedness aggregating $1,500,000, including accrued
interest, will be repaid from the net proceeds of the Offering.
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. The Company has received
$4,710,000 through the sale of these securities through June 30, 1996, including
certain debt that was converted to equity and amounts received from the exercise
of warrants.
The Company's working capital and capital requirements will depend on
numerous factors, including the growth of the Company's sales. The Company
currently has a 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 has invested $1,001,000 in property and equipment
through June 30, 1996. The equipment is specifically suited to the
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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, however, 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.
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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 first products consist of two Ocurest(R) 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. 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 fit 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
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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 shortly after the receipt by the Company of
the net proceeds of the Offering. As of the date of this Prospectus, retail
chains such as Wal-Mart, Target, 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 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 has
verbally advised the Company that it is currently conducting tests and other
evaluations to be completed prior to the December 31, 1996 expiration of the
licensing option agreement.
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
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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
compounded and owned by Bausch & Lomb. Within three years from the date of this
Prospectus, 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
compounded, 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:
"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.
The following describes the composition and indications of the
Company's eye care products:
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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
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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
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 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 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. 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
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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 common carriers. The
Company believes that, should the need arise, other bonded public warehouses are
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, 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 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
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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
keep the Company as a named 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.
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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.
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").
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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 or (d) general assignment by the
Company of its assets for the benefit of its creditors (e) payments due to Acorn
under the Acorn Agreement remain unpaid subsequent to a grace period or (f) the
Company or its successor or licensees defaults in the performance of any other
obligation under the Acorn Agreement and any such default remains uncured
subsequent to a grace period. 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 a portion of its royalties to the Company's President
and Senior Vice President. 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.
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 SIGNIICANT 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, three customers ccounted for approximately 13%, 11% and 10% 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.
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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 such 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. Prior to the end of 1996, the Company plans to hire six to
eight full-time accounting and administrative employees.
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
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incur certain liabilities under an applicable employment agreement.
POSITIONS WITH THE
NAME AGE COMPANY
---- --- ------------------
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
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
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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.
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
37
<PAGE>
December 31, 1995 and whose total annual salary exceeded $100,000 (the "Named
Officers"):
SUMMARY COMPENSATION TABLE
===========================================================================
LONG TERM
COMPENSATION
NAME AND YEAR SALARY SHARES
PRINCIPAL POSITION UNDERLING
AT DECEMBER 31, OPTIONS
1995 GRANTED
- ---------------------------------------------------------------------------
Edmund G. Vimond, 1995 $150,000 31,250
Jr., Chief 1994 100,000 -0-
Executive Officer 1993 -0- 12,500
- ---------------------------------------------------------------------------
Larry M. Reid, 1995 $115,000 23,438
Executive Vice 1994 76,800 -0-
President and 1993 29,000 6,250
Chief Financial
Officer
===========================================================================
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 SALARY THEN OWED TO HIM BY THE COMPANY. SEE "CERTAIN
RELATIONSHIPS AND TRANSACTIONS." NEITHER OF THE NAMED OFFICERS RECEIVED ANY
BONUS DURING THE THREE YEARS REFERRED TO IN THE TABLE.
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<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:
================================================================================
Percent of
Total
Number of Options
Shares Granted to
Underlying Employees Exercise Expi
Name Options Fiscal Year Price rati
on
Date
- --------------------------------------------------------------------------------
Edmund G. 31,250 52% $4.80 Octo
Vimond, ber
Jr. 5,
2005
- --------------------------------------------------------------------------------
Larry M. 23,438 39% $4.80 Octo
Reid ber
5,
2005
================================================================================
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.
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.
39
<PAGE>
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 be established by the
Company.
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
40
<PAGE>
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.
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:
41
<PAGE>
NUMBER OF SHARES APPROXIMATE
NAME OF BENEFICIAL OWNER BENEFICIALLY PERCENT
(1) (2) OWNED OF CLASS
Ralph H. Laffler 450,846 (3) 24%
Edmund G. Vimond, Jr. 183,271 (4) 10%
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 (6 911,529(9) 44%
persons)
Maurice Porter 242,398 (10) 12%
Robert M. Kassenbrock 180,000 (11) 9%
Eric R. Schwarz 113,037 (12) 6%
- ------------------------------
(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 by 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
42
<PAGE>
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
which may be purchased by 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 by 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 by 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.
(12) Includes 45,991 shares which may be purchased upon exercise of warrants
and 11,250 shares which may be purchased by 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.
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. See "Management" and
43
<PAGE>
"Certain Relationships and Transactions" for a description of certain
relationships between certain of the Selling Shareholders and the Company.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
OWNED SHARES
PRIOR TO TO BE SHARES TO BE OWNED
OFFERING SOLD IN AFTER SALES IN THE
SELLING (1) THE OFFERING (1)
------------
SHAREHOLDER _______ OFFERING
PERCENTAGE OF
OUTSTANDING
COMMON
NUMBER STOCK(2)
<S> <C> <C> <C> <C>
American Growth 50,000 30,000 20,000
Fund I L.P.
Jose Azel 10,000 5,000 5,000 *
William Boyd 53,334 10,000 43,334 *
Scott Cunningham 5,000 2,500 2,500 *
Robert and Nancy 4,000 2,000 2,000 *
Cousins
Cousins Trust 4,000 2,000 2,000 *
Paul Engel 2,100 1,000 1,000 *
William J. Hart 10,000 5,000 *
Hideaway Partners 40,000 20,000 20,000 *
Marcia G. 10,000 5,000 5,000 *
Kassenbrock
Robert M. 170,000 85,000 85,000
Kassenbrock
Carl Leydch 2,000 1,000 1,000 *
National Mortgage 3,000 1,500 1,500 *
Acceptance Corp.
William Roberts 5,000 2,500 *
Ardis Schwarz 98,243 (3) 15,000 83,243 (3)
Jeffrey Simon 5,000 2,500 *
E.J. Sylvestor 10,000 5,000 *
Trust
44
<PAGE>
Duane Wilder 10,000 5,000 *
</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)
1,350,000 shares issuable upon exercise of the Warrants, (c) 270,000
shares issuable upon exercise of the Representative's Warrants and the
Representative's Redeemable Warrants, (d) 2,500 shares issuable upon
exercise of the Over- Allotment Option and (e) 202,500 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. See "Use of Proceeds." Between
April 1, 1996 and August 1, 1996, AGF agreed to provide certain management
consulting and investment banking services to the 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. Other than the
foregoing, 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
In connection with the transaction, AGF received warrants for the
purchase of 25,000 shares of the Company's Common Stock at $.01 per share and
25,000 shares of the Company's Common Stock at $2.50 per share. 30,000 of such
shares are being offered by AGF pursuant to this Prospectus.
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.
45
<PAGE>
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 January 31, 1997. 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, 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 $4.80 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 $5,400.
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 $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 1,643 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
46
<PAGE>
of Common Stock for services rendered to the Company valued at $9,000.
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 37,337 shares of Common Stock, 14,957 shares of Common Stock and 22,388
shares of Common Stock, respectively, at values ranging from $4.50 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. Half 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.
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.
Between July 1992 and June 1996, the Company sold warrants (the "Private
Warrants") for the purchase of an aggregate of 798,153
47
<PAGE>
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. 45,234, 15,625 and 3,422 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.
Any activity taken to increase the Company's sales at the expense of profits in
excess of the minimum levels of net income as described above would benefit
those persons having an interest 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
48
<PAGE>
know whether the terms of the Acorn Agreement are as favorable to the Company as
could have been obtained from an 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."
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 owner 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.
DESCRIPTION OF SECURITIES
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.
49
<PAGE>
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
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 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." The Warrants may be presented to the Warrant Agent for transfer,
exchange or exercise at any time prior to their 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 from the date
of this Prospectus through the third anniversary of the date of this Prospectus,
one share of Common Stock at a price of $_______ 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
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<PAGE>
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.
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 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.
The Warrants may be redeemed by the Company at any time prior to
expiration, at a redemption price of $0.55 per Warrant during the first and
second years after the date of this Prospectus, and $0.75 per Warrant during 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
140% of the then exercise price of the Warrants 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
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
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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 Warrant 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
- ---------------------------------------.
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 the shares before the
control-share acquisition only to the extent
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<PAGE>
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
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<PAGE>
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 n or 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,
________ of such shares are currently eligible for resale under Rule 144 and
________ 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 ________ and ________. See
"Underwriting" with respect to an agreement by certain shareholders restricting
their ability to sell their Common Stock without the consent of the
Representative.
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.
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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 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 "Selling
Shareholders."
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.
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 shares of Common Stock and
Warrants 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:
UNDERWRITER NUMBER OF SHARES AND WARRANTS
----------- -----------------------------
RAF Financial Corporation ................ _____________
............... -------------
TOTAL 1,350,000
==========
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the securities 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 1,350,000 shares of
Common Stock and a like number of Warrants, if any are purchased.
The Underwriters propose to offer part of the Common Stock and Warrants
offered hereby directly to the public at the offering price and part of such
shares and Warrants to certain dealers at a price that represents a concession
within the discretion of the
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<PAGE>
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 Common Stock and Warrants 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 Common Stock and Warrants 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 Common Stock and
Warrants 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 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 Stock, may not sell
any of such shares without the consent of the Representative during either a two
year period (officers and directors) or 14 month period (5% or more
shareholders) 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. 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 202,500 additional shares of Common
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<PAGE>
stock (2,500 of which will be offered by the Company and 200,000 of which will
be offered by the Selling Shareholders) and 202,500 Warrants by the Company at
the respective prices to public less the underwriting discounts solely to cover
over-allotments, if any. In addition, the Company has agreed to pay to the
Representative at the closing of the Offering, a non-accountable expense
allowance of 3% of the aggregate initial public offering price of the Common
Stock 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 $________.
The Company has agreed to issue for $50.00, the Representative's Warrants
to the Representative. The Representative's Warrants are exercisable at any time
during the five year period after the date of this Prospectus to purchase up to
135,000 shares of Common Stock for $________ per share (120% of the initial
public offering price). The Representative's 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 the Representative's Warrants or the underlying
shares may be deemed additional underwriting compensation. Commencing one year
from the date hereof, holders of the Representatives' Warrants and the shares
underlying the Representative's Warrants will have demand and piggyback
registration rights for periods of five years and seven years, respectively,
with respect to the Representatives' Warrants and the underlying shares. The
Representatives' Warrants and the shares of Common Stock underlying the
Representative's 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 Representative's Warrants, the Company has agreed upon
completion of the Offering to issue to the Representative, for $50.00, the
Representative's Redeemable Warrants to purchase 135,000 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 120% of the exercise price of
the Warrants, and (ii) these warrants will not be transferable for a period of
one year after 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.
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 five 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
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<PAGE>
subsidiaries of the Company, any securities with respect to which any of them
may seek to sell, publicly or privately, for cash.
The prices to public of the Common Stock and Warrants have 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.
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.
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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 bility
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 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. Hopper and Kanouff, 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
The Company's Articles of Incorporation and By-Laws provide that each
officer and director of the Company shall be indemnified by the Company against
certain costs, expenses and liabilities which he may incur in his capacity as
such. See also "Underwriting." 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 Securities and Exchange Commission such
indemnification is against public policy as expressed in the 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
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<PAGE>
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.
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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
PAGE
Prospectus Summary ....
Risk Factors ..........
Use of Proceeds .......
Dividend Policy .......
Dilution ..............
Capitalization ........
Selected Financial
Data ..................
Management's Discussion
and Analysis of
Financial Condition
and Results of
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Operations ............
Business ..............
Management .............
Security Ownership of
Certain Beneficial
Owners and Management..
Certain Relationships and
Related Transactions ...
Selling Shareholders
Description of
Securities .............
Shares Eligible for
Future Sale ...........
Underwriting ...........
Legal Matters ..........
Experts ................
Legal Proceedings ......
Indemnification for
Securities Act
Liabilities ...........
Additional Information .
Index to Financial
Statements ............
Until ________, 1996 all dealers effecting transactions in the Common
Stock or Warrants, 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.
62
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FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
OCUREST LABORATORIES, INC.
December 31, 1994 and 1995
and June 30, 1996 (Unaudited)
<PAGE>
C O N T E N T S
PAGE
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
BALANCE SHEETS AT DECEMBER 31, 1994 AND 1995 AND
JUNE 30, 1996 (UNAUDITED) 2
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1994 AND 1995 AND THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 (UNAUDITED) 3
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) FOR
THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND
THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) 4 - 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) 6
NOTES TO FINANCIAL STATEMENTS 7 - 20
<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
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of 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 statements,
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
<PAGE>
<TABLE>
<CAPTION>
OCUREST LABORATORIES, INC.
BALANCE SHEETS
ASSETS
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
------------- ------------- -------------
(Unaudited)
<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.
2
<PAGE>
<TABLE>
<CAPTION>
OCUREST LABORATORIES, INC.
STATEMENTS OF OPERATIONS
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)
============ ============ ============ ============
Supplemental Pro Forma
Net loss $(2,670,192) $ (977,150)
============ ============
Supplemental Pro Forma
Net loss per share $ (1.44) $ (.37)
============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
<TABLE>
<CAPTION>
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)
COMMON
ADDITIONAL STOCK
COMMON 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 subscrip-
tion 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)
(continued)
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
OCUREST LABORATORIES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
COMMON
ADDITIONAL STOCK
COMMON STOCK PAID-IN SUBSCRIPTION ACCUMULATED
SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT TOTAL
--------- ------------ ------------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
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.
5
<PAGE>
<TABLE>
<CAPTION>
OCUREST LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
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.
6
<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
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.
7
` (continued)
<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
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.
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.
8
(continued)
<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
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, 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.
9
(continued)
<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
SUPPLEMENTAL PRO FORMA NET LOSS AND NET LOSS PER SHARE
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. 92,500 shares at $6.00 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.
10
(continued)
<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 $6,800,000.
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
----------- -- --------- -----------
(continued)
11
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
NOTE D - PROPERTY AND EQUIPMENT - Continued
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 September 30, 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.
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:
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
------------- ------------- -----------
(Unaudited)
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
============= ============= ===========
12
<PAGE>
<TABLE>
<CAPTION>
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:
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 --
</TABLE>
(continued)
13
<PAGE>
<TABLE>
<CAPTION>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
NOTE F - NOTES PAYABLE - STOCKHOLDERS - Continued
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
------------ ----------- -------------
(Unaudited)
<S> <C> <C> <C>
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.
NOTE G - NOTES PAYABLE - FACTOR
During 1995, the Company entered into separate agreements 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. Such fee increases by .1% for each day
in which an invoice remains unpaid after 30 days from the date of the sale
to the factor. 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. 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.
(continued)
14
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
NOTE G - NOTES PAYABLE - FACTOR - Continued
Under the terms of the inventory agreement the factor will provide advances
on 50% of the Company's finished goods inventory. The factor charges a fee
equal to 3% of inventory advances.
The advances are secured by all of the Company's accounts receivables,
equipment and inventory. The total amount outstanding under these
agreements 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.
15
<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 $ - $ -
============ =============
16
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
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:
<TABLE>
<CAPTION>
GRANTED UNDER THE PLAN
-----------------------------------------------
QUALIFIED NON-QUALIFIED OTHER NON-QUALIFIED
--------------------- ---------------------- ----------------------
SHARES PRICE SHARES PRICE SHARES PRICE
-------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
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
-------- --------- ---------
</TABLE>
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.
17
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
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 $8.00 per share to $8.00
share (see Note P).
NOTE L - SIGNIFICANT CUSTOMERS
Three customers accounted for 43%, 13% and 11%, respectively, of net sales
in 1995. During 1994, these customers accounted for 25%, 23% and 23%,
respectively.
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.
18
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
NOTE N - AFFILIATED TRANSACTION
During 1994, the Company entered into consulting agreements with the
previous Chairman of the Board and a 2.44% stockholder 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
PUBLIC OFFERING OF COMMON STOCK
The Board has authorized the filing of a registration statement relating to
an IPO for 1,350,000 shares of common stock and 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 will underwrite the
shares and the warrants being offered on a "firm commitment basis" and has
the right to purchase from the Company up to an additional 15% of the
shares offered in the IPO at the IPO price less the underwriting discount
to cover over-allotments. The underwriters will be paid 10% of the IPO
proceeds and a non-accountable expense allowance (of which $30,000 has
been paid), will be given the right to purchase a warrant for 10% of the
shares and will be given the right to purchase 10% of the Class A 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 conversion 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.
(continued)
19
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)
NOTE P - SUBSEQUENT EVENTS - Continued
During April 1996, the Company issued a $260,000 note payable 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 Initial
Public Offering of securities. 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
million shares. The Company also approved the post-split warrants with a
conversion 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.
20
<PAGE>
OCUREST LABORATORIES, INC.
1,350,000 SHARES OF
COMMON STOCK
1,350,000 CLASS A COMMON
STOCK PURCHASE WARRANTS
- --------------------------
PROSPECTUS
- --------------------------
RAF
FINANCIAL CORPORATION
, 1996
63
<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
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 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
all expenses 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 System
fees, all expenses are estimated.
Securities and Exchange Commission
Registration Fee......................... $ 9,372
NASD Filing Fee ............................ 3,218
NASDAQ National Small-Cap System Fees ...... 13,105
II-1
<PAGE>
Blue Sky Fees and Expenses ................. 25,000
Transfer Agent Fees and Expenses............ 10,000
Representative's Non-Accountable Expense
Allowance ......................
Legal Fees................................. 70,000
Accounting Fees............................ 55,000
Printing and Engraving..................... 60,000
Miscellaneous............................... 54,305
Total............................... $300,000
=========
- ------------------------------
* To be completed by amendment
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
(a) Between August 9, 1993 and August 9, 1996, the small business issuer
sold 1,303,768 shares of its Common Stock, promissory notes in the aggregate
principal amount of $1,226,770 and warrants for the purchase of an aggregate of
667,084 shares of Common Stock.
(b) The securities were sold to private investors.
(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
1.1 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,
II-2
<PAGE>
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 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
II-3
<PAGE>
Laboratories, Inc. and the small business issuer.
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 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 l, 1996 from the small business
issuer to American Growth Fund I.L.P. and Notw 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.
II-4
<PAGE>
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.
11 Statement Regarding Computation of Per Share Earnings.
23.1 Consent of Grant Thornton L.L.P.
23.2 Consent of Reisman and Associates, P.A.*
27.1 Financial Data Schedule.
- ----------------------
* 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.
II-5
<PAGE>
(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-6
<PAGE>
SIGNATURES
In accordance with he 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 August 15, 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:
/s/ Edmund G. Vimond, Jr. Dated: August 15, 1996
---------------------------------
Edmund G. Vimond, Jr.,
Principal Executive Officer
and Director
/s/ John F. Carlson Dated: August 15, 1996
---------------------------------
John F. Carlson, Principal
Financial and Accounting Officer
and Director
/s/ Larry M. Reid Dated: August 15, 1996
---------------------------------
Larry M. Reid, Director
/s/ Fred Ahlbin Dated: August 15, 1996
---------------------------------
Fred Ahlbin, Director
Dated: August __, 1996
---------------------------------
Ralph Laffler, Director
Dated: August __, 1996
---------------------------------
Robert S. Marker, Director
II-7
<PAGE>
INDEX TO EXHIBITS
1.1 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 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.
<PAGE>
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.
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 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.
<PAGE>
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 l, 1996 from the small business
issuer to American Growth Fund I.L.P. and Notw 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.
11 Statement Regarding Computation of Per Share Earnings.
23.1 Consent of Grant Thornton L.L.P.
23.2 Consent of Reisman and Associates, P.A.*
27 Financial Data Schedule.
- ----------------------
* TO BE FILED BY AMENDMENT
UA/CS/WTS
8/8/96
EXHIBIT 1.1
OCUREST LABORATORIES, INC.
UNDERWRITING AGREEMENT
_______________, 1996
RAF Financial Corporation
One Norwest Center
1700 Lincoln Street, 32nd Floor
Denver, Colorado 80203
Gentlemen:
OCUREST LABORATORIES, INC. ("Company"), a Florida corporation, and
the selling shareholders named in Schedule II hereto ("Selling Shareholders")
hereby confirm their agreement with you, as Representative, and with the other
members of the Underwriting Group as follows:
SECTION 1
DESCRIPTION OF OFFERING AND SECURITIES
The Underwriting Group proposes to purchase from the Company a total
of _____ shares of Common Stock of the Company ("Shares") and ____ Class A
Common Stock Purchase Warrants. The Class A Common Stock Purchase Warrants will
be referred to as "Class A Warrants" in this Agreement and in the Agreement
Among Underwriters. Such Shares and Class A Warrants are collectively referred
to herein as the "Firm Securities." The Representative, either on its own behalf
or on behalf of the members of the Underwriting Group, will have an
overallotment option to purchase up to an additional ___ shares of Common Stock
of the Company ("Overallotment Shares") and/or ____ Class A Warrants
("Overallotment Class A Warrants") to cover overallotments. Such Overallotment
Shares and Overallotment Class A Warrants are collectively referred to herein as
the "Overallotment Securities." Except as otherwise stated, the Firm Securities
and the Overallotment Securities are collectively referred to herein as the
"Securities." The Company agrees to sell to the Underwriting Group all of the
Firm Securities, and the Company agrees to sell to the Representative all of the
Overallotment Securities except for the Overallotment Shares which are sold to
the Representative by Selling Shareholders. The Selling Shareholders have the
right to sell to the Representative up to the first 200,000 of
- 1 -
<PAGE>
the Overallotment Shares. The Shares will be offered and sold to the public at a
price of $_____ per Share and the Class A Warrants will be offered and sold to
the public at a price of $.50 per Warrant. Such prices are referred to herein as
the "Public Offering Price." The Company's authorized and outstanding
capitalization when the offering of the Firm Securities is permitted to commence
and at the Closing Date (hereinafter defined) and at the Option Closing Date
(hereinafter defined) will be as set forth in the Registration Statement
(hereinafter defined) and the Prospectus (hereinafter defined) included therein.
Any Overallotment Shares sold to the Representative by the Selling Shareholders
will be referred to herein as the "Selling Shareholders Shares."
One Class A Warrant entitles the holder to purchase one share of the
Company's Common Stock ("Warrant Share") at $_____ per share ("Exercise Price")
at any time after the effective date and until ___________, 1999. At the time of
exercise of a Class A Warrant the Exercise Price of $_____ will be reduced by
$.50 to reflect a credit of the original purchase price of the Class A Warrant.
The Company has the right to call all of the Class A Warrants for redemption at
a price $.55 per Class A Warrant at any time during the first or second years
after the effective date and at a price of $.75 per Class A Warrant at any time
during the third year after the effective date and prior to the expiration of
the Class A Warrants. The Class A Warrants may be redeemed upon 30 days prior
written notice given at any time after the Common Stock of the Company has
traded for at least $______ for 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 Company's Common Stock: (i) if the
Common Stock is listed on a national stock exchange or admitted to unlisted
trading privileges on any such exchange or quoted on a trading system of the
National Association of Securities Dealers, Inc. ("NASD") such as the NASDAQ
Small Cap Market or the NASDAQ National Market System ("NASDAQ/ NMS"), then the
last reported sale price of the Common Stock each day shall be used, but if no
such sale has occurred on any of such days or if the last sale price is not
reported, then the average of the closing bid prices for the Common Stock for
such day on such exchange or system shall be used; or (ii) if the Common Stock
is not then traded on any such exchange or system then the average of the daily
bid prices for the Company's Common Stock reported by the National Quotation
Bureau, Inc. shall be used if the Company's Common Stock is included in the
National Quotation System.
The entire proceeds from sale of the Class A Warrants will be placed
in an interest bearing escrow account established with Tri-State Bank, Denver,
Colorado, during the three year term of the Class A 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 Class A Warrant, $.50
will be credited to the $_____ Class A Warrant Exercise Price and, together with
accrued interest thereon, will be released to the Company; (ii) upon redemption
of the Class A Warrants, the escrow proceeds relating to such redemption will be
released to the Company; and (iii) to the extent that the Class A Warrants are
not exercised or redeemed within the three year Class A Warrant period, then the
remaining escrow proceeds, plus accrued interest thereon, will be returned to
those Warrantholders
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owning unexercised or unredeemed Class A Warrants. The Company may amend the
terms of the Class A Warrants but only by extending the expiration date or
lowering the Exercise Price.
The Class A Warrants contain provisions protecting the holders
thereof against dilution of their interests represented by the Warrant Shares
upon the occurrence of certain events. Holders of the Class A Warrants have no
voting power and are not entitled to dividends. In the event of liquidation,
dissolution, or winding up of the Company, holders of the Class A Warrants are
not be entitled to participate in the Company's assets. The Company agrees to
take whatever actions are necessary so that during the period that the Class A
Warrants are exercisable a registration statement relating to the Warrant Shares
will be effective and current with the Securities and Exchange Commission
("Commission") and the Company agrees to use its best efforts so that during
such period the Class A Warrants may be exercised by the holders thereof under
the securities laws in those states in which any of the Securities are sold in
the public offering under the Registration Statement and in those states in
which registered holders reside who in the aggregate own at least 2% of the
Class A Warrants outstanding during the period that such Class A Warrants are
exercisable. The Company agrees that its obligations set forth in the preceding
sentence shall remain in full force and effect regardless of whether or not the
"market price" of the Company's Common Stock is less than the Exercise Price
under the Class A Warrants. The Company agrees not to call the Class A Warrants
for redemption at any time that such registration statement is not effective and
current with the Commission and the states described in the previous sentence.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the members of the Underwriting Group to enter
into this Agreement, the Company hereby represents and warrants to and agrees
with the members of the Underwriting Group as follows:
2.01. REGISTRATION STATEMENT AND PROSPECTUS. A registration statement
on Form SB-2 (File No. 33-________) ("Registration Statement") with respect to
the Securities, the Warrant Shares, and the Representative's Warrants and
Representative's Class A Warrants (hereinafter defined), including the related
Prospectus, copies of which have heretofore been delivered by the Company to the
Representative, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended ("Act"), and the rules
and regulations ("Rules and Regulations") of the Commission thereunder, and said
Registration Statement has been filed with the Commission under the Act; one or
more amendments to said Registration Statement, copies of which have heretofore
been delivered to the Representative, has or have heretofore been filed with the
Commission; and the Company may file with the Commission on or prior to the
effective date additional amendments to said Registration Statement, including
the final Prospectus. As used in this
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Agreement, the term "Registration Statement" refers to and means said
Registration Statement and all amendments thereto, including the Prospectus, all
exhibits and all financial statements, as it becomes effective; the term
"Prospectus" refers to and means the Prospectus included in the Registration
Statement when it becomes effective; and the term "Preliminary Prospectus"
refers to and means any Prospectus included in said Registration Statement
before it becomes effective. The terms "effective date" and "effective" refer to
the date the Commission declares effective, pursuant to Section 8 of the Act,
the Registration Statement relating to the offering described in this Agreement.
2.02. ACCURACY OF REGISTRATION STATEMENT AND PROSPECTUS. The
Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus with respect to the Securities and each Preliminary
Prospectus has conformed in all material respects with the requirements of the
Act and the applicable Rules and Regulations of the Commission thereunder and to
the best of the Company's knowledge has not included at the time of filing any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein not misleading. When the Registration
Statement becomes effective and on the Closing Date and on the Option Closing
Date, the Registration Statement and Prospectus and any further amendments or
supplements thereto will contain all statements which are required to be stated
therein in accordance with the Act and the Rules and Regulations thereunder for
the purposes of the proposed public offering of the Securities, all statements
of material fact contained in the Registration Statement and Prospectus will be
true and correct and neither the Registration Statement nor the Prospectus will
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided, however, the Company does not make any representations
or warranties as to information contained in or omitted from the Registration
Statement or the Prospectus in reliance upon written information furnished on
behalf of the members of the Underwriting Group specifically for use therein.
2.03. FINANCIAL STATEMENTS. The financial statements of the Company
together with related schedules and notes as set forth in the Registration
Statement and Prospectus present fairly the financial position of the Company
and the results of its operations and the changes in its financial position at
the respective dates and for the respective periods for which they apply. Such
financial statements have been prepared in accordance with generally accepted
principles of accounting consistently applied throughout the periods concerned
except as otherwise stated therein.
2.04. INDEPENDENT PUBLIC ACCOUNTANTS. The accountants which have
audited the financial statements filed or to be filed with the Commission as
part of the Registration Statement and Prospectus, are independent certified
public accountants with respect to the Company within the meaning of the Act and
the Rules and Regulations thereunder.
2.05. NO CONTINGENT LIABILITIES AND NO MATERIAL ADVERSE CHANGE.
Except as disclosed in the Registration Statement and Prospectus, neither the
Company nor any of its
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subsidiaries, if any, have any contingent liabilities, obligations or claims nor
have they received threats of claims or regulatory action. Except as may be
reflected in or contemplated by the Registration Statement or the Prospectus,
subsequent to the dates as of which information is given in the Registration
Statement and Prospectus and prior to the Closing Date and the Option Closing
Date, (i) there shall not have been any material adverse change in the
condition, financial or otherwise, of the Company or its subsidiaries, if any,
or in the business of the Company or its subsidiaries; (ii) there shall not have
been any material adverse transaction entered into by the Company or any of its
subsidiaries, if any; (iii) neither the Company nor any of its subsidiaries, if
any, shall have incurred any material obligations, contingent or otherwise,
which are not disclosed in the Prospectus; (iv) there shall not have been any
change in the outstanding securities or long term debt (except current payments)
of the Company or any of its subsidiaries, if any; (v) the Company has not and
will not have paid or declared any dividends or other distributions on its
Common Stock or other securities; and (vi) there shall not have been any change
in the officers or directors of the Company.
2.06. NO DEFAULTS. Neither the Company nor any of its subsidiaries,
if any, is in default under any of the contracts, leases, subleases, licenses or
agreements to which they are a party. Except as disclosed in the Prospectus,
neither the Company nor any of its subsidiaries, if any, is in default, which
has not been waived, in the performance of any obligation, agreement or
condition contained in any debenture, note or other evidence of indebtedness or
any indenture or loan agreement. The execution and delivery of this Agreement,
the consummation of the transactions herein contemplated and the compliance with
the terms of this Agreement will not conflict with or result in a breach of any
of the terms, conditions or provisions of, or constitute a default under, the
articles of incorporation, as amended, or bylaws of the Company or any of its
subsidiaries, if any, any note, indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any of its subsidiaries, if any,
is a party or by which it, its subsidiaries, if any, or any of their property is
bound, or any existing law, order, rule, regulation, writ, injunction or decree
of any government, governmental instrumentality, agency or body, arbitration
tribunal or court, domestic or foreign, having jurisdiction over the Company,
its subsidiaries, if any, or their property. The consent, approval,
authorization or order of any court or governmental instrumentality, agency or
body is not required for the consummation of the transactions herein
contemplated except such as may be required under the Act or under the blue sky
or securities laws of any state or jurisdiction.
2.07. INCORPORATION AND STANDING. The Company is and at the Closing
Date and at the Option Closing Date will be duly incorporated and validly
existing in good standing as a corporation under state law with authorized and
outstanding capital stock as set forth in the Registration Statement and the
Prospectus and with full power and authority (corporate and other) to own its
property and conduct its business, present and proposed, as described in the
Registration Statement and Prospectus; the Company has full power and authority
to enter into this Agreement; and the Company is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which it owns or
leases real property or transacts
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business requiring such qualification. All of the Company's subsidiaries, if
any, are identified and described in the Registration Statement. Each of the
Company's subsidiaries, if any, is and at the Closing Date and at the Option
Closing Date will be duly incorporated and validly existing in good standing as
a corporation under state law with authorized and outstanding capital stock as
set forth in the Registration Statement and the Prospectus and with full power
and authority (corporate and other) to own its property and conduct its
business, present and proposed, as described in the Registration Statement and
Prospectus, and is duly qualified and in good standing as a foreign corporation
in each jurisdiction in which it owns or leases real property or transacts
business requiring such qualification, except where the failure to so qualify
would not be materially adverse to the Company's business taken as a whole.
2.08. LEGALITY OF OUTSTANDING SECURITIES. The outstanding shares of
Common Stock of the Company and each of its subsidiaries, if any, have been duly
and validly authorized and issued, are fully paid and nonassessable and conform
to all statements with regard thereto contained in the Registration Statement
and Prospectus. No sales of securities have been made by the Company in
violation of the registration provisions of the Act or in violation of any other
federal or state laws.
2.09. LEGALITY OF SECURITIES. The Securities, the Warrant Shares, the
Representative's Warrants (described in Section 3.04 hereof) and the
Representative's Class A Warrants (described in Section 3.04 hereof) have been
duly and validly authorized and, when issued and delivered against payment as
provided in this Agreement, will be validly issued, fully paid and
nonassessable. The Securities, the Warrant Shares, the Representative's Warrants
and the Representative's Class A Warrants, upon issuance, will not be subject to
the preemptive rights of any shareholders of the Company. The Class A Warrants,
the Representative's Warrants, and the Representative's Class A Warrants, when
sold and delivered, will constitute valid and binding obligations of the Company
enforceable in accordance with their terms. A sufficient number of shares of
Common Stock have been reserved for issuance upon exercise of the Class A
Warrants, the Representative's Warrants, and the Representative's Class A
Warrants. The Securities, the Warrant Shares, the Representative's Warrants and
the Representative's Class A Warrants will conform to all statements in the
Registration Statement and Prospectus made with respect thereto. Upon delivery
of and payment for the Securities, the Representative's Warrants and the
Representative's Class A Warrants to be sold by the Company as set forth in this
Agreement, the persons paying therefor will receive good and marketable title
thereto, free and clear of all liens, encumbrances, charges and claims. The
Company will have on the effective date of the Registration Statement and at the
time of delivery of the Securities, the Representative's Warrants and the
Representative's Class A Warrants full legal right and power and all
authorizations and approvals required by law to sell and deliver the Securities,
Representative's Warrants and Representative's Class A Warrants in the manner
provided hereunder.
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2.10. OUTSTANDING SECURITIES AND LONG TERM DEBT ON EFFECTIVE DATE.
Immediately prior to the effective date, the only shares of capital stock,
warrants, options, or other convertible securities which have been issued by the
Company and which will be outstanding on the effective date will be as described
in the Prospectus, and the Company will not be obligated on any long term debt,
whether or not recorded on the books, records, or accounts of the Company and
will not be obligated to issue any capital stock, warrants, options, or other
convertible securities except as described in the Prospectus. Immediately prior
to the effective date of the Registration Statement, the number of shares of
Common Stock of the Company outstanding will not exceed 2,850,000 shares on a
fully diluted basis unless the Representative has approved in writing a
different maximum number of fully diluted shares. For purposes of this
Underwriting Agreement, the term "fully diluted basis" shall mean the number of
shares of Common Stock actually issued and outstanding plus the number of shares
of Common Stock underlying all issued and outstanding convertible or excisable
securities.
2.11. CUSIP NUMBER. The Company has obtained a CUSIP number for its
Common Stock and Class A Warrants.
2.12. OPTIONS AND TREASURY SHARES. There are no outstanding options,
warrants or other rights to purchase securities of the Company, however
characterized, except as described in the Registration Statement. Except as
described in the Registration Statement, there are no securities of the Company,
however characterized, held in its treasury. Except as described in the
Registration Statement, the Company has not offered or agreed to purchase or
issue any shares of Common Stock or any convertible securities in the future.
2.13. SUBSIDIARIES. Except as described herein and in the
Registration Statement, the Company has no subsidiaries and does not currently
intend to acquire any subsidiaries or engage in mergers with or the acquisition
of any entity.
2.14. PRIOR SALES. No securities of the Company, or of a predecessor
of the Company, have been sold except as described in the Registration
Statement.
2.15. LITIGATION. Except as set forth in the Registration Statement
and except for nonmaterial actions, suits, or proceedings disclosed in writing
to the Representative, there is and at the Closing Date and at the Option
Closing Date there will be no action, suit or proceeding before any court or
governmental agency, authority or body pending or to the knowledge of the
Company threatened against the Company or any of its subsidiaries.
2.16. FINDER. Except as set forth in the Registration Statement, the
Company knows of no outstanding claims against it for compensation for services
in the nature of a finder's fee, origination fee, or financial consulting fee
with respect to the offer and sale of the Securities and Warrant Shares
hereunder.
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2.17. EXHIBITS. There are no contracts or other documents which are
required to be filed as exhibits to the Registration Statement by the Act or by
the Rules and Regulations thereunder, which have not been so filed and each
contract to which the Company or any of its subsidiaries is a party and to which
reference is made in the Prospectus has been duly and validly executed, is in
full force and effect in all material respects in accordance with its terms, and
none of such contracts has been assigned and the Company knows of no present
situation or condition or fact which would prevent compliance with the terms of
such contracts. Except for amendments or modifications of such contracts in the
ordinary course of business, the Company has not been advised that any party to
any such contract intends to exercise any right which it may have to cancel any
of its obligations under any of such contracts and has no knowledge that any
other party to any such contracts has any intention not to render full
performance under such contracts.
2.18. TAX RETURNS. The Company has filed all tax returns which are
required to be filed by it and has paid all taxes shown on such returns and on
all assessments received by it to the extent such taxes have become due. All
taxes with respect to which the Company is obligated have been paid or adequate
accruals have been set up to cover any such unpaid taxes.
2.19. NO PREEMPTIVE RIGHTS. The Company's securities, however
characterized, are not subject to preemptive rights.
2.20. USE OF FORM SB-2. The Company is eligible to use Form SB-2 for
the offering of the Securities, the Representative's Warrants, the
Representative's Class A Warrants and the Warrant Shares.
2.21. NO SECURITIES BEING OFFERED. Except as described in the
Registration Statement, neither the Company nor any of its subsidiaries, if any,
is currently offering any securities of which it is the issuer.
2.22. CERTIFICATES, PERMITS, LICENSES, APPROVALS, PATENTS AND
TRADEMARKS. The Company and each of its subsidiaries, if any, possess adequate
certificates, permits, licenses, or approvals, issued by the appropriate
federal, state and local regulatory authorities necessary to conduct its
business and to retain possession of its properties. The Company and its
subsidiaries, if any, have not received any notice of any proceeding relating to
the revocation or modification of any of these certificates, permits, licenses,
or approvals. The Company and each of its subsidiaries, if any, has sufficient
trademarks, patent rights and copyright protection to conduct its business as
now being conducted; and except as described in the Prospectus, the Company has
no knowledge of any use by it or any of its subsidiaries, if any, of the trade
secrets of others, of infringement by it or them of trademarks, patent rights or
copyrights of others, or of any claim being made against the Company or any of
its subsidiaries, if any, regarding trademark, patent or copyright infringement
or use of trade secrets of others.
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2.23. TITLE TO PROPERTIES. The Company and each of its subsidiaries,
if any, has marketable title to all properties, including patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, equipment, and technology, described in the
Registration Statement as owned by it or them. The properties are free and clear
of all liens, charges, encumbrances or restrictions, however characterized,
except as described in the Registration Statement. All of the contracts, leases,
subleases, patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, copyrights, licenses and agreements,
however characterized, under which the Company and each of its subsidiaries, if
any, holds its properties, as described in the Registration Statement, are in
full force and effect.
2.24. NO DIRECTED SALES. The Company has not made any representation,
whether oral or in writing, to any person, whether an existing shareholder or
not, that any of the Securities will be reserved or directed to such person
during the proposed public offering.
2.25. RESTRICTED SECURITIES. The Company has caused each of its
current shareholders who holds "restricted securities" as such term is defined
in Rule 144 under the Act to acknowledge that they hold "restricted securities"
as defined in Rule 144.
2.26. NEGOTIATIONS. During the period from the effective date to the
Closing Date or the Option Closing Date, the Company will notify the
Representative in writing from time to time of the status of any negotiations
involving the Company or any of its subsidiaries, if any, relating to any
transaction which would, if consummated, have a material effect upon the Company
or any of its subsidiaries, if any. Also, the Company will consult with its
legal counsel concerning the need to disclose any such negotiations.
2.27. AUTHORITY. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and this
Agreement is the valid, binding and legally enforceable obligation of the
Company.
2.28. 1940 ACT. The Company has been advised of the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to conduct,
its affairs in such a manner as to ensure that it will not become an "investment
company" within the meaning of the 1940 Act and such rules and regulations.
2.29. CAMPAIGN CONTRIBUTIONS. The Company has not at any time during
the last five years made any unlawful contribution to any candidate for foreign
office, or failed to disclose fully any contribution in violation of law, or
made any payment to any federal or state governmental officer or official, or
other person charged with similar public or quasipublic duties, other than
payments required or permitted by the laws of the United States of any
jurisdiction thereof.
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2.30. SECURITIES ACTIVITIES. The Company has not taken and will not
take, directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or manipulation of the
price of any security to facilitate the sale or resale of the Securities.
2.31. ENVIRONMENTAL. Except as specifically described in the
Prospectus, the Company is in compliance with all federal, state, and local
rules, regulations, and policies relating to the use, treatment, storage,
transportation, discharge, emission, or disposal of, or exposure of others to,
toxic substances and protection of health, safety or the environment
("Environmental Laws") which are applicable to its business; there is no pending
or asserted claim, liability, or investigation by any third party or
governmental authority against the Company under Environmental Laws; no
substances which are prohibited or regulated by any Environmental Law or
designated to be radioactive, toxic, hazardous or otherwise a danger to health
or the environment by any governmental agency ("Hazardous Material") are present
or likely to become present on any property which is owned, leased, or occupied
by the Company and no such property has been designated as a SuperFund site,
pursuant to the Comprehensive Response, Compensation, and Liability Act of 1980,
as amended, or otherwise designated as a contaminated site under applicable
federal, state or local law; and the Company has received all permits, licenses,
or other approvals required of it under Environmental Laws to conduct its
business as presently conducted and is in compliance with all terms and
conditions of such permits, licenses, or approvals.
2.32. FOOD AND DRUG COMPLIANCE. The Company's products and the
manufacture and labeling thereof comply with all laws, rules and regulations
relating to or adopted by the United States Food and Drug Administration ("FDA")
and any state and state agency in which such products are being marketed or
sold.
REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS
In order to induce the members of the Underwriting Group to enter
into this Agreement, each of the Selling Shareholders, severally and not
jointly, represents and warrants to and agrees with the members of the
Underwriting Group as follows:
2.33. CUSTODY AGREEMENT. The Selling Shareholder has duly executed
and delivered the custody agreement ("Custody Agreement"), in the form
heretofore delivered to the Representative. The person designated by the Selling
Shareholder in the Custody Agreement as custodian will be referred to herein as
the "Custodian." Certificates in negotiable form representing the Selling
Shareholder's Shares to be sold by the Selling Shareholder hereunder have been
deposited with the Custodian pursuant to the Custody Agreement for the purpose
of delivery pursuant to this Agreement. All authorizations, orders and consents
necessary for the execution and delivery by the Selling Shareholder of this
Agreement and the Custody Agreement have been duly and validly given, and the
Selling Shareholder has full legal right, power and authority to enter into this
Agreement
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and the Custody Agreement and to sell, assign, transfer and deliver to the
Underwriters the Selling Shareholder's Shares. The Selling Shareholder agrees
that the Common Stock represented by the certificates he has deposited with the
Custodian are subject to the interests of the Underwriters hereunder, that the
arrangements made for such custody are to that extent irrevocable, and that the
obligations of the Selling Shareholder hereunder shall not be terminated, except
as provided in this Agreement and the Custody Agreement, by any act of such
Selling Shareholder, by operation of law, whether by the death or incapacity of
the Selling Shareholder, or by the occurrence of any other event. If any such
death or incapacity should occur, or if any other event should occur, before the
delivery of the Selling Shareholder's Shares hereunder, to the extent not
prohibited by law, the certificates for such Common Stock deposited with the
Custodian shall be delivered by the Custodian in accordance with the terms and
conditions of this Agreement and the Custody Agreement as if such death,
incapacity or other event had not occurred, regardless of whether or not the
Custodian shall have received notice thereof.
2.34. TITLE. The Selling Shareholder has, and on the Closing Date and
Option Closing Date will continue to have, valid and marketable title to the
Selling Shareholder's Shares deposited with the Custodian, free and clear of all
liens, encumbrances, equities and claims, and upon delivery of and payment for
the aforesaid shares as herein provided, valid and marketable title thereto,
free and clear of all liens, encumbrances, equities and claims, will be
transferred by the Selling Shareholder to the Underwriters.
2.35. NO BREACH OR DEFAULT. The performance of this Agreement by the
Selling Shareholder and the consummation of the transactions contemplated hereby
and by the Custody Agreement and compliance with the terms of this Agreement and
the Custody Agreement do not and will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under any indenture,
mortgage or other agreement or instrument to which the Selling Shareholder is a
party, or by which the Selling Shareholder is bound, or any existing law, rule,
regulation, judgment, order or decree applicable to the Selling Shareholder of
any court or other governmental body.
2.36. SECURITIES ACTIVITIES. The Selling Shareholder has not taken
and will not take, directly or indirectly, any action designed to, which has
constituted or might constitute, or which might reasonably be expected to cause
or result in any stabilization or manipulation of the price of any security to
facilitate the sale or resale of the Shares.
2.37. ACCURACY OF THE REGISTRATION STATEMENT AND PROSPECTUS AS TO THE
SELLING SHAREHOLDER. To the extent that any statements are made in or any
omissions occur as to the Registration Statement, any Preliminary Prospectus,
the Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by the Selling
Shareholder specifically for use therein, such Preliminary Prospectus did
conform, and the Registration Statement and the Prospectus and any amendments or
supplements thereto, when they become effective or are filed with the
Commission, as the case may be, will conform, in all material respects to the
requirements
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of the Act and the regulations and did not and will not contain any untrue
statement of a material fact or omit to state any fact required to be stated
therein or necessary to make the statements therein not misleading.
2.38. TRANSFER TAXES. No transfer taxes are required to be paid in
connection with the sale, transfer and/or delivery of any of the Shares being
sold to the Underwriters by the Selling Shareholder pursuant to this Agreement.
2.39. COMPANY REPRESENTATIONS. The Selling Shareholder is not aware
that any of the representations and warranties of the Company set forth in this
Agreement are untrue or inaccurate in any material respect.
All of the above representations and warranties shall survive the
performance or termination of this Agreement.
SECTION 3
PURCHASE AND SALE OF THE SECURITIES
3.01. PURCHASE OF SECURITIES. The Company hereby agrees to sell to
the members of the Underwriting Group named in Schedule I hereto (for all of
whom the Representative is acting), severally and not jointly, and each member
of the Underwriting Group, upon the basis of the representations and warranties
herein contained, but subject to the conditions hereinafter stated, agrees to
purchase from the Company, severally and not jointly, the number of Firm
Securities set forth opposite the name of each member of the Underwriting Group
as set forth in Schedule I hereto at a purchase price of $_____ per Share and
$.50 per Class A Warrant. The Company and each Selling Shareholder to the extent
described in Section 1 of this Agreement hereby grant to the Representative and
the members of the Underwriting Group an option for a period of 30 days after
the effective date to purchase at a purchase price of $_____ per Share and $.50
per Class A Warrant up to ____ Shares and/or up to ____ Class A Warrants in
order to cover overallotments. Any Overallotment Securities purchased shall be
purchased for the account of the Representative and/or for the accounts of the
members of the Underwriting Group as determined by the Representative.
3.01.01. DEFAULT BY MEMBER OF UNDERWRITING GROUP. If for any
reason one or more of the Underwriters shall fail or refuse (otherwise
than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 9 hereof) to purchase and pay
for the number of Firm Securities agreed to be purchased by such
Underwriter, the Company shall immediately give notice thereof to the
Representative, and the nondefaulting Underwriters shall have the right
within 24 hours after the receipt by the Representative of such notice,
to purchase or procure one or more other Underwriters to purchase, in
such proportions as may be agreed upon among the Representative and
such purchasing Underwriter or Underwriters and upon the terms herein
set forth, the Firm Securities which such
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defaulting Underwriter or Underwriters agreed to purchase. If the
nondefaulting Underwriters fail so to make such arrangements with
respect to all such Firm Securities, the number of Firm Securities
which each nondefaulting Underwriter is otherwise obligated to purchase
under this Agreement shall be automatically increased pro rata to
absorb the remaining Firm Securities which the defaulting Underwriter
or Underwriters agreed to purchase; provided, however, that the
nondefaulting Underwriters shall not be obligated to purchase any of
the Firm Securities if the aggregate Public Offering Price of the Firm
Securities which the defaulting Underwriter or Underwriters agreed to
purchase exceeds 10% of the Public Offering Price of the total Firm
Securities which all Underwriters agreed to purchase hereunder. If the
total number of Firm Securities which the defaulting Underwriter or
Underwriters agreed to purchase shall not be purchased or absorbed in
accordance with this subsection 3.01.01, then the Company shall have
the right, within 24 hours next succeeding the 24 hour period above
referred to, to make arrangements with other underwriters or purchasers
satisfactory to the Representative for the purchase of all of the Firm
Securities which the defaulting Underwriter or Underwriters agreed to
purchase hereunder on the terms herein set forth. In any such case,
either the Representative or the Company shall have the right to
postpone the Closing Date determined as provided in subsection 3.02.02.
hereof for not more than seven business days after the date originally
fixed as the Closing Date pursuant to said subsection 3.02.02. in order
that any necessary changes in the Registration Statement, the
Prospectus or any other documents or arrangements may be made. If
neither the nondefaulting Underwriters nor the Company shall make
arrangements within the 24 hour periods stated above for the purchase
of all the Firm Securities which the defaulting Underwriter or
Underwriters agreed to purchase hereunder, this Agreement shall be
terminated without further act or deed and without any liability on the
part of the Company or the Selling Shareholders to any nondefaulting
Underwriter and without any liability on the part of any nondefaulting
Underwriter to the Company or the Selling Shareholders.
3.01.02. LIABILITY OF DEFAULTING MEMBERS OF THE UNDERWRITING
GROUP. Nothing contained in this Section 3.01 shall relieve any
defaulting member of the Underwriting Group of its liability, if any,
to the Company or to the remaining members of the Underwriting Group
for damages occasioned by its default hereunder.
3.02. PUBLIC OFFERING PRICE. After the Commission notifies the
Company that the Registration Statement has become effective and after this
Agreement becomes effective, the members of the Underwriting Group propose to
offer the Shares to the public at a Public Offering Price of $_____ per Share
and to offer the Class A Warrants to the public at a Public Offering Price of
$.50 per Class A Warrant as set forth in the Prospectus. The members of the
Underwriting Group may allow such concessions and discounts upon sales to
selected dealers as may be determined from time to time by the Representative.
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3.02.01. PAYMENT FOR FIRM SECURITIES. Payment for the Firm
Securities shall be made to the Company by regular check or checks at
the offices of the Representative set forth above in Denver, Colorado,
upon delivery to the Representative of certificates for the Firm
Securities in definitive form in such numbers and registered in such
names as the Representative requests in writing at least two full
business days prior to such delivery. The Company agrees not to seek to
obtain (i) certification of the Representative's closing check or
checks from the Representative's bank or banks or (ii) a cashier's
check or checks from the Representative's bank or banks in substitution
for the Representative's closing check or checks. The Company agrees to
deposit the Representative's closing check or checks into the Company's
bank account and to allow such check or checks to clear through the
banking system on a "regular way" basis. Nothing contained in this
Section 3.02.01 shall be construed to relieve the Representative from
its obligations created as a result of the issuance of the
Representative's regular check or checks at the Closing.
3.02.02. CLOSING. The time and date of delivery and payment
hereunder for the Firm Securities is herein called the "Closing Date"
and shall take place at the office of the Representative at the address
set forth above in Denver, Colorado, at 10:00 A.M. on the third
business day following the effective date of this Agreement; provided,
however, the Company and the Representative may agree, on the date that
this Agreement becomes legally effective, to an alternative Closing
Date and such alternative Closing Date shall become the Closing Date
under this Agreement. Should the Representative elect to exercise any
part of the overallotment option pursuant to Section 3.01 hereof, the
time, date of delivery and payment for the Overallotment Securities
being purchased shall be as mutually agreed between the Company and the
Representative, but not later than the thirtieth calendar day after the
effective date. Said date is hereinafter referred to as the "Option
Closing Date."
3.02.03. INSPECTION OF CERTIFICATES. For the purpose of
expediting the checking and packaging of the certificates for the
Common Stock and Class A Warrants, the Company agrees to make the
certificates available for inspection by the Representative at the
place designated by the Representative at least one full business day
prior to the proposed delivery date.
3.02.04. PAYMENT TO SELLING SHAREHOLDERS. The Company, the
Selling Shareholders, and the Representative agree that the amount
payable by the Representative to the Custodian on the Option Closing
Date shall be $__________ for each Selling Shareholder Share which
amount equals the Public Offering Price of each Overallotment Share
less $________ for the Underwriting Group discount per Share and less
$________ for the nonaccountable expense allowance per Share payable to
the Representative.
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3.03. REPRESENTATIVE'S NONACCOUNTABLE EXPENSE ALLOWANCE. It is
understood that the Company and the Selling Shareholders shall reimburse the
Representative for its expenses on a nonaccountable basis in the amount of 3% of
the Public Offering Price of the Shares and Overallotment Shares purchased by
the Underwriters. The Representative acknowledges that it has received $30,000
of the nonaccountable expense allowance, which amount will be credited against
the unpaid balance of such nonaccountable expense allowance. On the Closing Date
and the Option Closing Date, the Company and the Selling Shareholders shall pay
to the Representative the unpaid balance of such nonaccountable expense
allowance then due.
3.04. REPRESENTATIVE'S WARRANTS AND REPRESENTATIVE'S CLASS A
WARRANTS. On the Closing Date, the Company will sell warrants to the
Representative ("Representative's Warrants") entitling the Representative to
purchase a total of ______ shares of the Company's Common Stock. The
Representative's Warrants will be in the form of the Representative's Warrants
to Purchase Common Stock filed as an exhibit to the Registration Statement. In
addition, on the Closing Date, the Company will sell to the Representative a
total of ________ Representative's Class A Common Stock Purchase Warrants
("Representative's Class A Warrants") which shall be exactly the same as the
Class A Warrants except that the exercise price for the Representative's Class A
Warrants will be 120% of the exercise price of the Class A Warrants and except
as otherwise specified in this Section 3.04. The total amount that the
Representative shall pay the Company for the Representative's Warrants and the
Representative's Class A Warrants is $100. The Company and the Representative
agree that the Representative's Warrants and the Representative's Class A
Warrants may not be sold, transferred, assigned, pledged, or hypothecated for a
period of one year after the effective date of the Registration Statement except
to officers of the Representative, to members of the Underwriting Group, and to
officers of members of the Underwriting Group and except by will or operation of
law. After such one year period, the Representative's Warrants and the
Representative's Class A Warrants may be sold, transferred, assigned, pledged,
or hypothecated provided that any such transaction is in accordance with the
registration or exemption from registration provisions of the Act and any
applicable state securities laws. If the Representative's Warrants or the
Representative's Class A Warrants are exercised during the first year after the
effective date of the Registration Statement, then any shares of Common Stock of
the Company acquired as a result of any such exercise may not be sold,
transferred, assigned, pledged, or hypothecated until after expiration of such
one year period. The Representative's Class A Warrants shall not be subject to
redemption.
3.05. REPRESENTATIONS OF THE PARTIES. The parties hereto respectively
represent that as of the Closing Date and as of the Option Closing Date the
representations herein contained and the statements contained in all the
certificates theretofore or simultaneously delivered by any party to another,
pursuant to this Agreement, shall in all material respects be true and correct.
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3.06. POSTCLOSING INFORMATION. The Representative covenants that
reasonably promptly after the Closing Date and after the Option Closing date,
the Representative will supply the Company with all information that the Company
may reasonably request which must be supplied to the Commission or securities
authorities of states in which the Securities have been qualified for sale.
3.07. REOFFERS BY SELECTED DEALERS. On each sale by the members of
the Underwriting Group of any of the Securities to selected dealers, the members
of the Underwriting Group shall require the selected dealers purchasing any such
Securities to agree to reoffer such Securities on the terms and conditions of
the offering set forth in the Registration Statement and Prospectus.
SECTION 4
REGISTRATION STATEMENT AND PROSPECTUS
4.01. DELIVERY OF REGISTRATION STATEMENT. The Company shall deliver
to the Representative without charge two signed printed copies of the
Registration Statement, including all financial statements and exhibits filed
therewith and any amendments or supplements thereto, and shall deliver without
charge to the Representative such number of conformed printed copies of the
Registration Statement as the Representative shall request, including all
financial statements and exhibits filed therewith and any amendments or
supplements thereto. The signed copies of the Registration Statement so
furnished to the Representative will include signed copies of any and all
opinions and consents of the independent public accountants certifying to the
financial statements included in the Registration Statement and Prospectus and
signed copies of any and all opinions, consents and certificates of any other
persons whose profession gives authority to statements made by them and who are
named in the Registration Statement or Prospectus as having prepared, certified
or reviewed any part thereof.
4.02. DELIVERY OF PRELIMINARY PROSPECTUS AND AGREEMENTS. The Company
will have caused to be delivered, at its expense, to the members of the
Underwriting Group and to other broker dealers specified by the Representative
prior to the effective date of the Registration Statement as many printed copies
of (i) each Preliminary Prospectus filed with the Commission bearing in red ink
the statements required by Item 501 of Regulation S-B, and (ii) each Agreement
Among Underwriters, Underwriting Agreement, and Selected Dealer Agreement, all
as may have been requested by the Representative. The Company consents to the
use of such documents by the members of the Underwriting Group and by
prospective dealers prior to the effective date of the Registration Statement,
so long as such use is in accordance with the applicable provisions of the Act,
the applicable Rules and Regulations thereunder and the applicable state blue
sky or securities laws.
4.03. DELIVERY OF PROSPECTUS. The Company will deliver, at its
expense, to the members of the Underwriting Group and to other broker dealers
specified by the
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Representative, as many printed copies of the Prospectus as the Representative
may request and will deliver said printed copies of the Prospectus to the
members of the Underwriting Group and such other persons on the effective date
and for such period of time thereafter as the Prospectus is required by law to
be delivered in connection with sales of the Securities.
4.04. FURTHER AMENDMENTS AND SUPPLEMENTS. If during the period of
time that the Company's Prospectus is required to be delivered under the Act,
any event occurs or any event known to the Company relating to or affecting the
Company shall occur, as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact, or omit to
state any material fact necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading or if it is
necessary at any time after the effective date to amend or supplement the
Prospectus to comply with the Act, the Company agrees to immediately notify the
Representative thereof and prepare and file with the Commission such further
amendment to the Registration Statement or supplemental or amended Prospectus as
may be required and furnish and deliver to the Representative and to others
designated by the Representative, all at the Company's expense, a reasonable
number of copies of the amended or supplemented Prospectus which as so amended
or supplemented will not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading when it is
delivered to a purchaser or prospective purchaser, and which will comply in all
respects with the Act; and in the event the Representative is required to
deliver a Prospectus after the date specified in Rule 174 of the Rules and
Regulations, the Company upon request will prepare promptly such Prospectus or
Prospectuses as may be necessary to permit compliance with the requirements of
Section 10 of the Act.
4.05. USE OF PROSPECTUS. The Company authorizes the members of the
Underwriting Group in connection with the distribution of the Securities and all
dealers who may distribute any of the Securities to use the Prospectus, as from
time to time amended or supplemented, in connection with the offering and sale
of the Securities so long as such use is in accordance with the applicable
provisions of the Act, the applicable Rules and Regulations thereunder and
applicable state blue sky or securities laws.
SECTION 5
COVENANTS OF THE COMPANY
The Company covenants and agrees with the members of the Underwriting
Group that:
5.01. OBJECTION OF REPRESENTATIVE TO AMENDMENTS OR SUPPLEMENTS. After
the date hereof, the Company will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment or supplement
to the Registration Statement or Prospectus (i) unless and until a copy of such
amendment or supplement has been
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previously furnished to the Representative within a reasonable time period prior
to the proposed filing thereof or (ii) to which the Representative or legal
counsel to the Representative has reasonably objected, in writing, on the ground
that such amendment or supplement is not in compliance with the Act or the Rules
and Regulations.
5.02. COMPANY'S BEST EFFORTS TO CAUSE REGISTRATION STATEMENT TO
BECOME EFFECTIVE. The Company agrees to use its best efforts to cause the
Registration Statement and any amendment thereto to become effective as promptly
as reasonably practicable and will promptly advise the Representative and will
confirm such advice in writing (i) when the Registration Statement shall have
become effective and when any amendment thereto shall have become effective and
when any amendment of or supplement to the Prospectus shall be filed with the
Commission, (ii) when the Commission shall make, either orally or in writing, a
request or suggestion for any amendment to the Registration Statement or the
Prospectus or for any additional information and the nature and substance
thereof, (iii) of the issuance by the Commission of an order suspending the
effectiveness of the Registration Statement pursuant to Section 8 of the Act or
of the initiation of any proceedings for that purpose, (iv) of the happening of
any event which in the judgment of the Company makes any material statement in
the Registration Statement or Prospectus untrue or which requires the making of
any changes in the Registration Statement or Prospectus in order to make the
statements therein not misleading, and (v) of the refusal to qualify or the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction or of the institution of any proceedings for any of such purposes.
The Company will use every reasonable effort to prevent the issuance of any such
order or of any order preventing or suspending such use, to prevent any such
refusal to qualify or any such suspension, and to obtain as soon as possible a
lifting of any such order, the reversal of any such refusal and the termination
of any such suspension.
5.03. PREPARATION AND FILING OF AMENDMENTS AND SUPPLEMENTS. The
Company agrees to prepare and file promptly with the Commission, upon request of
the Representative, such amendments or supplements to the Registration Statement
or Prospectus, in form satisfactory to legal counsel to the Representative, as
in the opinion of the Representative and of legal counsel to the Company, may be
necessary in connection with the offering or distribution of the Securities and
will use its best efforts to cause the same to become effective as promptly as
possible.
5.04. BLUE SKY QUALIFICATION. The Company agrees to use its best
efforts to register or qualify the Securities or such part thereof as the
Representative may determine for sale under the blue sky laws of such states as
are requested by the Representative. The Company will be assisted by legal
counsel for the Representative in registering or qualifying the Securities for
sale under such blue sky laws. The Company will pay all of the filing fees and
legal fees, costs and expenses incurred by such legal counsel in so registering
or qualifying such Securities within 30 days after receipt of a reasonably
itemized statement. Although legal counsel for the Representative will be
assisting the Company in registering and qualifying the Securities with the
states and foreign
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jurisdictions selected by the Representative and although legal counsel for the
Representative will be compensated by the Company for such services, such
Representative's legal counsel will not have an attorney/client relationship
with the Company and it is understood that all legal advice concerning such
registrations and qualifications will be provided to the Company by legal
counsel for the Company. The Representative's legal counsel will forward to
legal counsel for the Company copies of all documents and correspondence sent to
or received from such states in connection with such registrations and
qualifications at the time such documents and correspondence are sent or
received by legal counsel for the Representative.
5.05. FINANCIAL STATEMENTS. The Company at its own expense agrees to
prepare and give and will continue to give such financial statements and other
information and reports to and as may be required by the Commission or the
proper public bodies of the states in which the Securities may be registered or
qualified.
5.06. REPORTS AND FINANCIAL STATEMENTS TO THE REPRESENTATIVE. For a
period of five years from the Closing Date, the Company agrees to deliver to the
Representative copies of each annual report of the Company and copies of all
reports it is required to file or make available pursuant to the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and will deliver to the
Representative: (i) within 90 days (plus any extensions of time that the
Commission grants to the Company to file its annual report on the appropriate
Form) after the close of each fiscal year of the Company, a financial report of
the Company and its subsidiaries, if any, on a consolidated basis, and a similar
financial report of all of the Company's unconsolidated subsidiaries, if any,
all such reports to include a balance sheet as of the end of the preceding
fiscal year, a statement of operations, a statement of stockholders' equity and
statement of cash flows covering such fiscal year, and all to be in reasonable
detail and certified by independent public accountants for the Company; (ii)
within 45 days (plus any extensions of time that the Commission grants to the
Company to file its quarterly report on the appropriate Form) after the end of
each quarterly fiscal period of the Company other than the last quarterly fiscal
period in any fiscal year, copies of the consolidated statements of operations,
stockholders' equity and cash flows for the quarterly fiscal period and the
fiscal year to the end of such quarterly fiscal period, and the balance sheet as
of the end of that period of the Company and its subsidiaries, if any, and the
equivalent financial statements of all of the Company's unconsolidated
subsidiaries, if any, for that period, all subject to year end adjustment,
certified by the principal financial or accounting officer of the Company; (iii)
copies of all other statements, documents or other information which the Company
mails or otherwise makes available to any class of its security holders or files
with the Commission; (vi) copies of all news, press or public information
releases when made; (v) copies of all letters to the Company from its
independent certified public accountants concerning actual or potential
deficiencies in the Company's accounting procedures or internal control of
funds; and (vi) upon request in writing from the Representative, such other
information as may reasonably be requested and which may be properly disclosed
to the Representative with reference to the property, business and affairs of
the Company and its subsidiaries, if any. If the Company fails to
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furnish the Representative with financial statements as herein provided, within
the times specified herein, the Representative shall have the right to have such
financial statements prepared by independent public accountants of such
Representative's own choosing and the Company agrees to furnish such independent
public accountants such data and assistance and access to such records as they
may reasonably require to enable them to prepare such statements and to pay
their reasonable fees and expenses in preparing the same; provided, however, the
Company shall have the right to furnish the financial statements to the
Representative at any time after the Representative retains independent public
accountants to prepare the financial statements in which event the amount of
fees that the Company shall be obligated to pay to the independent public
accountants selected by the Representative will be limited to those fees
(including any retainer paid) actually incurred to the point in time that the
Company furnishes the required financial statements.
5.07. EXPENSES PAID BY THE COMPANY. The Company agrees to pay,
whether or not the transactions contemplated hereunder are consummated or this
Agreement is prevented from becoming effective or is terminated, all costs and
expenses incident to the performance of its obligations under this Agreement,
including all expenses incident to the authorization, issuance, and delivery of
the Securities, Representative's Warrants, and the Representative's Class A
Warrants, any original issue taxes in connection therewith, all transfer taxes,
if any, incident to the initial sale of the Securities to the public, the fees
and expenses of the Company's personnel in connection with the offering, the
costs, fees, and expenses incident to the preparation, printing and filing under
the Act and with the NASD of the Registration Statement, or supplements thereto,
the cost of printing, reproducing and filing all exhibits to the Registration
Statement, the Agreement Among Underwriters, this Agreement, the Selected Dealer
Agreement and any other underwriting documents, the cost of printing and
delivering to the Representative, the members of the Underwriting Group, and
selected dealers copies of the Registration Statement and copies of the
Agreement Among Underwriters, this Agreement and the Selected Dealer Agreement,
and any other underwriting documents, the Preliminary Prospectus and the
Prospectus as herein provided, the costs and legal counsel fees of qualifying
the Securities and Warrant Shares under the state securities or blue sky laws as
provided in Section 5.04 herein, the cost of providing the Representative with
two bound volumes of the Registration Statement, as amended, all exhibits
thereto, all state filings and all correspondence relating to the Registration
Statement and all state filings and the expenses of Company representatives in
attending a reasonable number of "due diligence" meetings (which shall include
all presentations specified by the Representative) held by the Representative.
5.08. REPORTS TO SHAREHOLDERS. For so long as the Company's Common
Stock is registered under the Exchange Act, the Company agrees to hold an annual
meeting of shareholders for the election of directors within 180 days after the
end of each of the Company's fiscal years and, within 180 days after the end of
each of the Company's fiscal years to send to each of the Company's shareholders
the audited financial statements of the Company as of the end of the fiscal year
just completed prior thereto. Such financial statements shall be those required
by Rule 14a-3 under the Exchange Act and shall be
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included in an annual report meeting the requirements of such Rule. Further, the
Company agrees, so long as such Common Stock is so registered, to send to each
of the Company's shareholders in printed form within 60 days after the end of
each fiscal quarter, reasonably itemized financial statements of the Company for
the quarter just ended and a narrative discussion of such financial statements
and the business conducted by the Company during such quarter.
5.09. SECTION 11(A) FINANCIALS. The Company agrees to send to each of
its security holders and agrees to deliver to the Representative, as soon as
practicable, but in no event later than the first day of the sixteenth full
calendar month following the effective date, an earnings statement (as to which
no opinion need be rendered but which will satisfy the provisions of Section
11(a) of the Act) covering a period of at least 12 months beginning after the
effective date.
5.10. POSTEFFECTIVE AVAILABILITY OF PROSPECTUS. Within the time
during which the Prospectus is required to be delivered under the Act, the
Company agrees to comply, at its own expense, with all requirements imposed upon
it by the Act, as now or hereafter amended, by the Rules and Regulations, as
from time to time may be in force, and by any order of the Commission, so far as
necessary to permit the continuance of sales of the Securities.
5.11. APPLICATION OF PROCEEDS. The Company agrees to apply the net
proceeds from the sale of the Securities substantially in the manner set forth
in the Registration Statement. Except for cumulative changes of less than
$100,000 in each specific item set forth in the "Use of Proceeds" section of the
definitive Prospectus, the Company will not deviate from such use without giving
written notice of such proposed deviation to the Representative at least 10
business days prior to any such deviation. Pending utilization of the net
proceeds by the Company for business purposes, all of the unused net proceeds
from the sale of the Securities will be invested in short term United States
government securities in a nondiscretionary account of the Company with the
Representative.
5.12. DELIVERY OF DOCUMENTS. Prior to the Closing Date, the Company
agrees to deliver to the Representative true and correct copies of the articles
of incorporation and certificate of incorporation of the Company and all
amendments thereto, all such copies to be certified by the secretary of state of
the state of incorporation of the Company; true and correct copies of the bylaws
of the Company and of the minutes of all meetings of the directors and
shareholders of the Company held prior to the Closing Date; and true and correct
copies of all material contracts to which the Company or any of its
subsidiaries, if any, is a party.
5.13. COOPERATION WITH REPRESENTATIVE'S DUE DILIGENCE. At all times
prior to the Closing Date, the Company agrees to cooperate with the
Representative, legal counsel to the Representative, and the Representative's
consultants in such investigation as the Representative may make or cause to be
made of the Company and its affiliates and the
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Company agrees to make available to the Representative in connection therewith
such information and documents relating to the Company and its affiliates as the
Representative may reasonably request.
5.14. ANNUAL MEETINGS. The Company will, at its expense, so long as
its Common Stock is registered under the Exchange Act, hold an annual meeting of
shareholders for the election of directors within 180 days after the end of each
of the Company's fiscal years.
5.15. LIMITATIONS ON COMPANY. Except with the Representative's prior
written consent, the Company agrees that the Company will not do the following
until (a) the completion of the offering of the Securities, or (b) the
termination of this Agreement, or (c) the number of days after the effective
date for which the Prospectus is required to be used pursuant to Rule 174 of the
Rules and Regulations, whichever occurs later:
(i) Undertake or authorize any change in its capital
structure;
(ii) Borrow any funds other than in the ordinary course of
business and as contemplated by the Prospectus;
(iii) Consolidate or merge with or into any other corporation;
or
(iv) Create any mortgage or any lien upon any of its properties
or assets other than in the ordinary course of business
and as contemplated by the Prospectus.
5.16. APPOINTMENT OF TRANSFER AGENT AND WARRANT AGENT. Prior to the
effective date, the Company will have appointed American Securities Transfer &
Trust, Inc., Denver, Colorado, as transfer agent for the Company's Common Stock
and as warrant agent for the Company's Class A Warrants.
5.17. COMMON STOCK AND CLASS A WARRANT CERTIFICATES. The Company
agrees to make arrangements to have available at the office of the transfer
agent sufficient quantities of the Company's Common Stock certificates as may be
needed for the quick and efficient transfer of the Common Stock. The Company
agrees to make arrangements to have available at the office of the warrant agent
sufficient quantities of the Company's Class A Warrant Certificates has may be
needed for quick and efficient transfer of Class A Warrants.
5.18. COMPLIANCE WITH CONDITIONS PRECEDENT. The Company agrees to use
all reasonable efforts to comply or cause to be complied with the conditions
precedent to the obligations of the members of the Underwriting Group in Section
8 hereof.
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5.19. FILINGS OF FORMS. The Company agrees to file with the
Commission all required reports on Form SR in accordance with the provisions of
Rule 463 of the Rules and Regulations and will file with the appropriate state
securities authorities any sales and other reports required by the rules and
regulations of such agencies and will provide copies of such reports to the
Representative and to the legal counsel to the members of the Underwriting
Group.
5.20. REGISTRATION UNDER THE EXCHANGE ACT. Prior to the effective
date of the Registration Statement, the Company will have made a filing under
Section 12(g) of the Exchange Act with respect to the Company's Common Stock and
Class A Warrants. The Company agrees to deliver a copy of such filing to the
Representative and to legal counsel for the Representative when filed. On the
effective date of the Registration Statement, the Company will cause the
Company's filing under Section 12(g) of the Exchange Act to become effective
with the Commission.
5.21. LISTING IN MANUALS. As soon as possible prior to the effective
date, the Company agrees to use its best efforts to have the Company listed in
Moody's Over-theCounter Manual and Standard & Poor's Standard Corporation
Records and such other Manuals as are reasonably requested by the
Representative.
5.22. NASDAQ/NMS. The Company agrees to have its Common Stock and
Class A Warrants listed and available for quotation on the NASDAQ Small Cap
Market on the effective date of the Registration Statement. The trading symbols
shall be mutually agreeable to the Company and the Representative. As soon as
the Company meets the qualifications required with respect thereto, the Company
will designate its securities for inclusion on the NASDAQ/NMS or, in the
alternative, such national stock exchange as is agreed to between the Company
and the Representative.
5.23. SECONDARY TRADING QUALIFICATION. The Company agrees to qualify
its Common Stock and Class A Warrants for secondary trading, as soon as legally
possible, in California and such other states as are reasonably requested by the
Representative from time to time.
5.24. LEGENDS ON STOCK CERTIFICATES. The Company agrees to cause the
stock certificates of its current shareholders that represent "restricted
securities," and the stock and warrant certificates held by officers, directors,
or controlling persons of the Company to be clearly legended as being restricted
against transfer without compliance with the Act and to cause the Company's
transfer agent and warrant agent to put stop transfer instructions against such
certificates.
5.25. STOCKHOLDERS AND CLASS A WARRANTHOLDERS LISTS AND TRANSFER
SUMMARY. Within 10 business days after the Closing Date and within 10 business
days after the Option Closing Date, the Company will deliver to the
Representative complete lists of all holders of the Common Stock and Class A
Warrants of the Company as of the
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Closing Date and as of the Option Closing Date. Each such list shall include the
name and address of each such holder and the number of shares of Common Stock or
Class A Warrants owned by each such person as of such date. Within 10 business
days after the end of each of the first 24 calendar months after the Closing
Date, the Company will provide the Representative with a new list containing the
information described above as the end of each such month and a list which shows
each transaction involving a transfer of a Common Stock certificate or Class A
Warrant certificate during such month. This transfer list shall include the name
and address of the transferor and the transferee and the number of shares of
Common Stock or Class A Warrants transferred.
5.26. DIRECTORS, OFFICERS AND COMMITTEES. The Company agrees that the
persons comprising the board of directors and officers of the Company on the
effective date must be acceptable to the Representative. Such acceptance will
only be withheld by the Representative if material adverse information is
discovered by the Representative. The Company agrees that for a period of three
years after the effective date, at the request of the Representative, the
Company will permit a representative of the Representative to be present at all
meetings of the board of directors of the Company. The Representative shall be
provided with the same notice of each meeting of the board of directors as is
provided to the board of directors. No compensation shall be paid to such
observer. However, the Company will reimburse out of pocket expenses incurred by
such observer to attend meetings. Such observer shall have no vote at such
meetings; such observer shall be required, prior to attending any such meeting,
to represent in writing to the Company that such observer is familiar with and
will comply with all requirements of the federal securities laws applicable to a
person who comes into possession of material nonpublic information concerning
the Company; and such observer may be excluded from attendance at any such
meeting during the discussion of information which is subject to the attorney
client or accountant client privilege. The board of directors of the Company
will establish an audit and a management compensation committee and will
maintain such committees so long as the Common Stock of the Company is
registered under the Exchange Act.
5.27. RIGHT OF INSPECTION. The Company agrees that for a period of
five years after the effective date, the Representative, at the Representative's
expense, will have the right to have a person or persons selected by the
Representative review the books and records of the Company if at any time the
audited or unaudited financial statements of the Company indicate that the
Company has realized a net loss after taxes or if a material adverse change
occurs in the Company, provided that the Representative may cause such review no
more than once in any 12 month period.
5.28. PUBLIC RELATIONS FIRM. For a period of at least 24 months after
the effective date, the Company will continue to use a public relations firm
which is mutually acceptable to the Company and the Representative. The Company
shall have sole authority to determine the compensation and the utilization of
such public relations firm.
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5.29. MANAGEMENT REFERRALS. Persons whom management of the Company
believe may be interested in purchasing Securities in the public offering will
be referred only to Representative and management of the Company will purchase
Securities in the public offering only through the Representative. The
Representative will have complete control of the distribution of the Securities
in the public offering.
5.30. TAKEOVER PROVISIONS. During the period of three years after the
effective date of the Registration Statement, the Company will not, without the
unanimous consent of those members of the board of directors of the Company who
are not affiliated with either the Company or the Representative, or if there
are no such nonaffiliated directors, without the approval of a majority of a
three person panel, one of whom is to be chosen by directors who are affiliated
with the Company, one of whom is to be chosen by the Representative, and the
third of whom is to be chosen by the two so selected, amend its Articles of
Incorporation or bylaws or enter into any contract or agreement with its
officers, directors, or employees or any other person, for the purpose of
preventing a corporate takeover of the Company; provided, however, only the vote
of approval of a majority of the board of directors of the Company shall be
required for an amendment of the Company's Articles of Incorporation or bylaws
designed to prevent a "two step" takeover of the Company involving a second step
which includes unfair provisions for minority shareholders of the Company or in
similar exigent circumstances in which such action is necessary to carry out the
fiduciary duty of the Company's directors.
5.31. FUTURE SALES.
5.31.01. COMPANY SALES TO AFFILIATES. During the period of two
years after the effective date of the Registration Statement, the
Company will not issue any options, warrants, Common Stock, preferred
stock, or other securities to any officer, director, principal
shareholder of the Company, or affiliate of any such person, without
the prior written consent of the Representative. The term "principal
shareholder" shall mean a person who owns of record or beneficially
more than 5% of the outstanding Common Stock of the Company. Also
excepted from this provision shall be warrants and options, and Common
Stock issued thereunder, which are described in the Registration
Statement and are outstanding on the effective date of the Registration
Statement or which are issued pursuant to a plan which has been
approved in writing by the board of directors of the Company and the
Representative. Such excluded securities shall be referred to herein as
the "Excluded Securities."
5.31.02. COMPANY SALES TO OTHERS. During the period of three
years after the effective date of the Registration Statement, the
Company will not sell any securities (other than debt securities issued
to financial institutions) not covered by the Registration Statement
without the Representative's prior written consent. Excepted from this
provision shall be sales of securities permitted under Section 5.31.01
and sales of Excluded Securities.
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5.31.03. COVERED PERSONS. Prior to the effective date of the
Registration Statement, the Company will cause each of its officers,
directors, 5% or more shareholders, and their affiliates ("Covered
Persons) to agree in writing with the Representative that, without the
prior written consent of the Representative, each such Covered Person
who is an officer, director, or an affiliate of an officer or director,
will not sell for a period of two years after the effective date of the
Registration Statement any of the Company's shares of Common Stock
owned by him or it prior to such effective date. With respect to a
Covered Person who is a 5% or more shareholder of the Company or an
affiliate of a 5% or more shareholder of the Company, such agreement
shall provide that, without the prior written consent of the
Representative, such Covered Person will not sell for a period of 14
months after the effective date of the Registration Statement any of
the Company's shares of Common Stock owned by him or it prior to such
effective date. Such agreement will also provide that if a Covered
Person who is an officer or director of the Company on the effective
date of the Registration Statement ceases to be an officer or director
of the Company during the period of two years after the effective date
of the Registration Statement, then such Covered Person and the
affiliates of such Covered Person will agree not to sell any of the
Company's shares of Common Stock owned by such Covered Person and such
Covered Person's affiliates prior to the effective date of such
Registration Statement until the expiration of the first to expire of
the following periods: two years after the effective date of the
Registration Statement or 14 months after the officer or director
ceases to be an officer or director of the Company. For purposes of
this Underwriting Agreement, the term "affiliate" shall have the
meaning ascribed to it in rule 405 of the Securities Act of 1933, as
amended ("Act"). Such agreements between the Representative and the
Covered Persons will also provide that any sales of shares of Common
Stock of the Company by such persons during the three year period after
the effective date of the Registration Statement under Rule 144
promulgated by the SEC under the Act ("Rule 144 Sales"), will be
executed only through the Representative acting as a broker or dealer.
In such agreement the Representative will agree to execute such Rule
144 Sales on a competitive basis. If any person required to execute an
agreement under this subsection 5.31.03. has pledged, or during the
applicable period pledges, any of the Company's shares of Common Stock
which are covered by such agreement; such person shall cause his
pledgee to also agree in writing to comply with the pledgor's agreement
with the Representative. A copy of any such written agreement from the
pledgee shall be promptly delivered by the pledgor to the
Representative after execution thereof by the pledgee.
SECTION 6
INDEMNIFICATION
6.01. INDEMNIFICATION BY COMPANY. The Company agrees to indemnify and
hold harmless the members of the Underwriting Group and each person who controls
any
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member of the Underwriting Group within the meaning of Section 15 of the Act
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act or any other statute
or at common law and to reimburse the persons indemnified for any legal or other
expenses (including the cost of any investigation and preparation) incurred by
them in connection with any litigation, whether or not resulting in any
liability, but only insofar as such losses, claims, damages, liabilities and
litigation arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendment thereto or any application or other document filed in order to qualify
the Securities under the blue sky or securities laws of the states where filings
were made, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, all as of the date when the Registration Statement or such
amendment, as the case may be, becomes effective, or any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus (as
amended or supplemented if the Company shall have filed with the Commission any
amendments thereof or supplements thereto), or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; PROVIDED, HOWEVER, that the indemnity agreement contained in this
subsection 6.01 shall not apply to the members of the Underwriting Group or any
person controlling a member of the Underwriting Group in respect of any such
losses, claims, damages, liabilities or actions arising out of or based upon any
such untrue statement or alleged untrue statement, or any such omission or
alleged omission, if such statement or omission was made in reliance upon
information peculiarly within the knowledge of a member of the Underwriting
Group and furnished in writing to the Company by a member of the Underwriting
Group specifically for use in connection with the preparation of the
Registration Statement and Prospectus or any such amendment or supplement
thereto. This indemnity agreement is in addition to any other liability which
the Company may otherwise have to the members of the Underwriting Group or to
any person controlling a member of the Underwriting Group. Each member of the
Underwriting Group agrees within 10 days after the receipt by it of written
notice of the commencement of any action against it or against any person
controlling it as aforesaid, in respect of which indemnity may be sought from
the Company on account of the indemnity agreement contained in this subsection
6.01 to notify the Company in writing of the commencement thereof. The failure
of such a member of the Underwriting Group so to notify the Company of any such
action shall relieve the person who did not receive notice from any liability
which it may have to that member of the Underwriting Group or any person
controlling it as aforesaid on account of the indemnity agreement contained in
this subsection 6.01, but shall not relieve the Company from any other liability
which it may have to that member of the Underwriting Group or such controlling
person. In case any such action shall be brought against a member of the
Underwriting Group or any such controlling person and the member of the
Underwriting Group shall notify the Company of the commencement thereof, the
Company shall be entitled to participate in (and, to the extent that it shall
wish, to direct) the defense thereof at its own expense, but such defense shall
be conducted by legal counsel of recognized standing and reasonably satisfactory
to
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such member of the Underwriting Group or such controlling person or persons,
which is a defendant or which are defendants in such litigation. If the Company
elects to direct such defense, the Company agrees to furnish to the involved
member of the Underwriting Group at its request, copies of all pleadings therein
and to apprise the involved member of the Underwriting Group of all developments
therein, all at the Company's expense, and to permit the member of the
Underwriting Group to be an observer therein.
6.02. INDEMNIFICATION BY THE MEMBERS OF THE UNDERWRITING GROUP. The
members of the Underwriting Group agree, in the same manner as set forth in
subsection 6.01. above, to indemnify and hold harmless the Company, the
directors and officers of the Company and each person, if any, who controls the
Company within the meaning of Section 15 of the Act, with respect to any
statement in or omission from the Registration Statement or any amendment
thereto, or the Prospectus (as amended or as supplemented, if amended or
supplemented as aforesaid) or any application or other document filed in any
state or jurisdiction in order to qualify the Securities under the blue sky or
securities laws thereof, or any information furnished pursuant to subsection
3.06 hereof, if such statement or omission was made in reliance upon information
peculiarly within the knowledge of a member of the Underwriting Group and
furnished in writing to the Company by a member of the Underwriting Group or on
its behalf specifically for use in connection with the preparation thereof or
supplement thereto. No member of the Underwriting Group shall be liable for
amounts paid in settlement of any such litigation if such settlement was
effected without the written consent of the member of the Underwriting Group. In
case of commencement of any action in respect of which indemnity may be sought
from a member of the Underwriting Group on account of the indemnity agreement
contained in this subsection 6.02., each person to be indemnified by the member
of the Underwriting Group shall have the same obligation to notify the member of
the Underwriting Group as the members of the Underwriting Group have toward the
Company in subsection 6.01. above, subject to the same loss of indemnity in the
event such notice is not given, and the member of the Underwriting Group shall
have the same right to participate in (and, to the extent that the member of the
Underwriting Group shall wish, to direct) the defense of such action at the
expense of the member of the Underwriting Group, but such defense shall be
conducted by legal counsel of recognized standing and satisfactory to the
Company. If the member of the Underwriting Group elects to direct such defense,
the member of the Underwriting Group agrees to furnish to the Company at its
request copies of all pleadings therein and apprise it of all the developments
therein, all at the expense of the member of the Underwriting Group, and permit
the Company to be an observer therein.
6.03. CONTRIBUTION. If the indemnification provided for in this
Section 6 is unavailable to or insufficient to hold harmless an indemnified
party under subsections 6.01. and 6.02. above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein, then
each indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect not only (i) the relative
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benefits received by the Company on the one hand and the member of the
Underwriting Group on the other from the offering of the Securities, but also
(ii) the relative fault of the Company and the member of the Underwriting Group
in connection with the statements or omissions which resulted in such losses,
claims, damages, or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the member of the Underwriting Group on the other
shall be deemed to be in the same proportion as the total net proceeds from the
public offering of the Securities (before deducting expenses) received by the
Company bears to the total underwriting discount received by the members of the
Underwriting Group, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the member of the Underwriting Group and
the person's relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the members of
the Underwriting Group agree that it would not be just and equitable if
contribution pursuant to this subsection 6.03. were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection 6.03. shall be deemed to include any legal or other expenses to which
such indemnified party would be entitled if subsections 6.01. and 6.02. hereof
were applied. Notwithstanding the provisions of this subsection 6.03., no member
of the Underwriting Group shall be required to contribute any amount in excess
of the amount equal to the total price of the Securities underwritten and
distributed by it to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11 of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
6.04. THREAT OF REGULATORY ACTION. The Company and the Representative
agree to advise each other immediately and confirm in writing the receipt of any
threat of or the initiation of any steps or procedures which would impair or
prevent the right to offer the Securities or the issuance of any "suspension
orders" or other prohibitions preventing or impairing the proposed offering of
the Securities. In the case of the happening of any such event, neither the
Company nor the members of the Underwriting Group will acquiesce in such steps,
procedures or suspension orders and each party agrees to actively defend any
such actions or orders unless all parties agree in writing to acquiesce in such
actions or orders.
SECTION 7
EFFECTIVENESS OF AGREEMENT
After this Agreement has been executed by the Company, the Selling
Shareholders, and the Representative, this Agreement shall become effective (i)
at 10:00 A.M., Denver,
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Colorado Time, on the first full business day after the effective date of the
Registration Statement or (ii) upon release by the Representative of the
Securities for offering after the effective date, whichever shall first occur.
The time of the release by the Representative of the Securities for offering,
for the purposes of this Section 7, shall mean the time of release by the
Representative for publication of the first newspaper advertisement which is
subsequently published relating to the Securities or the time of the first
mailing of copies of the Prospectus relating to the Securities in connection
with a confirmation of a sale of Securities by an Underwriter or Dealer
whichever shall first occur.
SECTION 8
CONDITIONS OF THE OBLIGATIONS OF THE
MEMBERS OF THE UNDERWRITING GROUP
After execution of this Agreement by the Company, the Selling
Shareholders, and the Representative, the obligations of the members of the
Underwriting Group to purchase the Securities and to make payment therefor on
the Closing Date and on the Option Closing Date shall be subject to the
accuracy, as of the Closing Date and as of the Option Closing Date, of the
representations and warranties on the part of the Company and the Selling
Shareholders herein contained, to the performance by the Company and the Selling
Shareholders of all of their agreements and obligations herein contained, to the
fulfillment of or compliance by the Company and the Selling Shareholders with
all covenants and conditions hereof, and to the following additional conditions,
any of which may be waived or modified by the Representative:
8.01. EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement shall have become effective and no order suspending the effectiveness
of the Registration Statement shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the Commission or be pending;
any request for additional information on the part of the Commission (to be
included in the Registration Statement or Prospectus or otherwise) shall have
been complied with to the satisfaction of the Commission; and neither the
Registration Statement nor the Prospectus nor any amendment thereto shall have
been filed to which legal counsel to the members of the Underwriting Group shall
have reasonably objected in writing or have not given its consent.
8.02. ACCURACY OF REGISTRATION STATEMENT. The Representative shall
not have disclosed in writing to the Company that the Registration Statement or
the Prospectus or any amendment thereof or supplement thereto contains an untrue
statement of a fact which, in the opinion of legal counsel to the members of the
Underwriting Group is material, or omits to state a fact which, in the opinion
of such legal counsel, is material and is required to be stated therein, or is
necessary to make the statements therein not misleading.
8.03. NO MATERIAL ADVERSE CHANGES. No changes shall have occurred in
or with respect to the officers or directors of the Company. No material adverse
changes shall have
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occurred in or with respect to the business, properties, financial condition or
credit of the Company or in or with respect to any conditions affecting the
prospects of its business.
8.04. CASUALTY AND OTHER CALAMITY. The Company shall not have
sustained any loss on account of fire, explosion, flood, accident, calamity or
any other cause, of such character as materially adversely affects its business
or property considered as an entire entity, whether or not such loss is covered
by insurance, and no officer or director of the Company shall have suffered any
injury, sickness or disability of a nature which would materially adversely
affect his or her ability to properly function as an officer or director of the
Company.
8.05. LITIGATION AND OTHER PROCEEDINGS. Except as disclosed in the
Prospectus, there shall be no litigation instituted or threatened against the
Company and there shall be no proceeding instituted or threatened against the
Company before or by any federal or state commission, regulatory body or
administrative agency or other governmental body, domestic or foreign.
8.06. LACK OF MATERIAL CHANGE. Except as contemplated herein or as
set forth in the Registration Statement and Prospectus, during the period
subsequent to the date of the last audited balance sheet included in the
Registration Statement, the Company (i) shall have conducted its business in the
usual and ordinary manner as the same was being conducted on the date of the
last audited balance sheet included in the Registration Statement, and (ii)
except in the ordinary course of its business, the Company shall not have
incurred any liabilities or obligations (direct or contingent) or disposed of
any of its assets, or entered into any material transaction or suffered or
experienced any materially adverse change in its condition, financial or
otherwise. The capital stock and surplus accounts of the Company shall be
substantially the same as at the date of the last balance sheet included in the
Registration Statement, without considering the proceeds from the sale of the
Securities, other than as may be set forth in the Prospectus.
8.07. REVIEW BY LEGAL COUNSEL TO THE MEMBERS OF THE UNDERWRITING
GROUP. The authorization of the Securities, Representative's Warrants,
Representative's Class A Warrants, Warrant Shares, Registration Statement,
Prospectus and all corporate proceedings and other legal matters incident
thereto and to this Agreement shall be reasonably satisfactory in all respects
to legal counsel to the members of the Underwriting Group.
8.08. OPINIONS OF LEGAL COUNSEL.
8.08.01. REISMAN & ASSOCIATES, P.A., LEGAL OPINION. The
Company shall have furnished to the members of the Underwriting Group
an opinion, dated the Closing Date, addressed to the members of the
Underwriting Group, from Reisman & Associates, P.A., legal counsel to
the Company, to the effect that based upon a review by them of the
Registration Statement, Prospectus, the Company's certificate of
incorporation, bylaws and relevant corporate proceedings and
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contracts, an examination of such statutes they deem necessary and
based upon such other investigation by such legal counsel as they deem
necessary to express such opinion:
(i) The Company and each of its subsidiaries, if any,
have been duly incorporated and are validly existing
corporations in good corporate standing under the laws of the
state in which it was incorporated, with full corporate power
and authority to own and operate its properties and to carry
on its business as set forth in the Registration Statement and
Prospectus.
(ii) The Company has authorized and outstanding
securities as set forth in the Registration Statement and
Prospectus; the outstanding securities of the Company and each
of its subsidiaries, if any, and the Securities conform to the
statements concerning them in the Registration Statement and
Prospectus; the outstanding securities of the Company and each
of its subsidiaries, if any, have been duly and validly issued
and are fully paid and nonassessable and contain no preemptive
rights; the Securities being sold by the Company to the
Underwriting Group, the Representative's Warrants and the
Representative's Class A Warrants have been duly and validly
authorized and, upon issuance thereof and payment therefor in
accordance with this Agreement and the Representative's
Warrants and Representative's Class A Warrants will be duly
and validly issued, fully paid and nonassessable and will not
be subject to the preemptive rights of any shareholder of the
Company.
(iii) To legal counsel's knowledge, no consents,
approvals, authorizations or orders of agencies, officers or
other regulatory authorities are known to such legal counsel
which are necessary for the valid authorization, issue or sale
of the Securities being sold by the Company to the
Underwriting Group hereunder, except as required under the Act
or the securities laws of the states in which the Securities
are qualified or except as required by the NASD.
(iv) To legal counsel's knowledge, the issuance and sale
of the Securities being sold by the Company to the
Underwriting Group and the consummation of the transactions
herein contemplated and compliance with the terms of this
Agreement will not conflict with or result in a breach of any
of the terms, conditions, or provisions of or constitute a
default under the certificate of incorporation or bylaws of
the Company, or any note, indenture, mortgage, deed of trust,
or other agreement or instrument known to such counsel to
which the Company is a party or by which the Company or any of
its property is bound or any existing law (provided this
Section 8.08 (iv) shall not relate to federal or state
securities laws), order, rule, regulation, writ, injunction,
or decree of any government, governmental
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instrumentality, agency, body, arbitration tribunal, or court,
domestic or foreign, having jurisdiction over the Company or
its property and which is known to such counsel.
(v) No preemptive rights exist with respect to the
Company's securities.
(vi) The Company has authorized capitalization as
described in the Registration Statement.
(vii) Based upon written or oral communications from the
Commission, the Registration Statement has become effective
under the Act and, to the knowledge of such legal counsel, no
stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose
has been instituted or is pending or contemplated; legal
counsel has participated in the preparation of the
Registration Statement and Prospectus and each amendment and
supplement thereto, and no facts have come to the attention of
legal counsel to lead counsel to believe that either the
Registration Statement or the Prospectus or any amendment or
supplement thereto contains any untrue statement of a material
fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances under which made
(except for the financial statements and other financial data
included therein, as to which legal counsel expresses no
opinion); and such counsel is familiar with all contracts
referred to in the Registration Statement or Prospectus and
such contracts are sufficiently summarized or disclosed
therein or filed as exhibits thereto as required, and such
legal counsel does not know of any other contracts that are
required to be summarized or disclosed or filed, and such
legal counsel does not know of any legal or governmental
proceedings pending or threatened to which the Company is
subject of such a character required to be disclosed in the
Registration Statement or the Prospectus which are not
disclosed and properly described therein.
(viii) This Agreement has been duly authorized by the
Company and is a valid and binding agreement of the Company
enforceable according to its terms subject to applicable
bankruptcy, insolvency and other laws concerning the
enforceability of creditors' rights generally; provided that
such counsel need express no opinion as to the enforceability
of any indemnification or contribution provisions contained in
this Agreement. A sufficient number of shares of the Company's
Common Stock have been duly reserved for issuance upon
exercise of the Class A Warrants, the Representative's
Warrants, and the Representatives Class A Warrants.
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(ix) Except as disclosed in the Registration Statement
and Prospectus, to the knowledge of legal counsel, the Company
is not in default under any of the contracts, licenses, leases
or agreements to which it is a party and which are described
in the Registration Statement or attached thereto as exhibits
and the offering of the Securities being sold by the Company
to the Underwriting Group will not cause the Company to become
in default of any of such contracts, licenses, leases or
agreements.
(x) Except as disclosed in the Registration Statement and
Prospectus, to the knowledge of legal counsel, the properties
owned by the Company and its subsidiaries, if any, described
in the Registration Statement are free and clear of all liens,
charges, encumbrances or restrictions; all of the leases,
subleases and other agreements known to such counsel under
which the Company and each of its subsidiaries, if any, holds
its properties and conducts its business are in full force and
effect; neither the Company nor any of its subsidiaries, if
any, is in default under any of the material terms or
provisions of any of such leases, subleases or other
agreements known to such counsel; and there are no claims
against the Company or any of its subsidiaries, if any,
concerning its rights under such leases, subleases and other
agreements and concerning its right to continued possession of
its properties.
(xi) Legal counsel is unaware of any promoter, affiliate,
parent or subsidiaries of the Company except as are described
in the Registration Statement and Prospectus.
(xii) To the knowledge of such counsel, the Company is
the owner of the exclusive worldwide license to make use, and
sell eye drop solutions contained in the Ocurest Delivery
System claimed in United States Patent Nos. 4,909,801 issued
March 20, 1990, and D320,083 issued September 17, 1991 ("U.S.
Patents") held by Acorn Laboratories, Inc. ("Acorn").
(xiii) To the knowledge of such counsel, the Company is
the owner of all rights to United States Trademark
Registration Nos. 1,903,891 and is the owner of the exclusive
worldwide license from Acorn to use United States Trademark
Registration 1,492,900 ("U.S. Trademarks") protecting the
shape of the Ocurest Delivery System and the name "Ocurest,"
respectively.
(xiv) Such counsel has not received and is not aware of
the Company having received any notice of any claim from any
third party which notice would cause such counsel to conclude
that the Company does not own or possess adequate rights with
respect to the U.S. Patents, the U.S. Trademarks, or other
material patents, patent rights, trademarks, service marks,
trade names, copyrights described or referred to in the
Prospectus as
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owned or used by the Company or which are necessary for the
conduct of the Company's business or proposed business as
described in the Prospectus.
(xv) To such counsel's knowledge, except as set forth in
the Registration Statement and Prospectus, no holders of
Common Stock or other securities of the Company have
registration rights with respect to securities of the Company
and, except as set forth in the Registration Statement and
Prospectus, all holders of securities of the Company having
rights to registration of such Common Stock, or other
securities, because of the filing of the Registration
Statement by the Company have, with respect to the offering
contemplated thereby, waived such rights or such rights have
expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement, or
have included securities in the Registration Statement
pursuant to the exercise of such rights.
In rendering such opinions, such legal counsel shall be
entitled to rely upon Public Authority Documents and upon information
provided by client officials in written Certificates provided that
copies of such Public Authority Documents and Certificates are attached
as exhibits to the written opinion of legal counsel. The term "Public
Authority Documents" shall have the meaning ascribed to it in the Legal
Opinion Accord of the ABA Section of Business Law (1991). Such opinions
may be subject to such qualifications, exceptions, definitions,
limitations as are normally included in similar opinions.
8.08.02. The Company shall furnish to the members of the
Underwriting Group an opinion, dated the Closing Date, addressed to the
members of the Underwriting Group, from ________________________ to the
effect that:
(i) To the knowledge of such counsel, the eye drop
products described in the Prospectus as being marketed by the
Company are in compliance with all laws applicable to the FDA,
all applicable rules and regulations of the FDA and all laws
and regulations of any states in which such products are
marketed.
(ii) Such counsel has not received and is not aware of
the Company having received any notice of any claim by the FDA
or any other governmental agency that the eye drop products
being marketed by the Company are not in compliance with all
applicable rules and regulations of the FDA and any laws and
regulations of any states in which such products are marketed.
In rendering such opinion, such legal counsel shall be
entitled to rely upon Public Authority Documents and upon information
provided by client officials in written Certificates provided that
copies of such Public Authority Documents and
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Certificates are attached as exhibits to the written opinion of legal
counsel. The term "Public Authority Documents" shall have the meaning
ascribed to it in the Legal Opinion Accord of the ABA Section of
Business Law (1991). Such opinions may be subject to such
qualifications, exceptions, definitions, limitations as are normally
included in similar opinions.
8.09. ACCOUNTANT'S LETTER. The Representative shall have received a
letter addressed to the Representative and dated the Closing Date from Grant
Thornton, independent public accountants for the Company, stating that with
respect to the Company they are independent public accountants within the
meaning of the Act and the applicable published Rules and Regulations
thereunder; in their opinion, the financial statements audited by them of the
Company at all dates and for all periods referred to in their opinion and
included in the Registration Statement and Prospectus, comply in all material
respects with the applicable accounting requirements of the Act and the
published Rules and Regulations thereunder with respect to registration
statements on Form SB-2; on the basis of certain indicated procedures (but not
an audit in accordance with generally accepted accounting principles), including
reading of the instruments of the Company set forth in the Prospectus, a reading
of the latest available interim unaudited financial statements of the Company,
whether or not appearing in the Prospectus, inquiries of the officers of the
Company or other persons responsible for its financial and accounting matters
regarding the specific items for which representations are requested below and a
reading of the minute book of the Company, nothing has come to their attention,
except as disclosed in their letter, which would cause them to believe that
during the period from the last audited balance sheet included in the
Registration Statement to a specified date not more than two days prior to the
date of such letter:
(i) there has been any material change in the financial
position of the Company other than as contemplated by
disclosures contained in the Prospectus;
(ii) there has been any material change in the capital
stock or surplus accounts of the Company or any payment or
declaration of any dividend or other distribution in respect
thereof or exchange therefor or in the debt of the Company
from that shown in the Company's last audited balance sheet
included in the Prospectus, other than as contemplated by
disclosures contained in the Prospectus;
(iii) there have been any material decreases in working
capital or net worth as compared with amounts shown in the
Company's last audited balance sheet included in the
Prospectus other than as contemplated by disclosures contained
in the Prospectus;
(iv) there have been any material decreases, as compared
with amounts shown in the Company's last audited balance sheet
included in the
- 36 -
<PAGE>
Prospectus, in the cash balances other than as contemplated
by disclosures contained in the Prospectus;
(v) the financial statements and schedules set forth in
the Registration Statement and Prospectus do not present
fairly the financial position and results of operations of the
Company for the periods indicated in conformity with generally
accepted accounting principles applied on a consistent basis,
and are not in all material respects a fair presentation of
the information purported to be shown; and
(vi) the dollar amounts, percentages and other financial
information set forth in the Registration Statement and
Prospectus under the captions "Prospectus Summary," "Risk
Factors," "Capitalization," "Dilution," "Use of Proceeds,"
"Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations,"
"Business," and "Certain Relationships and Transactions" are
not in agreement with the Company's general ledger, financial
records or computations made by the Company therefrom.
Such letter shall also cover such other matters incident to
the transactions contemplated by this Agreement in form satisfactory to the
Representative as the Representative reasonably requests.
8.10. CONFORMED COPIES OF ACCOUNTANT'S LETTER. The Representative
shall be furnished without charge, in addition to the original signed copies,
such number of signed or photostatic or conformed copies of such letters as the
Representative shall reasonably request.
8.11. OFFICER'S CERTIFICATES. The Company shall have furnished to the
Representative two certificates each signed by the president and by the chief
financial officer of the Company, one dated the date of this Agreement and one
dated as of the Closing Date, to the effect that:
(i) The representations and warranties of the Company in
this Agreement are true and correct at and as of the date of
the certificate and the Company has complied with all the
agreements and has satisfied all the conditions on its part to
be performed or satisfied at or prior to the date of the
certificate.
(ii) The Registration Statement has become effective and
no order suspending the effectiveness of the Registration
Statement has been issued and to the best of the knowledge of
the respective signers, after such respective signers have
made inquiry, no proceeding for that purpose has been
initiated or is threatened by the Commission.
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<PAGE>
(iii) The respective signers have each carefully examined
the Registration Statement and Prospectus and any amendments
and supplements thereto, and the Registration Statement and
the Prospectus and any amendments and supplements thereto
contain all statements required to be stated therein, and all
statements contained therein are true and correct, and neither
the Registration Statement nor Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading and, since the effective date of the Registration
Statement, there has occurred no event required to be set
forth in an amended or a supplemented Prospectus which has not
been so set forth.
(iv) This Agreement has been, and, as of the Closing
Date, the Representatives Warrants and the Representative's
Class A Warrants will have been, duly authorized and executed
by the Company.
(v) The respective signers have each reviewed the
questionnaires provided to the Representative by each officer,
director, and 5% shareholder of the Company and, to the best
of their knowledge, the statements made in such questionnaires
are true and correct.
(vi) Except as set forth in the Registration Statement
and Prospectus, since the respective dates as of which
information is given in the Registration Statement and
Prospectus and prior to the date of such certificate, (i)
there has not been any change in the officers or directors of
the Company or any substantially adverse change, financial or
otherwise, in the affairs or condition of the Company, and
(ii) the Company has not incurred any liabilities, direct or
contingent, or entered into any transactions, otherwise than
in the ordinary course of business.
(vii) Subsequent to the respective dates as of which
information is given in the Registration Statement and
Prospectus, no dividends or distributions whatever have been
declared and/or paid on or with respect to the securities of
the Company.
8.12. TENDER FOR DELIVERY. All of the Securities being offered by the
Company which have been sold in the offering shall be tendered for delivery in
accordance with the terms and provisions of this Agreement.
8.13. BLUE SKY QUALIFICATION. The Securities shall be qualified in
such states as are reasonably designated by the Representative as set forth in
Section 5.04 hereof and each such qualification shall be in effect and not
subject to any stop order or other proceeding on the Closing Date or Option
Closing Date. On both the effective date of the Registration
- 38 -
<PAGE>
Statement and on the Closing Date, the Company and the Representative shall
receive from ____________________________, written information which contains
the following:
(i) The names of the states in which applications to
register or qualify the Securities have been filed;
(ii) The status of such registrations or
qualifications in such states as of the date thereof;
(iii) A list containing the name of each such state in
which the Securities may be legally offered and sold by a
dealer licensed in such state and the number of each which may
be legally offered and sold in each such state as of the date
thereof;
(iv) With respect to the written information dated on the
effective date, a representation that such legal counsel will
continuously update such written information if any changes
occur in the information provided therein between the
effective date and the Closing Date and Option Closing Date;
and
(v) A statement that the Company, the members of the
Underwriting Group and selected dealers in the offering may
rely upon the information contained therein.
8.14. APPROVAL OF LEGAL COUNSEL TO THE REPRESENTATIVE. All opinions,
letters, certificates and evidence mentioned above or elsewhere in this
Agreement shall be deemed to be in compliance with the provisions hereof only if
they are in form and substance satisfactory to legal counsel to the
Representative. The suggested form of such documents shall be provided to the
legal counsel to the Representative at least three business days before the
Closing Date.
8.15. OFFICER'S CERTIFICATE AS A COMPANY REPRESENTATIVE. Any
certificate signed by an officer of the Company and delivered to the
Representative or to legal counsel to the members of the Underwriting Group will
be deemed a representation and warranty by the Company to the members of the
Underwriting Group as to the statements made therein.
SECTION 9
TERMINATION
9.01. TERMINATION BECAUSE OF NONCOMPLIANCE. This Agreement may be
terminated by the members of the Underwriting Group by notice to the Company in
the event that the Company shall have failed or been unable to comply with any
of the terms, conditions or provisions of this Agreement on the part of the
Company to be performed, complied with or fulfilled within the respective times
herein provided for, unless
- 39 -
<PAGE>
compliance therewith or performance or satisfaction thereof shall have been
expressly waived by the Representative in writing. This Agreement may be
terminated by the Company by notice to the Representative in the event the
members of the Underwriting Group shall have failed or been unable to comply
with any of the terms, conditions or provisions of this Agreement on the part of
the members of the Underwriting Group to be performed, complied with or
fulfilled within the respective times herein provided for, unless compliance
therewith or performance or satisfaction thereof shall have been expressly
waived by the Company in writing.
9.02. TERMINATION BECAUSE OF CHANGES. This Agreement may be
terminated by the members of the Underwriting Group by notice to the Company if
the Representative believes in its sole judgment that any changes have occurred
in or with respect to the management of the Company, that material adverse
changes have occurred in or with respect to the condition or obligations of the
Company, or if the Company shall have sustained a loss or anticipated loss as a
result of a strike, governmental action, fire, flood, accident, contract
termination, or other calamity of such a character as, in the sole judgment of
the Representative, may interfere materially with the conduct of the Company's
business and operations regardless of whether or not such loss or anticipated
loss shall have been insured.
9.03. MARKET OUT TERMINATION. This Agreement may be terminated by the
members of the Underwriting Group by notice to the Company at any time if, in
the judgment of the Representative, payment for and delivery of the Securities
is rendered impracticable or inadvisable because (i) additional material
governmental restrictions not in force and effect on the date hereof shall have
been imposed upon the trading in securities generally, or minimum or maximum
prices shall have been generally established on the New York or American Stock
Exchange, or trading in securities generally on either such Exchange shall have
been suspended, or a general moratorium shall have been established by federal
or state authorities, or (ii) a war or other national calamity or emergency
shall have occurred, or (iii) of any suspension of trading of the Common Stock
of the Company in the over the counter market, or (iv) the occurrence of a
material adverse event affecting the Company which materially impairs the
investment quality of the securities offered, or (v) substantial and material
adverse changes in the condition of the securities markets beyond normal
fluctuations have occurred.
9.04. EFFECT OF TERMINATION HEREUNDER. If the members of the
Underwriting Group decide to terminate this Agreement pursuant to this Section 9
or the Company decides to terminate this Agreement pursuant to Section 10
hereof, such party shall provide notice of such determination to the other
party. In such event, the Representative shall provide the Company with a
statement of the Underwriting Group's actual accountable out of pocket expenses,
which shall include but are not limited to, fees of legal counsel to the members
of the Underwriting Group and the fees of independent consultants who are not
directly or indirectly affiliated or associated with a member of the NASD and
who are retained by the Underwriting Group to provide a service in connection
with the due
- 40 -
<PAGE>
diligence investigation of the proposed offering, entertainment expenses, travel
expenses, postage expenses, advertising costs, duplication expenses, long
distance telephone expenses, and any other actual out of pocket accountable
expense incurred by the Underwriting Group in connection with the proposed
offering. The Representative shall not be required to include in such
accountable expenses any of the expenses to be paid by the Company under Section
5.07 hereof, and, if the Underwriting Group has paid any of such expenses on
behalf of the Company, the Company shall separately reimburse the Underwriting
Group for such advances immediately upon receipt of a statement therefor from
the Representative. If such actual accountable out of pocket expenses are more
than the amount of the nonaccountable expense payments the Company has made to
the Underwriting Group, the Underwriting Group will be entitled to keep the
amount of the nonaccountable expense payments the Company has made to the
Underwriting Group and, within 10 days after receipt by the Company of such
statement, the Company will pay to the Representative the excess expenses the
Underwriting Group has incurred, but if the actual accountable out of pocket
expenses are less than the amount of nonaccountable expense payments the
Underwriting Group has received from the Company, the Underwriting Group will
return the difference to the Company. The Company, the members of the
Underwriting Group, and the Selling Shareholders shall not have any liabilities
to each other if the Company or the members of the Underwriting Group decide not
to proceed with the proposed offering for any reason set forth in this Section 9
or in Section 10 hereof, except that the Company shall remain obligated to pay
the costs and expenses provided to be paid by it as specified in Sections 5.07
and 9.04 hereof; and the Company, and the members of the Underwriting Group
shall be obligated to pay, respectively, all losses, claims, damages or
liabilities, joint or several, under Section 6 hereof.
SECTION 10
REPRESENTATIONS AND WARRANTIES OF
THE MEMBERS OF THE UNDERWRITING GROUP
The members of the Underwriting Group represent and warrant to and
agree with the Company that:
10.01. REGISTRATION AS BROKER DEALER AND MEMBER OF NASD. The members
of the Underwriting Group are registered as broker dealers with the Commission
and are members in good standing of the NASD and are licensed as a dealer in all
states in which they will sell the Securities.
10.02. NO PENDING PROCEEDINGS. There is not now pending against the
Representative any action or proceeding of which it has been advised, either in
any court of competent jurisdiction, before the Commission or any state
securities commission, concerning its activities as a broker or dealer that, in
the opinion of the Representative, would prevent it from acting as such under
federal securities laws or under the laws of the states in which it intends to
offer the Securities.
- 41 -
<PAGE>
10.03. COMPANY'S RIGHT TO TERMINATE. In the event any action or
proceeding of the type referred to in Section 10.02 above shall be instituted
against the Representative at any time prior to the Closing Date hereunder, or
in the event there shall be filed by or against the Representative in any court
pursuant to any federal, state, local or municipal statute, a petition in
bankruptcy or insolvency or for reorganization or for the appointment of a
receiver or trustee of assets of the Representative or if the Representative
makes an assignment for the benefit of creditors, the Company shall have the
right on written notice to the Representative to terminate this Agreement
without any liability to the members of the Underwriting Group of any kind
except for the payment of expenses as provided in Section 5.07 hereof.
10.4. FINDER. The members of the Underwriting Group know of no
outstanding claims against them for compensation for services in the nature of a
finder's fee, origination fee or financial consulting fee with respect to the
offer and sale of the Securities hereunder.
10.5 COMPLIANCE. The members of the Underwriting Group, severally and
not jointly, agree to offer and sell the Securities being purchased hereunder in
accordance with the requirements of federal and state securities laws and the
rules of the NASD.
SECTION 11
RIGHT OF FIRST REFUSAL
For a period of three years after the effective date of the
Registration Statement, the Representative shall have a preferential right to
purchase for its account or to sell for any account of the Company, its parent
company, if any, or the Company's subsidiaries, if any, any securities with
respect to which the Company, its parent company, or its subsidiaries may seek a
public or private offering within the United States for cash. The Company will
consult the Representative with regard to any such covered offering for cash and
will offer the Representative the opportunity to purchase or sell any such
securities on terms not less favorable to the Company, its parent company, or
its subsidiaries than it or they can secure elsewhere. The Representative will
have 30 days in which to accept such offer. If the Representative rejects such
offer, the Company, its parent company, or its subsidiaries may sell such
securities on terms not less favorable than those offered to the Representative.
If such securities are not sold within a period of 180 days, the Representative
will once again have the rights specified herein with respect to the sale or
purchase of such securities. The Company has informed the Representative that it
has not previously granted a similar right of first refusal to any other person.
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<PAGE>
SECTION 12
FEE PAYABLE ON OCCURRENCE OF CERTAIN EVENTS
12.01 MERGERS AND ACQUISITIONS. Subject to the purchase of the Firm
Securities by the members of the Underwriting Group, for a period of five years
after the effective date, the Representative will provide consulting services
which are customary in the industry in connection with, and the Representative
will be paid a consulting fee in connection with any transaction initiated by
the Representative involving, a merger, consolidation, stock exchange, or the
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 its
subsidiaries. A transaction will be deemed initiated by the Representative if it
is suggested by the Representative to either party to the transaction. The
consulting fee will be computed as follows:
==========================================================
AMOUNT OF TRANSACTION FEE
- ----------------------------------------------------------
$1.00 - $1,000,000 5% plus
$1,000,001 - $2,000,000 4% plus
$2,000,001 - $3,000,000 3% plus
$3,000,001 - $4,000,000 2% plus
$4,000,001 and over 1%
==========================================================
Amount of the transaction includes:
(i) the total proceeds and other consideration being
received by the Company, its parent company, or its
subsidiaries and/or any of their stockholders upon the
consummation of the transaction (including payments made in
installments) inclusive of cash, securities, notes,
liabilities assumed, consulting agreements and agreements not
to compete;
(ii) if a portion of such consideration includes
contingent payments (whether or not related to future earnings
or operations), 50% of the maximum amount of such payments;
and
(iii) in the event that the aggregate consideration for a
transaction consists in whole or in part of securities, for
the purposes of calculating the amount of the consideration,
the value of such securities will be, in the case of the
existence of a public trading market thereof, the average of
the closing sale prices for the five days preceding the
consummation of the transaction or, in the absence of a public
trading market thereof, the fair market value
- 43 -
<PAGE>
thereof as agreed to by the parties on the day preceding the
consummation of the transaction.
If the Company, its parent company, or any of its subsidiaries
proposes to engage in any such type of transaction which was 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, its parent company, or such Subsidiary shall
provide the Representative with the first opportunity to provide consulting
services which are customary in the industry in connection therewith. If the
Representative accepts such offer, the fee for such services shall be determined
by using 50% of the full 5% to 1% scale set forth above.
12.02 WARRANT EXERCISE FEE. If the Representative provides written
notice to the Company, at any time after 12 months from the effective date of
the Registration Statement, that the Representative is electing to solicit the
exercise of the Class A Warrants by the holders thereof, the Company will pay to
the Representative a fee of 10% of the aggregate exercise price received by the
Company as a result of the Representatives's solicitation of such holders, if
(i) the market price of the Company's Common Stock on the date a Class A Warrant
is exercised is greater than the exercise price under the Class A Warrants, (ii)
the Class A Warrant is not held in a discretionary account, and (iii) the
solicitation of the exercise of the Class A Warrant is not in violation of Rule
10b-6 promulgated under the Exchange Act.
SECTION 13
NOTICE
Except as otherwise expressly provided in this Agreement:
13.01. NOTICE TO THE COMPANY. Whenever notice is required by the
provisions of this Agreement to be given to the Company or the Selling
Shareholders, such notice shall be in writing addressed as follows:
Ocurest Laboratories, Inc.
4400 PGA Boulevard, Suite 300
Palm Beach Gardens, Florida 33410
13.02. NOTICES. Whenever notice is required by the provisions of this
Agreement to be given to the members of the Underwriting Group, such notice
shall be given in writing addressed to the Representative at the address set out
at the beginning of this Agreement.
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<PAGE>
SECTION 14
MISCELLANEOUS
14.01. BENEFIT. This Agreement is made solely for the benefit of the
members of the Underwriting Group, the Company, their respective officers and
directors and any controlling person referred to in Section 15 of the Act, and
their respective successors and assigns and the Selling Shareholders, and no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successor" or the term "successors and assigns" as used in
this Agreement shall not include any purchasers, as such, of any of the
Securities. In addition, the indemnity, defense and contribution obligations of
the Company included in Section 6 of this Agreement also inure to the benefit of
the selected dealers and any person who controls the selected dealers within the
meaning of Section 15 of the Act.
14.02. SURVIVAL. The respective indemnities, agreements,
representations, warranties, covenants and other statements as set forth in or
made pursuant to this Agreement and the indemnity and contribution agreements
contained in Section 6 hereof shall survive and remain in full force and effect,
regardless of (i) any investigation made by or on behalf of the Company, or the
members of the Underwriting Group or any such officer or director thereof or any
controlling person of the Company or of any member of the Underwriting Group,
(ii) delivery of or payment for the Securities, and (iii) the occurrence of
Closing Date and the Option Closing Date; and any successor of the Company, any
member of the Underwriting Group or any controlling person, officer or director
thereof, and any Selling Shareholder, as the case may be, shall be entitled to
the benefits hereof.
14.03. GOVERNING LAW. The validity, interpretation and construction
of this Agreement and of each part hereof will be governed by the laws of the
state of Colorado.
14.04. THE INFORMATION OF THE MEMBERS OF THE UNDERWRITING GROUP.
Notwithstanding any participation by the legal counsel of the members of the
Underwriting Group in the reorganization and/or revision of the Prospectus, the
statements with respect to the public offering of the Securities on the cover
page of the Prospectus and the Notes thereto and under the caption
"Underwriting" in the Prospectus constitute the only written information
furnished by or on behalf of the members of the Underwriting Group referred to
in Sections 2.02, 6.01 and 6.02 hereof.
14.05. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be deemed an original and all of which together
will constitute one and the same instrument.
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<PAGE>
Please confirm that the foregoing correctly sets forth the Agreement
between the members of the Underwriting Group and the Company.
Very truly yours,
OCUREST LABORATORIES, INC.
By:
----------------------------------------------------
EDMUND G. VIMOND, JR., PRESIDENT AND CHIEF EXECUTIVE
OFFICER
LARRY REID, SECRETARY
THE SELLING SHAREHOLDERS NAMED ON
SCHEDULE II
By:
----------------------------------------------------
_________________________________, Attorney-in-Fact
THE REPRESENTATIVE, ON BEHALF OF THE UNDERWRITING GROUP, HEREBY CONFIRMS AS
OF THE DATE HEREOF THAT THE ABOVE LETTER SETS FORTH THE AGREEMENT BETWEEN THE
COMPANY AND THE UNDERWRITING GROUP.
RAF FINANCIAL CORPORATION
By:
Robert L. Long, Senior Vice President of RAF
Financial Corporation, as Attorney in
Fact for the several Underwriters named
in Schedule I to the Underwriting
Agreement
- 46 -
<PAGE>
SCHEDULE I
UNDERWRITERS
NUMBER OF
NUMBER OF SHARES OF CLASS A WARRANTS
UNDERWRITER COMMON STOCK PURCHASED TO BE PURCHASED
- --------------------------------------------------------------------------------
RAF Financial Corporation
Total _____________ _____________
- 47 -
<PAGE>
SCHEDULE II
SELLING SHAREHOLDERS
NAME NUMBER OF SHARES
- ---- ----------------
- 48 -
EXHIBIT 3.2
FILED
1991 MAY 23 AM 8:20
SECRETARY OF STATE
TALLAHASSEE, FLORIDA
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF OCUREST LABORATORIES, INC.
1. Pursuant to the provisions of Section 607.1006, Florida Statutes,
Article V, Section 1 of the Articles of Incorporation of Ocurest Laboratories,
Inc. is hereby amended to read as follows:
"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 Sixteen Million (16,0OO,OOO)
shares, consisting of Eleven Million (11,000,000) shares of Common Stock, par
value $.0O1 per share ("Common Stock"), and Five Million (5,000,000) shares of
Preferred Stock, par value $.001 per share (the "Preferred stocks ) . "
2. The foregoing amendment was duly adopted by the unanimous written
consent of the shareholders and directors on May 17, 1991.
IN WITNESS WHEREOF, the undersigned Vice President of this corporation
has executed these Articles of Amendment this 20TH day of May, 1991.
Ocurest Laboratories, Inc.,
a Florida corporation
/s/ LARRY M. REID
-----------------------------
Larry M. Reid
Vice President
EXHIBIT 3.5
STATE OF FLORIDA
[SYMBOL]
IN GOD WE TRUST
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Artices of Amendment,
filed on August 9, 1996, to Articles of Incorporation for OCUREST LABORATORIES,
INC., a Florida corporation, as shown by the records of this office.
The doucment number of this corporation is S49868.
GIVEN UNDER MY HAND AND THE
GREAT SEAL OF THE STATE OF FLORIDA,
TALLAHASSEE, THE CAPITAL, THIS THE
NINTH DAY OF AUGUST, 1996
GREAT SEAL OF THE
STATE OF FLORIDA,
/s/ SANDRA B. MORTHAM
-------------------------
IN GOD WE TRUST Sandra B. Mortham
CR2E022 (1095) Secretary of State
<PAGE>
ARTICLES OF AMENDMENT
TO THE
TO THE ARTICLES OF INCORPORATION
OF
OF OCUREST LABORATORIES, INC.
- --------------------------------------------------------------------------------
1. The name of the corporation is Ocurest Laboratories, Inc.
2. The authorization for the corporation's Series A, 9% Cumulative
Convertible Preferred Stock is hereby deleted.
3. This amendment was duly adopted by the Board of Directors on
August 7, 1996. Shareholder action is not required pursuant to the provisions
of Section 607.1002(5) of the Florida Business Corporation Act.
IN WITNESS WHEREOF, the undersigned President and a director of the
corporation has executed these Articles of Amendment on the 7TH day of August,
1996.
/s/ EDMUND G. VIMOND, JR.
-----------------------------
Edmund G. Vimond, Jr., Director and President
EXHIBIT 3.6
STATEMENT OF DESIGNATION
OF
THE SERIES A, 9% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
+ OCUREST LABORATORIES, INC.
PURSUANT TO SECTION 607.0602 OF THE BUSINESS CORPORATION ACT OF THE
STATE OF FLORIDA, OCUREST LABORATORIES, INC., a Florida corporation (the
"Corporation"), certifies as follows:
FIRST: The Board of Directors of the Corporation under the authority
contained in Article V of the Articles of FILED Incorporation of the Corporation
and the resolutions ILLEGIBLE duly adopted by the Board of Directors of the
Corporation as of April 30, 1991, have designated 2,500,000 shares SECRETARY OF
STATE of the authorized but unissued shares of Preferred Stock TALLAHASSEE,
FLORIDA of the Corporation, par value $.001 per share, as shares of "Series A 9%
Cumulative Convertible Preferred Stock".
SECOND: The following resolution was duly adopted by the Board of
Directors as of April 30, 1991 and such resolution has not been modified and is
in full force and effect on the date hereof;
RESOLVED, that the Board of Directors hereby creates, from the
authorized but unissued shares of preferred stock, par value $.001 per share, of
the Corporation (hereinafter the "Preferred Stock"), a series of Preferred Stock
to consist of 2,500,000 shares, and hereby fixes the voting powers, designation,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof, of the shares of such
series, in addition to those set forth in the Articles of Incorporation, as
follows:
(a) DESIGNATION. The designation of the series of stock created by this
resolution shall be "Series A, 9% Cumulative Convertible Preferred
Stock" (the "Series A Preferred Stock") and the number of shares
constituting the Series A Preferred Stock shall be 2,500,000 shares.
The number of authorized shares of the Series A Preferred Stock may be
increased (but not above the total number of authorized shares of
Preferred Stock) or decreased (but not below the number of shares then
outstanding) by further resolution duly adopted by the Board of
Directors and by the filing of a certificate pursuant to the provisions
of the Business Corporation Act of the State of Florida stating that
such an increase or decrease has been so authorized.
<PAGE>
(b) DIVIDENDS.
(1) The annual rate of dividends on shares of the Series A Preferred
Stock shall be $.09 per share (the "Dividend Rate"), which is 9% of the
stated value of $1.00 of a share of Series A Preferred Stock. Such
dividends shall be payable in cash in equal guarterly payments (as
nearly as reasonably may be possible) for each full quarterly dividend
period. Dividends payable on the Series A Preferred Stock for any
period more than or less than a full quarterly dividend period shall be
computed on the basis of a 360-day year consisting of twelve 30-day
months. Dividends shall be cumulative and begin to accrue on each share
of the Series A Preferred Stock commencing on the date of issuance, and
shall be payable, out of funds legally available for the payment of
dividends, when, as and if declared by the Board of Directors, on
January 1, April 1, July 1 and October 1 of each year (each such date
being called a "Dividend Payment Date") with respect to the period
ending on the day immediately preceding the Dividend Payment Date,
commencing on the first such date after the date dividends begin to
accrue. Each such dividend shall be paid to the holders of record of
shares of the Series A Preferred Stock as they appear on the stock
books of the Corporation on the close of business on the date specified
by the Board of Directors of the Corporation or a duly authorized
committee thereof at the time such dividend is declared; provided,
however, that such date shall not be more than 60 nor less than 10 days
preceding the payment date thereof. Accumulated but unpaid dividends
for any past quarterly dividend periods shall be fully cumulative and
shall accrue, without interest, and may be declared and paid at any
time, without reference to any regular Dividend Payment Date, to
holders of record on the close of business on the date specified by the
Board of Directors of the Corporation or a duly authorized committee
thereof at the time such dividend is declared; provided, however, that
such date shall not be more than 60 nor less than 10 days preceding the
payment date thereof.
(2) If at any time the Corporation shall have failed to pay all
dividends which have accrued on any outstanding shares of any Preferred
Stock ranking as to dividends prior to the Series A Preferred Stock at
the times such dividends are payable, no dividend shall be declared by
the Board of Directors or paid or set apart for payment by the
Corporation on shares of the Series A Preferred Stock unless prior to
or
2
<PAGE>
concurrently with such declaration, payment or setting apart for
payment, all accrued and unpaid dividends on all outstanding shares of
such Preferred Stock ranking prior to the Series A Preferred Stock
shall have been or contemporaneously are declared and paid (or declared
and a cash sum sufficient for the payment thereof set apart for such
payment), without interest. Any dividend with respect to the Series A
Preferred Stock not paid pursuant to this Subparagraph (b)(2) shall be
fully cumulative and shall accrue (whether or not declared), without
interest.
(3) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends shall, for any period, be declared, paid or
set apart for payment on the Preferred Stock of any class or series
ranking, as to dividends, junior to the Series A Preferred Stock, and
no such Preferred Stock of any such class or series ranking, as to
dividends, junior to the Series A Preferred Stock shall be redeemed,
purchased or otherwise acquired by the Corporation for any
consideration (except by conversion into or exchange for capital stock
of the Corporation ranking junior to the Series A Preferred Stock as to
dividends and liquidation rights) unless full cumulative dividends have
been or contemporaneously are declared and paid in cash (or declared
and a cash sum sufficient for the payment thereof set apart for such
payment), on the Series A Preferred Stock for all dividend payment
periods terminating on or prior to the date of payment of such
dividends. When dividends are not paid in full upon the shares of the
Series A Preferred Stock and other Preferred Stock ranking on a parity
as to dividends with the Series A Preferred Stock, all dividends
declared upon shares of the Series A Preferred Stock and such other
Preferred Stock shall be declared pro rata so that the amount of
dividends declared per share on the series A Preferred Stock and such
other Preferred Stock shall in all cases bear to each other the same
ratio that dividends per share on the shares of the Series A Preferred
Stock and such other Preferred Stock ranking on a parity with the
Series A Preferred Stock as to dividends bear to each other. Except as
provided in the preceding sentence, unless full cumulative dividends
have been paid (or declared anc a cash sum sufficient for the payment
thereof set apart for such payment) on the Series A Preferred Stock for
ail dividend paymenc periods terminating on or prior to the date of
payment of such dividends, so long as any shares of Series A Preferred
Stock are outstanding, no dividends or distributions (other than a
dividend or distributicn in the form of
3
<PAGE>
Common Stock or any other capital stock of the Corporation ranking
junior to the Series A Preferred Stock as to dividends and liquidation
rights) shall be declared or paid or set aside for payment or other
distribution made upon the Common Stock of the Corporation or any other
stock of the Corporation ranking junior to or on a parity with the
Series A Preferred Stock as to dividends or liquidation rights, and no
Common Stock or any other capital stock of the Corporation ranking
junior to or on a parity with the Series A Preferred Stock as to
dividends or liquidation rights shall be redeemed, purchased or
otherwise acquired for any consideration by the Corporation (except by
conversion of or exchange for capital stock of the Corporation ranking
junior to the Series A Preferred Stock as to dividends and liquidation
rights). "Common Stock", as used in this resolution, shall mean shares
of any class of the Corporation's capital stock which is not preferred
and limited as to dividends. The foregoing restriction on redemption,
purchas~ or acquisition of Common Stock or any other capital stock of
the Corporation ranking junior to oron a parity with the Series A
Preferred Stock shall be inapplicable to (a) any payments in lieu of
isslance of fractional shares thereof whether upon any merger,
conversion, stock dividend or otherwise; (b) the acquisition of any
shares of Common Stock or other capital stock of the Corporation in
connection with the settlement of disputes arising out of acquisitions
by the Corporation pursuant to which such stock was issued; and (c) the
rescission of any acquisition or disposition by the Corporation
pursuant to which such stock was issued. Holders of shares of the
Series A Preferred Stock shall not be entitled to any dividend in
excess of full cumulative dividends, as herein provided, on the series
A Preferred Stock, and no dividend shall be paid on the Series A
Preferred Stock other than in cash. No interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment
or payments on the Series A Preferred Stock, whether or not accumulated
and unpaid.
(4) Notwithstanding the foregoing provisions of this Paragraph (b),
dividends on the Series A Preferred Stock may not be declared, paid or
set apart if (i) the Corporation is insolvent or would be rendered
insolvent thereby, (ii) such payment would be in violation of any laws,
rules or regulations applicable to the Corporation or (iii) at such
time as the terms and provisions of any agreement of the Corporation,
including any agreement relating to its indebtedness,
4
<PAGE>
specifically prohibits such declaration, payment or setting apart for
payment or provides that such declaration, payment or setting apart for
payment would constitute a violation or breach thereof or a default
thereunder; provided, however, that nothing herein contained shall in
any way or under any circumstance be construed or deemed to require the
Board of Directors to declare or the Corporation to pay or set apart
for payment any dividends on shares of the Series A Preferred Stock at
any time except to the extent expressly required hereunder, whether
permitted by any of such agreements or not.
(c) REDEMPTION BY THE CORPORATION.
(1) Commencing January 1, 1994 the shares of the Series A Preferred
Stock may be redeemed at any time at the option of the Corporation,
either in whole or from time to time in part, at a redemption price
equal to $1.00 per share, payable in cash, together with accrued and
unpaid dividends through the Optional Redemption Date (as hereinafter
defined). The Corporation shall have no obligation to establish a
sinking fund for the redemption of the Series A Preferred Stock.
(2) Notice of any redemption of shares of the Series A Preferred Stock,
specifying the date (the "Optional Redemption Date") and place of
redemption, shall be mailed to each holder of record of the shares to
be redeemed, at such holder's address of record, not more than 60 days
nor less than 20 days prior to any Optiona1 Redemption Date; if less
than all the shares owned by such stockholder are then to be redeemed,
the notice shall also specify the number of shares thereof which are to
be redeemed and the numbers of the certificates representing such
shares. A holder's election to exercise conversion rights provided by
and subject to paragraph (g) herein shall take precedence over and
supersede the Corporation's right of redemption if the conversion right
is exercised on or prior to the Optional Redemption Date.
(3) Notwithstanding the foregoing provisions of Subparagraph (c)(1)
above, unless full cumulative dividends on all outstanding shares of
the Series A Preferred Stock shall have been paid or contemporaneously
are declared and paid for all past dividend periods, none of the shares
of the Series A Preferred Stock shall be redeemed pursuant to Paragraph
(1) above unless all outstanding shares of the Series A Preferred Stock
are simultaneously redeemed.
5
<PAGE>
(4) Unless the Corporation defaults in the payment in full of the
redemption price and any accrued and unpaid dividends from and after
the Optional Redemption Date, (a) dividends on the shares called for
redemption shall cease to accrue on the Optional Redemption Date; (b)
all rights of the holders of such shares as stockholders of the
Corporation by reason of the ownership of such shares shall cease on
the Optional Redemption Date, except the right to receive the amount
payable upon redemption of such shares, on presentation and surrender
of the respective certificates representing such shares; and (c) such
shares shall not after the Optional Redemption Date be deemed to be
outstanding. In case less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares without cost to the holder thereof
upon relinquishment of the original certificate(s).
(5) At its option, the Corporation may, on or prior to the Optional
Redemption Date, deposit the aggregate amount payable upon redemption
of the shares to be redeemed with a bank or trust company located in
Palm Beach County, Florida (the "Depository") designated by the Board
of Directors, to be held in trust by the Depository for payment to the
holders of the shares then to be redeemed. If such deposit is made and
the funds so deposited are made immediately available to the holders of
the shares to be redeemed, the Corporation shall thereupon be released
and discharged from any obligation to make payment of the amount
payable upon redemption of the shares to be redeemed, and the holders
of such shares shall look only ro the Depository for such payment.
(6) Any funds deposited with the Depository as aforesaid with respect
to the shares of the Series A Preferred Stock redeemed pursuant to this
Paragraph (c) prior to the close of business on the Optional Redemption
Date, and remaining unclaimed at the end of two years from and after
the Optional Redemption Date in respect of which such funds were
deposited, shall be returned to the Corporation forthwith; thereafter,
the holders of shares of the Series A Preferred Stock redeemed on such
Optional Redemption Date shall look only to the Corporation for the
payment of the redemption price thereof and any accrued and unpaid
dividends thereon. Any interest accrued on any funds deposited with the
Depository shall belong to the Corporation and shall be paid to it from
time to time on demand.
6
<PAGE>
(7) Any shares of the Series A Preferred Stock which shall at any time
have been redeemed shall, after such redemption, be automatically
retired and shall, after any necessary filing has been made with the
Secretary of State of the State of Florida, have the status of
authorized but unissued shares of Preferred Stock, without designation
as to class or series until such shares are once more designated as
part of a particular class or series by the Board of Directors.
(8) If less than all of the outstanding shares of the Series A
Preferred Stock are to be redeemed, the Corporation shall select the
shares to be redeemed as nearly pro rata as practicable or by lot, at
the discretion of the Board of Directors. The Corporation shall make
the selection from the shares outstanding, not previously called for
redemption.
(9) Notwithstanding the foregoing provisions of this Paragraph (c), the
shares of the Series A Preferred Stock may not be redeemed in whole or
in part if (i) the Corporation is insolvent or would be rendered
insolvent thereby, (ii) such payment would be in violation of any laws,
rules or regulations applicable to the Corporation or (iii) at such
time as the terms and provisions of any agreement of the Corporation,
including any agreement relating to its indebtedness, specifically
prohibits such redemption or provides that such redemption would
constitute a violation or breach thereof or a default thereunder
(collectively, the "Redemption Restrictions"); provided, however, that
nothing herein contained shall in any way or under any circumstance be
construed or deemed to require the Corporation to redeem the Series A
Preferred Stock at any time except to the extent expressly required
hereunder, whecher permitted by any such agreements or not.
(d) VOTING RIGHTS.
(1) Except as otherwise required by law and in Subparagraph (d)(2)
below, the holders of the Series A Preferred Stock shall not be
entitled to vote on any of the Corporation's matters.
(2) So long as any shares of the Series A Preferred Stock remain
outstanding, the Corporation shall not, without obtaining the
affirmative vote at a meeting or the written consent without a meeting
(to the extent permitted by the Florida Business Corporation Act and
the Corporation's Articles of Incorporation), of the
7
<PAGE>
holders of at least a majority in number of shares of the Series A
Preferred Stock then outstanding, voting or consenting (as the case may
be) separately as a class, (a) adopt any amendment to its Articles of
Incorporation which would alter or change the powers, preferences or
special rights of the Series A Preferred Stock so as to affect them
adversely, or (b) create, authorize or issue any other class or series
of capital stock of the Corporation, the terms of which shall
specifically provide that such class or series shall rank prior to the
Series A Preferred Stock in respect to dividend rights or rights upon
dissolution, liquidation or winding up of the Corporation; provided,
however, that, the prior clause notwithstanding, the Corporation may
issue, without the consent of the holders of the Series A Preferred
Stock, other series of Preferred Stock which rank on parity with or
junior to the Series A Preferred Stock in respect to dividend rights
and on dissolution, liquidation or winding up of the Corporation.
(e) LIQUIDATION RIQHTS.
(1) Subject to the rights of creditors and holders of stock ranking
prior to the shares of the Series A Preferred Stock, upon the
dissolution, liquidation or winding up of the Corporation, the holders
of shares of the Series A Preferred Stock shall be entitled to receive
and to be paid out of the assets of the Corporation available for
distribution to its stockholders, before any payment or distribution
shall be made on any class or series of Common Stock or any series of
Preferred Stock which rank junior to the Series A Preferred Stock in
respect of dividend rights or on dissolution, liquidation or winding up
of the Corporation, the amount of $1.00 in cash full share, plus an
amount in cash equal to all accrued but unpaid dividends thereon to the
date of final distribution, less any amount previously distributed on
such share in connection with any such dissolution, liquidation or
winding up of the affairs of the Corporation.
(2) None of (A) the sale, transfer or lease of all or substantially all
the property or business of the Corporation, (B) the merger or
consolidation of the Corporation into or with any other corporation,
(C) the merger or consolidation of any other corporation into or with
the Corporation, or (D) any dissolution, liquidation, winding up or
reorganization of the Corporation immediately followed, in the case of
(D) above, by reincorporation of another corporation
8
<PAGE>
succeeding to the business and obligations of the Corporation, shall be
deemed to be a dissolution, liquidation or winding up, voluntary or
involuntary, for the purposes of this Paragraph (e).
(3) After the payment to the holders of shares of the Series A
Preferred Stock of the full preferential amounts provided for in this
Paragraph (e), the holders of the Series A Preferred Stock as such
shall have no right or claim to any of the remaining assets of the
Corporation.
(4) In the event the assets of the Corporation available for
distribution to the holders of shares of the Series A Preferred Stock
upon any dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, shall be insufficient to pay in full
all amounts to which such holders are entitled pursuant to this
Paragraph (e), no such distribution shall he made on account of any
shares of any other class or series of capital stock of the Corporation
ranking on a parity with the shares of the Series A Preferred Stock
upon such dissolution, liquidation or winding up unless proportionate
distributive amounts shall te paid on account of each share of the
Series A Preferred Stock, ratably, in proportion to the full
distributable amounts for which holders of all such parity shares,
including other shares of Series A Preferred Stock, are respectively
entitled upon such dissolution, liquidation or winding up.
(f) RANKING. For purposes of this resolution, any capital stock of any
class or series of the Corporation shall be deemed to rank:
(1) Prior to shares of the Series A Preferred Stock, either as to
dividends or upon liquidation, if the holders of such stock shall be
entitled to the receipt of dividends, or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case
may be, in preference or priority to the holders of shares of the
Series A Preferred Stock;
(2) On a parity with shares of the Series A Preferred Stock, either as,
to dividends or upon liquidation, whether or not the dividend rates,
dividend payment dates or redemption or liquidation prices per share,
be different from those of the Series A Preferred Stock, if the holders
of such capital stock shall be entitled to the receipt of dividends or
of amounts distributable upon dissolution, liquidation or winding
9
<PAGE>
up of the Corporation, as the case may be, in proportion to their
respective dividend rates or liquidation prices, without preference or
priority, one over the other, as between the holders of such capital
stock and the holders of shares of the Series A Preferred Stock; and
(3) Junior to shares of the Series A Preferred Stock, either as to
dividends or upon liquidation, if such capital stock shall be any class
or series of Common Stock or if the holders of shares of the Series A
Preferred Stock shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the
holders of shares of such class or series .
(g) CONVERSION. Each share of the Series A Preferred Stock shall be
convertible at any time into, at the option of the holder thereof, fully paid
and non-assessable shares of Common Stock at the conversion price, determined as
hereinafter provided in effect at the time of conversion.
(1) The price at which shares of the Common Stock shall be delivered
upon conversion of shares of the Series A Preferred Stock (for purposes
of this Subsection (g), the "Conversion Price") shall be $2.50 per
share. The number of shares of Common Stock issuable upon conversion of
a share of Series A Preferred Stock is determined by dividing the
stated value of $1.00 per share of Series A Preferred Stock plus, at
the option of the holder, any accumulated but unpaid (but no accrued
and undeclared) dividends with respect thereto, by the Conversion Price
in effect on the Conversion Date (as defined in Paragraph (g)(2)
below). The Conversion Price shall be subject to adjustment as provided
below. To the extent permitted by law, at the time of each conversion
of any of the Series A Preferred Stock, the Corporation shall pay in
cash all accumulated and unpaid dividends on the shares surrendered for
conversion which the holder does not elect to convert into shares of
Common Stock, as well as all dividends which have accrued but have not
been declared at the time of conversion. If a holder converts more than
one share at the same time, the number of full shares issuable upon the
conversion shall be based upon the total number of shares converted. No
fractional shares of Common Stock or scrip representing fractional
shares of Common Stock shall be issued upon any conversion of the
Series A Preferred Stock, but, in lieu thereof, there shall be
10
<PAGE>
paid an amount in cash equal to the Current Market Price (as defined in
Subparagraph (g)(3)(E) below) of such fractional shares of Common Stock
on the business day preceding the Conversion Date.
(2) In order to convert shares of the Series A Preferred Stock into
shares of Common Stock, the holder thereof shall surrender at the
office of any transfer agent for the Series A Preferred Stock (which
may be the Corporation) the certificate or certificates therefor, duly
endorsed to the Corporation or in blank, and give written notice to the
Corporation at said office (which shall be deemed given upon actual
receipt by the Corporation) that he or she elects to convert such
shares and, if desired, any accrued but unpaid dividends with respect
thereto, stating the number of shares of Common Stock that such holder
wishes to receive in exchange therefor and the name or names (with
addresses) in which the certificate or certificates shall be issued.
The Corporation shall issue the certificate(s) for Common Stock in the
name(s) so designated with such legends affixed or restrictions imposed
as required by federal, state or jurisdictional securities laws as
determined by legal counsel for the Corporation; provided that the
Corporation is not advised by its counsel that the issuance of such
certificate(s) would be in violation of federal, state or
jurisdictional securities law. Shares of the Series A Preferred Stock
shall be deemed to have been converted immediately prior to the close
of business on the date of surrender of such shares for conversion in
accordance with the foregoing provisions (for purposes of this
Subsection (g), the "Conversion Date"), and the person or persons
entitled to receive shares of the Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock at such time. As promptly as
practicable after the Conversion Date, the Corporation shall issue and
deliver at said office the certificate or certificates for the number
of full shares of the Common Stock issuable upon such conversion,
together with a cash payment in lieu of any fraction of a share of
Common Stock, as hereinafter provided, to the person or persons
entitled to receive the same or to the nominee or nominees of the
person or persons.
(3) The Conversion Price shall be subject to adjustment as follows:
(A) In case the Corporation shall at any time - after filing of
this Statement of Designation
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<PAGE>
with the Florida Secretary of State's Office (i) declare a
dividend on any class of the Corporation's Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding shares of
Common Stock into a greater number or shares, (iii) combine the
outstanding shares of Common Stock into a smaller number of
shares, (iv) make a distribution on Common Stock in shares of its
capital stock other than Common Stock, or (v) issue any shares of
its capital stock in a reclassification of Common Stock (including
any such reclassification in connection with a consolidation or
merger in which the Corporation is the continuing Corporation),
then the conversion privilege and the Conversion Price as to
Common Stock in effect immediately prior to such action shall be
adjusted so that the holder of any shares of Series A Preferred
Stock thereafter converted may receive the number of shares of
Common Stock which such holder would have owned immediately
following such action if such holder had converted the shares
immediately prior to such action. Such adjustment shall be made
successively whenever any event listed above shall occur.
For a dividend or distribution, the adjustment shall become
effective immediately after the record date for the dividend or
distribution. For a subdivision, combination or reclassification,
the adjustment shall become effective immediately after the
effective date of the subdivision, combination or
reclassification. If after an adjustment a holder of a share of
Series A Preferred Stock upon conversion of it may receive shares
of two or more classes or series of capital stock of the
Corporation instead of the Common Stock, the Board of Directors
shall determine the allocation of the adjusted conversion price
between or among the classes or series of capital stock. After
such allocation, the conversion prices of the classes or series of
capital stock shall thereafter be subject to adjustment on terms
comparable to those applicable to Common Stock in this
Subparagraph (g)(3)(A).
(B) If the Corporation issues any rights or warrants to all
holders of shares of Common Stock entitling them for a period
expiring within forty-five days after the record date mentioned
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<PAGE>
below to purchase shares of Common Stock (or securities
convertible into shares of Common Stock), at a price per share (or
having a conversion price per share) less than the Current Market
Price (as defined in Subparagraph (g)(3)(E) below) per share on
that record date, the Conversion Price shall be adjusted in
accordance with the formula:
O + (N x P)
-----
C' = C x (M)
------------
O + N
where
C' = the adjusted Conversion Price per share of Common Stock; C =
the then current Conversion Price per share of Common Stock; 0 =
the number of shares of all classes of Common Stock
outstanding on the record date;
N = the number of additional shares of Common Stock offered; P =
the offering or conversion price per share of the additioncl
shares of Common Stock; and
M = the Current Market Price per share of Common Stock on the
record date.
The adjustment shall be made successively whenever any such rights
or warrants are issued, and shall become effective immediately
after the record date for the determination of stockholders
entitled to receive the rights or warrants. If all of the shares
of Common Stock subject to such-rights or warrants have not been
issued when such rights or warrants expire, then the Conversion
Price as to unconverted shares of Series A Preferred Stock shall
promptly be readjusted to the Conversion Price which would then be
in effect had the adjustment upon the issuance of such rights or
warrants been made on the basis of the actual number of shares of
Common Stock (or securities convertible into shares of Common
Stock) issued upon the exercise of such rights or warrants.
(C) If the Corporation distributes to all holders of shares of
Common Stock any assets or debt securities or any rights or
warrants to purchase securities, the Conversion Price shall be
adjusted in accordance with the formula:
((O x M) - F)
-------------
C' = C x O x M
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<PAGE>
where
C' = the adjusted Conversion Price;
C = the then current Conversion Price;
0 = the number of shares of all classes of Common Stock
outstanding on the record date mentioned below;
M = the Current Market Price per share of Common Stock on the
record date mentioned below; and
F = the fair market value on the record date of the assets,
securities, rights or warrants distributed, as determined by
the Board of Directors.
The adjustment shall be made successively whenever any such
distribution is made, and shall become effective immediately after
the record date for the determination of stockholders entitled to
receive the distribution.
This Subparagraph (g)(3)(C) does not apply to cash dividends or
cash distributions paid out of Consolidated Net Income (as
hereinafter defined) or retained earnings as shown on the books of
the Corporation maintained for reporting in accordance with
generally accepted accounting principles, or to rights or warrants
referred to in Subparagraph (g)(3)(B) above. For purposes of this
Subsection (g), "Consolidated Net Income" means the amount of
consolidated net income of the Corporation and its subsidiaries,
before the payment of dividends, all determined in accordance with
generally accepted accounting principles.
(D) The Corporation at any time may reduce the Conversion Price,
temporarily or otherwise, by any amount, so long as such reduction
is for a minimum period of twenty days and is irrevocable during
that period and the Corporation notifies the holders of the Series
A Preferred Stock at least 15 days prior to the date on which the
reduced Conversion Price takes effect.
(E) For the purpose of any computation herein, the Current Market
Price per share of Common Stock on any date is the average of the
daily closing sale price for 30 consecutive trading days
commencing 45 trading days before the date in question. The
closing sale prices per share of the Common Stock for each day
shall be the
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<PAGE>
lower of (i) the closing bid price as reported by the National
Association of Securities Dealers Automated Quotation System or
(ii) the last reported sale price on the principal national
securities exchange on which the Common Stock shall be listed or
admitted to trading (which shall be the national securities
exchange on which the greatest number of shares of the Common
Stock has been traded during such thirty consecutive trading
days); provided, that if on any such date the shares of Common
Stock are not quoted by any such source, the fair value of such
shares on such date, as determined in good faith by the Board of
Directors of the Corporation, shall be used.
(F) No adjustments in the Conversion Price need be made unless the
adjustment would require an increase or decrease of at least $.10
in the Conversion Price. Any adjustments which are not made shall
be carried forward and taken into account in any subsequent
adjustment. All calculations under this Subsection (g) shall be
made to the nearest cent or to the nearest whole share, as the
case may be. Notwithstanding the first sentence of this
Subparagraph (g)(3)(F), any adjustment required herein shall be
made no later than three years from the date of the transaction
which mandates such adjustment.
(G) No adjustment in the Conversion Price shall be made because
the Corporation issues, in exchange for cash, property or
services, shares of Common Stock, or any securities convertible
into or exchangeable for shares of Common Stock, or securities
carrying the right to purchase shares of Common Stock or such
convertible or exchangeable securities. Furthermore, no adjustment
in the Conversion Price need be made under this Paragraph (g)(3)
for the sale of shares of Common Stock pursuant to a Corporation
plan providing for reinvestment of dividends or interest or in the
event the par value of Common Stock is changed. Anything contained
herein to the contrary notwithstanding, no adjustment in the
Conversion Price or the conversion privilege shall be made as a
result of the issuance of shares or Common Stock upon or pursuant
to conversion of shares of the Series A Preferred Stock.
15
<PAGE>
(H) Whenever the Conversion Price is adjusted, the Corporation
shall promptly mail to holders of the Series A Preferred Stock and
to the transfer agent a notice of the adjustment briefly stating
the facts requiring the adjustment and the manner of computing it.
The notice shall be conclusive evidence that the adjustment is
correct.
(I) If the Corporation engages in any transaction specified in
Paragraph (h)(2) below, then each holder of shares of the Series A
Preferred Stock shall have the right thereafter to receive, upon
conversion of such Series A Preferred Stock into Common Stock
pursuant to this Subsection (g), the kind and amount of
securities, cash or other assets which such holder would have
owned immediately after the consolidation, merger or transfer if
such holder had converted the Series A Preferred Stock into Common
Stock immediately before the effective date of the transaction.
The provisions of this Subparagraph (g)(3)(I) shall similarly
apply to successive consolidations, mergers or transfers.
If the Corporation engages in any transaction specified in
Subsection (h)(2) below, provision shall be made by the Board of
Directors of the Corporation (or the resulting, surviving or
successor Corporation) for the protection of the conversion rights
of the holders of the Series A Preferred Stock which shall be
applicable, as nearly as reasonably may be possible, to any such
other shares of stock and other securities or procerty deliverable
upon conversion of shares of the Series A Preferred Stock after
the effective date of such transaction. If securities or property
other than Common Stock shall be issuable upon such conversion,
then all references in this Subsection (g) to Common Stock shall
be deemed to apply, so far as appropriate, to such other
securities or property.
(J) The Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of the Series A
Preferred Stock, the full number of shares of Common Stock then
deliverable upon the conversion or exchange of all shares of the
Series A Preferred Stock at the time outstandinq plus accrued but
unpaid dividends with respect
16
<PAGE>
thereto. If at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the
conversion of the Series A Preferred Stock, the Corporation shall
take such corporate action as may in the opinion of its counsel be
necessary to increase its authorized but unissued Common Stock to
such number of shares as shall be sufficient for those purposes.
The Corporation shall take all such action as may be necessary to
assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, the Charter
or by-laws of the Corporation, or any agreement, instrument or
order to which the Corporation or any of its subsidiaries is then
subject.
(K) If a state of facts shall occur which, without being
specifically controlled by the provisions of this Section (g),
would not fairly protect the conversion privilege of the Series A
Preferred Stock in accordance with the essential intent and
principles of such provisions, then the Board of Directors of the
Corporation shall make an adjustment in the application of such
provisions, in accordance with such essential intent and
principles, so as to protect such conversion rights. Any
determination that the Board of Directors makes pursuant to this
Subparagraph (g)(3)(K) shall be conclusive.
(4) The issuance of certificates for shares of Common Stock upon
conversion of the Series A Preferred Stock and the issuance of
certificates for shares of the Series A Preferred Stock upon the
conversion of only a portion of the number of shares of the Series A
Preferred Stock covered by a certificate therefor, shall be made
without charge to any holder thereof for any issuance tax in respect
thereto, provided that the Corporation shall not be required to pay any
tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of
such holder.
(h) REGISTRATION RIGHTS UPON CONVERSION.
(1) DEFINITIONS. As used in this Subsection (h), the following terms
shall have the following respective meanings:
(A) "EXCHANGE ACT" means the Securities Exchange Act of 1934, or
any similar Federal statute, and the rules and regulations of the
SEC issued under such Act, as they each may, from time to time,
be in effect.
17
<PAGE>
(B) "SEC" means the Securities and Exchange Commission.
(C) "SECURITIES ACT" means the Securities Act of 1933 or any
similar Federal statute, and the rules and regulations of the SEC
issued under such Act, as they each may, from time to time, be in
effect.
(D) "REGISTRABLE SHARES" means such of the Series A Preferred
Stock and any other shares of the Series A Preferred Stock of the
Corporation issued or issuable in respect of the Series A
Preferred Stock (because of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events) which,
upon notice from the Corporation of its intent to file a
Registration Statement as hereinafter provided, are converted
into shares of the Corporation's Common Stock in accordance with
Subsection (g); PROVIDED, HOWEVER, that shares of Series A
Preferred Stock which are Registrable Shares shall cease to be
Registrable Shares upon any sale pursuant to a Registration
Statement or Rule 144 under the Securities Act.
(E) "REGISTRATION STATEMENT" means a registration statement filed
with the SEC for the public offering and sale of shares of the
Common Stock of the Corporation (other than a registration
statement on Form S-4 or Form S-8, or their successors, or any
other form for a limited purpose, or any registration statement
covering only common stock proposed to be issued in exchange for
securities or assets of another corporation).
(2) PIGGYBACK REGISTRATION.
(A) Whenever the Corporation proposes to file a Registration
Statement, it will, prior to such filing, give written notice to
all holders of the Series A Preferred Stock of its intention to
do so. Holders of the Series A Preferred Stock shall have twenty
(20) days after the Corporation provides such notice to provide
written notice of their election to convert shares in the manner
provided in Subsection (g) and to register such shares in the
manner provided in this Subsection (h). Such written notice shall
also set forth the intended method of disposition of such shares
of Series A Prererred Stock so converted. The
18
<PAGE>
Corporation shall use its best efforts to cause all Registrable
Shares, which the Corporation has been requested to be registered
by such holder or holders, to be registered under the Securities
Act to the extent necessary to permit their sale or other
disposition in accordance with the intended methods of
distribution specified in the written notice of such holder or
holders; provided that the Corporation shall have the right to
postpone or withdraw any registration effected pursuant to this
Subsection (h)(2) without obligation to any holder.
(B) In connection with any offering under this Subsection (h)(2)
involving an underwriting, the Corporation shall not be required
to include any Registrable Shares in such underwriting unless the
holders thereof accept the terms of the underwriting as agreed
upon between the Corporation and the underwriters selected by it,
and then only in such quantity as will not, in the opinion of the
underwriters, jeopardize the success of the offering by the
Corporation. If in the opinion of the managing underwriter or
underwriters the registration of all, or part of, the Registrable
Shares which the holders have requested to be included would
materially and adversely affect such public offering, then the
Corporation shall be required to include in the underwriting only
that number of Registrable Shares, if any, which the managing
underwriter believes may be sold without causing such adverse
effect. If the number of Registrable Shares to be included in the
underwriting in accordance with the foregoing is less than the
total number of shares which the holders of Registrable Shares
have requested to be included, then the holders of Registrable
Shares who have requested registration shall participate in the
underwriting pro rata based upon their total ownership of
Registrable Shares (or in any other proportion as agreed upon by
all holders of Registrable Share) and if any holder would thus be
entitled to include more shares than such holder requested to be
registered, the excess shall be allocated among other requesting
holders pro rata based upon their total ownership of Registrable
Shares.
(3) REGISTRATION PROCEDURES. If and whenever the Corporation is
required to use its best efforts to effect the registration of any of
the Registrable Shares under the Securities Act, the Corporation shall:
19
<PAGE>
(A) file with the SEC a Registration Statement with respect to
such Registrable Shares and use its best efforts to cause that
Registration Statement to become and remain effective;
(B) prepare and file with the SEC any amendments and supplements
to the Registration Statement and the prospectus included in the
Registration Statement as may be necessary to keep the
Registration Statement effective for a period of not less than
120 days from the effective date;
(C) furnish to each holder such reasonable numbers of copies of
the prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other
documents as the holder may reasonably request in order to
facilitate the public sale or other disposition of the
Registrable Shares owned by the holder; and
(D) use its best efforts to register or qualify the Registrable
Shares covered by the Registration Statement under the securities
or Blue Sky laws of such states as the holders shall reasonably
request, and do any and all other acts and things that may be
necessary or desirable to enable the holders to consummate the
public sale or other disposition in such jurisdictions of the
Registrable Shares owned by the holder: PROVIDED, HOWEVER, that
the Corporation shall not be required in connection with this
Subsection (h)(3) to qualify as a foreign corporation or execute
a general consent to service of process in any jurisdiction.
If the Corporationn has delivered preliminary or final
prospectuses to the holders and after having done so the prospectus is
amended to comply with the requirements of the Securities Act, the
Corporation shall promptly notify the holders and, if requested, the
holders shall immediately cease making offers of Registrable Shares and
return all proscectuses to the Corporation. The Corporation shall
promptly provide the holders with revised prospectuses to permit the
holders to resume making offers of the Registrable Shares.
(4) ALLOCATION OF EXPENSES. The Corporation will pay all Registration
Expenses of all registrations under this Agreement; PROVIDED, HOWEVER,
that if a reqistration is withdrawn at the request of the holders
requesting such registration (other than as a result of information
concerning the business or financial condition of the
20
<PAGE>
Corporation which is made known to the holders after the date on which
such registration was requested), the requesting holders shall pay the
Registration Expenses of such registration pro rata in accordance with
the number of their Registrable Shares included in such registration.
For purposes of this Section, the term "Registration Expenses" shall
mean all expenses incurred by the Corporation in complying with this
Subsection (h), including, without limitation, all registration and
filing fees, exchange listing fees, printing expenses, fees and
disbursements of counsel for the Corporation, state Blue Sky fees and
expenses, and the expense of any special audits incident to or required
by any such registration, but excluding underwriting discounts and
selling commissions attributable to the Registrable Shares and the fees
and expenses of the holders' own counsel, which shall be borne by such
holders.
(5) INDEMNIFICATION. In the event of any registration of any of the
Registrable Shares under the Securities Act pursuant to this Subsection
(h), the Corporation will indemnify and hold harmless the seller of
such Registrable Shares, each underwriter of such Registrable Shares,
and each other person, if any, who controls such seller or underwriter
within the meaning of the Securities Act or the Exchange Act against
any losses, claims, damages or liabilities, joint or several, to which
such seller, underwriter or controlling person may become subject under
the Securities Act, the Exchange Act, state securities laws or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in
any Registration Statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus or
final prospectus contained in the Registration Statement, or any
amendment or supplement to such Registration Statement, or arise out of
or are based upon the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; and the Corporation will reimburse such seller,
underwriter and each such controlling person for any legal or any other
expenses reasonably incurred by such seller, underwriter or controlling
person in connection with investigating and defending any such loss,
claim, damage, liability or action; PROVIDED, HOWEVER, that the
Corporation will not be liable in any such case to the extent that any
such loss, claim, damage, liability or expense arises out of or is
based upon any untrue statement or omission made in such Registration
Statement, preliminary prospectus or
21
<PAGE>
prospectus, or any such amendment or supplement, in reliance upon and
in conformity with information furnished to the Corporation, in
writing, by or on behalf of such seller, underwriter or controlling
person specifically for use in the preparation thereof.
In the event of any registration of any of the Registrable Shares under
the Securities Act, each seller of Registrable Shares, severally and
not jointly, will indemnify and hold harmless the Corporation, each of
its directors and officers and each underwriter (if any) and each
person, if any, who controls the Corporation or any such underwriter
within the meaning of the Securities Act or the Exchange Act, against
any losses, claims, damages or liabilities, joint or several, to which
the Corporation, such directors and officers, underwriter or
controlling person may become subject under the Securities Act,
Exchange Act, state securities laws or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement
under which such Registrable Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus
contained in the Registration Statement, or any amendment or supplement
to the Registration Statement, or arise out of or are based upon any
omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and each seller of the Registrable Shares will reimburse
the Corporation, each of its directors and officers, each underwriter
and each controlling person, severally and not jointly, for any legal
or other expenses reasonably incurred by the Corporation, each director
and officer, each underwriter and each controlling person in connection
with investigating and defending any such loss, claim, damage,
liability or action, if the statement or omission was made in reliance
upon and in conformity with information furnished in writing to the
Corporation by or on behalf of such seller, specifically for use in
connection with the preparation of such Registration Statement,
prospectus, amendment or supplement.
Each party entitled to indemnification under this Subsection (h)(5)
(the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such
22
<PAGE>
claim or any litigation resulting therefrom; PROVIDED, that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval
shall not be unreasonably withheld); and, PROVIDED, FURTHER, that the
failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Subsection (h). The Indemnified Party may participate in such defense
at such party's expense. No Indemnifying Party, in the defense of any
such claim or litigation shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect of such claim or litigation.
(6) INFORMATION BY HOLDER. Each holder of Registrable Shares included
in any registration shall furnish to the Company such information
regarding such holder and the distribution proposed by such holder as
the Corporation may request in writing and as shall be required in
connection with any registration, qualification or compliance referred
to in this Subsection (h).
(7) "STAND-OFF" AQREEMENT. Each holder of Registrable Shares, if
requested by the Corporation and an underwriter of Common Stock or
other securities of the Corporation, shall agree not to sell or
otherwise transfer or dispose of any Registrable Shares or other
securities of the Corporation held by such holder for a specified
period of time (not to exceed 120 days) before or after the effective
date of a Registration Statement. Such agreement shall be in writing in
a form satisfactory to the Corporation and such underwriter. The
Corporation may impose stop transfer instructions with respect to the
Registrable Shares or other securities subject to the foregoing
restriction until the end of the stand-off period.
(i) NOTICE OF CERTAIN ACTIONS. If:
(1) the Corporation takes any action which would require an adjustment
in the Conversion Price;
(2) the Corporation consolidates or merges with, or transfers all or
substantially all of its assets to, another corporation, and
stockholders of the Corporation must approve the transaction; or
(3) there is a dissolution or liquidation of the corporation;
23
<PAGE>
the Corporation shall mail to holders of the Series A Preferred Stock a
notice stating the proposed record date or, in the case of transactions
for which no record date need be determined, the effective date. The
Corporation shall mail the notice at least 10 days before such date.
Failure to mail the notice or any defect in it shall not affect the
validity of any transaction referred to in Paragraph (1) or (2) of this
Subsection (i).
(j) PAYMENTS DUE ON SATURDAY, SUNDAY OR LEGAL HOLIDAYS. In case a
Dividend Payment Date or Optional Redemption Date for the Series A
Preferred Stock shall be a Saturday, Sunday or, in Palm Beach County,
Florida, a legal holiday or a day on which banking institutions are
authorized or required by law or executive order to close or remain
closed, the payment of any dividend on the Series A Preferred Stock or
the redemption of such stock need not be made on such date, but may be
made on the next succeeding day not a Saturday, Sunday, or in such
county, a legal holiday or a day on which banking institutions are
closed or authorized to close, with the same force and effect as if
made on such Dividend Payment Date or Optional Redemption Date.
(k) NO OTHER RIGHTS. The shares of the Series A Preferred Stock shall
not have any relative, participating, optional or other special rights
and powers other than as set forth above in this Statement of
Designation and in the Articles of Incorporation of the Corporation.
IN WITNESS WHEREOF, OCUREST LABORATORIES, INC. has caused this
Statement to be signed by its Chairman, this 30TH day of APRIL, 1991.
OCUREST LABORATORIES, INC.
By: /s/ WILLIAM J. CASEY
---------------------------------
William J. Casey, Chairman
24
EXHIBIT 3.6
ARTICLES OF AMENDMENT
TO THE STATEMENT OF DESIGNATION OF
THE SERIES A, 9% CUMULATIVE CONVERTIBLE PREFERRED STOCK OF
OCUREST LABORATORIES, INC.
1. Pursuant to Section 607.0602 of the Business Corporation Act of the
State of Florida and Article V of its Articles of Incorporation, Ocurest
Laboratories, Inc. filed a Statement of Designation of The Series A, 9%
Cumulative Convertible Preferred Stock (the "Statement of Designation") with the
Florida Department of State on May l, 1991.
2. Pursuant to the provisions of Section 607.1006, Florida Statutes,
section (a) of the Statement of Designation is hereby amended to read as
follows:
"(a) Designation. The designation of the series of stock created by this
resolution shall be "Series A, 9% Cumulative Convertible Preferred Stock"
(the "Series A Preferred Stock") and the number of shares constituting the
Series A Preferred Stock shall be 3,600,000 shares. The number of
authorized shares of the Series A Preferred Stock may be increased (but not
above the total number of authorized shares of Preferred Stock) or
decreased (but not below the number of shares then outstanding) by further
resolution duly adopted by the Board of Directors and by the filing of a
certificate pursuant to the provisions of the Business Corporation Act of
the State of Florida stating that such an increase or decrease has been so
authorized."
3. The foregoing amendment was duly adopted by the unanimous written
consent of the shareholders and directors on May 17, 1991.
IN WITNESS WHEREOF, the undersigned Vice President of this corporation has
executed these Articles of Amendment this 20th day of May, 1991.
Ocurest Laboratories, Inc.,
a Florida corporation
By: /s/ Larry M. Reid
Vice President
394/926
EXHIBIT 3.7
ARTICLES OF AMENDMENT
TO THE STATEMENT OF DESIGNATION OF
THE SERIES A, 9% CUMULATIVE CONVERTIBLE PREFERRED STOCK OF
OCUREST LABORATORIES, INC.
1. Pursuant to Section 607.0602 of the Business Corporation Act of the
State of Florida and Article V of its Articles of Incorporation, Ocurest
Laboratories, Inc. filed a Statement of Designation of The Series A, 9%
Cumulative Convertible Preferred Stock (the "Statement of Designation") with the
Florida Department of State on May l, 1991.
2. Pursuant to the provisions of Section 607.1006, Florida Statutes,
section (a) of the Statement of Designation is hereby amended to read as
follows:
"(a) Designation. The designation of the series of stock created by this
resolution shall be "Series A, 9% Cumulative Convertible Preferred Stock"
(the "Series A Preferred Stock") and the number of shares constituting the
Series A Preferred Stock shall be 3,600,000 shares. The number of
authorized shares of the Series A Preferred Stock may be increased (but not
above the total number of authorized shares of Preferred Stock) or
decreased (but not below the number of shares then outstanding) by further
resolution duly adopted by the Board of Directors and by the filing of a
certificate pursuant to the provisions of the Business Corporation Act of
the State of Florida stating that such an increase or decrease has been so
authorized."
3. The foregoing amendment was duly adopted by the unanimous written
consent of the shareholders and directors on May 17, 1991.
IN WITNESS WHEREOF, the undersigned Vice President of this corporation has
executed these Articles of Amendment this 20th day of May, 1991.
Ocurest Laboratories, Inc.,
a Florida corporation
By: /s/ Larry M. Reid
Vice President
394/926
EXHIBIT 3.8
BY LAWS
OF
OCUREST LABORATORIES, INC.
<PAGE>
INDEX
ARTICLE I MEETINGS OF SHAREHOLDERS
--------- ------------------------
Section 1 Annual Meeting
Section 2 Special Meetings
Section 3 Place
Section 4 Notice
Section 5 Notice of Adjourned Meeting
Section 6 Shareholder Voting and Quorum
Section 7 Voting of Shares
Section 8 Proxies
ARTICLE II DIRECTORS
---------- ---------
Section 1 Function
Section 2 Qualification
Section 3 Compensation
Section 4 Presumption of Assent
Section 5 Number
Section 6 Election and Term
Section 7 Vacancies
Section 8 Removal of Directors
Section 9 Quorum and Voting
Section 10 Executive and Other Committees
Section 11 Place of Meeting
Section 12 Time, Notice and Call of Meetings
Section 13 Action Without a Meeting
ARTICLE III OFFICERS
----------- --------
Section 1 Officers
Section 2 Duties
Section 3 Removal of Officers
ARTICLE IV STOCK CERTIFICATES
---------- ------------------
Section 1 Issuance
Section 2 Form
Section 3 Transfer of Stock; Restrictions
Section 4 Lost, Stolen or Destroyed Certificates
ARTICLE V BOOKS AND RECORDS
--------- -----------------
Section 1 Books and Records
Section 2 Shareholders' Inspection Rights
Section 3 Financial Information
2
<PAGE>
ARTICLE VI DISTRIBUTIONS
---------- -------------
ARTICLE VII CORPORATE SEAL
----------- --------------
ARTICLE VIII INDEMNIFICATION
------------ ---------------
ARTICLE IX AMENDMENT
---------- ---------
3
<PAGE>
BY-LAWS
OF
OCUREST LABORATORIES, INC.
- --------------------------------------------------------------------------------
ARTICLE I.
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting
The Annual Meeting of the shareholders of the Corporation shall be held
annually on a date and at a time and place fixed from time to time by the Board
of Directors of the Corporation. Business transacted at the Annual Meeting shall
include the election of directors of the Corporation and the transaction of any
proper business. If any date so designated by the Board of Directors shall fall
on a Sunday or legal holiday, then the Annual Meeting shall be held on the first
business day thereafter.
Section 2. Special Meetings
Special Meetings of the shareholders shall be held when called by the
President of the Corporation or the Board of Directors, or when requested in a
writing signed, dated and delivered to the Corporation's Secretary describing
the purpose or purposes for which it is to be held by the holders of not less
than ten (10%) percent of all of the shares of stock entitled to be cast on any
issue proposed to be considered at any such meeting. Any meeting so requested
shall be held not less that ten (10) nor more than sixty (60) days after such
request is made. Notice for such
4
<PAGE>
meeting shall be issued by the Secretary of the Corporation, unless the
President, Board of Directors or shareholders duly requesting the meeting shall
designate another person to do so.
Section 3. Place
Shareholder meetings shall be held at the principal place of business of
the Corporation or at such other place as may be designated by the Board of
Directors.
Section 4. Notice
Written notice stating the place, day and hour of the meeting and, in the
case of a Special Meeting, the purpose or purposes for which the meeting is
called, shall be given to each shareholder of record entitled to vote at such
meeting, not less than ten (10) nor more than sixty (60) days before the
meeting, either personally or by first class mail, by or at the direction of the
President, the Secretary or the officer or persons calling the meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mails addressed to the shareholder at his address as it appears on the
stock transfer books of the Corporation, with postage thereon prepaid.
Section 5. Notice of Adjourned Meeting
When a meeting is adjourned to another time or place, it shall not be
necessary to give any notice of the adjourned meeting if the time and place to
which the meeting is adjourned are announced at the meeting at which the
adjournment is taken; and any business may be transacted at the adjourned
meeting that might have been transacted on the original date of the meeting. If,
however, after
5
<PAGE>
the adjournment the Board of Directors fixes a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given as provided in Section
4 of this Article to each shareholder of record on the new record date entitled
to vote at such meeting.
Section 6. Shareholder Quorum and Voting
Except as otherwise required by law, a majority of the shares entitled to
be cast, represented in person or by proxy, shall constitute a quorum at a
meeting of shareholders. If a quorum is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders unless otherwise provided by
law.
Section 7. Voting of Shares
Each outstanding share shall be entitled to one (1) vote on each matter
submitted to a vote at a meeting of shareholders.
Section 8. Proxies
A shareholder may vote either in person or by proxy executed by the
shareholder or his duly authorized attorney-in-fact. No appointment of a proxy
shall be valid after the duration of eleven (11) months from the date thereof
unless otherwise provided in the appointment form.
Section 9. Action by Shareholders Without a Meeting
Any action required by the Florida General Corporation Act to be taken at
any annual or special meeting of shareholders, or any action which may be taken
at any annual or special meeting of shareholders, may be taken without a
meeting, without prior notice
6
<PAGE>
and without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of the outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
within ten (10) days after obtaining such authorization by written consent,
notice must be given to those shareholders who have not consented in writing.
The notice shall fairly summarize the material features of the authorized action
and, if the action be such for which dissenters' rights are provided under the
Florida Business Corporation Act, the notice shall contain a clear statement of
the right of shareholders dissenting therefrom to be paid the fair value of
their shares upon compliance with certain further provisions of such Act
regarding the rights of dissenting shareholders.
ARTICLE II.
DIRECTORS
Section 1. Function
All corporate powers shall be exercised by or under the authority of, and
the business and affairs of the Corporation shall be managed under the direction
of, the Board of Directors.
Section 2. Qualification
Directors must be natural persons who are 18 years of age or older but need
not be residents of the State of Florida or shareholders of the Corporation.
7
<PAGE>
Section 3. Compensation
The Board of Directors of the Corporation shall have the authority to fix
the compensation of the directors.
Section 4. Presumption of Assent
A director of the Corporation who is present at a meeting of the Board of
Directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless he votes against such action or
abstains from voting in respect thereto because of an asserted conflict of
interest.
Section 5. Number of Directors
The number of directors shall be fixed from time to time by action of the
Board of Directors, but the Corporation shall always have a minimum of one (1)
director.
Section 6. Election and Term
Each person named in the Articles of Incorporation as a member of the
initial Board of Directors shall hold office until the first meeting of
shareholders at which directors are elected, and until his successor shall have
been elected and qualifies, or until his earlier resignation, removal from
office or death. The term of all other directors expire at the next annual
shareholders' meeting following their election, and until his successor shall
have been elected and qualified, or until his earlier resignation, removal from
office or death.
Section 7. Vacancies
Any vacancy occurring in the Board of Directors, including any vacancy
created by reason of any increase in the number of
8
<PAGE>
directors, may be filled by the affirmative vote of a majority of the remaining
directors, though less than a quorum of the Board of Directors, or by
shareholders. A director elected to fill a vacancy shall hold office only until
the next election of directors by the shareholders.
Section 8. Removal of Directors
The shareholders may remove one or more directors with or without cause, by
a vote of the holders of a majority of the shares then entitled to vote at any
election of directors.
Section 9. Quorum and Voting
A majority of the number of directors fixed by or in the manner provided in
these By-Laws shall continue a quorum for the transaction of business. The act
of a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
Section 10. Executive and Other Committees
The Board of Directors, by resolution adopted by a majority of the entire
Board of Directors, may designate from among its members an Executive Committee
and one or more other committees, each of which, to the extent provided in such
resolution, shall have and may exercise all of the authority of the Board of
Directors, except as is otherwise provided by law.
Section 11. Place of Meeting
Regular and special meetings of the Board of Directors shall be held at the
principal place of business of the Corporation or at such other place as may be
designated by the Board of Directors.
9
<PAGE>
Section 12. Time, Notice and Call of Meetings
Written notice of the time and place of special meetings of the Board of
Directors shall be given to each director by either personal delivery, mail,
telegram or cablegram, at least two (2) days before such meeting. Regular
meetings of the Board of Directors may be held without notice. Notice of a
special meeting of the Board of Directors need not be given to any director who
signs a waiver of notice either before or after the meeting. Attendance of a
director at a special meeting shall constitute a waiver of notice of such
meeting and a waiver of any and all objections to the place of the meeting, the
time of the meeting or the manner in which such meeting was called or convened,
except when a director states at the beginning of the meeting, any objection to
the transaction of business because the meeting has not been legally called or
convened. Neither the business to be transacted at, nor the purpose of, any
special meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting. A majority of the directors present, whether
or not a quorum exists, may adjourn any meeting of the Board of Directors to
another time and place. Notice of any such adjourned meeting shall be given to
the directors who were not present at the time of the adjournment. Meetings of
the Board of Directors may be called by the Chairman of the Board, by the
President of the Corporation or by any two (2) directors. Members of the Board
of Directors may participate in a meeting of such Board through the use of any
means of communication by which all directors participating may
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simultaneously hear each other during the meeting. Participation by such means
shall constitute presence in person at a meeting.
Section 13. Action Without a Meeting
Any action required to be taken at a meeting of the Board of Directors, or
any action which may be taken at a meeting of the Board of Directors or a
committee thereof, may be taken without a meeting if a consent in writing
setting forth the action so to be taken is signed by all directors, or all of
the committee members, as the case may be.
ARTICLE III.
OFFICERS
Section 1. Officers
The officers of the Corporation shall consist of a President, a Secretary
and a Treasurer, each of whom shall be elected by the Board of Directors. Such
other officers and assistant officers and agents as may be deemed necessary may
be elected or appointed by the Board of Directors from time to time. Any two (2)
or more offices may be held by the same person.
Section 2. Duties
The officers of the Corporation shall have the following duties: The
President shall be the chief executive officer of the Corporation; shall have
general and active management responsibility for the business affairs of the
Corporation, subject to the direction of the Board of Directors; and shall
preside at all meetings of the shareholders and Board of Directors. The
Secretary shall have custody of, and shall maintain all of the
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corporate records, except the financial records; shall record the minutes of all
meetings of the shareholders and the Board of Directors; shall send notices of
all meetings and shall perform such other duties as may be prescribed by the
Board of Directors or the President of the Corporation. The Treasurer shall have
custody of all corporate funds and financial records; shall keep full and
accurate records of all corporate financial records and shall render reports
thereof at the annual meetings of shareholders and at any other time when
requested to do so by the Board of Directors or the President; and shall perform
such other duties as may be prescribed by the Board of Directors or the
President of the Corporation.
Section 3. Removal of Officers
An officer or agent elected or appointed by the Board of Directors may be
removed by the Board of Directors with or without cause. Any vacancy, however
occurring, in any office may be filled by the Board of Directors.
ARTICLE IV.
SHARE CERTIFICATES
Section l. Issuance
Unless otherwise determined by the Board of Directors, every holder of
shares in the Corporation shall be entitled to have a certificate representing
all shares to which he is entitled.
Section 2. Form
Certificates representing shares in the Corporation shall be signed by the
President or a Vice President and the Secretary or
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Assistant Secretary of the Corporation, and may be sealed with the seal of the
Corporation or a facsimile thereof.
Section 3. Transfer of Stock; Restrictions
Every certificate representing shares which are restricted as to sale,
disposition or other transfer shall state that such shares are restricted as to
transfer and shall set forth or fairly summarize upon the certificate, or state
that the Corporation will furnish to any shareholder, upon request and without
charge, a full statement of such restrictions. Subject to any such restriction,
the Corporation shall register any stock certificate presented to it for
transfer if the certificate is properly endorsed by the holder of record or by
his duly authorized attorney.
Section 4. Lost, Stolen or Destroyed Certificates
If any shareholder shall claim to have lost a certificate of shares issued
by the Corporation, or that such a certificate has been stolen or destroyed, a
new certificate shall be issued upon the making of an appropriate affidavit by
the person claiming the occurrence of any such event, and at the discretion of
the Board of Directors, upon the deposit of a bond or other indemnity and with
such sureties, if any, as the Board may reasonably require.
ARTICLE V.
BOOKS AND RECORDS
Section l. Books and Records
The Corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its shareholder, Board of
Directors and committees of directors. The
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Corporation shall keep at its registered office or principal place of business
or at the office of its transfer agent a record of its shareholders, giving the
names and addresses of all shareholders and the number of shares held by each of
them. Any books, records and minutes may be in written form or in any other form
capable of being converted into written form within a reasonable period of time.
Section 2. Shareholders' Inspection Rights
The right to inspect or make copies of the records of the Corporation is
limited to those person entitled to do so in accordance with applicable law.
ARTICLE VI.
DISTRIBUTIONS
The Board of Directors of the Corporation may, from time to time, declare,
and the Corporation may make distributions in respect of any of the
Corporation's shares except to the extent otherwise restricted by applicable
law.
ARTICLE VII.
CORPORATE SEAL
The Board of Directors of the Corporation shall adopt a corporate seal in
such form as the Board shall prescribe.
ARTICLE VIII.
INDEMNIFICATION
Subject only to limitations provided in the Florida Business Corporation
Act, each director or officer of the Corporation. whether or not then in office
shall be indemnified by the
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Corporation against all costs and expenses reasonably incurred by or imposed
upon such director or officer in connection with or arising out of any claim,
demand, action, suit or proceeding, whether civil, criminal, administrative or
investigative, in which he or it may be involved or to which he or it may be
made a party by reason of his or its being or having been a director or officer
of the Corporation, said costs and expenses to include (without limitation)
attorneys' fees and the costs of reasonable settlement made with a view to
curtailment of costs of litigation, if such director, officer or legal counsel
acted in good faith and in a manner he or it reasonably believed to be in, or
not opposed to, the best interests of the Corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or its
conduct was unlawful. Such right of indemnification shall not be exclusive of
any other rights to which the indemnified person may be entitled, pursuant to
other agreements, or as a matter of law, and the foregoing right of
indemnification shall inure to the benefit of the heirs, successors, personal
representatives, executors and administrators of any such director or officer.
ARTICLE IX.
AMENDMENT
These By-Laws may be altered, amended or repealed and new By-Laws may be
adopted, by a vote of a majority of the Board of Directors or by a majority of
the shareholders of the Corporation.
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RW-1 RW/CS
8/8/96
EXHIBIT 4.1
VOID AFTER 3:30 P.M., MOUNTAIN TIME, ON ______________________, 2001
REPRESENTATIVE'S WARRANTS TO PURCHASE COMMON SHARES
OCUREST LABORATORIES, INC.
This is to Certify That, FOR VALUE RECEIVED, RAF FINANCIAL
CORPORATION, 1700 Lincoln Street, 32nd Floor, Denver, Colorado 80203 ("Holder")
is entitled to purchase, subject to the provisions of this Warrant, from OCUREST
LABORATORIES, INC. ("Company"), at any time until 3:30 P.M., Mountain Time, on
_______________, 2001 ("Expiration Date"), Common Shares of the Company at a
purchase price per share of $_________ during the period this Warrant is
exercisable. The number of Common Shares to be received upon the exercise of
this Warrant and the price to be paid for a Common Share may be adjusted from
time to time as hereinafter set forth. The purchase price of a Common Share in
effect at any time and as adjusted from time to time is hereinafter sometimes
referred to as the "Exercise Price." This Warrant is or may be one of a series
of warrants identical in form issued by the Company to purchase an aggregate of
__________ Common Shares of the Company and the term "Warrants" as used herein
means all such Warrants (including this Warrant). The Common Shares, as adjusted
from time to time, underlying the Warrants are hereinafter sometimes referred to
as "Warrant Shares" and include all Common Shares that have been issued upon the
exercise of the Warrants and all unissued Common Shares underlying the Warrants.
(A) EXERCISE OF WARRANT. This Warrant may be exercised in whole or in
part at any time or from time to time until the Expiration Date or if the
Expiration Date is a day on which banking institutions are authorized by law to
close, then on the next succeeding day which shall not be such a day, by
presentation and surrender hereof to the Company or at the office of its stock
transfer agent, if any, with the Purchase Form annexed hereto duly executed and
accompanied by payment of the Exercise Price for the number of shares specified
in such Form, together with all federal and state taxes applicable upon such
exercise. The Company agrees not to merge, reorganize or take any action that
would terminate this Warrant unless provisions are made as part of such merger,
reorganization or other action which would provide the holders of this Warrant
with an equivalent of this Warrant as specified in Section (i) hereof. The
Company agrees to provide notice to the Holder that any tender offer is being
made for the Company's Common Shares no later than three business days after the
day the Company becomes aware that any tender offer is being made for
outstanding Common Shares of the Company. If this Warrant should be exercised in
part only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the right of the Holder to purchase
the balance of the Common Shares purchasable hereunder. Upon receipt by the
Company of this Warrant at the office of the Company or at the office of
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the Company's stock transfer agent, in proper form for exercise and accompanied
by the Exercise Price, the Holder shall be deemed to be the holder of record of
the Common Shares issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such Common Shares shall not then be actually delivered to the
Holder.
(B) RESERVATION OF SHARES. The Company hereby agrees that at all
times there shall be reserved for issuance and/or delivery upon exercise of this
Warrant such number of Common Shares as shall be required for issuance or
delivery upon exercise of this Warrant.
(C) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a Common Share called for upon any exercise hereof,
the Company shall, upon receipt by the Company or the Company's stock transfer
agent of the Exercise Price on such fractional share, pay to the Holder an
amount in cash equal to such fraction multiplied by the current market value of
such fractional share, determined as follows:
(1) If the Common Shares are listed on a national securities
exchange, are admitted to unlisted trading privileges on such an
exchange, or are listed for trading on a trading system of the
National Association of Securities Dealers, Inc. ("NASD") such as the
NASDAQ Small Cap Market or NASDAQ National Market System ("NMS"),
then the current value shall be the last reported sale price of the
Common Shares on such an 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 of the closing bid prices for the
Common Shares for such day on such exchange or such system shall be
used; or
(2) If the Common Shares are not so listed on such exchange
or system or admitted to unlisted trading privileges, the current
value shall be the average of the last reported bid prices reported
by the National Quotation Bureau, Inc. on the last business day prior
to the date of the exercise of this Warrant; or
(3) If the Common Shares are not so listed or admitted to
unlisted trading privileges and if bid and asked prices are not so
reported, the current value shall be an amount, not less than book
value, determined in such reasonable manner as may be prescribed by
the board of directors of the Company.
(D) EXCHANGE, 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 (under the same terms and conditions as provided by
this Warrant) in the aggregate the same number of Common Shares purchasable
hereunder. This Warrant may not be sold, transferred, assigned, or hypothecated
on or before __________________, 1997, except that it may be transferred or
assigned in whole or in part
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prior to __________________, 1997, to the officers of RAF Financial Corporation,
to other securities brokers and dealers who participated in the offering of
securities of the Company with respect to which this Warrant was issued
("Offering"), to the officers of such other securities brokers and dealers, or
by will or operation of law. Any such transfer or assignment shall be made by
surrender of this Warrant to the Company or at the office of its stock transfer
agent, if any, with the Assignment Form annexed hereto duly executed and with
funds sufficient to pay any transfer tax; whereupon the Company shall, without
charge, execute and deliver a new Warrant in the name of the assignee named in
such instrument of assignment and this Warrant shall promptly be cancelled. This
Warrant may be divided or combined with other Warrants which carry the same
rights upon presentation hereof at the office of the Company or at the office of
its stock transfer agent, if any, together with a written notice specifying the
names and denominations in which new Warrants are to be issued and signed by the
Holder hereof. The term "Warrant" as used herein includes any warrants issued in
substitution for or replacement of this Warrant, or into which this Warrant may
be divided or exchanged. Upon receipt by the Company of evidence satisfactory to
it of the loss, theft, destruction or mutilation of this 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. Subject to such
right of indemnification, 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.
(E) RIGHTS 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 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 extent set forth herein.
(F) ADJUSTMENT PROVISIONS.
(1) ADJUSTMENTS OF THE EXERCISE PRICE.
(A) If the Company subdivides its outstanding
Common Shares into a greater number of Common Shares, the
Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced. Conversely, if
the Company combines its outstanding Common Shares into a
lesser number of Common Shares, the Exercise Price in effect
immediately prior to such combination shall be
proportionally increased. In case of a subdivision or
combination, the adjustment of the Exercise Price shall be
made as of the effective date of the applicable event. A
distribution on Common Shares, including a distribution of
Convertible Securities, to shareholders of the Company on a
pro rata basis shall be considered a subdivision of Common
Shares for the purposes of this subsection (1)(A) of this
Section, except that the adjustment will be made as of the
record date for such distribution and any such
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distribution of Convertible Securities shall be deemed to be
a distribution of the Common Shares underlying such
Convertible Securities.
(B) If the Company shall at any time distribute or
cause to be distributed to its shareholders, on a pro rata
basis, cash, assets, or securities of any entity other than
the Company, then the Exercise Price in effect immediately
prior to such distribution shall automatically be reduced by
an amount determined by dividing (x) the amount (if cash) or
the value (if assets or securities) of the holders' of
Warrants (as such term is defined in the first paragraph
hereof) pro rata share of such distribution determined
assuming that all holders of Warrants had exercised their
Warrants on the day prior to such distribution, by (y) the
number of Common Shares issuable upon the exercise of this
Warrant by the Holder on the day prior to such distribution.
(3) NO ADJUSTMENT FOR SMALL AMOUNTS. Anything in this
Section (f) to the contrary notwithstanding, the Company shall not be
required to give effect to any adjustment in the Exercise Price
unless and until the net effect of one or more adjustments,
determined as above provided, shall have required a change of the
Exercise Price by at least one cent, but when the cumulative net
effect of more than one adjustment so determined shall be to change
the actual Exercise Price by at least one cent, such change in the
Exercise Price shall thereupon be given effect.
(4) NUMBER OF SHARES ADJUSTED. Upon any adjustment of the
Exercise Price, the Holder of this Warrant shall thereafter (until
another such adjustment) be entitled to purchase, at the new Exercise
Price, the number of Common Shares, calculated to the nearest full
share, obtained by multiplying the number of Common Shares initially
issuable upon exercise of this Warrant by the Exercise Price
specified in the first paragraph hereof and dividing the product so
obtained by the new Exercise Price.
(5) DEFINITIONS.
(A) Whenever reference is made in this Section (f)
to the distribution of Common Shares, the term "Common
Shares" shall mean the Common Shares of the Company
authorized as of the date hereof and any other class of
stock ranking on a parity with such Common Shares. However,
subject to the provisions of Section (i) hereof, Common
Shares issuable upon exercise hereof shall include only
Common Shares of the class designated as Common Shares of
the Company as of the date hereof.
(B) Whenever reference is made in this Section (f)
to the distribution of Convertible Securities, the term
"Convertible Securities" shall mean options or warrants or
rights for the purchase of Common Shares of the Company or
for the purchase of any stock or other securities
convertible into or exchangeable for Common Shares of the
Company.
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(G) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section (f) hereof, the Company shall
forthwith file in the custody of its Secretary or an Assistant Secretary at its
principal office, and with its stock transfer and warrant agent, if any, an
officer's certificate showing the adjusted Exercise Price determined as herein
provided and setting forth in reasonable detail the facts requiring such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the Holder and the Company shall, forthwith
after each such adjustment, deliver a copy of such certificate to the Holder.
(H) NOTICES TO HOLDERS. So long as this Warrant shall be outstanding
and unexercised (i) if the Company shall pay any dividend or make any
distribution upon the Common Shares or (ii) if the Company shall offer to the
holders of Common Shares for subscription or purchase by them any shares of
stock of any class or any other rights or (iii) 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 delivered to the Holder, at least 10 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 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 Shares of record shall be
entitled to exchange their Common Shares for securities or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
(I) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding Common
Shares of the Company (other than a change in par value, or from par value to no
par value, or from no par value to par value, or as a result of an issuance of
Common Shares by way of dividend or other distribution or of a subdivision or
combination), 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 other change of outstanding Common
Shares of the class issuable upon exercise of this Warrant) or in case of any
sale or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the Company shall cause effective
provision to be made so that the Holder shall have the right thereafter, by
exercising this Warrant, to purchase the kind and amount of shares of stock and
other securities and property which the Holder would have received upon such
reclassification, capital reorganization or other change, consolidation, merger,
sale or conveyance had this Warrant been exercised prior to the consummation of
such transaction. 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 Section (i) shall
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similarly apply to successive reclassifications, capital reorganizations and
changes of Common Shares and to successive consolidations, mergers, sales or
conveyances. In the event the Company spins off a subsidiary by distributing to
the shareholders of the Company as a dividend or otherwise the stock of the
subsidiary, the Company shall reserve for the life of this Warrant, shares of
the subsidiary to be delivered to the Holders of the Warrants upon exercise to
the same extent as if they were owners of record of the Warrant Shares on the
record date for payment of the shares of the subsidiary.
(J) REGISTRATION UNDER THE SECURITIES ACT OF 1933.
(1) Within 45 days after receipt of a written request by the
then Holder(s) of Warrants or Warrant Shares representing at least
51% of the total Warrant Shares made at any time within the period
commencing ________________, 1997, and ending __________________,
2001, the Company will file, no more than once, a registration
statement under the Securities Act of 1933, as amended, registering
the Warrants and the Warrant Shares. The Company will use its best
efforts to cause such registration statement to become effective.
(2) In addition, if at any time during the period commencing
_________________, 1997, and ending _________________, 2003, the
Company should file a registration statement under the Securities Act
of 1933, as amended (the "Act"), which relates to a current offering
of securities of the Company (except in connection with an offering
(i) to employees or (ii) of the Company's securities solely in
exchange for properties, assets or stock of other individuals or
corporations), such registration statement and the prospectus
included therein shall also, at the written request to the Company by
any of the Holder(s) of the Warrants and Warrant Shares, relate to,
and meet the requirements of the Act with respect to any public
offering of the Warrants and Warrant Shares so as to permit the
public sale thereof in compliance with the Act. The Company shall
give written notice to the Holder(s) of its intention to file a
registration statement under the Act relating to a current offering
of the aforesaid securities of the Company 30 or more days prior to
the filing of such registration statement, and the written request
provided for in the first sentence of this subsection shall be made
by the Holder(s) 10 or more days prior to the date specified in the
notice as the date on which it is intended to file such registration
statement. Neither the delivery of such notice by the Company nor of
such request by the Holder(s) shall in any way obligate the Company
to file such registration statement and notwithstanding the filing of
such registration statement, the Company may, at any time prior to
the effective date thereof, determine not to proceed to effectiveness
with such registration statement, without liability to the Holder(s).
The Company shall pay all expenses (with the exception of any selling
commissions relating to the sale of the Warrants and Warrant Shares
which shall be paid by the sellers thereof) of any such registration
statement.
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(3) In addition, the Company will cooperate with the then
Holder(s) of the Warrants and Warrant Shares in preparing and signing
any registration statement, in addition to the registration
statements discussed above, required in order to sell or transfer the
Warrants and Warrant Shares and will sign and supply all information
required therefor, but such additional registration shall be at the
then Holder(s) cost and expense.
(4) When, pursuant to subsection (1), (2), or (3) of this
Section, the Company shall take any action to permit a public
offering or sale or other distribution of the Warrants and Warrant
Shares, the Company shall:
(A) Supply to each selling Holder a reasonable
number of copies of the preliminary, final and other
prospectus in conformity with the requirements of the Act
and the Rules and Regulations promulgated thereunder and
such other documents as the Holders shall reasonably
request.
(B) Use its best efforts to register or qualify for
sale the Warrants and Warrant Shares in those states in
which any of the securities were sold in the Offering. The
Company shall bear the complete cost and expense (other than
any selling commissions relating to the sale of the Warrants
and Warrant Shares, which shall be paid by the sellers
thereof) of such registrations or qualifications except
those filed under subsection (j)(3) which shall be at the
Holder(s) cost and expense.
(C) Keep effective such registration statement
until the first of the following events occur: (i) 36 months
have elapsed after the effective date of such registration
statement or (ii) all of the registered Warrant Shares
issued by the Company either before or after the effective
date of such registration statement have been publicly sold
under such registration statement.
(D) Indemnify and hold harmless each such Holder
and each underwriter, within the meaning of the Act, who may
purchase from or sell for any such Holder, any Warrants or
Warrant Shares, from and against any and all losses, claims,
damages, and liabilities (including but not limited to, any
and all expenses whatsoever reasonably incurred in
investigating, preparing, defending or settling any claim)
arising from (i) any untrue or alleged untrue statement of a
material fact contained in any registration statement
furnished pursuant to clause (A) of this subsection, or any
prospectus included therein or (ii) any omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading (unless such untrue statement or omission or
such alleged untrue statement or omission was based upon
information furnished or required to be furnished in writing
to the Company by such Holder or underwriter expressly for
use therein), which indemnification shall include each
person, if any, who controls any such Holder
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or underwriter within the meaning of the Act; provided,
however, that the Company shall not be so obligated to
indemnify any such Holder or underwriter or controlling
person unless such Holder and underwriter shall at the same
time indemnify the Company, its directors, each officer
signing any registration statement or any amendment to any
registration statement and each person, if any, who controls
the Company within the meaning of the Act, from and against
any and all losses, claims, damages and liabilities
(including, but not limited to, any and all expenses
whatsoever reasonably incurred in investigating, preparing,
defending or settling any claim) arising from (iii) any
untrue or alleged untrue statement of a material fact
contained in any registration statement or prospectus
furnished pursuant to Clause (A) of this subsection, or (iv)
any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, but the indemnity of such
Holder, underwriter or controlling person shall be limited
to liability based upon information furnished, or required
to be furnished, in writing to the Company by such Holder or
underwriter or controlling person expressly for use therein.
The Company shall not be liable for amounts paid in
settlement of any such litigation if such settlement was
effected without the consent of the Company. The indemnity
agreement of the Company herein shall not inure to the
benefit of any such underwriter (or to the benefit of any
person who controls such underwriter) on account of any
losses, claims, damages, liabilities (or actions or
proceedings in respect thereof) arising from the sale of any
of such Warrants or Warrant Shares by such underwriter to a
person if such underwriter failed to send or give a copy of
the prospectus furnished pursuant to Clause (A) of this
subsection, as the same may then be supplemented or amended
(if such supplement or amendment shall have been furnished
to the Holders pursuant to said Clause (A)), to such person
with or prior to the written confirmation of the sale
involved.
(5) Each Holder shall supply such information as the Company
may reasonably require from such Holder, or any underwriter for such
Holder, for inclusion in such registration statement or posteffective
amendment.
(6) The Company's agreements with respect to the Warrants
and Warrant Shares in this Section will continue in effect regardless
of the exercise or surrender of this Warrant.
(7) Any notices or certificates by the Company to the Holder
and by the Holder to the Company shall be deemed delivered if in
writing and delivered personally or sent by certified mail, return
receipt requested, to the Holder, addressed to the Holder at the
Holder's address as set forth on the Warrant or stockholder register
of the Company, or, if the Holder has designated, by notice in
writing to the Company, any other address, to such other address,
and, if to the Company, addressed to it at
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4400 PGA Boulevard, Suite 800, Palm Beach Gardens, Florida 33410. The
Company may change its address by written notice to Holders.
(K) TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. The Company
may cause the following legend, or one similar thereto, to be set forth on the
Warrants and on each certificate representing Warrant Shares or any other
security issued or issuable upon exercise of this Warrant not theretofore
distributed to the public or sold to underwriters for distribution to the public
pursuant to Section (j) hereof; unless legal counsel for the Company is of the
opinion as to any such certificate that such legend, or one similar thereto, is
unnecessary:
"The securities represented by this certificate may not be offered
for sale, sold or otherwise transferred except pursuant to an
effective registration statement made under the Securities Act of
1933 (the "Act") and under any applicable state securities law, or
pursuant to an exemption from registration under the Act and under
any applicable state securities law, the availability of which is to
be established to the satisfaction of the Company."
(L) ADDITIONAL LEGEND. In the event this Warrant is exercised prior
to _________________, 1997, the following legend shall be set forth on the
certificate representing the Warrant Shares so acquired:
"The securities representing this Certificate are subject to
restrictions on transfer set forth in the Representative's Warrants
to Purchase Common Shares (the "Warrant") issued by the Company. A
copy of the Warrant is available for inspection at the principal
office of the Company."
(M) APPLICABLE LAW. This Warrant shall be governed by, and construed
in accordance with, the laws of the state of Colorado.
(N) EXCHANGE PROVISIONS.
(1) For purposes of this Section (n), this Warrant shall be
deemed to represent the same number of Warrants as there are Warrant
Shares underlying this Warrant. For example, if there are 10,000
Warrant Shares underlying this Warrant, then for purposes of this
Section (n) the Holder shall be deemed to hold 10,000 Warrants.
(2) For purposes of this Section (n), the following terms
shall have the following meanings:
(A) "Current Market Value of a Warrant Share" shall
be the value as determined under Section (c)(1) or (2)
hereof except that the time of the determination thereunder
shall be the last business day prior to the day the Company
receives a notice from the Holder under this Section (n).
9
<PAGE>
(B) "Warrant Value" shall mean the Current Market
Value of a Warrant Share underlying each Warrant minus or
less the Exercise Price of such Warrant as of the close of
business on the last business day prior to the day the
Company receives a notice from the Holder under this Section
(n).
(3) The Holder shall have the right to exchange, in a
cashless transaction, all or part of the Holder's Warrants for Common
Shares issued by the Company at anytime prior to the Expiration Date
of such Warrants by providing written notice ("Notice") to the
Company. Such Notice may only be provided after _______________, 1997
and only at a time when the Company's Common Shares are listed or
approved for trading or quotation on an exchange, interdealer
communications system, or national quotation bureau. Such Notice
shall set forth the number of Warrants which the Holder elects to
exchange for Common Shares.
(4) Within 10 days after receipt of such Notice by the
Company, the Company shall issue the number of Common Shares of the
Company to the Holder which is determined by dividing the Warrant
Value of the Warrants being exchanged by the Current Market Value of
a Warrant Share as of the date the Notice is received by the Company.
(5) The Holder shall surrender the Warrant which the Holder
is exchanging for Common Shares upon receipt of such Common Shares.
If the entire Warrant is being exchanged by the Holder for Common
Shares, the Company shall cancel the entire Warrant. If less than the
entire Warrant is being exchanged for Common Shares, the Company
shall issue a new Warrant to the Holder representing the portion of
this Warrant which was not exchanged for Common shares.
Dated: _________________, 1996.
OCUREST LABORATORIES, INC.
By:
-------------------------------------
EDMUND G. VIMOND, JR., PRESIDENT AND
CHIEF EXECUTIVE OFFICER
10
<PAGE>
PURCHASE FORM
DATED: _______________, 19__
The undersigned hereby irrevocably elects to exercise the Warrant to the
extent of purchasing ____________ shares of Common Shares and hereby makes
payment of $_______________ in payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF SHARES
Name:__________________________________________________________________________
(Please typewrite or print in block letters)
Address:_______________________________________________________________________
Signature:_____________________________________________________________________
ASSIGNMENT FORM
DATED: ___________________, 19__
FOR VALUE RECEIVED,___________________________________________________________
hereby sells, assigns and transfers unto _______________________________________
Name:___________________________________________________________________________
(Please typewrite or print in block letters)
Address: _______________________________________________________________________
the right to purchase Common Shares represented by this Warrant to the extent
______________________ of Common Shares as to which such right is exercisable
and does hereby irrevocably constitute and appoint ____________________________
- -------------------------------------------------------------------------------,
attorney, to transfer the same on the books of the Company with full power of
substitution in the premises.
Signature: _____________________________
11
EXHIBIT 4.2
Ocurest Laboratories, Inc.
4400 PGA Boulevard o Suite 800 o Palm Beach Gardens, FL 33410
1992 STOCK OPTION PLAN
Adopted February 1992
Amended July 1994, April 1996
<PAGE>
OCUREST LABORATORIES, INC.
1992 STOCK OPTION PLAN
1. Purpose.
The purposes of this 1992 Stock Option Plan (the "Plan") are to induce
certain individuals to remain in the employ or service of Ocurest Laboratories,
Inc. (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 stock ownership in the Company. The Board of Directors of
the Company (the "Board") believes that the granting of stock options (the
"Options") under the Plan will promote continuity of management and increased
incentive and personal interest in the welfare of the Company and aid in
securing its growth and financial success.
Options granted hereunder are intended to be either: (a) "incentive stock
options" (which term, when used herein, shall have the meaning ascribed thereto
by the provisions of Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code")); or (b) options which are not incentive stock options
("non-incentive stock options"); or (c) a combination thereof, as determined by
the Committee referred to in Section 3A (the "Committee") at the time of the
grant.
2. Stock Subject to Plan.*
143,750 of the authorized but unissued shares of the Company's common
stock, par value $.004 ("Common Stock"), are available for issuance upon the
exercise of Options granted under the Plan; provided, however, that such number
of shares from time to time may be reduced to the extent that a corresponding
number of issued and outstanding shares of the Common Stock are purchased by the
Company and set aside for issuance upon the exercise of Options, and the number
of shares issued upon the exercise of Options granted under the Plan shall be
determined without giving effect to the use by a Participant of the right set
forth in Section 8C to deliver shares of the Common Stock in payment of all or a
portion of the option price with respect to an Option and the use by the
Participant of the right set forth in Section 12C to cause the Company to
withhold from the shares the Common Stock otherwise issuable to him upon the
exercise of Option shares of the Common Stock in payment of all or a portion of
his withholding obligation arising from such exercise. If any Options expire or
terminate for any reason without having been exercised in full, the unpurchased
shares subject thereto shall again be available for the purpose of the Plan.
3. Administration.
A. The Plan shall be administered by a Committee which shall consist of two
or more members of the Board, both or all of who shall be "disinterested
persons" within the meaning of Rule 16b-3(c)(2)(i) promulgated under Section
16(b) of the Securities Exchange Act of 1934 (the "Exchange Act") if the Company
shall then have a class of its securities registered under Section 12 of the
Exchange Act. The Chief Executive Officer of the
- ----------
*Adjusted for 1:4 reverse stock split, January 27, 1994.
<PAGE>
Company shall also be a member of the Committee, ex-officio, whether or not he
is otherwise eligible to be a member of the Committee to the extent permitted by
Rule 16b-3.
The Committee shall be appointed by the Board, which may at any time, and
from time to time remove any members of the Committee and fill vacancies,
however caused, in the Committee. A majority of the members of the Committee
shall construct a quorum. All determinations of the Committee shall be made by a
majority of its members present at a meeting duly called and held. Any decision
or determination of the Committee reduced to writing and signed by all of the
members of the Committee shall be fully as effective as if it had been made at a
meeting duly called and held.
B. Subject to the express provisions of the Plan, the Committee shall have
complete authority, in its discretion, to interpret the Plan; to prescribe,
amend and rescind rules and regulations relating to it; to determine the terms
and provisions of the respective option agreements and certificates (which need
not be identical); to determine the individuals (each a "Participant") to whom
and the times and the prices at which Options shall be granted; the periods
during which each Option shall be exercisable; the number of shares of Common
Stock to be subject to each Option and whether such Option shall be an incentive
stock option or non-incentive stock option; and to make all other determinations
necessary or advisable for the administration of the Plan.
In making such determinations, the Committee may take into account the
nature of the services rendered by the respective Participant, their present and
potential contributions to the success of the Company and such other factors as
the Committee in its discretion shall deem relevant. The Committee's
determination on the matters referred to in this Section 3B shall be conclusive.
Any dispute or disagreement which may arise under or as a result of or with
respect to any Option shall be determined by the Committee, in its sole
discretion, and any interpretations by the Committee of the terms of any Option
shall be final, binding and conclusive.
C. If a Committee shall not be established as set forth in Section 3A, the
Board shall perform the duties and functions ascribed in this Plan to the
Committee.
4. Eligibility.
An incentive stock option may be granted to employees of the Company. A
non-incentive stock option may be granted to (a) employees of the Company; (b)
directors of the Company who are not employees; (c) independent contractors
hired by the Company to provide, on a regular basis for compensation, consulting
services for the Company; and (d) employees of a corporation which has been
acquired by the Company, whether by way of exchange or purchase of stock,
purchase of assets, merger or reverse merger, or otherwise, who hold options
with respect to the stock of such corporation which the Company has agreed to
assume.
5. Option Prices.
A. The initial per share option price of any Option which is an incentive
stock option shall not be less than the fair market value of a share of Common
Stock on the date of the grant; provided, however, that in the case of a
Participant who owns more than 10%
2
<PAGE>
of the total combined voting power of all classes of the outstanding capital
stock of the Company at the time an option which is an incentive stock option is
granted to him, the initial per share option price shall not be less than 110%
of the fair market value of a share of Common Stock on the date of the grant.
B. The initial per share option price of any option which is a
non-incentive stock option shall not be less than 85% of the fair market value
of a share of Common Stock on the date of the grant.
C. For all purposes of this Plan, the fair market value of a share of
Common Stock on any date shall be determined by reference to the last business
day for which the prices or quotes discussed herein are available prior to such
date and shall mean (i) the closing sale price of a share of the Common Stock on
the primary securities exchange or the NASDAQ National Market System ("NMS") on
which the shares of Common Stock are traded; or (ii) if the Common Stock is not
traded on an exchange or the NASDAQ/NMS on such date, the average of the bid and
asked prices by an established quotation service for over-the-counter securities
at the close of trading; or (iii) if the shares are not traded on a securities
exchange or the over-the-counter market, the fair market value of a share of the
Common Stock on such date as shall be determined in good faith by the Committee.
6. Option Term.
Participants shall be granted Options for such term as the Committee shall
determine, not in excess of ten years from the date of the grant; provided,
however, that in the case of a Participant who owns more than 10% of the total
combined voting power of the Common Stock at the time the Option which is an
incentive stock option is granted to him, the term with respect to such Option
shall not be in excess of five years from the date of the grant.
7. Limitation On Amount Of Incentive Stock Options Granted.
The aggregate fair market value of the shares of the Common Stock for which
any Participant may be granted incentive stock options which are exercisable for
the first time in any calendar year (whether under the terms of the Plan or any
other stock option plan of the Company) shall not exceed $100,000. For this
purpose, options shall be taken into account in the order in which they were
granted, and the market value shall be determined at the time the option is
granted.
8. Exercise Of Options.
A. Except as otherwise determined by the Committee at the time of the
grant, a Participant may (i) during the period commencing on the first
anniversary of the date of the granting of an Option and ending on the day
preceding the second anniversary of such date, exercise such Option with respect
to one-third of the shares subject to the Option; (ii) during the period
commencing on such second anniversary and ending on the day preceding the third
anniversary of the date of the granting of such Option, exercise such Option
with respect to two-thirds of the shares subject to the Option; and (iii) during
the period commencing on such third anniversary, exercise such Option with
respect to all of the shares subject to the Option.
3
<PAGE>
B. Except as hereinbefore otherwise set forth, an Option may be exercised
either in whole at any time or in part from time to time.
C. An Option may be exercised only by a written notice of intent to
exercise such Option with respect to a specific number of shares of the Common
Stock and payment to the Company of the amount of the option price for the
number of shares of the Common Stock so specified; provided, however, that all
or any portion of such payment may be made in kind by the delivery of shares of
the Common Stock having a fair market value on the date of delivery (as
determined in the manner set forth in Section 5C) equal to the portion of the
option price so paid; provided further, however, that subject to the
requirements of Regulation T (as in effect from time to time) promulgated under
the Exchange Act, if the Company then has a class of securities registered under
Section 12 of the Exchange Act, the Committee may implement procedures to allow
a broker chosen by a Participant to make payment of all or any portion of the
option price payable upon the exercise of an Option and receive, on behalf of
such Participant, all or any portion of the shares of the Common Stock issuable
upon such exercise.
D. The Committee may, in its discretion, permit any Option to be exercised,
in whole or in part, prior to the time when it would otherwise be exercisable.
9. Transferability.
No Option shall be assignable or transferable except by will and/or by the
laws of descent and distribution and, during the life of any Participant, each
Option granted to him may be exercised only by him.
10. Termination Of Services.
A. In the event a Participant voluntarily leaves the employ or service of
the Company prior to his 65th birthday, other than by reason of his death or
"disability" (as such term is defined in Section 22(e)(3) of the Code), or if a
Participant's employment is terminated for "cause" (as determined by the Board
or, if the Participant is party to an employment agreement with the Company, as
such term is defined in said employment agreement), each Option theretofore
granted to him shall, to the extent not previously exercised, terminate
forthwith.
B. In the event a Participant's employment or service with the Company
terminates by reason of his death or disability, each Option theretofore granted
to him shall become immediately exercisable in full and shall terminate upon the
earlier to occur of (i) the expiration period of one year after the date of such
Participant's death or disability and (ii) the date specified in such Option.
C. In the event a Participant leaves the employ or service of the Company
after his 65th birthday or if his employment is terminated without "cause", each
Option theretofore granted to him shall become immediately exercisable in full
and shall terminate upon the earlier to occur of (i) the expiration of the
period of three months after the date of such retirement and (ii) the date
specified in such Option.
4
<PAGE>
11. Adjustment Of Number Of Shares.
A. In the event that a dividend shall be declared upon the Common Stock
payable in shares of the Common Stock, the number of shares of Common Stock then
subject to any Option and the number of shares of the Common Stock available for
issuance in accordance with the provisions of the Plan, but not yet covered by
an Option, shall be adjusted by adding to each share the number of shares which
would be distributable thereon if such shares had been outstanding on the date
fixed for determining the stockholders entitled to receive such stock dividend.
In the event that the outstanding shares of the Common Stock shall be
changed into or exchanged for a different number or kind of shares of stock or
other securities of the Company or of another corporation, whether through
reorganization, recapitalization, stock split-up, combination of shares, sale of
assets, merger or consolidation, whether or not the Company is the surviving
corporation, then there shall be substituted for each share of the Common Stock
then subject to any Option and for each share of the Common Stock available for
issuance in accordance with the provisions of the Plan, but not yet covered by
an Option, the number and kind of shares of stock or other securities into which
each outstanding share of the Common Stock shall be so changed or for which each
such share shall be exchanged. B. In the event there shall be any change, other
than as specified in Section 11A, in the number or kind of outstanding shares of
the Common Stock, or of any stock or other securities into which the Common
Stock shall have been changed, or for which it shall have been exchanged, then
if the Committee shall, in its sole discretion, determine that such change
equitably requires an adjustment in the number or kind of shares available for
issuance in accordance with the provisions of the Plan, but not yet covered by
an Option, such adjustment shall be made by the Committee and shall be effective
and binding for all purposes of the Plan and of each stock option agreement or
certificate entered into or issued in accordance with the provisions of the
Plan.
C. In the case of any substitution or adjustment in accordance with the
provisions of this Section 11, the option price in each stock option agreement
or certificate for each share covered thereby, prior to such substitution or
adjustment, shall be the option price for all shares of stock or other
securities which shall have been substituted for such share or to which such
share shall have been adjusted in accordance with the provisions of this Section
11.
D. No adjustment or substitution provided for in this Section 11 shall
require the Company to sell a fractional share under any stock option agreement
or certificate.
E. In the event of the dissolution or liquidation of the Company, the
Board, in its discretion, may accelerate the exercisability of the Option and
terminate the same within a reasonable time thereafter.
12. Purchase for Investment, Withholding and Waivers.
A. Unless the shares to be issued upon the exercise of an Option by a
Participant shall be registered prior to the issuance thereof under the
Securities Act of 1933, such Participant shall, as a condition of the Company's
obligation to issue such
5
<PAGE>
shares, be required to give a representation in writing that he is acquiring
such shares for his own account as an investment and not with a view to, or for
sale in connection with, the distribution of any such shares.
B. In the event of the death of a Participant, an additional condition of
exercising any Option shall be the delivery to the Company of such tax waivers
and other documents as the Committee shall determine.
C. In the case of each non-incentive stock option, a condition of
exercising the Option shall be the entry by the person exercising such option
into such arrangements with the Company with respect to withholding as the
Committee shall determine; provided, however, that such Participant may direct
the Company to satisfy all or a portion of such withholding obligation by
withholding from the shares of the Common Stock issuable to him on such exercise
shares of the Common Stock having a fair market value equal to the portion of
the withholding obligation so satisfied.
13. Declining Market Price.
In the event the fair market value of the Common Stock declines below the
option price set forth in any Option, the Committee may, at any time, adjust,
reduce, cancel and re-grant any unexercised Option or take any similar action it
deems to be for the benefit of the Participant in light of the declining fair
market value of the Common Stock; provided, however, that none of the foregoing
actions may be without the prior approval of the Board.
14. No Stockholder Status; No Restrictions On Corporate Acts;
No Employment Right.
A. Neither any Participant nor his legal representatives, legatees or
distributees shall be, or be deemed to be, the holder of any share of the Common
Stock covered by an Option unless and until a certificate for such share has
been issued. Upon payment of the purchase price, a share issued upon exercise of
an Option shall be paid and non-assessable.
B. Neither the existence of the Plan nor any Option shall in any way affect
the right or power of the Company or its stockholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding whether
of a similar character or otherwise.
C. Neither the existence of the Plan nor the grant of any Option shall
require the Company to continue any Participant in the employ or service of the
Company.
15. Termination and Amendment of the Plan.
The Board may at any time terminate the Plan or make such modifications of
the Plan as it shall deem advisable; provided, however, that the Board may not,
without further approval of the holders of the shares of the Common Stock,
materially increase the benefits
6
<PAGE>
accruing to participants under the Plan, materially increase the number of
shares of Common Stock which may be issued under the Plan, or materially modify
the requirements as to eligibility for participation in the Plan. Except as
otherwise provided in Section 16, no termination or amendment of the Plan may,
without the consent of the Participant to whom any Option shall theretofore have
been granted, adversely affect the rights of such Participant under such Option.
The Plan shall terminate on February 1, 2002, or at such earlier time as
the Board may determine. Options may be granted under the Plan at any time and
from time to time prior to its termination. Any Option outstanding under the
Plan at the time of the termination of the Plan shall remain in effect until
such Option shall have been exercised or shall have expired in accordance with
its terms.
16. Options Granted in Connection with Acquisitions.
In the event the Committee determines that, in connection with the
acquisition by the Company of another corporation which shall become a
subsidiary or division of the Company (such corporation being hereinafter
referred to as an "Acquired Subsidiary"), Options may be granted to employees
and other personnel of the Acquired Subsidiary in exchange for then outstanding
options to purchase securities of the Acquired Subsidiary. To the extent not
inconsistent with the terms, limitations and conditions of Section 422A of the
Code, such Options may be granted at such option prices, may be exercisable
immediately or at any time or times either in whole or in part, may be
exercisable for such terms and may contain such other provisions not
inconsistent with the Plan, or the requirements set forth in Section 15 that
certain amendments to the Plan be approved by the stockholders of the Company,
as the Committee, in its discretion, shall deem appropriate at the time of the
granting of such Options.
7
EXHIBIT 10.12
Acorn Laboratories, Inc.
1423 14th Terrace
Palm Beach Gardens, FL 33418
June 17, 1996
Ocurest Laboratories, Inc.
44OO PGA Boulevard, Suite 3OO
Palm Beach Gardens, FL 3341O
Gentlemen;
Acorn Laboratories, Inc. hereby acknowledges and confirms that Ocurest
Laboratories, Inc. has paid in full the "Initial Payment" of $2OO,OOO.OO as
called for in the agreement between Acorn Laboratories, Inc. and Ocurest
Laboratories, Inc., dated October 3O, 1991, as subsequently amended, and for
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, irrevocably waives any and all rights and remedies which it has
or has ever had or may have against Ocurest Laboratories, Inc. as a result of
the failure by Ocurest Laboratories, Inc. to make such "Initial Payment" on a
timely basis.
Very truly yours,
/s/ WILLIAM J. CASEY
- -----------------------
William J. Casey
President
Acorn Laboratories, Inc.
EXHIBIT 10.13
CONTRACT SUPPLY AGREEMENT
This CONTRACT SUPPLY AGREEMENT ("Agreement") is made as of the 1st day of March,
1994, by and between BAUSCH & LOMB PHARMACEUTICAL, INC., a Delaware corporation,
having its principal office at 8500 Hidden River Parkway, Tampa, Florida 33637
(hereinafter referred to as "BLP"), a Florida corporation, and OCUREST
LABORATORIES, INC., a Florida corporation having its principal office at 4400
PGA Blvd., Suite 800, Palm Beach Gardens, Florida 33410 (hereinafter referred to
as "OLI").
WHEREAS, OLI desires to purchase from BLP certain ophthalmic pharmaceutical
products to be manufactured by BLP in OLI's proprietary dispenser and bearing
OLI's labeling and trademark registration;
WHEREAS, BLP desires to manufacture and sell such pharmaceutical products to OLI
under the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual premises contained herein, and
intending to be legally bound hereby, the parties hereby agree as follows:
1. Product
The term "ophthalmic pharmaceutical product" means the ophthalmic product
formulations described in Appendix A.
1
<PAGE>
These formulations may be amended from time to time upon 180 days' written
notice by BLP to OLI. Ophthalmic pharmaceutical products may be added to or
deleted from Appendix A from time to time upon the written mutual consent
of both parties.
2. Quantity
OLI agrees to order from BLP both "Minimum Annual Quantity" and "Minimum
Quarterly Quantity" of units of pharmaceutical products as described below
for each "Production Year." A Production Year for purposes of this
Agreement is defined as the period commencing each April 1 and ending March
31 of the following calendar year.
If OLI fails to purchase the Minimum Annual Quantity of units in a given
Production Year as specified below, OLI shall have the right to cure the
breach by purchasing the deficient quantity in the first six months of the
following year, in addition to that portion, but no less than half, of the
Minimum Annual Quantity applicable to the first six-month period of the
Production Year in progress. If OLI does not cure the breach during this
six-month period, BLP shall have the right to terminate the Agreement at
the end of the Production Year in progress. This breach supersedes Section
12.A.
2
<PAGE>
OLI agrees to issue quarterly purchase orders to BLP that shall meet
the Minimum Quarterly Quantity of units as described in the schedule
below, during a Production Year. BLP shall have the right to reject
any quarterly purchase order that does not meet the Minimum Quarterly
Quantity for any Production Year.
Production Year Starting Annual Minimum Quarterly Minimum
------------------------ -------------- -----------------
April 1, 1994 500,000 0
April 1, 1995 1,000,000 200,000
April 1, 1996 2,000,000 400,000
April 1, 1997 3,000,000 500,000
April 1, 1998 4,000,000 600,000
3. Price
A. BLP will sell pharmaceutical products to OLI at prices set forth in
Appendix B for each Production Year through the term of the Agreement.
These prices include the following cost elements: 1) Chemicals
consisting of all ingredients used in the product formulations
described in Appendix A; 2) Packaging Components consisting of a riser
carton, dispenser shrink band, consumer information insert and two
dispenser labels; and 3) Contract Manufacturing Fee which includes
BLP's fee for producing the pharmaceutical products including BLP's
costs associated with EtO sterilization and shipping materials
consisting of shipping cases and shipping pallets.
3
<PAGE>
B. Pricing in Appendix B shall be binding on BLP, except BLP shall have
the right to increase prices in any year commencing with the 2nd
Production Year beginning April 1, 1995, commensurate with documented
cost increases experienced by BLP that exceed the annual inflation
rates included in the prices set forth in Appendix B.
C. BLP shall notify OLI 90 days' prior to the start of a Production Year
of cost increases. While a Production Year is in progress, BLP shall
have the right to raise prices quarterly upon 90 days notice for any
cost increases in excess of the inflation rates projected for
Chemicals, Packaging Components and Contract Manufacturing Fees.
D. The price for quarterly purchase orders will be at the annualized
price break for cumulative units purchased through the current quarter
of the Production Year in progress. At the receipt of a Purchase Order
from OLI, BLP will confirm the price based upon price breaks in effect
for the Production Year in progress. When the Production Year is
completed, the price on cumulative units purchased by OLI will be
computed versus the cumulative price paid, and a credit/debit
adjustment will be issued by BLP within 60 days to close out the
Production Year.
4
<PAGE>
E. Following is the quantity price break schedule that shall be in effect
each Production Year:
Quantity Price Break Schedule
-----------------------------
500,000 - 999,999
1,000,000 - 2,499,999
2,500,000 - 4,999,999
5,000,000 - 7,499,999
7,500,000 - 9,999,999
10,000,000 - 14,999,999
15,000,000 - 19,999,999
4. Ordering and Acceptance
A. Ordering Through Submittal of Rolling Forecast
OLI will provide BLP with a twelve-month rolling forecast of its
pharmaceutical products requirements, by month, and by product code
delivered to BLP 90 days prior to the start of each calendar quarter.
The first three months of each twelve-month rolling forecast shall: 1)
be equal to or greater than the Minimum Quarterly Quantity required to
be ordered by OLI pursuant to Section 2; and 2) constitute a binding
purchase commitment for pharmaceutical products indicated for the
quarter. On or within 10 working days from the date of issuing the
twelve-month rolling forecast, OLI will issue a binding purchase order
for the first three months of said forecast.
5
<PAGE>
B. Acceptance by Order Acknowledgement
BLP will deliver to OLI a written order acknowledgement form within 10
days of BLP's receipt of each rolling forecast, confirming the
quantities which BLP is able to fill. Only those quantities of OLI's
firm three-month purchase order confirmed by BLP in its written order
acknowledgement shall be binding on BLP. Quantities which are ordered
by OLI, but which BLP is not able to fill due to unforeseen
circumstance outside of BLP's control such as Acts of God or other
catastrophes, shall be credited against the minimum quantities
specified in Section 2.
C. Orders Other Than Through Rolling Forecasts
Subject to the provision of Section 16, OLI may submit additional
purchase orders for pharmaceutical products in addition to the
quantities specified in the rolling forecasts. Acceptance of such
additional purchase orders shall be at BLP's discretion.
5. Payment
BLP will invoice OLI for each order at its principal address upon shipment
of the pharmaceutical products. Invoices shall be due and payable within
thirty (30) days of the date of the invoice. In the event that any invoice
is not paid when due, OLI agrees to pay a "late
6
<PAGE>
charge" on the unpaid delinquent balance at an interest rate of ten percent
(10%) per annum. OLI agrees not to make any deductions of any kind from any
payment becoming due to BLP unless OLI has received an official credit
memorandum from BLP authorizing such deduction. BLP reserves the right to
require payment in advance before shipment in the event BLP reasonably
believes OLI's credit insufficiently impaired as to cast serious doubt on
OLI's ability to pay invoices in a timely manner.
6. Delivery
BLP shall ship to OLI the quantity of pharmaceutical products confirmed for
delivery each month by OLI pursuant to Section 4. Pharmaceutical products
shall be shipped FOB Tampa, Florida to locations designated by OLI. Unless
otherwise requested in writing by OLI, all shipments shall be transported
by third party carriers selected by BLP, the cost of which shall be billed
to OLI for payment within 30 days from the date of said freight invoices.
BLP reserves the right to make partial shipments of OLI's purchase orders
provided OLI is notified in advance of any partial shipment.
7. Packaging and Labeling
Pharmaceutical products shall be packaged and labeled as mutually agreed
between BLP and OLI. Upon reasonable
7
<PAGE>
written notice, BLP will make, at OLI's expense, any improvements or
alterations to packaging or labeling as requested by OLI and implement such
alterations or improvements at the earliest opportunity. Initial orders for
components (labels and boxes) will be at BLP's expense. Any alterations to
these components will be at OLI's expense. OLI is responsible for label
text and graphics being in compliance with all state and federal
regulations. BLP will purchase only printed components that have received
OLI's approval.
8. BLP's Warranties and Obligations
A. Limited Product Warranty
BLP represents and warrants to OLI that:
(1) pharmaceutical products sold to OLI will have been approved for
sale in accordance with the "Indication for Use" provisions of the
package inserts provided by BLP with the pharmaceutical products;
(2) the manufacture, packaging and labeling of the pharmaceutical
products will comply with all applicable governmental rules and
regulations; and
(3) BLP will promptly notify OLI of any notice it receives from any
regulatory agency regarding any alleged regulatory non-compliance of
the pharmaceutical products.
8
<PAGE>
This warranty is exclusive and in lieu of all other warranties.
B. Notification of Defects
OLI shall notify BLP in writing within seven (7) days after delivery
to OLI of any non-conforming pharmaceutical products containing
obvious defects caused by shipping damage discoverable without
affecting the integrity of the pharmaceutical product's packaging and
within seven (7) days of its discovery of any latent defects, or this
warranty as to such obvious or latent non-conformance shall be waived
by OLI. OLI shall be responsible for the cost of labor to inspect
pharmaceutical products.
C. Returns
BLP shall accept for return and replacement any pharmaceutical
products sold to OLI under this Agreement which do not conform with
the warranty set forth in Subsection 8.A and for which proper notice
has been given in accordance with Subsection 8.B, provided OLI obtains
prior shipping authorization from BLP. All returns of pharmaceutical
products with obvious defects shall be in the original manufactured
condition. BLP will pay reasonable return freight and shipping
charges, but OLI shall assume the risk of loss in transit associated
with such returns.
9
<PAGE>
D. Indemnification
BLP shall indemnify, defend, save and hold OLI harmless from and
against all claims, liabilities, costs and expenses, including without
limitation, reasonable attorney's fees, arising as a result of
(1) BLP's breach of any warranty or covenant made by BLP in this
Agreement; or
(2) any infringement or violation by the pharmaceutical products of
any patent, trade secret or proprietary right; provided, however, that
BLP shall in no event be liable for any lost profits or revenues,
unless OLI has been required to pay such lost profits or revenues to
third parties to whom it has resold a pharmaceutical product purchased
hereunder. Such indemnity shall be subject to the requirement that OLI
shall promptly provide BLP with written notice of any claim for which
indemnification is sought, and OLI shall provide its reasonable
cooperation, information and assistance in connection therewith. BLP
shall have the primary control and authority with respect to the
defense, settlement and comprise of any such claim.
10
<PAGE>
9. Ocurest's Warranties and Obligations
A. OLI shall indemnify, defend, save and hold BLP harmless from and
against all claims, liabilities, costs and expenses, including without
limitation, reasonable attorney's fees, arising as a result of
(1) OLI's breach of any warranty or covenant made by OLI in this
Agreement;
(2) absence of notification of product/component defects. OLI shall
notify BLP in writing within seven (7) days after delivery to OLI of
any non-conforming pharmaceutical products containing obvious defects
caused by shipping damage discoverable without affecting the integrity
of the pharmaceutical product's packaging and within seven (7) days of
its discovery of any latent defects, or this warranty as to such
obvious or latent non-conformance shall be waived by OLI. OLI shall be
responsible for the cost of labor to inspect pharmaceutical products;
(3) any actual or alleged infringement or violation of any patent,
trade secret, proprietary right, tradename, trademark, service mark or
copyright due to packaging labeling or package insert modifications
for the pharmaceutical products requested by OLI. Such indemnity
11
<PAGE>
shall be subject to the requirement that BLP shall promptly provide
OLI with written notice of any claim for which indemnification is
sought, and BLP shall provide its reasonable cooperation, information
and assistance in connection therewith. OLI shall have the primary
control and authority with respect to the defense, settlement or
compromise of any such claim.
B. Insurance
(a) Prior to OLI commencing sale of the pharmaceutical products, BLP
shall obtain commercial general liability insurance which
includes product liability insurance covering the pharmaceutical
products to the extent of not less than $1,000,000, at no cost to
OLI, and wherein OLI shall be included as an additional insured
with respect to liability that BLP incurs arising out of
representations and warranties contained in this Agreement. BLP
shall provide OLI with certificates of insurance showing that
such insurance is in full force and effect. Such insurance shall
not be canceled, or materially changed without at least thirty
(30) days' prior written notice to OLI;
(b) OLI shall, before commencing sale of the pharmaceutical products,
obtain commercial general liability insurance which includes
product liability insurance covering the
12
<PAGE>
pharmaceutical products to the extent of not less than
$1,000,000, at no cost to BLP. OLI shall provide BLP with
certificates of insurance showing that such insurance is in full
force and effect. Such insurance shall not be canceled, or
materially changed without at least thirty (30) days' prior
written notice to BLP.
C. Adverse Reaction Reports
(a) OLI shall establish a system for monitoring, investigating and
following-up on adverse reaction complaints involving the
pharmaceutical products in accordance with BLP procedures which are
attached hereto as Appendix C.
(b) In the event that OLI receives any adverse reaction complaint or
claim regarding the pharmaceutical products, OLI shall, within three
(3) business days, provide BLP with a report regarding the complaint
and such additional information regarding the specific pharmaceutical
products as BLP may reasonably require. Each report of an adverse
reaction shall include the total number of pharmaceutical products of
the same model sold up to the date that said adverse reaction report
is received by OLI.
13
<PAGE>
(c) BLP shall be responsible for investigating adverse reaction
complaints and, as required, notifying OLI in writing. OLI shall be
responsible for notifying the appropriate U.S. regulatory authorities,
in writing.
10. Confidentiality
For three (3) years from the termination of this Agreement, each party
hereto agrees to keep any proprietary information furnished under this
Agreement confidential within its respective company and agrees not to
disclose same to third parties without the prior written consent of the
other party hereto, except as required by law or to the extent such
information
(i) was already in the rightful possession of a party prior to its receipt
from the other party,
(ii) becomes generally known to the public otherwise than as a result of
the breach of this Section, or
(iii)is disclosed by a third party having no obligation to keep such
information confidential.
During the term of this Agreement, both OLI and BLP agree to keep the
subject matter of this Agreement confidential and not disclose it to any
third party except as required by law, in which instance timely notice
shall be given to the party not
14
<PAGE>
making the disclosure, or except as necessary under this Agreement or as
mutually agreed to. All drawings, specifications or other confidential
written information furnished or paid for by one party shall remain the
property of that party and be identified as such. Upon completion or
termination of this Agreement, each party shall return all drawings,
specifications or confidential written information to the other party
within thirty (30) days after the effective date of completion or
termination except for one copy of such information which may be kept for
corporate archival purposes.
11. Patents and Trademarks
No right or license is granted, expressly or by implication, under any
patent, proprietary right, tradename, trademark, service mark or copyright
of BLP or Bausch & Lomb Pharmaceutical, Inc., except, for the term of this
Agreement and ninety (90) days thereafter, insofar as the sale of the
pharmaceutical products by OLI may be within the scope of a patent owned or
controlled by BLP or Bausch & Lomb Pharmaceutical, Inc. Under no
circumstance shall OLI use BLP's or Bausch & Lomb Pharmaceutical, Inc.'s
name, trade names, trademarks, service marks or copyrights in connection
with the pharmaceutical products, unless Bausch & Lomb Pharmaceutical, Inc.
specifically has given prior written approval for any such particular use.
However, it is acknowledged and agreed by BLP that the labeling will say
"Manufactured for Ocurest or distributed by Ocurest."
15
<PAGE>
12. Termination
A. Term
This Agreement shall be effective April 1, 1994, and remain in effect
for five (5) years from its effective date, but may be cancelled by
either party with or without cause upon the giving of not less than
one year prior written notice to the other party.
B. For Insolvency
Without prejudice to any legal or equitable remedy or remedies either
party may have, this Agreement may be immediately terminated at the
option of a party, immediately upon written notice, in the event of
the insolvency of the other party, however such insolvency may be
evidenced.
C. Post-Termination Obligations
All unpaid obligations of OLI arising prior to termination of this
Agreement shall be fulfilled notwithstanding such termination,
including without limitation, OLI's obligations to pay for
pharmaceutical products ordered or required to be purchased by OLI
prior to termination. BLP shall not, by reason of the termination of
this Agreement, be liable to OLI for compensation,
16
<PAGE>
reimbursement or damages due to loss of present or prospective profits
on sales or anticipated sales or anticipated sales or losses due to
expenditures, investments, or commitments made relating to such sales
or in connection with the establishment, development, or maintenance
of the business or good will of OLI.
13. Force Majeure and Allocation
The obligations of either party hereunder are contingent upon, and the
parties shall not be liable for, acts of God, war, riots, floods, fires,
storms, strikes, catastrophes, or any other acts of force majeure,
governmental restrictions, prohibitions, regulations, and requisitions, the
acts of suppliers or common carriers, or other interferences beyond their
reasonable control to the extent that the same prevent or delay the
performance of the obligations herein contained, always provided that such
party shall use its best efforts to fulfill the obligations under this
Agreement and provide the other party with prompt notice of the occurrence
of any such event of force majeure.
14. Assignment of Transfer of Rights
Neither BLP nor OLI shall assign or otherwise transfer its rights and
obligations under this Agreement without the prior written consent of BLP
or its successors and OLI or its successors, and any assignment or transfer
without such consent shall be deemed void.
17
<PAGE>
15. Notices
All notices or communications required or permitted hereby shall be sent to
the respective addresses set forth below by overnight delivery, telegram,
telex, telefax, or registered or certified mail, return receipt requested
and shall be effective upon delivery.
As to BLP: Anthony Caracciolo
VP, Operations
Bausch & Lomb Pharmaceutical, Inc.
8500 Hidden River Parkway
Tampa, Florida 33637
As to OLI: Edmund Vimond
President
Ocurest Laboratories, Inc.
4400 PGA Blvd., Suite 800
Palm Beach Gardens, FL 33410
The address to which notice to either party shall be sent may be changed by
such party by written notice to the other party.
18
<PAGE>
16. Order of Preference
All sales by BLP to OLI of pharmaceutical products shall be subject to the
provisions of this Agreement and any provision of any purchase order placed
by OLI or order acknowledgement sent by BLP which is inconsistent herewith
or in addition hereto shall be null and void unless accepted by the
receiving party in writing and signed by one of its authorized
representatives.
17. Applicable Law
The validity, performance and construction of this Agreement shall be
governed by, and construed in accordance with the laws of the State of
Florida, without regard to its choice of law or conflicts of law rules, as
though made and fully performed in Florida.
18. Survival
The provisions of Articles 8, 9, 10 and 11 shall survive the termination of
this Agreement as well as those provisions which, by their meaning and
intent, have applicability beyond the term of this Agreement.
19. Waiver
The parties hereto acknowledge and agree that any failure on the part of
the other to enforce at any time, or for any period of time, any of the
provisions of this Agreement shall not be deemed or construed to be a
waiver of such provisions or of the right of such party thereafter to
enforce each and every such provision.
19
<PAGE>
20. Entire Agreement
This is the entire Agreement between the parties hereto regarding the
pharmaceutical products and supersedes any prior agreements made between
the parties regarding the pharmaceutical products. No prior statement,
representation, promise or agreement, written or verbal, shall be of any
force to vary, expand or diminish the provisions hereof. The Agreement may
be modified or amended only by an instrument in writing, executed by both
parties.
IN WITNESS WHEREOF, the parties have hereunder set forth their signatures as of
the date set forth above.
BAUSCH & LOMB PHARMACEUTICAL, INC.
By: /s/ Anthony Caracciolo
- --------------------------------------------
Title: Vice President Operations
OCUREST LABORATORIES, INC.
By: /s/ Edmund G. Vimond
- --------------------------------------------
Title: President & Chief Executive Officer
20
<PAGE>
OCUREST OPHTHALMIC PRODUCT FORMULATIONS
Appendix A
<TABLE>
<CAPTION>
Product Core # 31111: Tetrahydrozoline Hydrochloride Extra, Ophthalmic Solution (Sterile), 0.05%
Ocurest Code # 40101: Redness Reliever Lubricant, 15 mL.
Qty/mL Unit Item # Raw Material Description
------ ---- ------ ------------------------
<S> <C> <C> <C>
0.50 mg XA10580 Tetrahydrozoline HCI, USP
10.00 mg XB10725 Polyethylene Glycol 400, NF
0.26 mg XB10055 Benzalkonium Chloride, 50% Solution, NF
12.50 mg XB10085 Boric Acid, NF
1.11 mg XB10355 Edetate Disodium Dihydrate, USP (equal to 1 mg of Edeate Disodium Anhydrous)
0.55 mg XB10915 Sodium Borate, NF
1.20 mg XB10975 Sodium Chloride, USP
QS to 1 mL XB11455 Purified Water, USP
pH Adjust Hydrochloric Acid, 37%, NF (diluted to 6 N)
pH Adjust Sodium Hydroxide, NF (diluted to 6 N)
Product Core # 32211: Artificial Tears with Hydroxypropyl Methycellulose, Ophthalmic Solution (Sterile), 0.4%.
Ocurest Code # 40102: Tears Formula Lubricant, 15 mL.
Qty/mL Unit Item # Raw Material Description
------ ---- ------ ------------------------
4.00 mg XB10510 Hydroxypropyl Methylcellulose 2910, USP
0.20 mg XB10055 Benzalkonium Chloride, 50% Solution, NF
7.00 mg XB11045 Dibasic Sodium Phosphate (tested to meet current USP/NF criteria)
1.00 mg XB10355 Edetate Disodium Dihydrate, USP
0.50 mg XB11035 Monobasic Sodium Phosphate, USP, Anhydrous
1.20 mg XB10755 Potassium Chloride, USP
4.00 mg XB10975 Sodium Chloride, USP
QS to 1 mL XB11455 Purified Water, USP
pH Adjust 1 N Sodium Hydroxide
pH Adjust 1 N Hydrochloric Acid
Product Core # 31211:Tetrahydrozoline Hydrochloride 0.05%/Zinc Sulfate 0.25%,
Ophthalmic Solution (Sterile).
Ocurest Code # 40103: Redness Reliever Astringent, 15 mL.
Qty/mL Unit Item # Raw Material Description
------ ---- ------ ------------------------
0.50 mg XA10580 Tetrahydrozoline HCI, USP
2.50 mg XA50310 Zinc Sulfate Heptahydrate, USP
0.10 mg XB10065 Benzalkonium Chloride, NF
1.00 mg XB10085 Boric Acid, NF
1.11 mg XB10355 Edetate Disodium Dihydrate, USP (equal to 1 mg of Edeate Disodium Anhydrous)
5.00 mg XB10975 Sodium Chloride, USP
0.55 mg XB10995 Sodium Citrate Dihydrate, USP
QS to 1 mL XB11455 Purified Water, USP
pH Adjust Hydrochloric Acid, 37%, NF (diluted to 6 N)
pH Adjust Sodium Hydroxide, NF (diluted to 6 N)
</TABLE>
<PAGE>
OCUREST MANUFACTURING QUANTITY PRICK BREAK SCHEDULE Exhibit B
<TABLE>
<CAPTION>
Price per 1000 Units According to Annual Unit Volume Level and Production Year
500,000 1,000,000 2,500,000 5,000,000 7,500,000 10,000,000 15,000,000
to to to to to to to
4/94-3/95 (Base Year) 999,999 2,499,999 4,999,999 7,499,999 9,999,999 14,999,999 19,999,999
<S> <C> <C> <C> <C> <C> <C> <C>
Chemicals 36.00 35.90 35.65 35.20 34.50 32.75 31.95
Packaging Components 235.00 186.40 143.55 129.85 106.15 106.15 106.15
Contract Manufacturing Fee 714.00 673.80 611.60 553.85 496.30 461.75 429.80
------- ------ ------ ------ ------ ------ ------
Bausch & Lomb Price Per 1000 985.00 896.10 790.80 718.90 636.95 600.65 567.90
------- ------ ------ ------ ------ ------ ------
4/95-3/96 (3.0% Increase)
Chemicals 37.10 37.00 36.70 36.25 35.55 33.75 32.90
Packaging Components 242.05 192.00 147.85 133.75 109.35 109.35 109.35
Contract Manufacturing Fee 735.40 694.00 629.95 570.45 511.20 475.60 442.70
------- ------ ------ ------ ------ ------ ------
Bausch & Lomb Price Per 1000 1014.55 923.00 814.50 740.45 656.10 618.70 584.95
------- ------ ------ ------ ------ ------ ------
4/96-3/97 (3.5% Increase)
Chemicals 38.30 38.00 37.50 36.80 34.95 34.05
Packaging Components 198.70 153.00 138.45 113.20 113.20 113.20
Contract Manufacturing Fee 718.30 652.00 590.40 529.10 492.25 458.20
------ ------ ------ ------ ------ ------
Bausch & Lomb Price Per 1000 955.30 843.00 766.35 679.10 640.40 605.45
------ ------ ------ ------ ------ ------
4/97-3/98 (4.0% Increase)
Chemicals 39.50 39.00 38.30 36.35 35.40
Packaging Components 159.10 144.00 117.70 117.70 117.70
Contract Manufacturing Fee 678.10 614.00 550.25 511.95 476.55
------ ------ ------ ------ ------
Bausch & Lomb Price Per 1000 876.70 797.00 706.25 666.00 629.65
------ ------ ------ ------ ------
4/98-3/99 (4.5% Increase)
Chemicals 41.30 40.75 40.00 38.00 37.00
Packaging Components 166.25 150.50 123.00 123.00 123.00
Contract Manufacturing Fee 708.60 641.65 575.00 535.00 498.00
------ ------ ------ ------ ------
Bausch & Lomb Price Per 1000 916.15 832.90 738.00 696.00 658.00
------ ------ ------ ------ ------
<FN>
Packaging components include riser carton, insert, dispenser safety seal and 2
dispenser labels.
Contract manufacturing fee includes EtO sterilization of dispenser parts,
shipping case 24s, 4 shrink wraps and shipping pallet.
</FN>
</TABLE>
<PAGE>
Appendix C
OCUREST ADVERSE REACTION COMPLAINT PROCEDURES
Responding to Adverse Reaction Complaints
1. Any complaint received by the Company that alleges an adverse reaction to
any product distributed by the Company will be forwarded to the individual
designated by the President to investigate and respond to product
complaints of any and all types ("Product Complaint Coordinator").
2. At the time of an oral complaint or by a return telephone call to a written
complaint, the Coordinator will advise the complainant of an alleged
adverse reaction that the complaint will be investigated. The Coordinator
during the call will obtain information required to prepare an Adverse
Reaction Complaint Report and arrange for the product to be returned for
analysis. After the call, the Coordinator will prepare the Adverse Reaction
Complaint Report ("ARCR") to include the following information:
a. Date received, complainant's name, address and telephone number.
b. The product's name, code number, lot number and expiration date.
c. A complete description of the nature of the complaint, including
whether treatment by a health care professional was involved (if so,
record the professional's name, address and telephone number).
3. As soon as possible after receiving a product complaint alleging an adverse
reaction, the Coordinator will notify the complainant in writing on the
results of the Company's investigation which may include other information
relevant to the complaint; a summary of any laboratory tests conducted;
and/or a summary of any manufacturing record review. Should the complainant
have contacted any regulatory agency, the Coordinator will send a copy of
the complaint response to the indicated agency after receiving approval to
do so from the President.
Investigating Adverse Reaction Complaints
1. The Coordinator will send the ARCR to Bausch & Lomb Pharmaceutical, Inc.
for immediate investigation. This investigation will determine whether or
not the complaint is an isolated incident; the result of the product's
non-compliance with stability specifications; the result of improper
packaging; and the date and lot number of manufacturing. Bausch & Lomb will
determine what further investigation is required, including laboratory
testing of returned product and obtaining of a medical opinion.
2. Bausch & Lomb will, once the investigation is completed, report the results
of the investigation to the Company, including the results of any and all
laboratory tests and a list of corrective actions taken or recommended. If
Bausch & Lomb decides that no investigation is necessary, this decision
will be communicated in writing to the Company, indicating the reasons for
the decision and references to previous situations of the same nature, if
any.
Maintaining Adverse Reaction Complaint Records
1. The Company will maintain a hard copy file for each adverse reaction
complaint, including all documentation relating to the investigation and
follow-up correspondence with the complainant and any regulatory agency
regarding the complaint. Such files will be retained for three calendar
years following the year in which the complaint was originally received.
2. The Company will maintain computerized data records kept on a quarterly
basis of all product complaints received, segregated by type and
description. Such records will be electronically stored and kept
permanently.
EXHIBIT 10.14
8500 Hidden River Parkway 813 975 7711
Tampa FL 33637 Fax 813 975 7701
Alan P. Dozier
Vice President and President BAUSCH
U.S. Pharmaceutical & LOMB
Healthcare and Optics
Worldwide
[LOGO]
October 4, 1995
Edmund G. Vimond
Chairman & CEO
Ocurest Laboratories, Inc.
4400 PGA Boulevard
Palm Beach Gardens, FL 33410
Dear Ed:
This communication will serve as an expression of Bausch & Lomb Pharmaceuticals'
intent to evaluate the potential for marketing selected ophthalmic
pharmaceutical products utilizing the Ocurest delivery system. Bausch & Lomb
Pharmaceuticals requests that Ocurest grant us an option to license, on mutually
agreed to terms, the Ocurest delivery system on an exclusive basis. The option
would remain open until December 31, 1995.
For and in consideration of this option, Bausch & Lomb Pharmaceuticals agrees to
pay Ocurest Laboratories, Inc. the sum of $10,000 (ten-thousand dollars). This
sum will be payable by applying a credit of $10,000 against Ocurest Laboratories
current accounts receivable balance with Bausch & Lomb Pharmaceuticals.
Upon election to pursue the license, Bausch & Lomb Pharmaceuticals agrees to
negotiate, in good faith, an agreement which contains a sliding royalty based on
net sales along the following lines:
$0 - $10 million 7%
$10 million - $20 million 6%
greater than $20 million 5%
To indicate Ocurest Laboratories' agreement with the terms of this option,
please sign and return the enclosed original of this letter, retaining one of
the enclosed originals for your records. Upon receipt of the signed document,
Bausch & Lomb Pharmaceuticals will process the appropriate paperwork for the
$10,000 credit.
Sincerely,
/s/ Alan P. Dozier
- ----------------------------------
Alan P. Dozier
Vice President and President Agreed:
Pharmaceutical Division Ocurest Laboratories, Inc.
/s/ Edmund G. Vimond
------------------------------------
Edmund G. Vimond, Chairman & CEO
EXHIBIT 10.15
Interoffice
Memo
BAUSCH & LOMB
Healthcare and Optics
Worldwide
March 27, 1996
Edmund G. Vimond
Chairman & CEO
Ocurest Laboratories, Inc.
4400 PGA Boulevard
Palm Beach Gardens, FL 33410
Dear Ed:
Bausch & Lomb Pharmaceutical is interested in extending our option to license
the Ocurest delivery system (as outlined in my letter to you on October 4, 1995)
until December 31, 1996. I am requesting the extension of this option to allow
sufficient time to evaluate the potential for marketing selected ophthalmic
pharmaceutical products utilizing this delivery system.
Under the terms of this extension, there would be no additional payments to
Ocurest for consideration of the extension of the option. To indicate Ocurest
Laboratories' agreement with the terms of this extension, please sign and return
the enclosed original of this letter, retaining one of the enclosed originals
for your records.
Sincerely,
/s/ Alan P. Dozier
- ----------------------------------
Alan P. Dozier
Vice President and President Agreed:
Pharmaceutical Division Ocurest Laboratories, Inc.
/s/ Edmund G. Vimond
------------------------------------
Edmund G. Vimond, Chairman & CEO
EXHIBIT 10.16
[LOGO]
WHEATON
P L A S T I C P R O D U C T S
[LETTERHEAD]
Ocurest Laboratories, Inc.
4400 PGA Boulevard
Suite 300
Palm Beach Gardens, FL 33410
Attn: Mr. Edmund G. Vimond Jr. President and CEO
Dear Mr. Vimond:
It is agreed beginning January 1, 1996, that Ocurest Laboratories will
purchase, and Wheaton Plastic Products will sell, all of Ocurest Laboratories'
requirements for the items listed on Wheaton's enclosed price quotations
941287C, 941288B, and 941292B dated 6/13/95, except in the case of capacity
constraints. This agreement is for three years, terminating on December 31,
1998. It is based on Ocurest Laboratories' commitment to pay for the molds and
mold upgrades described by the above quotations. It is further predicated on
Ocurest Laboratories purchasing the above quoted items from Wheaton and no other
supplier for the life of this contract except in the case of disruption.
Prices will be adjusted according to the resin escalator/de-escalator
factors now in effect for any increase or decrease in thermoplastic resin
prices. Any other documented cost increases will be passed through on a
percentage basis. Other, undocumented cost changes will be passed through on the
basis of general increases or decreases which will not exceed 2.5% per year in
1996, and will not exceed 4.5% in 1997 and 1998.
All terms and conditions not expressly addressed in this agreement are
to be as set forth by the above quotations.
We are very pleased to reach this agreement and we look forward to a
long and mutually beneficial relationship. If this agreement is acceptable to
Ocurest Laboratories, please sign and return a copy.
Sincerely, Accepted:
Wheaton Plastic Products Ocurest Laboratories, Inc.
/s/ BRUCE W. STRAUSS 6/26/95 /s/ EDMUND G. VIMOND JR. 7/6/95
- ------------------------------------ -------------------------------
Bruce W. Strauss Date Edmund G. Vimond Jr. Date
Vice President, Sales Administration President and CEO
<PAGE>
[LOGO] WHEATON PLASTIC PRODUCTS PRICE QUOTATION
<TABLE>
<CAPTION>
6115 Old Harding Highway, Mays Landing, NJ 08330-2298
TEL: 609-625-4811 FAX: 609-625-2206
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Customer Number Customer Name Ouotation Date Quotation Number
0601 Ocurest Labs 06/13/95 941287C
- -------------------------------------------------------------------------------------------------
Illegible Number Part Description Number of Cavities Project Number
12259 Ocurest Cap 16 92083-8
- -------------------------------------------------------------------------------------------------
Gram Weight Plastic Resin Type Color Type Parts per Day Sales Representative
4.7 PP 5820 White 65,300 D. Donaldson
- -------------------------------------------------------------------------------------------------
</TABLE>
INJECTION MOLDED
ANNUAL QUANTITY: 1MM 2.5MM 5MM 10MM
MINIMUM PRODUCTION RUN: 25OM 500M 1MM 2.5MM
PART PRICE: $24.57/M $24.36/M $23.94/M $23.53/M
ADD FOR LOT CERTIFICATION: $25.00 net
PALLET CHARGE: $ 7.70 Each
TERMS AND CONDITIONS:
1. Net 30, FOB Wheaton Manufacturing Plant, Freight Collect.
2. Part costs are subject to change in relation to variations in the cost
of resin. For each $0.01/pound change in resin price, part price will
be increased/decreased $0.15/M.
3. Due to the current instability of the resin market, Wheaton Plastic Products'
acceptance of an order based on this quotation is based on the availability
of resin at the time of order.
4. Price includes lot control and ring and filter pack.
PACKAGING:
1. 1,200 parts tumble packed in standard Wheaton medium carton with polybag.
2. Palletizing.
MOLD PRICING AND DELIVERY PRICING AND CAVITIES DELIVERY
Production Tool $103,600 (16 Cavities) 20-22 Weeks
Above price is for complete production tool (cold runner).
- --------------------------------------------------------------------------------
MOLD, CHANGE PART AND FIXTURE DELIVERY TIMES COMMENCE ON RECEIPT OF BOTH
CUSTOMER SIGNED, APPROVED DRAWINGS AND WRITTEN PURCHASE ORDER. PLEASE ALLOW
TWO (2) WEEKS AFTER MOLD DELIVERY FOR SAMPLING.
- --------------------------------------------------------------------------------
MOLDED PART PAYMENT GENERAL TERMS AND CONDITIONS
- ------------------------------------------------
1. Cash with order, or with prior credit approval, net 30 days F O B plant of
manufacture. freight collect
2. Prices are subject to change to reflect a passthrough of changes in plastic
resin, colorant and other component costs purchased by Wheaton
3. Quoted prices are firm for thirty (30) days from the quotation date shown
above.
- --------------------------------------------------------------------------------
CUSTOM MOLD AND FIXTURE PAYMENT TERMS Exclusive use fee payable for construction
of both custom prototype and production molds and fixtures is total in cash, or
with prior credit approval 50% ot total price wiih purchase order, 40% on
Wheaton approved sample shipment and balance on customer approval All custom
molds and fixtures are the property ot Wheaton and will remain in its
possession, but are reserved exclusively to produce buyer's orders (except as
otherwise agreed to by buyer in writing) and all charges made with respect to
such custom molds and fixtures are tor this exclusive reservation. These custom
molds and fixtures will be made available by Wheaton to manufacture articles to
order, and will be maintained by Wheaton at its own expense subject to damage or
destruction by risks not ordinarily insurable. All custom molds and fixtures
will be considered obsolete if not used for production for a period of three
consecutive years and may be scrapped after the three year period, after 120
days written notice to the buyer.
- --------------------------------------------------------------------------------
Polyethylene Terephthalate (PET) injection blow molded clear & transparent
containers are produced under U. S. Patent No. 4,356,142 and other patents
pending.
================================================================================
This offer is subject to final
acceptance by Wheatin Plastic Products Wheaton Plastic Products
Home Office at Mays Landing NJ, and is
also subject to WHEATON STANDARD ORDER
CONTRACT TERMS AND CONDITIONS printed By: D. Shropshire/rop632
on the reverse side of this form. -----------------------------
Please refer to quotation number on all communications and orders.
================================================================================
QUOTE BOOK COPY
<PAGE>
[LOGO] WHEATON PLASTIC PRODUCTS PRICE QUOTATION
<TABLE>
<CAPTION>
6115 Old Harding Highway, Mays Landing, NJ 08330-2298
TEL: 609-625-4811 FAX: 609-625-2206
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Customer Number Customer Name Ouotation Date Quotation Number
0601 Ocurest Labs 06/13/95 941288B
- -------------------------------------------------------------------------------------------------
Illegible Number Part Description Number of Cavities Project Number
12258 Ocurest Controlled Dropper Tip 16 92082-8
- -------------------------------------------------------------------------------------------------
Gram Weight Plastic Resin Type Color Type Parts per Day Sales Representative
2.7 LDPE-NA249 White 73,400 D. Donaldson
- -------------------------------------------------------------------------------------------------
</TABLE>
INJECTION MOLDED
ANNUAL QUANTITY: 1MM 2.5MM 5MM 10MM
MINIMUM PRODUCTION RUN: 25OM 500M 1MM 2.5MM
PART PRICE: $21.30/M $21.11/M $20.74/M $20.37/M
ADD FOR LOT CERTIFICATION: $25.00 net
PALLET CHARGE: $ 7.70 Each
TERMS AND CONDITIONS:
1. Net 30, FOB Wheaton Manufacturing Plant, Freight Collect.
2. Part costs are subject to change in relation to variations in the cost
of resin. For each $0.01/pound change in resin price, part price will
be increased/decreased $0.09/M.
3. Due to the current instability of the resin market, Wheaton Plastic Products'
acceptance of an order based on this quotation is based on the availability
of resin at the time of order.
4. Price includes lot control and ring and filter pack.
PACKAGING:
1. 1,500 parts tumble packed in standard Wheaton medium carton with polybag.
2. Palletizing.
MOLD PRICING AND DELIVERY PRICING AND CAVITIES DELIVERY
Production Tool $91,700 (16 Cavities) 20-22 Weeks
Above price is for complete production tool (cold runner).
- --------------------------------------------------------------------------------
MOLD, CHANGE PART AND FIXTURE DELIVERY TIMES COMMENCE ON RECEIPT OF BOTH
CUSTOMER SIGNED, APPROVED DRAWINGS AND WRITTEN PURCHASE ORDER. PLEASE ALLOW
TWO (2) WEEKS AFTER MOLD DELIVERY FOR SAMPLING.
- --------------------------------------------------------------------------------
MOLDED PART PAYMENT GENERAL TERMS AND CONDITIONS
- ------------------------------------------------
1. Cash with order, or with prior credit approval, net 30 days F O B plant of
manufacture. freight collect
2. Prices are subject to change to reflect a passthrough of changes in plastic
resin, colorant and other component costs purchased by Wheaton
3. Quoted prices are firm for thirty (30) days from the quotation date shown
above.
- --------------------------------------------------------------------------------
CUSTOM MOLD AND FIXTURE PAYMENT TERMS Exclusive use fee payable for construction
of both custom prototype and production molds and fixtures is total in cash, or
with prior credit approval 50% ot total price wiih purchase order, 40% on
Wheaton approved sample shipment and balance on customer approval All custom
molds and fixtures are the property ot Wheaton and will remain in its
possession, but are reserved exclusively to produce buyer's orders (except as
otherwise agreed to by buyer in writing) and all charges made with respect to
such custom molds and fixtures are tor this exclusive reservation. These custom
molds and fixtures will be made available by Wheaton to manufacture articles to
order, and will be maintained by Wheaton at its own expense subject to damage or
destruction by risks not ordinarily insurable. All custom molds and fixtures
will be considered obsolete if not used for production for a period of three
consecutive years and may be scrapped after the three year period, after 120
days written notice to the buyer.
- --------------------------------------------------------------------------------
Polyethylene Terephthalate (PET) injection blow molded clear & transparent
containers are produced under U. S. Patent No. 4,356,142 and other patents
pending.
================================================================================
This offer is subject to final
acceptance by Wheatin Plastic Products Wheaton Plastic Products
Home Office at Mays Landing NJ, and is
also subject to WHEATON STANDARD ORDER
CONTRACT TERMS AND CONDITIONS printed By: D. Shropshire/rop631
on the reverse side of this form. -----------------------------
Please refer to quotation number on all communications and orders.
================================================================================
QUOTE BOOK COPY
<PAGE>
[LOGO] WHEATON PLASTIC PRODUCTS PRICE QUOTATION
<TABLE>
<CAPTION>
6115 Old Harding Highway, Mays Landing, NJ 08330-2298
TEL: 609-625-4811 FAX: 609-625-2206
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Customer Number Customer Name Ouotation Date Quotation Number
0601 Ocurest Labs 06/13/95 941292B
- -------------------------------------------------------------------------------------------------
Illegible Number Part Description Number of Cavities Project Number
23344 15 cc Oval Eye Dropper Bottle 14 82-90A
- -------------------------------------------------------------------------------------------------
Gram Weight Plastic Resin Type Color Type Parts per Day Sales Representative
4.1 PP Rexene 23M2 White 69,000 D. Donaldson
- -------------------------------------------------------------------------------------------------
</TABLE>
INJECTION BLOW MOLDED
ANNUAL QUANTITY: 10MM
MINIMUM PRODUCTION RUN: 25OM 500M 1MM 2.5MM
PART PRICE: $43.21/M $42.84/M $42.09/M $41.34/M
PALLET CHARGE: $ 7.70 Each
BATCH CERTIFICATION: $25.00 net
TERMS AND CONDITIONS:
1. Net 30, FOB Wheaton Manufacturing Plant, Freight Collect.
2. For each $0.01/pound change in resin price, part price will
be increased/decreased $0.13/M on 15 dys written notice.
3. For each one gram change in part weight, part price will
increased/decreased $2.49/M
4. Price includes lot control and ring and filter pack.
5. Due to the current instability of the resin market, Wheaton Plastic
Products' acceptance of an order based on this quotation is based on the
availability of resin at the time of order.
PACKAGING:
1. 700 parts tumble packed in standard Wheaton medium carton with
double polybags with rings and filters.
2. Unitizing and palletizing.
MOLD PRICING AND DELIVERY PRICING AND CAVITIES DELIVERY
Upgrade from 3 to 14 Cavities $109,000 10-12 Weeks
- --------------------------------------------------------------------------------
MOLD, CHANGE PART AND FIXTURE DELIVERY TIMES COMMENCE ON RECEIPT OF BOTH
CUSTOMER SIGNED, APPROVED DRAWINGS AND WRITTEN PURCHASE ORDER. PLEASE ALLOW
TWO (2) WEEKS AFTER MOLD DELIVERY FOR SAMPLING.
- --------------------------------------------------------------------------------
MOLDED PART PAYMENT GENERAL TERMS AND CONDITIONS
- ------------------------------------------------
1. Cash with order, or with prior credit approval, net 30 days F O B plant of
manufacture. freight collect
2. Prices are subject to change to reflect a passthrough of changes in plastic
resin, colorant and other component costs purchased by Wheaton
3. Quoted prices are firm for thirty (30) days from the quotation date shown
above.
- --------------------------------------------------------------------------------
CUSTOM MOLD AND FIXTURE PAYMENT TERMS Exclusive use fee payable for construction
of both custom prototype and production molds and fixtures is total in cash, or
with prior credit approval 50% ot total price wiih purchase order, 40% on
Wheaton approved sample shipment and balance on customer approval All custom
molds and fixtures are the property ot Wheaton and will remain in its
possession, but are reserved exclusively to produce buyer's orders (except as
otherwise agreed to by buyer in writing) and all charges made with respect to
such custom molds and fixtures are tor this exclusive reservation. These custom
molds and fixtures will be made available by Wheaton to manufacture articles to
order, and will be maintained by Wheaton at its own expense subject to damage or
destruction by risks not ordinarily insurable. All custom molds and fixtures
will be considered obsolete if not used for production for a period of three
consecutive years and may be scrapped after the three year period, after 120
days written notice to the buyer.
- --------------------------------------------------------------------------------
Polyethylene Terephthalate (PET) injection blow molded clear & transparent
containers are produced under U. S. Patent No. 4,356,142 and other patents
pending.
================================================================================
This offer is subject to final
acceptance by Wheatin Plastic Products Wheaton Plastic Products
Home Office at Mays Landing NJ, and is
also subject to WHEATON STANDARD ORDER
CONTRACT TERMS AND CONDITIONS printed By: D. Shropshire/rop1704
on the reverse side of this form. -----------------------------
Please refer to quotation number on all communications and orders.
================================================================================
QUOTE BOOK COPY
EXHIBIT 10.19
Ocurest Laboratories, Inc.
4400 PGA Boulevard o Suite 800 o Palm Beach Gardens, FL 33410
Tel (407) 627-8121
Fax (407) 627-7954
CONSULTING AGREEMENT
This CONSULTING AGREEMENT ("Agreement") is made as of the 20th day of
February, 1995 by and between Ocurest Laboratories, Inc., a Florida corporation
(hereinafter called the "Company") and Joseph Morano dba Morano Associates, Inc.
(hereinafter called the "Consultant").
WHEREAS, the Company believes it is in the Company's best interest to
retain the Consultant, and the Consultant desires to be retained by the Company;
and
WHEREAS, the Company and the Consultant desire to set forth the terms and
conditions on which the Consultant shall be retained 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. Retainer. The Company hereby retains the Consultant in its business and
the Consultant hereby accepts such retainment, all upon the terms and conditions
hereinafter set forth.
2. Term. Unless sooner terminated pursuant to the provisions of this
Agreement, the term of this Agreement shall be for a period of twenty four (24)
months commencing January 1, 1995 and terminating December 31, 1996.
3. Compensation: The Consultant shall be entitled to receive a consulting
fee during the term of this Agreement of Five Thousand Eight Hundred Thirty
Three and 34/100 Dollars ($5,833.34) per month; provided, however, the
consulting fee shall be increased to Eight Thousand Three Hundred Thirty Three
and 34/100 ($8,333.34) per month in the month Ocurest shipments commence in an
area representing sixty five percent (65.0%) or more of the United States adult
population. The consulting fee shall be payable no less frequently than monthly
and no later than the fifteenth (15th) day of each such month.
4. Services: The Consultant shall report to the President & Chief Executive
Officer of the Company and shall carry the title Vice President--Sales or other
appropriate title selected by the
<PAGE>
Company. In this capacity, the Consultant shall have direct responsibility for
managing the Company's sales and trade promotion activities and for achieving
trade distribution of the Company's products. The Consultant shall devote a
significant portion of his available 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.
5. Confidentiality: Consultant may be given access to or become acquainted
with confidential information, trade secrets, documents, reports,
correspondence, lists and other written records. During the term of this
Agreement and at all times thereafter, the Consultant 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 aforementioned information
and materials which he may have acquired in the course of his retainment by the
Company.
6. Expenses: Ordinary and necessary travel expenses incurred by the
Consultant shall be reimbursed by the Company upon submission of appropriate
documentation.
7. Death or Incapacity: In the event of the permanent incapacity of the
Consultant, 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 Consultant
during the term of the Agreement, the Consultant's retainment hereunder shall
terminate immediately upon such death or determination of incapacity. The
Company shall thereupon be obliged to pay to the Consultant or the Consultant's
estate all consulting fee amounts owed to the Consultant which have accrued
until the date of such death or determination of incapacity plus six months of
the Consultant's consulting fee at the time of such death or incapacity.
8. Termination: The Company shall be entitled to terminate the retainment
of the Consultant for "just cause" or without cause. The Consultant 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 Consultant
involving the commission of any criminal act, act of moral turpitude, any
fraudulent or dishonest act in connection with services rendered hereunder, or a
material breach of any provision of this Agreement.
Any termination of the Agreement 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 Agreement by the Consultant or by the Company for
just cause, the Consultant shall not be entitled to any severance compensation
and shall only be paid the consulting fee amounts accrued through the date of
termination. In the event the
2
<PAGE>
Agreement is terminated by the Company without cause, the Consultant shall be
entitled to consulting fee amounts accrued through the date of termination plus
severance compensation equal to twelve months of the Consultant's consulting fee
at the time of the termination.
9. 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.
10. Assignments: The Consultant shall not assign his rights and/or
obligations hereunder without the prior written consent of the Company.
11. Choice of 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 in accordance with the laws of the State of Florida.
12. 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.
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.
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, Jr. /s/ Joseph Morano
- ----------------------------------- -----------------------------------
Edmund G. Vimond, Jr. Joseph Morano
President dba Morano Associates, Inc.
3
<PAGE>
ADDENDUM TO CONSULTING AGREEMENT
This Addendum amends the Consulting Agreement dated February 20, 1995
between Ocurest Laboratories and Joseph Morano dba Morano Associates, Inc.
The Company and Consultant hereby confirm their agreement that the
compensation specified in the Consulting Agreement shall not be increased in the
first month Ocurest shipments commence in an area representing sixty five
percent (65.0%) or more of the United States adult population, but shall be
maintained at a consulting fee of Five Thousand Eight Hundred Thirty Three and
34/100 Dollars ($5,833.34)per month for the remaining term of the Consulting
Agreement.
Dated: December 7, 1995. OCUREST LABORATORIES, INC.
By: /s/ Edmund G. Vimond, Jr.
-------------------------------
Edmund G. Vimond, Jr.
President
-------------------------------
Joseph Morano
dba Morano Associates, Inc.
EXHIBIT 10.20
Ocurest Laboratories, Inc.
4400 PGA Boulevard - Suite 800 - Palm Beach Gardens, FL 33410
Tel (407) 627-8121
Fax (407) 627-7954
CONSULTING AGREEMENT
This CONSULTING AGREEMENT ("Agreement") is made as of the 17th day of
February, 1992 by and between Ocurest Laboratories, Inc., a Florida corporation
(hereinafter called the "Company") and Dr. Leonard L. Kaplan (hereinafter called
the "Consultant").
WHEREAS, the Company believes it is in the Company's best interest to
retain the Consultant, and the Consultant desires to be retained by the Company;
and
WHEREAS, the Company and the Consultant desire to set forth the terms and
conditions on which the Consultant shall be retained 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. Retainer. The Company hereby retains the Consultant in its business and
the Consultant hereby accepts such retainment, all upon the terms and conditions
hereinafter set forth.
2. Term. Unless sooner terminated pursuant to the provisions of this
Agreement, the term of this Agreement shall be for a period of three years,
commencing on the effective date of any registration statement filed by the
Company with the Securities and Exchange Commission relating to an initial
public offering of shares of the Company's equity securities.
3. Compensation: The Consultant shall be entitled to receive a consulting
fee during the term of this Agreement of
<PAGE>
Three Thousand Dollars ($3,000.00) per month during the first eighteen months of
the Agreement and Four Thousand Dollars ($4,000.00) per month during the second
eighteen months of the Agreement ("Consulting Fee"). Such fee shall be payable
no less frequently than monthly and no later than the fifteenth (15th) day of
each such month.
4. Services: The Consultant shall devote up to four (4) days per month to
provide the President & Chief Executive Officer of the Company or his designees
with technical services relating to the Company's ophthalmic pharmaceutical
products. These technical services shall include, but not necessarily be limited
to:
a. Overseeing the Company's product development activities, consisting
of formulation selections and testing of such formulations that may be
required in compliance with Food & Drug Administration ("FDA") regulations;
b. Reviewing product labeling and advertising claims for the purpose
of assuring the Company that such labeling and claims are technically
supportable and in compliance with FDA regulations;
c. Installing and overseeing the Company's quality control and quality
assurance procedures to ensure adherence to the Company's desired product
quality standards in conformance with FDA Good Manufacturing Practices
requirements.
d. Organizing and chairing a Medical Advisory Committee whose purpose
shall be to advise the Company of scientific and medical developments that
bear on the Company's business and marketing strategies.
5. Per Diem Supplement: In any calendar quarter in which the Consultant
shall be called upon to devote more than twelve (12) days to perform the
aforementioned services, the Company shall pay the Consultant a per diem fee of
Eight Hundred Fifty
2
<PAGE>
Dollars ($850.00) for each additional day of services performed; provided,
however, the Consultant shall obtain the approval of the Chief Executive Office
before undertaking such additional day or days of services at the aforementioned
per diem rate.
6. Confidentiality: In the course of the Consultant's retainment hereunder,
the Consultant may be given access to or become acquainted with confidential
information, trade secrets, documents, reports, correspondence, lists and other
written records. During the term of this Agreement and at all times thereafter,
the Consultant 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 aforementioned information and materials which he may have
acquired in the course of his retainment by the Company.
7. Expenses: Ordinary and necessary travel expenses incurred by the
Consultant shall be reimbursed by the Company upon submission of appropriate
documentation.
8. Death or Incapacity: In the event of the permanent incapacity of the
Consultant, defined as ninety (90) days continuous incapacity or one hundred
twenty (120) days of intermittent incapacity in any twelve (12) month period, or
the death of the Consultant during the term of the Agreement, the Consultant's
retainment hereunder shall terminate upon such death or determination of
incapacity. The Company shall thereupon be obliged to pay to the Consultant or
the Consultant's estate Consulting Fee amounts owed to the Consultant which have
accrued until the date of such death or determination of incapacity.
9. Termination: The Consultant shall be entitled to terminate this
Agreement at any time or for any reason upon thirty (30) days prior written
notice to the Company. In the event of such termination by the Consultant, the
Consulting Fee for the remaining term of this Agreement shall be terminated, and
the
3
<PAGE>
Consultant shall be paid only the Consulting Fee amounts accrued through the
date of termination.
The Company shall be entitled to terminate this Agreement at any time and
for any reason upon thirty days prior written notification to the Consultant. In
the event of such termination by the Company, the Consultant shall be entitled
to Consulting Fee amounts accrued through the date of termination plus the
balance of the Consulting Fee which, but for termination, would have been
payable over the remaining term of this Agreement. Such payment shall be due and
payable in one (1) lump sum within thirty (30) days of the date of termination.
9. 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.
10. Assignments: The Consultant shall not assign his rights and/or
obligations hereunder without the prior written consent of the Company.
11. Choice of 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 in accordance with the laws of the State of Florida.
12. 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.
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
4
otherwise changed only with and by the mutual written consent of both 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, Jr. /s/ Dr. Leonard L. Kaplan
-------------------------------- ------------------------------------
Edmund G. Vimond, Jr. Dr. Leonard L. Kaplan
President
5
<PAGE>
ADDENDUM TO CONSULTING AGREEMENT
This Addendum amends the Consulting Agreement dated February 17, 1992
between Ocurest Laboratories and Dr. Leonard L. Kaplan.
The Company and Consultant hereby confirm their agreement that the
Consulting Agreement began April 1, 1994 and terminates March 31, 1997 and that
the compensation specified in the Consulting Agreement for the second eighteen
months of the term starting September 1, 1995 is hereby changed retroactively to
Three Thousand Dollars ($3,000.00) per month.
Dated: December 7, 1995. OCUREST LABORATORIES, INC.
By:_____________________________
/s/ Edmund G. Vimond, Jr.
President
--------------------------------
/s/ Dr. Leonard L. Kaplan
6
EXHIBIT 10.21
LOAN AGREEMENT
This Loan Agreement (the "Agreement") is made this 1st day of April, 1996,
by and between the Lender and the Borrower to become effective upon the
Effective Date.
WHEREAS, the Partnership may elect to be a "Business Development Company",
which is subject to the Investment Company Act of 1940 (15 U.S.C. Section 80b-1
et. seq.), as amended, with stated investment objectives to invest its assets
and to provide management services to business operations which demonstrate
potential for long-term capital growth and which would benefit from public
ownership, and;
WHEREAS, the Borrower has determined that it is a pre-public company with
demonstrated potential for long-term capital growth and which would benefit from
public ownership, and that it requires financing and other assistance to become
publicly-held, and has reviewed the requirements for NASDAQ listing, and;
WHEREAS, the Borrower, recognizing the scope of the Partnership's business
as described in its Offering Memorandum, seeks assistance from the Lender to
provide the Borrower with necessary financing and other assistance, and;
WHEREAS the Borrower intends to propose an initial public offering of its
common stock (the "Offering"), and in connection with the Offering and the
operation of its business has requested that the Lender assist the Borrower with
the Offering, and;
WHEREAS the Lender is willing to provide the Borrower with necessary
short-term financing and other assistance needed to prepare the Borrower for the
Offering subject to and in accordance with the terms and conditions contained
herein,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Lender and the Borrower, intending to be
legally bound hereby, agree as follows.
A. Terms of Financing.
1. PRINCIPAL AMOUNTS. During the Lender's due diligence period, the
Lender will recommend the total efforts and costs needed to complete
the Offering within the scope of the Partnership's business. The
Lender, based upon its due diligence, will then determine the amounts
to be advanced or charged pursuant to this Agreement. The Lender will
finance the reasonable and necessary expenses, including due
diligence, legal, audit, organization, necessary printing,
registration, marketing of the Borrower's stock, and other fees that
would otherwise not be incurred, except for preparation for the
Offering.
2. EXPENSES. The General Partner, in its role as Investment Banking
consultant, will introduce to the Borrower certain professionals
(attorneys, accountants, etc.) to assist the Borrower during the
Offering. The Lender shall include as part of its advance all
necessary expenses incurred by these professionals as a result of
preparing for the Offering. If the Borrower uses other professionals
not recommended by the Lender, the Lender shall be responsible for
advancing only the reasonable expenses incurred by those professionals
as a result of preparing for the Offering. The General Partner, in its
sole discretion, shall determine which expenses are necessary and
reasonable. The Borrower shall cooperate fully with the Lender in
obtaining detailed breakdowns of all expenses it incurs.
3. Payment of Principal. The Principal Amount, along with interest as
provided under paragraph 4 below, shall be payable in full upon the
Maturity Date. It is anticipated that the Principal Amount will not
exceed the Maximum Amount, without agreement of the Borrower and the
Lender.
3
<PAGE>
4. INTEREST PAYMENTS. Interest on the Note will be calculated based upon
the Principal Amount and will accrue from the dates of the advances.
5. COMPUTATION OF INTEREST. Interest shall be calculated on the basis of
the actual number of days elapsed over a three hundred sixty-five
(365) day year.
6. SECURITY. Each Note shall be secured by the Collateral owned, owed to,
or controlled by the Borrower upon the date of this Agreement and
acquired later. The Borrower agrees to execute a Security Agreement or
similar document in favor of the Lender, and to execute whatever other
documents are necessary for the Lender to perfect its interest in the
Collateral. The Borrower agrees further to execute a UCC-1 financing
statement in a form appropriate for filing with the appropriate state
or county agencies. Any entities owned or controlled by the Borrower,
or any such entities that are acquired by or come under the control of
the Borrower at any time prior to the Note being fully paid
(collectively, "Subsidiaries"), shall become a party to the Note and
the Security Agreement. Collateral of the type described in the
Security Agreement that is owned, owed to, or controlled by the
Subsidiary upon the date of this Agreement or at the date on which
that entity becomes a Subsidiary, or that is acquired later by the
Subsidiary, shall become additional security for the Lender. Each
Subsidiary will execute a Security Agreement identical to that signed
by the Borrower, and will execute a UCC-1 financing statement in a
form appropriate for filing with the appropriate state or county
agencies. The costs of all such filings shall be borne by the
Borrower.
7. PREPAYMENT. The Borrower may prepay any amounts due hereunder without
penalties or premiums.
B. EQUITY INVESTMENT. The Borrower and Lender acknowledge and agree that:
1. WARRANTS.
a. The Lender agrees to purchase, and the Borrower agrees to sell to
the Lender, the Bridge Warrants entitling the Lender to purchase
TWENTY FIVE THOUSAND (25,000) shares of Borrower's common stock
to be "piggybacked" with the first right of registration at the
Offering. The Bridge Warrants will contain an anti-dilution
clause. The purchase price for the Bridge Warrants shall be ONE
DOLLAR ($1.00). The Bridge Warrants may be exercised at the
Offering Date, and are non-callable.
b. The Lender agrees to purchase, and the Borrower agrees to sell to
the Lender, the IPO Warrants entitling the Lender to purchase
FIFTY THOUSAND (50,000) shares of Borrower's common stock. The
IPO Warrants will contain an anti-dilution clause, but it is
understood and agreed that a one-time 50% dilution may occur at
the time of the Offering. The purchase price for the IPO Warrants
shall be ONE DOLLAR ($1.00). The IPO Warrants may be exercised at
any time during the five (5) year period beginning six (6) months
after the Offering Date and are non-callable for a period of two
years after the Offering Date.
c. The Borrower acknowledges the Lender's intention to distribute
the Bridge Warrants and the IPO Warrants to the limited partners
of the Fund.
2. REGISTRATION OF SHARES. If the Borrower completes the Offering, the
Shares will be registered for resale with the Securities and Exchange
Commission, along with the common stock sold as part of the Offering,
on a Registration Statement under the Securities Act of 1933 as
amended, (the "Federal Securities Act," 15 U.S.C. Section 77a et seq.)
and with the appropriate states pursuant to their securities laws,
(the state security laws and the Federal Securities Act are referred
to collectively as the "Securities Act"). The responsibility for
registering the Shares, and all costs incurred in doing so, rests
solely with the Borrower. The Lender acknowledges that the Securities
will be issued pursuant to an exemption from the Federal Securities
Act and, where they exist,
4
<PAGE>
from the securities laws of the various states. The Lender agrees to
execute such investment representations and agrees to such transfer
restrictions as shall be legally required to obtain such exemptions.
In the event that the Offering is not completed, the Borrower agrees
to use its best efforts to include the Securities in any subsequent
public offering of the Borrower's securities.
3. PROHIBITED COMBINATIONS. The Borrower shall not, directly or
indirectly, enter into any merger, consolidation, or reorganization
(collectively, a "Combination") in which the Borrower shall not be the
surviving corporation, unless the proposed surviving entity shall,
prior to such combination, agree in writing to assume the Borrower's
obligations under this Agreement and its exhibits. For that purpose,
references hereunder to any shares of the Borrower's stock shall be
deemed to be references to the securities that the Borrower's
stockholders would be entitled to receive in exchange for their shares
under any such Combination.
4. PERMITTED COMBINATIONS. The provisions of this Agreement, however,
shall apply in the event of any Combination in which the Borrower is
not the surviving corporation if all stockholders of the Borrower are
entitled to receive in exchange for their shares consideration
consisting mainly of (i) cash, (ii) securities of the acquiring or
surviving entity that may be sold immediately to the public without
registration under the Securities Act, or (iii) securities of the
acquiring or surviving entity that the acquiring or surviving entity
has agreed to register within ninety (90) days of completion of the
Combination for resale to the public pursuant to the Securities Act.
Except as provided, the provisions of this Agreement shall be binding
upon, and shall inure to the benefit of, the respective successors,
assigns, heirs, executors and administrators of the Borrower and the
Lender.
C. (RESERVED)
D. MANAGEMENT CONSULTING. The Borrower agrees that the advances contemplated
herein may finance certain services to be provided by the Lender, including
management consulting services provided by the General Partner. These
services shall be provided for a period of three (3) years from the
Effective Date or until the Offering Date, whichever occurs first.
E. INVESTMENT BANKING. As an additional service, the Borrower has entered into
an agreement to use the General Partner as its non-exclusive investment
banking consultant. The Borrower acknowledges that charges for such
services will be billed as incurred, or pursuant to a later agreement
between the parties. It is not anticipated that charges for these services
will be included in the advances described in this Agreement.
F. SUBSEQUENT FUND RAISING. During the one-year period following the
completion of the Offering, the Borrower agrees to provide the Lender a
right of first refusal in the event the Borrower decides to raise funds
through subsequent public offerings of debt or equity. The Borrower will
provide the Lender with written notice of the terms of any bona-fide offer
from another investment banking firm. The Lender shall have ten (10) days
from receipt of such notice to propose a contract to the Borrower on
substantially the same terms. The Lender must notify the Borrower within
five (5) business days of its decision, and, if it chooses to reject the
Borrower's proposal, must notify the Borrower of any defects in the
Borrower's proposal and give the Borrower two (2) business days to cure
these defects. If the defects are cured, the Lender must accept the
Borrower's proposal. During the entire period beginning when the Borrower
sends the required ten day notice, the Borrower may not solicit or accept
proposals from additional firms.
G. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower represents and
warrants to the Lender that:
1. ORGANIZATION. The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the Incorporation
State, and is duly qualified as a foreign corporation in good standing
under the laws of each jurisdiction in which it is required to be
qualified because of the business it conducts or the property that it
owns.
5
<PAGE>
2. AUTHORITY. The Borrower has the necessary power, authority and legal
right to own or lease its assets and to engage in its business as now
conducted. It has the necessary power, authority, and legal right to
enter into and perform the obligations imposed by this Agreement and
the Related Documents. The execution and performance of this Agreement
has been duly authorized by all necessary proceedings and will, upon
their execution and delivery, be valid, binding and enforceable in
accordance with its terms.
3. NO CONFLICT. The terms of this Agreement and of the Related Documents
will not conflict with, result in a breach of any provision of, or
constitute a default (or an event which would constitute a default
upon the giving of any required notice or upon a lapse of time) under
Borrower's articles of incorporation, by-laws, or the provisions of
any agreement, contract or administrative order, consent decree, or
other instrument to which the Borrower is a party.
4. NO ACTIONS. There are no actions, suits or proceedings, pending or
threatened, against the Borrower in any court or before any
administrative agency, which would prevent the Borrower from
completing the transactions provided for in this Agreement.
5. RELIANCE OF THE LENDER. The Borrower affirms and agrees that the
representations, warranties, agreements, undertakings and
acknowledgments made by him pursuant to this Agreement are made with
the intent that they be relied upon by the Lender in determining the
potential for the Borrower to satisfy the requirements for NASDAQ
listing and otherwise as a candidate for a successful initial public
offering. In addition, the Lender agrees to notify the Borrower
immediately of any change in any representation, warranty or other
information relating to the Lender as set forth herein.
H. REPRESENTATIONS AND WARRANTIES OF THE LENDER. The Lender represents and
warrants to the Borrower that:
1. INVESTMENT PURPOSE. The Lender is acquiring the Instruments for its
own account, for investment purposes only.
2. ABILITY TO BEAR RISK. The Lender has the financial ability to bear the
economic risk of this investment in the Borrower, including a complete
loss of such investment, has adequate means for providing for its
current financial needs and possible personal contingencies, and has
no need for liquidity with respect to this investment.
3. ACCREDITED AND SOPHISTICATED INVESTOR. The Lender is an "accredited
investor" as that term is defined in Rule 501(a) under Regulation D
promulgated pursuant to the Federal Securities Act.
4. RELIANCE OF THE BORROWER. The Lender affirms and agrees that the
representations, warranties, agreements, undertakings and
acknowledgments made by him pursuant to this Agreement are made with
the intent that they be relied upon by the Borrower in determining the
suitability of the Lender as a recipient of the Securities, and shall
survive the Lender's receipt of same. In addition, the Lender agrees
to notify the Borrower immediately of any change in any
representation, warranty or other information relating to the Lender
as set forth herein.
I. Default.
1. EVENTS OF DEFAULT.
a. PAYMENTS. It shall be an event of default hereunder if the
Borrower fails to make any payment under the terms of this
Agreement and the Notes when due.
b. DUE DILIGENCE. The Borrower will cooperate as the Lender performs
its "due diligence" to confirm the Borrower as an IPO candidate.
The Borrower warrants that all information supplied to the Lender
is materially true, correct and complete. It shall be an
6
<PAGE>
event of default under the Note if the Borrower does not
cooperate with the Lender in its "due diligence" or should any of
the information it supplies to the Lender shall be materially
untrue, incorrect or incomplete, or if, upon the completion of
the due diligence, the Borrower refuses to execute a Note to the
Lender.
2. REMEDIES. The Lender is permitted to recover from the Borrower all
costs incurred in collecting the amounts due, including reasonable
attorney fees (the "Collection Costs"). Upon the occurrence of such an
event of default, the total amounts due to the Lender, including the
Collection Costs, shall accrue interest at the Default Interest Rate.
The Lender may, at its option,
a. notify the Borrower that the entire amounts due under all of the
Notes (or, if the Notes have not yet been issued, all charges for
services and expenses incurred by the Lender during the due
diligence period), together with Collection Costs permitted by
this section are due and payable immediately. The Lender may
immediately terminate its obligations under this Agreement and
may enforce all of its rights at law or in equity that are
available pursuant to the Note and the Security Agreement, or
b. notify the Borrower of the event of default and permit the
Borrower to cure the default by remitting all payments plus
Collection Costs permitted by this section to the Lender within
five (5) days. At the expiration of the cure period, the Lender
may immediately invoke the remedy indicated in paragraph a. above
or may extend the cure period without additional notice.
Any notice required by this section is proper if sent by facsimile
service.
J. FAILURE TO COMPLETE OFFERING.
1. REASONS.
a. BORROWER'S CANCELLATION. The Borrower may determine that it is no
longer in its best interest to proceed with the Offering. Upon making such
a determination, the Borrower shall give the Lender written notice of its
intentions.
b. LENDER'S CANCELLATION. Due to market conditions, the condition of
the Borrower as determined during the Lender's due diligence period, or
other events, it may be infeasible to proceed to the Offering. For example,
the Lender may not be able to procure an underwriter who will enter into a
contract for a firm commitment, or the Borrower may not be able to satisfy
the conditions for NASDAQ listing. The Lender will use its best efforts to
complete the Offering. If it is not able to do so, however, it will notify
the Borrower immediately.
2. RESULTING OBLIGATIONS. All expenses incurred by the Lender, and all of
the Lender's charges shall be reimbursed by the Borrower whether or
not a Note has yet been executed. In the event that the Lender
canceled the Offering, the Borrower shall execute a Note payable six
(6) months from the date the Lender's notice is given. If the Borrower
canceled the Offering, the Borrower must reimburse the Lender within
two (2) business days of the required notice to the Lender. Borrower
acknowledges that the Lender will incur certain charges during the
due-diligence period. It is agreed by both parties that the these
charges, which include out-of-pocket expenses and hourly charges for
review of documents by the General Partner, will be included in the
Principal Amount. For purposes of this section J, these charges shall
be stated to be TEN THOUSAND DOLLARS ($10,000.00).
K. MISCELLANEOUS.
1. NOTICES. Except as provided elsewhere in the Transaction Documents,
all notices, requests, demands and other communications relating to
the Transaction Documents shall be in writing,
7
<PAGE>
delivered personally to the other party or its agent, or sent by
registered or certified mail, postage prepaid, to the Notice Address
shown on the Term Sheet. The Lender or the Borrower may, by written
notice given to the other in accordance with the terms hereof,
designate additional or different addresses for subsequent notice or
communications. Notices sent in accordance with this section shall be
effective three days after placement in the mails, whether or not
receipt is acknowledged. Where Notice is expressly permitted to be
made by facsimile service, such notice is effective when received, if
it is received prior to 5:00 p.m. on a Business Day, or, if not, then
at 9:00 a.m. on the following Business Day. Notices delivered
personally are effective immediately.
2. COSTS AND EXPENSES. Whether or not the transactions contemplated by
the Transaction Documents are fully consummated, the Borrower and the
Lender each agree to pay the costs and expenses they have incurred or
may hereafter incur in connection with the negotiation and preparation
of this Agreement.
3. NO GUARANTEE. Nothing contained in this Agreement or in any of the
Transaction Documents shall be interpreted as a guarantee by the
Lender that the Offering will be able to proceed, that the Lender will
be able to attract an Underwriter to participate in the Offering on a
full commitment basis, or that any other events that are dependent
upon third parties, or which are beyond the control of the Lender,
will occur.
4. ACCESS TO INFORMATION. The Lender has been and will be provided an
opportunity to obtain all information concerning or related to the
Borrower, the Transaction Documents and the Instruments and to ask
questions of and receive answers from authorized representatives of
the Borrower concerning the same, and other matters pertaining to the
Borrower, as the Lender deems necessary to make an investment decision
regarding this investment. The Lender has been and will be given the
opportunity to obtain such additional information as may be necessary
to verify the accuracy of any information requested from the Borrower.
Lender will continue to have access to all information of the Borrower
and its Subsidiaries, including but not limited to legal opinions,
financial statements and similar documents, for a period of three (3)
years from the Offering Date. The General Partner shall be the
recipient of all information to be disclosed or distributed to the
limited partners of the Partnership.
5. CONFIDENTIALITY. The parties recognize that certain information
provided to the Lender is considered by the Borrower to be
confidential. The Borrower will identify such information as
confidential, and the Lender and its agents will not make such
information available to others or use such information, except in
accordance with this Agreement or the Related Documents, without
specific agreement by the Borrower. Similarly, the Borrower will keep
confidential all information identified by the Lender as being
confidential, and will use such information only to the extent
permitted by the Lender.
6. GOVERNING LAW. The validity, construction and interpretation of this
Agreement and the Related Documents, and the rights and obligations of
the Borrower and the Lender under them, shall be governed by the
substantive laws of the Jurisdiction State without reference to
conflicts of laws principles.
7. INTEGRATION; AMENDMENT. This Agreement constitutes the sole agreement
of the Borrower and the Lender with respect to the subject matter
included, and supersedes all oral negotiations and prior writings with
respect to the subject matter hereof and thereof. No amendment of this
Agreement shall be effective unless set forth in writing and signed by
the Borrower and Lender.
8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Borrower and the Lender and, where applicable, their respective heirs,
executors, administrators and successors (collectively, their
"Representatives"), and shall inure to the benefit of the Borrower and
the Lender and their Representatives, except as otherwise provided in
the Transaction Documents. Neither the Borrower nor the Lender may
assign any rights, obligations and/or interests it may
8
<PAGE>
have pursuant to this Agreement. Any such assignment or attempted
assignment by one party shall be void and have no binding effect upon
the other party.
9. SEVERABILITY. The determination that any covenant, agreement,
condition or other provision of the Transaction Documents which is not
necessary to the enjoyment by either party of the benefit contemplated
herein or therein is invalid, shall not affect the enforceability of
the remaining covenants, agreements, conditions or other provisions of
the Transaction Documents. In the event of such determination, the
affected documents shall be construed as if such invalid covenant,
agreement, condition or provision were not included.
10. DRAFTING AMBIGUITIES. The Borrower, the Lender, and their counsel have
reviewed and revised the Transaction Documents. The normal rule of
construction providing that ambiguities are to be resolved against the
drafting party shall not be employed in interpreting the Transaction
Documents.
11. TIME OF ESSENCE. Time is of the essence with respect to all of the
Borrower's obligations as set forth in the Transaction Documents. Each
and every such obligation must be performed fully and punctually.
12. TERM SHEET; GOVERNING DOCUMENT. This Agreement governs the transaction
between the Borrower and the Lender. The Term Sheet attached hereto
defines certain expressions that are used throughout the Transaction
Documents, and is included by this reference as a part of this
Agreement. In the event that any provisions in the Related Documents
conflict with a provision in this Agreement, the provision in this
Agreement shall govern.
IN WITNESS WHEREOF, the Borrower and the Lender have duly executed this
Agreement as of the day and year first above written.
BORROWER: LENDER:
OCUREST LABORATORIES, INC. AMERICAN GROWTH CAPITAL
CORPORATION As General Partner Of
AMERICAN GROWTH FUND I L.P.
By: ______________________________ By: _____________________________
Its: _____________________________ Its: Secretary/Treasurer
9
<PAGE>
NOTE MODIFICATION AGREEMENT
THIS NOTE MODIFICATION AGREEMENT is made this 1st day of August, 1996 by and
between AMERICAN GROWTH FUND I, L.P., a CA limited partnership (the "Lender")
and OCUREST LABORATORIES, INC., a Florida corporation (the "Borrower").
WITNESSETH:
WHEREAS, Lender loaned the sum of Two Hundred Sixty Thousand and No/100
Dollars ($260,000.00) to Borrower (the "Loan"); and
WHEREAS, the Loan was evidenced by a Promissory Note, signed by
Borrower and dated April l, 1996 (the "Note"); and
WHEREAS, pursuant to the terms of the Note, the Loan was due and
payable to the Lender on the earlier of July 15, 1996 or ten days after the
Offering Date (as that term is defined in the Note) (the "Maturity Date"); and
WHEREAS, the parties have agreed to modify the Maturity Date of the
Note, pursuant the provisions hereof.
NOW, THEREFORE, in consideration of Ten and No/100 Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency are hereby
acknowledged, the parties hereto agree as follows:
1. RECITALS. The recitals mentioned above are hereby agreed by the
parties to be true and correct and are incorporated herein by reference.
2. MODIFICATION. The Maturity Date is amended to be "the earlier of (a)
September 30, 1996, or (b) 10 days after the effective date of the registration
statement filed with the U.S. Securities and Exchange Commission for the
Offering.
3. REMAINING TERMS. All other terms, conditions and provisions
contained in the Note and not modified hereby shall remain in full force and
effect and unchanged, In the event of any conflict in terms, this Note
Modification Agreement shall control.
WHEREFORE, THIS NOTE MODIFICATION AGREEMENT was executed the day and
year first above written.
Ocurest Laboratories, InC..
By: /s/ LARRY M. REID
---------------------------
Larry M. Reid, Senior Vice President
American Growth Fund I, L.P., by
American Growth Capital Corporation, as
general partner
By: /s/ ILLEGIBLE
---------------------------
--------------, ---------------
<PAGE>
MODIFICATION OF LOAN AGREEMENT
THIS MODIFICATION OF LOAN AGREEMENT (the "Modification") is made this 1st day of
August, 1996 by and between AMERICAN GROWTH FUND I, L.P., a CA limited
partnership (the "Lender") and OCUREST LABORATORIES, INC., a Florida corporation
(the "Borrower").
WITNESSETH:
WHEREAS, the parties hereto entered into that certain Loan Agreement
dated April l, 1996 (the "Loan Agreement"); and
WHEREAS, the parties have agreed to modify the Loan Agreement in
accordance with the terms hereof.
NOW, THEREFORE, in consideration of Ten and No/100 Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency are hereby
acknowledged, the parties hereto agree as follows:
1. MODIFICATION. The Loan Agreement is hereby modified as follows:
Paragraphs D, E and F of the Loan Agreement are hereby deleted in their
entirety.
2. REMAINING TERMS. All other terms, conditions and provisions
contained in the Loan Agreement and not modified hereby shall remain in full
force and effect and unchanged. In the event of any conflict in terms, this
Modification of Loan Agreement shall control.
WHEREFORE, THIS MODIFICATION OF LOAN AGREEMENT was executed the day and
year first above written.
Ocurest Laboratories, Inc..
By: /s/ LARRY M. REID
---------------------------
Larry M. Reid, Senior Vice President
American Growth Fund I, L.P., by
American Growth Capital Corporation, as
general partner
By: /s/ ILLEGIBLE
---------------------------
--------------, ---------------
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED STATES
FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE
SECURITIES BE TRANSFERRED ON THE BOOKS OF THE COMPANY, WITHOUT REGISTRATION OF
SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL AND STATE SECURITIES
LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT
THE OPTION OF THE COMPANY, TO BE EVIDENCED BY AN OPINION OF THE HOLDER'S COUNSEL
IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY THAT NO VIOLATION OF SUCH
REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT.
DATE: April 1, 1996
COMMON STOCK PURCHASE WARRANT
This Common Stock Purchase Warrant (the "Warrant") is issued for good and
valuable consideration, receipt of which is hereby acknowledged, to the American
Growth Fund I L.P., a California limited partnership (the "Holder"), by Ocurest
Laboratories, Inc., a Florida corporation (the "Company"), pursuant to a Loan
Agreement of even date herewith.
1. PURCHASE OF SHARES. For good and valued consideration of ONE DOLLAR
($1.00) and subject to the terms and conditions set forth herein, the
Holder is entitled to purchase from the Company, upon surrender of the
Warrant to the Company, TWENTY FIVE THOUSAND (25,000) shares (the
"Shares") of the Company's common stock.
2. PURCHASE PRICE. The initial Exercise Price for each share of common
stock purchased by exercise of the Warrant is the Bridge Exercise Price
as specified in the Loan Agreement. The Exercise Price shall be subject
to adjustment as set forth in Section 8 below. The Company may, in its
sole discretion, reduce the Exercise Price upon notice to all Holders.
The Holder shall remit the Purchase Price (defined as the then effective
Exercise Price multiplied by the number of shares being purchased) by
certified or bank check payable to the order of the Company.
3. EXERCISE PERIOD. The Warrant shall be exercisable during the two (2)
year period beginning at the opening of the initial public offering of
the Company's common stock (the "IPO") as contemplated in the Loan
Agreement, or upon such other transaction contemplated in Section 10.9
herein pursuant to which the securities of the Company or any successor
thereto shall become fully tradable.
4. METHOD OF EXERCISE. While the Warrant remains outstanding and
exercisable, the Holder may exercise at any time, and from time-to-time,
the purchase rights evidenced hereby. Such exercise shall be effected
by:
/bullet/ the surrender of the Warrant together with a duly executed
Exercise Notice in the form attached hereto submitted to the
Company; and
i
Exhibit C
<PAGE>
/bullet/ remittance to the Company of an amount equal to the Purchase
Price for the Shares being purchased as set forth in Section
2. above.
5. CERTIFICATES FOR SHARES. Upon the exercise of the purchase rights
evidenced by the Warrant, one or more certificates for the Shares so
purchased shall be issued as soon as practicable thereafter, and in any
event within five (5) business days of the delivery of the Exercise
Notice and payment of the aggregate purchase price for the Shares being
purchased. In the event that the Warrant is exercised in part,
concurrently with the delivery to the Holder of the certificates for any
Shares purchased, the Company will deliver to the Holder a new Warrant
representing the right to purchase the number of Shares for which this
Warrant has not been exercised.
6. RESERVATION OF SHARES. The Company covenants that it will at all times
keep available the number of Shares of its common stock, free from all
preemptive rights, as will be sufficient to permit the exercise of the
Warrant for the full number of Shares specified herein. The Company
covenants further that such Shares, when issued pursuant to the exercise
of the Warrant, will be duly and validly issued, fully paid and
non-assessable, and free from all taxes, liens, and charges with respect
to the issuance thereof.
7. RIGHTS OF THE HOLDER. Prior to the exercise of the Warrant, the Holder
shall not be entitled to any rights of a shareholder with respect to the
Shares, including (without limitation) the right to vote such Shares, to
receive preemptive rights, to be notified of shareholder meetings, or to
any notice or other communication concerning the business or the affairs
of the Company, except as otherwise set forth below.
8. ADJUSTMENTS. The Exercise Price and the number of shares of common
stock purchasable upon exercise of the Warrant shall be subject to
adjustment from time-to-time in accordance with the following
provisions:
8.1. ANTIDILUTION. If the Company, at any time or from time-to-time
after the date first written above shall issue any Additional Stock
(as defined below) without consideration, or for a consideration
less than the Exercise Price in effect immediately prior to the
issuance of such Additional Stock, that Exercise Price shall be
adjusted to a price determined by multiplying such Exercise Price
by the following fraction:
/bullet/ the numerator shall be the number of shares of Common
Stock outstanding immediately prior to such issuance plus
the number of shares of Common Stock which the aggregate
consideration received by the Company for the total
number of shares of Additional Stock so issued would have
purchased at that Exercise Price
/bullet/ the denominator shall be the number of shares of Common
Stock outstanding immediately prior to such issuance plus
the number of such shares of Additional Stock so issued.
For the purposes of this subsection, all shares of Common Stock
issuable upon conversion of the outstanding Warrant shall be deemed
to be outstanding, and immediately after any Additional Stock is
deemed issued, such Additional Stock shall be deemed to be
Exhibit C
ii
<PAGE>
outstanding. In addition, the maximum number of shares of Common Stock
deliverable upon exercise of any other option or convertible security shall
be deemed to have been issued at the time that option or convertible
security was issued for a consideration equal to the consideration, if any,
received by the company upon the issuance of such option or convertible
security plus the minimum purchase price provided in the option or
convertible security at the time of conversion.
8.1.1. No adjustment of the Exercise Price for the Warrant shall be made in
an amount less than one cent per share, provided that any adjustments
which are not required to be made by reason of this sentence shall be
carried forward and shall be either taken into account in any
subsequent adjustment made prior to three years from the date of the
event giving rise to the adjustment being carried forward, or shall
be made at the end of three years from the date of the event giving
rise to the adjustment being carried forward. Except as provided
later in this section, no adjustment of such Exercise Price pursuant
to this subsection shall have the effect of increasing the Exercise
Price above the Exercise Price in effect immediately prior to such
adjustment.
8.1.2. In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid before
deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by the Company for any underwriting or
otherwise in connection with such issuance and sale.
8.1.3. In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash
shall be deemed to be the fair value thereof as determined by the
Board of Directors irrespective of any accounting treatment.
8.1.4. "ADDITIONAL STOCK" shall mean any shares of Common Stock issued (or
deemed to have been issued pursuant to this subsection 8.1) by the
Company on or after the date first written above other than shares of
Common Stock issued or issuable as follows:
/bullet/ pursuant to a transaction described in subsection 8.2
below,
/bullet/ to officers, directors, employees and consultants of the
Company directly or pursuant to benefit plans approved by
the shareholders and directors of the Company, or
/bullet/ upon conversion of the Warrant.
8.2. SUBDIVISIONS, COMBINATIONS, AND OTHER ISSUANCES. If the Company
shall, at any time prior to the expiration of the Warrant, subdivide
its Common Stock, by stock split or otherwise, combine its Common
Stock or issue additional shares of its Common Stock as a dividend
with respect to any shares of its Common Stock, the number of
Shares issuable upon exercise of the Warrant shall be proportionately
increased or decreased. Appropriate
Exhibit C
iii
<PAGE>
adjustments shall also be made to the Exercise Price, though the
Purchase Price for the Shares purchased under the Warrant shall
remain the same. Any adjustment under this section shall become
effective at the close of business on the date the subdivision or
combination becomes effective or as of the record date of such
dividend, or in the event that no record date is fixed, upon the
making of such dividend.
8.3. ACQUISITION, RECLASSIFICATION, OR REORGANIZATION. In the event of any
reclassification, capital reorganization or other change in the
Common Stock of the Company or in the event of any sale of all or
substantially all of the Company's assets or any merger,
consolidation or restructuring to which the Company is a party in
which the Company's stockholders before the transaction or series of
transactions hold less than 50% of the voting power of the surviving
entity immediately after the transaction or series of transactions
(other than as a result of a subdivision, combination or stock
dividend provided for in Section 8.1), lawful provision shall be
made, and duly executed documents evidencing the same shall be made
and delivered to the Holder in substitution for the Holder's rights
under the Warrant, so that the Holder shall have the right at any
time and from time-to-time prior to the expiration of the Warrant to
purchase at a total price equal to that payable upon exercise of the
Warrant immediately prior to such event, the kind and amount of
shares of stock or other securities or property receivable in
connection with such reclassification, reorganization or change by a
holder of the same number of shares of Common Stock as were
purchasable by the Holder immediately prior to such reclassification,
reorganization or change. In any such case, appropriate provisions
shall be made with respect to the rights and interest of the Holder
so that the provisions hereof shall thereafter be applicable with
respect to any shares of stock or other securities or property
deliverable upon exercise hereof, and appropriate adjustments shall
be made to the Exercise Price, provided that the aggregate purchase
price payable for the total number of Shares purchased under the
Warrant shall remain the same.
8.4. NOTICE OF ADJUSTMENT. Upon any adjustment of the number of Shares
issuable upon exercise of the Warrant or of the Exercise Price
pursuant to this Section 8, the Company shall cause to be prepared
within thirty (30) days thereafter a certificate of the Chief
Financial or Accounting Officer of the Company setting forth the
number of Shares issuable upon exercise of the Warrant and the
Exercise Price after such adjustment and setting forth in reasonable
detail the method of calculation used and cause a coop of such
certificate to be mailed to the Holder.
9. FRACTIONAL SHARES. No fractional share of Common Stock will be issued
with any exercise hereof, but in lieu of a fractional share upon
exercise hereof, the Holder may purchase a whole share at the then
effective Exercise Price.
10. REGISTRATION OF SHARES.
10.1. If the holders of at least 30% of the Registrable Securities (as
defined below) then outstanding request that the Company file a
registration statement covering the public sale of Registrable
Securities, the Company will use its best efforts to cause such
shares to be
Exhibit C
iv
<PAGE>
registered under the 1933 Act, provided that the Company shall have
the right to delay such a demand registration under certain
circumstances for a period not in excess or 60 days each in any 12
month period. The term Registrable Securities will include the Common
Stock issuable on conversion of the Warrant.
10.2. The holders of the Registrable Securities shall be entitled to
"piggyback" registration rights on all 1933 Act registrations of the
Company or on any demand registration (except for the registrations
relating to employee benefit plans and corporate reorganizations),
subject to the right of the Company and its underwriters to reduce
the number of shares proposed to be registered pro rata in view of
market conditions. However, the underwriters' "cutback" right shall
be restricted so that (i) all shares held by Company employees,
officers and directors which are not Registrable Securities shall be
excluded from the registration before any Registrable Securities are
so excluded, and (ii) the number of Registrable Securities required
to be included in such registration shall not be less than 25% of the
shares of Registrable Securities requested to be included in the
registration.
10.3. Investors shall be entitled to unlimited registrations on Form S-3
(if available to the Company) unless: (i) the Company certifies that
it is not in the Company's best interest to file such Form S-3, in
which event, the Company may defer the filing for up to 180 days once
during any 12 month period, or (ii) the Company has already effected
registration on Form S-3 during the preceding 12 months.
10.4. The Company shall bear the registration and filing expenses
(exclusive of underwriting discounts and commissions but including
fees of one counsel for the selling shareholders) of all such demand,
piggyback and S-3 registrations.
10.5. The registration rights may be transferred.
10.6. Other provisions shall be included with respect to registration
rights as reasonable, including cross-indemnification.
10.7. These registration rights will terminate seven (7) years after the
closing of the Company's initial public offering and will not apply
to any shares that can be sold in a three month period without
registration pursuant to Rule 144 promulgated under the 1933 Act.
10.8. The Company will not grant registration rights to any other holder of
the Company's securities without the prior approval of a majority of
the Registrable Securities. The Company will keep any registration
effective for the lesser of six months or until all Registrable
Securities offered pursuant to such registration have been sold.
10.9. The Company shall not, directly or indirectly, enter into any merger,
consolidation, or reorganization in which the Company shall not be
the surviving corporation unless the proposed surviving corporation
shall, prior to such merger, consolidation, or reorganization, agree
in writing to assume the obligations of the Company under this
Section 10, and for that purpose references hereunder to "Registrable
Shares" shall be deemed to be references to the securities that the
Stockholders would be entitled to receive
Exhibit C
v
<PAGE>
in exchange for Registrable Shares under any such merger,
consolidation, or reorganization; provided, however, that the
provisions of this Section 10 shall not apply in the event of any
merger, consolidation, or reorganization in which the Company is not
the surviving corporation if all of the Holders are entitled to
receive in exchange for their Registrable Shares consideration
consisting solely of (i) cash, (ii) securities of the acquiring
corporation that may be sold to the public immediately without
registration under the Securities Act of 1933, as amended (the
"Act"), or (iii) securities of the acquiring corporation that the
acquiring corporation has agreed to register within 90 days of
completion of the transaction for resale to the public pursuant to
the Act.
l1. INDEMNIFICATION.
11.1. When, pursuant to Section 10, a registration statement registering
the Registrable Shares is filed under the Act or is amended or
supplemented, the Company will indemnify and hold harmless each
holder of the securities covered by such registration statement,
amendment, or supplement (such holder being hereinafter called the
"Distributing Holder"), and each person, if any, who controls (within
the meaning of the Act) the Distributing Holder, and each underwriter
(within the meaning of the Act) of such securities and each person,
if any, who controls (within the meaning of the Act) any such
underwriter, against any losses, claims, damages, or liabilities,
joint or several, (collectively "losses") to which the Distributing
Holder, any such controlling person or any such underwriter may
become subject, under the Act or otherwise, insofar as such losses or
actions in respect thereof, arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained
in any such registration statement or any preliminary prospectus or
final prospectus constituting a part thereof or any amendment or
supplement thereto, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading an will reimburse the Distributing Holder or such
controlling person or underwriter in connection with investigating or
defending any such loss or action; provided, however, that the
Company will not be liable in any such case to the extent that any
such losses arise out of or are based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in said
registration statement, said preliminary prospectus, said final
prospectus, or said amendment or supplement in reliance upon and in
conformity with written information furnished by such Distributing
Holder or any other Distributing Holder for use in the preparation
thereof.
11.2. The Distributing Holder will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto,
and each person, if any, who controls the Company (within the meaning
of the Act) against any losses to which the Company or any such
director, officer, or controlling person may become subject, under
the Act or otherwise, insofar as such losses or actions in respect
thereof, arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in said registration
statement, said preliminary prospectus, said final prospectus, or
said amendment or supplement, or arise out of or are based upon the
omission or the alleged omission to state
Exhibit C
vi
<PAGE>
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the
extent, but only to the extent, that such loss arises out of or is
based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus, or said amendment
or supplement in reliance upon and in conformity with written
information furnished by such Distributing Holder for use in the
preparation thereof; and will reimburse the Company or any such
director, officer, or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating
or defending any such loss or action.
11.3. Promptly after receipt by an indemnified party under this Section 11
of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any
indemnifying party, give the indemnifying party notice of the
commencement thereof, but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 11.
11.4. In case any such action is brought against any indemnified party, and
it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party (however, in the
event of disagreement as to the selection of counsel, the indemnified
party shall have the right to select such counsel), and after notice
from the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 11 for any legal
or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation. Any settlement of such action shall require the
indemnifying party's consent, which shall not be unreasonably
withheld.
12. RESTRICTED SECURITIES. The Holder understands that the Warrant and the
Shares constitute "restricted securities" under the Act, inasmuch as
they are being, or will be, acquired from the Company in transactions
not involving a public offering and accordingly may not, under such laws
and applicable regulations, be resold or transferred without
registration under the Act or an applicable exemption from registration.
The Holder further acknowledges that the Shares shall bear legends
substantially in the form of the legend appearing on the face hereof.
13. CERTIFICATION OF INVESTMENT INTENT. The Holder, by accepting the
Warrant, covenants and agrees that, at the time of exercise hereof, such
holder will deliver to the Company a written certification satisfactory
to the Company that (i) the Holder understands that the offering and
sale of the Shares is intended to be exempt from registration pursuant
to section 4(2) of the Act; (ii) the Holder is an "accredited investor"
within the meaning of Regulation D under the Act; (iii) the securities
acquired by the holder are acquired for investment purposes only; and
(iv) such securities are not acquired with a view to, or for sale in
connection with, any distribution thereof.
Exhibit C
vii
<PAGE>
14. SUCCESSORS AND ASSIGNS. The terms and provisions of the Warrant shall
inure to the benefit of, and be binding upon, the respective successors,
assigns, heirs, executors, and administrators of the parties hereto.
15. MODIFICATIONS. The Company may make any changes or corrections in this
Warrant (i) that it shall deem appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest mistake or
error herein contained; or (ii) that it may deem necessary or desirable
and which shall not adversely affect the interests of the Holder;
provided, however, that the Warrant shall not otherwise be modified,
supplemented, or altered in any respect except with the consent in
writing of the Registered Holders representing not less than 50% of the
Warrant then outstanding; and provided, further, that no change in the
number or nature of the securities purchasable upon the exercise of any
Warrant, or the increase in the Exercise Price therefor, or the
shortening of the Warrant Exercise Period, shall be made without the
consent in writing of the Registered Holders representing such Warrant,
other than such changes as are specifically prescribed by this Warrant
as originally executed.
16. GOVERNING LAW. The Warrant shall be governed by the laws of the State
of Nevada, excluding the conflicts of laws principles thereof.
Ocurest Laboratories, Inc.
By: Larry M. Reid
--------------------------
Its: Secretary
-------------------------
Exhibit C
viii
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED STATES
FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE
SECURITIES BE TRANSFERRED ON THE BOOKS OF THE COMPANY, WITHOUT REGISTRATION OF
SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL AND STATE SECURITIES
LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT
THE OPTION OF THE COMPANY, TO BE EVIDENCED BY AN OPINION OF THE HOLDER'S COUNSEL
IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY THAT NO VIOLATION OF SUCH
REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT.
DATE: April 1,1996
COMMON STOCK PURCHASE WARRANT
This Common Stock Purchase Warrant (the "Warrant") is issued for good and
valuable consideration, receipt of which is hereby acknowledged, to the American
Growth Fund I L.P., a California limited partnership (the "Holder"), by Ocurest
Laboratories, Inc., a Florida corporation (the "Company"), pursuant to a Loan
Agreement of even date herewith.
1. PURCHASE OF SHARES. For good and valued consideration of ONE DOLLARS
($1.00) and subject to the terms and conditions set forth herein, the
Holder is entitled to purchase from the Company, upon surrender of the
Warrant to the Company, FIFTY THOUSAND shares (the "Shares") of the
Company's common stock.
2. PURCHASE PRICE. The initial Exercise Price for each share of common
stock purchased by exercise of the Warrant is the IPO Exercise Price as
specified in the Loan Agreement. The Exercise Price shall be subject to
adjustment as set forth in Section 8 below. The Company may, in its sole
discretion, reduce the Exercise Price upon notice to all Holders. The
Holder shall remit the Purchase Price (defined as the then effective
Exercise Price multiplied by the number of shares being purchased) by
certified or bank check payable to the order of the Company.
3. EXERCISE PERIOD. The Warrant shall be exercisable during the five (5)
year period beginning three months following the closing of the initial
public offering of the Company's common stock (the "IPO") as
contemplated in the Loan Agreement, or upon such other transaction
contemplated in Section 10.9 herein pursuant to which the securities of
the Company or any successor thereto shall become fully tradable.
4. METHOD OF EXERCISE. While the Warrant remains outstanding and
exercisable, the Holder may exercise at any time, and from time-to-time,
the purchase rights evidenced hereby. Such exercise shall be effected
by:
/bullet/ the surrender of the Warrant together with a duly executed
Exercise Notice in the form attached hereto submitted to the
Company; and
i
Exhibit D
<PAGE>
/bullet/ remittance to the Company of an amount equal to the Purchase
Price for the Shares being purchased as set forth in Section
2. above.
5. CERTIFICATES FOR SHARES. Upon the exercise of the purchase rights
evidenced by the Warrant, one or more certificates for the Shares so
purchased shall be issued as soon as practicable thereafter, and in any
event within five (5) business days of the delivery of the Exercise
Notice and payment of the aggregate purchase price for the Shares being
purchased. In the event that the Warrant is exercised in part,
concurrently with the delivery to the Holder of the certificates for any
Shares purchased, the Company will deliver to the Holder a new Warrant
representing the right to purchase the number of Shares for which this
Warrant has not been exercised.
6. RESERVATION OF SHARES. The Company covenants that it will at all times
keep available the number of Shares of its common stock, free from all
preemptive rights, as will be sufficient to permit the exercise of the
Warrant for the full number of Shares specified herein. The Company
covenants further that such Shares, when issued pursuant to the exercise
of the Warrant, will be duly and validly issued, fully paid and
non-assessable, and free from all taxes, liens, and charges with respect
to the issuance thereof.
7. RIGHTS OF THE HOLDER. Prior to the exercise of the Warrant, the Holder
shall not be entitled to any rights of a shareholder with respect to the
Shares, including (without limitation) the right to vote such Shares, to
receive preemptive rights, to be notified of shareholder meetings, or to
any notice or other communication concerning the business or the affairs
of the Company, except as otherwise set forth below.
8. ADJUSTMENTS. The Exercise Price and the number of shares of common
stock purchasable upon exercise of the Warrant shall be subject to
adjustment from time-to-time in accordance with the following
provisions:
8.1. ANTIDILUTION. If the Company, at any time or from time-to-time
after the date first written above shall issue any Additional Stock
(as defined below) without consideration, or for a consideration
less than the Exercise Price in effect immediately prior to the
issuance of such Additional Stock, that Exercise Price shall be
adjusted to a price determined by multiplying such Exercise Price
by the following fraction:
/bullet/ the numerator shall be the number of shares of Common
Stock outstanding immediately prior to such issuance plus
the number of shares of Common Stock which the aggregate
consideration received by the Company for the total
number of shares of Additional Stock so issued would have
purchased at that Exercise Price
/bullet/ the denominator shall be the number of shares of Common
Stock outstanding immediately prior to such issuance plus
the number of such shares of Additional Stock so issued.
For the purposes of this subsection, all shares of Common Stock
issuable upon conversion of the outstanding Warrant shall be deemed
to be outstanding, and immediately after any Additional Stock is
deemed issued, such Additional Stock shall be deemed to be
Exhibit D
ii
<PAGE>
outstanding. In addition, the maximum number of shares of Common Stock
deliverable upon exercise of any other option or convertible security shall
be deemed to have been issued at the time that option or convertible
security was issued for a consideration equal to the consideration, if any,
received by the company upon the issuance of such option or convertible
security plus the minimum purchase price provided in the option or
convertible security at the time of conversion.
8.1.1. No adjustment of the Exercise Price for the Warrant shall be made in
an amount less than one cent per share, provided that any adjustments
which are not required to be made by reason of this sentence shall be
carried forward and shall be either taken into account in any
subsequent adjustment made prior to three years from the date of the
event giving rise to the adjustment being carried forward, or shall
be made at the end of three years from the date of the event giving
rise to the adjustment being carried forward. Except as provided
later in this section, no adjustment of such Exercise Price pursuant
to this subsection shall have the effect of increasing the Exercise
Price above the Exercise Price in effect immediately prior to such
adjustment.
8.1.2. In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid before
deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by the Company for any underwriting or
otherwise in connection with such issuance and sale.
8.1.3. In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash
shall be deemed to be the fair value thereof as determined by the
Board of Directors irrespective of any accounting treatment.
8.1.4. "ADDITIONAL STOCK" shall mean any shares of Common Stock issued (or
deemed to have been issued pursuant to this subsection 8.1) by the
Company on or after the date first written above other than shares of
Common Stock issued or issuable as follows:
/bullet/ pursuant to a transaction described in subsection 8.2
below,
/bullet/ to officers, directors, employees and consultants of the
Company directly or pursuant to benefit plans approved by
the shareholders and directors of the Company, or
/bullet/ upon conversion of the Warrant.
8.2. SUBDIVISIONS, COMBINATIONS, AND OTHER ISSUANCES. If the Company
shall, at any time prior to the expiration of the Warrant, subdivide
its Common Stock, by stock split or otherwise, combine its Common
Stock or issue additional shares of its Common Stock as a dividend
with respect to any shares of its Common Stock, the number of
Shares issuable upon exercise of the Warrant shall be proportionately
increased or decreased. Appropriate
Exhibit D
iii
<PAGE>
adjustments shall also be made to the Exercise Price, though the
Purchase Price for the Shares purchased under the Warrant shall
remain the same. Any adjustment under this section shall become
effective at the close of business on the date the subdivision or
combination becomes effective or as of the record date of such
dividend, or in the event that no record date is fixed, upon the
making of such dividend. Note, however, that the Company may reduce
its outstanding shares one time by executing a 2-for-1 split without
an appropriate adjustment to the number of Shares issuable upon
exercise of the Warrant.
8.3. ACQUISITION, RECLASSIFICATION, OR REORGANIZATION. In the event of any
reclassification, capital reorganization or other change in the
Common Stock of the Company or in the event of any sale of all or
substantially all of the Company's assets or any merger,
consolidation or restructuring to which the Company is a party in
which the Company's stockholders before the transaction or series of
transactions hold less than 50% of the voting power of the surviving
entity immediately after the transaction or series of transactions
(other than as a result of a subdivision, combination or stock
dividend provided for in Section 8.1), lawful provision shall be
made, and duly executed documents evidencing the same shall be made
and delivered to the Holder in substitution for the Holder's rights
under the Warrant, so that the Holder shall have the right at any
time and from time-to-time prior to the expiration of the Warrant to
purchase at a total price equal to that payable upon exercise of the
Warrant immediately prior to such event, the kind and amount of
shares of stock or other securities or property receivable in
connection with such reclassification, reorganization or change by a
holder of the same number of shares of Common Stock as were
purchasable by the Holder immediately prior to such reclassification,
reorganization or change. In any such case, appropriate provisions
shall be made with respect to the rights and interest of the Holder
so that the provisions hereof shall thereafter be applicable with
respect to any shares of stock or other securities or property
deliverable upon exercise hereof, and appropriate adjustments shall
be made to the Exercise Price, provided that the aggregate purchase
price payable for the total number of Shares purchased under the
Warrant shall remain the same.
8.4. NOTICE OF ADJUSTMENT. Upon any adjustment of the number of Shares
issuable upon exercise of the Warrant or of the Exercise Price
pursuant to this Section 8, the Company shall cause to be prepared
within thirty (30) days thereafter a certificate of the Chief
Financial or Accounting Officer of the Company setting forth the
number of Shares issuable upon exercise of the Warrant and the
Exercise Price after such adjustment and setting forth in reasonable
detail the method of calculation used and cause a coop of such
certificate to be mailed to the Holder.
9. FRACTIONAL SHARES. No fractional share of Common Stock will be issued
with any exercise hereof, but in lieu of a fractional share upon
exercise hereof, the Holder may purchase a whole share at the then
effective Exercise Price.
10. REGISTRATION OF SHARES.
10.1. If the holders of at least 30% of the Registrable Securities (as
defined below) then
Exhibit D
iv
<PAGE>
outstanding request that the Company file a registration statement
covering the public sale of Registrable Securities, the Company will
use its best efforts to cause such shares to be registered under the
1933 Act, provided that the Company shall have the right to delay
such a demand registration under certain circumstances for a period
not in excess or 60 days each in any 12 month period. The term
Registrable Securities will include the Common Stock issuable on
conversion of the Warrant.
10.2. The holders of the Registrable Securities shall be entitled to
"piggyback" registration rights on all 1933 Act registrations of the
Company or on any demand registration (except for the registrations
relating to employee benefit plans and corporate reorganizations),
subject to the right of the Company and its underwriters to reduce
the number of shares proposed to be registered pro rata in view of
market conditions. However, the underwriters' "cutback" right shall
be restricted so that (i) all shares held by Company employees,
officers and directors which are not Registrable Securities shall be
excluded from the registration before any Registrable Securities are
so excluded, and (ii) the number of Registrable Securities required
to be included in such registration shall not be less than 25% of the
shares of Registrable Securities requested to be included in the
registration.
10.3. Investors shall be entitled to unlimited registrations on Form S-3
(if available to the Company) unless: (i) the Company certifies that
it is not in the Company's best interest to file such Form S-3, in
which event, the Company may defer the filing for up to 180 days once
during any 12 month period, or (ii) the Company has already effected
registration on Form S-3 during the preceding 12 months.
10.4. The Company shall bear the registration and filing expenses
(exclusive of underwriting discounts and commissions but including
fees of one counsel for the selling shareholders) of all such demand,
piggyback and S-3 registrations.
10.5. The registration rights may be transferred.
10.6. Other provisions shall be included with respect to registration
rights as reasonable, including cross-indemnification.
10.7. These registration rights will terminate seven (7) years after the
closing of the Company's initial public offering and will not apply
to any shares that can be sold in a three month period without
registration pursuant to Rule 144 promulgated under the 1933 Act.
10.8. The Company will not grant registration rights to any other holder of
the Company's securities without the prior approval of a majority of
the Registrable Securities. The Company will keep any registration
effective for the lesser of six months or until all Registrable
Securities offered pursuant to such registration have been sold.
10.9. The Company shall not, directly or indirectly, enter into any merger,
consolidation, or reorganization in which the Company shall not be
the surviving corporation unless the proposed surviving corporation
shall, prior to such merger, consolidation, or reorganization, agree
in writing to assume the obligations of the Company under this
Exhibit D
v
<PAGE>
Section 10, and for that purpose references hereunder to "Registrable
Shares" shall be deemed to be references to the securities that the
Stockholders would be entitled to receive in exchange for Registrable
Shares under any such merger, consolidation, or reorganization;
provided, however, that the provisions of this Section 10 shall not
apply in the event of any merger, consolidation, or reorganization in
which the Company is not the surviving corporation if all of the
Holders are entitled to receive in exchange for their Registrable
Shares consideration consisting solely of (i) cash, (ii) securities
of the acquiring corporation that may be sold to the public
immediately without registration under the Securities Act of 1933, as
amended (the "Act"), or (iii) securities of the acquiring corporation
that the acquiring corporation has agreed to register within 90 days
of completion of the transaction for resale to the public pursuant to
the Act.
l1. INDEMNIFICATION.
11.1. When, pursuant to Section 10, a registration statement registering
the Registrable Shares is filed under the Act or is amended or
supplemented, the Company will indemnify and hold harmless each
holder of the securities covered by such registration statement,
amendment, or supplement (such holder being hereinafter called the
"Distributing Holder"), and each person, if any, who controls (within
the meaning of the Act) the Distributing Holder, and each underwriter
(within the meaning of the Act) of such securities and each person,
if any, who controls (within the meaning of the Act) any such
underwriter, against any losses, claims, damages, or liabilities,
joint or several, (collectively "losses") to which the Distributing
Holder, any such controlling person or any such underwriter may
become subject, under the Act or otherwise, insofar as such losses or
actions in respect thereof, arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained
in any such registration statement or any preliminary prospectus or
final prospectus constituting a part thereof or any amendment or
supplement thereto, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading an will reimburse the Distributing Holder or such
controlling person or underwriter in connection with investigating or
defending any such loss or action; provided, however, that the
Company will not be liable in any such case to the extent that any
such losses arise out of or are based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in said
registration statement, said preliminary prospectus, said final
prospectus, or said amendment or supplement in reliance upon and in
conformity with written information furnished by such Distributing
Holder or any other Distributing Holder for use in the preparation
thereof.
11.2. The Distributing Holder will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto,
and each person, if any, who controls the Company (within the meaning
of the Act) against any losses to which the Company or any such
director, officer, or controlling person may become subject, under
the Act or otherwise, insofar as such losses or actions in respect
thereof, arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in said registration
Exhibit D
vi
<PAGE>
statement, said preliminary prospectus, said final prospectus, or
said amendment or supplement, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such loss arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
made in said registration statement, said preliminary prospectus,
said final prospectus, or said amendment or supplement in reliance
upon and in conformity with written information furnished by such
Distributing Holder for use in the preparation thereof; and will
reimburse the Company or any such director, officer, or controlling
person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss or action.
11.3. Promptly after receipt by an indemnified party under this Section 11
of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any
indemnifying party, give the indemnifying party notice of the
commencement thereof, but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 11.
11.4. In case any such action is brought against any indemnified party, and
it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party (however, in the
event of disagreement as to the selection of counsel, the indemnified
party shall have the right to select such counsel), and after notice
from the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 11 for any legal
or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation. Any settlement of such action shall require the
indemnifying party's consent, which shall not be unreasonably
withheld.
12. RESTRICTED SECURITIES. The Holder understands that the Warrant and the
Shares constitute "restricted securities" under the Act, inasmuch as
they are being, or will be, acquired from the Company in transactions
not involving a public offering and accordingly may not, under such laws
and applicable regulations, be resold or transferred without
registration under the Act or an applicable exemption from registration.
The Holder further acknowledges that the Shares shall bear legends
substantially in the form of the legend appearing on the face hereof.
13. CERTIFICATION OF INVESTMENT INTENT. The Holder, by accepting the
Warrant, covenants and agrees that, at the time of exercise hereof, such
holder will deliver to the Company a written certification satisfactory
to the Company that (i) the Holder understands that the offering and
sale of the Shares is intended to be exempt from registration pursuant
to section 4(2) of the Act; (ii) the Holder is an "accredited investor"
within the meaning of Regulation D under the Act; (iii) the securities
Exhibit D
vii
<PAGE>
acquired by the holder are acquired for investment purposes only; and
(iv) such securities are not acquired with a view to, or for sale in
connection with, any distribution thereof.
14. SUCCESSORS AND ASSIGNS. The terms and provisions of the Warrant shall
inure to the benefit of, and be binding upon, the respective successors,
assigns, heirs, executors, and administrators of the parties hereto.
15. MODIFICATIONS. The Company may make any changes or corrections in this
Warrant (i) that it shall deem appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest mistake or
error herein contained; or (ii) that it may deem necessary or desirable
and which shall not adversely affect the interests of the Holder;
provided, however, that the Warrant shall not otherwise be modified,
supplemented, or altered in any respect except with the consent in
writing of the Registered Holders representing not less than 50% of the
Warrant then outstanding; and provided, further, that no change in the
number or nature of the securities purchasable upon the exercise of any
Warrant, or the increase in the Exercise Price therefor, or the
shortening of the Warrant Exercise Period, shall be made without the
consent in writing of the Registered Holders representing such Warrant,
other than such changes as are specifically prescribed by this Warrant
as originally executed.
16. GOVERNING LAW. The Warrant shall be governed by the laws of the State
of Nevada, excluding the conflicts of laws principles thereof.
Ocurest Laboratories, Inc.
By: Larry M. Reid
--------------------------
Its: Secretary
-------------------------
Exhibit D
viii
PROMISSORY NOTE
LAS VEGAS, NEVADA
Principal Amount: $260,000 Date:April 1, 1996
FOR VALUE RECEIVED OCUREST LABORATORIES, INC. a Florida corporation, having an
address of 4400 PGA Blvd., Suite 300, Palm Beach Gardens, FL 33410, including
both jointly and severally any co-signer, guarantors, suretkies and all other
such parties (collectively the "Maker"), uncinditiinally promises to pay to the
other of AMERICAN GROWTH CAPITAL CORPORATION, a Nevada Corporation (the
"Lender") at 1455 E. Tropicana Avenue, Suite 100, Las Vegas, NV 89119, TWO
HUNDRED SIXTY THOUSAND DOLLARS ($260,000.00) together with interest, as follows:
1. PAYMENT OF PRINCIPAL. The Principal Amount, along with interest as
provided under paragraph 2, shall be payable in full upon the maturity
date (the "Maturity Date"), which shall be the earlier of (a) July 15,
1996, or (b)O ten days after the Offering Date.
2. INTEREST PAYMENTS. Beginning ninety (90) days after the date of this
Note, interest will accrue at the rate of two percentage points (2%)
per annum in excess of the prime lending rate, as reported by the
Second District Cost of Funds, until the Maturity Date.
3. COMPUTATION OF INTEREST. Interest shall be calculated on the basis
of the actual number of days elapsed over a three hundred sixty-five
(365) day year.
4. MATURITY DATE NOT A BUSINESS DAY. In the event that the Maturity Date
falls on a day which is not a Business Day, then the payments due
thereon shall be payable on the next Business Day. For purposes of
this Agreement, "Business Day" means a day onwhich banks are open for
business in Clark County, Nevada.
5. PREPAYMENT. The Borrower may prepay any amounts due hereunder
without prepayment penalties or premiums.
Failure to make payment on the Maturity Date shall constitute a Default. Upon
any Default under this Note or under the Loan Agreement of even date, the entire
unpid principal and interest due hreunder shall immediately be due and payable.
In the event of a default, the Lender shall be entitled to collect all costs of
collection, including but not limited to, reasonable attorney fees, whether or
not suit is institued on this Note. During the period of any Default, the entire
unpaid outstanding indebtedness, including Principal, Interst, and any costs
incurred by the Lender under this Note shall bear interest at a rate four
percentage points (4%) kin excess of the rate stated above.
This Note may be prepaid in whole or part at any time prior to the Maturity Date
without penalty or discount. All payments made shall be applied first against
payment of costs of
<PAGE>
collection, if any, next against interest accrued to the date of any the
payment, and then against principal due. The Maker shall pay all costs of
collection and litigation of Lender, together with reasonable attorney's fees
and costs, to enforce this Note in the event of a Default whether or not a suit
is brought. The Maker waives demand, protest and notice of maturity and
non-payment, and all requirements necessary to hold the Make liable hereunder.
This Note shall be governed by, and construed in accordance with, the laws of
the State of Nevada. The Maker irrevocably consents to the jurisdiction of any
court of competent jurisdiction, state of federal, in Clark County, Nevada and
consents to service of process by certified and registered mail to the Maker's
address set forth above.
All payments shall be sent to the Lender's address as set forth above, or such
address as later specified by the Lender, or any successor, in writing to the
Maker.
Time is of the essence with regard to the Maker's performance under the terms
and provisions of this note, and any amendment, modification or revision
thereof.
<PAGE>
NOTE MODIFICATION AGREEMENT
THIS NOTE MODIFICATION AGREEMENT is made this 1ST day of AUGUST, 1996 by and
between AMERICAN GROWTH FUND I, L.P., CA limited partnership (THE "Lender") and
OCUREST LABORATORIES, INC., a Florida corporation (the "Borrower").
W I T N E S S T H
WHEREAS, Lender loaned the snum of Two Hundred Sixty Thousand and No/100
Dollars ($260,000.00) to borrower (the "Loan"); and
WHEREAS, the Loan was evidenced by a Promissory NAote, signed by
Borrower and dated April 1, 1996 (the "Note"); and
WHEREAS, pursuant to the terms of the Note, the Loan was due and payable
to the Lender on the earlier of July 15, 1996 or ten days after the Offering
Date (as tht term is defined in the Note) (the "Maturity Date"); and
WHEREAS, the parties have agreed to modify the Maturity Date of the
Note, pursuant the provisions hereof.
NOW, THEREFORE, in consideration of ten and No/100 Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency are hereby
acknowledged, the parties hereto agree as follows:
1. RECITALS. The recitals mentioned above are hereby agreed by the
parties to be true and correct and are incorporated herein by reference.
2. MODIFICATION. The Maturity Date is amended to be "the earlier if
(a) September 30, 1996, or (b) 10 days fter tge effective date of the
registration statement filed with the U.S. Securities and Exchange Commission
for the Offering.
3. REMAINING TERMS. All other terms, conditions and provisions
contained in the Note and not midifiecd hreby shall remakin in full force and
effect and unchanged. In the event of any conflict in terms, this Note
Modification Agreement shall control.
WHEREFORE, THIS NOTE MODIFICATION AGREEMENT was executed the day and
year first above written.
Ocurest Laboratories, Inc.
By: /s/ LARRY M. REID
` ---------------------------------
Larry M. Reid
Executive Vice President
AMERICAN GROWTH FUND I L.P.
AMERICAN GROWTH CAPITAL CORPORATION, as
general partner
By: /s/ SONYA HAYDEN
----------------------------------
Its: Secretary/Treasurer
EXHIBIT 10.23
SECURITY AGREEMENT
AMERICAN GROWTH CAPITAL CORPORATION, a Nevada Corporation, as Secured
Party, and OCUREST LABORATORIES, INC., a Florida Corporation, as the Debtor,
enter into this Security Agreement on the 1st day of April 1996.
IN CONSIDERATION of the mutual covenants and promises set forth herein,
including Secured Party's loan to the Debtor in the amount of Two Hundred Sixty
Thousand Dollars ($260,000.00) pursuant to a Loan Agreement dated April 1, 1996,
and evidenced by a Secured Promissory Note (the "Note") of even date therewith,
the Debtor and the Secured Party agree:
SECTION ONE
CREATION OF SECURITY INTEREST
The Debtor hereby grants to the Secured Party a security interest in the
Collateral defined in Section Two, in order to secure the performance and
payment of the Debtor's obligations pursuant to the Note and the Loan Agreement,
together with all costs and expenses incurred by Secured Party in the collection
and enforcement of the obligations evidenced by the Note, future advances to be
evidenced by notes to be made by the Debtor to the Secured Party at Secured
Party's option, and all liabilities of the Debtor to Secured Party now existing
or hereafter incurred, matured or unmatured, direct or contingent, and any
renewals and extensions thereof and substitutions therefor related to the
obligation.
SECTION TWO
DESCRIPTION OF COLLATERAL
The Collateral subject to this Security Agreement, herein referred to as
the "Collateral", is the Debtor's dispensers and molds, as more particularly
described in Schedule 1 attached hereto. The Debtor represents that all of the
Collateral is located on or about or used in conjunction with the Debtor's
business in the States of Florida and New Jersey.
SECTION THREE
OBLIGATIONS OF THE DEBTOR, GENERALLY
(a) PAYMENT. The Debtor shall pay to the Secured Party the amount due under
the Note or any renewals or extensions thereof executed pursuant to this
Security Agreement in accordance with the terms of the Note, the Loan Agreement,
and the Transaction Documents (as that term is defined in the Loan Agreement)
evidencing the obligations, including all future advances that may be made at
the option of the Secured Party as provided herein.
(b) WARRANTIES AND REPRESENTATIONS. The Debtor warrants and covenants that:
1
<PAGE>
(1) Except for the security interest hereby granted, the Debtor has,
or on acquisition will have, full fee simple title to the Collateral free
from any lien, security interests, encumbrance, or claim except for
third-party purchase money security interests in said Collateral and the
Debtor will, at the Debtor' cost and expense, defend any action that may
affect Secured Party's security interest in, or the Debtor's title to, the
Collateral.
(2) The Collateral is used or is to be used Primarily in the business
of the Debtor.
(c) PERFORMANCE OF AGREEMENT. The Debtor shall perform all covenants and
agreements set forth in this Security Agreement and all other Transaction
Documents.
SECTION FOUR
PROCEEDS OF COLLATERAL
The Debtor hereby grants to the Secured Party a security interest in and to
all proceeds of Collateral, as defined by UCC Section 9-306. This provision
shall not be construed to mean that the Debtor is authorized to sell, lease, or
dispose of Collateral without the consent of Secured Party except as set forth
in Section Eight.
SECTION FIVE
(RESERVED)
SECTION SIX
FINANCING STATEMENTS
At the request of the Secured Party, the Debtor will join in executing, or
will execute as appropriate, all necessary financing statements in a form
satisfactory to the Secured Party, and will pay the cost of filing such
statements. The Debtor will execute all other instruments deemed necessary by
the Secured Party and pay the cost of filing such documents. The Debtor warrants
that no financing thereof is presently on file in any public office.
SECTION SEVEN
ALIENATION OF COLLATERAL
The Debtor will not, without the written consent of the Secured Party,
sell, contract to sell, lease, assign, factor, encumber, or otherwise dispose of
Collateral or any interest therein, or permit the Collateral to be moved or
remitted to a state other than until this Security Agreement and all debts
secured thereby have been fully satisfied.
SECTION EIGHT
INSPECTION
The Debtor agrees to provide the Secured Party with access to its books and
records as needed for the Secured Party to monitor the Debtor's compliance with
the terms of this Security Agreement.
2
<PAGE>
SECTION NINE
TAXES AND ASSESSMENTS
The Debtor shall pay promptly when due all taxes and assessments, if any,
levied on the Collateral or on its use and operation.
SECTION TEN
REIMBURSEMENT OF EXPENSES
The Secured Party may at its option and at any time discharge taxes, liens,
or interest on the Collateral, perform or cause to be performed for and on
behalf of the Debtor any actions and conditions, obligations, or covenants that
the Debtor has failed or refused to perform, or pay for the repair, maintenance,
and preservation of Collateral. All sums so expended shall bear interest from
the date of payment at the interest rate as provided for in the Note, and shall
be secured by this Security Agreement.
SECTION ELEVEN
TIME OF PERFORMANCE
When performing any act under this Security Agreement and the obligations
secured thereby, time shall be of the essence.
SECTION TWELVE
EVENTS OF DEFAULT
The Debtor shall be in default upon the happening of the following ("Events
of Default"):
(a) Any default under the Note or other Transaction Documents;
(b) Any failure to observe or perform any of the other provisions of
this Security Agreement or of the other Transaction Documents not cured
within 10 days of such default;
(c) If any of the Debtor' property shall be seized or levied upon
under any legal or governmental process against the Debtor or against its
property, or if criminal proceedings, either under federal or state law,
are instituted against the Debtor for which forfeiture is a potential
penalty, or if the Collateral is substantially lost, stolen, damaged,
destroyed or unreasonably depreciated in value which is not covered by
applicable insurance, or if the equity in the Collateral is assigned
without the written consent of the Secured Party;
(d) If the Debtor become insolvent or is the subject of a petition in
bankruptcy, either voluntary or involuntary, or in any other proceeding
under the federal bankruptcy laws, or makes an assignment for the benefit
of creditors or is subject to a proceeding for reorganization, arrangement,
readjustment of debt, dissolution or liquidation, or if the Debtor is named
in, or any of the Debtor' property is subject to a suit for the appointment
of a receiver.
3
<PAGE>
SECTION THIRTEEN
REMEDIES
On any Event of Default; and at any time thereafter:
(a) The Secured Party may declare all obligations secured hereby
immediately due and payable and may proceed to enforce payment of the same
and exercise any and all of the rights and remedies provided by NRS
104.9501 through NRS 104.9507 as well as any and all other rights and
remedies possessed by the Secured Party.
SECTION FOURTEEN
COLLECTION RIGHTS OF SECURED PARTY
Notwithstanding the Secured Party's rights with respect to any and all debt
instruments, chattel papers, accounts, leases and other rights to payment
constituting the Collateral (including proceeds), the Secured Party may, at any
time after the occurrence of an Event of Default, notify any account debtor, or
any other person obligated to pay any amount due, that such chattel paper,
account, lease or right to payment has been assigned or transferred to the
Secured Party for security or otherwise and shall be paid directly to the
Secured Party. If the Secured Party so requests at any time, the Debtor will so
notify such account debtor and other obligors. The Debtor will indicate on all
invoices to such account debtors or other obligors that the amount due is
payable directly to the Secured Party. Any time after the Secured Party or the
Debtor give such notice to an account debtor or other obligor, the Secured Party
may, but need not, in its own name or in the Debtor' names, demand, sue for,
collect or receive any money or property at any time payable or receivable on
account of, or securing, any such chattel paper, account, or other right to
payment, or grant any extension to, make any compromise or settlement with or
otherwise agree to waive, modify, amend, or change the obligations (including
collateral obligations) of any such account debtor or other obligor.
Notwithstanding any provision contained herein, in the event that by separate
agreement the Debtor has irrevocably and absolutely assigned rents, issues and
profits to the Secured Party, nothing contained herein shall be deemed to limit,
amend, modify or extinguish any such absolute and irrevocable assignment.
SECTION FIFTEEN
ATTORNEY-IN-FACT
To facilitate the performance or observance by the Secured Party of the
agreements of the Debtor as contained herein, the Debtor hereby irrevocably
appoint (which appointment is coupled with an interest) the Secured Party or its
delegate as the attorney-in-fact of the Debtor with the right (but not the duty)
from time to time to create, prepare, complete, execute, deliver, endorse or
file, in the name and on behalf of the Debtor any and all instruments,
documents, financing statements, applications for insurance and other agreements
or writings required to be obtained, executed, delivered or endorsed by the
Debtor hereunder.
4
<PAGE>
SECTION SIXTEEN
NOTICES
Any notice required or desired to be given hereunder shall be deemed to
have been properly given if sent by registered or certified mail addressed, to
the following, at the following addresses:
To the DEBTOR: To the LENDER:
4400 PGA Blvd. 1455 Tropicana Ave.
Palm Beach Gardens, FL 33410 Suite 100
Las Vegas, NV 89119
Attn: Larry M. Reid Attn: Donna Snyder
IN WITNESS WHEREOF, the Borrower and the Lender have duly executed this
Agreement as of the day and year first above written.
BORROWER: LENDER:
OCUREST LABORATORIES, INC. AMERICAN GROWTH CAPITAL
CORPORATION as general partner of
AMERICAN GROWTH FUND I L.P.
By: ______________________________ By: _____________________________
Its: _____________________________ Its: Secretary/Treasurer
5
EXHIBIT 10.24
MASTER PURCHASE AND SALE AGREEMENT
THIS MASTER PURCHASE AND SALE AGREEMENT is made and entered into between
JMR Funding, Inc., a Florida Corporation ("JMRF"), and Ocurest Laboratories,
Inc., a Florida Corporation, ("Seller"), having its principal and executive
offices at 4400 PGA Blvd., Suite 300, Palm Beach Gardens, FL 33410.
WITNESSETH
Seller and JMRF, in consideration of the sum of Ten Dollars, ($ 10.00),
the mutual covenants and conditions herein provided, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, do
hereby agree as follows:
1. PURCHASE AND SALE. Seller shall, from time to time, submit all of its
accounts receivable owned by and owed to Seller by its trade account debtor(s)
(the "Account Debtor(s)") to JMRF, and JMRF shall purchase all of said accounts
receivable. All invoices representing accounts receivable purchased by JMRF
shall be identified and transferred to JMRF by an assignment in the form
attached hereto as Exhibit "A": (the "Assignment"). Each Assignment whether
constituting the transfer of one or more accounts receivable (the "Receivables
"), shall be deemed to constitute a separate "Account" of Seller with JMRF. In
its purchase of Receivables from Seller, JMRF shall be deemed to have purchased:
(a) the Receivables and all rights to payment from the Account Debtor(s), (b)
the originals of all documents and all datum evidencing the creation, terms and
payment status of the Receivables, and all security received from the Account
Debtor(s) or others by Seller regarding the Receivables, (c) all rights of
Seller regarding the goods or services, the sale of which gave rise to the
Receivables, and all proceeds thereof, and (d) all rights of Seller for the
collection or management of the Receivables. Each Assignment shall constitute a
sale, transfer and outright assignment of all of Seller's right, title and
interest in and to the Receivables described in the Assignment to JMRF as
absolute owner. To the extent that JMRF purchases Receivables from Seller, the
rights and obligations of Seller and JMRF with respect to each Assignment and
the Receivables described therein shall be subject to the provisions of this
Master Purchase And Sale Agreement, and to the terms of each Assignment, which
are incorporated herein by reference.
2. PURCHASE PRICE. JMRF agrees to purchase the Receivable(s) identified
in any Assignment accepted by JMRF from Seller at a purchase price equal to the
aggregate face value, less discounts and allowances of invoices comprising the
Receivables thereby Assigned, less a fee ("JMRF's Fee") as hereinafter
described. Such purchase price shall be payable by JMRF to Seller as follows:
a. Upon the Assignment to JMRF and receipt by JMRF of all documentation
and security relative to the Receivables, JMRF shall pay to Seller an initial
sum (the "Initial Sum") in the amount of Seventy percent (70.0%) of the face
value of the Receivables.
b. JMRF's Fee under this Agreement and the Assignment shall be due upon
each invoice in each Account in accordance with the fee schedule set forth
within Paragraph 4 hereof
c. An Account of Seller with JMRF shall be considered closed once all
invoices and other sums payable by the Account Debtor(s) under the Account have
been paid in full by the Account Debtor(s) or repurchased by Seller as provided
in paragraph 3 below, or any combination thereof. When an Account closes, JMRF
shall remit to Seller all remaining balances of the purchase price owed on such
Receivables, less JMRF's Fee, and any sums payable by Seller to JMRF with regard
to such Receivables as provided in Paragraph 11 or otherwise in this Agreement.
<PAGE>
3. SELLER'S OPTION TO REPURCHASE RECEIVABLE. Seller shall have the
right, at any time, to repurchase from JMRF any Receivables assigned to JMRF,
for an amount equal to the Initial Sum paid by JMRF, plus JMRF's Fee earned by
JMRF through the time of repurchase, together with any other sums payable by
Seller to JMRF with regard to the Receivables as provided in this Agreement.
4. JMRF'S FEE. As an inducement to Seller to sell to JMRF only
Receivables from which prompt payment by Account Debtors can be expected, JMRF's
Fee for services regarding any particular invoice within an Account shall be due
as each invoice is collected.. JMRF's Fee for Invoices paid within 30 days of
the Assignment thereof shall be 3.0% of the Initial Sum. In addition with
respect to any Invoice where the Initial Sum is not paid in full within 60 days
of the Assignment thereof, an amount of 1% of the Initial Sum multiplied by the
percentage of such invoice not so paid shall be added to the foregoing amount of
3% with respect to each 30 day period or portion thereof subsequent to such 60
day period during which the respective Initial Sum is not paid in full
For purposes of calculating JMRF's Fee for any particular invoice, time
shall be of the essence, and the first day of the Fee period shall be the day
upon which JMRF purchases the Account including the invoice and makes the
Initial Advance available to the Seller. The final day of the Fee period shall
be the day in which the JMRF receives cash credit by its bank for the full
payment of the invoice. It is contemplated that most invoice payments by Account
Debtor(s) shall be by check and Seller acknowledges that JMRF shall not receive
cash credit by its bank until several days after said check is deposited
depending on bank policy and Federal and State banking laws.
JMRF agrees to accept a substitute invoice in an equal amount for any
invoice that is not paid in full in 60 days and Seller agrees to pay fee to JMRF
on substitute invoice as well as fee on invoice that was not paid.
5. SELLER'S REPRESENTATIONS. Seller unconditionally makes the following
express representations and warranties with respect to each Receivable:
a. Seller has the full power and authority to sell the Receivable and
has duly authorized its sale and the Assignment to JMRF in accordance with the
terms of this Agreement and the Assignment. All invoices or other documents
relating to the Receivable are genuine and bona fide in all respects, and the
Seller is the sole owner of the Receivable and the Receivable has not previously
been assigned nor has any security interest or other manner of encumbrance been
granted by seller with respect to the Receivable. At the time of the purchase
and Assignment of any Receivable, of the receivable has been incurred by the
Account Debtor for full consideration therefore given by Seller. At the time of
the purchase and Assignment of any Receivable, the Receivable shall be current
and then due and owing to Seller and is for the full amount stated in the
Assignment. There exists no setoffs, deduction, disputes, contingencies, or
counterclaims by the Account Debtor against Seller or the Receivable and the
Receivable is due and payable in full no later than ninety (90) days after the
date of each Assignment. There are no express or implied conditions precedent to
payment of all or any portion of the Receivable. Seller shall be responsible for
the payment of all sales, use or other taxes assessable against the Receivable.
b. That at the time of the purchase and Assignment of any Receivable,
there are no bankruptcy or insolvent proceedings, voluntary or involuntary,
threatened or pending against the Seller in any court, and there are no grounds
upon which any such proceeding could be filed against the Seller.
c. Seller's identification number for Federal Income tax purpose is:
65-0259441
d. Seller's sole place of business or, in the event Seller has more
than one place of business. Seller's chief executive office is located: 4400 PGA
Blvd., Suite 300, Palm Beach Gardens, FL 33410
2
<PAGE>
e. Seller shall notify JMRF in writing immediately upon obtaining any
knowledge of any nonconsensual lien (e.g. Federal or State tax lien, judgment
lien, etc.), claim, levy, attachment, encumbrance or other court or legal
proceeding or process filed, recorded or otherwise brought against Seller or any
Account Debtors, or against any property of Seller or of any Account Debtor.
f. Seller shall notify JMRF in writing prior to any change in the
location of Seller's place(s) of business or, if Seller has or intends to
acquire any additional place(s) of business, or prior to any change in Seller's
chief executive office. Seller will immediately notify JMRF in writing of any
proposed change of Seller's name, identity, legal entity, corporate structure,
use of additional trade name(s), and/or any proposed change in any of the
officers, principals, partners and/or owners of Seller.
All representations, warranties, indemnities and covenants of Seller
under this Agreement shall survive the termination of this Agreement and the
full payment of the purchase price by JMRF to Seller for any and all Receivables
Assigned under this Agreement.
6. MANAGEMENT OF RECEIVABLES. Upon Assignment of the Receivables, JMRF,
as the sole and absolute owner of the Receivables, and therefore having assumed
the risk of nonpayment thereof based solely upon the Account Debtor(s) financial
inability to pay, shall have the exclusive authority to collect each Receivable,
to bring proceedings for collection in JMRF's or Seller's name, to exercise all
right of Seller to stoppage in transit, replevin, reclamation, or otherwise, and
in JMRF's sole discretion, to settle, compromise or assign any of the
Receivables. In the event that Seller receives payment in any form upon any
receivable, Seller shall be deemed to hold same in trust for JMRF and shall
immediately deliver same to JMRF. JMRF may contact Account Debtor(s) to give
notice, written or otherwise, that Receivables have been purchased and assigned
by Seller to JMRF, and that payment thereon shall be made directly to JMRF. JMRF
may affix (or require that Seller affix) labels, stickers, or stamps on the face
of all invoices, bills, notices, statements, and shipping documents relating to
Receivables sold to JMRF stating that the have been sold and assigned to JMRF
and are payable only to JMRF. JMRF shall have the right to receive and open all
mail addressed to Seller or Seller's trade name at JMRF's address and do any and
all things reasonably necessary and proper to carry out the purpose and intent
of this Agreement. Seller shall not make or attempt to make any modification,
amendment or change in the terms of subsequent accounts receivable from any
Account Debtor(s) from those currently in practice on the date hereof without
JMRF's prior written consent.
7. EXPRESS GRANT OF POWER OF ATTORNEY TO JMRF. Seller hereby expressly
grants to JMRF the power to exercise any right of Seller with regard to any
Receivables, or the goods therewith concerned, and to endorse in the name of
Seller any and all checks, drafts, letters of credit or other manner of payment
or security upon any and all Receivables, and for these purposes and for JMRF's
exercise of ail of such rights and powers, Seller hereby unconditionally and
irrevocable appoints JMRF, its agents and employees, as its lawful
attorney-in-fact, which appointment is coupled with an interest, with full power
of substitution, to do and perform any and all acts as fully as Seller could do
if present.
8. INSPECTION AND AUDIT. The Seller agrees that it will permit a
representative of JMRF, to examine all records of or held by Seller, in whatever
form or media, regarding any Receivables purchased by JMRF. JMRF may make copies
and extracts therefrom, and may cause such records to be audited by an
independent certified public accountant selected by JMRF. Seller further agrees
to discuss its affairs, finances and accounts relating to this Agreement with
JMRF and its agents as often as may be reasonable requested. Any expense
incident to the exercise by JMRF of any right under this paragraph 8 shall be
borne by, provided that, if an audit is made during continuance of a default by
Seller under this Agreement or an Assignment, the reasonable expenses incident
to such audit shall be borne by Seller.
9. INDEMNIFICATION AGREEMENT. Seller hereby agrees to indemnify, defend
and hold harmless JMRF from and against any and all damages, claims, demands,
liabilities, suits, actions, causes of action, or administrative proceedings,
together with all costs, expense and fees, including without limitation
3
<PAGE>
reasonable attorneys' and paralegals' fees, incurred or expended by JMRF in any
manner relating to: (a) the failure of any representation or warranty of Seller
set forth in this Agreement or any Assignment; or (b) the non-performance by
Seller of any of its obligations to its Customer or the rejection by the
Customer of all or any portion of goods and services of Seller or actual or
alleged claims, defenses of offsets of any kind or nature by any Customer
relating to an Receivable; or (c) any other breach or violation of any term of
this Agreement or of any Assignment by Seller. In addition to JMRF's right and
remedies upon default of Seller under this Agreement as otherwise set forth in
the Agreement, JMRF shall have all rights and remedies available at law or in
equity, none of which shall be deemed mutually exclusive of any other right or
remedy available to
10. SETTLEMENT ACCOUNT. In order to protect JMRF's rights under this
Agreement and all Assignments, JMRF shall create a record as to each Account
purchased by JMRF from Seller under this Agreement (the "Settlement Account").
The balance of the Seller's Settlement Account shall be the total of the invoice
amounts for the Receivables as set forth in the Assignment, reduced by the
Initial Advance, JMRF's Fees, and all amounts charged back or setoff with
respect to sums owed Seller under this Agreement, including without limitation,
charges arising against Seller pursuant to Paragraphs 9, and 13, if any. On or
about the fifth (5th) business day after the closing of an Account (the
"Settlement Date"), JMRF shall pay Seller any portion of the purchase price
remaining due Seller on the Account as is held in the Settlement Account
established for the Account, provided the JMRF expressly reserves the right to
offset sums due from Seller under any particular Account against sums payable to
Seller on any other Account.
11. SECURITY INTEREST. JMRF shall be the sole and absolute owner of the
purchased Receivables. In order to evidence, secure and perfect JMRF's interest
in the Receivables, and further to secure Seller's representations and
warranties under Paragraph 5, Seller hereby grants to JMRF a security interest
in and lien upon all the purchased Receivables, as well as all other accounts
receivable now or at any time hereafter acquired or arising out of the business
of Seller, including without limitation, all existing and future sums payable
thereunder, contract rights, claims, proceeds (including insurance proceeds
payable upon any loss or casualty), and all right to property or payment
represented thereby. Seller agrees to comply with all appropriate laws in order
to perfect JMRF's security interest as aforesaid and to execute and deliver any
financing statement(s) or additional documents as JMRF may from time to time
require, including a separate security agreement, and for this purpose,, Seller
hereby irrevocably appoints JMRF, its agents and employees, as its
attorney-in-fact, coupled with an interest, for the purpose of executing, in
Seller's name, or in the name of JMRF, all financing statements or other
documentation necessary to create, perfect or secure JMRF's interests as
provided herein. Seller will not, during the term of this Agreement, sell,
transfer, pledge, create a security interest in, hypothecate of otherwise
encumber any Receivable purchased by JMRF, or any other account receivable of
Seller to any person, firm, association or corporation other than JMRF.
12. ATTORNEYS' FEES. In the event of any litigation, action or
proceeding in any manner relating to this Agreement, the prevailing party shall
be entitled to the payment of all of its costs, expenses and fees, including
without limitation reasonable attorneys' fees and expert witness fees, by the
non prevailing party, including any of such costs, expenses and fees upon appeal
or in connection with any post judgment proceedings. Further, Seller shall
indemnify, defend and hold harmless Purchaser from any costs, expenses and fees
incurred in any action, counterclaim or proceeding asserted by an Account Debtor
or third party regarding a Receivable.
13. TERM OF AGREEMENT. The term of this Agreement shall be from the date
of full execution hereof until either party serves written notice to the other
of its termination of the Agreement, but no such termination shall affect the
transactions or sales of Receivables or the rights of either party hereto made
prior to the date of such termination and no such termination notice shall be
effective as to any Receivable simultaneously purchased by JMRF at the time of
termination.
4
<PAGE>
14. GOVERNING LAW; VENUE. This Agreement shall be governed by the laws
of the State of Florida, except as may be necessary for the perfection any
security interest of JMRF hereunder. The Seller submits to the jurisdiction of
all courts located in the State of Florida. Seller irrevocably and
unconditionally agrees that any suit, action or legal proceeding arising out of
or relating to this Agreement may be brought in the courts of record of the
State of Florida in Palm Beach County or the District Court of the United States
for the Southern District of Florida, and consents to the jurisdiction of each
such court, and waives any objection to the laying of venue in any of such
courts. EACH PARTY WAIVES ALL RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY
CLAIM, COUNTERCLAIM OR ON THE PROCEEDING RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
15. NOTICES. All notices to be given by any party hereunder shall be in
writing and shall be hand delivered by messenger or commercial courier, or
alternatively shall be sent by United States Certified Mail, with return receipt
requested. The effective date of any notice shall be the date of delivery of the
notice if by personal delivery or delivery by commercial courier service, or if
mailed, upon the date upon which the return receipt is signed or delivery is
refused or the notice is designated by the postal authorities as being
non-deliverable, as the case may be. Parties hereby designate the address set
forth in the preamble hereof as the address to which notices may be delivered,
provided that any party may change the address to which notices under this
Agreement shall be given to such party upon five (5) days prior written notice
to the other party.
16. INUREMENT. This Agreement shall inure to the benefit of and be
binding upon the heirs, legal representatives, successors and assigns of the
parties hereto.
17. COMPLETE AGREEMENT. This Master Purchase And Sale Agreement and any
Assignments of Receivables as contemplated herein set forth the complete and
entire understanding between Seller and JMRF and may only be modified by a
written instrument signed by the party to be bound thereby.
IN WITNESS WHEREOF, the parties have causes these presents to be
executed as of the 1st day of December, 1995.
"JMRF" "SELLER"
JMR Funding, Inc. Ocurest Laboratories, Inc.
By: /s/ J. MICHAEL REISERT By: /s/ LARRY M. REID
---------------------------- ---------------------------------
J. Michael Reisert Larry M. Reid
Executive Vice President
EXHIBIT 10.25
THE TAX HAS BEEN PAID AND THE PROPER DOCUMENTARY STAMPS HAVE BEEN AFFIXED TO THE
SECURITY AGREEMENT SECURING THIS NOTE.
NOTE
$524,000.00 Fort Lauderdale, Florida
June 28, 1996
FOR VALUE RECEIVED, the undersigned, OCUREST LABORATORIES, INC., a
Florida corporation, located at 4400 PGA Boulevard, Suite 300, Palm Beach
Gardens, Florida 33410 (the "Maker"), promises to pay to the order of JMR
FUNDING. INC., a Florida corporation, its successors and assigns ("Lender"), at
2455 East Sunrise Boulevard, Suite 700, Fort Lauderdale, Florida 33304, or at
such other place as may be designated in writing by Lender, the principal sum of
FIVE HUNDRED TWENTY-FOUR THOUSAND ($524,000) DOLLARS, together with interest at
the rate of Twenty-four (24%) percent per annum on the unpaid principal balance,
payable as follows: on the first day of August, 1996 and on the first day of
each month thereafter the interest due as calculated above; provided, however,
that the entire principal balance and all accrued and unpaid interest shall be
due and payable one (1) year from the date hereof (the "Maturity Date").
This Note may be prepaid in whole or in part without penalty or premium;
provided, however, that any partial prepayments shall be applied against the
balance due at the Maturity Date.
This Note is secured by a Security Agreement of even date herewith (the
"Security Agreement"), executed by Maker in favor of Lender. Reference is hereby
made to the Security Agreement for a description of events of default and rights
of acceleration of the Maturity Date in the event of default. It is expressly
agreed that all of the covenants, conditions and agreements contained in the
Security Agreement are made a part of this Note.
In the event any payment of the principal sum, or any installment
thereof, or any interest thereon, as above provided, is not made when payment is
due and the continuance of such failure for a period of fifteen (15) days after
such date, this Note may be declared in default and the entire balance then
outstanding, together with all interest accrued thereon, shall become
immediately due and payable, at the option of Lender and without notice (the
Maker hereby expressly waives notice of such default), time being of the essence
of this agreement.
Maker agrees to pay all costs of collection incurred in enforcing this
Note, including costs and reasonable attorneys' fees at both trial and appellate
levels and in any bankruptcy action. In the event any legal proceedings are
instituted in connection with, or for the enforcement of this Note, Lender shall
be entitled to recover its costs of suit, including costs and reasonable
attorneys' fees at both trial and appellate levels and in any bankruptcy action.
Each maker, endorser and guarantor or any person, firm or corporation
becoming liable under this Note hereby consents to any extension or renewal of
this Note or any part hereof, without notice, and agrees that they will remain
liable under this Note during any extension or renewal hereof, until the debts
represented hereby are paid in full.
This Note is subject to the express condition that at no time shall
Maker by obligated or required to pay interest on the principal balance due
under this Note at a rate which could subject the holder of this Note to either
civil or criminal liability as a result of being in excess of the maximum
interest rate which Maker is permitted by law to contract or agree to pay. If,
by the terms of this Note, Maker is at any time required or obligated to pay
interest on the principal balance due under this Note at a rate in excess of
such maximum rate, the rate of interest under this Note shall be deemed to be
immediately reduced to such maximum rate and the interest payable shall be
computed at such maximum rate and all prior interest
<PAGE>
payments in excess of such maximum rate shall be applied and shall be deemed to
have been payments in reduction of the principal balance of this Note.
All persons now or at any time liable for payment of this Note hereby
waive presentment, protest, notice of protest and dishonor. Maker expressly
consents to any extension or renewal, in whole or in part, and all delays in
time of payment or other performance which Lender may grant at any time and from
time to time without limitation and without notice or further consent of the
undersigned.
The remedies of Lender as provided herein, or in the Security Agreement
shall be cumulative and concurrent and may be pursued singularly, successively
or together, at the sole discretion of Lender, and may be exercised as often as
the occasion therefor shall arise.
This Note and the obligations arising hereunder shall be governed by,
and construed in accordance with, the laws of the State of Florida and any
applicable laws of the United States of America. Any action brought upon the
enforcement of this Note is hereby authorized to be instituted and prosecuted in
Broward County, Florida, or at the United States District Court for the Southern
District of Florida, at the election of Lender.
This Note may not be changed orally, but only by an agreement in
writing, signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
MAKER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, AND LENDER BY ITS
ACCEPTANCE OF THIS NOTE IRREVOCABLY AND UNCONDITIONALLY WAIVES, ANY AND ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN
CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THIS NOTE, THE MORTGAGE OR ANY
OTHER DOCUMENT OR INSTRUMENT HERETOFORE, NOW OR HEREAFTER EXECUTED AND DELIVERED
IN CONNECTION THEREWITH, OR THE LOAN REPRESENTED BY THIS NOTE.
This Note is executed by Maker pursuant to the terms of an Agreement
effective as of November 15, 1995, the terms of which are incorporated by
reference herein.
IN WITNESS WHEREOF, Maker has duly executed this Note under seal the day
and year first above written.
MAKER:
OCUREST LABORATORIES, INC.,
a Florida corporation
By: /s/ LARRY M. REID
--------------------------
Name: Larry M. Reid
------------------------
Title: Exec. V.P.
-----------------------
EXHIBIT 10.26
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made and entered into as of
the 15th day of November, 1995, by and between JMR FUNDING, INC., a Florida
corporation, whose address is 2455 East Sunrise Boulevard, Suite 700, Ft.
Lauderdale, Florida 33304 (the "Secured Party"), and OCUREST LABORATORIES, INC.,
a Florida corporation (the "Debtor"), whose address is 4400 PGA Boulevard, Suite
300, Palm Beach Gardens, Florida 33410.
W I T N E S S E T H:
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the parties hereto agree as follows:
1. SECURITY INTEREST. In consideration of and as an inducement for the
extension of credit, now and in the future by Secured Party to Debtor, Debtor
hereby grants Secured Party an unconditional and continuing security interest
(the "Security Interest") in the following described assets, all such assets
acquired by the Debtor after the date hereof, and in all proceeds and products
thereof in any form whatsoever, together with all records relating thereto (the
"Collateral"):
All inventory and accounts receivable
2. INDEBTEDNESS SECURED. This Agreement and the Security Interest
created by it secures payment of all obligations of any kind owing by the Debtor
to the Secured Party, whether now existing or hereafter incurred, direct or
indirect, arising from loans, guarantees, endorsements or otherwise, whether
related or unrelated to the purpose of the original loan, whether of the same or
a different class as the primary obligation, and whether the obligations are
from time to time reduced and thereafter increased, or entirely extinguished and
new obligations thereafter incurred, including without limitations any sums
advanced and any expenses or obligations incurred by the Secured Party pursuant
to this Agreement or any other agreement concerning, evidencing or securing
obligations of the Debtor to the Secured Party arising from any source
whatsoever (the "Indebtedness").
3. REPRESENTATIONS AND WARRANTIES OF DEBTOR. The Debtor represents and
warrants, and so long as the Indebtedness remains unpaid shall be deemed to
continuously to represent and warrant, that:
(a) Other than with respect to accounts receivable assigned to the
Secured Party, the Debtor is the owner of the Collateral, free of all security
interests or other encumbrances except the Security Interest;
(b) The Debtor is a corporation duly organized and
<PAGE>
validly existing under the laws of the State of Florida;
(c) This Security Agreement is being executed on behalf of Debtor by
one (1) or more properly authorized officers, and all necessary actions have
been taken by Debtor to authorize such execution; and
(d) The Debtor is engaged in business operations that are carried on
in the state specified above.
4. COVENANTS OF DEBTOR. So long as the Indebtedness remains unpaid, the
Debtor will perform and observe each of the Debtor's covenants to the Secured
Party as set forth herein, and without limitation of the foregoing, the Debtor:
(a) Will not remove the Collateral from its principal place of
business without the prior written consent of Secured Party, except that Debtor
may sell any of its inventory in the ordinary course of business free of the
security interest granted hereby;
(b) Will advise the Secured Party, in writing, immediately upon
request, of the location of the Collateral;
(c) Will defend the Collateral against the claims and demands of all
other parties and will keep the Collateral free from all security interests or
other encumbrances except the Security Interest;
(d) Will keep accurate and complete records concerning the Collateral
and, at the Secured Party's request, will make any such records and the
Collateral to give notice of the Security Interest;
(e) Will, upon demand, deliver to Secured Party any documents
relating to the Collateral or any part thereof, and any and all other schedules,
documents and statements that the Secured Party may from time to time request;
(f) Will at all times keep the Collateral insured against loss,
damage, theft, and such other risks as Secured Party may require, in such
amounts as are equal to the full insurable value of the Collateral, and in such
companies and under such policies as shall be satisfactory to Secured Party;
each such policy shall name the Secured Party as "loss payee" and shall provide
that any proceeds payable thereunder shall be payable to Secured Party;
(g) Will notify the Secured Party promptly in writing of any change
in the Debtor's address as specified above;
(h) Will notify the Secured Party in writing within five
2
<PAGE>
(5) days from the date of any loss, damage or theft of the Collateral,
specifying in such notice the exact nature and amount of such loss;
(i) Will not, without Secured Party's written consent, make or agree
to make any alteration or modification to the Collateral or permit anything to
be done that may impair the value of the Collateral or the security intended to
be afforded by this Agreement; and
(j) Will, in connection herewith, execute and deliver to Secured
Party such financing statements and other documents, pay all costs of filing
financing statements and other documents in all public offices requested by
Secured Party, and do such other things as Secured Party may request to protect
the Collateral and Secured Party's Security Interest.
5. EVENTS OF DEFAULT. If any of the following events ("Events of
Default") shall occur and be continuing, the Secured Party may, at its option,
by notice in writing to any or all of the Debtors, declare all of the
Indebtedness to be immediately due and payable, together with interest accrued
thereon:
(a) If any representation or warranty made by the Debtor herein or in
any writing furnished in connection with or pursuant to this Agreement shall be
false in any material respect;
(b) If there is any material loss, theft, damage or destruction to or
of any of the Collateral which is not covered by insurance, or the making of any
levy, seizures, or attachment thereof or thereon;
(c) If the Debtor shall default in the performance or observance of
any other agreement, covenant, term or condition contained herein, or in any
other instrument or documents evidencing or securing any of the Indebtedness, or
in any other agreement between the Debtor and the Secured Party which default
continues for a period of five (5) days after the initial occurrence of such
default;
(d) If the Debtor makes an assignment for the benefit of creditors;
(e) If the Debtor petitions or applies to any tribunal for the
appointment of a trustee or receiver for itself, or of any substantial part of
its assets, or commences any proceedings relating to itself under any
insolvency, reorganization, arrangement, readjustment of debts, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect;
(f) If any such petition or application is filed or any such
proceedings are commenced against the Debtor, and such Debtor
3
<PAGE>
by any act indicates its approval thereof, consent thereto, or acquiescence
therein, or any order is entered appointing any such trustee or receiver, or
adjudicating such Debtor bankrupt or insolvent, or approving the petition in any
proceedings, and such order remains in effect for more than ten (10) days; or
(g) If any order is entered in any proceeding against the Debtor
decreeing the dissolution or split-up of that person, partnership or entity.
6. REMEDIES. Upon the happening of any Event of Default:
(a) The Secured Party's rights with respect to the Collateral shall
be those of a secured party under the Florida Uniform Commercial Code as now in
effect or hereinafter amended. The Secured Party shall also have any additional
rights granted herein and in any other Agreement now or hereafter in effect
between the Debtors and the Secured Party. If requested by the Secured Party,
the Debtors will immediately assemble the Collateral and make it available to
the Secured Party at a place to be designated by the Secured Party.
(b) The Secured Party shall have the right, without notice to the
Debtor, to enter upon any premises where the Collateral may be located for the
purpose of taking possession of the Collateral.
(c) The Secured Party shall have the right, at its option, to demand,
collect and sue for all proceeds (either in the Debtor's name or in the Secured
Party's name, at the latter's option), with the right to enforce, compromise,
settle or discharge any proceeds. The Debtor appoints the Secured Party the
Debtor's attorney-in-fact to endorse the Debtor's name on all checks, commercial
paper and other instruments pertaining to the proceeds after any Event of
Default.
(d) The Debtor agrees that any notice by the Secured Party of the
sale or disposition of the Collateral or any other intended action hereunder,
whether required by the Uniform Commercial code or otherwise, shall constitute
reasonable notice to the Debtors, if the notice is mailed by regular or
certified mail, postage prepaid, at least five (5) days before the action, to
the Debtors' address as specified in this Agreement, or to any other address
that the Debtor has specified in writing to the Secured Party as the address to
which notices shall be given to the Debtors. The Debtor further agrees that the
Secured Party may be the purchaser of the Collateral at any public or private
sale.
(e) The Debtor shall pay all costs and expenses incurred by the
Secured Party in enforcing this Agreement, realizing upon any Collateral, and
collecting any Indebtedness, including a reasonable attorneys' fee, whether or
not suit is brought, and
4
<PAGE>
whether incurred in connection with collection, trial, appeal or otherwise, and
shall be liable for any deficiencies in the event the proceeds of disposition of
the Collateral does not satisfy the Indebtedness in full.
8. MISCELLANEOUS.
(a) The Debtor authorizes the Secured Party at the Debtors' expense
to file any financing statement or other documents or statements relating to the
Collateral (without the Debtor's signature thereon) that the Secured Party deems
appropriate, and the Debtor appoints the Secured Party as the Debtor's
attorney-in-fact to execute any such financing statement or statements in the
Debtor's name and to perform all other acts that the Secured Party deems
appropriate to perfect and to continue perfection of the Security Interest.
(b) The Security Interest of the Collateral shall continue after the
payment of the Indebtedness, if at the time of such payment the Debtor shall be
liable to Secured Party on any promissory note, draft, bill of exchange, or
other instrument or Agreement.
(c) The Debtor hereby irrevocably consents to any act by the Secured
Party or its agents in entering upon any premises for the purpose of either: (1)
inspecting the Collateral; or (2) taking possession of the Collateral after any
Event of Default; and the Debtor waives its right to assert against the Secured
Party or its agents any claim based upon trespass or any similar cause of action
for entering upon any premises where the Collateral may be located.
(d) After any Event of Default, the Secured Party may notify any
party obligated to pay proceeds of the existence of the Security Interest, and
may also direct them to make payments of all proceeds to the Secured Party.
(e) No delay or omission by the Secured Party in exercising any right
hereunder or with respect to any Indebtedness shall operate as a waiver of that
or any other right, and no single or partial exercise of any right shall
preclude the Secured Party from any other or future exercise of the right or the
exercise of any other right or remedy. The Secured Party may cure any Event of
Default by the Debtor in any reasonable manner without waiving the Event of
Default so cured and without waiving any other prior or subsequent default by
the Debtor. All rights and remedies of the Secured Party under this Agreement
and under the Uniform Commercial Code shall be deemed cumulative.
(f) The Secured Party shall have no obligation to take and the Debtor
shall have the sole responsibility for taking any steps to preserve rights
against all prior parties to the
5
<PAGE>
Collateral.
(g) The rights and benefits of the Secured Party under this Agreement
shall, if the Secured Party agrees, inure to any party acquiring an interest in
the Indebtedness of any part thereof.
(h) At its option, Secured Party may discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on the Collateral,
and may pay for insurance on the Collateral. Debtor shall reimburse Secured
Party on demand for any such payments made or expenses incurred by Secured
Party.
(i) The terms "Secured Party" and "Debtor" as used in this Agreement
include the heirs, personal representatives, and successors or assigns of those
parties.
(j) This Agreement may not be modified or amended, nor shall any
provision of it be waived, except in a writing signed by authorized officers of
the Debtor and by the Secured Party.
(k) This Agreement shall be construed under the Florida Uniform
Commercial Code and any other applicable Florida law in effect from time to
time.
(1) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the remaining
provisions.
(m) The provisions contained in this Agreement constitute the entire
agreement between the parties, and no statement or inducement with respect to
the subject matter hereof by any party or by any agent or representative of
either party that is not contained in this Agreement shall be valid or binding
as between the parties.
(n) All sections and descriptive headings in this Agreement are
inserted for convenience only and shall not affect the construction or
interpretation hereof.
(o) This Agreement is a continuing agreement which shall remain in
force and effect until all of the Indebtedness and any extensions or renewals,
together with interest thereon, shall be paid in full.
IN WITNESS WHEREOF, the undersigned have set their hands and seals as of
the day and date first above written.
SIGNATURES BEGIN ON FOLLOWING PAGE
6
<PAGE>
WITNESSES: SECURED PARTY:
JMR FUNDING, INC.
/s/ ILLEGIBLE
- -------------------------------
Print Name: ILLEGIBLE
-------------------- By: /s/ IRVING H. BOWEN
--------------------------------
/s/ ILLEGIBLE Irving H. Bowen, Managing
- ------------------------------- Director
Print Name: ILLEGIBLE
---------------------
DEBTOR:
OCUREST LABORATORIES, INC.
/s/ ILLEGIBLE
- -------------------------------
Print Name: ILLEGIBLE
-------------------- By: /s/ LARRY REID
---------------------------------
/s/ ILLEGIBLE Larry Reid, Executive Vice President
- -------------------------------
Print Name: ILLEGIBLE
---------------------
7
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement"), is made and entered into as
of June 28, 1996, by and between JMR Funding, Inc., a Florida Corporation (the
"Secured Party"), whose address is 2455 East Sunrise Boulevard, Suite 700, Fort
Lauderdale, Florida 33304 and Ocurest Laboratories, Inc., a Florida Corporation
(the "Debtor"), having its principal and executive offices at 4400 PGA Blvd.,
Suite 300, Palm Beach Gardens, FL 33410.
W I T N E S S E T H:
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the parties agree as follows:
1. The parties entered into a Security Agreement, dated November 15,
1995 (the "Prior Security Agreement") for a security interest in inventory and
accounts receivable of the Debtor. The Secured Party has loaned the Debtor the
sum of Five Hundred Twenty-four Thousand ($524,000) Dollars, represented by a
note and to be secured by certain fixed assets of the Debtor (the "Collateral")
set forth on Exhibit A and attached hereto.
2. The parties hereby incorporate by reference the terms and provisions
of the Prior Security Agreement for the Collateral set forth above.
IN WITNESS WHEREOF, the parties have caused these presents to be executed as of
this day of 28th day of June, 1996.
Secured Party Debtor
JMR Funding, Inc. Ocurest Laboratories, Inc.
By: /s/ IRVING H. BOWEN By: /s/ LARRY M. REID
------------------------- ----------------------------
Irving H. Bowen Larry M. Reid
Managing Director Executive Vice President
EXHIBIT 10.27
SECURITY AGREEMENT
OCUREST LABORATORIES (hereinafter referred to as "Debtor"), of 4400 PGA
Blvd., Suite 800, Palm Beach Gardens, FL 33410, for value received, hereby
grants to Ralph H. Laffler (hereinafter referred to as "Secured Party") of
1500-5 Australian Avenue, Riviera Beach, FL 33403, a security interest in the
following property: (i) a junior/subordinated interest in the IMA North America
Filling, Plugging, Capping Machine with Unscrambler Serial #F87V-27, BR12-VD10
and Harland-Mercury Pressure Sensitive Dual Head Labeler Serial #BX-5377-CB
("Equipment"); and (ii) ten (10%) percent of the revenue of all sales made by
Debtor, less returns, allowances and discounts; and ten (10%) percent of all
revenue by Debtor from Selling and Licensing Agreements, (to the extent
described in paragraph 5(c) of that certain Agreement entered into on even date
herewith between Debtor and Secured Party) ("Revenue Interest"), (all of which
is hereafter collectively called "Collateral") to secure both the payment of
Debtor's $200,000 obligation owed to Secured Party as evidenced by Promissory
Note of even date herewith as well as Debtor's $370,000 obligation owed to First
Union National Bank of Florida (as cosigned by Secured Party) also of even date
herewith and any and all extensions or renewals thereof and any other
liabilities or obligations of the Debtor to Secured Party, direct or indirect,
absolute or contingent, now existing or hereafter arising, now due or hereafter
to become due (all hereinafter called the "Obligations").
Debtor hereby warrants and agrees that:
1. Except for the security interest granted hereby, Debtor is the owner
of the Collateral fee from any adverse lien, security interest, or encumbrance
except for the first
<PAGE>
lien granted by Debtor to First Union National Bank of Florida with respect to
the Equipment portion of the Collateral; and Debtor will defend the Collateral
against all claims and demands of all persons at any time claiming the same or
any interest thereon.
2. No Financing Statement covering any Collateral or any proceeds
thereof is on file in any public office except for the Financing Statement filed
by First Union National Bank of Florida with respect to the Equipment portion of
the Collateral; Debtor authorized Secured Party at Debtor's expense to file any
Financing Statement or Statements relating to the Collateral (without any
Debtor's signature thereon) which Secured Party deems appropriate, and Debtor
irrevocably appoints Secured Party as Debtor's attorney-in-fact to execute any
such Financing Statement or Statements in Debtor's name and to do such other
acts and things, all as Secured Party may request, to establish and maintain a
valid security interest in the Collateral (free of all other liens and claims
whatsoever) to secure the payment of the Obligations, including, without
limitation, deposit with Secured Party of any certificate of title issuable with
respect to the Collateral and notation thereon of the security interest
hereunder. For purpose of perfecting the security interest created by this
Agreement, a carbon, photographic or other reproduction of this Security
Agreement or a financing statement will be sufficient to serve as a financing
statement. If this Agreement is to be used as a Financing Statement, it is
hereby stated that any documentary stamps required by Chapter 201, Florida
Statutes have been placed on the promissory instruments, advances or similar
instruments that may be secured hereby.
3. Debtor will not sell, transfer, lease, relocate or otherwise dispose
of any of the Collateral or any interest therein, without the prior written
consent of Secured Party.
2
<PAGE>
4. Debtor will at all times keep the Collateral insured against loss,
damage, theft and such other risks as Secured Party may require in such amounts
and companies and under such policies and in such form, and for such periods, as
shall be satisfactory to Secured Party.
5. Debtor shall at all times keep the Collateral free from any adverse
lien (other than First Union National Bank of Florida's lien on the Equipment
portion of the Collateral), security interest or encumbrance and in good order
and repair and will not waste or destroy the Collateral or any part thereof; and
Debtor will prevent the Collateral or any part thereof from being or becoming an
accession or fixture to other goods not covered hereunder; and Debtor will not
use the Collateral in violation of any statute or ordinance; and Debtor will
keep, in accordance with generally accepted accounting principles consistently
applied, accurate and complete records concerning the Collateral; at Secured
Party's request, will mark any of such records and all or any of the Collateral
to give notice of the security interest; and will permit Secured Party or its
agents to examine and inspect the Collateral and to audit and make abstracts of
such records or any of the Debtor's books, ledgers, reports, correspondence or
other records at any time, wherever located, and in connection therewith,
Secured Party or its agents may enter upon any premises of Debtor and Debtor
expressly waives any and all claims for damage or trespass or other injury
occasioned thereby.
6. Debtor will pay promptly when due all taxes and assessments upon the
Collateral or for its use or operation or upon this Agreement or upon any note
or notes evidencing the Obligations, or any of them. Further, Debtor will make
available to Secured
3
<PAGE>
Party a copy of Debtor's financial statement, including balance sheet and profit
and loss statements, on a semi-annual basis as well as a copy of Debtor's
Federal Tax Return each year for so long as any portion of the Obligation
remains outstanding.
7. If any certificate of title may be issued with respect to any of the
Collateral, Debtor will cause Secured Party's interest hereunder to be noted on
the certificate and will deliver a copy of the certificate to Secured Party.
8. At its option, Secured Party may discharge taxes, liens or security
interests or other encumbrances at any time levied or placed on the Collateral,
may pay for insurance on the Collateral, and may pay for the maintenance and
preservation of the Collateral, Debtor agrees to reimburse Secured Party on
demand for any payment made, or any expense incurred, by Secured Party pursuant
to the foregoing authorization. Until default, Debtor may have possession of the
Collateral and use it in any lawful manner not inconsistent with this Agreement
and not inconsistent with any policy of insurance thereon.
10. Debtor shall be in default of this Agreement upon the happening of
any of the following events or conditions: (a) failure of any Obligor (which
term as used herein shall mean each Debtor and each other party primarily or
secondarily or contingently liable on any of the Obligations) to pay when due
(whether by acceleration or otherwise), any amount payable on any of the
Obligations: (b) any warranty, representation or statement
4
<PAGE>
made or furnished to Secured Party by or on behalf of any Obligor proves to have
been false in any material respect when made or furnished; (c) loss, theft,
substantial damage, destruction, sale or encumbrance to or of any of the
Collateral, or the making of any levy, seizure or attachment thereof or thereon;
(d) the filing of any petition under the Bankruptcy Code, or any similar Federal
or State Statute, by or against any Obligor; (e) the filing of an application
for the appointment of a receiver for, the making of a general assignment for
the benefit of creditors by, or the insolvency of any Obligor; (f) the entry of
a judgment against any Obligor; (g) the issuing of any attachment or garnishment
or the filing of any lien, against any property or any Obligor; (h) the taking
of possession of any substantial part of the property of any Obligor at the
instance of any governmental authority; (i) the dissolution, incompetency,
consolidation or reorganization of any Obligor.
11. Upon the occurrence of any such default or upon the happening of any
default as defined in any note evidencing any of the Obligations or in any other
agreement or instrument securing or otherwise related to any of the Obligations,
or at any time; thereafter, Secured Party may, at its option, declare all
Obligations of Debtor to Secured Party immediately due and payable without
demand or notice of any kind and the same thereupon shall become and be due and
payable (but with such adjustments, if any, with respect to interest, or other
charges as may be provided for in the promissory note or other writing
evidencing such liability); shall have the remedies of a secured party under the
Uniform Commercial Code of Florida and any and all rights and remedies available
to it under any other applicable law; and upon request or demand of Secured
Party, Debtor shall, at its expense,
5
<PAGE>
assemble the Collateral and make it available to Secured Party at a convenient
place acceptable to Secured Party; and Debtor shall promptly pay all expenses of
retaking, holding, preparing for sale, selling, or the like, all expenses of
collection of any and all the Obligations, all expenses of any repairs to any of
the Collateral and expenses of any repairs to any realty or other property to
which any of the Collateral may be affixed or be a part and all other expenses
of enforcement of rights hereunder. Expenses of retaking, holding, preparing for
sale, selling or the like, expenses of collection and other expenses of
enforcement of rights hereunder shall include Secured Party's reasonable
attorneys' fees and legal expenses. In connection with the exercise of any
rights available upon default, Secured Party or its agent may enter upon the
premises of Debtor and Debtor expressly waives any and all claims for damage,
trespass or other injury occasioned thereby. Unless the Collateral is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Secured Party will give Debtor reasonable notice of the time
and place of any public sale thereof or of the time after which any private sale
or any other intended disposition thereof is to be made. The requirements of
reasonable notice shall be met if such notice is mailed, postage prepaid, to any
Debtor at the address of Debtor shown at the beginning of this Agreement or at
any other address shown on the records of Secured Party, at least five (5) days
before the time of the sale or disposition. Upon disposition of any Collateral,
Debtor shall be and remain liable for any deficiency; and Secured Party shall
account to Debtor for any surplus.
6
<PAGE>
12. No waiver by Secured party of any default shall operate as a waiver
of any other default or of the same default on a future occasion. No delay or
omission on the party of Secured Party in exercising any right or remedy shall
operate as a waiver thereof, and no single or partial exercise by Secured Party
of any right or remedy shall preclude any other or further exercise thereof or
the exercise of any other right or remedy. Time is of the essence of this
Agreement. The provisions of this Agreement are cumulative and in addition to
the provisions of any note secured by this Agreement, and Secured Party shall
have all the benefits, rights and remedies of any under any note secured hereby.
If more than one party shall execute this Agreement, the term "Debtor" shall
mean all parties signing this Agreement and each of them, and all such parties
shall be jointly and severally obligated and liable hereunder. The singular
pronoun, when used herein, shall include the plural. If this Agreement is not
dated when executed by the Debtor, the Secured Party is authorized, without
notice to the Debtor, to date this Agreement. This Agreement shall become
effective as of the date of this Agreement. All rights of Secured Party
hereunder shall incur to the benefit of its successors and assigns; and all
Obligations of Debtor shall bind the heir, executors, administrators, successors
and assigns of each Debtor.
13. The parties acknowledge that a substantial portion of negotiations,
anticipated performance and execution of this Agreement occurred in Palm Beach
County, Florida and that, therefore, without limiting the jurisdiction or venue
of any other State Court, each of the parties irrevocably and unconditionally
(a) agree that any suit, action or
7
<PAGE>
legal proceeding arising out of or relating to this Agreement may be brought in
the courts of records of the State of Florida in Palm Beach County; (b) consents
to the jurisdiction of such court in any suit, action or proceeding; (c) waives
any objection which it may have to the laying of venue of any such suit, action
or proceeding in any of such courts; and (d) agrees that service of any court
paper may be effected on such party by mail, as provided in this Agreement, or
in such other manner as may be provided under applicable laws or court rules in
said state.
14. This Agreement has been delivered in the State of Florida and shall
be construed in accordance with the laws of the State of Florida. Wherever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement. This Agreement may not be modified or amended nor shall any provision
of it be waived except by a writing signed by the parties.
IN WITNESS WHEREOF, this Agreement has been executed as of thi 3rd day
of May, 1995.
WITNESSES BY: Ocurest Laboratories, Inc.
/s/ ILLEGIBLE By /s/ LARRY M. REID
- ---------------------------------- ------------------------------
Executive Vice President
/s/ RALPH LAFFLER
- ----------------------------------
8
<PAGE>
AGREEMENT
THIS AGREEMENT ( the "Agreement") is entered into this third day of May,
1995 by and between OCUREST LABORATORIES , INC., a Florida corporation
("Ocurest") and RALPH H. LAFFLER ("Laffler").
W I T N E S S E T H:
WHEREAS, Bausch & Lomb Pharmaceuticals, Inc. ("B&L" ) has advanced
$369,843.31 to Ocurest in order to finance the purchase price of certain
equipment more particularly described on EXHIBIT A attached hereto the
(the "Equipment"); and
WHEREAS, on January 3O, 1995, Ocurest borrowed the sum of $300,000 from
Laffler as evidenced by a promissory note of such date (the "Laffler Note")
which is in default; and
WHEREAS, $100,OOO of the Laffler Note will be repaid simultaneously with
the execution hereof through the issuance by Ocurest to Laffler of (a) 44,445
shares of Ocurest's common stock (the "Note Shares") and (b) a Warrant for the
purchase of an additional 44,445 shares of Ocurest's common stock in the form
attached hereto as EXHIBIT B (the "Note Warrants"): and
WHEREAS the remaining $2OO,OOO of principal amount of the Laffler Note
which remains unpaid will be represented by the New Laffler Note, as that term
is hereinafter defined; and
WHEREAS, Ocurest desires to borrow the sum of $370,000 from First Union
National Bank of Florida ("First Union") pursuant to the terms of that certain
Loan Agreement dated the date hereof (the "First Union Loan"): and
WHEREAS, in order to obtain the First Union Loan, First Union has
required that Laffler be a co-borrower of the First Union Loan; and
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which area hereby acknowledged by the parties and in
consideration of the mutual promises and obligations of the parties contained
herein, the parties hereto agree as follows:
1. RECITALS. The recitals set forth above are agreed by the parties to
be true and correct and are incorporated herein by reference.
2. MODIFICATION OF LAFFLER NOTE. Upon the execution hereof, Laffler
agrees to waive any and all defaults which may have arisen under the Laffler
Note. Furthermore, Laffler agrees to exchange the Laffler Note for a new
promissory note in the Amount of $2OO,OOO (the "New Laffler Note"), in the form
attached hereto as EXHIBIT C. The New Laffler Note shall best interest at the
rate of
<PAGE>
12% per annum and shall be payable quarterly with the initial payment being due
on November 30, l995.
3. WARRANT. Concurrently with the closing of the First Union Loan,
Ocurest shall grant to Laffler a warrant (the "Warrant") for the purchase of
l00,000 shares of common stock of Ocurest (the "Warrant Shares") at a price of
$2.25 per share of common stock in accordance with the terms and conditions
contained in the form of warrant attached hereto as EXHIBIT D.
4. FIRST UNION LOAN. Laffler agrees to be a co-borrower of the First
Union Loan. The parties hereto acknowledge that the proceeds of the First Union
Loan shall be paid exclusively to Ocurest and that Ocurest shall use such
proceeds to repay the B&L Advance.
5. DEFAULT BY OCUREST UNDER THE FIRST UNION NOTE.
(a) INDEMNIFICATION. Ocurest hereby agrees to indemnify, defend and hold
harmless Laffler from and against any and all demands, claims, actions or causes
of action, assessments, losses, damages, liabilities, costs and expenses,
including, without limitation, interest, penalties and reasonable attorney's
fees and expenses asserted against, imposed upon or incurred by Laffler
resulting from or by reason of a default by Ocurest under the terms of the First
Union Note, as such an event is defined. by the First Union Note (an "Ocurest
Default"),
(b) SECURITY. In consideration of Laffler cosigning the First Union Loan
and, further, waiving any and all default under the Laffler Note and accepting
in lieu thereof the New Laffler Note, Ocurest has granted to Laffler a security
interest in the Equipment, subordinated only to the First Union Loan, which
security interest is evidenced by a Security Agreement annexed hereto as Exhibit
E and UCC Financing Statements annexed hereto an Exhibit F. The Security
Agreement and Financing Statements also secure Laffler's interest in Ocurest's
revenues as contemplated in paragraph 5(c) below.
(c) OCUREST DEFAULT. As further security for Ocurest's performance under
both the First Union Loan as well as the New Laffler Note, Ocurest hereby grants
to Laffler a security interest in its revenues as hereinafter defined, In the
event that the First Union Loan and/or the New Laffler Note should be declared
in default and the then default is not Cured within the applicable grace periods
as described under the First Union Loan and/or the New Laffler Note then Laffler
shall be entitled to receive:
(1) Ten (l0%) percent of the revenue from all sales made by Ocurest,
less returns, allowances and discounts; and
(2) Ten (l0%) percent from all revenues received by Ocurest from selling
and licensing agreements.
2
<PAGE>
(d) It is understood and agreed that payments made to Laffler under
paragraphs 5(c) (1) and (2) above, shall be paid by Ocurest within 10 days after
the proceeds of sale have been received by Ocurest. Notwithstanding anything to
the contrary contained herein, Ocurest's obligation to pay all such sums to
Laffler pursuant to this paragraph 5(c) shall not exceed in the aggregate
$1,300,000 and shall terminate upon the earlier to occur of (i) the receipt by
Laffler of such $1,3OO,OOO or (ii) the date upon which the default under the
First Union Loan and/or the New Laffler Note has been cured by Ocurest.
(e) Notwithstanding the provisions of paragraph 5 (d) above, if Laffler
has, prior to the date that Ocurest had cured any default referred to in such
paragraph, satisfied in full the then remaining unpaid balance of the First
Union Loan (the "Laffler Payment") and gives notice thereof to Ocurest,
Ocurest's obligation to pay Laffler ten (10%) percent of its revenues shall
terminate only upon the earlier to occur of (i) the receipt by Laffler of
$l,30O,OOO pursuant to the provisions of paragraphs 5(c) (1) and (2) above or
(ii) the reimbursement of Laffler by Ocurest for the full amount of the Laffler
Payment with interest thereon at the rate of twelve (12%) per cent per annum.
(f) Notwithstanding anything herein to the contrary, Laffler's
entitlement to receive ten (10%) percent of Ocurest's revenue is conditioned on
Laffler foregoing the exercise of the then unexercised portion of the Warrant
during the period of time that Laffler is entitled to receive ten (10%) percent
of Ocurest's revenue. At such time as Laffler ceases to receive ten (10%)
percent of Ocurest's revenue, for whatever reason, Laffler may then exercise the
unexercised portion of the Warrant, subject, however, to the terms and
conditions of thereof.
d. REPRESENTATIONS AND WARRANTIES OF LAFFLER. Laffler hereby represents
and warrants to Ocurest the following:
(a) There are no claims for brokerage commissions or finder's fees in
connection with the transactions contemplated hereby which have arisen or may
arise from any act or failure to act of Laffler or any person or entity
authorized to act on such partied behalf.
(b) Laffler, as a member of the Board of Directors and otherwise, has
access to all books, records an documents thereof and has reviewed the same to
the extent he deems necessary or desirable to make his investment decision.
(c) Laffler will acquire the New Laffler Note, the Note Warrant, the
Note Shares, the Warrant and the Warrant Shares; (collectively hereinafter
referred to as the "Securities") solely for investment purposes for his own
account, and not with a view to the distribution, fractionalization or other
disposition thereof or any interest therein.
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<PAGE>
(d) Laffler has had an opportunity to ask questions of and receive
answers from the executive officers of Ocurest concerning the Ocurest and the
purchase by Laffler of the Securities.
(e) Laffler is able to bear the economic risk of the investment in the
Securities, and Laffler is aware of the limited ability to sell, transfer or
otherwise dispose of them.
(f) Laffler has such knowledge and experience in financial and business
matters and can evaluate the merits and risks of the purchase of the Securities.
(g) Laffler understands that:
(1) the Securities are not being offered or sold pursuant to a
registration statement under the Securities Act of 1933 {the "Act") and
Laffler must bear the economic risk of an investment in the Securities for
an indefinite period of time, because they have not been registered under
the Act or any other applicable federal or state statute and cannot be
transferred, sold or otherwise disposed of unless registered thereunder or
pursuant to an exemption therefrom
(2) the following legend will be placed on the certificate or
certificates evidencing the warrant shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). THE SHARES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF A CURRENT AND EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT WITH RESPECT TO SUCH SHARES, OR AN OPINION OF THE
REGISTERED HOLDER'S COUNSEL, REASONABLY ACCEPTABLE TO THE ISSUER'S COUNSEL,
TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT.
and
(3) Ocurest will issue "stop-transfer" instructions to its transfer
agent with respect to the Securities or note such restrictions on its
appropriate records
(h) Laffler is aware that Rule 144 under the Act, as herein relevant,
permits public sales of restricted securities such as the Securities only if a
minimum of two years, as calculated in accordance with the provisions of such
Rule, has elapsed between the later of the date of the acquisition of such
Securities from Ocurest or an affiliate of Ocurest, and with respect to any
resale of such securities in reliance on Rule 144 for the account of either
Laffler or any subsequent holder of such Securities, such two year period to
begin at the time that such securities are fully paid as contemplated in such
Rule, and only upon satisfaction of
4
<PAGE>
the other conditions to the availability of such Rule. If such Rule is available
to Laffler, Laffler may make only routine sales of such securities in limited
amounts in accordance with the terms: and conditions of such Rule.
(i) Laffler understands that Ocurest is the only person which may
register the Securities under the Act and Ocurest has no intention or obligation
to do so.
(j) Laffler is aware that the Securities will be acquired by the Laffler
in transactions exempt from registration under the Florida Securities and
Investor Protection Act and, accordingly, the securities have not been
registered under such Act. Laffler shall have the privilege of voiding the
purchase of the Securities within three (3) days after the first tender of
consideration is made by such him to by Ocurest or an agent of Ocurest.
7. MISCELLANEOUS PROVISIONS.
(a) BENEFIT. This Agreement shall enure to the benefit of the parties
hereto and their respective successors and assigns.
(b) ENTIRE AGREEMENT. This Agreement, including all schedules and other
instruments or documents referred to herein or delivered pursuant hereto which
form a part hereof, contains the entire understanding of the parties hereto in
respect of the subject matter contained herein. There are no representations,
warranties, promises, covenants or undertakings other than those expressly set
forth herein or therein. This Agreement supersedes all prior agreements, whether
written or oral, between the parties with respect to the subject matter hereof.
This Agreement may be amended only by a written agreement duly executed by the
parties hereto. Any condition to a particular party's obligations hereunder may
be waived in writing by such party.
(c) HEADINGS. The headings contained in this Agreement have been
inserted for convenience and reference purposes only and shall not affect the
meaning or interpretation hereof in any manner whatsoever.
(d) SEVERABILITY. It any of the terms, provisions or conditions
contained in this Agreement shall be declared to be invalld or void in any
judicial proceeding, this Agreement Shall be honored and enforced to the extent
of its validity, and those provisions not declared invalid shall remain in full
force and effect.
(e) REMEDIES. In the event of a breach or threatened breach by either
party of its obligations hereunder, each party acknowledges that the other party
may not have an adequate remedy at law and shall be entitled to such equitable
and injunctive relief as may be available to restrain the other party from any
5
<PAGE>
violation of such obligations. Noting herein shall be construed as prohibiting
either party from pursuing any other remedies available for such breach or
threatened breach, including the recovery of damages.
(a) NOTICES. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be deemed given when sent,
postage paid, by Registered or Certified Mail, Return Receipt Requested, or by
recognized overnight delivery service (such as Federal Express) addressed to
each of the parties as follows:
If to Ocurest: 44OO PGA Boulevard
Suite 800
Palm Beach Gardens, FL 33410
If to Laffler: 23 Cayman Place
Palm Beach Gardens, FL 33148
or to such other address, or the attention of such other party, as the parties
shall advise the other by notice given in conformity herewith.
(g) GOVERNING LAW. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Florida, without giving
effect to conflicts of law.
(h) COUNTERPARTS. This Agreement may be executed in counterparts each of
which shall be deemed an original and all of which together shall constitute one
and the same agreement.
(i) EXHIBITS AND SCHEDULES. All exhibits and Schedules hereto shall be
deemed to be a part hereof.
(j) JURISDICTION AND VENUE. 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 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
hearing 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.
(k) ASSIGNMENT. This Agreement may not be assigned by either party
without the prior written consent of the other party.
6
<PAGE>
(l) CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if 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. 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 limitation.
(m) ATTORNEY'S FEES AND COSTS. In the event of any dispute between the
parties as a result of this Agreement, the prevailing party in such a dispute
shall be entitled to attorneys' fees and costs at all levels of trial, including
appeals.
(n) FACSIMILE SIGNATURES. Facsimile signatures on counterparts of this
Agreement are hereby authorized and shall be acknowledged as if such facsimile
signatures were an original execution, and this agreement shall be deemed as
executed when an executed facsimile hereof is transmitted by a party to any
other party.
IN WITNESS WHEREOF, the parties have sat their hands and seal on the
date first above written.
Ocurest Laboratories, Inc.
(Corporate Seal) By: /s/ LARRY M. REID
------------------------------
Larry M. Reid
Vice President
WITNESSES:
/s/ ILLEGIBLE
- ----------------------------------
Print Name
-----------------------
/s/ ILLEGIBLE /s/ RALPH H. LAFFLER
- ---------------------------------- -----------------------------
Print Name Ralph H. Laffler
------------------------
7
<PAGE>
PROMISSORY NOTE
$200,000.00 Palm Beach Gardens, Florida
May 3, l995
FOR VALUE RECEIVED, the undersigned, OCUREST LABORATORIES, INC., a
Florida corporation, (hereinafter referred to as "Obligor") promises to pay to
RALPH H. LAFFLER, individually (said party and any subsequent holder hereinafter
collectively called "Holder"), at Palm Beach Gardens, Florida (or at such other
place as the Holder hereof may designate), the principal sum of Two Hundred
Thousand and OO/100 Dollars ($200,000.O0) with interest on the outstanding
principal balance calculated in the manner hereinafter set forth, to be paid in
lawful money of the United States of America.
Interest on the unpaid principal balance outstanding from time to time
shall accrue at the rate of twelve percent (12%) per annum based upon a 365-day
year. Payments of principal in the amount of $50,000.00 each plus accrued
interest on the unpaid principal balance shall be due in four (4) quarterly
installments commencing November 30, 1995. The final installment shall be due
November 3O, 1996 (the "Maturity Date").
This Note may be pre-paid without penalty at any time until Maturity
Date. Any payments received shall first be credited to outstanding unpaid
charges and late fees, then to interest, then to principal.
The happening of any of the following events ("Events of Default") shall
constitute a default hereunder:
1. Failure of the Obligor to pay in full any amount of principal or
interest due hereunder promptly and fully within ten (1O) days next after the
same becomes due and payable;
2. Failure of the Obligor to pay in full any amount of principal or
interest due under the Promissory Note of even date of the Obligor and the
Holder in favor of First Union Bank of Florida in the amount of $370,OOO after
giving effect to any grace periods permitted thereunder;
3. If any bankruptcy proceeding (voluntary or involuntary) and, in the
case of an involuntary proceeding the petition is not discharged within thirty
(30) days, or insolvency proceedings" (as said terms "insolvent" and "insolvency
proceedings are defined in the Uniform Commercial Code of Florida) are
instituted or made by or against Obligor, or if application is made for the
appointment for a receiver for the Obligor or for any of the assets of any
Obligor, or an assignment is made for the benefit of the Obligor's creditors .
Upon the happening of any Event of Default (as defined hereinabove), the
entire outstanding balance of this Note remaining
Exhibit C
<PAGE>
unpaid, less the amount of any prepaid interest or discount and any rebates
required by law, shall become immediately due and payable forthwith or
thereafter at the option of the Holder.
The Obligor agrees to pay all reasonable costs of collection hereof,
including reasonable attorneys' fees in the event litigation is commenced in
order to collect amounts due hereunder.
The Holder shall not by 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.
Any provision of this Note which 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.
The provisions of this Note are binding on the assigns and successors of
Obligor and shall inure to the benefit of the Holder, its heirs, successors and
assigns. The Obligor has subscribed Obligor's name and seal hereto without
condition that anyone else should sign or become bound hereon and without any
other condition whatever being made.
This Note shall be governed by and construed in accordance with the laws
of the State of Florida.
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 FACTO, the obligation shall be reduced to the limit of
such validity and any amounts received by the Holder as interest which 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.
This Promissory Note is secured by a security interest in certain machinery and
other collateral.
Ocurest Laboratories, Inc.
By /s/ LARRY M. REID
WITNESSES BY: ------------------------------
Larry M. Reid,
/s/ BRIAN J. COHEN Executive Vice President
- ----------------------------------
/s/ CYNTHIA BARNETT
- ----------------------------------
EXHIBIT 10.28
PROMISSORY NOTE
U.S. $5O,OOO.OO November 6, 1995
For value received, The undersigned OCUREST LABORATORIES INC., a Florida
Corporation ("Maker"), hereby promises to pay to the order of Maurice Porter or
assigns ("Payee"), at Palm Beach Gardens, Florida, or at such other place as
Payee of the holder hereof may designate in writing, from time to time, or
order, the principal sum of Fifty Thousand Dollars, in lawful money of the
United States of America, payable in one (1) installment on January 31, 1996.
This note shall bear simple interest of the unpaid principal amount
hereof computed from the date hereof until payment in full, whether before or
after maturity at the rate of twelve percent (12%) per annum during its term.
Accrued interest is to be payable on the Maturity Date. Such rate of interest
shall never exceed the maximum legal rate of interest which is legally permitted
under applicable law; and if such rate of interest, computed in the amount
herein provided for, should exceed said maximum legal rate, then the rate,
either of interest shall be automatically reduced to such maximum legal rate.
All delinquent interest shall bear interest from the due date at the
same rate as set forth above.
All payments hereunder will be made in such coin or currency of the
United States of America as at the time of payment shall be legal tender for the
payment of public and private debts
Nothing herein contained, nor any transaction related thereto, shall be
construed or so operate as to require the Maker to pay interest at a greater
rate than is now lawful in such case to contract for, or to make any payment, or
do any act contrary to law. Should any interest or other charges paid by the
Maker in connection with the transaction evidenced by this note, or any document
delivered in connection with said transaction, result in the computation or
earning of interest in excess of the maximum legal rate of interest which is
legally permitted under applicable law, then any and all such excess shall be
and the same is hereby waived by Payee and holder hereof, and any and all such
excess shall be automatically credited against and in reduction of the balance
due under this indebtedness, and the portion of said excess which exceeds the
balance due under this indebtedness shall be paid by the Payee to the Maker.\
In the event of the continuation of any default in the payment of
interest or principal hereunder for a period of ten (1O) days after notice of
such default from the payee to Maker or in the event of any default or event of
default under any other documents delivered to Payee in connection herewith, the
holder hereof may elect to declare and may declare the entire unpaid principal
amount hereof, together with interest accrued hereon, immediately due and
payable.
The Maker and all endorser and guarantors of this Note hereby waive
demand, presentment, notice of nonpayment, dishonor prod protest, and agree in
case suit shall be brought for the collection hereof, or if it is necessary to
place the same in the hands of an attorney for collection, to pay reasonable
attorney's fees and costs for making such collection, including but not limited
to, all fees and costs incident to any appeals which may result, whether the
holder hereof is obligated therefor or not.
This Note may be prepaid in whole or in part at any time without penalty
or premium.
This Note shall be governed by and construed in accordance with the laws
of the State of Florida, and venue of any proceedings in connection herewith
shall be in Palm Beach County, Florida.
OCUREST LABORATORIES, INC., a Florida Corporation
By /s/ LARRY M. REID
----------------------------------------
Larry M. Reid, Executive Vice President
EXHIBIT 10.29
AGREEMENT
This Agreement made and entered into the Both day of April logs by : and between
Acorn Laboratories, Inc., a Florida corporation having an office at 1423
Fourteenth Terrace, PGA National, Palm Beach Gardens, Florida 33410 ("Acorn")
and Edmund G. Vimond, Jr., having an office at 18 Timothy Lane, Bedminster, New
Jersey O792l. ("Vimond").
WHEREAS, Acorn has entered into Licensing Agreement dated October 30,
l99l with ocurest Laboratories, Inc. ("Ocurest"), a copy of Which is annexed
hereto, pursuant to which Acorn shall receive royalties based on future Ocurest
net sales; and
WHEREAS, in recognition of various and sundry services performed by
Vimond on behalf of Acorn, Acorn desires to assign Vimond an irrevocable
interest in future royalties received from ocurest; .
Now, THEREFORE, the parties do hereby agree as follows:
1. Acorn does hereby assign Vimond an irrevocable twenty five percent
(25.0%) interest in any and all royalties received from Ocurest or its
successors, inclusive of any remaining balance due Acorn in the event ocurest
sells or transfers its business or otherwise disposes of its assets in
accordance with the terms of the Licensing Agreement annexed hereto.
2. Acorn does hereby agree to authorize Ocurest to pay directly to
Vimond his 25.0% share of royalties on such dates that Ocurest pays Acorn its
royalties, pursuant to the terms and conditions of the Licensing Agreement
annexed hereto and any subsequent amendments thereof.
3. Thin Agreement in Eluding on the parties hereto and their successors
and assigns and those priyity to them. This Agreement may be assigned by Vimond,
but not by Acorn without the consent of Vimond which shall not be unreasonably
withheld.
<PAGE>
4. It is agreed by both parties that this Agreement shall be construed
under the laws of the State of Florida, and that should any dispute arise, both
parties consent to a jurisdiction of the courts of the State of Florida.
5. This Agreement sets forth the entire agreement and understanding
between the parties and supersedes any prior agreements, warranters and
representations between the parties, oral or written. This Agreement may be
modified only by the written mutual consent of both parties.
IN WITNESS WHEREOF, the parties hereto have executed toll Agreement as
of the day and year first written,
/s/ WILLIAM J. CASEY /s/ EDMUND G. VIMOND, JR.
- ------------------------------- --------------------------------
William J. Casey Edmund G. Vimond, Jr.
Acorn Laboraroties
-2-
<PAGE>
FIRST AMENDMENT TO AGREEMENT
THIS FIRST AMENDMENT TO AGREEMENT (the "Amendment") relates to a certain
Agreement dated April 30, 1993 (the "Agreement"), between ACORN LABORATORIES,
INC., a Florida corporation ("Acorn") and EDMUND G. VIMOND, JR., ("Vimond").
1. Notwithstanding anything to the contrary in the Agreement (a) Vimond's
25% interest in royalties referred to in the Agreement as amended hereby
shall be deemed to refer to and shall include any and all payments of
any nature whatsoever (the "Ocurest Payments"), other than the "Initial
Payment" as that term is defined in the Agreement, made or to be made by
Ocurest Laboratories, Inc. ("Ocurest") or its successors to Acorn or its
successors and assigns pursuant to that certain Agreement dated October
3O, 1991 between Acorn and Ocurest as amended by a certain First
Amendment to Agreement dated the date hereof, and (b) Vimond hereby
agrees to defer, but not waive, his right to receive such 25% interest
in the Ocurest Payments solely to the extent that at the time Vimond is
entitled to receive any payment from Acorn hereunder, Acorn shall have
not then received payments from ocurest on a cumulative basis at the
rate of at least $4,OOO per month commencing as of January 1, 199S after
giving effect to (a) the payment to be made to Vimond hereunder and (b) a
payment to be made to Larry M. Reid of 15% of the Ocurest Payments under
a separate agreement with Acorn.
2. 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.
WITNESSES: ACORN LABORATORIES, INC.
/S/ ILLEGIBLE By: /S/ ILLEGIBLE
- --------------------------- ---------------------------
WITNESSES:
/S/ ILLEGIBLE By: /s/ EDMUND G. VIMOND, JR.
- --------------------------- ---------------------------
Edmund G. Vimond, Jr.
1
EXHIBIT 10.30
AGREEMENT
This Agreement made and entered into the 3Oth day of April 1993 by and between
Acorn Laboratories, Inc., a Florida corporation having an office at 1423
Fourteenth Terrace, PGA National, Palm Beach Gardens, Florida 33410 ("Acorn")
and Larry M. Reid, having an office at 4 Via Lucindia North, Stuart, Florida
34996 ("Reid").
WHEREAS, Acorn has entered into a Licensing Agreement dated October 30,
1991 with Ocurest Laboratories, Inc. (~"Ocurest"), a copy of which is annexed
hereto, pursuant to which Acorn shall receive royalties based on future Ocurest
net sales; and
WHEREAS, in recognition of various and sundry services performed by Reid
on behalf of Acorn, Acorn desires to assign Reid an irrevocable interest in
future royalties received from Ocurest;
NOW, THEREFORE, the parties do hereby agree as follows:
1. Acorn does hereby assign Reid an irrevocable fifteen percent (15.0%)
interest in any and all royalties received from Ocurest or its successors,
inclusive of any remaining balance due Acorn in the event Ocurest sells or
transfers its business or otherwise disposes of its assets in accordance with
the terms of the Licensing Agreement annexed hereto.
2. Acorn does hereby agree to authorize Ocurest to pay directly to Reid
his 15.O% share of royalties on such dates that Ocurest pays Acorn its
royalties, pursuant to the terms and conditions of the Licensing Agreement
annexed hereto and any subsequent amendments thereof.
3. This Agreement is binding on the parties hereto and their successors
and assigns and those privity to them. This Agreement may be assigned by Reid,
but not by Acorn without the consent of Reid which shall not be unreasonably
withheld.
<PAGE>
4. It is agreed by both parties that this Agreement shall be construed
under the laws of the State of Florida, and that should any dispute arise, both
parties consent to a jurisdiction of the courts of the State of Florida.
5. This Agreement sets forth the entire agreement and understanding
between the parties and supersedes any prior agreements, warrantees and
representations between the parties, oral or written. This Agreement may be
modified only by the written mutual consent of both parties.
IN WITNESS WHEREoF, the parties hereto have executed this Agreement as
of the day and year first written.
/s/ WILLIAM J. CASEY /s/ LARRY M. REID
- --------------------------- ---------------------------
William J. Casey Larry M. Reid
Acorn Laboratories
-2-
<PAGE>
FIRST AMENDMENT TO AGREEMENT
THIS FIRST AMENDMENT To AGREEMENT (the "Amendment") relates to a certain
Agreement dated April 30, 1993 (the "Agreement"), between ACORN LABORATORIES,
INC., a Florida corporation ("Acorn") and LARRY M. REID, ("REID").
1. Notwithstanding anything to the contrary in the Agreement (a) Reid's
15% interest in royalties referred to in the Agreement as amended hereby
shall be deemed to refer to and shall include any and all payments of
any nature whatsoever (the "Ocurest Payments"), other than the "Initial
Payment" as that term is defined in the Agreement, made or to be made by
Ocurest Laboratories, Inc. ("Ocurest") or its successors to Acorn or its
successors and assigns pursuant to that certain Agreement dated October
3O, 1991 between Acorn and Ocurest as amended by a certain First
Amendment to Agreement dated the date hereof, and (b) Reid hereby
agrees to defer, but not waive, his right to receive such 15% interest
in the Ocurest Payments solely to the extent that at the time Reid is
entitled to receive any payment from Acorn hereunder, Acorn shall have
not then received payments from Ocurest on a cumulative basis at the
rate of at least $4,OOO per month commencing as of January 1, 1995 after
giving effect to (a) the payment to be made to Reid hereunder and (b) a
payment to be made to Edmund G. Vimond, Jr., 25% of the Ocurest Payments
under a separate agreement with Acorn.
2. 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.
WITNESSES: ACORN LABORATORIES, INC.
/S/ ILLEGIBLE By: /S/ ILLEGIBLE
- --------------------------- ---------------------------
WITNESSES:
/S/ ILLEGIBLE By: /s/ LARRY M. REID
- --------------------------- ---------------------------
Larry M. Reid
1
<TABLE>
<CAPTION>
EXHIBIT 11
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------------
1994 1995 1995 1996
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average shares of common stock 709,979 1,018,482 976,475 1,778,533
Common stock issued within one year of IPO (1) 547,774 547,774 547,774 547,774
Warrants issued within one year of IPO (2) 28,750 28,750 28,750 28,750
Optins issued within ine year of IPO (3) 172,566 172,566 172,566 172,566
Weighted average shares of common stock and
--------------------------------------------------------------
common stock equivalents 1,459,049 1,767,562 1,725,555 2,527,613
==============================================================
Net loss $(1,689,320) $(2,736,792) $ (929,778) $(1,010,450)
==============================================================
Net loss per share $ (1.16) $ (1.55) $ (0.54) $ (0.40)
==============================================================
</TABLE>
(1) Reflects the incremental number of shares of common stock issued within one
year of the proposed Initial Public Offering (IPO) at prices below the IPO price
as calculated under the treasury stock method.
(2) Reflects the incremental number of shares of common stocfk that could be
acquired by warrants issued within one year of the proposed IPO that contains
exerciose prices below the IPO price as calculated under the treasury stock
method.
(3) Reflects the incremental number of shares of common stock that could be
acquired by options issued within one year of the proposed IPO that contain
exercise prices below the IPO price as calculated under the treasury stock
method.
EXHIBIT 23.1
We have issued our report dated March 29, 1996, accompanying the financial
statements of Ocurest Laboratories, Inc. contained in the Registration Statement
and Prospectus. We consent to the use of the aforementioned report in the
Registration Statement and Prospectus, and to the use of our name as it appears
under this caption "Experts."
GRANT THORNTON LLP
Fort Lauderdale, Florida
August 15, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JUL-01-1995
<PERIOD-END> JUN-30-1996 DEC-31-1995
<CASH> 5,138 1,607
<SECURITIES> 0 0
<RECEIVABLES> 240,643 65,140
<ALLOWANCES> 0 0
<INVENTORY> 847,183 542,071
<CURRENT-ASSETS> 1,226,064 673,230
<PP&E> 1,060,618 662,129
<DEPRECIATION> 172,175 118,828
<TOTAL-ASSETS> 2,340,899 1,562,271
<CURRENT-LIABILITIES> 3,265,616 2,649,054
<BONDS> 0 657,257
0 0
0 0
<COMMON> 15,381 8,989
<OTHER-SE> (940,098) (1,753,029)
<TOTAL-LIABILITY-AND-EQUITY> 2,340,899 1,562,271
<SALES> 734,291 687,122
<TOTAL-REVENUES> 734,291 697,122
<CGS> 443,579 545,175
<TOTAL-COSTS> 1,153,080 2,776,413
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 148,082 112,326
<INCOME-PRETAX> (1,010,450) 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,010,450) (2,736,792)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,010,450) (2,736,792)
<EPS-PRIMARY> (.40) (1.55)
<EPS-DILUTED> (.37) (1.44)
</TABLE>
